-----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, Q0D+DU5ZOjphZf8PnyUrWWUwZyUt68l7n7Kmp4V1SpVOde6Rp7QCldXmWHHPS154 1S/givIP656koUTKrGV2yg== 0000899243-98-001095.txt : 19980601 0000899243-98-001095.hdr.sgml : 19980601 ACCESSION NUMBER: 0000899243-98-001095 CONFORMED SUBMISSION TYPE: S-6 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980529 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT VL R CENTRAL INDEX KEY: 0001051485 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6 SEC ACT: SEC FILE NUMBER: 333-53909 FILM NUMBER: 98634195 BUSINESS ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 BUSINESS PHONE: 7138313632 MAIL ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 S-6 1 FORM S-6 Registration No. 333- As filed with the Securities and Exchange Commission on May 29, 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUST REGISTERED ON FORM N-8B-2 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Exact Name of Trust) AMERICAN GENERAL LIFE INSURANCE COMPANY (Exact Name of Depositor) 2727-A Allen Parkway Houston, Texas 77019-2191 (Complete Address of Depositor's Principal Executive Offices) Pauletta P. Cohn, Esq. Associate General Counsel American General Independent Producer Division 2727-A Allen Parkway Houston, Texas 77019-2191 (Name and Complete Address of Agent for Service) Please send copies of all communications to: Diane E. Ambler, Esq. Mayer, Brown & Platt 2000 Pennsylvania Ave., N.W. Washington, D.C. 20006 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. Securities Being Offered: Flexible Premium Variable Life Insurance Policies. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2 AND THE PROSPECTUS (PURSUANT TO INSTRUCTION 4 OF FORM S-6) CROSS REFERENCE SHEET
ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION - ----------------------- ------------------ 1 Additional Information : Separate Account VL-R 2 Additional Information: AGL. 3 Inapplicable. 4 Additional Information: Distribution of Policies. 5, 6 Additional Information: Separate Account VL-R. 7 Inapplicable.** 8 Inapplicable.** 9 Additional Information: Legal Matters. 10(a) Additional Information: Your Beneficiary, Assigning Your Policy. 10(b) Basic Questions You May Have: How will the value of my investment in a Policy change over time? 10(c)(d) Basic Questions You May Have: How can I change my Policy's insurance coverage? How can I access my investment in a Policy? Can I choose the form in which AGL pays out any proceeds from my Policy? Additional Information: Payment of Policy Proceeds. 10(e) Basic Questions You May Have: Must I invest any minimum amount in a policy? 10(f) Additional Information: Voting Privileges. 10(g)(1), 10(g)(4), 10(h)(3), 10(h)(2) Basic Questions You May Have: To what extent will AGL vary the terms and conditions of the Policies in particular cases? Additional Information: Voting Privileges; Additional Rights That We Have. 10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.** 10(i) Additional Information: Separate Account VL-R;Tax Effects. 11 Basic Questions You May Have: How will the value of my investment in a Policy change over time? Additional Information: Separate Account VL-R. 12(a) Additional Information: Separate Account VL-R; Front Cover. 12(b) Inapplicable. 12(c), 12(d) Inapplicable.** 12(e) Inapplicable, because the Separate Account did not commence operations until 1998. 13(a) Basic Questions You May Have: What charges will AGL deduct from my investment in a Policy? What charges and expenses will the Mutual Funds deduct from the amounts I invest through my Policy? Additional Information: More About Policy Charges. 13(b) Illustrations of Hypothetical Policy Benefits. 13(c) Inapplicable.**
13(d) Basic Questions You May Have: To what extent will AGL vary the terms and conditions of the Policy in particular cases? 13(e), 13(f), 13(g) None. 14 Basic Questions You May Have: How can I invest money in a Policy? 15 Basic Questions You May Have: How can I invest money in a Policy? How do I communicate with AGL? 16 Basic Questions You May Have: How will the value of my investment in a Policy change over time? ITEM NO. ADDITIONAL INFORMATION - -------- ---------------------- 17(a), 17(b) Captions referenced under Items 10(c), 10(d), and 10(e). 17(c) Inapplicable. 18(a) Captions referred to under Item 16. 18(b), 18(d) Inapplicable. 18(c) Additional Information: Separate Account VL-R. 19 Additional Information: Separate Account VL-R; Our Reports to Policy Owners. 20(a), 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable. 21(a), 21(b) Basic Questions You May Have: How can I access my investment in a Policy? Additional Information: Payment of Policy Proceeds. 21(c) Inapplicable.** 22 Additional Information: Payment of Policy Proceeds- Delay to Challenge Coverage. 23 Inapplicable.** 24 Basic Questions You May Have; Additional Information. 25 Additional Information: AGL. 26 Inapplicable, because the Separate Account did not commence operations until 1998. 27 Additional Information: AGL. 28 Additional Information: AGL's Management. 29 Additional Information: AGL. 30, 31, 32, 33, 34 Inapplicable, because the Separate Account did not commence operations until 1998. 35 Inapplicable.** 36 Inapplicable.** 37 None. 38, 39 Additional Information: Distribution of the Policies. 40 Inapplicable, because the Separate Account did not commence operations until 1998. 41(a) Additional Information: Distribution of the Policies. 41(b), 41(c) Inapplicable.** 42, 43 Inapplicable, because the Separate Account did not commence operations or issue any securities until 1998. 44(a)(1), 44(a)(2), 44(a)(3) Basic Questions You May Have: How will the value of my investment in a Policy change over time? 44(a)(4) Additional Information: Tax Effects--Our taxes. 44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will AGL deduct from my investment in a Policy? 44(b) Inapplicable.** 44(c) Caption referenced in 13(d) above.
45 Inapplicable, because the Separate Account did not commence operations until 1998. 46(a) Captions referenced in 44(a) above. 46(b) Inapplicable.** 47, 48, 49 None. 50 Inapplicable. 51 Inapplicable. 52(a), 52(c) Basic Questions You May Have: To what extent can AGL vary the terms and conditions of the Policy in particular cases? Additional Information: Additional Rights That We Have. 52(b), 52(d) None. 53(a) Additional Information: Tax Effects--Our taxes. 53(b), 54 Inapplicable. 55 Illustrations of Hypothetical Policy Benefits. 56-59 Inapplicable.** * Registrant includes this Reconciliation and Tie in its Registration Statement in compliance with Instruction 4 as to the Prospectus as set out in Form S-6. Separate Account VL-R (Account) has previously filed a notice of registration as an investment company on Form N-8A under the Investment Company Act of 1940 (Act), and a Form N-8B-2 Registration Statement. Pursuant to Sections 8 and 30(b)(1) of the Act, Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR under that Act, the Account will keep its Form N-8B-2 Registration Statement current through the filing of periodic reports required by the Securities and Exchange Commission (Commission). ** Not required pursuant to either Instruction 1(a) as to the Prospectus as set out in Form S-6 or the administrative practice of the Commission and its staff of adapting the disclosure requirements of the Commission's registration statement forms in recognition of the differences between variable life insurance policies and other periodic payment plan certificates issued by investment companies and between separate accounts organized as management companies and unit investment trusts. LEGACY ENHANCER FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY (THE "POLICY") ISSUED BY AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") HOME OFFICE: (Express Delivery) (US Mail) 2727-A Allen Parkway Variable Universal Life Houston, Texas 77019-2191 Administration PHONE: 1-888-325-9315 P.O. Box 4880 or 1-713-831-3443 Houston, Texas 77210-4880 FAX: 1-713-620-3857
Investment options. You may invest in the following variable investment options and change your selections from time to time: BT INSURANCE FUNDS TRUST MORGAN STANLEY UNIVERSAL AMERICAN GENERAL SERIES FUNDS, INC. PORTFOLIO COMPANY . Equity 500 Index . Equity Growth . Money Market . EAFE Equity Index - ---------------------------------------------------------------------------- AIM VARIABLE INSURANCE ROYCE CAPITAL FUND FUNDS, INC. . AIM V.I. Value . Royce Total Return
SEPARATE PROSPECTUSES CONTAIN MORE INFORMATION ABOUT THE MUTUAL FUNDS ("FUNDS" OR "MUTUAL FUNDS") IN WHICH WE INVEST THE ACCUMULATION VALUE THAT YOU ALLOCATE TO ANY OF THE ABOVE-LISTED INVESTMENT OPTIONS. THE FORMAL NAME OF EACH SUCH FUND IS SET FORTH IN THE CHART THAT APPEARS ON PAGE . YOUR INVESTMENT RESULTS IN ANY SUCH OPTION WILL DEPEND ON THOSE OF THE RELATED FUND. THEREFORE, YOU SHOULD BE SURE YOU ALSO READ THE PROSPECTUS OF THE MUTUAL FUND FOR ANY SUCH INVESTMENT OPTION YOU MAY BE INTERESTED IN. YOU CAN REQUEST FREE COPIES OF ANY OR ALL OF THE MUTUAL FUND PROSPECTUSES FROM YOUR AGL REPRESENTATIVE OR FROM US AT OUR HOME OFFICE LISTED ABOVE. Other choices you have. During the insured person's lifetime, you can (1) change the amount of insurance, (2) borrow or withdraw amounts you have invested, (3) choose, within limits, when and how much you invest, and (4) choose whether the amount you have invested under your Policy, upon the insured person's death, will be added to the insurance proceeds we otherwise will pay to the beneficiary. Charges and expenses. We deduct charges and expenses from the amounts you invest. These are described beginning on page . Right to return. If for any reason you are not satisfied with your Policy, you may return it to us and we will refund any premiums paid adjusted to reflect investment experience. (In some states, we will return premiums paid as required by state law.) To exercise your right to return your Policy, you must mail it directly to the Home Office address shown on the first page of this prospectus or return it to the AGL representative through whom you purchased the Policy within 10 days after you receive it. In a few states, this period may be longer. Because you have this right, we will invest your initial premium payment in the money market investment option from the date your investment performance begins until the first business day that is at least 15 days later. Then we will automatically allocate your investment among the above-listed investment options as you have chosen. Any additional premium we receive during the 15-day period will also be invested in the money market division and allocated to the investment options at the same time as your initial premium. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS PROSPECTUS CONTAINS INFORMATION THAT YOU SHOULD KNOW BEFORE INVESTING IN A POLICY. THE POLICIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"). NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE POLICIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF PRINCIPAL INVESTED. THIS BOOKLET IS CALLED A "PROSPECTUS." ITS DATE IS , 1998 2 GUIDE TO THIS PROSPECTUS This booklet (which is called a "prospectus") contains information that you should know before you purchase a Legacy Enhancer policy ("Policy") or exercise any of your rights or privileges under a Policy. Basic Information. Here are the page numbers in this prospectus where you may find answers to most of your questions:
PAGE TO SEE BASIC QUESTIONS YOU MAY HAVE IN THIS PROSPECTUS ---------------------------- ------------------ . What is the Policy?....................................... . How can I invest money in a Policy?....................... . How will the value of my investment in a Policy change over time?................................................ . What is the basic amount of insurance ("death benefit") that AGL pays when the insured person dies?............... . What charges will AGL deduct from my investment in a Policy?................................................... . What charges and expenses will the Mutual Funds deduct from amounts I invest through my Policy?.................. . Must I invest any minimum amount in a Policy?............. . How can I change my Policy's investment options?.......... . How can I change my Policy's insurance coverage?.......... . What additional rider benefits might I select?............ . How can I access my investment in a Policy?............... . Can I choose the form in which AGL pays out proceeds from my Policy?................................................ . To what extent can AGL vary the terms and conditions of the Policy in particular cases?........................... . How will my Policy be treated for income tax purposes?.... . How do I communicate with AGL?............................
Illustrations of a hypothetical policy. Starting on page , we have included some illustrations of how the values of a hypothetical Policy would change over time, based on certain assumptions we have made. Because your circumstances may vary considerably from our assumptions, your AGL representative will also provide you with a similar hypothetical illustration that is more tailored to your own circumstances and wishes. Additional information. You may find the answers to any other questions you have under "Additional Information" beginning on page or in the form of our Policy. A table of contents for the "Additional Information" portion of this prospectus also appears on page . You can obtain copies of our Policy form from (and direct any other questions to) your AGL representative or our Home Office (shown on the first page of this Prospectus). AGL's financial statements. We have included our financial statements in this prospectus. These begin on page . Special words and phrases. If you want more information about any words or phrases that you read in this prospectus, you may wish to refer to the Index of Words and Phrases that appears at the back of this prospectus. That index will tell you on what page you can read more about many of the words and phrases that we use. 3 BASIC QUESTIONS YOU MAY HAVE HOW CAN I INVEST MONEY IN A POLICY? Premium payments. We call the investments you make in a Policy "premiums" or "premium payments." The amount we require as your first premium varies depending on the specifics of your Policy and the insured person. We can refuse to accept a subsequent premium payment that is less than $50. Otherwise, with a few exceptions mentioned below, you can make premium payments at any time and in any amount. Limits on premium payments. In certain circumstances, we may refuse to accept an additional premium if the insured person does not provide us with adequate evidence that he/she continues to meet our requirements for issuing insurance or if the additional premium would cause the "net amount at risk" to exceed the Maximum Net Amount at Risk, as set out in your Policy. The net amount at risk is the difference between (a) the death benefit that would be payable before reduction by policy loans if the insured person died on that date and (b) the then total accumulation value under the Policy. The term "accumulation value" is described on page . Checks and money orders. Premiums must be by check or money order drawn on a U.S. bank in U.S. dollars and made payable to "American General Life Insurance Company," or "AGL." Premiums after the first premium must be sent directly to our Home Office at the appropriate address shown on the first page of this prospectus. Other ways to pay premiums. We also accept premium payments by bank draft, wire, or by exchange from another insurance company. You may obtain further information about how to make premium payments by any of these methods from your AGL representative or from our Home Office shown on the front page of this prospectus. Dollar cost averaging. Dollar cost averaging is an investment strategy designed to reduce the risks that result from market fluctuations. The strategy spreads the allocation of your accumulation value over a period of time. This allows you to reduce the risk of investing most of your funds at a time when prices are high. The success of this strategy depends on market trends and is not guaranteed. Under dollar cost averaging, we automatically make transfers of your accumulation value from the money market investment option to one or more of the other investment options that you choose. You tell us whether you want these transfers to be made monthly, quarterly, semi-annually or annually; and we make the transfers as of the end of the valuation period that contains the day of the month that you select other than the 29th, 30th or 31st day of the month. The term "valuation period" is described on page . You must have at least $100,000 of accumulation value to start dollar cost averaging and each transfer under the program must be at least $5,000. You cannot participate in dollar cost averaging while also using automatic rebalancing (discussed below). Dollar cost averaging ceases upon your request, or if your accumulation value in the money market option becomes exhausted. Automatic rebalancing. This feature automatically rebalances the proportion of your accumulation value in each investment option under your Policy to correspond to your then current premium allocation designation. You tell us whether you want us to do the rebalancing quarterly, semi-annually or annually. The date automatic rebalancing occurs will be based on the date of issue of your Policy. For example, if your Policy is dated January 17, and you have requested automatic rebalancing on a quarterly basis, automatic rebalancing will start on April 17, and will occur quarterly thereafter. Automatic rebalancing will occur as of the end of the valuation period that contains the date of the month your policy was issued. You must have a total accumulation value of at least $100,000 to begin automatic rebalancing. You cannot participate in this program while also participating in dollar cost averaging (discussed above). Rebalancing terminates upon your request. 4 HOW WILL THE VALUE OF MY INVESTMENT IN A POLICY CHANGE OVER TIME? Your accumulation value. From each premium payment you make, we deduct the charges that we describe on page under "Deductions from each premium payment." We invest the rest in one or more of the investment options listed on the first page of this prospectus. We call the amount that is at any time invested under your Policy (including any loan collateral we are holding for your Policy loans) your "accumulation value." Your investment options. We invest the accumulation value that you have allocated to any investment option in shares of a Mutual Fund that follows investment practices, policies and objectives that are appropriate to that option. Over time, your accumulation value in any investment option will increase or decrease by the same amount as if you had invested in the related Fund's shares directly (and reinvested all dividends and distributions from the Fund in additional Fund shares); except that your accumulation value will be reduced by certain charges that we deduct. We describe these charges beginning on page under "What charges will AGL deduct from my investment in a Policy?" Other important information about the Mutual Funds that you can choose is included in the separate prospectuses for those Funds. This includes information about the investment performance that each Fund's investment manager has achieved. Additional free copies of these prospectuses are available from your AGL representative or from our Home Office shown on the first page of this prospectus. Policies are "non-participating." The Policies are not "participating." Therefore, you will not be entitled to any dividends from AGL. WHAT IS THE BASIC AMOUNT OF INSURANCE ("DEATH BENEFIT") THAT AGL PAYS WHEN THE INSURED PERSON DIES? Your specified amount of insurance. In your application to buy a Legacy Enhancer Policy, you will tell us how much life insurance coverage you want on the life of the insured person. We call this the "specified amount" of insurance. Your death benefit. The basic death benefit we will pay is reduced by any outstanding Policy loans. You also choose whether the basic death benefit we will pay is . Option 1-The specified amount on the date of the insured person's death - or - . Option 2-The specified amount plus the Policy's accumulation value on the date of death. Under Option 2, your death benefit will tend to be higher than under Option 1. However, the monthly insurance charge we deduct will also be higher to compensate us for our additional risk. Because of this, your accumulation value will tend to be higher under Option 1 than under Option 2. We will automatically pay an alternative basic death benefit if it is higher than the basic Option 1 or Option 2 death benefit (whichever you have selected). The alternative basic death benefit is computed by multiplying your Policy's accumulation value on the insured person's date of death by the following percentages: 5 TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCUMULATION VALUE CASH VALUE ACCUMULATION TEST
% OF ACCUMULATION % OF ACCUMULATION INSURED'S AGE ON VALUE VALUE POLICY ------------------ ------------------ ANNIVERSARY* MALE FEMALE UNISEX INSURED'S AGE ON POLICY ANNIVERSARY* MALE FEMALE UNISEX - ---------------- ---- ------ ------ ------------------------------------ ---- ------ ------ 18 691 830 715 59 196 226 202 19 671 804 694 60 191 220 196 20 652 778 674 61 186 214 191 21 633 753 654 62 182 208 187 22 615 729 635 63 177 202 182 23 597 706 616 64 173 197 178 24 579 683 597 65 169 191 173 25 561 661 579 66 165 186 169 26 544 640 561 67 162 181 166 27 527 619 543 68 158 177 162 28 510 597 526 69 155 172 158 29 494 579 509 70 152 168 155 30 478 560 492 71 149 164 152 31 463 542 477 72 146 160 149 32 448 524 461 73 143 156 146 33 433 507 446 74 141 152 143 34 419 490 431 75 138 149 141 35 405 474 417 76 136 146 138 36 392 459 404 77 134 143 136 37 380 444 391 78 132 140 134 38 367 429 378 79 130 137 132 39 355 415 366 80 128 134 130 40 344 402 354 81 126 132 128 41 333 389 343 82 125 130 126 42 323 377 332 83 123 128 124 43 312 365 322 84 122 126 123 44 303 354 312 85 120 124 121 45 294 343 302 86 119 122 120 46 285 333 293 87 118 121 119 47 276 323 284 88 117 119 118 48 268 313 276 89 116 118 117 49 260 303 268 90 115 116 115 50 252 294 260 91 114 115 114 51 245 286 252 92 113 114 113 52 238 277 245 93 112 112 112 53 231 269 238 94 111 111 111 54 225 261 231 95 110 110 110 55 218 254 225 96 108 108 108 56 212 247 219 97 107 107 107 57 208 240 213 98 105 105 105 58 201 233 207 99 104 104 104
- -------- * Nearest birthday at the beginning of the Policy year in which the insured person dies. 6 WHAT CHARGES WILL AGL DEDUCT FROM MY INVESTMENT IN A POLICY? Deductions from each premium payment. There is currently no deduction from each premium payment you make. However, We have the right at any time to assess a charge not to exceed more than 1.5% on all future premium payments. Daily charge. We make a daily deduction at an annual effective rate of .75% of your accumulation value that is then being invested in any of the investment options. After a Policy has been in effect for 30 years, we intend to reduce the rate of this charge by .35%. Because the Policies were first offered in 1998, however, this decrease has not yet occurred for any outstanding Policy. Neither this decrease nor the current rate of .75% is guaranteed. Rather, we have the right at any time to raise this charge under your Policy to not more than .90%; except that in Texas and Oregon, until a Policy has been in effect for 30 years, this maximum is .35% higher. Monthly insurance charge. Every month we will deduct from your accumulation value a charge based on the cost of insurance rates applicable to your Policy on the date of the deduction and our "amount at risk" on that date. Our amount at risk is the difference between (a) the death benefit that would be payable before reduction by policy loans if the insured person died on that date and (b) the then total accumulation value under the Policy. For otherwise identical Policies, a greater amount at risk results in a higher monthly insurance charge. For otherwise identical Policies, a higher cost of insurance rate also results in a higher monthly insurance charge. Our cost of insurance rates are guaranteed not to exceed those that will be specified in your Policy. In general, our cost of insurance rates increase with the insured person's age. Therefore, the longer you own your Policy, the higher the cost of insurance rate will be. Also our cost of insurance rates will generally be lower (except in Montana) if the insured person is a female than if a male. Similarly, our current cost of insurance rates are generally lower for non- smokers than smokers. Insured persons who present particular health, occupational or avocational risks may be charged higher cost of insurance rates and other additional charges based on the specified amount of insurance coverage under their Policy. Our cost of insurance rates also are generally higher under a Policy that has been in force for some period of time than they would be under an otherwise identical Policy purchased more recently on the same insured person. Transaction Fee. We will charge a $25 transaction fee for each partial surrender you make. This fee will be deducted pro-rata from all of the funds you then have in each investment option. Charge for taxes. We can make a charge in the future for taxes we incur or reserves we set aside for taxes in connection with the Policies. This would reduce the investment experience of your accumulation value. Allocation of charges. You may choose from which of your investment options we deduct all monthly charges. If you do not have enough accumulation value in any investment option to comply with your selection, we will deduct these charges in proportion to the amount of accumulation value you then have in each investment option. 7 WHAT CHARGES AND EXPENSES WILL THE MUTUAL FUNDS DEDUCT FROM AMOUNTS I INVEST THROUGH MY POLICY? Each Mutual Fund pays its investment management fees and other operating expenses. Because they reduce the investment return of a Fund, these fees and expenses also will reduce indirectly the return you will earn on any accumulation value that you have invested in that Fund. These charges and expenses currently are as follows: THE MUTUAL FUNDS' ANNUAL EXPENSES (1) (as a percentage of average net assets)
OTHER FUND TOTAL FUND FUND MANAGEMENT OPERATING OPERATING FEES AFTER EXPENSES AFTER EXPENSES AFTER EXPENSE EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT(2) REIMBURSEMENT(2) REIMBURSEMENT(2) ------------ ---------------- ---------------- ---------------- The following funds of BT INSURANCE FUNDS TRUST: Equity 500 Index.......... 0.00% 0.30% 0.30% EAFE Equity Index......... 0.02% 0.63% 0.65% The following fund of MORGAN STANLEY UNIVERSAL FUNDS, INC.: Equity Growth............. 0.55% 0.30% 0.85% The following fund of AMERICAN GENERAL SERIES PORTFOLIO COMPANY: Money Market.............. 0.50% 0.07% 0.57% The following fund of ROYCE CAPITAL FUND: Royce Total Return........ 0.00% 1.35% 1.35% The following fund of AIM VARIABLE INSURANCE FUNDS, INC.: AIM V.I. Value............ 0.62% 0.08% 0.70%
- -------- (1) The annual expenses are estimated for the current fiscal year for the Equity 500 Index and EAFE Equity Index Funds, because neither of these Funds has financial statements covering a period of at least ten months. (2) If certain voluntary expense reimbursements from the investment adviser were terminated, management fees and other expenses for the fiscal year ended in 1997 would have been as set out in the following table. Information about annual expenses excluding voluntary expense reimbursements is estimated for the Equity 500 Index and EAFE Equity Index Funds since neither of these Funds has financial statements covering a period of at least ten months.
FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING NAME OF FUND FEES EXPENSES EXPENSES ------------ ---------- ---------- ---------- Equity 500 Index............................... 0.20% 2.58% 2.78% EAFE Equity Index.............................. 0.45% 2.30% 2.75% Royce Total Return............................. 1.00% 1.99% 2.99%
MUST I INVEST ANY MINIMUM AMOUNT IN A POLICY? Planned periodic premiums. Page 3 of your Policy will specify a "Planned Periodic Premium." This is the amount that you (within limits) choose to have us bill you. Our current practice is to bill quarterly, semi-annually or annually. However, payment of these or any other specific amounts of premiums is not mandatory. After payment of your initial minimum premium, you need only invest enough to ensure your Policy's cash surrender value stays above zero. The less you invest, the more likely it is that your Policy's cash surrender value could fall to zero, as a result of the deductions we periodically make from your accumulation value. 8 Policy lapse and reinstatement. If your Policy's cash surrender value does fall to zero, we will notify you and give you a grace period to pay at least the amount we estimate is necessary to keep your Policy in force for a reasonable time. If we don't receive your payment by the end of the grace period, your Policy will terminate without value and all coverage under your Policy will cease. Although you can apply to have your Policy "reinstated," you must do this within 5 years (or, if earlier, before the Policy's maturity date), and you must present evidence that the insured person still meets our requirements for issuing coverage. Also, you would have to pay certain extra amounts that we require. In the Policy form itself, you will find additional information about the values and terms of a Policy after it is reinstated. HOW CAN I CHANGE MY POLICY'S INVESTMENT OPTIONS? Future premium payments. You may at any time change the investment options in which future premiums you pay will be invested. Your allocation must, however, be in whole percentages that total 100%. Transfers of existing accumulation value. You may also transfer your existing accumulation value from one investment option under the Policy to another. You may make transfers at any time. Unless you are transferring the entire amount you have in an investment option, each transfer must be at least $5,000. See "Additional Rights That We Have" on page . Transaction Fee. We will charge a $25 transaction fee for each transfer you make in excess of 12 per policy year. Maximum number of investment options. We can at any time limit the number of investment options you may use. HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE? Increase in coverage. You may at any time request an increase in the specified amount of coverage under your Policy. You must, however, provide us with satisfactory evidence that the insured person continues to meet our requirements for issuing insurance coverage. We treat an increase in specified amount in many respects as if it were the issuance of a new Policy. For example, the monthly insurance charge for the increase will be based on the age and risk class of the insured person at the time of the increase. Change of death benefit option. You may at any time request us to change your coverage from death benefit Option 1 to 2 or vice-versa. If you change from Option 1 to 2, we also automatically reduce your Policy's specified amount of insurance by the amount of your Policy's accumulation value (but not below zero) at the time of the change. If you change from Option 2 to 1, we automatically increase your Policy's specified amount by the amount of your Policy's accumulation value. Tax consequences of changes in insurance coverage. Please read "Tax Effects" starting on page of this prospectus to learn about possible tax consequences of changing your insurance coverage under your Policy. WHAT ADDITIONAL RIDER BENEFITS MIGHT I SELECT? Under the terms of your Policy, there are currently no additional rider benefits available. HOW CAN I ACCESS MY INVESTMENT IN A POLICY? Full surrender. You may at any time surrender your Policy in full. If you do, we will pay you the accumulation value, less any Policy loans. We call this amount your "cash surrender value". Partial surrender. You may, at any time after the first Policy year, make a partial surrender of your Policy's cash surrender value. A partial surrender must be at least $5,000. If the Option 1 death benefit is then in effect, 9 we will also automatically reduce your Policy's specified amount of insurance by the amount of your withdrawal and any related charges. We will not permit a partial surrender if it would cause your accumulation value to fall below $100,000 or your death benefit to fall below the minimum specified in your Policy. You may choose the investment option or options from which money that you withdraw will be taken. Otherwise, we will allocate the withdrawal in the same proportions as then apply for deducting monthly charges under your Policy or, if that is not possible, in proportion to the amount of accumulation value you then have in each investment option. Transaction Fee. We will charge a $25 transaction fee for each partial surrender you make. This fee will be deducted pro-rata from all of the funds you then have in each investment option. Policy loans. You may at any time borrow from us an amount equal to your Policy's cash surrender value (less $100,000, less our estimate of three months' charges and less the interest that will be payable on your loan through your next Policy anniversary; this rule is not applicable in all states). The minimum amount of each loan is $5,000 or, if less, the entire remaining loan value. We remove from your investment options an amount equal to your loan and hold that amount as additional collateral for the loan. We will credit your Policy with interest on this collateral amount at an effective annual rate of 4% (rather than any amount you could otherwise earn in one of our investment options), and we will charge you interest on your loan at an effective annual rate of 4.75%. Loan interest is payable annually, on the Policy anniversary, in advance, at a rate of 4.54%. Any amount not paid by its due date will automatically be added to the loan balance as an additional loan. Interest you pay on Policy loans will not, in most cases, be deductible on your tax returns. You may choose which of your investment options the loan will be taken from. If you do not so specify, we will allocate the loan in the same way that charges under your Policy are being allocated. If this is not possible, we will make the loan pro-rata from each investment option that you then are using. You may repay all or part (but not less than $5,000) of your loan at any time prior to the death of the Insured while the Policy is in force. You must designate any loan repayment as such. Otherwise, we will treat it as a premium payment instead. We will invest any additional loan repayments you make in the investment options you request. In the absence of such a request we will invest the repayment in the same proportion as you then have selected for premium payments that we receive from you. Any unpaid loan will be deducted from the proceeds we pay following the insured person's death. Preferred loan interest rate. We will credit a higher interest rate, but not more than 4.75%, on an amount of the collateral securing Policy loans taken out after the first 10 Policy years. The maximum amount of new loans that will receive this preferred loan interest rate for any year is (a) 10% of your Policy's accumulation value (including any loan collateral we are holding for your Policy loans) at the beginning of the Policy year or (b) if less, your Policy's maximum remaining loan value at that anniversary. We intend to set the rate of interest we credit to your preferred collateral amount equal to the loan interest rate you are paying, resulting in a zero net cost of borrowing for that amount. We have full discretion to vary the preferred rate, however, provided that it will always be greater than the rate we are then crediting in connection with regular Policy loans. Because we first offered the Policies in 1998, we have not yet applied the preferred loan interest rate to any Policy loan amounts. Maturity of your Policy. If the insured person is still living on the "Maturity Date" shown on page 3 of your Policy, we will automatically pay you the cash surrender value of the Policy, and the Policy will terminate. The maturity date is the Policy anniversary nearest the insured person's 100th birthday. 10 CAN I CHOOSE THE FORM IN WHICH AGL PAYS OUT THE PROCEEDS FROM MY POLICY? Choosing a payment option. You may choose to receive the full proceeds from the Policy as a single sum. This includes proceeds that become payable upon the death of the insured person, full surrender or the maturity date. Alternatively, you may elect that all or part of such proceeds be applied to one or more of the following payment options: .Option 1 - Equal monthly payments for a specified period of time. .Option 2 - Equal monthly payments of a specified amount until all amounts are paid out. .Option 3 - Equal monthly payments for the payee's life, but with payments guaranteed for a specified number of years. These payments are based on annuity rates that are set forth in the Policy or, at the payee's request, the annuity rates that we then are using. .Option 4 - Proceeds left to accumulate with interest. Additional payment options may also be available with our consent. We have the right to veto any payment option, if the payee is a corporation or other entity. You can read more about each of these options in our Policy form and in the separate form of payment contract that we issue when any such option takes effect. Within 60 days after the insured person's death, any payee entitled to receive proceeds as a single sum may elect one or more payment options. Interest rates that we credit under each option will be at least 3%. Change of payment option. You may change any payment option you have elected at any time while the Policy is in force and before the start date of the payment option. Tax impact. If a payment option is chosen, you or your beneficiary may have tax consequences. You therefore should consult with a qualified tax adviser before deciding whether to elect one or more payment options. TO WHAT EXTENT CAN AGL VARY THE TERMS AND CONDITIONS OF THE POLICIES IN PARTICULAR CASES? Listed below are some variations we may make in the terms of a Policy. Any variations will be made only in accordance with uniform rules that we establish. Policies purchased through "internal rollovers." We maintain published rules that describe the procedures necessary to replace the other life insurance we issue with one of the Policies. Not all types of other insurance we issue are eligible to be replaced with one of the Policies. Our published rules may be changed from time to time, but are evenly applied to all our customers. Policies purchased through term life conversions. Also, we maintain rules about how to convert term insurance to a Legacy Enhancer Policy. This is referred to as a term conversion. Term conversions are available to owners of term life insurance we have issued. Any right to a term conversion is stated in the term life insurance policy. Again, our published rules about term conversions may be changed from time to time, but are evenly applied to all our customers. State law requirements. AGL is subject to the insurance laws and regulations in every jurisdiction in which Legacy Enhancer Policies are sold. As a result, various time periods and other terms and conditions described in this prospectus may vary depending on where you reside. These variations will be reflected in your Policy and related endorsements. Variations in expenses or risks. AGL may vary the charges and other terms of the Policies where special circumstances result in sales, administrative or other expenses, mortality risks or other risks that are different from those normally associated with the Policies. 11 HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES? Generally, death benefits paid under a Policy are not subject to income tax, and earnings on your accumulation value are not subject to income tax as long as we do not pay them out to you. If we do pay any amount of your Policy's accumulation value upon surrender, partial surrender, or maturity of your Policy, all or part of that distribution may be treated as a return of the premiums you paid, and therefore not subject to income tax. Amounts you receive as Policy loans are not taxable to you, unless you have paid such a large amount of premiums that your Policy becomes what the tax law calls a "modified endowment contract." In that case, the loan will be taxed as if it were a partial surrender. Furthermore, loans, partial surrenders and other distributions from a modified endowment contract may require you to pay additional taxes and penalties that otherwise would not apply. For further information about the tax consequences of owning a Policy, please read "Tax Effects" starting on page . HOW DO I COMMUNICATE WITH AGL? When we refer to "you," we mean the person who is duly authorized to take any contemplated action with respect to a Policy. Generally, this is the owner named in the Policy. Where a Policy has more than one owner, each owner generally must join in any requested action, except for transfers and changes in the allocation of future premiums or charges among the investment options. General. You should mail or express checks and money orders for premium payments and loan repayments directly to our Home Office at the appropriate address shown on the first page of this prospectus. The following requests must be made in writing and signed by you: transfer of accumulation value; loan; full surrender; partial surrender; change of beneficiary or contingent beneficiary; change of allocation percentages for premium payments, loan repayments or charges; change of death benefit option or manner of death benefit payment; increase in specified insurance amount; addition or cancellation of, or other action with respect to, election of a payment option for Policy proceeds; tax withholding elections; and telephone transaction privileges. You should mail or express these requests to our Home Office at the appropriate address shown on the first page of this prospectus. You should also communicate notice of the insured person's death, and related documentation, to our Home Office. We have special forms which should be used for loans, assignments, partial and full surrenders, changes of owner or beneficiary, and all other contractual changes. A Service Request form covering many of these transactions is attached to the back of this prospectus. You will be asked to return your Policy when you request a full surrender. You may also obtain these forms from our Home Office or from your AGL representative. Each communication must include your name, Policy number and, if you are not the insured person, that person's name. We cannot process any requested action that does not include all required information. Telephone transactions. If you have a completed telephone authorization form on file with us, you may make transfers, or change the allocation of future premium payments or deduction of charges, by telephone, subject to the terms of the form. We will honor telephone instructions from any person who provides the correct information, so there is a risk of possible loss to you if unauthorized persons use this service in your name. Our current procedure is that only the owner or your AGL representative may make a transfer request by phone. We are not liable for any acts or omissions based upon instructions that we reasonably believe to be genuine. Our procedures include verification of the Policy number, the identity of the caller, both the insured person's and owner's names, and a form of personal identification from the caller. We will mail you a prompt written confirmation of the transaction. If many people seek to make telephone requests at or about the same time, or if our recording equipment malfunctions, it may be impossible for you to make a telephone request at the time you wish. If this occurs, you should submit a written request. Also, if, due to malfunction or other circumstances, the 12 recording of your telephone request is incomplete or not fully comprehensible, we will not process the transaction. The phone number for telephone requests is 1-888-325-9315. The Policies 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 policies or procedures regarding telephone requests or to cease permitting telephone requests altogether. ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS To help clarify how our Policies work, we have prepared the following tables:
PAGE TO SEE IN TABLE THIS PROSPECTUS ----- --------------- Death Benefit Option 1-Current Charges.................... Guaranteed Maximum Charges..............................
The tables show how death benefits, accumulation values, and cash surrender values ("Policy benefits") under a hypothetical Legacy Enhancer Policies would vary over time if the investment options had constant hypothetical gross annual investment returns of 0%, 6% or 12% over the years covered by each table. The tables are for a 45 year-old male non-tobacco user. A single premium payment of $250,000 for an initial $733,762 of specified amount of coverage is assumed to be paid at issue. The illustrations assume no Policy loan has been taken. Although the tables below do not include illustrations of a Policy with an Option 2 death benefit, such a Policy would have higher death benefits, lower cash values, and a greater risk of lapse. Separate tables are included to illustrate both current and guaranteed maximum charges. The charges assumed in the current charge tables include a daily charge at an annual effective rate of .75% for the first 30 Policy years and .40% thereafter and current monthly insurance charges. The guaranteed maximum charge tables assume that these charges will include a daily charge at an .90% and an additional charge of 1.5% of every premium and guaranteed maximum insurance charges. In Texas and Oregon, the guaranteed maximum daily charge is .35% per annum higher for certain periods of time than the daily charges assumed in the maximum charge tables below. Therefore, an identical Policy sold in those states would have values less than those illustrated if we deducted the maximum charges. The charges assumed by both the current and guaranteed maximum charge tables also include 0.74% for expenses of the Mutual Funds, which is the unweighted average of the advisory fees payable with respect to each Mutual Fund, after all reimbursements, as reflected on page of this prospectus, plus the weighted average of all other operating expenses of each such Fund after all reimbursements, as reflected on page of this prospectus. The second column of each table shows the effect of an amount equal to the premiums invested to earn interest, after taxes, of 5% compounded annually. Individual illustrations. On request, we will furnish you with a comparable illustration based on your Policy's characteristics. If you request illustrations more than once in any Policy year, we may charge $25 for the illustration. 13 LEGACY ENHANCER SINGLE PREMIUM $250,000.00 INITIAL SPECIFIED AMOUNT $733,762 DEATH BENEFIT OPTION 1 MALE AGE 45 NONSMOKER ASSUMING CURRENT CHARGES
ACCUMULATION VALUE CASH SURRENDER VALUE DEATH BENEFIT ASSUMING ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL HYPOTHETICAL GROSS ANNUAL ANNUAL INVESTMENT RETURN GROSS ANNUAL INVESTMENT END OF INVESTMENT RETURN OF OF RETURN OF POLICY ACCUMULATED ------------------------- ------------------------- ------------------------- YEAR PREMIUMS(1) 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% - ------ ----------- ------- ------- --------- ------- ------- --------- ------- ------- --------- 1 262,500 733,762 750,345 793,107 245,497 260,359 275,197 245,497 260,359 275,197 2 275,625 733,762 757,097 845,847 240,791 270,936 302,696 240,791 270,936 302,696 3 289,406 733,762 764,515 902,804 236,235 282,092 333,118 236,235 282,092 333,118 4 303,877 733,762 771,851 963,403 231,539 293,571 366,427 231,539 293,571 366,427 5 319,070 733,762 779,209 1,028,006 226,735 305,423 402,944 226,735 305,423 402,944 6 335,024 733,762 786,695 1,097,023 221,843 317,691 443,010 221,843 317,691 443,010 7 351,775 733,762 794,360 1,170,830 216,873 330,407 486,996 216,873 330,407 486,996 8 369,364 733,762 802,262 1,249,856 211,814 343,587 535,279 211,814 343,587 535,279 9 387,832 733,762 810,397 1,334,470 206,634 357,229 588,244 206,634 357,229 588,244 10 407,224 733,762 818,701 1,424,964 201,261 371,298 646,250 201,261 371,298 646,250 15 519,732 733,762 865,100 1,986,467 171,680 449,252 1,031,586 171,680 449,252 1,031,586 20 663,324 733,762 920,054 2,787,179 134,926 541,269 1,639,699 134,926 541,269 1,639,699
- -------- (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 14 LEGACY ENHANCER SINGLE PREMIUM $250,000.00 INITIAL SPECIFIED AMOUNT $733,762 DEATH BENEFIT OPTION 1 MALE AGE 45 NONSMOKER ASSUMING GUARANTEED CHARGES
ACCUMULATION VALUE CASH SURRENDER VALUE DEATH BENEFIT ASSUMING ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL HYPOTHETICAL GROSS ANNUAL ANNUAL INVESTMENT RETURN GROSS ANNUAL INVESTMENT INVESTMENT RETURN OF OF RETURN OF END OF ACCUMULATED ------------------------- ------------------------- ------------------------- POLICY YEAR PREMIUMS(1) 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% - ----------- ----------- ------- ------- --------- ------- ------- --------- ------- ------- --------- 1 262,500 733,762 745,411 787,907 243,836 258,647 273,393 243,836 258,647 273,393 2 275,625 733,762 747,571 835,247 237,561 267,527 298,902 237,561 267,527 298,902 3 289,406 733,762 749,737 885,418 231,157 276,639 326,703 231,157 276,639 326,703 4 303,877 733,762 751,923 938,609 224,610 285,992 356,997 224,610 285,992 356,997 5 319,070 733,762 754,092 994,957 217,890 295,579 389,989 217,890 295,579 389,989 6 335,024 733,762 756,268 1,054,685 210,977 305,403 425,913 210,977 305,403 425,913 7 351,775 733,762 758,386 1,117,906 203,818 315,444 464,983 203,818 315,444 464,983 8 369,364 733,762 760,476 1,184,862 196,369 325,691 507,444 196,369 325,691 507,444 9 387,832 733,762 762,525 1,255,750 188,575 336,126 553,543 188,575 336,126 553,543 10 407,224 733,762 764,529 1,330,795 180,370 346,730 603,543 180,370 346,730 603,543 15 519,732 733,762 774,572 1,778,753 131,423 402,241 923,718 131,423 402,241 923,718 20 663,324 733,762 784,027 2,375,316 61,323 461,243 1,397,400 61,323 461,243 1,397,400
- -------- (1) Assumes net interest of 5% compounded annually. THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 15 ADDITIONAL INFORMATION A general overview of the Policies appears at pages -- . The additional information that follows gives more details, but generally does not repeat what is set forth above.
PAGE TO SEE IN THIS CONTENTS OF ADDITIONAL INFORMATION PROSPECTUS ---------------------------------- ---------- AGL.................................................................. Separate Account VL-R................................................ Tax Effects.......................................................... Voting Privileges.................................................... Your Beneficiary..................................................... Assigning Your Policy................................................ More About Policy Charges............................................ Effective Date of Policy and Related Transactions.................... Distribution of the Policies......................................... Payment of Policy Proceeds........................................... Adjustments to Death Benefit......................................... Additional Rights That We Have....................................... Our Reports to Policy Owners......................................... AGL's Management..................................................... Legal Matters........................................................ Accounting and Actuarial Experts..................................... Certain Potential Conflicts..........................................
