-----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, SLXbY1QH7qCHLrnRS8rPyOnOfBhSZuFnTcz0FiMoPDnBmXLIQ5TGcw+dt2Hy5ECe 1GI8m2aquBFk1VRxHJOAfg== 0000899243-00-000082.txt : 20000202 0000899243-00-000082.hdr.sgml : 20000202 ACCESSION NUMBER: 0000899243-00-000082 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20000120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGL SEPARATE ACCOUNT VL R CENTRAL INDEX KEY: 0001051485 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 250598210 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: SEC FILE NUMBER: 333-87307 FILM NUMBER: 510170 BUSINESS ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 BUSINESS PHONE: 7135221111 MAIL ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT VL R DATE OF NAME CHANGE: 19971216 S-6/A 1 AMENDMENT NO. 1 TO FORM S-6 Registration No. 333-87307 As filed with the Securities and Exchange Commission on January 20, 2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS 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. Deputy General Counsel American General Life Companies 2727 Allen Parkway Houston, Texas 77019-2191 (Name and Complete Address of Agent for Service) Securities Being Offered: Flexible Premium Variable Life Insurance Policies. Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. The Registrant hereby amends this Registration Statement on such date or date as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 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** 41,43 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. THE ONE(R) VUL SOLUTION/(SM)/ 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: 1-888-436-5255 P.O. Box 4880 or 1-713-831-3443 Houston, Texas 77210-4880 FAX: 1-877-445-3098 This booklet is called the "prospectus." Investment options. You may use AGL's Separate Account VL-R ("Separate Account") to invest in the following variable investment options and change your selections from time to time: - ---------------------------------------------------------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. AMERICAN GENERAL SERIES PORTFOLIO PUTNAM VARIABLE TRUST COMPANY . AIM V.I. Capital Appreciation Fund . Putnam VT Vista Fund - . AIM V.I. International Equity Fund . Money Market Fund Class IB . AIM V.I. Government Securities Fund . AIM V.I. High Yield Fund The Variable Annuity Life A I M Advisors, Inc.* Insurance Company * Putnam Investment Management, - ---------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS TEMPLETON VARIABLE PRODUCTS KEMPER VARIABLE SERIES SERIES FUND . Oppenheimer High Income Fund/VA . Kemper International . Templeton Developing Markets Portfolio Fund - Class 2 . Kemper Small Cap Value Portfolio OppenheimerFunds, Inc.* Templeton Asset Management Ltd.* Scudder Kemper Investments, Inc.* - ---------------------------------------------------------------------------------------------------------------------------------- MFS VARIABLE INSURANCE TRUST VAN KAMPEN LIFE INVESTMENT TRUST One Group\\(R)\\ Investment Trust . Growth With Income Series . Emerging Growth Portfolio . One Group Investment Trust Equity Index Portfolio . One Group Investment Trust Mid Cap Growth Portfolio . One Group Investment Trust Large Cap Growth Portfolio . One Group Investment Trust Government Bond Portfolio . One Group Investment Trust Diversified Equity Portfolio Massachusetts Financial Services Banc One Investment Advisors Company* Van Kampen Asset Management Inc.* Corporation* - ---------------------------------------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST . Franklin Small Cap Fund - Class 2 Franklin Advisers, Inc.* - ---------------------------------------------------------------------------------------------------------------------------------- *The Investment Adviser of the investment option
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 1. YOUR INVESTMENT RESULTS IN ANY SUCH OPTION WILL DEPEND ON THOSE OF THE RELATED FUND. 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 ON PAGE 1. Other choices you have. During the insured person's lifetime, you may, within limits: (1) request an increase in the amount of insurance, (2) borrow or withdraw amounts you have invested, (3) choose when and how much you invest, and (4) choose whether your accumulation value 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 6. Right to return. If for any reason you are not satisfied with your Policy, you may return it to us and we will refund you the greater of (i) any premium payments received by us or (ii) your accumulation value plus any charges that have been deducted. 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 net 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 net premium. We have designed this prospectus to provide you with information that you should have before investing in the Policies. Please read the prospectus carefully and keep it for future reference. NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE POLICIES ARE NOT AVAILABLE IN ALL STATES. THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY BANK ONE CORPORATION OR ANY OF ITS AFFILIATES OR CORRESPONDENTS OR ANY OTHER AGENCY. THE POLICIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF PRINCIPAL INVESTED. THIS PROSPECTUS IS DATED _____________. 2 GUIDE TO THIS PROSPECTUS This prospectus contains information that you should know before you purchase The One VUL Solution 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 IN THIS PROSPECTUS ------------ BASIC QUESTIONS YOU MAY HAVE - ---------------------------- . How can I invest money in a Policy?.................................... 4 . How will the value of my investment in a Policy change over time?...... 5 . What is the basic amount of insurance ("death benefit") that AGL pays when the insured person dies?........................... 5 . What charges will AGL deduct from my investment in a Policy?........... 6 . What charges and expenses will the Mutual Funds deduct from amounts I invest through my Policy?................................... 8 . Must I invest any minimum amount in a Policy?.......................... 10 . How can I change my Policy's investment options?....................... 10 . How can I change my Policy's insurance coverage?....................... 11 . What additional rider benefits might I select?......................... 11 . How can I access my investment in a Policy?............................ 12 . Can I choose the form in which AGL pays out proceeds from my Policy?... 13 . To what extent can AGL vary the terms and conditions of the Policy in particular cases? 14 . How will my Policy be treated for income tax purposes?................. 15 . How do I communicate with AGL?......................................... 15
Illustrations of a hypothetical Policy. Starting on page 17, we have included some examples of how the values of a sample 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 sample illustration that is more tailored to your own circumstances and wishes. Underwriting. We will issue the Policy using either simplified underwriting or full underwriting based on our established guidelines. See the discussion regarding our underwriting process on page 14. Additional information. You may find the answers to any other questions you have under "Additional Information" beginning on page 22 or in the form of our Policy. A table of contents for the "Additional Information" portion of this prospectus also appears on page 22. You can obtain copies of our form of Policy from (and direct any other questions to) your AGL representative or our Home Office (shown on the first page of this prospectus). Financial statements. We have included certain financial statements of AGL. These begin on page Q-1. 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 initial 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. Premium payments we receive after your right to return expires, as discussed on page 2, will be allocated upon receipt to the available investment options you have chosen. Limits on premium payments. Federal tax law limits your ability to make certain very large amounts of premium payments (relative to the amount of your Policy's insurance coverage) and may impose penalties on amounts you take out of your Policy if you do not observe certain additional requirements. We will monitor your premium payments, however, to be sure that you do not exceed permitted amounts or inadvertently incur any tax penalties. Also, in certain limited circumstances (if your Policy is determined to be a "modified endowment contract" or if additional premiums cause the death benefit to increase more than the accumulation value), 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. These tax law requirements and a discussion of modified endowment contracts are summarized further under "Tax Effects" beginning on page 23. Ways to pay premiums. You may pay premiums 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 initial premium must be sent directly to our Home Office. 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 first 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. 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 31. You must have at least $5,000 of accumulation value to start dollar cost averaging and each transfer under the program must be at least $100. 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. We do not charge you for using this feature. 4 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 $5,000 to begin automatic rebalancing. You cannot participate in this program while also participating in dollar cost averaging (discussed above). Rebalancing ends upon your request. We do not charge you for using this feature. 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 6 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 corresponding Mutual Fund. 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 also be reduced by certain charges that we deduct. We describe these charges beginning on page 6 under "What charges will AGL deduct from my investment in a Policy?" You can review other important information about the Mutual Funds that you can choose in the separate prospectuses for those Funds. You can request additional free copies of these prospectuses from your AGL representative or from our Home Office shown on the first page of this prospectus. Policies are "non-participating." 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 The One VUL Solution 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. 5 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: TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCUMULATION VALUE
INSURED'S INSURED'S AGE ON % OF AGE ON % OF POLICY ACCUMULATION POLICY ACCUMULATION ANNIVERSARY* VALUE ANNIVERSARY VALUE - ----------------- ------------ ----------- ------------ 0-40 250 60 130 41 243 61 128 42 236 62 126 43 229 63 124 44 222 64 122 45 215 65 120 46 209 66 119 47 203 67 118 48 197 68 117 49 191 69 116 50 185 70 115 51 178 71 113 52 171 72 111 53 164 73 109 54 157 74 107 55 150 75-90 105 56 146 91 104 57 142 92 103 58 138 93 102 59 134 94 101 95+ 100
- -------------- * Nearest birthday at the beginning of the Policy year in which the insured person dies. 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 6 future premium payments for the costs associated with the issuance of the Policy and administrative services we perform. Daily Charge. We will deduct a daily charge based on either the guaranteed rate or the current rate (if lower than the guaranteed rate) for the costs associated with the mortality and expense risks we assume under the Policy. . The guaranteed daily charge will be at an annual effective rate of .90% for the first 10 Policy Years, .65% for Policy Years 11 - 20 and .40% thereafter. The guaranteed daily deduction charges are .15% higher than the current daily charges. The guaranteed daily deduction charges are the maximums we may charge; we may charge less, but we can never charge more. . The current daily charge will be 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 10 years, we intend to reduce the rate of the current charge to .50%, and after 20 years, we intend to further reduce the current charge to .25%. We may change the applicable current charge at any time as long as the charge does not exceed the guaranteed daily charge. 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. The current monthly insurance charge has been designed primarily to provide funds out of which we can make payments of death benefits under the Policy as insured persons die. 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. We will offer the Policy on a simplified issue method based on our established guidelines, including that the specified amount of the Policy cannot exceed $250,000. Our cost of insurance rates will generally be higher for a simplified issue Policy. In general, our cost of insurance rates increase with the insured person's age. 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 if the insured person is a female than if a male (except in Montana where such costs cannot be based on gender). Similarly, our current cost of insurance rates are generally lower for non- smokers than smokers. Insured persons who present particular health, occupational or non-work related 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. 7 Transaction Fee. The fee for each partial surrender you make will be the lesser of 2% of the amount withdrawn or $25 to cover administrative services. This charge will be deducted from the remaining accumulation value in the investment options in the same ratio as the requested partial surrender. Charge for taxes. We can make a charge in the future for federal or state 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 the investment options from which we deduct all monthly charges. If you do not have enough accumulation value in the investment options, we will deduct these charges in proportion to the amount of accumulation value you then have in each investment option. For a further discussion regarding the charges we will deduct from your investment in a Policy, see "More About Policy Charges" on page 29. 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. Current and future fees and expenses may vary from the fiscal year 1998 fees and expenses. The charges and expenses for fiscal year 1998 are as follows: The Mutual Funds' Annual Expenses (as a percentage of average net assets).
FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER EXPENSE EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT) 12B-1 REIMBURSEMENT) REIMBURSEMENT) - ---------------------------------------------------- ---------------- ---------------- -------------- -------------- The following funds of AIM VARIABLE INSURANCE FUNDS, INC.:/1/ AIM V.I. International Equity Fund............... 0.75% 0.16% 0.91% AIM V.I. High Yield Fund/2/...................... 0.00% 1.13% 1.13% AIM V.I. Government Securities Fund.............. 0.50% 0.26% 0.76% AIM V.I. Capital Appreciation Fund............... 0.62% 0.05% 0.67% The following fund of AMERICAN GENERAL SERIES PORTFOLIO COMPANY:/1/ Money Market Fund................................ 0.50% 0.04% 0.54% The following fund of MFS VARIABLE INSURANCE TRUST/1/ Growth With Income Series........................ 0.75% 0.13% 0.88%
(Footnotes on next page) 8
FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER EXPENSE EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT) 12B-1 REIMBURSEMENT) REIMBURSEMENT) - ---------------------------------------------------- -------------- --------------- -------------- ---------------- The following fund of PUTNAM VARIABLE TRUST/1/ Putnam VT Vista Fund - Class IB/3/ 0.44% 0.10% 0.08% 0.62% The following fund of TEMPLETON VARIABLE PRODUCT SERIES FUND/1, 4/ Templeton Developing Markets Fund - Class 2/3/ 1.35% 0.25% 0.31% 1.91% The following fund of OPPENHEIMER VARIABLE ACCOUNT FUNDS/1/ Oppenheimer High Income Fund/VA 0.74% .04% 0.78% The following funds of KEMPER VARIABLE SERIES/1/ Kemper International Portfolio 0.75% 0.18% 0.93% Kemper Small Cap Value Portfolio 0.75% 0.05% 0.80% The following fund of FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST/1/ Franklin Small Cap Fund - Class 2/3/ 0.75% .25% 0.02% 1.02% The following fund of VAN KAMPEN LIFE INVESTMENT TRUST/1/ Emerging Growth Portfolio/2/ 0.32% 0.53% 0.85% The following funds of ONE GROUP INVESTMENT TRUST/5/ One Group Investment Trust Equity Index Portfolio 0.30% 0.25% 0.55% One Group Investment Trust Mid Cap Growth Portfolio 0.65% 0.26% 0.91% One Group Investment Trust Large Cap Growth Portfolio 0.65% 0.22% 0.87% One Group Investment Trust Government Bond Portfolio 0.45% 0.26% 0.71% One Group Investment Trust Diversified Equity Portfolio/2/ 0.70% 0.25% 0.95%
/1/ Certain of the Mutual Funds' advisers or administrators have entered into service agreements with AGL. Under these arrangements, the advisers or administrators pay fees to AGL for certain administrative services. The fees do not have a direct relationship to the Mutual Funds' Annual Expenses. (See "Miscellaneous" under "More About Policy Changes.") /2/ If certain voluntary expense reimbursements from the investment adviser were terminated, management fees and other expenses for the fiscal year ended in 1998 would have been as set out in the following table. (Footnotes continued on next page) 9
OTHER TOTAL FUND FUND FUND MANAGEMENT OPERATING OPERATING NAME OF FUND FEES EXPENSES EXPENSES - ----------------------------------------- ---------- ---------- --------- AIM V.I. High Yield Fund................. 0.63% 1.87% 2.50% Van Kampen Emerging Growth Portfolio..... 0.70% 0.53% 1.23% One Group Diversified Equity Portfolio... 0.74% 0.25% 0.99%
/3/ The prospectus for Putnam Variable Trust under "Distribution Plan" discusses this fund's 12b-1 fee. The prospectuses for Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust under "Distribution and Services (12b-1) Fees" discuss each fund's 12b-1 fees. /4/ On February 8, 2000, a shareholders' meeting will be held to approve a proposal to merge the funds of Templeton Variable Products Series Fund into similar corresponding funds of Franklin Templeton Variable Insurance Product Trust (the "Reorganization"). If approved, this Reorganization will be completed around May 1, 2000. /5/ Fees and charges for One Group Investment Trust are for fiscal year 2000. 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 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. 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 of 61 days to pay at least the amount we estimate is necessary to keep your Policy in force for a reasonable time. If we do not receive your payment by the end of the grace period, your Policy will end 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 will have to pay enough premium to keep your Policy in force for two months as well as pay or reinstate any indebtedness. In the Policy, 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 free of charge. You may make transfers at any time. Unless 10 you are transferring the entire amount you have in an investment option, each transfer must be at least $500. See "Additional Rights That We Have" on page 34. Market Timing. The Policy is not designed for professional market timing organizations or other entities using 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 stop permitting telephone requests altogether. 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. 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. Decrease in Coverage. After the first Policy year, you may request a reduction in the specified amount of coverage, but not below certain minimums. After any decrease, the death benefit amount cannot be less than the greater of (i) $50,000, and (ii) any death benefit amount which, upon comparing such amounts to the sums already paid, would result in an excess of premium payments. 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 23 of this prospectus to learn about possible tax consequences of changing your insurance coverage under your Policy. WHAT ADDITIONAL RIDER BENEFITS MIGHT I SELECT? You can request that your Policy include the maturity extension rider benefit described below. Eligibility for and changes in this benefit are subject to our rules and procedures as in effect from time to time. More details are included in the form of the rider, which we suggest that you review if you choose this benefit. 11 Maturity Extension Rider . This rider permits you to extend the Policy's maturity date beyond what it otherwise would be. The rider provides for a death benefit after the original maturity date that is equal to the accumulation value on the date of death. With this rider, all accumulation value that is in the separate account can remain there. . In this rider, only the insurance coverage associated with the base policy will be extended beyond the original maturity date. No additional premium payments, new loans, monthly insurance charge, or changes in specified amount will be allowed after the original maturity date. There is no charge for this rider except for a flat monthly charge of no more than $10 each month after the original maturity date. . Extension of the maturity date beyond the insured person's age 100 may result in the current taxation of increases in your Policy's accumulation value as a result of interest or investment experience after that time. You should consult a qualified tax adviser before making such an extension. HOW CAN I ACCESS MY INVESTMENT IN A POLICY? Full surrender. You may at any time, without charge, 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 $500. If the Option 1 death benefit is then in effect, we will also automatically reduce your Policy's specified amount of insurance by the amount of your withdrawal and any related charges. 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. Exchange of Policy in Certain States. Certain states require that a policy owner be given the right to exchange the Policy for a fixed benefit life insurance policy, within either 18 or 24 months from the date of issue. This right is subject to various conditions imposed by the states and us. In such states, this right has been more fully described in your Policy or related endorsements to comply with the applicable state requirements. Transaction Fee. The fee for each partial surrender you make will be the lesser of 2% of the amount withdrawn or $25 to cover administrative services. This charge will be deducted from the remaining accumulation value in the investment options in the same ratio as the requested partial surrender. Policy loans. You may at any time borrow from us an amount equal to your Policy's cash surrender value 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 $500. 12 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 $500 unless it is the final payment) of your loan at any time before 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: . 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 . 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, provided that it will always be greater than the rate we are then crediting in connection with regular Policy loans, and will never be less than an effective annual rate of 4.5%. Because we first offered the Policies in 2000, 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 end. The maturity date is the Policy anniversary nearest the insured person's 100th birthday. 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. 13 . 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 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 POLICY IN PARTICULAR CASES? Listed below are some variations we may make in the terms and conditions of a Policy. Any variations will be made only in accordance with uniform rules that we establish. Underwriting. We use two underwriting methods to issue a Policy, simplified underwriting and full underwriting, which are described below. We reserve the right to request additional information or reject an application for any reason under either underwriting procedure. . Simplified Underwriting - Any Policy with a specified amount of $250,000 or lower must be issued based on simplified underwriting. Our guidelines include that the proposed insured must answer limited health questions and certain medical records are required. The Policy specified amount is limited to $250,000, and any requested increases in specified amount are considered under full underwriting only. Additionally, a proposed insured who is rejected under simplified underwriting cannot be considered for full underwriting. . Full Underwriting - Any Policy that has a specified amount of over $250,000 must be issued based on full underwriting. Our guidelines include medical exams or tests and other satisfactory evidence of insurability. Policies purchased through "internal rollovers." We maintain published rules that describe the procedures necessary to replace the other life insurance we issue with a Policy. Not all types of other 14 insurance we issue are eligible to be replaced with a Policy. Our published rules may be changed from time to time, but are evenly applied to all our customers. Policies purchased through term life conversions. We maintain rules about how to convert term insurance to The One VUL Solution 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 The One VUL Solution 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 Policy where special circumstances result in sales, administrative or other expenses, mortality risks or other risks that are different from those normally associated with the Policy. 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, which is 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 23. HOW DO I COMMUNICATE WITH AGL? When we refer to "you," we mean the person who is authorized to take any 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 changes 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. The following requests must be made in writing and signed by you: . transfer of accumulation value; 15 . 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; . changes in specified 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. You will be asked to return your Policy when you request a full surrender. You may 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 (a) many people seek to make telephone requests at or about the same time, or (b) our recording equipment malfunctions, it may be impossible for you to make a telephone request at the time you wish. You should submit a written request if you cannot make a telephone transfer. Also, if, due to malfunction or other circumstances, the recording of your telephone request is incomplete or not fully comprehensible, we will not process the transaction. The phone number for telephone requests is 1-888-436-5255. 16 ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS To help explain how our Policy works, we have prepared the following tables:
PAGE TO SEE IN THIS PROSPECTUS ----------- Death Benefit Option 1--Simplified Underwriting/Current Charges.............. 18 Death Benefit Option 1--Full Underwriting/Current Charges.................... 19 Death Benefit Option 1--Simplified Underwriting/Guaranteed Maximum Charges... 20 Death Benefit Option 1--Full Underwriting/Guaranteed Maximum Charges......... 21
The tables show how death benefits, accumulation values, and cash surrender values ("Policy benefits") under a sample The One VUL Solution Policy would change 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 $56,279 for an initial $250,000 or $250,001 of specified amount of coverage is assumed to be paid at issue. The illustrations assume no Policy loan has been taken. As illustrated, this Policy would be classified as a modified endowment contract (See "Tax Effects" in Additional Information for further discussion). Although the tables below do not include an example of a Policy with an Option 2 death benefit, such a Policy would have higher death benefits and lower cash surrender values. Separate tables are included to show both current and guaranteed maximum charges under both simplified underwriting and full underwriting. We have used the maximum specified amount of $250,000 for the simplified underwriting table and the minimum specified amount of $250,001 for the full underwriting table to show the applicable investment results. . The charges assumed in the current charge tables include a daily charge at an annual effective rate of .75% for the first 10 Policy years, .50% for Policy years 11--20, and .25% thereafter and current monthly insurance charges. . The guaranteed maximum charge tables assume that these charges will include a daily charge at an annual effective rate of .90% for the first 10 Policy years, .65% for Policy years 11--20, and .40% thereafter, and an additional charge of 1.5% of every premium and guaranteed maximum insurance charges. The charges assumed by both the current and guaranteed maximum charge tables also include Mutual Fund expenses of 0.90% of aggregate Mutual Fund assets, which is the arithmetic average of the advisory fees payable with respect to each Mutual Fund, after all reimbursements, plus the arithmetic average of all other operating expenses of each such Fund after all reimbursements, as reflected on pages 8 - 10 of this prospectus. We expect the reimbursement arrangements to continue in the future. If the reimbursement arrangements were not currently in effect, the arithmetic average of Mutual Fund expenses would equal 0.98% of aggregate Mutual Fund assets. 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. 17 THE ONE VUL SOLUTION SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,000 DEATH BENEFIT OPTION 1 MALE AGE 45 SIMPLIFIED UNDERWRITING NONSMOKER ASSUMING CURRENT CHARGES
DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 250,000 250,000 250,000 54,511 57,841 61,173 54,511 57,841 61,173 2 250,000 250,000 250,000 52,659 59,373 66,487 52,659 59,373 66,487 3 250,000 250,000 250,000 50,758 60,909 72,308 50,758 60,909 72,308 4 250,000 250,000 250,000 48,889 62,529 78,770 48,889 62,529 78,770 5 250,000 250,000 250,000 46,967 64,159 85,868 46,967 64,159 85,868 6 250,000 250,000 250,000 45,023 65,827 93,702 45,023 65,827 93,702 7 250,000 250,000 250,000 42,998 67,485 102,311 42,998 67,485 102,311 8 250,000 250,000 250,000 41,051 69,275 111,906 41,051 69,275 111,906 9 250,000 250,000 250,000 39,097 71,131 122,532 39,097 71,131 122,532 10 250,000 250,000 250,000 37,110 73,033 134,289 37,110 73,033 134,289 15 250,000 250,000 292,072 27,749 85,063 217,964 27,749 85,063 217,964 20 250,000 250,000 434,047 16,105 98,612 355,776 16,105 98,612 355,776
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 18 THE ONE VUL SOLUTION SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001 DEATH BENEFIT OPTION 1 MALE AGE 45 FULL UNDERWRITING NONSMOKER ASSUMING CURRENT CHARGES
DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 250,001 250,001 250,001 54,995 58,337 61,680 54,995 58,337 61,680 2 250,001 250,001 250,001 53,625 60,384 67,543 53,625 60,384 67,543 3 250,001 250,001 250,001 52,313 62,562 74,059 52,313 62,562 74,059 4 250,001 250,001 250,001 50,941 64,762 81,189 50,941 64,762 81,189 5 250,001 250,001 250,001 49,523 67,002 89,013 49,523 67,002 89,013 6 250,001 250,001 250,001 48,067 69,292 97,620 48,067 69,292 97,620 7 250,001 250,001 250,001 46,578 71,640 107,100 46,578 71,640 107,100 8 250,001 250,001 250,001 45,051 74,048 117,549 45,051 74,048 117,549 9 250,001 250,001 250,001 43,476 76,508 129,069 43,476 76,508 129,069 10 250,001 250,001 250,001 41,822 79,002 141,767 41,822 79,002 141,767 15 250,001 250,001 309,388 32,941 93,430 230,887 32,941 93,430 230,887 20 250,001 250,001 459,781 21,164 109,549 376,870 21,164 109,549 376,870
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 19 THE ONE VUL SOLUTION SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,000 DEATH BENEFIT OPTION 1 MALE AGE 45 SIMPLIFIED UNDERWRITING NONSMOKER ASSUMING GUARANTEED CHARGES
DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 250,000 250,000 250,000 53,560 56,835 60,110 53,560 56,835 60,110 2 250,000 250,000 250,000 51,641 58,230 65,211 51,641 58,230 65,211 3 250,000 250,000 250,000 49,676 59,619 70,785 49,676 59,619 70,785 4 250,000 250,000 250,000 47,640 60,981 76,866 47,640 60,981 76,866 5 250,000 250,000 250,000 45,531 62,314 83,514 45,531 62,314 83,514 6 250,000 250,000 250,000 43,350 63,620 90,796 43,350 63,620 90,796 7 250,000 250,000 250,000 41,069 64,874 98,769 41,069 64,874 98,769 8 250,000 250,000 250,000 38,662 66,054 107,500 38,662 66,054 107,500 9 250,000 250,000 250,000 36,127 67,158 117,085 36,127 67,158 117,085 10 250,000 250,000 250,000 33,436 68,160 127,618 33,436 68,160 127,618 15 250,000 250,000 270,347 17,236 72,003 201,751 17,236 72,003 201,751 20 0 250,000 393,277 0 69,959 322,358 0 69,959 322,358
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 20 THE ONE VUL SOLUTION SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001 DEATH BENEFIT OPTION 1 MALE AGE 45 FULL UNDERWRITING NONSMOKER ASSUMING GUARANTEED CHARGES
DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 250,001 250,001 250,001 53,561 56,835 60,110 53,561 56,835 60,110 2 250,001 250,001 250,001 51,641 58,230 65,211 51,641 58,230 65,211 3 250,001 250,001 250,001 49,676 59,619 70,786 49,676 59,619 70,786 4 250,001 250,001 250,001 47,640 60,981 76,866 47,640 60,981 76,866 5 250,001 250,001 250,001 45,531 62,314 83,514 45,531 62,314 83,514 6 250,001 250,001 250,001 43,350 63,620 90,796 43,350 63,620 90,796 7 250,001 250,001 250,001 41,069 64,875 98,769 41,069 64,875 98,769 8 250,001 250,001 250,001 38,662 66,055 107,500 38,662 66,055 107,500 9 250,001 250,001 250,001 36,127 67,158 117,086 36,127 67,158 117,086 10 250,001 250,001 250,001 33,436 68,161 127,619 33,436 68,161 127,619 15 250,001 250,001 270,348 17,236 72,004 201,752 17,236 72,004 201,752 20 0 250,001 393,279 0 69,959 322,360 0 69,959 322,360
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 21 ADDITIONAL INFORMATION A general overview of the Policy appears at pages 1 - 21. 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................................................. 22 Separate Account VL-R............................... 23 Tax Effects......................................... 23 Voting Privileges................................... 28 Your Beneficiary.................................... 29 Assigning Your Policy............................... 29 More About Policy Charges........................... 29 Effective Date of Policy and Related Transactions... 30 Distribution of the Policies........................ 32 Payment of Policy Proceeds.......................... 33 Adjustments to Death Benefit........................ 34 Additional Rights That We Have...................... 34 Performance Information............................. 35 Our Reports to Policy Owners........................ 36 AGL's Management.................................... 36 Principal Underwriter's Management.................. 39 Legal Matters....................................... 40 Independent Auditors................................ 40 Actuarial Expert.................................... 40 Services Agreement.................................. 41 Certain Potential Conflicts......................... 41 Year 2000 Considerations............................ 41
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 this prospectus (page 44, which follows all of the financial pages). 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 on January 10, 1917. AGL is an indirect, wholly-owned subsidiary of American General Corporation (formerly American General Insurance Company), a diversified financial services holding 22 company engaged primarily in the insurance business. The commitments under the Policies are AGL's, and American General Corporation has no legal obligation to back those commitments. AGL is a member of the Insurance Marketplace Standards Association ("IMSA"). IMSA is a voluntary membership organization created by the life insurance industry to promote ethical market conduct for individual life insurance and annuity products. AGL's membership in IMSA applies only to AGL and not its products. SEPARATE ACCOUNT VL-R We hold the Mutual Fund shares in which any of your accumulation value is invested in 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, as amended. We created the separate account on May 6, 1997 under Texas law. For record keeping and financial reporting purposes, Separate Account VL-R is divided into 41 separate "divisions," 18 of which correspond to the 18 variable investment options available since the inception of the Policy. The remaining 23 divisions, and some of these 18 divisions, represent investment options available under other variable life policies 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 Separate Account VL-R are our property. The assets in Separate Account VL-R would be available only to satisfy the claims of owners of the Policies, to the extent they have allocated their accumulation value to 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 other contract liabilities under the Policies with respect to 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. The One VUL Solution 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, as amended (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 Policy 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. 23 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 contract 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 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 24 tax. In addition, if a Policy ends 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 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: . to taxpayers 59-1/2 years of age or older; . in the case of a disability (as defined in the Code); or . 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 ends after a grace period while there is a Policy loan, the cancellation of the 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. 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. 25 Diversification. Under Section 817(h) of the Code, the Treasury Department has issued regulations that implement investment diversification requirements. Our failure 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. Also, if the insured died during such period of disqualification or subsequent periods, a portion of the death benefit proceeds would be taxable to the beneficiary. Separate Account VL-R, through the Mutual Funds, intends to comply with these requirements. Although we do not have direct control over the investments or activities of the Mutual Funds, we 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 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. Due to the lack of specific guidance on investor control, there is some uncertainty about when a policy owner is considered the owner of the assets for tax purposes. If you were considered the owner of the assets of 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 Separate Account VL-R. Estate and generation skipping taxes. If the insured person is the Policy's owner, the death benefit under The One VUL Solution 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. The federal estate tax is integrated with the federal gift tax under a unified rate schedule and unified credit. The Taxpayer Relief Act of 1997 gradually raises the credit over the next seven years to $1,000,000. 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. Life Insurance in Split Dollar Arrangements. The Internal Revenue Service ("IRS") has released a technical advice memorandum ("TAM") on the taxability of the insurance policies used in certain split dollar arrangements. A TAM provides advice as to the internal revenue laws, regulations, and related statutes with respect to a specific set of facts and a specific taxpayer. In the TAM, among other things, the IRS concluded that an employee was subject to current taxation on the excess of the cash surrender value of the policy over the premiums to be returned to the employer. Purchasers of life insurance policies to be used in split dollar 26 arrangements are strongly advised to consult with a qualified tax adviser to determine the tax treatment resulting from such an arrangement. 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. The reasonable net premium cost for such amount of insurance that is purchased as part of a pension or profit-sharing plan 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. 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, as amended. You should consult a qualified legal adviser. Our taxes. We report the operations of Separate Account VL-R in our federal income tax return, but we currently pay no income tax on 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. We currently make no charge 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 Separate Account VL-R for income taxes we incur that are allocable to the Policy. 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, we may make charges for such taxes when they are attributable to Separate Account VL-R or allocable to the Policy. 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 27 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. In the case of non-resident aliens who own a policy, the withholding rules may be different. With respect to distributions from modified endowment contracts, nonresident aliens are generally subject to federal income tax withholding at a statutory rate of 30% of the distributed amount. In some cases, the non- resident alien may be subject to lower or even no withholding if the United States has entered into a tax treaty with his or her country of residence. 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 We are the legal owner of the Funds' shares held in Separate Account VL-R. However, you may be asked to instruct us how to vote the Fund shares held in the various Mutual Funds 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 that you may direct related to a particular 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. We will vote all shares of each Fund that we hold of record, including any shares we own on our own behalf, in the same proportions as those shares for which we have received instructions from owners participating in that Fund through Separate Account VL-R. If you are asked to give us voting instructions, you will be sent the proxy material and a form for providing such instructions. Should we determine that we are no longer required to send the owner such materials, we will vote the shares as we determine in our sole discretion. 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 explain the reasons in our next report to policy owners. AGL reserves the right to modify these procedures in any manner that the laws in effect from time to time allow. 28 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. You must provide us with two copies of the assignment. We are not responsible for any payment we make or any action taken before we receive a complete notice of the assignment in good order. We are also not 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 before making an assignment. MORE ABOUT POLICY CHARGES Purpose of our charges. The charges under the Policy are designed to cover, in total, our direct and indirect costs of selling, administering and providing benefits under the Policy. They are also designed, in total, to compensate us for the risks we assume and services that we provide under the Policy. 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 Policy requires us to provide will exceed what we currently project). If the charges that we collect from the Policy exceed our total costs in connection with the Policy, 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 Policy as insured persons die. Any excess from the charges discussed above is primarily intended to: 29 . offset 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 costs of paying death claims if the mortality experience of insured persons is worse than we expect); . compensate us for the risk we assume under the Policies; or . otherwise be retained by us as profit. Although the paragraphs above describe the primary purposes for which charges under the Policies have been designed, these purposes are subject to considerable change over the life of a Policy. We can retain or use the revenues from any charge or charge increase for any purpose. 