Special words and phrases. If you want more information about any words or phrases that you read in this prospectus, you may wish to refer to the Index of Words and Phrases that appears at the end of the back cover of this prospectus. That index will tell you on what page you can read more about many of the words and phrases that we use. AGL We are American General Life Insurance Company ("AGL"). AGL is a stock life insurance company organized under the laws of Texas. AGL is a successor in interest to a company originally organized under the laws of Delaware in 1917. AGL is a 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 VL-R We hold the Mutual Fund shares in which any of your accumulation value is invested in our Separate Account VL-R. Separate Account VL-R is a "separate account," as defined by the SEC and is registered as a unit investment trust with the SEC under the Investment Company Act of 1940. We created the separate account on May 6, 1997. For record keeping and financial reporting purposes, Separate Account VL-R is divided into 22 separate "divisions", 6 of which correspond to one of the 6 available investment options. The remaining 16 divisions represent investment options available under another variable life Policy we offer. We hold the Mutual Fund shares in which we invest your accumulation value for an investment option in the division that corresponds to that investment option. The assets in the Separate Account VL-R are our property. Nevertheless, the assets in the Separate Account VL-R would be available only to satisfy the claims of owners of the Policies, to the extent they have allocated 16 their accumulation value to the Separate Account VL-R. Our other creditors could reach only those Separate Account VL-R assets (if any) that are in excess of the amount of our reserves and liabilities under the Policies with respect to the Separate Account VL-R. TAX EFFECTS This discussion is based on current federal income tax law and interpretations. It assumes that the Policy owner is a natural person who is a U.S. citizen and resident. The tax effects on corporate taxpayers, non-U.S. residents or non-U.S. citizens, may be different. This discussion is general in nature, and should not be considered tax advice, for which you should consult a qualified tax adviser. General. A Legacy Enhancer Policy will be treated as "life insurance" for federal income tax purposes (a) if it meets the definition of life insurance under Section 7702 of the Internal Revenue Code of 1986 ("the Code") and (b) for as long as the investments made by the underlying Mutual Funds satisfy certain investment diversification requirements under Section 817(h) of the Code. We believe that the Policies will meet these requirements and that: . the death benefit received by the beneficiary under your Policy will not be subject to federal income tax; and . increases in your Policy's accumulation value as a result of interest or investment experience will not be subject to federal income tax unless and until there is a distribution from your Policy, such as a surrender or a partial surrender. The federal income tax consequences of a distribution from your Policy can be affected by whether your Policy is determined to be a "modified endowment contract" (which is discussed below). In all cases, however, the character of all income that is described below as taxable to the payee will be ordinary income (as opposed to capital gain). Testing for modified endowment contract status. Your Policy will be a "modified endowment contract" if, at any time during the first seven Policy years, you have paid a cumulative amount of premiums that exceeds the premiums that would have been paid by that time under a similar fixed-benefit insurance policy that was designed (based on certain assumptions mandated under the Code) to provide for paid-up future benefits after the payment of seven level annual premiums. This is called the "seven-pay" test. Whenever there is a "material change" under a Policy, the Policy will generally be (a) treated as a new contract for purposes of determining whether the Policy is a modified endowment contract and (b) subjected to a new seven- pay period and a new seven-pay limit. The new seven-pay limit would be determined taking into account, under a prescribed formula, the accumulation value of the Policy at the time of such change. A materially changed Policy would be considered a modified endowment if it failed to satisfy the new seven-pay limit. A material change for these purposes could occur as a result of a change in death benefit option. A material change will occur as a result of an increase in your Policy's specified amount of coverage, and certain other changes. If your Policy's benefits are reduced during the first seven Policy years (or within seven years after a material change), the calculated seven-pay premium limit will be redetermined based on the reduced level of benefits and applied retroactively for purposes of the seven-pay test. (Such a reduction in benefits could include, for example, a decrease in the specified amount resulting from a partial surrender). If the premiums previously paid are greater than the recalculated seven-payment premium level limit, the Policy will become a modified endowment contract. A life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. Other effects of Policy changes. Changes made to your Policy (for example, a decrease in benefits or a lapse or reinstatement of your Policy) may also have other effects on your Policy. Such effects may include impacting 17 the maximum amount of premiums that can be paid under your Policy, as well as the maximum amount of accumulation value that may be maintained under your Policy. Taxation of pre-death distributions if your Policy is not a modified endowment contract. As long as your Policy remains in force during the insured person's lifetime, as a non-modified endowment contract, a Policy loan will be treated as indebtedness, and no part of the loan proceeds will be subject to current federal income tax. Interest on the loan generally will not be tax deductible. After the first 15 Policy years, the proceeds from a partial surrender will not be subject to federal income tax except to the extent such proceeds exceed your "basis" in your Policy. (Your basis generally will equal the premiums you have paid, less the amount of any previous distributions from your Policy that were not taxable.) During the first 15 Policy years, the proceeds from a partial surrender could be subject to federal income tax, under a complex formula, to the extent that your accumulation value exceeds your basis in your Policy. On the maturity date or upon full surrender, any excess in the amount of proceeds we pay (including amounts we use to discharge any Policy loan) over your basis in the Policy, will be subject to federal income tax. In addition, if a Policy terminates after a grace period while there is a policy loan, the cancellation of such loan and accrued loan interest will be treated as a distribution and could be subject to tax under the above rules. Finally, if you make an assignment of rights or benefits under your Policy you may be deemed to have received a distribution from your Policy, all or part of which may be taxable. Taxation of pre-death distributions if your Policy is a modified endowment contract. If your Policy is a modified endowment contract, any distribution from your Policy during the insured person's lifetime will be taxed on an "income-first" basis. Distributions for this purpose include a loan (including any increase in the loan amount to pay interest on an existing loan or an assignment or a pledge to secure a loan) or partial surrender. Any such distributions will be considered taxable income to you to the extent your accumulation value exceeds your basis in the Policy. For modified endowment contracts, your basis is similar to the basis described above for other Policies, except that it also would be increased by the amount of any prior loan under your Policy that was considered taxable income to you. For purposes of determining the taxable portion of any distribution, all modified endowment contracts issued by the same insurer (or its affiliate) to the same owner (excluding certain qualified plans) during any calendar year are aggregated. The U.S. Treasury Department has authority to prescribe additional rules to prevent avoidance of "income-first" taxation on distributions from modified endowment contracts. A 10% penalty tax also will apply to the taxable portion of most distributions from a Policy that is a modified endowment contract. The penalty tax will not, however, apply to distributions (i) to taxpayers 59 years of age or older, (ii) in the case of a disability (as defined in the Code) or (iii) received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his or her beneficiary. If your Policy terminates after a grace period while there is a Policy loan, the cancellation of such loan will be treated as a distribution to the extent not previously treated as such and could be subject to tax, including the 10% penalty tax, as described above. In addition, on the maturity date or upon a full surrender, any excess of the proceeds we pay (including any amounts we use to discharge any loan) over your basis in the Policy, will be subject to federal income tax and, unless an exception applies, the 10% penalty tax. Distributions that occur during a Policy year in which your Policy becomes a modified endowment contract, and during any subsequent Policy years, will be taxed as described in the two preceding paragraphs. In addition, distributions from a Policy within two years before it becomes a modified endowment contract also will be subject to tax in this manner. This means that a distribution made from a Policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. The Treasury Department has been authorized to prescribe rules which would treat similarly other distributions made in anticipation of a policy becoming a modified endowment contract. 18 Policy lapses and reinstatements. A Policy which has lapsed may have the tax consequences described above, even though you may be able to reinstate that Policy. For tax purposes, some reinstatements may be treated as the purchase of a new insurance contract. Diversification. Under Section 817(h) of the Code, the Treasury Department has issued regulations that implement investment diversification requirements. Failure by us to comply with these regulations would disqualify your Policy as a life insurance policy under Section 7702 of the Code. If this were to occur, you would be subject to federal income tax on the income under the Policy for the period of the disqualification and for subsequent periods. Our Separate Account VL-R, through the Mutual Funds, intends to comply with these requirements. Although the Company does not have direct control over the investments or activities of the Mutual Funds, it will enter into agreements with them requiring the Mutual Funds to comply with the diversification requirements of the Section 817(h) Treasury Regulations. In connection with the issuance of then temporary diversification regulations, the Treasury Department stated that it anticipated the issuance of guidelines prescribing the circumstances in which the ability of a policy owner to direct his or her investment to particular Mutual Funds within a Separate Account VL-R may cause the policy owner, rather than the insurance company, to be treated as the owner of the assets in the account. If you were considered the owner of the assets of the Separate Account VL-R, income and gains from the account would be included in your gross income for federal income tax purposes. Under current law, however, we believe that AGL, and not the owner of a Policy, would be considered the owner of the assets of our Separate Account VL-R. Estate and generation skipping taxes. If the insured person is the Policy's owner, the death benefit under a Legacy Enhancer Policy will generally be includable in the owner's estate for purposes of federal estate tax. If the owner is not the insured person, under certain conditions, only an amount approximately equal to the cash surrender value of the Policy would be includable. Federal estate tax is integrated with federal gift tax under a unified rate schedule. In general, estates less than $625,000 (or larger amounts specified in the Code to commence in certain future years) will not incur a federal estate tax liability. In addition, an unlimited marital deduction may be available for federal estate tax purposes. As a general rule, if a "transfer" is made to a person two or more generations younger than the Policy's owner, a generation skipping tax may be payable at rates similar to the maximum estate tax rate in effect at the time. The generation skipping tax provisions generally apply to "transfers" that would be subject to the gift and estate tax rules. Individuals are generally allowed an aggregate generation skipping tax exemption of $1 million. Because these rules are complex, you should consult with a qualified tax adviser for specific information, especially where benefits are passing to younger generations. The particular situation of each Policy owner, insured person or beneficiary will determine how ownership or receipt of Policy proceeds will be treated for purposes of federal estate and generation skipping taxes, as well as state and local estate, inheritance and other taxes. Pension and profit-sharing plans. If a life insurance policy is purchased by a trust or other entity that forms part of a pension or profit-sharing plan qualified under Section 401(a) of the Code for the benefit of participants covered under the plan, the federal income tax treatment of such policies will be somewhat different from that described above. If purchased as part of a pension or profit-sharing plan, the reasonable net premium cost for such amount of insurance is required to be included annually in the plan participant's gross income. This cost (generally referred to as the "P.S. 58" cost) is reported to the participant annually. If the plan participant dies while covered by the plan and the policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the policy's accumulation value will not be subject to federal income tax. However, the policy's accumulation value will generally be taxable to the extent it exceeds the participant's cost basis in the policy. The participant's cost basis will generally include the costs of insurance previously reported as income to the participant. Special rules may apply if the participant had borrowed from the policy or was an owner-employee under the plan. 19 There are limits on the amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan. Complex rules, in addition to those discussed above, apply whenever life insurance is purchased by a tax qualified plan. You should consult a qualified tax adviser. Other employee benefit programs. Complex rules may also apply when a policy is held by an employer or a trust, or acquired by an employee, in connection with the provision of other employee benefits. These policy owners must consider whether the policy was applied for by or issued to a person having an insurable interest under applicable state law and with the insured person's consent. The lack of an insurable interest or consent may, among other things, affect the qualification of the policy as life insurance for federal income tax purposes and the right of the beneficiary to receive a death benefit. ERISA. Employers and employer-created trusts may be subject to reporting, disclosure and fiduciary obligations under the Employee Retirement Income Security Act of 1974. You should consult a qualified legal adviser. Our taxes. The operations of our Separate Account VL-R are reported in our federal income tax return, but we currently pay no income tax on the Separate Account VL-R's investment income and capital gains, because these items are, for tax purposes, reflected in our variable life insurance policy reserves. Therefore, no charge is currently being made to any Separate Account VL-R division for taxes. We reserve the right to make a charge in the future for taxes incurred; for example, a charge to the Separate Account VL-R for income taxes incurred by us that are allocable to the Policies. We may have to pay state, local or other taxes in addition to applicable taxes based on premiums. At present, these taxes are not substantial. If they increase, charges may be made for such taxes when they are attributable to our Separate Account VL-R or allocable to the Policies. Certain Mutual Funds in which your accumulation value is invested may elect to pass through to AGL 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. When we withhold income taxes. Generally, unless you provide us with an election to the contrary before we make the distribution, we are required to withhold income tax from any proceeds we distribute as part of a taxable transaction under your Policy. In some cases, where generation skipping taxes may apply, we may also be required to withhold for such taxes unless we are provided satisfactory written notification that no such taxes are due. Tax changes. The U.S. Congress frequently considers legislation that, if enacted, could change the tax treatment of life insurance policies. In addition, the Treasury Department may amend existing regulations, issue regulations on the qualification of life insurance and modified endowment contracts, or adopt new interpretations of existing law. State and local tax law or, if you are not a U.S. citizen and resident, foreign tax law, may also affect the tax consequences to you, the insured person or your beneficiary, and are subject to change. Any changes in federal, state, local or foreign tax law or interpretation could have a retroactive effect. We suggest you consult a qualified tax adviser. VOTING PRIVILEGES You will be entitled to instruct us how to vote Mutual Fund shares held in the divisions of Separate Account VL-R and attributable to your Policy at meetings of shareholders of the Funds. The number of votes for which you may give directions will be determined as of the record date for the meeting. The number of votes you are entitled to direct with respect to a particular Mutual Fund is equal to (a) your accumulation value invested in that Fund divided by (b) the net asset value of one share of that Fund. Fractional votes will be recognized. 20 Separate Account VL-R will vote all shares of each Fund that it holds of record in the same proportions as those shares for which we have received instructions from owners participating in that Fund through the Separate Account VL-R. If you are entitled to give us voting instructions, we will send you proxy material and a form for providing such instructions. In certain cases, we may disregard instructions relating to changes in a Fund's investment manager or its investment policies. We will advise you if we do and detail the reasons in our next report to Policy owners. 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. YOUR BENEFICIARY You name your beneficiary when you apply for a Policy. The beneficiary is entitled to the insurance benefits of the Policy. You may change the beneficiary during the insured person's lifetime. We also require the consent of any irrevocably named beneficiary. A new beneficiary designation is effective as of the date you sign it, but will not affect any payments we may make before we receive it. If no beneficiary is living when the insured person dies, we will pay the insurance proceeds to the owner or the owner's estate. ASSIGNING YOUR POLICY You may assign (transfer) your rights in a Policy to someone else as collateral for a loan or for some other reason. We will not be bound by an assignment unless it is received in writing. Two copies of the assignment must be forwarded to us. We are not responsible for any payment we make or any action taken before we receive due and complete notice of the assignment in good order. Nor are we responsible for the validity of the assignment. An absolute assignment is a change of ownership. Because there may be unfavorable tax consequences, including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary, you should consult a qualified tax adviser prior to making an assignment. MORE ABOUT POLICY CHARGES Purpose of our charges. The charges under the Policies are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the Policies. They are also designed, in the aggregate, to compensate us for the risks we assume and services that we provide under the Policies. These include mortality risks (such as the risk that insured persons will, on average, die before we expect, thereby increasing the amount of claims we must pay); investment risks (such as the risk that adverse investment performance will make it more difficult for us to reduce the amount of our daily charge for revenues below what we anticipate); sales risks (such as the risk that the number of Policies we sell and the premiums we receive net of withdrawals, are less than we expect, thereby depriving us of expected economies of scale); regulatory risks (such as the risk that tax or other regulations may be changed in ways adverse to issuers of variable life insurance policies); and expense risks (such as the risk that the costs of administrative services that the Policies require us to provide will exceed what we currently project). If the charges that we collect from the Policies exceed our total costs in connection with the Policies, we will earn a profit. Otherwise we will incur a loss. The current monthly insurance charge has been designed primarily to provide funds out of which we can make payments of death benefits under the Policies as insured persons die. Any excess from the charges discussed in the preceding paragraph, are primarily intended (a) to defray other expenses in connection with the Policies (such as the costs of processing applications for Policies and other unreimbursed administrative expenses, costs of paying marketing and distribution expenses for the Policies, and 21 costs of paying death claims for the mortality experience of insured persons is worse than we expect), (b) to compensate us for the risk we assume under the Policies, or (c) otherwise to be retained by us as profit. Although the preceding paragraphs describe the primary purposes for which charges under the Policies have been designed, these distinctions are imprecise and subject to considerable change over the life of a Policy. We have full discretion to retain or use the revenues from any charge or charge increase for any purpose, whether or not related to the Policies. Change of tobacco use. If the person insured under your Policy is a tobacco user, you may apply to us for an improved risk class if the insured person meets our then applicable requirements for demonstrating that he or she has ceased tobacco use for a sufficient period. Gender neutral Policies. Our cost of insurance charge rates in Montana will not be greater than the comparable male rates illustrated in this prospectus. Congress and the legislatures of various states have from time to time considered legislation that would require insurance rates to be the same for males and females of the same age, rating class and tobacco user status. In addition, employers and employee organizations should consider, in consultation with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase of life insurance policies in connection with an employment-related insurance or benefit plan. In a 1983 decision, the United States Supreme Court held that, under Title VII, optional annuity benefits under a deferred compensation plan could not vary on the basis of sex. Cost of insurance rates. Because of specified amount increases, different cost of insurance rates may apply to different increments of specified amount under your Policy. If so, we attribute your accumulation value first to the oldest increments of specified amount in order to compute our net amount at risk at each cost of insurance rate. See "Monthly Insurance Charge" beginning on page . Miscellaneous. Each of the distributors or advisers of the Mutual Funds listed on page 1 of this prospectus reimburses us, on a quarterly basis, for certain administrative, Policy, and Policy owner support expenses. These reimbursements will be reasonable in relation to the services performed and are not designed to result in a profit. These reimbursements are paid by the distributors or the advisers, and will not be paid by the Mutual Funds, the divisions or the owners. No payments have yet been made under these arrangements, because no Policies have yet been issued. EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS Valuation dates, times, and periods. We generally compute values under Policies on each day that we are open for business except, with respect to any investment option, days on which the related Mutual Fund does not value its shares. We call each such day a "valuation date." We compute policy values as of 3:00 p.m., Central time, on each valuation date. We call this our "close of business." We call the time from the close of business on one valuation date to the close of business of the next valuation date a "valuation period." Date of receipt. Generally we consider that we have received a premium payment or another communication from you on the day we actually receive it in full and proper order at our Home Office (shown on the first page of this prospectus). If we receive it after the close of business on any valuation date, however, we consider that we have received it on the day following that valuation date. Commencement of insurance coverage. After you apply for a Policy, it can sometimes take up to several weeks for us to gather and evaluate all the information we need to decide whether to issue a Policy to you and, if so, what the insured person's insurance rate class should be. We will not pay a death benefit under a Policy unless (a) it has been delivered to and accepted by the owner and at least the minimum first premium has been 22 paid, and (b) at the time of such delivery and payment, there have been no adverse developments in the insured person's health or risk of death. Date of issue; Policy months and years. After we approve an application for a Policy and assign an appropriate insurance rate class, we prepare the Policy. The day we begin to deduct charges will appear on page 3 of your Policy and is called the "date of issue." Policy months and years are measured from the date of issue. In order to preserve a younger age at issue for the insured person, we may assign a date of issue to a Policy that is up to 6 months earlier than otherwise would apply. Monthly deduction days. Each charge that we deduct monthly is assessed against your accumulation value at the close of business on the date of issue and at the end of each subsequent valuation period that includes the first day of a Policy month. We call these "monthly deduction days." Commencement of investment performance. We begin to credit an investment return to the accumulation value resulting from your initial premium payment on the later of (a) the date of issue, or (b) the date all requirements needed to place the Policy in force have been satisfied, including underwriting approval and receipt in the Home Office of the necessary premium, or (c) in the case of a back-dated policy, the date we approve the Policy for insurance. Effective date of other premium payments and requests that you make. Premium payments (after the first) and transactions implemented in response to requests and elections made by you are generally effected at the end of the valuation period in which we receive the payment, request or election and based on prices and values computed as of that same time. Exceptions to this general rule are as follows: . Increases you request in the specified amount of insurance, and reinstatements of Policies that have lapsed take effect on the Policy's monthly deduction day on or next following our approval of the transaction; . We may return premium payments if we determine that such premiums would cause your Policy to become a modified endowment contract or to cease to qualify as life insurance under federal income tax law or exceed the maximum net amount at risk; . If you exercise the right to return your Policy described on the first page of this prospectus, your coverage will end when you mail us your Policy or deliver it to your AGL representative; and . If you pay a premium in connection with a request which requires our approval, your payment will be applied when received rather than following the effective date of the change requested so long as your coverage is in force and the amount paid will not cause you to exceed premium limitations under the Code. If we do not approve your request, no premium will be refunded to you except to the extent necessary to cure any violation of the maximum premium limitations under the Code. This procedure will not apply to premiums remitted in connection with reinstatement requests. DISTRIBUTION OF THE POLICIES American General Securities Incorporated ("AGSI") is the principal underwriter of the Policies. AGSI is a wholly-owned subsidiary of AGL, a wholly-owned subsidiary of American General Corporation ("American General"), and its principal office is 2727 Allen Parkway, Houston, Texas, 77019. AGSI was organized as a Texas corporation on March 8, 1983 and is a registered broker-dealer under the Securities Exchange Act of 1934 ("1934 Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). AGSI is also the principal underwriter for AGL's Separate Accounts A and D, and Separate Account E of American General Life Insurance Company of New York, which is a wholly-owned subsidiary of AGL. These separate accounts are registered investment companies. AGL has entered into a distribution agreement with AGSI which acts as the principal distributor of the Policies and provides certain marketing support services for which it is compensated by AGL. Pursuant to the 23 agreement, AGL pays AGSI a distribution fee of .20% of each Policy's average annual cash value. AGSI may enter into other agreements with broker-dealers registered under the 1934 Act. AGSI has also entered into an agreement with Independent Advantage Financial and Insurance Services, Inc., a licensed insurance agency and another indirect wholly-owned subsidiary of American General, to provide certain additional marketing support services. PAYMENT OF POLICY PROCEEDS General. We will pay any death benefit, maturity benefit, cash surrender value or loan proceeds within seven days after we receive the last required form or request (and any other documents that may be required for payment of death benefit). If we do not have information about the desired manner of payment within 60 days after the date of notification of the insured person's death, we will pay the proceeds as a single sum, normally within seven days thereafter. Delay for check clearance. We reserve the right to defer payment of that portion of your accumulation value that is attributable to a premium payment made by check for a reasonable period of time (not to exceed 15 days) to allow the check to clear the banking system. Delay of Separate Account VL-R proceeds. We reserve the right to defer payment of any death benefit, loan or other distribution that is derived from that portion of your accumulation value that is allocated to Separate Account VL-R, 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 accumulation value; or (c) the SEC by order permits the delay for the protection of owners. Transfers and allocations of accumulation value among the investment options may also be postponed under these circumstances. If we need to defer calculation of Separate Account VL-R values for any of the foregoing reasons, all delayed transactions will be processed at the next values that we do compute. Delay to challenge coverage. We may challenge the validity of your insurance Policy based on any material misstatements in your application and any application for a change in coverage. However, . We cannot challenge the Policy after it has been in effect, during the insured person's lifetime, for two years from the date the Policy was issued or restored after termination. (Some states may require that we measure this time in some other way.) . We cannot challenge any Policy change that requires evidence of insurability (such as an increase in specified amount) after the change has been in effect for two years during the insured person's lifetime. ADJUSTMENTS TO DEATH BENEFIT Suicide. If the insured person commits suicide within two years after the date on which the Policy was issued, the death benefit will be limited to the total of all premiums that have been paid to the time of death minus any outstanding Policy loan and any partial surrenders. If the insured person commits suicide within two years after the effective date of an increase in specified amount that you requested, we will pay the death benefit based on the specified amount which was in effect before the increase, plus the monthly insurance deductions for the increase. Some states require that we compute differently these periods for non-contestability following a suicide. Wrong age or sex. If the age or gender of the insured person was misstated on your application for a Policy (or for any increase in benefits), we will adjust any death benefit to be what the monthly insurance charge deducted for the current month would have purchased based on the correct information. Death during grace period. If the insured person dies during the Policy's grace period, we will deduct any overdue monthly charges from the insurance proceeds. 24 ADDITIONAL RIGHTS THAT WE HAVE We have the right at any time to: . transfer the entire balance in an investment option in accordance with any transfer request you make that would reduce your accumulation value for that option to below $5,000; . transfer the entire balance in proportion to any other investment options you then are using, if the accumulation value in an investment option is below $5,000 for any other reason; . terminate the automatic rebalancing feature if your accumulation value falls below $100,000; . change the underlying Mutual Fund that any investment option uses; . add or delete investment options, combine two or more investment options, or withdraw assets relating to Legacy Enhancer from one investment option and put them into another; . operate Separate Account VL-R under the direction of a committee or discharge such a committee at any time; . operate the Separate Account VL-R, or one or more investment options, in any other form the law allows, including a form that allows us to make direct investments. Our Separate Account VL-R may be charged an advisory fee if its investments are made directly rather than through another investment company. In that case, we may make any legal investments we wish; or . make other changes in the Policies that in our judgment are necessary or appropriate to ensure that the Policies continue to qualify for tax treatment as life insurance, or that do not reduce any cash surrender value, death benefit, accumulation value, or other accrued rights or benefits. If there are any material changes in the underlying investments of an investment option that you are using, you will be notified as required by law. We intend to comply with applicable law in making any changes and, if necessary, we will seek Policy owner approval. PERFORMANCE INFORMATION From time to time, we may quote performance information for the divisions of the Separate Account VL-R in advertisements, sales literature, or reports to owners or prospective investors. We may quote performance information in any manner permitted under applicable law. We may, for example, present such information as a change in a hypothetical owner's cash value or death benefit. We also may present the yield or total return of the division based on a hypothetical investment in a Policy. The performance information shown may cover various periods of time, including periods beginning with the commencement of the operations of the division or the Mutual Funds in which it invests. The performance information shown may reflect the deduction of one or more charges, such as the premium charge or surrender charge, and we generally expect to exclude costs of insurance charges because of the individual nature of these charges. OUR REPORTS TO POLICY OWNERS Shortly after the end of each Policy year, we will mail you a report that includes information about your Policy's current death benefit, accumulation value, cash surrender value and policy loans. Notices will be sent to you to confirm premium payments, transfers and certain other Policy transactions. We will mail to you at your last known address of record, these and any other reports and communications required by law. You should therefore give us prompt written notice of any address change. 25 AGL'S MANAGEMENT The directors, executive officers, and (to the extent responsible for variable life operations) the other principal officers of AGL are listed below.
NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS ---- ---------------------------------------------------- James S. D'Agostino, Jr. Director and Vice Chairman of American General Life Insurance Company since May 1997. Director and President American General Corporation since 1996 and Senior Vice President (February 1993-August 1993). Officer positions with other American General Companies since July 1986. Jon P. Newton........... Director and Vice Chairman of American General Life Insurance Company since February 1996. Director of American General Corporation since October 1995 and Vice Chairman since April 1997; Vice Chairman and General Counsel (October 1995-April 1997). Director of other American General affiliates since October 1994. Prior thereto, Partner with Clark, Thomas, Winter & Newton, Austin, Texas (February 1979- February 1993). Directorships with Houston Museum of Natural Science Board of Trustees since 1997; University of Texas Law School Foundation Board of Trustees, Austin, Texas since 1997; University of Texas-Houston Health Science Center Development Board, Houston, Texas since 1996; Texas Commerce Bancshares, Houston, Texas (1985-1993); Texas Commerce Bank, Austin, Texas (1979-1993); Lomas Financial Corporation, Dallas, Texas (1983-1993); Vista Properties, Inc., Dallas, Texas (1992-1993). Rodney O. Martin, Jr. .. Director, President and CEO of American General Life Insurance Company since August 1996. Chairman of the Board since April, 1998. President of American General Life Insurance Company of New York (November 1995-August 1996). Vice President Agencies, with Connecticut Mutual Life Insurance Company (1990- 1995). David A. Fravel......... Director and Senior Vice President of American General Life Insurance Company since November 1996. Elected Executive Vice President in April, 1998. Senior Vice President Massachusetts Mutual, Springfield, Missouri (March 1996-June 1996); Vice President, New Business, Connecticut Mutual Life, Hartford, Connecticut (December 1978-March 1996). Robert F. Herbert, Jr... Director and Senior Vice President, Chief Financial Officer of American General Life Insurance Company since May 1996, and Controller, Actuary from June 1988 to May 1996. Royce G. Imhoff, II..... Director, Senior Vice President and Chief Marketing Officer for American General Life Insurance Company since November 1997, Vice President (August 1996- August 1997), and Regional Director (1992-1996). John V. LaGrasse........ Director, Senior Vice President and Chief Systems Officer since August 1996. Prior thereto, Director Citicorp Insurance Services, Inc., Dover, Delaware (1986-1996).
26
NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS ---- ---------------------------------------------------- Gary D. Reddick............ Executive Vice President of American General Life Insurance Company since April 1998. Vice Chairman since July 1997 and Executive Vice President- Administration of The Franklin Life Insurance Company since February 1995. Senior Vice President- Administration of American General Corporation (October 1994-February 1995). Senior Vice President for American General Life Insurance Company (September 1986-October 1994). Philip K. Polkinghorn...... Director of American General Life Insurance Company since February 1997. Senior Vice President-Product Development Center since April, 1998. Senior Vice President and Chief Marketing Officer (December 1996-September 1997). Prior thereto, Chief Financial Officer, Connecticut Mutual Life Insurance Company (March 1995-March 1996); Senior Vice President First Colony Life Insurance Company, Lynchburg, Virginia (March 1996-December 1996), and Chief Marketing Officer, Allmerica Financial, Worchester, MA (March 1993-April 1994). Wayne A. Barnard........... Senior Vice President and Chief Actuary of American General Life Insurance Company since November 1997 and Vice President since February, 1991 and Chief Actuary since February, 1993. B. Shelby Baetz............ Senior Vice President, General Counsel and Secretary of American General Life Insurance Company since April 1998. From 1986 through 1997, held various attorney positions at American General Corporation with the last title being Associate General Counsel. F. Paul Kovach Jr.......... Senior Vice President-Broker Dealers and FIMG for American General Life Insurance Company since August 1997. Since October 1994, President and Director of American General Securities, Inc. Vice President of Chubb Securities Corporation, Concord, New Hampshire, (February 1990-October 1994). Simon J. Leech............. In July 1997 named as Senior Vice President-Houston Service Center for American General Life Insurance Company. Various positions with American General Life Company since 1981, including Director of POS in 1993, and Vice President-Policy Administration in 1995. Brian D. Murphy............ In April 1998 named as Senior Vice President- Insurance Operations of American General Life Insurance Company. Vice President-Sales, Phoenix Home Life, Hartford, CT (January 1997-April 1998). Vice President of Underwriting and Issue, Phoenix Home Life (July 1994-January 1997). Various positions with Mutual New York, Syracuse, NY, including Agent, Agency Manager, Marketing Life and DI Underwriting Management, (1978-July 1994).
27
NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS ---- ---------------------------------------------------- Robert A. Slepicka......... In September, 1997 named as President of the Corporate Markets Group of American General Life Insurance Company. Senior Vice President-American General Life Insurance Company, American General Life Insurance Company of New York, and the United States Life Insurance Company, New York. President- American General Life Insurance Company of New York (December 1996). President-United States Life Insurance Company, New York (June 1997). Senior Vice President of New York Life Insurance Company, New York, NY (1987-October 1996). Don M. Ward................ In February 1998 named as Senior Vice President- Variable Products-Marketing of American General Life Insurance Company. Vice President of Pacific Life Insurance Company, Newport Beach, CA (1991-February 1998). Larry M. Robinson.......... In April 1998 named as Vice President-Variable Products-Marketing of American General Life Insurance Company. From July 1996 Vice President of American General Life Insurance Company. Vice President of Business Development of Allmerica Financial, Worcester, MA (1994-1996). Vice President of Life Marketing at Nationwide Insurance Enterprise, Columbus, Ohio (1991-1994).
The principal business address of each person listed above is our Home Office; except that the street number for Messrs. D'Agostino and Newton, is 2929 Allen Parkway and the street address for Mr. Reddick is #1 Franklin Square, Springfield, IL 62713. LEGAL MATTERS We are not involved in any legal proceedings that would be considered material with respect to a Policy owner's interest in Separate Account VL-R. Pauletta P. Cohn, Esquire, Associate General Counsel of the American General Independent Producer Division, an affiliate of AGL, has opined as to the validity of the Policies. Mayer, Brown & Platt has advised AGL about certain federal securities and tax law matters in connection with the Policies. ACCOUNTING AND ACTUARIAL EXPERTS The financial statements of AGL included in this prospectus have been audited by Ernest & Young, LLP, as stated in their reports. The financial statements of AGL have been included in reliance on the reports of Ernest & Young, LLP, independent accountants, given on the authority of such firm as experts in accounting and auditing. Actuarial matters in this prospectus have been examined by Wayne A. Barnard, who is Senior Vice President and Chief Actuary of AGL. His opinion on actuarial matters is filed as an exhibit to the registration statement we have filed with the SEC in connection with the Policies. SERVICES AGREEMENT American General Independent Producer Division ("AGIPD") is party to an existing general services agreement with AGL. AGIPD, an affiliate of AGL, is a corporation incorporated in Delaware on November 24, 1997. Pursuant to this agreement, AGIPD provides services to AGL, including most of the administration, data 28 processing, systems, customer services, product development, actuarial, auditing, accounting and legal services for AGL and the Legacy Enhancer Policies. CERTAIN POTENTIAL CONFLICTS The Mutual Funds sell shares to separate accounts of insurance companies, both affiliated and not affiliated with AGL. We currently do not foresee any disadvantages to you arising out of this process. Nevertheless, differences in treatment under tax and other laws, as well as other considerations, could cause the interests of various owners to conflict. For example, violation of the federal tax laws by one separate account investing in the Funds could cause the contracts funded through another separate account to lose their tax- deferred status, unless remedial action were taken. However, each mutual Fund has advised us that its board of trustees (or directors) intends to monitor events in order to identify any material irreconcilable conflicts that possibly may arise and to determine what action, if any, should be taken in response. If we believe that a Fund's response to any such event insufficiently protects our Policy owners, we will see to it that appropriate action is taken to do so. If it becomes necessary for any separate account to replace shares of any Mutual Fund in which it invests, that Fund may have to liquidate securities in its portfolio on a disadvantageous basis. YEAR 2000 AGL and its affiliates are in the process of modifying its computer systems to be Year 2000 compliant. During 1997, AGL and its affiliates incurred and expensed $15 million (pretax) related to this project. AGL and its affiliates estimate that it will incur futures costs in excess of $45 million (pretax) for additional internal staff, third-party vendors, and other expenses to render its systems Year 2000 compliant. AGL and its affiliates expect to substantially complete this project during 1998. However, risks and uncertainties exist in most significant systems development projects. If conversion of AGL and its affiliates' systems is not completed on a timely basis, due to non-performance by third-party vendors or other unforeseen circumstances, the Year 2000 issue could have a material adverse impact on the operations of AGL and its affiliates. 29 FINANCIAL STATEMENTS The financial statements of AGL contained in this prospectus should be considered to bear only upon the ability of AGL to meet its obligations under the Legacy Enhancer Policies. They should not be considered as bearing upon the investment experience of the Separate Account VL-R. No financial statements of Separate Account VL-R are included because, as of December 31, 1997, the Separate Account VL-R had not yet commenced operations and has no assets or liabilities.
PAGE TO SEE IN CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN GENERAL LIFE INSURANCE THIS COMPANY PROSPECTUS - -------------------------------------------------------------------- ---------- Report of Ernest & Young, LLP, Independent Auditors................. Consolidated Balance Sheets as of December 31, 1997 and 1996........ Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995................................................ Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996 and 1995................................... Consolidated Statements of Cash Flows for the years, ended December 31, 1997, 1996 and 1995............................................ Notes to Consolidated Financial Statements..........................
[Financial Statements to be filed by pre-effective amendment] 30 INDEX OF WORDS AND PHRASES This index should help you to locate more information about some of the terms and phrases used in this prospectus.
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS ------------ ---------- accumulation value........ AGIPD..................... AGL....................... amount at risk............ automatic rebalancing..... basis..................... beneficiary............... cash surrender value...... close of business......... Code...................... cost of insurance rates... daily charge.............. date of issue............. death benefit............. division.................. dollar cost averaging..... full surrender............ Fund...................... grace period.............. insured person............ investment option......... lapse..................... Legacy Enhancer........... loan, loan interest....... maturity, maturity date... monthly deduction day..... Mutual Fund............... monthly insurance charge..
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS ------------ ---------- Option 1, 2..................................................... our............................................................. owner........................................................... partial surrender............................................... payment option.................................................. planned periodic premium........................................ Policy.......................................................... Policy anniversary.............................................. Policy loan..................................................... Policy month, year.............................................. preferred loan interest......................................... premium payments................................................ premiums........................................................ prospectus...................................................... reinstate, reinstatement........................................ SEC............................................................. Separate Account VL-R........................................... separate account................................................ seven-pay test.................................................. specified amount................................................ surrender....................................................... target.......................................................... telephone transfer.............................................. transfers....................................................... valuation date, period.......................................... we.............................................................. you, your.......................................................
We have filed a registration statement relating to Separate Account VL-R and the Policies with the SEC. The registration statement, which is required by the Securities Act of 1933, includes additional information that is not required in this prospectus. If you would like the additional information, you may obtain it from the SEC's main office in Washington, D.C. You will have to pay a fee for the material. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (OR ANY SALES LITERATURE APPROVED BY AGL) IN CONNECTION WITH THE OFFER OF THE POLICIES, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE POLICIES ARE NOT AVAILABLE IN ALL JURISDICTIONS, AND THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL THEREIN. 31 PART II (OTHER INFORMATION) UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore, or hereafter duly adopted pursuant to authority conferred in that section. RULE 484 UNDERTAKING American General Life Insurance Company's Bylaws provide in Article VII, Section 1 for indemnification of directors, officers and employees of the Company. Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF 1940 American General Life Insurance Company ("AGL") hereby represents that the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and risks assumed by AGL. CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following papers and documents: The facing sheet. Cross-Reference Table. Prospectus, consisting of ____ pages. The undertaking to file reports. The Rule 484 undertaking. Representation pursuant to Section 26(e)(2)(A). The signatures. Written Consents of the following persons: (a) Pauletta P. Cohn, Associate General Counsel of the American General Independent Producer Division. (b) Mayer, Brown & Platt. (c) AGL's actuary. (d) Independent Auditors. The following exhibits: 1. Exhibits required by Article IX, paragraph A of Form N-8B-2: (1)(a) Resolutions of Board of Directors of AGL authorizing the establishment of Separate Account VL-R. (3) (1)(b) Resolutions of Board of Directors of AGL authorizing the establishment of variable life insurance standards of suitability and conduct. (1) (2) Not applicable. (3)(a)(i) Distribution Agreement dated October 3, 1991, between American General Securities Incorporated and American General Life Insurance Company. (2) (3)(a)(ii) Form of First Amendment to Distribution Agreement. (5) (3)(b) Form of Selling Group Agreement. (5) (3)(c) Not applicable. (4) Not applicable. 2 (5)(a)(i) Specimen form of the Lockwood Flexible Premium Variable Life Insurance Policy (Policy Form No. 98615). (Filed herewith) (6)(a) Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective December 31, 1991. (2) (6)(b) Bylaws of American General Life Insurance Company, adopted January 22, 1992. (3) (6)(c) Amendment to the Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective July 13, 1995 (6). (7) Not applicable. (8)(a) Form of Participation Agreement by and between BT Insurance Funds Trust and American General Life Insurance Company. (Filed herewith) (8)(b) Amendment No. 3 to the Participation Agreement by and between Morgan Stanley Universal Funds, Inc. and American General Life Insurance Company. (6) (8)(c) Participation Agreement by and between American General Life Insurance Company and American General Series Portfolio Company. (6) (8)(d) Participation Agreement by and between AIM Variable Insurance Funds, Inc. and American General Life Insurance Company. (6) (8)(e) Participation Agreement by and between Royce Capital Fund and American General Life Insurance Company. (6) (8)(f) Form of Administrative Services Agreement between AGL and fund distributor. (5) (9) All other material contracts not entered into in the ordinary course of business of the trust or of the depositor concerning the trust. Not applicable. (10)(a) Specimen form of application for life insurance issued by AGL. (6) 3 (10)(b) Specimen form of supplemental application for variable life insurance issued by AGL on Policy Form No. 98615. (6) Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Associate General Counsel of American General Independent Producer Division. (6) 2(b) Consent of Mayer, Brown & Platt. (6) 2(c) Opinion and Consent of AGL's actuary. (6) 3 Not applicable. 4 Not applicable. 6 Consent of Independent Auditors. (6) 7 Powers of Attorney. (Filed herewith) 27 Financial Data Schedule. Not applicable. (1) Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R on December 18, 1997. (2) Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 33-43390) of Separate Account D of AGL on October 16, 1991. (3) Incorporated herein by reference to the filing of Post-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate Account D of AGL on April 30, 1992. (4) Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 333-40637) of Separate Account D of AGL on February 12, 1998. (5) Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of the Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R on March 23, 1998. (6) To be filed by amendment. 4 POWERS OF ATTORNEY Each person whose signature appears below hereby appoints Robert F. Herbert, Jr., B. Shelby Baetz, and Pauletta P. Cohn and each of them, any one of whom may act without joinder of the others, as his/her attorney-in-fact to sign on his/her behalf and in the capacity stated below and to file all amendments to this Registration Statement, which amendment or amendments may make such changes and additions to this Registration Statement as such attorney-in-fact may deem necessary or appropriate. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, American General Life Insurance Company Separate Account VL-R, has duly caused this amended registration statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Houston, and State of Texas, on the 29th day of May, 1998. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Registrant) BY: AMERICAN GENERAL LIFE INSURANCE COMPANY (On behalf of the Registrant and itself) BY: ROBERT F. HERBERT, JR. ------------------------------ Robert F. Herbert, Jr. Senior Vice President [SEAL] ATTEST: PAULETTA P. COHN ------------------------ Pauletta P. Cohn Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- RODNEY O. MARTIN, JR. Principal Executive Officer May 29, 1998 - ------------------------ (Rodney O. Martin, Jr.) ROBERT F. HERBERT, JR. Principal Financial and May 29, 1998 - ------------------------- Accounting Officer (Robert F. Herbert, Jr.) 5 Directors - --------- ________________________ May , 1998 (James S. D'Agostino, Jr.) DAVID A. FRAVEL May 29, 1998 - ------------------------ (David A. Fravel) ROBERT F. HERBERT, JR. May 29, 1998 - ------------------------ (Robert F. Herbert, Jr.) May , 1998 - ------------------------ (Royce G. Imhoff, II) JOHN V. LAGRASSE May 29, 1998 - ------------------------ (John V. LaGrasse) RODNEY O. MARTIN, JR. May 29, 1998 - ------------------------ (Rodney O. Martin, Jr.) - ------------------------ May , 1998 (Jon P. Newton) PHILIP K. POLKINGHORN May 29, 1998 - ------------------------ (Philip K. Polkinghorn) 6 EXHIBIT INDEX (1)(a) Resolutions of Board of Directors of AGL authorizing the establishment of Separate Account VL-R. (3) (1)(b) Resolutions of Board of Directors of AGL authorizing the establishment of variable life insurance standards of suitability and conduct. (1) (2) Not applicable. (3)(a)(i) Distribution Agreement dated October 3, 1991, between American General Securities Incorporated and American General Life Insurance Company. (2) (3)(a)(ii) Form of First Amendment to Distribution Agreement. (5) (3)(b) Form of Selling Group Agreement. (5) (3)(c) Not applicable. (4) Not applicable. (5)(a)(i) Specimen form of the Lockwood Flexible Premium Variable Life Insurance Policy (Policy Form No. 98615). (Filed herewith) (6)(a) Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective December 31, 1991. (2) (6)(b) Bylaws of American General Life Insurance Company, adopted January 22, 1992. (3) (6)(c) Amendment to the Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective July 13, 1995 (6). (7) Not applicable. (8)(a) Form of Participation Agreement by and between BT Insurance Funds Trust and American General Life Insurance Company. (Filed herewith) (8)(b) Amendment No. 3 to the Participation Agreement by and between Morgan Stanley Universal Funds, Inc. and American General Life Insurance Company. (6) (8)(c) Participation Agreement by and between American General Life Insurance Company and American General Series Portfolio Company. (6) (8)(d) Participation Agreement by and between AIM Variable Insurance Funds, Inc. and American General Life Insurance Company. (6) (8)(e) Participation Agreement by and between Royce Capital Fund and American General Life Insurance Company. (6) (8)(f) Form of Administrative Services Agreement between AGL and fund distributor. (5) (9) All other material contracts not entered into in the ordinary course of business of the trust or of the depositor concerning the trust. Not applicable. (10)(a) Specimen form of application for life insurance issued by AGL. (6) (10)(b) Specimen form of supplemental application for variable life insurance issued by AGL on Policy Form No. 98615. (6) Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Associate General Counsel of American General Independent Producer Division. (6) 2(b) Consent of Mayer, Brown & Platt. (6) 2(c) Opinion and Consent of AGL's actuary. (6) 3 Not applicable. 4 Not applicable. 6 Consent of Independent Auditors. (6) 7 Powers of Attorney. (Filed herewith) 27 Financial Data Schedule. Not applicable. (1) Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R on December 18, 1997. (2) Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 33-43390) of Separate Account D of AGL on October 16, 1991. (3) Incorporated herein by reference to the filing of Post-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate Account D of AGL on April 30, 1992. (4) Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 333-40637) of Separate Account D of AGL on February 12, 1998. (5) Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of the Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R on March 23, 1998. (6) To be filed by amendment. 2 EX-5.AI 2 SPECIMEN FORM OF LFPV LIFE INSURANCE POLICY EXHIBIT 5(a)(i) AMERICAN GENERAL LIFE INSURANCE COMPANY Home Office: Houston, Texas 2727-A Allen Parkway JOHN DOE [LOGO OF AMERICAN P.O. Box 4880 POLICY NUMBER: 0000000000 GENERAL APPEARS HERE] Houston, Texas 77210-4880 A STOCK COMPANY -------------------------------------------- (713) 522-1111 A SUBSIDIARY OF AMERICAN GENERAL CORPORATION -------------------------------------------- WE WILL PAY THE DEATH BENEFIT PROCEEDS to the Beneficiary if the Insured dies prior to the Maturity Date and while this policy is in force. Payment will be made after We receive due proof of the Insured's death, and will be subject to the terms of this policy. WE WILL PAY THE CASH SURRENDER VALUE of this policy to the Owner on the Maturity Date if the Insured is living on that date. THE AMOUNT OR DURATION OF THE DEATH BENEFIT PROCEEDS AND THE ACCUMULATION VALUES PROVIDED BY THIS POLICY WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. The consideration for this policy is the application and payment of the first premium. The first premium must be paid on or before delivery of this policy. This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death Benefit is payable upon the Insured's death prior to the Maturity Date. Investment results are reflected in policy benefits. ACCUMULATION VALUES are flexible and will be based on the amount and frequency of premiums paid and the investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS. NOTICE OF TEN DAY RIGHT TO EXAMINE POLICY YOU MAY RETURN THIS POLICY WITHIN 10 DAYS AFTER DELIVERY IF YOU ARE NOT SATISFIED WITH IT FOR ANY REASON. THE POLICY MAY BE RETURNED TO US OR TO THE REGISTERED REPRESENTATIVE THROUGH WHOM IT WAS PURCHASED. UPON SURRENDER OF THIS POLICY WITHIN THE 10 DAY PERIOD, IT WILL BE DEEMED VOID FROM THE DATE OF ISSUE, AND WE WILL REFUND ANY PREMIUMS PAID ADJUSTED TO REFLECT INVESTMENT EXPERIENCE. SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE. Secretary President FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY READ YOUR POLICY CAREFULLY INDEX
Allocation of Policy Deductions 4 Loan Account 14 Allocation of Net Premiums 4 General Provisions 18 Annual Report 19 Grace Period 11 Automatic Rebalancing 14 Incontestability 18 Beneficiary and Proceeds 16 Investment Advisor, Change of 9 Cash Surrender Value 11 Investments of the Separate Account 8 Changing Your Insurance Policy 7 Maturity Date 3 Change of Ownership or Beneficiary 16 Owner 5 Changing the Death Benefit Option 7 Payment Options 16 Increasing the Death Benefit Amount 7 Policy Loans 14 Contract 5 Policy Values 9 Cost of Insurance Rate Table 20 Premium Class 2 Date of Issue 3,5 Premium Payments 5 Death Benefit and Death Benefit Options 6 Separate Account 8 Dollar Cost Averaging 13 Surrender, Full and Partial 12 Expense Charges Transfer Provision 13 Premium Expense Charge 4 Valuation of Assets 8 Valuation Dates 8 Valuation Units 8
COMPANY REFERENCE. We, Our, Us, or Company means American General Life Insurance Company. YOU, YOUR. The words You or Your mean the Owner of this policy. HOME OFFICE. Our office at 2727-A Allen Parkway, Houston, Texas 77019-4880; Mailing Address P. O. Box 4880, Houston, Texas 77210- 4880. WRITTEN, IN WRITING. A written request or notice in acceptable form and content, which is signed and dated, and received at Our Home Office. PREMIUM CLASS. The Premium Class of this policy is shown on page 3 as one or a combination of the following terms: .PREFERRED. The term "Preferred" means the cost of insurance is based on the Insured being a non-user of tobacco. .STANDARD. The term "Standard" means the cost of insurance is based on the Insured being a tobacco user. .SPECIAL. The term "Special" means an extra premium is being charged due to the Insured's health, occupation or avocation. NOTICE This Policy Is A Legal Contract Between The Policy Owner And the Company. Page 2 POLICY SCHEDULE BASIC POLICY MONTHLY COST YEARS PAYABLE VARIABLE LIFE SEE PAGE 20 65 ADDITIONAL BENEFITS PROVIDED BY RIDERS NONE PREMIUM CLASS: PREFERRED INITIAL PREMIUM: $250,000.00 PLANNED PERIODIC PREMIUM: $5,000.00 PAYABLE ANNUALLY MONTHLY DEDUCTION DAY: 1ST DAY OF EACH MONTH MINIMUM DEATH BENEFIT $ 500,000 AMOUNT (AFTER A DECREASE IN SPECIFIED AMOUNT) MINIMUM CASH SURRENDER VALUE AFTER A PARTIAL SURRENDER: $ 100,000 MINIMUM PARTIAL SURRENDER $ 5,000 MINIMUM VALUE THAT MAY BE RETAINED IN A DIVISION AFTER A PARTIAL SURRENDER OR TRANSFER $ 5,000 MAXIMUM NET AMOUNT AT RISK [$1,500,000] COVERAGE MAY EXPIRE PRIOR TO THE MATURITY DATE SHOWN WHERE EITHER NO PREMIUMS ARE PAID FOLLOWING PAYMENT OF THE INITIAL PREMIUM, OR SUBSEQUENT PREMIUMS ARE INSUFFICIENT TO CONTINUE COVERAGE TO SUCH DATE.
INSURED: JOHN DOE POLICY NUMBER: 0000000000 INSURANCE AGE: 35 DATE OF ISSUE: JUNE 1, 1998 INITIAL SPECIFIED AMOUNT: $500,000 MATURITY DATE: JUNE 1, 2063 DEATH BENEFIT OPTION: 1 THIS IS A [SEX DISTINCT] POLICY
THIS IS A (STATE NAME) POLICY Page 3 POLICY SCHEDULE CONTINUED - POLICY NUMBER 0000000000 CHARGES DEDUCTED FROM THE SEPARATE ACCOUNT MORTALITY AND EXPENSE CHARGE. Deductions from the Separate Account will be made at an annual rate not to exceed .90%. After the 30th policy year, the current mortality and expense charges will be reduced by .35% in each policy year that the current mortality and expense charge annual rate, before the anticipated .35% reduction, is less than .90%. The current rate on the Date of Issue is [.75%]. The actual deduction will be made on a daily basis. The current rate on a daily basis is [.002055%]. EXPENSE CHARGES: PREMIUM EXPENSE CHARGE: CURRENT GUARANTEED (ADJUSTABLE PERCENTAGE OF PREMIUM) [0%] 1.5% BASIC POLICY CHARGES AND FEES COST OF INSURANCE CHARGES. Guaranteed Maximum Cost of Insurance Rates Per $1,000 of Net Amount at Risk are shown on page 20. INITIAL ALLOCATION OF NET PREMIUMS AND POLICY DEDUCTIONS
Investment Option(s) Initial Allocation Initial Allocation of of Net Premiums Policy Deductions SEPARATE ACCOUNT: VL-R [( ) Equity 500 Index 100% 100% ( ) EAFE Equity Index 0% 0% ( ) AIM V.I. Value 0% 0% ( ) Equity Growth 0% 0% ( ) Royce Total Return 0% 0% ( ) Money Market 0% 0%]
Page 4 CONTRACT. Your policy is a legal contract that You have entered into with Us. You have paid the first premium and have submitted an application, a copy of which is attached. In return, We promise to provide the insurance coverage described in this policy. The entire contract consists of: 1. The basic policy; 2. The riders that add benefits to the basic policy, if any; 3. Endorsements, if any; and 4. The attached copy of your application, and any amendments or supplemental applications. DATE OF ISSUE. The Date of Issue of this policy is the date on which the first premium is due. The Date of Issue is also the date from which all policy years, anniversaries, and monthly deduction dates are determined. OWNER. The Owner is as stated in the application unless later changed. During the Insured's lifetime, the Owner may exercise every right the policy confers or We allow (subject to the rights of any assignee of record, and to any endorsement on this policy limiting such rights). You may have Joint Owners of the policy. In that case, the authorization of both Joint Owners is required for all policy changes except for transfers, premium allocations and deduction allocations. We will accept the authorization of either Joint Owner for transfers and changes in premium and deduction allocations. The Owner and the Insured may be the same person but do not have to be. If the Owner dies while the policy is in force and the Insured is living, ownership rights pass on to a successor owner, if any, or to the estate of the Owner. PREMIUM PAYMENTS All premiums after the first are payable in advance. Premium payments are flexible. This means You may choose the amount and frequency of payments. The actual amount and frequency of premium payments will affect the Accumulation Value and the amount and duration of insurance. Please refer to the Policy Values Provision for a detailed explanation. To receive the tax treatment accorded life insurance under U.S. law, this policy must initially qualify and continue to qualify as life insurance under Section 7702 of the Internal Revenue Code. PLANNED PERIODIC PREMIUMS. The amount and frequency of the Planned Periodic Premiums You selected are shown on page 3. You may request a change in the amount and frequency. We may limit the amount of any increase. (See "Maximum Net Amount at Risk"). UNSCHEDULED ADDITIONAL PREMIUMS. You may pay additional premiums at any time before the Maturity Date shown on page 3, except that: 1. We may limit the number and amount of additional premiums, as provided in the "Maximum Net Amount at Risk" provision; or 2. If payment of additional premiums would result in an increase in the Death Benefit Amount, such increase will be subject to a written application and evidence of insurability satisfactory to Us. Any unscheduled payments will be applied as Unscheduled Additional Premiums unless You specifically state otherwise. MAXIMUM NET AMOUNT AT RISK. We reserve the right to reduce the Death Benefit by affecting partial surrenders or limit the number and amount of additional premiums in order to maintain the Net Amount at Risk, as defined below, at an amount that will not exceed the Maximum Net Amount at Risk shown on page 3. Net Amount at Risk is the excess of the Death Benefit over the Accumulation Value of the policy. Page 5 PREMIUM EXPENSE CHARGE. The Premium Expense Charge is calculated by multiplying the premium paid by the Premium Expense Charge Percentage. The Premium Expense Charge Percentage is adjustable, but will never be more than the guaranteed Premium Expense Charge Percentage shown on the Policy Schedule. NET PREMIUM. The Net Premium is the premium paid, less the Premium Expense Charge. ALLOCATION OF PREMIUMS. The initial allocation of Net Premiums is shown on the Policy Schedule and will remain in effect until changed by Written notice from the Owner. The percentage allocation for future Net Premiums may be changed at any time by Written notice. If We have on file a completed telephone authorization form (Telephone Transaction), We will allow the percentage allocation for future Net Premiums to be changed at any time by telephone. We will honor instructions for Telephone Transactions from any person who provides the correct information. Therefore, there is a risk of possible loss to You if unauthorized persons use this service in Your name. Under Telephone Transactions, 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 telephone instructions. The initial Net Premium will be allocated to the Money Market Division on the later of the following dates: 1. The Date of Issue; or 2. The date all requirements needed to place the policy in force have been satisfied, including underwriting approval and receipt in the Home Office of the necessary premium. The initial Net Premium will remain in the Money Market Division until the first Valuation Date following the 15th day after it was applied. Any additional Net Premiums received prior to the first Valuation Date which follows the 15th day after the initial Net Premium was applied will be allocated to the Money Market Division until such Valuation Date. At that time, We will transfer the Accumulation Value to the selected Investment Option(s). Each premium received after such Valuation Date will be reduced by the Premium Expense Charge and applied directly to the selected Investment Option(s) as of the Business Day received. Changes in the allocation will be effective on the date we receive the Owner's notice. The allocation may be 100% to any available Division or may be divided among these options in whole percentage points totaling 100%. We reserve the right to limit the number of Divisions which You may select. WHERE TO PAY. You may make You payments to Us at Our Home Office or to an authorized agent. A receipt signed by an officer of the Company will be furnished upon request. DEATH BENEFIT AND DEATH BENEFIT OPTIONS DEATH BENEFIT PROCEEDS. If the Insured dies prior to the Maturity Date and while this policy is in force, We will pay the Death Benefit Proceeds to the Beneficiary. The Death Benefit Proceeds will be subject to: 1. The Death Benefit Option in effect on the date of death; and 2. Any increases (or decreases resulting from a partial surrender) made to the Specified Amount. The Initial Specified Amount is shown on page 3. Guidelines for changing the Death Benefit Option or the Specified Amount will be found in the section entitled "Changing Your Insurance Policy." The Death Benefit Proceeds will be the Death Page 6 Benefit Amount reduced by any outstanding policy loan and will be subject to the other provisions of the "Beneficiary and Proceeds" section. DEATH BENEFIT OPTION. The Death Benefit Option which You have chosen is shown on page 3 as either Option 1 or Option 2. OPTION 1. If You have chosen Option 1 the Death Benefit Amount will be the greater of: 1. The Specified Amount on the date of death; or 2. The Accumulation Value on the date of death multiplied by the Death Benefit Corridor Rate for the Insured's age nearest birthday as shown in the table on page [ ]. OPTION 2. If You have chosen Option 2, the Death Benefit Amount will be the greater of: 1. The Specified Amount plus the Accumulation Value on the date of death; or 2. The Accumulation Value on the date of death multiplied by the Death Benefit Corridor Rate for the Insured's age nearest birthday as shown in the table on page [ ]. CHANGING YOUR INSURANCE POLICY You may request an increase in the Specified Amount or a change in the Death Benefit Option at any time. Your request must be submitted to Our Home Office In Writing in a form acceptable to Us. INCREASING THE DEATH BENEFIT AMOUNT. The Owner may request an increase in the Death Benefit Amount by submitting a written supplemental application to Us. The increase will require evidence of insurability satisfactory to Us. An increase will be effective as of the next Monthly Deduction Day following the date the application for increase is approved by Us. The effective date will appear in an endorsement to this policy. CHANGING THE DEATH BENEFIT OPTION. You may request a change in the Death Benefit Option You have chosen. 1. If You request a change from Option 1 to Option 2: The new Specified Amount will be the Specified Amount, prior to change, less the Accumulation Value as of the effective date of the change, but not less than zero. 2. If You request a change from Option 2 to Option 1: The new Specified Amount will be the Specified Amount, prior to change, plus the Accumulation Value as of the effective date of the change. We will not require evidence of insurability for a change in the Death Benefit Option. The change will go into effect on the Monthly Deduction Day following the date We receive Your Written request for change. CHANGING THE TERMS OF YOUR POLICY. Any change in Your policy must be approved by one of Our officers. No agent has the authority to make any changes or waive any of the terms of Your policy. Page 7 SEPARATE ACCOUNT PROVISIONS SEPARATE ACCOUNT. Separate Account VL-R is a segregated investment account established by the Company under Texas law to separate the assets funding the variable benefits for the class of policies to which this policy belongs from the other assets of the Company. That portion of the assets of the Separate Account equal to the reserves and other policy liabilities with respect to the Separate Account shall not be chargeable with liabilities arising out of any other business We may conduct. Income, gains and losses, whether or not realized from assets allocable to the Separate Account, are credited to or charged against such Account without regard to Our other income, gains or losses. INVESTMENTS OF THE SEPARATE ACCOUNT. The Separate Account is segmented into Divisions. Each Division invests in a single Investment Option. Net Premiums will be applied to the Separate Account and allocated to one or more Divisions. The assets of the Separate Account are invested in the Investment Option(s) listed on the Policy Schedule pages. From time to time, We may add additional Divisions to those shown on the Policy Schedule pages. We may also discontinue offering one or more Divisions as provided in "Rights Reserved by Us." Any change in Divisions available or selected are shown on the Policy Schedule or on an amended Policy Schedule. Any change in investment selection shall be pursuant to a duly executed change form filed with Our Home Office. Transfers may be made to the additional Divisions subject to the rules stated in the Transfer Provision and any new rules or limitations tied to such additional Divisions. If shares of any of the Investment Options become unavailable for investment by the Separate Account, or the Company's Board of Directors deems further investment in these shares inappropriate, the Company may limit further investment in the shares or may substitute shares of another Investment Option for shares already purchased under this policy as provided in "Rights Reserved by Us" provision. VALUATION OF ASSETS. The assets of the Separate Account are valued as of each Valuation Date at their fair market value in accordance with Our established procedures. The Separate Account Value as of any Valuation Date prior to the Maturity Date is the sum of Your account values in each Division of the Separate Account as of that date. VALUATION UNITS. In order to determine policy values in the Divisions, We use Valuation Units which are calculated separately for each Division. The Valuation Unit value for each Division will vary to reflect the investment experience of the applicable Investment Option. The Valuation Unit for a Division will be determined on each Valuation Date for the Division by multiplying the Valuation Unit value for the Division on the preceding Valuation Date by the Net Investment Factor for that Division for the current Valuation Date. The Net Investment Factor for each Division is determined by dividing (1) by (2) and subtracting (3), where: (1) is the net asset value per share of the applicable Investment Option as of the current Valuation Date (plus any per share amount of any dividend or capital gains distribution paid by the Investment Option since the last Valuation Date); and (2) is the net asset value per share of the shares held in the Division as determined at the end of the previous valuation period; and (3) is a factor representing the Mortality and Expense Charge. The net asset value of an Investment Option's shares held in each division shall be the value reported to Us by that Investment Option. VALUATION DATES. Valuation of the various Divisions will occur on each Business Day during each month. If the underlying Investment Option is unable to value or determine the Division's Page 8 SEPARATE ACCOUNT PROVISIONS (CONT'D) investment in an Investment Option due to any of the reasons stated in the "Suspension and Deferral of Payments Provision," the Valuation Date for the Division with respect to the unvalued portion shall be the first Business Day that the assets can be valued or determined. BUSINESS DAY. A business day is each day that the New York Stock Exchange and the Company are open for business. For the purpose of collecting daily charges, a business day immediately preceded by one or more non-business calendar days will include those non-business days as a part of that business day. For example, a business day which falls on a Monday will consist of a Monday and the immediately preceding Saturday and Sunday. MINIMUM BALANCE. The minimum value that may be retained in a Division after a partial surrender or transfer is shown on page 3. If a partial surrender causes the balance in any Division to drop below such minimum amount, the Company reserves the right to transfer the remaining balance to the Money Market Division. If a transfer causes the balance in any Division to drop below the minimum amount, the Company reserves the right to transfer the remaining balance in proportion to the transfer request. A partial surrender may not leave a Cash Surrender Value of less than the amount specified on page 3. CHANGE OF INVESTMENT ADVISOR OR INVESTMENT POLICY. Unless otherwise required by law or regulation, the investment advisor or any investment policy may not be changed without Our consent. If required, approval of or change of any investment objective will be filed with the Insurance Department of the state where the policy is being delivered. RIGHTS RESERVED BY US. Upon notice to You, this policy may be modified by Us, but only if such modification is necessary to: 1. Operate the Separate Account in any form permitted under the Investment Company Act of 1940 or in any other form permitted by law; 2. Transfer any assets in any Division to another Division, or to one or more other separate accounts; 3. Add, combine or remove Divisions in the Separate Account, or combine the Separate Account with another separate account; 4 Make any new Division available to You on a basis to be determined by Us; 5. Substitute for the shares held by any Division the shares of another Division or the shares of another investment company or any other investment permitted by law; 6. Make any changes as required by the Internal Revenue Code, or by any other applicable law, regulation or interpretation in order to continue treatment of this policy as life insurance; or 7. Make any changes required to comply with the requirements of any underlying Investment Option. When required by law, We will obtain Your approval of changes and We will gain approval from any appropriate regulatory authority. POLICY VALUES PROVISION ACCUMULATION VALUE. The Accumulation Value of Your policy is the total of all values in the Divisions of the Separate Account and in the Loan Account. The Accumulation Value reflects: 1. Net Premiums paid; Page 9 2. Monthly deductions; 3. The investment experience of the Divisions selected less the Mortality and Expense Charge; 4. Amounts allocated to the Loan Account, including interest earned on amounts in the Loan Account (See "Policy Loans"); 5. Deductions due to partial surrenders and any charges for partial surrenders and transfers. Net premiums are allocated, in accordance with your instructions, to the selected Divisions of the Separate Account and converted to Valuation Units. On each Monthly Deduction Day, a Monthly Deduction will be made by redeeming Valuation Units from each applicable Division in the same ratio as the Allocation of Policy Deductions in effect on the Monthly Deduction Day. If the number of Valuation Units in any Division is insufficient to make a Monthly Deduction in this manner, We will cancel Valuation Units from each applicable Division in the same ratio the Monthly Deduction bears to the unloaned Accumulation Value of your policy. The Accumulation Value in any Division is determined by multiplying the value of a Valuation Unit by the number of Valuation Units held under the policy in that Division. The value of the Valuation Units equal to the amount being borrowed from the Separate Account will be transferred to the Loan Account as of the Business Day that the loan request is received In Writing. Valuation Units are surrendered to reflect a partial surrender as of the Business Day that the request for partial surrender is received In Writing. ON THE DATE OF ISSUE. The Accumulation Value on the Date of Issue will be determined as follows: 1. The Net Premium received; less 2. The Monthly Deduction for the first policy month (See "How We Calculate a Monthly Deduction."). The first deduction day is the Date of Issue. The Monthly Deduction Day is shown on page 3. ON EACH MONTHLY DEDUCTION DAY. On each Monthly Deduction Day after the Date of Issue, we will determine the Accumulation Value as follows: 1. We will take the Accumulation Value as of the last Monthly Deduction Day; and 2. Add the interest earned for the month on the excess of the Loan Account value on the last Monthly Deduction Day over any reductions made in the Loan Account since the last Monthly Deduction Day; and 3. Add any investment gain (or subtract any investment loss) on the Divisions of the Separate Account since the last Monthly Deduction Day as measured by the change in the value of the Valuation Units; and 4. Add all Net Premiums received since the last Monthly Deduction Day; and 5. Subtract any partial surrender made since the last Monthly Deduction Day; and 6. Subtract the Monthly Deduction for the policy month following the Monthly Deduction Day. (See "How We Calculate a Monthly Deduction.") ON ANY VALUATION DATE OTHER THAN A MONTHLY DEDUCTION DAY. The Accumulation Value on any Valuation Date other than a Monthly Deduction Day will be the sum of: 1. The value of the Loan Account; 2. Less any partial surrenders since the last Monthly Deduction Day. 3. Plus all Net Premiums received since the last Monthly Deduction Day; 4. Plus the sum of the values of the Divisions of the Separate Account as of the last Monthly Page 10 Deduction Day, plus the amount of any investment gain (or minus any investment loss) on the Divisions since the last Monthly Deduction Day as measured by the change in the value of the Valuation Units. CASH SURRENDER VALUE. The Cash Surrender Value of this policy will be equal to the Accumulation Value less any indebtedness. HOW WE CALCULATE A MONTHLY DEDUCTION. Each Monthly Deduction includes: 1. The cost of insurance