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 stopped tobacco use for a sufficient period. Gender neutral Policy. 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 gender. 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 to compute our net amount at risk at each cost of insurance rate. See "Monthly Insurance Charge" beginning on page 7. Miscellaneous. Certain of the distributors or advisers of the Mutual Funds listed on page 8 of this prospectus reimburse us, on a quarterly basis, for certain administrative, Policy, and policy owner support expenses. These reimbursements will be reasonable for 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 the number of Policies issued does not require a payment. EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS Valuation dates, times, and periods. We generally compute values under a Policy on each day that the New York Stock Exchange is open for business. We call each such day a "valuation date." 30 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. 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 initial premium has been 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. However, if you pay at least the minimum first premium payment with your application for a Policy, we will provide temporary coverage of up to $500,000 provided the insured person meets certain medical and risk requirements. The terms and conditions of this coverage are described in our "Limited Temporary Life Insurance Agreement." You can obtain a copy from our Home Office by writing to the address shown on the first page of this prospectus or from your AGL representative. Date of issue; Policy months and years. We prepare the Policy only after we approve an application for a Policy and assign an appropriate insurance rate class. 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. 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. In the case of a back- dated Policy, we do not credit an investment return to the accumulation value resulting from your initial premium payment until the date stated in (b) above. Effective date of other premium payments and requests that you make. Premium payments (after the first) and transactions made in response to your requests and elections 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 a Policy that has lapsed take effect on the Policy's monthly deduction day on or next following our approval of the transaction; 31 . 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 second 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. We will not apply this procedure to premiums you pay 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. AGL, in turn, is a wholly-owned subsidiary of American General Corporation ("American General"). AGSI's principal office is at 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, as amended ("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. AGSI, as the principal underwriter, is not paid any fees on the Policies. We and AGSI have entered into an exclusive sales agreement with Banc One Securities Corporation ("BOSC"). The Policies will be sold by registered representatives of BOSC. These registered representatives are also required to be authorized under applicable state regulations as life insurance agents to sell variable life insurance and are appointed by AGL as an AGL representative for the Policies. BOSC is a member of the NASD. We pay compensation directly to BOSC for the promotion and sales of the Policies. The compensation payable to BOSC for the sales of the Policies may vary with the sales agreement, but is generally not expected to exceed the amounts described below: A. For a Policy issued based on simplified underwriting: . 1.2% annually of the Policy's accumulation value (reduced by any outstanding loan) in Policy years 1 through 10; and . .95% annually of the Policy's accumulation value (reduced by any outstanding loan) in Policy years 11 through 15. 32 B. For a Policy issued based on full underwriting: . 2.5% of the Policy's accumulation value (reduced by any outstanding loan) in Policy year 1; . 1.0% annually of the Policy's accumulation value (reduced by any outstanding loan) in Policy years 2 through 10; . 0.50% annually of the Policy's accumulation value (reduced by any outstanding loan) in Policy years 11 through 20; and . 0.25% annually of the Policy's accumulation value (reduced by any outstanding loan) after Policy year 20. The maximum value of any alternative amounts we may pay for sales of the Policies is expected to be equivalent over time to the amounts described above. For example, we may pay BOSC compensation in a lump sum which will not exceed the aggregate compensation described above. We pay a comparable amount of compensation to BOSC with respect to any increase in the specified amount of coverage that you request. In addition, we may pay BOSC expense allowances, bonuses, wholesaler fees and training allowances. We pay the compensation directly to BOSC. We pay the compensation from our own resources which does not result in any additional charge to you that is not described on page 6 of the prospectus. BOSC may compensate its registered representative or employee who acts as agent in selling you a Policy. 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 a death benefit). If we do not have information about the desired manner of payment within 60 days after the date we receive 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 comes from that portion of your accumulation value that is allocated to Separate Account VL-R, if: . the New York Stock Exchange is closed other than customary weekend and holiday closings, or trading on the New York Stock Exchange is restricted; 33 . 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 . 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 loans 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 gender. 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. 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 $500; . 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 $500 for any other reason; 34 . end the automatic rebalancing feature if your accumulation value falls below $5,000; . change the underlying Mutual Fund that any investment option uses; . add, delete or limit investment options, combine two or more investment options, or withdraw assets relating to The One VUL Solution 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; . change our guidelines for the simplified and full underwriting methods; . operate 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. 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 Policy that in our judgment are necessary or appropriate to ensure that the Policy continues 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. You will be notified as required by law if there are any material changes in the underlying investments of an investment option that you are using. We intend to comply with all applicable laws 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 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, and we generally expect to exclude costs of insurance charges because of the individual nature of these charges. We may compare a division's performance to that of other variable life separate accounts or investment products, as well as to generally accepted indices or analyses, such as those provided by research firms and rating services. In addition, we may use performance ratings that may be reported periodically in financial publications, such as Money Magazine, Forbes, Business Week, Fortune, Financial Planning and The Wall Street Journal. We also may advertise ratings of AGL's financial strength or claims-paying ability as determined by firms that analyze and rate insurance companies and by nationally recognized statistical rating organizations. 35 Performance information for any division reflects the performance of a hypothetical Policy and are not illustrative of how actual investment performance would affect the benefits under your Policy. You should not consider such performance information to be an estimate or guarantee of future performance. 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. We will send you notices 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 give us prompt written notice of any address change. 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 - ------------------------------------------------------------------------------- Rodney O. Martin, Jr. Senior Chairman of the Board of American General Life Insurance Company since April 1999 and a Director since August 1996. President and CEO (August 1996-July 1998). President of American General Life Insurance Company of New York (November 1995-August 1996). Vice President Agencies, with Connecticut Mutual Life Insurance Company, Hartford, Connecticut (1990-1995). Donald W. Britton Director and Vice Chairman of the Board of American General Life Insurance Company since April 1999. President of First Colony Life, Lynchburg, Virginia (1996 -April 1997) and Executive Vice President of First Colony Life (1992 - 1996). Ronald H. Ridlehuber Director, President and Chief Executive Officer of American General Life Insurance Company since July 1998. Senior Vice President and Chief Marketing Officer of Jefferson-Pilot Life Insurance Company in Greensboro, North Carolina (1993-1998). David A. Fravel Director of American General Life Insurance Company since November 1996. Elected Executive Vice President in April 1998. Previously held position of Senior Vice President of American General Life Insurance Company since November 1996. Senior Vice President of Massachusetts Mutual, Springfield, Missouri (March 1996-June 1996); Vice President, New Business, Connecticut Mutual Life Insurance Company, Hartford, Connecticut (December 1978-March 1996). Robert F. Herbert, Jr. Director, Senior Vice President and Treasurer of American General Life Insurance Company since May 1996, and Controller since February 1991.
36 Royce G. Imhoff, II Director, Senior Vice President and Chief Marketing Officer for American General Life Insurance Company since November 1997. Previously held various positions with American General Life Insurance Company including Vice President since August 1996 and Regional Director since 1992. John V. LaGrasse Director and Chief Systems Officer of American General Life Insurance Company since August 1996. Elected Executive Vice President in July 1998. Previously held position of Senior Vice President of American General Life Insurance Company since August 1996. Director of Citicorp Insurance Services, Inc., Dover, Delaware (1986-1996). Gary D. Reddick Director of American General Life Insurance Company since October 1998. Elected Executive Vice President in 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). Thomas M. Zurek Director and Executive Vice President of American General Life Insurance Company since April 1999. Elected Secretary in July 1999 and General Counsel in December 1998. Previously held various positions with American General Life Insurance Company including Senior Vice President since December 1998 and Vice President since October 1998. In February 1998 named as Senior Vice President and Deputy General Counsel of American General Corporation. Attorney Shareholder with Nyemaster, Goode, Voigts, West, Hansell & O'Brien, Des Moines, Iowa (June 1992 - February 1998). Paul L. Mistretta Executive Vice President of American General Life Insurance Company since July 1999. Senior Vice President of First Colony Life Insurance, Lynchburg, Virginia (1992 - July 1999). Brian D. Murphy Executive Vice President of American General Life Insurance Company since July 1999. Previously held position of Senior Vice President-Insurance Operations of American General Life Insurance Company since April 1998. 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 of New York, Syracuse, NY, including Agent, Agency Manager, Marketing Life and Disability Income Underwriting Management, (1978- July 1994). Wayne A. Barnard Senior Vice President of American General Life Insurance Company since November 1997. Previously held various positions with American General Life Insurance Company including Vice President since February 1991.
37 Robert M. Beuerlein Senior Vice President and Chief Actuary of American General Life Insurance Company since September 1999. Previously held position of Vice President of American General Life Insurance Company since December 1998. Director, Senior Vice President and Chief Actuary of The Franklin Life Insurance Company, Springfield, Illinois (January 1991 - June 1999). David J. Dietz Senior Vice President - Corporate Markets Group of American General Life Insurance Company since January 1999. President and Chief Executive Officer - Individual Insurance Operations of The United States Life Insurance Company in the City of New York since September, 1997. President of Prudential Select Life, Newark, New Jersey (August 1990 - September 1997). Barbara J. Fossum Senior Vice President of American General Life Insurance Company since July 1999. Previously held position of Vice President of American General Life Insurance Company since 1988. Ross D. Friend Senior Vice President and Chief Compliance Officer of American General Life Insurance Company since July 1998. Senior Vice President and General Counsel of The Franklin Life Insurance Company, Springfield, Illinois (August 1996 - July 1998). Attorney-in- Charge for The Prudential Insurance Company, Jacksonville, Florida (July 1995 - August 1996). Chief Legal Officer for Confederation Life Insurance, Atlanta, Georgia (1982 - June 1995). William Guterding Senior Vice President of American General Life Insurance Company since April 1999. Senior Vice President and Chief Underwriting Officer of The United States Life Insurance Company in the City of New York since October, 1980. F. Paul Kovach, Jr. Senior Vice President - Broker Dealers for American General Life Insurance Company since August 1997. President and Director of American General Securities Incorporated since October 1994. Vice President of Chubb Securities Corporation, Concord, New Hampshire, (February 1990 - October 1994). Simon J. Leech Senior Vice President - Houston Service Center for American General Life Insurance Company since July 1997. Previously held various positions with American General Life Insurance Company since 1981, including Director of Policy Owners' Service Department in 1993, and Vice President - Policy Administration in 1995. JoAnn Waddell Senior Vice President - Human Resources for American General Life Insurance Company since October 1998. Vice President - Human Resources for American General Corporation (1995 - October 1998) and Director, Corporate Personnel of American General Corporation (1993 - 1995).
38 Don M. Ward Senior Vice President - Variable Products - Marketing of American General Life Insurance Company since February 1998. Vice President of Pacific Life Insurance Company, Newport Beach, CA (1991 - February 1998).