provided by the basic policy; and 2. The cost of insurance for benefits provided by riders, if any. HOW WE CALCULATE THE COST OF INSURANCE FOR THE BASIC POLICY. We calculate the cost of insurance at the beginning of each policy month as of the Monthly Deduction Day. The cost of insurance is determined as follows: 1. Reduce the Death Benefit Amount by the amount of Accumulation Value on the Monthly Deduction Day before the cost of insurance deduction is taken, and after the cost of insurance for riders, if any, are deducted; 2. Multiply the difference by the cost of insurance rate per $1,000 of the Net Amount at Risk as provided in the Cost of Insurance Rate provision; and 3. Divide the result by 1,000. If Option 1 is in effect, and there have been increases in the Specified Amount, the Accumulation Value will first be considered part of the Initial Specified Amount. If the Accumulation Value exceeds the Initial Specified Amount, the excess will be considered part of any Specified Amount increases in the order in which the increases were made. COST OF INSURANCE FOR BENEFITS PROVIDED BY RIDERS. The cost of insurance for benefits provided by riders, if any, will be as stated on the Policy Schedule or in an endorsement to this policy. COST OF INSURANCE RATE. The cost of insurance rate for the Initial Specified Amount, and for each Specified Amount increase, is based on the Insured's: 1. Sex (if issued on a Sex Distinct basis); 2. Age nearest birthday on each policy anniversary; and 3. Premium class shown on the Policy Schedule, associated with the Initial Specified Amount and each increase in the Specified Amount. The guaranteed monthly cost of insurance rates are shown in the table on page []. We can use cost of insurance rates that are lower than the guaranteed rates. Any change in rates will apply to all policies in the same rate class as this policy. The rate class of this policy is determined on its Date of Issue and according to: 1. The calendar year of issue and policy year; 2. The plan of insurance; 3. The amount of insurance; and 4. The age, sex and premium class of the Insured if issued on a Sex Distinct basis or the age and premium class if issued on a Unisex basis. CHANGES IN RATES, CHARGES AND FEES. This policy does not participate in Our profits or surplus. Any redetermination of the cost of insurance rates, interest rates, mortality and expense charges or percentage of premium charges will be based on Our expectations as to investment earnings, mortality, persistency and expenses. We will not change these charges in order to recoup any prior losses. GRACE PERIOD. If the Cash Surrender Value on a Monthly Deduction Day is not enough to meet the Monthly Deduction for the current month, this policy will remain in force during the 61-day Page 11 period that follows. If the Cash Surrender Value on a policy anniversary is not enough to pay any loan interest due, this policy will remain in force during the 61-day period that follows. Such 61-day period is referred to in this policy as the "Grace Period." There is no Grace Period for the initial Monthly Deduction. If the amount we require to keep your policy in force is not paid by the end of the Grace Period, this policy will terminate without value. However, we will give You at least 31 days notice prior to termination that your policy is in the Grace Period and advise You of the amount required to keep your policy in force. Such 31 days prior notice will be sent to You at your last known address, and to the assignee of record, if any. If death occurs during the Grace Period, Monthly Deductions through the policy month in which death occurred will be deducted from the proceeds. If a surrender request is received within 31 days after the Grace Period commences, the Cash Surrender Value payable will not be less than the Cash Surrender Value on the Monthly Deduction Day the Grace Period commenced. The Monthly Deduction for the policy month following such Monthly Deduction Day will not be subtracted in the calculation of such Cash Surrender Value. FULL SURRENDER. Subject to the Beneficiary and Proceeds section, You may return Your policy to Us and request its Cash Surrender Value at any time during the Insured's lifetime before the Maturity Date. The Cash Surrender Value will be determined as of the Business Day the policy and the signed request for surrender are received In Writing at the Home Office. The Company may delay payment if the Suspension and Deferral of Payments Provision is in effect. PARTIAL SURRENDER. At any time after the first policy year, You may request a portion of the Cash Surrender Value of the policy. Your request must be made In Writing prior to the Maturity Date during the Insured's lifetime. The minimum partial surrender is $5,000.00. Valuation Units are surrendered to reflect a partial surrender as of the Business Day the request for partial surrender is received In Writing. A partial surrender will result in a reduction of the Accumulation Value and the Death Benefit Amount. The Accumulation Value will be reduced by the amount of partial surrender benefit. The reduced Death Benefit Amount will be determined in accordance with the Death Benefit Option provision. If your Death Benefit Option is Option 1, the Specified Amount will be reduced by the amount of the partial surrender. (The reduced amount will not be less than zero.) The Cash Surrender Value and Death Benefit Amount remaining after this reduction must be no less than the Minimum Cash Surrender Value and Minimum Death Benefit Amount after a Partial Surrender shown on page 3. A partial surrender will result in the cancellation of Valuation Units from each applicable Division in the same ratio as the Allocation of Policy Deductions in effect on the date of partial surrender. If the number of Valuation Units in any Division is insufficient to make a partial surrender in this manner, We will cancel Valuation Units from each applicable Division in the ratio the partial surrender request bears to the Cash Surrender Value of your policy. You must state In Writing in advance how partial surrenders should be made if other than this method is to be used. There will be a $25.00 charge for each partial surrender. The Company may delay payment if the Suspension and Deferral of Payments Provision is in effect. PERIOD OF INSURANCE COVERAGE IF AMOUNT OR FREQUENCY OF PREMIUM PAYMENTS IS REDUCED OR IF PREMIUM PAYMENTS ARE DISCONTINUED. If You reduce the amount or frequency of premium payments, or if You discontinue payment of premiums, We will continue making Monthly Deductions (as long as there is sufficient Cash Surrender Value to make such deductions) until Page 12 the Maturity date. This policy will remain in force until the earlier of the following dates: 1. The Maturity Date (if there is sufficient Cash Surrender Value to make Monthly Deductions to that date); or 2. Surrender of the policy; or 3. The end of the Grace Period; or 4. Death of the insured. TRANSFER PROVISION TRANSFER OF ACCUMULATION VALUE. You may transfer all or part of Your interest in a Division of the Separate Account subject to the following: 1. Transfers will be made as of the Business Day that the transfer request is received in good order. 2. The minimum amount which may be transferred is $5,000.00. 3. Prior to the Maturity Date, You may make up to 12 transfers each policy year without charge. 4. There will be a charge of $25.00 for each transfer in excess of 12 in a policy year. This charge will be deducted from the Divisions in the same ratio as the requested transfer. 5. We reserve the right to transfer the entire balance in proportion to any other Investment Options you are then using, if the Accumulation Value is below $5,000. 6. We reserve the right to terminate, suspend or modify the transfer privilege described above. If You elect to use the transfer privilege, We will not be liable for a transfer made in accordance with Your instructions. Transfers between Separate Account Divisions result in the redemption of Valuation Units in one Division and the purchase of Valuation Units in the Division to which the transfer is made. DOLLAR COST AVERAGING. Dollar Cost Averaging is an automatic transfer of funds made periodically prior to the Maturity Date in accordance with the Transfers provision, except as provided below, and instructions from the Owner. Dollar Cost Averaging (DCA) is subject to the following guidelines: 1. DCA transfers may be made: (a) On any day of the month except the 29th, 30th or 31st; (b) On a monthly, quarterly, semi-annual or annual basis; and (c) From the Money Market Division to one or more of the other Separate Account Divisions. 2. DCA may be elected only if the Accumulation Value at the time of election is $100,000 or more. 3. The minimum amount of each DCA transfer is $5,000, or the remaining amount in the Money Market Division, if less. 4. DCA may not begin prior to the first Valuation Date following the 15th day after the initial Net Premium is applied. 5. DCA will end when there is no longer any value in the Money Market Division, or when You request that DCA end. (You will be notified if the value of Your Money Market Division reaches zero). 6. Amounts applied to the Money Market Division while DCA is active will be available for future Dollar Cost Averaging in accordance with the current DCA request. 7. There is no charge for DCA. 8. DCA is not available if Automatic Rebalancing is active. Page 13 AUTOMATIC REBALANCING. Automatic Rebalancing occurs when funds are transferred by the Company between the Separate Account Divisions so that the values in each Division match the premium allocation percentages then in effect. You may choose Automatic Rebalancing on a quarterly, semi-annual or annual basis if your Accumulation Value is $100,000 or more. The date Automatic Rebalancing occurs will be based on the Date of Issue of Your policy. For example, if Your policy is dated January 17, and You have requested Automatic Rebalancing on a quarterly basis, Automatic Rebalancing will start on April 17, and will occur quarterly thereafter. After Automatic Rebalancing is elected, it will continue until We are notified In Writing that it is to be discontinued. There is no charge for Automatic Rebalancing. Automatic Rebalancing is not available if Dollar Cost Averaging is active. SUSPENSION AND DEFERRAL OF PAYMENTS PROVISION We may suspend the calculation and payment of the policy's Cash Surrender Value in the following circumstances: 1. If there is a failure in any of the means normally employed in ascertaining the prices or values of investments, or 2. If for any reason the prices or values of investments in the Separate Account cannot be reasonably ascertained; or 3. If circumstances exist as a result of which it is not reasonably practicable to realize any of the Separate Account's investments or to determine fairly the net asset value of the Separate Account; or 4. If the remittance of funds involved in the realization of, or in the payment for investments or payment due under this policy cannot be carried out without undue delay and at normal rates of exchange; or 5. The U.S. Securities and Exchange Commission (SEC) determines that a state of emergency exists; or 6. An order of the SEC permits a delay for the protection of policy holders. Written notice of both the imposition and termination of any such suspension will be given to the Owners, assignees of record and any irrevocable Beneficiaries. Payments which were due to have been made and which were deferred following the suspension of the calculation of the Cash Surrender Value will be made within thirty (30) days following the lifting of the suspension, and will be calculated based on the Valuation Date which immediately follows termination of the suspension. POLICY LOANS You may borrow from Us at any time while this policy is in force, an amount which is equal to or less than the policy's loan value. The loan value will be the Cash Surrender Value, less $100,000, minus 3 monthly deductions and less interest on the amount to be borrowed to the next policy anniversary. The minimum amount of each loan is $5,000 or, if less, the entire remaining loan value. The value of Valuation Units equal to the amount being borrowed from the Separate Account will be transferred to the Loan Account as of the Business Day that the loan request is received in good order. LOAN ACCOUNT. The Loan Account is a fixed account within Our general assets which we have established for any amounts transferred from the Divisions as a result of a loan. Interest applied to Page 14 the Loan Account will be an annual rate of not less than 4% nor more than 4.75%, and is not based on investment experience of any Division of the Separate Account. LOAN INTEREST. Loan interest will accrue daily at an annual effective rate of 4.54% payable in advance. (This is equivalent to an annual effective rate of 4.75% paid in arrears.) On each policy anniversary, loan interest for the next year is due in advance. Unpaid loan interest will be deducted from the various Divisions according to the Allocation of Policy Deductions then in effect, and added to the Loan Account. If the number of Valuation Units in any Division is insufficient to deduct unpaid loan interest in this manner, We will cancel Valuation Units from each applicable Division in the same ratio the unpaid loan interest bears to the unloaned Accumulation Value of your policy. HOW YOU MAY REPAY A POLICY LOAN. You may repay all or part of a policy loan at any time, except that; 1. Repayment may be made only while this policy is in force and prior to the death of the Insured; 2. A partial repayment must be at least $5,000; and 3. At the time You repay all or part of a Policy Loan, You must specify the payment is to repay all or part of the Policy Loan. You may tell Us how to allocate repayments. If You do not tell Us, an amount equal to the loan repayment will be transferred from the Loan Account to the Divisions in the same ratio currently in effect for the Allocation of Premiums. WE CAN DELAY PAYMENT. We can delay lending You money for up to 6 months, or the period allowed by law, whichever is less. However, We cannot delay lending You money if the amount is to be used to pay a premium to Us. OBTAINING A LOAN. You may obtain a policy loan by Written request and assignment of the policy as sole security for the loan. The Company may delay a loan if the Suspension and Deferral of Payments Provision is in effect. EFFECT OF A LOAN. When a loan is made, an amount equal to the amount being borrowed from the Separate Account will be transferred to the Loan Account. A loan will result in cancellation of units from each applicable Division in the ratio that the loan bears to the unloaned Accumulation Value of Your policy. You must state In Writing in advance which Division units are to be canceled if a different method is to be used. A loan, whether or not repaid, will have a permanent effect on the Cash Surrender Values and on the death benefits. If not repaid, any indebtedness will reduce the amount of Death Benefit Proceeds and the amount available upon surrender of the policy. PREFERRED LOANS. A "Preferred Loan" is a policy loan that is made at a net cost to the Owner that is less than the net cost of other policy loans. Starting on the tenth policy anniversary, this policy will be eligible for "Preferred Loans" subject to the following guidelines: 1. The maximum amount eligible for a new Preferred Loan during a policy year is restricted to the lesser of the following values on the first day of such policy year: a. The policy loan value; or b. 10% of the Accumulation Value. 2. When a Preferred Loan is made, interest to the next policy anniversary will be charged at the rate shown in the Loan Interest provision. 3. Interest credited to the amount of the Accumulation Value offset by a Preferred Loan: a. Will be at an annual effective rate that is equal to or less than the Policy Loan annual effective interest rate; and b. Will be at a higher rate than the rate used to credit interest to values offset by any other policy loan. Page 15 BENEFICIARY AND PROCEEDS BENEFICIARY. The Beneficiary as named in the application, or later changed by You, will receive the proceeds upon the death of the Insured. Unless You have stated otherwise, proceeds will be paid as follows: 1. If any Beneficiary dies before the Insured, that Beneficiary's interest will pass to any other Beneficiaries according to their respective interests. 2. If no Beneficiary survives the Insured, proceeds will be paid to You, as Owner, if You are then living; otherwise proceeds will be paid to Your estate. CHANGE OF OWNERSHIP OR BENEFICIARY. You may change the Owner or the Beneficiary at any time during the lifetime of the Insured unless the previous designation provides otherwise. To do so, send a Written request to Our Home Office. The change will go into effect when We have recorded the change. However, after the change is recorded, it will be deemed effective as of the date of Your Written request for change. The change will be subject to any payment made or action taken by Us before the request is recorded. COMMON DISASTER. If We cannot determine whether a Beneficiary or the Insured died first in a common disaster, We will assume that the Beneficiary died first. Proceeds will be paid on this basis unless an endorsement to this policy provides otherwise. PROCEEDS. Proceeds means the amount payable on: 1. The Maturity Date; 2. Exercise of the full surrender benefit; or 3. The Insured's death. The Proceeds on the Maturity Date will be the Cash Surrender Value. The Proceeds on the Insured's death will be the Death Benefit Amount less any outstanding Policy Loan. All Proceeds are subject to the provisions of the Payment Options section and the other provisions of this policy. PAYMENT OPTIONS Instead of being paid in one sum, all or part of the proceeds may be applied under any of the Payment Options described below. In addition to these options other methods of payment may be chosen with Our consent. PAYMENT CONTRACT. When proceeds become payable under a Payment Option, a Payment Contract will be issued to each payee. The Payment Contract will state the rights and benefits of the payee. It will also name those who are to receive any balance unpaid at the death of the payee. ELECTION OF OPTIONS. The Owner may elect or change any Payment Option while the Insured is living, subject to the provisions of this policy. This election or change must be In Writing. Within 60 days after the Insured's death, a payee entitled to proceeds in one sum may elect to receive proceeds under any option. OPTION 1. PAYMENTS FOR A SPECIFIED PERIOD: Equal monthly payments will be made for a specified period. The Option 1 Table in this policy shows the monthly income for each $1,000 of proceeds applied. OPTION 2. PAYMENTS OF A SPECIFIED AMOUNT: Equal monthly payments of a specified amount will be made. Each payment must be at least $60 a year for each $1,000 of proceeds applied. Payments will continue until the amount applied, with interest, has been paid in full. Page 16 OPTION 3. MONTHLY PAYMENTS FOR LIFE: Equal monthly payments will be made for a specified period, and will continue after that period for as long as the payee lives. The specified period may be 10, 15 or 20 years. The Option 3 Table in this policy shows the monthly income for each $1,000 of proceeds applied. If issued on a Sex Distinct basis, tables are based on the 1983a Male or Female Tables adjusted by projection scale G for 9 years, with interest at the rate of 3% per year and a 2% load. If issued on a Unisex basis, tables are based on the 1983a Male or Female Tables, adjusted by projection scale G for 9 years, with unisex rates based on 60% female and 40% male, and interest at the rate of 3% per year and a 2% load. At the time payments are to begin under this option, the payee may choose one of the following: 1. Monthly payments based on the Option 3 Table; or 2. Monthly payments equal to a monthly annuity based on our single premium immediate annuity rates then in use. OPTION 4. PROCEEDS LEFT AT INTEREST: Proceeds may be left on deposit with us for any period up to 30 years. Interest earned on the proceeds may be: 1. Left on deposit to accumulate at the rate of 3% compounded annually; or 2. Paid in installments at the rate for each $1,000 of proceeds of $30 annually, $14.89 semiannually, $7.42 quarterly or $2.47 monthly. Upon the death of the payee, or at the end of the specified period, any balance left on deposit will be paid in a lump sum or under Payment Options 1, 2 or 3. INTEREST RATES. The guaranteed rate of interest for proceeds held under Payment Options 1, 2, 3 and 4 is 3% compounded annually. We may credit interest at a higher rate. The amount of any increase will be determined by Us. PAYMENTS. The first payment under Options 1, 2 and 3 will be made when the claim for settlement has been approved. Payments after the first will be made according to the manner of payment chosen. Interest under Option 4 will be credited from the date of death and paid or added to the proceeds as provided in the Payment Contract. AVAILABILITY OF OPTIONS. If the proposed payee is not a natural person, payment options may be chosen only with Our consent. If this policy is assigned, We will have the right to pay the assignee in one sum the amount to which the assignee is entitled. Any balance will be applied according to the option chosen. The amount to be applied under any one option must be at least $2,000. The payment elected under any one option must be at least $25. If the total policy proceeds are less than $2,000, payment will be made in one lump sum. EVIDENCE THAT PAYEE IS ALIVE. Before making any payment under a Payment Option, We may ask for proof that the payee is alive. If proof is requested, no payment will be made or considered due until We receive proof. DEATH OF A PAYEE. If a payee dies, any unpaid balance will be paid as stated in the Payment Contract. If there is no surviving payee named in the Payment Contract, We will pay the estate of the payee: 1. Under Options 1 and 3, the value as of the date of death of the remaining payments for the specified period, discounted at the rate of interest, compounded annually, that was used in determining the amount of the monthly payment; 2. Under Options 2 and 4, the balance of any proceeds remaining unpaid with accrued interest, if any. WITHDRAWAL OF PROCEEDS UNDER OPTIONS 1 OR 2. If provided in the Payment Contract, a payee will have the right to withdraw the entire unpaid balance under Options 1 or 2. Under Option 1, Page 17 the amount will be the value of the remaining payments for the specified period discounted at the rate of interest used in determining monthly income. Under Option 2, the amount will be the entire unpaid balance. WITHDRAWAL OF PROCEEDS UNDER OPTION 4. A payee will have the right to withdraw proceeds left under Option 4 subject to the following rules: 1. The amount to be withdrawn must be $500 or more; and 2. A partial withdrawal must leave a balance on deposit of $1,000 or more. WITHDRAWALS MAY BE DEFERRED. We may defer payment of any withdrawal for up to 6 months from the date We receive a withdrawal request. ASSIGNMENT. Payment Contracts may not be assigned. CHANGE IN PAYMENT. The right to make any change in payment is available only if it is provided in the Payment Contract. CLAIMS OF CREDITORS. To the extent permitted by law, proceeds will not be subject to any claims of a Beneficiary's creditors. GENERAL PROVISIONS ASSIGNING YOUR POLICY. During the lifetime of the Insured, You may assign this policy as security for an obligation. We will not be bound by an assignment unless it is received In Writing at the Home Office. Two copies of the assignment must be submitted. We will retain one copy and return the other. We will not be responsible for the validity of any assignment. INCONTESTABILITY. We rely on the statements made in the application for the policy and applications for any reinstatements or increases in Specified Amount. These statements, in the absence of fraud, are considered representations and not warranties. No statement may be used in defense of a claim under the policy unless it is in such applications. Except as stated below, We cannot contest this policy after it has been in force during the Insured's lifetime for 2 years from the Date of Issue. Exceptions: We cannot contest any claim related to an increase in Specified Amount after such increase has been in effect during the Insured's lifetime for 2 years. If this policy is reinstated, We cannot contest this policy after it has been in force during the Insured's lifetime for 2 years from the date of reinstatement. We can contest a reinstatement or an increase in Specified Amount only on the basis of the information furnished in the application for such reinstatement or increase. This 2-year limitation does not apply to any Disability or Accidental Death Benefit, or to the nonpayment of premium. SUICIDE EXCLUSION. If the Insured takes his or her own life, while sane or insane, within 2 years from the Date of Issue, We will limit the Death Benefit Proceeds to the premiums paid less any policy loans and less any partial cash surrenders paid. If there are any increases in the Specified Amount (See the section entitled "Changing Your Insurance Policy") a new 2 year period shall apply to each increase beginning on the date of each increase. The Death Benefit Proceeds will be the costs of insurance associated with each increase. When the laws of the state in which this policy is delivered require less than this 2 year period, the period will be as stated in such laws. Page 18 AGE OR SEX INCORRECTLY STATED (AGE INCORRECTLY STATED IF ISSUED ON A UNISEX BASIS). If the (1) age or sex of the Insured (if this policy was issued on a Sex Distinct basis) or (2) age of the Insured (if this policy was issued on a Unisex basis) has been misstated to Us, We will adjust the excess of the Death Benefit Amount over the Accumulation Value on the date of death to that which would have been purchased by the Monthly Deduction for the policy month of death at the correct cost of insurance rate. By age, We mean age nearest birthday as of the Date of Issue. STATUTORY BASIS OF POLICY VALUES. The Accumulation Values of the policy are not less than the minimum values required by the law of the state where this policy is delivered. The calculation of the Accumulation Values includes a charge for the cost of insurance, as shown in the Table of Guaranteed Monthly Cost of Insurance Rates. Calculation of minimum Accumulation Values, nonforfeiture benefits and Guaranteed Cost of Insurance Rates are based on the Composite 1980 Commissioners Standard Ordinary Male\Female\Unisex Table B (80% male, 20% female) Mortality Table for the appropriate sex and age nearest birthday. A detailed statement of the method of computing values has been filed with the state insurance department where required. NO DIVIDENDS. This policy will not pay dividends. It will not participate in any of Our surplus or earnings. ANNUAL REPORT. We will send You at least once a year an annual report which will show a summary of all transactions since the last report, including: 1. Premiums paid since the last report; 2. Transfers since the last report; 3. Expense charges deducted since the last report; 4. The cost of insurance deducted since the last report; 5. Partial surrender benefits deducted since the last report including partial surrender fees; 6. The amount of any outstanding policy loan; 7. Separate Account Unit Values; 8. The current Cash Surrender Value and Accumulation Values; and 9. The Death Benefit Amount. WHEN THIS POLICY TERMINATES. This policy will terminate if: 1. You request that this policy be terminated; 2. The Insured dies; 3. The policy matures; or 4. The Grace Period ends and there is not sufficient Cash Surrender Value to cover a Monthly Deduction. REINSTATEMENT. "Reinstating" means placing Your policy in force after it has terminated at the end of the Grace Period. We will reinstate this policy if We receive: 1. Your Written request within 5 years after the end of the Grace Period and before the Maturity Date; 2. Evidence of insurability satisfactory to Us; 3. Payment of enough premiums so that the policy will remain in force for 2 months; and 4. Payment or reinstatement of any indebtedness. The reinstated policy will be in force from the Monthly Deduction Day on or following the date We approve the reinstatement application. The Accumulation Value at the time of reinstatement will be: 1. The Net Premium allocated in accordance with the premium allocation percentages at time of lapse unless the reinstatement application provides otherwise, using Unit Values as of the date of reinstatement; plus 2. Any loan, including loan interest to the next policy anniversary, repaid or reinstated; less 3. The monthly deduction for one month. If a person other than the Insured is covered by a rider attached to this policy, coverage will be reinstated according to that rider. Page 19 TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK
ATTAINED AGE MALE ATTAINED AGE MALE NEAREST BIRTHDAY NEAREST BIRTHDAY (ON EACH POLICY (ON EACH POLICY ANNIVERSARY) ANNIVERSARY) 0 $0.35 50 $0.56 1 0.09 51 0.61 2 0.08 52 0.67 3 0.08 53 0.73 4 0.08 54 0.80 5 0.08 55 0.88 6 0.07 56 0.96 7 0.07 57 1.05 8 0.06 58 1.14 9 0.06 59 1.24 10 0.06 60 1.35 11 0.06 61 1.48 12 0.07 62 1.62 13 0.08 63 1.78 14 0.10 64 1.95 15 0.11 65 2.15 16 0.13 66 2.36 17 0.14 67 2.58 18 0.15 68 2.82 19 0.16 69 3.07 20 0.16 70 3.36 21 0.16 71 3.70 22 0.16 72 4.08 23 0.16 73 4.52 24 0.15 74 5.01 25 0.15 75 5.54 26 0.14 76 6.11 27 0.14 77 6.71 28 0.14 78 7.33 29 0.14 79 7.99 30 0.14 80 8.71 31 0.15 81 9.52 32 0.15 82 10.45 33 0.16 83 11.50 34 0.17 84 12.67 35 0.18 85 13.93 36 0.19 86 15.25 37 0.20 87 16.63 38 0.22 88 18.06 39 0.23 89 19.55 40 0.25 90 21.11 41 0.27 91 22.80 42 0.30 92 24.66 43 0.32 93 26.82 44 0.35 94 29.67 45 0.38 46 0.41 47 0.44 48 0.48 49 0.52
The rates shown above represent the guaranteed (maximum) monthly cost of insurance for each $1,000 of net amount at risk. If this policy has been issued in a special (rated) premium class, the guaranteed monthly cost will be calculated as shown on page 3. Page 20 TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
OPTION 1 TABLE INSTALLMENTS FOR A SPECIFIED PERIOD - -------------------------------------------------------------------------------------------------------- Number Amount of Number Amount of Number Amount of Number Amount of of Years Monthly of Years Monthly of Years Monthly of Years Monthly Payable Installments Payable Installments Payable Installments Payable Installments - -------------------------------------------------------------------------------------------------------- 5 $17.91 15 $6.87 25 $4.71 35 $3.82 6 15.14 16 6.53 26 4.59 36 3.76 7 13.16 17 6.23 27 4.47 37 3.70 8 11.68 18 5.96 28 4.37 38 3.65 9 10.53 19 5.73 29 4.27 39 3.60 10 9.61 20 5.51 30 4.18 40 3.55 11 8.86 21 5.32 31 4.10 12 8.24 22 5.15 32 4.02 13 7.71 23 4.99 33 3.95 14 7.26 24 4.84 34 3.88 - --------------------------------------------------------------------------------------------------------
OPTION 3 TABLE INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD - ------------------------------------------------------------------------------------------------------------------------------ AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Male 10 Years 15 Years 20 Years Male 10 Years 15 Years 20 Years - ------------------------------------------------------------------------------------------------------------------------------- 20* $2.95 $2.94 $2.94 50 $4.05 $4.00 $3.93 21 2.97 2.96 2.96 51 4.11 4.06 3.99 22 2.98 2.98 2.98 52 4.18 4.13 4.04 23 3.00 3.00 3.00 53 4.26 4.19 4.10 24 3.02 3.02 3.02 54 4.34 4.27 4.16 25 3.05 3.04 3.04 55 4.42 4.34 4.22 26 3.07 3.06 3.06 56 4.51 4.42 4.28 27 3.09 3.09 3.08 57 4.60 4.50 4.35 28 3.12 3.11 3.11 58 4.69 4.58 4.41 29 3.14 3.14 3.13 59 4.79 4.66 4.47 30 3.17 3.16 3.16 60 4.90 4.75 4.54 31 3.20 3.19 3.18 61 5.01 4.84 4.60 32 3.22 3.22 3.21 62 5.13 4.94 4.67 33 3.25 3.25 3.24 63 5.26 5.03 4.73 34 3.29 3.28 3.27 64 5.39 5.13 4.79 35 3.32 3.31 3.00 65 5.52 5.23 4.85 36 3.35 3.35 3.33 66 5.66 5.33 4.91 37 3.39 3.38 3.36 67 5.81 5.43 4.97 38 3.43 3.42 3.40 68 5.96 5.53 5.02 39 3.47 3.46 3.44 69 6.12 5.63 5.07 40 3.51 3.50 3.47 70 6.28 5.73 5.11 41 3.55 3.54 3.51 71 6.44 5.82 5.15 42 3.60 3.58 3.55 72 6.61 5.91 5.19 43 3.65 3.63 3.59 73 6.78 6.00 5.23 44 3.70 3.67 3.64 74 6.96 6.08 5.26 45 3.75 3.72 3.68 75 7.13 6.16 5.28 46 3.80 3.77 3.73 76 7.30 6.24 5.31 47 3.86 3.83 3.78 77 7.47 6.31 5.33 48 3.92 3.88 3.83 78 7.64 6.37 5.34 49 3.98 3.94 3.88 79 7.81 6.42 5.36 80** 7.97 6.48 5.37 - ---------------------------------------------------------------------------------------------------------------------------------- Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for two or more specified periods for a given age are the same, the specified period of longer duration will apply. *Also applies to younger ages. **Also applies to older ages. - ----------------------------------------------------------------------------------------------------------------------------------
Page 21 TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK
ATTAINED AGE FEMALE ATTAINED AGE FEMALE NEAREST BIRTHDAY NEAREST BIRTHDAY (ON EACH POLICY (ON EACH POLICY ANNIVERSARY) ANNIVERSARY) 0 $0.24 50 $0.41 1 0.07 51 0.44 2 0.07 52 0.48 3 0.07 53 0.51 4 0.06 54 0.55 5 0.06 55 0.59 6 0.06 56 0.63 7 0.06 57 0.67 8 0.06 58 0.71 9 0.06 59 0.75 10 0.06 60 0.79 11 0.06 61 0.85 12 0.06 62 0.92 13 0.06 63 1.01 14 0.07 64 1.11 15 0.07 65 1.23 16 0.08 66 1.35 17 0.08 67 1.47 18 0.08 68 1.59 19 0.09 69 1.72 20 0.09 70 1.86 21 0.09 71 2.05 22 0.09 72 2.27 23 0.09 73 2.55 24 0.10 74 2.88 25 0.10 75 3.25 26 0.10 76 3.67 27 0.10 77 4.11 28 0.11 78 4.59 29 0.11 79 5.11 30 0.11 80 5.71 31 0.12 81 6.39 32 0.12 82 7.19 33 0.13 83 8.12 34 0.13 84 9.18 35 0.14 85 10.34 36 0.15 86 11.60 37 0.16 87 12.97 38 0.17 88 14.45 39 0.19 89 16.05 40 0.20 90 17.79 41 0.22 91 19.72 42 0.24 92 21.89 43 0.26 93 24.44 44 0.28 94 27.67 45 0.30 46 0.32 47 0.34 48 0.36 49 0.39
The rates shown above represent the guaranteed (maximum) monthly cost of insurance for each $1,000 of net amount at risk. If this policy has been issued in a special (rated) premium class, the guaranteed monthly cost will be calculated as shown on page 3. Page 22 TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
OPTION 1 TABLE INSTALLMENTS FOR A SPECIFIED PERIOD - -------------------------------------------------------------------------------------------------------- Number Amount of Number Amount of Number Amount of Number Amount of of Years Monthly of Years Monthly of Years Monthly of Years Monthly Payable Installments Payable Installments Payable Installments Payable Installments - -------------------------------------------------------------------------------------------------------- 5 $17.91 15 $6.87 25 $4.71 35 $3.82 6 15.14 16 6.53 26 4.59 36 3.76 7 13.16 17 6.23 27 4.47 37 3.70 8 11.68 18 5.96 28 4.37 38 3.65 9 10.53 19 5.73 29 4.27 39 3.60 10 9.61 20 5.51 30 4.18 40 3.55 11 8.86 21 5.32 31 4.10 12 8.24 22 5.15 32 4.02 13 7.71 23 4.99 33 3.95 14 7.26 24 4.84 34 3.88 - --------------------------------------------------------------------------------------------------------
OPTION 3 TABLE INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Female 10 Years 15 Years 20 Years Female 10 Years 15 Years 20 Years - ------------------------------------------------------------------------------------------------------------------------------------ 20* $2.85 $2.85 $2.85 50 $3.75 $3.73 $3.69 21 2.87 2.87 2.87 51 3.80 3.78 3.74 22 2.89 2.88 2.88 52 3.86 3.84 3.79 23 2.90 2.90 2.90 53 3.92 3.89 3.85 24 2.92 2.92 2.91 54 3.99 3.96 3.90 25 2.94 2.93 2.93 55 4.06 4.02 3.96 26 2.95 2.95 2.95 56 4.13 4.09 4.02 27 2.97 2.97 2.97 57 4.21 4.16 4.08 28 2.99 2.99 2.99 58 4.29 4.23 4.15 29 3.01 3.01 3.01 59 4.37 4.31 4.21 30 3.03 3.03 3.03 60 4.46 4.39 4.28 31 3.06 3.05 3.05 61 4.56 4.47 4.35 32 3.08 3.08 3.07 62 4.66 4.56 4.42 33 3.10 3.10 3.10 63 4.76 4.65 4.49 34 3.13 3.13 3.12 64 4.88 4.75 4.56 35 3.16 3.15 3.15 65 4.99 4.85 4.63 36 3.19 3.18 3.17 66 5.12 4.95 4.70 37 3.21 3.21 3.20 67 5.25 5.05 4.77 38 3.24 3.24 3.23 68 5.39 5.16 4.83 39 3.28 3.27 3.26 69 5.53 5.27 4.90 40 3.31 3.30 3.29 70 5.69 5.38 4.96 41 3.35 3.34 3.33 71 5.85 5.49 5.02 42 3.38 3.37 3.36 72 6.02 5.60 5.08 43 3.42 3.41 3.40 73 6.19 5.71 5.13 44 3.46 3.45 3.43 74 6.37 5.82 5.17 45 3.50 3.49 3.47 75 6.56 5.92 5.21 46 3.55 3.53 3.51 76 6.75 6.02 5.25 47 3.59 3.58 3.56 77 6.95 6.11 5.28 48 3.64 3.63 3.60 78 7.14 6.20 5.30 49 3.69 3.67 3.65 79 7.34 6.28 5.32 80** 7.54 6.35 5.34 - ----------------------------------------------------------------------------------------------------------------------------------- Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for two or more specified periods for a given age are the same, the specified period of longer duration will apply. *Also applies to younger ages. **Also applies to older ages. - ------------------------------------------------------------------------------------------------------------------------------------
Page 23 TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK
ATTAINED AGE RATE ATTAINED AGE RATE NEAREST BIRTHDAY NEAREST BIRTHDAY (ON EACH POLICY (ON EACH POLICY ANNIVERSARY) ANNIVERSARY) 0 $0.33 50 $0.53 1 0.09 51 0.58 2 0.08 52 0.63 3 0.08 53 0.69 4 0.08 54 0.75 5 0.07 55 0.82 6 0.07 56 0.89 7 0.07 57 0.97 8 0.06 58 1.05 9 0.06 59 1.14 10 0.06 60 1.24 11 0.06 61 1.35 12 0.07 62 1.47 13 0.08 63 1.61 14 0.09 64 1.77 15 0.10 65 1.95 16 0.12 66 2.14 17 0.13 67 2.34 18 0.14 68 2.54 19 0.14 69 2.77 20 0.15 70 3.02 21 0.15 71 3.32 22 0.14 72 3.66 23 0.14 73 4.05 24 0.14 74 4.49 25 0.14 75 4.98 26 0.14 76 5.50 27 0.13 77 6.04 28 0.13 78 6.60 29 0.14 79 7.21 30 0.14 80 7.87 31 0.14 81 8.63 32 0.15 82 9.49 33 0.15 83 10.49 34 0.16 84 11.59 35 0.17 85 12.78 36 0.18 86 14.05 37 0.19 87 15.39 38 0.21 88 16.80 39 0.22 89 18.30 40 0.24 90 19.89 41 0.26 91 21.63 42 0.29 92 23.60 43 0.31 93 25.88 44 0.33 94 28.87 45 0.36 46 0.39 47 0.42 48 0.46 49 0.49
The rates shown above represent the guaranteed (maximum) monthly cost of insurance for each $1,000 of net amount at risk. If this policy has been issued in a special (rated) premium class, the guaranteed monthly cost will be calculated as shown on page 3. Page 24
OPTION 1 TABLE INSTALLMENTS FOR A SPECIFIED PERIOD - -------------------------------------------------------------------------------------------------------- Number Amount of Number Amount of Number Amount of Number Amount of of Years Monthly of Years Monthly of Years Monthly of Years Monthly Payable Installments Payable Installments Payable Installments Payable Installments - -------------------------------------------------------------------------------------------------------- 5 $17.91 15 $6.87 25 $4.71 35 $3.82 6 15.14 16 6.53 26 4.59 36 3.76 7 13.16 17 6.23 27 4.47 37 3.70 8 11.68 18 5.96 28 4.37 38 3.65 9 10.53 19 5.73 29 4.27 39 3.60 10 9.61 20 5.51 30 4.18 40 3.55 11 8.86 21 5.32 31 4.10 12 8.24 22 5.15 32 4.02 13 7.71 23 4.99 33 3.95 14 7.26 24 4.84 34 3.88 - --------------------------------------------------------------------------------------------------------
OPTION 3 TABLE INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- GUARANTEED PERIOD GUARANTEED PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- AGE OF PAYEE 10 Years 15 Years 20 Years AGE OF PAYEE 10 Years 15 Years 20 Years - ------------------------------------------------------------------------------------------------------------------------------------ 20* $2.89 $2.89 $2.89 50 $3.87 $3.84 $3.79 21 2.91 2.91 2.90 51 3.93 3.90 3.85 22 2.93 2.92 2.92 52 3.99 3.96 3.90 23 2.94 2.94 2.94 53 4.06 4.02 3.95 24 2.96 2.96 2.96 54 4.13 4.08 4.01 25 2.98 2.98 2.98 55 4.21 4.15 4.07 26 3.00 3.00 3.00 56 4.28 4.22 4.13 27 3.02 3.02 3.02 57 4.37 4.30 4.19 28 3.04 3.04 3.04 58 4.45 4.38 4.26 29 3.07 3.06 3.06 59 4.55 4.46 4.32 30 3.09 3.09 3.08 60 4.64 4.54 4.39 31 3.11 3.11 3.11 61 4.74 4.63 4.46 32 3.14 3.14 3.13 62 4.85 4.72 4.52 33 3.17 3.16 3.16 63 4.97 4.81 4.59 34 3.20 3.19 3.18 64 5.08 4.91 4.66 35 3.22 3.22 3.21 65 5.21 5.01 4.73 36 3.26 3.25 3.24 66 5.34 5.11 4.79 37 3.29 3.28 3.27 67 5.48 5.21 4.85 38 3.32 3.31 3.30 68 5.62 5.32 4.92 39 3.36 3.35 3.33 69 5.77 5.42 4.97 40 3.39 3.38 3.37 70 5.93 5.53 5.03 41 3.43 3.42 3.40 71 6.09 5.63 5.08 42 3.47 3.46 3.44 72 6.26 5.73 5.13 43 3.51 3.50 3.48 73 6.44 5.84 5.17 44 3.56 3.54 3.52 74 6.62 5.93 5.21 45 3.60 3.59 3.56 75 6.80 6.03 5.24 46 3.65 3.63 3.60 76 6.98 6.12 5.27 47 3.70 3.68 3.65 77 7.17 6.20 5.30 48 3.76 3.73 3.70 78 7.35 6.27 5.32 49 3.81 3.78 3.74 79 7.54 6.34 5.34 80** 7.72 6.41 5.35 - ----------------------------------------------------------------------------------------------------------------------------------- Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for two or more specified periods for a given age are the same, the specified period of longer duration will apply. *Also applies to younger ages. **Also applies to older ages. - -----------------------------------------------------------------------------------------------------------------------------------
Page 25 AMERICAN GENERAL LIFE INSURANCE COMPANY This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death Benefit is payable upon the Insured's death prior to the Maturity Date. Investment results are reflected in policy benefits. ACCUMULATION VALUES are flexible and will be based on the amount and frequency of premiums paid and the investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS. For Information, Service or to make a Complaint Contact your Servicing Agent, or our VUL Administration. 2727-A Allen Parkway P.O. Box 4880 Houston, Texas 77210-4880 1-888-325-9315 [LOGO OF AMERICAN GENERAL APPEARS HERE] A STOCK COMPANY _______________________ A Subsidiary of American General Corporation Page 26 EX-8.A 3 FUND PARTICIPATION AGREEMENT EXHIBIT 8(a) FUND PARTICIPATION AGREEMENT THIS AGREEMENT made as of the ____ day of _____________, 199__ by and among BT Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers Trust Company ("ADVISER"), a New York banking corporation, and American General Life Insurance Company ("LIFE COMPANY"), a life insurance company organized under the laws of the State of Texas. WHEREAS, TRUST is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "'40 Act"), as an open-end, diversified management investment company; and WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"), with those Portfolios currently available being listed on Appendix A hereto; and WHEREAS, TRUST was organized to act as the funding vehicle for certain variable life insurance and/or variable annuity contracts ("Variable Contracts") offered by life insurance companies through separate accounts ("Separate Accounts") of such life insurance companies ("Participating Insurance Companies"); and WHEREAS, TRUST may also offer its shares to certain qualified pension and retirement plans ("Qualified Plans"); and WHEREAS, TRUST has received an order from the SEC, granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e2(b)(15) and 6e3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Portfolios of the TRUST to be sold to and held by Variable Contract Separate Accounts of both affiliated and unaffiliated Participating Insurance Companies and Qualified Plans ("Exemptive Order"); and WHEREAS, LIFE COMPANY has established or will establish one or more Separate Accounts to offer Variable Contracts and is desirous of having TRUST as one of the underlying funding vehicles for such Variable Contracts; and WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of 1940, as amended (the "Advisers Act") and as such is excluded from the definition of "Investment Adviser" and is not required to register as an investment adviser pursuant to the Advisers Act; and WHEREAS, ADVISER serves as the TRUST's investment adviser; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE 1 COMPANY intends to purchase shares of TRUST to fund the aforementioned Variable Contracts and TRUST is authorized to sell such shares to LIFE COMPANY at such shares' net asset value; NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, TRUST, and ADVISER agree as follows: Article I. SALE OF TRUST SHARES 1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY shares of the selected Portfolios as listed on Appendix B for investment of purchase payments of Variable Contracts allocated to the designated Separate Accounts as provided in TRUST's Registration Statement. 1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the order for the shares of TRUST. For purposes of this Section 1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in writing) of such order by 8:00 a.m. New York time on the next Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which TRUST calculates its net asset value pursuant to the rules of the SEC. 1.3 TRUST agrees to redeem on LIFE COMPANY's request, any full or fractional shares of TRUST held by LIFE COMPANY, executing such requests on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the request for redemption, in accordance with the provisions of this Agreement and TRUST's Registration Statement. (In the event of a conflict between the provisions of this Agreement and the Trust's Registration Statement, the provisions of the Registration Statement shall govern.) For purposes of this Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests for redemption from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the request for redemption by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in writing) of such request for redemption by 9:00 a.m. New York time on the next Business Day. 1.4 TRUST shall furnish, on or before each ex-dividend date, notice to LIFE COMPANY of any 2 income dividends or capital gain distributions payable on the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of the Portfolio. TRUST shall notify LIFE COMPANY or its designee of the number of shares so issued as payment of such dividends and distributions. 1.5 TRUST shall make the net asset value per share for the selected Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m. New York time. If TRUST provides LIFE COMPANY with materially incorrect share net asset value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts, shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct share net asset value. Any material error in the calculation of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. 1.6 At the end of each Business Day, LIFE COMPANY shall use the information described in Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, LIFE COMPANY shall process each such Business Day's Separate Account transactions based on requests and premiums received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount of TRUST shares which shall be purchased or redeemed at that day's closing net asset value per share. The net purchase or redemption orders so determined shall be transmitted to TRUST by LIFE COMPANY by 8:00 a.m. New York Time on the Business Day next following LIFE COMPANY's receipt of such requests and premiums in accordance with the terms of Sections 1.2 and 1.3 hereof. 1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or its designated custodial account on the day the order is transmitted by LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a payment of redemption proceeds to LIFE COMPANY, TRUST shall use its best efforts to wire the redemption proceeds to LIFE COMPANY by the next Business Day, unless doing so would require TRUST to dispose of Portfolio securities or otherwise incur additional costs. In any event, proceeds shall be wired to LIFE COMPANY within the time period permitted by the '40 Act or the rules, orders or regulations thereunder, and TRUST shall notify the person designated in writing by LIFE COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York Time on the same Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's order requests the application of redemption proceeds from the redemption of shares to the purchase of shares of another Fund advised by ADVISER, TRUST shall so apply such proceeds on the same Business Day that LIFE 3 COMPANY transmits such order to TRUST. 1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold only to Participating Insurance Companies which have agreed to participate in TRUST to fund their Separate Accounts and/or to Qualified Plans, all in accordance with the requirements of Section 817(h)(4) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation 1.8175. Shares of the TRUST's Portfolios will not be sold directly to the general public. 1.9 TRUST may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of the shares of or liquidate any Portfolio of TRUST if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST (the "Board"), acting in good faith and in light of its duties under federal and any applicable state laws, deemed necessary, desirable or appropriate and in the best interests of the shareholders of such Portfolios. 1.10 Issuance and transfer of Portfolio shares will be by book entry only. Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts. Shares ordered from Portfolio will be recorded in appropriate book entry titles for the Separate Accounts. Article II. REPRESENTATIONS AND WARRANTIES 2.1 LIFE COMPANY represents and warrants that it is an insurance company duly organized and in good standing under the laws of ___________________ and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that ___________________, the principal underwriter for the Variable Contracts, is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "'34 Act"). 2.2 LIFE COMPANY represents and warrants that it has registered or, prior to any issuance or sale of the Variable Contracts, will register each Separate Account as a unit investment trust ("UIT") in accordance with the provisions of the '40 Act and cause each Separate Account to remain so registered to serve as a segregated asset account for the Variable Contracts, unless an exemption from registration is available. 