The principal business address of each person listed above is our Home Office; except that the street number for Messrs. Ridlehuber, Fravel, LaGrasse, Martin, Reddick, Britton, Mistretta and Zurek is 2929 Allen Parkway, the street number for Messrs. Kovach, Ward and Friend is 2727 Allen Parkway, the street number for Messrs. Dietz and Guterding is 125 Maiden Lane, New York, New York and the street number for Ms. Fossum is #1 Franklin Square, Springfield, Illinois. PRINCIPAL UNDERWRITER'S MANAGEMENT The directors and principal officers of the principal underwriter are:
POSITION AND OFFICES WITH UNDERWRITER, NAME AND PRINCIPAL AMERICAN GENERAL BUSINESS ADDRESS SECURITIES INCORPORATED - ----------------- ----------------------- F. Paul Kovach, Jr. Director and Chairman, American General Securities Incorporated President and Chief Executive Officer 2727 Allen Parkway Houston, TX 77019 Royce G. Imhoff, II Director American General Life Companies 2727-A Allen Parkway Houston, Texas 77019 Rodney O. Martin, Jr. Director and Vice Chairman American General Life Companies 2929 Allen Parkway Houston, TX 77019 Donald W. Britton Director American General Life Companies 2929 Allen Parkway Houston, TX 77019 John A. Kalbaugh Vice President - American General Life Companies Chief Marketing Officer 2727 Allen Parkway Houston, TX 77019
39 Robert M. Roth Vice President - American General Securities Incorporated Administration and Compliance, 2727 Allen Parkway Treasurer and Secretary Houston, TX 77019 Don M. Ward Vice President American General Life Companies 2727 Allen Parkway Houston, TX 77019 Julie A. Cotton Assistant Secretary American General Life Companies 2727 Allen Parkway Houston, TX 77019 Robert F. Herbert Assistant Treasurer American General Life Companies 2727-A Allen Parkway Houston, Texas 77019 K. David Nunley Assistant Associate Tax Officer 2727-A Allen Parkway Houston, TX 77019
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, Deputy General Counsel of the American General Life Companies, an affiliate of AGL, has opined as to the validity of the Policies. INDEPENDENT AUDITORS The financial statements of AGL included in this prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing elsewhere in this prospectus. Such financial statements have been included in this prospectus in reliance upon the report of Ernst & Young LLP given upon the authority of such firm as experts in accounting and auditing. Ernst & Young LLP is located at One Houston Center, 1221 McKinney, Suite 2400, Houston, Texas 77010-2007. ACTUARIAL EXPERT Actuarial matters have been examined by Robert M. Beuerlein, 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. 40 SERVICES AGREEMENT American General Life Companies ("AGLC") is party to an existing general services agreement with AGL. AGLC, an affiliate of AGL, is a corporation incorporated in Delaware on November 24, 1997. Pursuant to this agreement, AGLC provides services to AGL, including most of the administrative, data processing, systems, customer services, product development, actuarial, auditing, accounting and legal services for AGL and The One VUL Solution Policies. CERTAIN POTENTIAL CONFLICTS The Mutual Funds sell shares to separate accounts of insurance companies (and may sell in the future, certain qualified plans), both affiliated and not affiliated with AGL. We currently do not foresee any disadvantages to you arising out of such sales. 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 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 as well as report any material irreconcilable conflicts that we know exist to each Mutual Fund as soon as a conflict arises. 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 CONSIDERATIONS Internal Systems. Our ultimate parent, American General Corporation ("AGC"), has numerous technology and non-technology systems that are managed on a decentralized basis. AGC's Year 2000 readiness efforts have been performed by its key business units with centralized oversight. Each business unit, including AGL, executed a plan to minimize the risk of a significant negative impact on its operations. While the specifics of the plans varied, the plans included the following activities: (1) perform an inventory of the company's information technology and non-information technology systems; (2) assess which items in the inventory may expose us to business interruptions due to Year 2000 issues; (3) reprogram or replace systems that are not Year 2000 ready; (4) test systems to prove that they will function into the next century; and (5) return the systems to operations. As of December 31, 1999, these activities have been completed, making our critical systems Year 2000 ready. We continued to test our systems throughout 1999 to maintain Year 2000 readiness. In addition, we implemented plans for the century transition. These plans included a freeze on system modifications from November 1999 through January 2000, the creation of rapid response teams to address problems and limiting vacations for certain business and technical personnel and establishing Y2K command centers. In addition, AGC established Y2K command centers in Houston and each of its locations across the country. Each command center monitored all major business processing activities during the century transition and reported progress to the Houston command center which coordinated the company's nationwide Year 2000 effort. The command centers continued to operate 24 hours a day until January 7, 2000. 41 On January 1, 2000, AGC announced that its Year 2000 command centers reported that all major technology systems, programs, and applications were operating smoothly following the transition into the 21st century. As of January 20, 2000, we have experienced no interruptions to normal business operations, including the processing of customer account data and transactions. We will continue to monitor our technology systems and maintain quality customer service throughout the transition period. Third Party Relationships. We have relationships with various third parties who must also be Year 2000 ready. These third parties provide (or receive) resources and services to (or from) us and include organizations with which we exchange information. Third parties include vendors of hardware, software, and information services; providers of infrastructure services such as voice and data communications and utilities for office facilities; investors; customers; distribution channels; and joint venture partners. Third parties differ from internal systems in that we exercise less, or no, control over such parties' Year 2000 readiness. We developed plans to assess and mitigate the risks associated with the potential failure of third parties to achieve Year 2000 readiness. These plans included the following activities: (1) identify and classify third party dependencies; (2) research, analyze, and document Year 2000 readiness for critical third parties; and (3) test critical hardware and software products and electronic interfaces, and, where feasible, we have taken reasonable precautions to protect against the receipt of non-Year 2000 ready data. Where necessary, critical third party dependencies have been included in our contingency plans. Contingency Plans. Our contingency planning process was designed to reduce the risk of Year 2000-related business failures related to both internal systems and third party relationships. The contingency plans included the following activities: (1) evaluate the consequences of failure of critical business processes with significant exposure to Year 2000 risk; (2) determine the probability of a Year 2000-related failure for those critical processes that have a high consequence of failure; (3) develop an action plan to complete contingency plans for critical processes that rank high in consequence and probability of failure; and (4) complete the applicable contingency plans. The contingency plans were tested and updated throughout 1999. Risks and Uncertainties. Based on the Year 2000 readiness of internal systems, century transition plans, plans to deal with third party relationships, contingency plans and the reports from the AGC command centers described above, we believe that we will experience at most isolated and minor disruptions of business processes due to the Year 2000 transition. Such disruptions are not expected to have a material effect on our future results of operations, liquidity, or financial condition. However, due to the magnitude and complexity of this project, risks and uncertainties exist and we are not able to predict a most reasonably likely worst case scenario. If Year 2000 readiness is not achieved due to our failure to maintain critical systems as Year 2000 ready, failure of critical third parties to achieve Year 2000 readiness on a timely basis, failure of contingency plans to reduce Year 2000-related business failures, or other unforeseen circumstances in completing its plans, the Year 2000 issues could have a material adverse impact on our operations following the turn of the century. Costs. Through December 31, 1999, we have incurred, and anticipate that we will continue to incur, costs relative to achieving and maintaining Year 2000 readiness. The cost of activities related to Year 2000 readiness has not had a material adverse effect on our results of operations or financial condition. In addition, we have elected to accelerate the planned replacement of certain systems as part of the Year 2000 plans. Costs of the replacement systems are being capitalized and amortized over their useful lives, in accordance with our normal accounting policies. None of the costs associated with Year 2000 readiness are passed to divisions of the Separate Account. 42 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 One VUL Solution Policies. They should not be considered as bearing upon the investment experience of Separate Account VL-R. No financial statements of Separate Account VL-R are included because, at the date of this prospectus, none of the Divisions of Separate Account VL-R were available under The One VUL Solution Policy.
PAGE TO CONSOLIDATED FINANCIAL STATEMENTS OF SEE IN THIS AMERICAN GENERAL LIFE INSURANCE COMPANY PROSPECTUS - --------------------------------------- ----------- Unaudited consolidated Balance Sheets as of September 30, 1999... Q-1 Unaudited consolidated Income Statements for the nine months ended September 30, 1999...................................... Q-3 Report of Ernst & Young, LLP Independent Auditors................ F-1 Consolidated Balance Sheets as of December 31, 1998 and 1997..... F-2 Consolidated Income Statements for the years ended December 31, 1998, 1997 and 1996............................ F-3 Consolidated Statements of Comprehensive Income for the years ended December 31, 1998, 1997, and 1996........ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996..................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996...................... F-6 Notes to Consolidated Financial Statements....................... F-7
43 American General Life Insurance Company Consolidated Balance Sheet (Unaudited) September 30 1999 -------------- (In Thousands) ASSETS Investments: Fixed maturity securities, at fair value (amortized cost - $27,720,226) $27,539,065 Equity securities, at fair value (cost - $215,480) 245,837 Mortgage loans on real estate 1,703,850 Policy loans 1,224,130 Investment real estate 117,005 Other long-term investments 154,183 Short-term investments 484,721 ----------- Total investments 31,468,791 Cash 89,211 Investment in Parent Company (cost - $7,958) 44,254 Indebtedness from affiliates 53,756 Accrued investment income 477,429 Accounts receivable 505,368 Deferred policy acquisition costs 1,733,978 Property and equipment 74,683 Other assets 225,353 Assets held in separate accounts 18,734,868 ----------- Total assets $53,407,691 =========== Q-1 American General Life Insurance Company Consolidated Balance Sheet (Unaudited) September 30 1999 -------------- (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Future policy benefits $29,704,115 Other policy claims and benefits payable 45,955 Other policyholders' funds 379,623 Federal income taxes 414,324 Indebtedness to affiliates 3,053 Other liabilities 1,035,653 Liabilities related to separate accounts 18,734,868 ----------- Total liabilities 50,317,591 Shareholders' equity: Common stock, $10 par value, 600,000 shares authorized, issued, and outstanding 6,000 Preferred stock, $100 par value, 8,500 shares authorized, issued, and outstanding 850 Additional paid-in capital 1,369,315 Accumulated other comprehensive income (15,046) Retained earnings 1,728,981 ----------- Total shareholders' equity 3,090,100 ----------- Total liabilities and shareholders' equity $53,407,691 =========== Q-2 American General Life Insurance Company Consolidated Income Statement (Unaudited) Nine months ended September 30 1999 -------------- (In Thousands) Revenues: Premiums and other considerations $ 402,583 Net investment income 1,753,914 Net realized investment gains 3,899 Other 58,530 ---------- Total revenues 2,218,926 Benefits and expenses: Benefits 1,289,534 Operating costs and expenses 367,123 Total benefits and expenses 1,656,657 ---------- Income before income tax expense 562,269 Income tax expense 190,143 ---------- Net income $ 372,126 ========== Q-3 [ERNST & YOUNG LLP LETTERHEAD] . One Houston Center . Phone: 713 750 1500 Suite 2400 Fax: 713 750 1501 1221 McKinney Houston, Texas 77010-2007 Report of Independent Auditors Board of Directors and Stockholder American General Life Insurance Company We have audited the accompanying consolidated balance sheets of American General Life Insurance Company (an indirectly wholly owned subsidiary of American General Corporation) and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, comprehensive income, shareholder's equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American General Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP --------------------- February 16, 1999 Ernst & Young LLP is a member of Ernst & Young International, Ltd. F-1 American General Life Insurance Company Consolidated Balance Sheets