2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be registered under the Securities Act of 1933 (the "'33 Act") unless an exemption from registration is available prior to any issuance or sale of the Variable Contracts, and that the Variable Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws (including all applicable blue sky laws) and further that the sale of the Variable Contracts shall comply in all material respects with applicable state insurance law suitability requirements. 4 2.4 LIFE COMPANY represents and warrants that the Variable Contracts are currently and at the time of issuance will be treated as life insurance, endowment or annuity contracts under applicable provisions of the Code, that it will maintain such treatment and that it will notify TRUST immediately upon having a reasonable basis for believing that the Variable Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5 TRUST represents and warrants that the Fund shares offered and sold pursuant to this Agreement will be registered under the '33 Act and sold in accordance with all applicable federal laws, and TRUST shall be registered under the '40 Act prior to and at the time of any issuance or sale of such shares. TRUST, subject to Section 1.9 above, shall amend its registration statement under the '33 Act and the '40 Act from time to time as required in order to effect the continuous offering of its shares. TRUST shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by TRUST. 2.6 TRUST represents and warrants that each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing any Portfolio has ceased to comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance. 2.7 TRUST represents and warrants that each Portfolio invested in by the Separate Account will be treated as a "regulated investment company" under Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. 2.8 ADVISER represents and warrants that it shall perform its obligations hereunder in compliance in all material respects with any applicable state and federal laws. Article III. PROSPECTUS AND PROXY STATEMENTS 3.1 TRUST shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of TRUST. TRUST shall bear the costs of registration and qualification of shares of the Portfolios, preparation and filing of the documents listed in this Section 3.1 and all taxes and filing fees to which an issuer is subject on the issuance and transfer of its shares. 3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge, with as many copies 5 of the current prospectus (or prospectuses), statements of additional information, annual and semi-annual reports and proxy statements for the shares of the Portfolios as LIFE COMPANY may reasonably request for distribution to existing Variable Contract owners whose Variable Contracts are funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE COMPANY's expense, with as many copies of the current prospectus (or prospectuses) for the shares as LIFE COMPANY may reasonably request for distribution to prospective purchasers of Variable Contracts. If requested by LIFE COMPANY, TRUST or its designee shall provide such documentation (including a "camera ready" copy of the current prospectus (or prospectuses) as set in type or, at the request of LIFE COMPANY, as a diskette in the form sent to the financial printer) and other assistance as is reasonably necessary in order for the parties hereto once a year (or more frequently if the prospectus (or prospectuses) for the shares is supplemented or amended) to have the prospectus for the Variable Contracts and the prospectus (or prospectuses) for the TRUST shares printed together in one document. The expenses of such printing will be apportioned between LIFE COMPANY and TRUST in proportion to the number of pages of the Variable Contract and TRUST prospectus, taking account of other relevant factors affecting the expense of printing, such as covers, columns, graphs and charts; TRUST shall bear the cost of printing the TRUST prospectus portion of such document for distribution only to owners of existing Variable Contracts funded by the TRUST shares and LIFE COMPANY shall bear the expense of printing the portion of such documents relating to the Separate Account; provided, however, LIFE COMPANY shall bear all printing expenses of such combined documents where used for distribution to prospective purchasers or to owners of existing Variable Contracts not funded by the shares. In the event that LIFE COMPANY requests that TRUST or its designee provide TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be responsible for providing the prospectus (or prospectuses) in the format in which it is accustomed to formatting prospectuses and shall bear the expense of providing the prospectus (or prospectuses) in such format (e.g. typesetting expenses), and LIFE COMPANY shall bear the expense of adjusting or changing the format to conform with any of its prospectuses. 3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to the Portfolios promptly after the filing of each such document with the SEC or other regulatory authority. LIFE COMPANY will provide TRUST with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to a Separate Account promptly after the filing of each such document with the SEC or other regulatory authority. Article IV. SALES MATERIALS 4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and ADVISER, 6 each piece of sales literature or other promotional material in which TRUST or ADVISER is named, at least fifteen (15) Business Days prior to its intended use. No such material will be used if TRUST or ADVISER objects to its use in writing within ten (10) Business Days after receipt of such material. 4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE COMPANY, each piece of sales literature or other promotional material in which LIFE COMPANY or its Separate Accounts are named, at least fifteen (15) Business Days prior to its intended use. No such material will be used if LIFE COMPANY objects to its use in writing within ten (10) Business Days after receipt of such material. 4.3 TRUST and its affiliates and agents shall not give any information or make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other than the information or representations contained in a registration statement or prospectus for such Variable Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports of the Separate Accounts or reports prepared for distribution to owners of such Variable Contracts, or in sales literature or other promotional material approved by LIFE COMPANY or its designee, except with the written permission of LIFE COMPANY. 4.4 LIFE COMPANY and its affiliates and agents shall not give any information or make any representations on behalf of TRUST or concerning TRUST other than the information or representations contained in a registration statement or prospectus for TRUST, as such registration statement and prospectus may be amended or supplemented from time to time, or in sales literature or other promotional material approved by TRUST or its designee, except with the written permission of TRUST. 4.5 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under National Association of Securities Dealers, Inc. ("NASD") rules, the '40 Act, the '33 Act or rules thereunder. 7 Article V. POTENTIAL CONFLICTS 5.1 The parties acknowledge that TRUST has received an order from the SEC granting relief from various provisions of the '40 Act and the rules thereunder to the extent necessary to permit TRUST shares to be sold to and held by Variable Contract separate accounts of both affiliated and unaffiliated Participating Insurance Companies and Qualified Plans. The Exemptive Order requires TRUST and each Participating Insurance Company to comply with conditions and undertakings substantially as provided in this Section 5. The TRUST will not enter into a participation agreement with any other Participating Insurance Company unless it imposes the same conditions and undertakings as are imposed on LIFE COMPANY hereby. 5.2 The Board will monitor TRUST for the existence of any material irreconcilable conflict between the interests of Variable Contract owners of all separate accounts and with participants of Qualified Plans investing in TRUST. An irreconcilable material conflict may arise for a variety of reasons, which may include: (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 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 TRUST are being managed; (e) a difference in voting instructions given by Variable Contract owners; (f) a decision by a Participating Insurance Company to disregard the voting instructions of Variable Contract owners and (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of plan participants. 5.3 LIFE COMPANY will report any potential or existing conflicts of which it becomes aware to the Board. LIFE COMPANY will be responsible for assisting the Board in carrying out its duties in this regard by providing the Board with all information reasonably necessary for the Board to consider any issues raised. The responsibility includes, but is not limited to, an obligation by the LIFE COMPANY to inform the Board whenever it has determined to disregard Variable Contract owner voting instructions. These responsibilities of LIFE COMPANY will be carried out with a view only to the interests of the Variable Contract owners. 5.4 If a majority of the Board or majority of its disinterested Trustees, determines that a material irreconcilable conflict exists affecting LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable (as determined by a majority of the Board's disinterested Trustees), 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 TRUST or any Portfolio thereof and reinvesting those assets in a different investment medium, which may include another Portfolio of TRUST, or another investment company; (b) submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners 8 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 Variable 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 LIFE COMPANY's decision to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at the election of TRUST, to withdraw the Separate Account's investment in TRUST, 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 Variable Contract owners. For the purposes of this Section 5.4, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will TRUST or ADVISER (or any other investment adviser of TRUST) be required to establish a new funding medium for any Variable Contract. Further, LIFE COMPANY shall not be required by this Section 5.4 to establish a new funding medium for any Variable Contracts if any offer to do so has been declined by a vote of a majority of Variable Contract owners materially and adversely affected by the irreconcilable material conflict. 5.5 The Board's determination of the existence of an irreconcilable material conflict and its implications shall be made known promptly and in writing to LIFE COMPANY. 5.6 No less than annually, LIFE COMPANY shall submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out its obligations. Such reports, materials, and data shall be submitted more frequently if deemed appropriate by the Board. Article VI. VOTING 6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable Contract owners so long as the SEC continues to interpret the '40 Act as requiring pass-through voting privileges for Variable Contract owners. Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio held in its Separate Accounts in a manner consistent with voting instructions timely received from its Variable Contract owners. LIFE COMPANY will be responsible for assuring that each of its Separate Accounts that participates in TRUST calculates voting privileges in a manner consistent with other Participating Insurance Companies. LIFE COMPANY will vote shares for which it has not received timely voting instructions, as well as shares it owns, in the same proportion as its votes those shares for which it has received voting instructions. 9 6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act or the rules thereunder with respect to mixed and shared funding on terms and conditions materially different from any exemptions granted in the Exemptive Order, then TRUST, and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable. Article VII. INDEMNIFICATION 7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and hold harmless TRUST, ADVISER and each of their Trustees, directors, principals, officers, employees and agents and each person, if any, who controls TRUST or ADVISER within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties") against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY, which consent shall not be unreasonably withheld) or litigation or threatened litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of TRUST's shares or the Variable Contracts and: (a) 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 Variable Contracts or contained in the Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY by or on behalf of TRUST for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of TRUST not supplied by LIFE COMPANY, or persons under its control) or (ii) wrongful conduct of LIFE COMPANY or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or 10 (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of TRUST or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to TRUST by or on behalf of LIFE COMPANY; or (d) arise as a result of any failure by LIFE COMPANY to provide substantially the services and furnish the materials under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY. 7.2 LIFE COMPANY shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party to the extent that such losses, claims, damages, liabilities or litigation are attributable to 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. 7.3 LIFE COMPANY shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified LIFE COMPANY in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY of any such claim shall not relieve LIFE COMPANY from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against an Indemnified Party, LIFE COMPANY shall be entitled to participate at its own expense in the defense of such action. LIFE COMPANY also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from LIFE COMPANY to such party of LIFE COMPANY's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and LIFE COMPANY will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.4 Indemnification by TRUST. TRUST agrees to indemnify and hold harmless LIFE COMPANY and each of its directors, officers, employees, and agents and each person, if any, who 11 controls LIFE COMPANY within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties") against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of TRUST which consent shall not be unreasonably withheld) or litigation or threatened 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 TRUST's shares or the Variable Contracts and: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of TRUST (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the 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 in writing to ADVISER or TRUST by or on behalf of LIFE COMPANY for use in the registration statement or prospectus for TRUST or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by ADVISER or TRUST or persons under its control) or (ii) gross negligence or wrongful conduct or willful misfeasance of TRUST or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts, 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 statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY for inclusion therein by or on behalf of TRUST; or (d) arise as a result of (i) a failure by TRUST to provide substantially the services and furnish the materials under the terms of this Agreement; or (ii) a failure by a 12 Portfolio(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code; or (iii) a failure by a Portfolio(s) invested in by the Separate Account to qualify as a "regulated investment company" under Subchapter M of the Code; or (e) arise out of or result from any material breach of any representation and/or warranty made by TRUST in this Agreement or arise out of or result from any other material breach of this Agreement by TRUST. 7.5 TRUST 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 to the extent that such losses, claims, damages, liabilities or litigation are attributable to 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. 7.6 TRUST 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 TRUST 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 TRUST of any such claim shall not relieve TRUST 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, TRUST shall be entitled to participate at its own expense in the defense thereof. TRUST also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from TRUST to such party of TRUST's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and TRUST 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. Article VIII. TERM; TERMINATION 8.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein. 8.2 This Agreement shall terminate in accordance with the following provisions: 13 (a) At the option of LIFE COMPANY or TRUST at any time from the date hereof upon 180 days' notice, unless a shorter time is agreed to by the parties; (b) At the option of LIFE COMPANY, if TRUST shares are not reasonably available to meet the requirements of the Variable Contracts as determined by LIFE COMPANY. Prompt notice of election to terminate shall be furnished by LIFE COMPANY, said termination to be effective ten days after receipt of notice unless TRUST makes available a sufficient number of shares to reasonably meet the requirements of the Variable Contracts within said ten- day period; (c) At the option of LIFE COMPANY, upon the institution of formal proceedings against TRUST by the SEC, the NASD, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in LIFE COMPANY's reasonable judgment, materially impair TRUST's ability to meet and perform TRUST's obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by LIFE COMPANY with said termination to be effective upon receipt of notice; (d) At the option of TRUST, upon the institution of formal proceedings against LIFE COMPANY and/or its broker-dealer affiliates by the SEC, the NASD, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in TRUST's reasonable judgment, materially impair LIFE COMPANY's ability to meet and perform its obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by TRUST with said termination to be effective upon receipt of notice; (e) In the event TRUST's shares are not registered, issued or sold in accordance with applicable state or federal law, or such law precludes the use of such shares as the underlying investment medium of Variable Contracts issued or to be issued by LIFE COMPANY. Termination shall be effective upon such occurrence without notice; (f) At the option of TRUST if the Variable Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code, or if TRUST reasonably believes that the Variable Contracts may fail to so qualify. Termination shall be effective upon receipt of notice by LIFE COMPANY; (g) At the option of LIFE COMPANY, upon TRUST's breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of LIFE COMPANY within ten days after written notice of such breach is delivered to TRUST; 14 (h) At the option of TRUST, upon LIFE COMPANY's breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of TRUST within ten days after written notice of such breach is delivered to LIFE COMPANY; (i) At the option of TRUST, if the Variable Contracts are not registered, issued or sold in accordance with applicable federal and/or state law. Termination shall be effective immediately upon such occurrence without notice; In the event this Agreement is assigned without the prior written consent of LIFE COMPANY, TRUST, and ADVISER, termination shall be effective immediately upon such occurrence without notice. 8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2 hereof, TRUST at its option may elect to continue to make available additional TRUST shares, as provided below, for so long as TRUST desires pursuant to the terms and conditions of this Agreement, for all Variable Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if TRUST so elects to make additional TRUST shares available, the owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal authority to do so, shall be permitted to reallocate investments in TRUST, redeem investments in TRUST and/or invest in TRUST upon the payment of additional premiums under the Existing Contracts. In the event of a termination of this Agreement pursuant to Section 8.2 hereof, TRUST and ADVISER, as promptly as is practicable under the circumstances, shall notify LIFE COMPANY whether TRUST elects to continue to make TRUST shares available after such termination. If TRUST shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect and thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so continued pursuant to this Section 8.3, upon sixty (60) days' prior written notice to the other party. 8.4 Except as necessary to implement Variable Contract owner initiated transactions, or as required by state insurance laws or regulations, LIFE COMPANY shall not redeem the shares attributable to the Variable Contracts (as opposed to the shares attributable to LIFE COMPANY's assets held in the Separate Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from allocating payments to a Portfolio that was otherwise available under the Variable Contracts until thirty (30) days after the LIFE COMPANY shall have notified TRUST of its intention to do so. Article IX. NOTICES Any notice hereunder shall be given by registered or certified mail return receipt requested to the 15 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 TRUST: BT Insurance Funds Trust c/o First Data Investor Services Group, Inc. One Exchange Place 53 State Street, Mail Stop BOS 865 Boston, MA 02109 Attn: Elizabeth Russell, Legal Dep't and c/o BT Alex. Brown One South Street, Mail Stop 1-18-6 Baltimore, MD 21202 Attn: Brian Wixted, Mutual Fund Services If to ADVISER: Bankers Trust Company - Global Investment Management 130 Liberty Street New York, NY 10006 Attn.: Vinay Mendiratta, Mail Stop 2355 If to LIFE COMPANY: American General Life Company c/o American General Independent Producer Division 2727-A Allen Parkway Houston, TX 77019 Facsimile: (713) 831-3071 Attn: Lauren W. Jones, Senior Counsel Notice shall be deemed given on the date of receipt by the addressee as evidenced by the return receipt. Article X. MISCELLANEOUS 10.1 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. 10.2 This Agreement may be executed simultaneously in two or more counterparts, each of 16 which taken together shall constitute one and the same instrument. 10.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 10.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the SEC granting exemptive relief therefrom and the conditions of such orders. 10.5 It is understood and expressly stipulated that neither the shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or any Portfolio shall be personally liable hereunder. No Portfolio shall be liable for the liabilities of any other Portfolio. All persons dealing with TRUST or a Portfolio must look solely to the property of TRUST or that Portfolio, respectively, for enforcement of any claims against TRUST or that Portfolio. It is also understood that each of the Portfolios shall be deemed to be entering into a separate Agreement with LIFE COMPANY so that it is as if each of the Portfolios had signed a separate Agreement with LIFE COMPANY and that a single document is being signed simply to facilitate the execution and administration of the Agreement. 10.6 Each party 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. 10.7 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. 10.8 If the Agreement terminates, the parties agree that Article 7 and Sections 10.5, 10.6 and 10.7 shall remain in effect after termination. 10.9 No provision of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by TRUST, ADVISER and the LIFE COMPANY. 10.10 No failure or delay by a party in exercising any right or remedy under this Agreement will operate as a waiver thereof and no single or partial exercise of rights shall preclude a further or subsequent exercise. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. 17 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Fund Participation Agreement as of the date and year first above written. BT INSURANCE FUNDS TRUST By:___________________________________ Name: Title: BANKERS TRUST COMPANY By:___________________________________ Name: Title: AMERICAN GENERAL LIFE INSURANCE COMPANY By:___________________________________ Name: Title: 18 APPENDIX A To Participation Agreement by and among _________________, ________________ and ______________________. List of portfolios: 19 APPENDIX B To Participation Agreement by and among _________________, ________________ and ______________________. List of variable separate accounts: 20 -----END PRIVACY-ENHANCED MESSAGE-----