DECEMBER 31 1998 1997 --------------------------------- (In Thousands) ASSETS Investments: Fixed maturity securities, at fair value (amortized cost- $27,425,605 in 1998 and $26,131,207 in 1997) $28,906,261 $27,386,715 Equity securities, at fair value (cost - $193,368 in 1998 and $19,208 in 1997) 211,684 21,114 Mortgage loans on real estate 1,557,268 1,659,921 Policy loans 1,170,686 1,093,694 Investment real estate 119,520 129,364 Other long-term investments 86,194 55,118 Short-term investments 222,949 100,061 --------------------------------- Total investments 32,274,562 30,445,987 Cash 117,675 99,284 Investment in Parent Company (cost - $8,597 in 1998 and 1997) 54,570 37,823 Indebtedness from affiliates 161,096 96,519 Accrued investment income 459,961 433,111 Accounts receivable 196,596 208,209 Deferred policy acquisition costs 1,087,718 835,031 Property and equipment 66,197 33,827 Other assets 206,318 132,659 Assets held in separate accounts 15,616,020 11,242,270 --------------------------------- Total assets $50,240,713 $43,564,720 ================================= LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Future policy benefits $29,353,022 $27,849,893 Other policy claims and benefits payable 54,278 42,677 Other policyholders' funds 398,587 398,314 Federal income taxes 677,315 543,379 Indebtedness to affiliates 18,173 4,712 Other liabilities 554,783 421,861 Liabilities related to separate accounts 15,616,020 11,242,270 --------------------------------- Total liabilities 46,672,178 40,503,106 Shareholder's equity: Common stock, $10 par value, 600,000 shares authorized, issued, and outstanding 6,000 6,000 Preferred stock, $100 par value, 8,500 shares authorized, issued, and outstanding 850 850 Additional paid-in capital 1,368,089 1,184,743 Accumulated other comprehensive income 679,107 427,526 Retained earnings 1,514,489 1,442,495 --------------------------------- Total shareholder's equity 3,568,535 3,061,614 --------------------------------- Total liabilities and shareholder's equity $50,240,713 $43,564,720 =================================
See accompanying notes. F-2 American General Life Insurance Company Consolidated Statements of Income
YEAR ENDED DECEMBER 31 1998 1997 1996 ---------------------------------------------------------- (In Thousands) Revenues: Premiums and other considerations $ 470,238 $ 428,721 $ 382,923 Net investment income 2,316,933 2,198,623 2,095,072 Net realized investment gains (losses) (33,785) 29,865 28,502 Other 69,602 53,370 41,968 ---------------------------------------------------------- Total revenues 2,822,988 2,710,579 2,548,465 Benefits and expenses: Benefits 1,788,417 1,757,504 1,689,011 Operating costs and expenses 467,067 379,012 347,369 Interest expense 15 782 830 Litigation settlement 97,096 - - ---------------------------------------------------------- Total benefits and expenses 2,352,595 2,137,298 2,037,210 ---------------------------------------------------------- Income before income tax expense 470,393 573,281 511,255 Income tax expense 153,719 198,724 176,660 ---------------------------------------------------------- Net income $ 316,674 $ 374,557 $ 334,595 ==========================================================
See accompanying notes. F-3 American General Life Insurance Company Consolidated Statements of Comprehensive Income
YEAR ENDED DECEMBER 31 1998 1997 1996 -------------------------------------------------------- (In Thousands) Net income $316,674 $374,557 $ 334,595 Other comprehensive income: Gross change in unrealized gains (losses) on securities (pretax: $341,000; $318,700; ($404,900)) 222,245 207,124 (263,181) Less: gains (losses) realized in net income (29,336) (1,251) 11,262 -------------------------------------------------------- Change in net unrealized gains (losses) on securities (pretax: $387,000; $320,600; ($422,200) 251,581 208,375 (274,443) ------------------------------------------------------- Comprehensive income $568,255 $582,932 $ 60,152 ========================================================
See accompanying notes. F-4 American General Life Insurance Company Consolidated Statements of Shareholder's Equity
YEAR ENDED DECEMBER 31 1998 1997 1996 ---------------------------------------------------------- (In Thousands) Common stock: Balance at beginning of year $ 6,000 $ 6,000 $ 6,000 Change during year - - - ---------------------------------------------------------- Balance at end of year 6,000 6,000 6,000 Preferred stock: Balance at beginning of year 850 850 850 Change during year - - - ---------------------------------------------------------- Balance at end of year 850 850 850 Additional paid-in capital: Balance at beginning of year 1,184,743 933,342 858,075 Capital contribution from Parent Company 182,284 250,000 75,000 Other changes during year 1,062 1,401 267 ---------------------------------------------------------- Balance at end of year 1,368,089 1,184,743 933,342 Accumulated other comprehensive income: Balance at beginning of year 427,526 219,151 493,594 Change in unrealized gains (losses) on securities 251,581 208,375 (274,443) ---------------------------------------------------------- Balance at end of year 679,107 427,526 219,151 Retained earnings: Balance at beginning of year 1,442,495 1,469,618 1,324,703 Net income 316,674 374,557 334,595 Dividends paid (244,680) (401,680) (189,680) ---------------------------------------------------------- Balance at end of year 1,514,489 1,442,495 1,469,618 ---------------------------------------------------------- Total shareholder's equity $3,568,535 $3,061,614 $2,628,961 ==========================================================
See accompanying notes. F-5 American General Life Insurance Company Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1998 1997 1996 -------------------------------------------------------------------- (In Thousands) OPERATING ACTIVITIES Net income $ 316,674 $ 374,557 $ 334,595 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Change in accounts receivable 11,613 (37,752) 3,846 Change in future policy benefits and other policy claims (866,428) (1,143,736) (543,193) Amortization of policy acquisition costs 125,062 115,467 102,189 Policy acquisition costs deferred (244,196) (219,339) (188,001) Change in other policyholders' funds 273 21,639 (69,126) Provision for deferred income tax expense 15,872 13,264 12,388 Depreciation 19,418 16,893 16,993 Amortization (26,775) (28,276) (30,758) Change in indebtedness to/from affiliates (51,116) (8,695) 4,432 Change in amounts payable to brokers (894) 31,769 (25,260) Net (gain) loss on sale of investments 37,016 (29,865) (28,502) Other, net 57,307 30,409 32,111 -------------------------------------------------------------------- Net cash used in operating activities (606,174) (863,665) (378,286) INVESTING ACTIVITIES Purchases of investments and loans made (28,231,615) (29,638,861) (27,245,453) Sales or maturities of investments and receipts from repayment of loans 26,656,897 28,300,238 25,889,422 Sales and purchases of property, equipment, and software, net (105,907) (9,230) (8,057) -------------------------------------------------------------------- Net cash used in investing activities (1,680,625) (1,347,853) (1,364,088) FINANCING ACTIVITIES Policyholder account deposits 4,688,831 4,187,191 3,593,380 Policyholder account withdrawals (2,322,307) (1,759,660) (1,746,987) Dividends paid (244,680) (401,680) (189,680) Capital contribution from Parent 182,284 250,000 75,000 Other 1,062 1,401 267 -------------------------------------------------------------------- Net cash provided by financing activities 2,305,190 2,277,252 1,731,980 -------------------------------------------------------------------- Increase (decrease) in cash 18,391 65,734 (10,394) Cash at beginning of year 99,284 33,550 43,944 -------------------------------------------------------------------- Cash at end of year $ 117,675 $ 99,284 $ 33,550 ====================================================================
Interest paid amounted to approximately $420,000, $1,004,000, and $1,080,000 in 1998, 1997, and 1996, respectively. See accompanying notes. F-6 American General Life Insurance Company Notes to Consolidated Financial Statements December 31, 1998 NATURE OF OPERATIONS American General Life Insurance Company (the "Company") is a wholly owned subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary of American General Corporation (the "Parent Company"). The Company's wholly owned life insurance subsidiaries are American General Life Insurance Company of New York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During 1998, the Company formed a new wholly owned subsidiary, American General Life Companies (AGLC), to provide management services to certain life insurance subsidiaries of the Parent Company. The Company offers a complete portfolio of the standard forms of universal life, variable universal life, interest-sensitive whole life, term life, structured settlements, and fixed and variable annuities throughout the United States. In addition, a variety of equity products is sold through its wholly owned broker/dealer, American General Securities, Inc. The Company serves the estate planning needs of middle- and upper-income households and the insurance needs of small- to medium-sized businesses. AGNY offers a broad array of traditional and interest-sensitive insurance, in addition to individual annuity products. VALIC provides tax-deferred retirement annuities and employer-sponsored retirement plans to employees of health care, educational, public sector, and other not- for-profit organizations throughout the United States. 1. ACCOUNTING POLICIES 1.1 PREPARATION OF FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") and include the accounts of the Company and its wholly owned subsidiaries. Transactions with the Parent Company and other subsidiaries of the Parent Company are not eliminated from the financial statements of the Company. All other material intercompany transactions have been eliminated in consolidation. The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates. F-7 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.2 STATUTORY ACCOUNTING The Company and its wholly owned life insurance subsidiaries are required to file financial statements with state regulatory authorities. State insurance laws and regulations prescribe accounting practices for calculating statutory net income and equity. In addition, state regulators may permit statutory accounting practices that differ from prescribed practices. The use of such permitted practices by the Company and its wholly owned life insurance subsidiaries did not have a material effect on statutory equity at December 31, 1998. Statutory financial statements differ from GAAP. Significant differences were as follows (in thousands):
1998 1997 1996 ------------------------------------------------------ Net income: Statutory net income (1998 balance is unaudited) $ 259,903 $ 327,813 $ 284,070 Deferred policy acquisition costs and cost of insurance purchased 116,597 103,872 85,812 Deferred income taxes (53,358) (13,264) (12,388) Adjustments to policy reserves 52,445 (30,162) (19,954) Goodwill amortization (2,033) (2,067) (2,169) Net realized gain on investments 41,488 20,139 14,140 Litigation settlement (63,112) -- -- Other, net (35,256) (31,774) (14,916) ------------------------------------------------------- GAAP net income $ 316,674 $ 374,557 $ 334,595 ======================================================= Shareholders' equity: Statutory capital and surplus (1998 balance is unaudited) $1,670,412 $1,636,327 $1,441,768 Deferred policy acquisition costs 1,109,831 835,031 1,042,783 Deferred income taxes (698,350) (535,703) (410,007) Adjustments to policy reserves (274,532) (319,680) (297,434) Acquisition-related goodwill 54,754 51,424 55,626 Asset valuation reserve ("AVR") 310,564 255,975 291,205 Interest maintenance reserve ("IMR") 27,323 9,596 63 Investment valuation differences 1,487,658 1,272,339 643,289 Surplus from separate accounts (174,447) (150,928) (106,026) Other, net 55,322 7,233 (32,306) ------------------------------------------------------- Total GAAP shareholders' equity $3,568,535 $3,061,614 $2,628,961 =======================================================
F-8 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.2 STATUTORY ACCOUNTING (CONTINUED) The more significant differences between GAAP and statutory accounting principles are that under GAAP: (a) acquisition costs related to acquiring new business are deferred and amortized (generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality, and expense margins), rather than being charged to operations as incurred; (b) future policy benefits are based on estimates of mortality, interest, and withdrawals generally representing the Company's experience, which may differ from those based on statutory mortality and interest requirements without consideration of withdrawals; (c) deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, at the enacted tax rates expected to be in effect when the temporary differences reverse; (d) certain assets (principally furniture and equipment, agents' debit balances, computer software, and certain other receivables) are reported as assets rather than being charged to retained earnings; (e) acquisitions are accounted for using the purchase method of accounting rather than being accounted for as equity investments; and (f) fixed maturity investments are carried at fair value rather than amortized cost. In addition, statutory accounting principles require life insurance companies to establish an AVR and an IMR. The AVR is designed to address the credit-related risk for bonds, preferred stocks, derivative instruments, and mortgages and market risk for common stocks, real estate, and other invested assets. The IMR is composed of investment- and liability-related realized gains and losses that result from interest rate fluctuations. These realized gains and losses, net of tax, are amortized into income over the expected remaining life of the asset sold or the liability released. 1.3 INSURANCE CONTRACTS The insurance contracts accounted for in these financial statements include primarily long-duration contracts. Long-duration contracts include traditional whole life, endowment, guaranteed renewable term life, universal life, limited payment, and investment contracts. Long-duration contracts generally require the performance of various functions and services over a period of more than one year. The contract provisions generally cannot be changed or canceled by the insurer during the contract period; however, most new contracts written by the Company allow the insurer to revise certain elements used in determining premium rates or policy benefits, subject to guarantees stated in the contracts. F-9 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.4 INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES All fixed maturity and equity securities were classified as available-for-sale and recorded at fair value at December 31, 1998, 1997, and 1996. After adjusting related balance sheet accounts as if the unrealized gains (losses) had been realized, the net adjustment is recorded in accumulated other comprehensive income within shareholders' equity. If the fair value of a security classified as available-for-sale declines below its cost and this decline is considered to be other than temporary, the security is reduced to its fair value, and the reduction is recorded as a realized loss. During 1998, the Company maintained a trading portfolio of certain fixed maturity securities. Trading securities are recorded at fair value. Unrealized gains (losses), as well as realized gains (losses), are included in net investment income. The Company held no trading securities at December 31, 1998, and trading securities did not have a material effect on net investment income in 1998. MORTGAGE LOANS Mortgage loans are reported at amortized cost, net of an allowance for losses. The allowance for losses covers all non-performing loans and loans for which management has a concern based on its assessment of risk factors, such as potential non-payment or non-monetary default. The allowance is based on a loan- specific review and a formula that reflects past results and current trends. Loans for which the Company determines that collection of all amounts due under the contractual terms is not probable are considered to be impaired. The Company generally looks to the underlying collateral for repayment of impaired loans. Therefore, impaired loans are considered to be collateral dependent and are reported at the lower of amortized cost or fair value of the underlying collateral, less estimated cost to sell. POLICY LOANS Policy loans are reported at unpaid principal balance. F-10 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.4 INVESTMENTS (CONTINUED) INVESTMENT REAL ESTATE Investment real estate is classified as held for investment or available for sale, based on management's intent. Real estate held for investment is carried at cost, less accumulated depreciation and impairment write-downs. Real estate available for sale is carried at the lower of cost (less accumulated depreciation, if applicable) or fair value less cost to sell. INVESTMENT INCOME Interest on fixed maturity securities and performing and restructured mortgage loans is recorded as income when earned and is adjusted for any amortization of premium or discount. Interest on delinquent mortgage loans is recorded as income when received. Dividends are recorded as income on ex-dividend dates. REALIZED INVESTMENT GAINS Realized investment gains (losses) are recognized using the specific- identification method. 1.5 SEPARATE ACCOUNTS Separate Accounts are assets and liabilities associated with certain contracts, principally annuities; for which the investment risk lies solely with the contract holder. Therefore, the Company's liability for these accounts equals the value of the account assets. Investment income, realized investment gains (losses), and policyholder account deposits and withdrawals related to separate accounts are excluded from the consolidated statements of income, comprehensive income, and cash flows. Assets held in Separate Accounts are primarily shares in mutual funds, which are carried at fair value based on the quoted net asset value per share. F-11 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") AND COST OF INSURANCE PURCHASED ("CIP") Certain costs of writing an insurance policy, including commissions, underwriting, and marketing expenses, are deferred and reported as DPAC. CIP represents the cost assigned to insurance contracts in force that are acquired through the purchase of a block of business. At December 31, 1998, CIP of $22.1 million was reported within other assets. DPAC and CIP associated with interest-sensitive life contracts, insurance investment contracts, and participating life insurance contracts is charged to expense in relation to the estimated gross profits of those contracts. DPAC and CIP associated with all other insurance contracts is charged to expense over the premium-paying period or as the premiums are earned over the life of the contract. DPAC and CIP are adjusted for the impact on estimated future gross profits as if net unrealized gains (losses) on securities had been realized at the balance sheet date. The impact of this adjustment is included in accumulated other comprehensive income within shareholder's equity. The Company reviews the carrying amount of DPAC and CIP on at least an annual basis. Management considers estimated future gross profits or future premiums, expected mortality, interest earned and credited rates, persistency, and expenses in determining whether the carrying amount is recoverable. 1.7 PREMIUM RECOGNITION Most receipts for annuities and interest-sensitive life insurance policies are classified as deposits instead of revenue. Revenues for these contracts consist of mortality, expense, and surrender charges. Policy charges that compensate the Company for future services are deferred and recognized in income over the period earned, using the same assumptions used to amortize DPAC (see Note 1.6). For limited-payment contracts, net premiums are recorded as revenue, and the difference between the gross premium received and the net premium is deferred and recognized in a constant relationship to insurance in force. For all other contracts, premiums are recognized when due. F-12 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.8 OTHER ASSETS Acquisition-related goodwill, which is included in other assets, is charged to expense in equal amounts over 40 years. The carrying value of goodwill is regularly reviewed by management for indicators of impairment in value. If facts and circumstances suggest that goodwill is impaired, other than temporarily, the Company assesses the fair value of the underlying assets and reduces goodwill accordingly. 1.9 POLICY AND CONTRACT CLAIMS RESERVES Substantially all of the Company's insurance and annuity liabilities relate to long-duration contracts. The contracts normally cannot be changed or canceled by the Company during the contract period. For interest-sensitive life and insurance investment contracts, reserves equal the sum of the policy account balance and deferred revenue charges. Reserves for other contracts are based on estimates of the cost of future policy benefits. Reserves are determined using the net level premium method. Interest assumptions used to compute reserves ranged from 2.5% to 13.5% at December 31, 1998. 1.10 REINSURANCE The Company limits its exposure to loss on any single insured to $2.5 million by ceding additional risks through reinsurance contracts with other insurers. The Company diversifies its risk of reinsurance loss by using a number of reinsurers that have strong claims-paying ability ratings. If the reinsurer could not meet its obligations, the Company would reassume the liability. The likelihood of a material reinsurance liability being reassumed by the Company is considered to be remote. A receivable is recorded for the portion of benefits paid and insurance liabilities that have been reinsured. Reinsurance recoveries on ceded reinsurance contracts were $63 million, $25 million, and $24 million during 1998, 1997, and 1996, respectively. The cost of reinsurance is recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies. F-13 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.10 REINSURANCE Benefits paid and future policy benefits related to ceded insurance contracts are recorded as reinsurance receivables. The cost of reinsurance is recognized over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. 1.11 PARTICIPATING POLICY CONTRACTS Participating life insurance accounted for approximately 2% of life insurance in force at December 31, 1998 and 1997. The portion of earnings allocated to participating policyholders that cannot be expected to inure to shareholders is excluded from net income and shareholder's equity. Dividends to be paid on participating life insurance contracts are determined annually based on estimates of the contracts' earnings. Policyholder dividends were $4.9 million in 1998. 1.12 INCOME TAXES The Company and its life insurance subsidiaries, together with certain other life insurance subsidiaries of the Parent Company, are included in a life/non- life consolidated tax return with the Parent Company and its noninsurance subsidiaries. The Company participates in a tax sharing agreement with other companies included in the consolidated tax return. Under this agreement, tax payments are made to the Parent Company as if the companies filed separate tax returns; and companies incurring operating and/or capital losses are reimbursed for the use of these losses by the consolidated return group. Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, at the enacted tax rates expected to be in effect when the temporary differences reverse. The effect of a tax rate change is recognized in income in the period of enactment. State income taxes are included in income tax expense. F-14 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) 1.12 INCOME TAXES (CONTINUED) A valuation allowance for deferred tax assets is provided if it is more likely than not that some portion of the deferred tax asset will not be realized. An increase or decrease in a valuation allowance that results from a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset is included in income. Changes related to fluctuations in fair value of available-for-sale securities are included in the consolidated statements of comprehensive income and accumulated other comprehensive income in shareholder's equity. 1.13 ACCOUNTING CHANGES During 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) 130, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive income and its components in the financial statements. The Company elected to report comprehensive income and its components in a separate statement of comprehensive income. Adoption of this statement did not change recognition or measurement of net income and, therefore, did not impact the Company's consolidated results of operations or financial position. Effective December 31, 1998, the Company adopted SFAS 131, Disclosures about Segments of an Enterprise and Related Information, which changes the way companies report segment information. With the adoption of SFAS 131, the Company reports division earnings exclusive of goodwill amortization, net realized investment gains, and nonrecurring items. This methodology is consistent with the manner in which management reviews division results. Adoption of this statement did not impact the Company's consolidated results of operations or financial position. In June 1998, the Financial Accounting Standards Board issued SFAS 133, Accounting for Derivative Instruments and Hedging Activities, which requires all derivative instruments to be recognized at fair value as either assets or liabilities in the balance sheet. Changes in the fair value of a derivative instrument are to be reported as earnings or other comprehensive income, depending upon the intended use of the derivative instrument. This statement is effective for years beginning after June 15, 1999. Adoption of SFAS 133 is not expected to have a material impact on the Company's consolidated results of operations or financial position. F-15 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS 2.1 INVESTMENT INCOME Investment income by type of investment was as follows:
1998 1997 1996 ---------------------------------------------------------- (In Thousands) Investment income: Fixed maturities $2,101,730 $1,966,528 $1,846,549 Equity securities 1,813 1,067 1,842 Mortgage loans on real estate 148,447 157,035 175,833 Investment real estate 23,139 22,157 22,752 Policy loans 66,573 62,939 58,211 Other long-term investments 3,837 3,135 2,328 Short-term investments 15,492 8,626 9,280 Investment income from affiliates 10,536 11,094 11,502 ---------------------------------------------------------- Gross investment income 2,371,567 2,232,581 2,128,297 Investment expenses 54,634 33,958 33,225 ---------------------------------------------------------- Net investment income $2,316,933 $2,198,623 $2,095,072 ==========================================================
The carrying value of investments that produced no investment income during 1998 was less than 0.2% of total invested assets. The ultimate disposition of these investments is not expected to have a material effect on the Company's results of operations and financial position. F-16 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.2 NET REALIZED INVESTMENT GAINS (LOSSES) Realized gains (losses) by type of investment were as follows:
1998 1997 1996 -------------------------------------------------------- (In Thousands) Fixed maturities: Gross gains $ 20,109 $ 42,966 $ 46,498 Gross losses (62,657) (34,456) (47,293) -------------------------------------------------------- Total fixed maturities (42,548) 8,510 (795) Equity securities 645 1,971 18,304 Other investments 8,118 19,384 10,993 -------------------------------------------------------- Net realized investment gains (losses) before tax (33,785) 29,865 28,502 Income tax expense (benefit) (11,826) 10,452 9,976 -------------------------------------------------------- Net realized investment gains (losses) after tax $(21,959) $ 19,413 $ 18,526 ========================================================
F-17 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.3 FIXED MATURITY AND EQUITY SECURITIES All fixed maturity and equity securities are classified as available-for-sale and reported at fair value (see Note 1.4). Amortized cost and fair value at December 31, 1998 and 1997 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAIN LOSS VALUE ------------------------------------------------------------------------------ (In Thousands) DECEMBER 31, 1998 Fixed maturity securities: Corporate securities: Investment-grade $18,800,553 $1,129,504 $(26,353) $19,903,703 Below investment-grade 1,409,198 33,910 (45,789) 1,397,320 Mortgage-backed securities* 6,359,242 294,331 (870) 6,652,703 U.S. government obligations 417,822 69,321 (178) 486,965 Foreign governments 331,699 24,625 (2,437) 353,887 State and political subdivisions 86,778 4,796 (187) 91,387 Redeemable preferred stocks 20,313 - (17) 20,296 ------------------------------------------------------------------------------ Total fixed maturity securities $27,425,605 $1,556,487 $(75,831) $28,906,261 ============================================================================== Equity securities $ 193,368 $ 19,426 $ (1,110) $ 211,684 ============================================================================== Investment in Parent Company $ 8,597 $ 45,973 $ - $ 54,570 ==============================================================================
* Primarily include pass-through securities guaranteed by and mortgage obligations ("CMOs") collateralized by the U.S. government and government agencies. F-18 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAIN LOSS VALUE ------------------------------------------------------------------------------ (In Thousands) DECEMBER 31, 1997 Fixed maturity securities: Corporate securities: Investment-grade $17,913,942 $ 906,235 $(17,551) $18,802,626 Below investment-grade 950,438 34,290 (4,032) 980,696 Mortgage-backed securities* 6,614,704 278,143 (4,260) 6,888,587 U.S. government obligations 289,406 46,529 (74) 335,861 Foreign governments 318,212 18,076 (3,534) 332,754 State and political subdivisions 44,505 1,686 -- 46,191 ------------------------------------------------------------------------------ Total fixed maturity securities $26,131,207 $1,284,959 $(29,451) $27,386,715 ============================================================================== Equity securities $ 19,208 $ 2,145 $ (239) $ 21,114 ============================================================================== Investment in Parent Company $ 8,597 $ 29,226 $ -- $ 37,823 ==============================================================================
* Primarily include pass-through securities guaranteed by and mortgage obligations ("CMOs") collateralized by the U.S. government and government agencies. F-19 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED) Net unrealized gains (losses) on securities included in accumulated comprehensive income in shareholders' equity at December 31 were as follows:
1998 1997 -------------------------------------------- (In Thousands) Gross unrealized gains $1,621,886 $1,316,330 Gross unrealized losses (76,941) (29,690) DPAC and other fair value adjustments (488,120) (621,867) Deferred federal income taxes (377,718) (237,247) -------------------------------------------- Net unrealized gains on securities $ 679,107 $ 427,526 ============================================
The contractual maturities of fixed maturity securities at December 31, 1998 were as follows:
1998 1997 ----------------------------------------------------------------------------- AMORTIZED MARKET AMORTIZED MARKET COST VALUE COST VALUE ----------------------------------------------------------------------------- (In Thousands) (In Thousands) Fixed maturity securities, excluding mortgage- backed securities: Due in one year or less $ 531,496 $ 536,264 $ 205,719 $ 207,364 Due after one year through five years 5,550,665 5,812,581 5,008,933 5,216,174 Due after five years through ten years 9,229,980 9,747,761 9,163,681 9,604,447 Due after ten years 5,754,220 6,156,950 5,138,169 5,470,143 Mortgage-backed securities 6,359,244 6,652,705 6,614,705 6,888,587 ----------------------------------------------------------------------------- Total fixed maturity securities $27,425,605 $28,906,261 $26,131,207 $27,386,715 =============================================================================
Actual maturities may differ from contractual maturities, since borrowers may have the right to call or prepay obligations. In addition, corporate requirements and investment strategies may result in the sale of investments before maturity. Proceeds from sales of fixed maturities were $5.4 billion, $14.8 billion, and $16.2 billion during 1998, 1997, and 1996, respectively. F-20 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.4 MORTGAGE LOANS ON REAL ESTATE Diversification of the geographic location and type of property collateralizing mortgage loans reduces the concentration of credit risk. For new loans, the Company requires loan-to-value ratios of 75% or less, based on management's credit assessment of the borrower. The mortgage loan portfolio was distributed as follows at December 31, 1998 and 1997:
OUTSTANDING PERCENT OF PERCENT AMOUNT TOTAL NONPERFORMING ------------------------------------------------------------------ (In Millions) DECEMBER 31, 1998 Geographic distribution: South Atlantic $ 429 27.6% 0.2% Pacific 320 20.6 10.4 Mid-Atlantic 326 20.9 4.1 East North Central 178 11.4 - Mountain 95 6.1 - West South Central 118 7.5 - East South Central 46 3.0 - West North Central 33 2.1 - New England 25 1.6 - Allowance for losses (13) (0.8) - ------------------------------------- Total $ 1,557 100.00% 3.1% ===================================== Property type: Office $ 593 38.1% 7.0% Retail 423 27.1 0.2 Industrial 292 18.8 - Apartments 178 11.4 2.9 Hotel/motel 38 2.4 - Other 46 3.0 - Allowance for losses (13) (0.8) - ------------------------------------- Total $ 1,557 100% 3.1% =====================================
F-21 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
OUTSTANDING PERCENT OF PERCENT AMOUNT TOTAL NONPERFORMING ------------------------------------------------------------------ (In Millions) DECEMBER 31, 1997 Geographic distribution: South Atlantic $ 456 27.5% 1.8% Pacific 340 20.5 14.4 Mid-Atlantic 288 17.3 - East North Central 186 11.2 - Mountain 151 9.1 2.7 West South Central 132 7.9 .1 East South Central 94 5.7 - West North Central 19 1.1 - New England 17 1.1 - Allowance for losses (23) (1.4) - ------------------------------------- Total $1,660 100.0% 3.6% ===================================== Property type: Office $ 622 37.5% 4.6% Retail 463 27.9 3.0 Industrial 324 19.5 1.8 Apartments 223 13.4 6.1 Hotel/motel 40 2.4 - Other 11 .7 - Allowance for losses (23) (1.4) - ------------------------------------- Total $1,660 100.0% 3.6% =====================================
F-22 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED) Impaired mortgage loans on real estate and related interest income were as follows:
DECEMBER 31 1998 1997 ----------------------------------------- (In Millions) Impaired loans: With allowance* $ 13 $ 35 Without allowance - - ----------------------------------------- Total impaired loans $ 13 $ 35 =========================================
* Represents gross amounts before allowance for mortgage loan losses of $1.8 million and $10 million, respectively.
1998 1997 1996 --------------------------------------------------------------- (In Millions) Average investment $ 24 $ 48 $ 72 Interest income earned $ - $ 3 $ 6 Interest income - cash basis $ - $ - $ 6
F-23 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.5 INVESTMENT SUMMARY Investments of the Company were as follows:
DECEMBER 31, 1998 DECEMBER 31, 1997 -------------------------------------------------------------------------------------------------------- CARRYING CARRYING COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT -------------------------------------------------------------------------------------------------------- (In Thousands) (In Thousands) Fixed maturities: Bonds: United States government and government agencies and authorities $ 417,822 $ 486,965 $ 486,965 $ 289,406 $ 335,861 $ 335,861 States, municipalities, and political subdivisions 86,778 91,387 91,387 44,505 46,191 46,191 Foreign governments 331,699 353,887 353,887 318,212 332,754 332,754 Public utilities 1,777,172 1,895,326 1,895,326 1,848,546 1,952,724 1,952,724 Mortgage-backed securities 6,359,242 6,652,703 6,652,703 6,614,704 6,888,587 6,888,587 All other corporate bonds 18,432,579 19,405,697 19,405,697 17,015,834 17,830,598 17,830,598 Redeemable preferred stocks 20,313 20,296 20,296 - - - -------------------------------------------------------------------------------------------------------- Total fixed maturities 27,425,605 28,906,261 28,906,261 26,131,207 27,386,715 27,386,715 Equity securities: Common stocks: Banks, trust, and insurance companies - - - - - - Industrial, miscellaneous, and other 176,321 211,684 211,684 5,604 5,785 5,785 Nonredeemable preferred stocks 17,047 - - 13,604 15,329 15,329 -------------------------------------------------------------------------------------------------------- Total equity securities 193,368 211,684 211,684 19,208 21,114 21,114 Mortgage loans on real estate* 1,557,268 - 1,557,268 1,659,921 - 1,659,921 Investment real estate 119,520 - 119,520 129,364 - 129,364 Policy loans 1,170,686 - 1,170,686 1,093,694 - 1,093,694 Other long-term investments 86,194 - 86,194 55,118 - 55,118 Short-term investments 222,949 - 222,949 100,061 - 100,061 -------------------------------------------------------------------------------------------------------- Total investments $30,775,590 $ - $32,274,562 $29,188,573 $ - $30,445,987 ========================================================================================================
* Amount is net of allowance for losses of $13 million and $23 million at December 31, 1996 and 1997, respectively. F-24 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. DEFERRED POLICY ACQUISITION COSTS The balance of DPAC at December 31 and the components of the change reported in operating costs and expenses for the years then ended were as follows:
1998 1997 1996 ---------------------------------------------------------- (In Thousands) Balance at January 1 $ 835,031 $1,042,783 $ 605,501 Capitalization 244,196 219,339 188,001 Amortization (125,062) (115,467) (102,189) Effect of unrealized gains (losses) on securities 133,553 (311,624) 351,470 ---------------------------------------------------------- Balance at December 31 $1,087,718 $ 835,031 $1,042,783 ==========================================================
4. OTHER ASSETS Other assets consisted of the following:
DECEMBER 31 1998 1997 ------------------------------------ (In Thousands) Goodwill $ 54,754 $ 51,424 American General Corporation CBO (Collateralized Bond Obligation) 98-1 Ltd. 9,740 - Cost of insurance purchased ("CIP") 22,113 - Other 119,711 81,235 ------------------------------------ Total other assets $206,318 $132,659 ====================================
F-25 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 4. OTHER ASSETS (CONTINUED) A rollforward of CIP for the year ended December 31, 1998, was as follows:
1998 -------------------- (In Thousands) Balance at January 1 $ -- Acquisition of business 23,915 Accretion of interest at 5.88% 733 Amortization (2,535) -------------------- Balance at December 31 $ 22,113 ====================
5. FEDERAL INCOME TAXES 5.1 TAX LIABILITIES Income tax liabilities were as follows:
DECEMBER 31 1998 1997 -------------------------------------- (In Thousands) Current tax (receivable) payable $ (21,035) $ 7,676 Deferred tax liabilities, applicable to: Net income 320,632 298,456 Net unrealized investment gains 377,718 237,247 ----------------------------------------- Total deferred tax liabilities 698,350 535,703 ----------------------------------------- Total current and deferred tax liabilities $ 677,315 $ 543,379 =========================================
F-26 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. FEDERAL INCOME TAXES (CONTINUED) 5.1 TAX LIABILITIES (CONTINUED) Components of deferred tax liabilities and assets at December 31 were as follows:
1998 1997 ------------------------------------------ (In Thousands) Deferred tax liabilities applicable to: Deferred policy acquisition costs $ 307,025 $ 226,653 Basis differential of investments 590,661 486,194 Other 150,189 139,298 ------------------------------------------ Total deferred tax liabilities 1,047,875 852,145 Deferred tax assets applicable to: Policy reserves (212,459) (232,539) Other (137,066) (83,903) ------------------------------------------ Total deferred tax assets before valuation allowance (349,525) (316,442) Valuation allowance - - ------------------------------------------ Total deferred tax assets, net of valuation allowance (349,525) (316,442) ------------------------------------------ Net deferred tax liabilities $ 698,350 $ 535,703 ==========================================
A portion of life insurance income earned prior to 1984 is not taxable unless it exceeds certain statutory limitations, is distributed as dividends, or unless the income tax deferred status of such amount is modified by future tax legislation. Such income, accumulated in policyholders' surplus accounts, totaled $87.1 million at December 31, 1998. At current corporate rates, the maximum amount of tax on such income is approximately $30.5 million. Deferred income taxes on these accumulations are not required because no distributions are expected. F-27 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. FEDERAL INCOME TAXES (CONTINUED) 5.2 TAX EXPENSE Components of income tax expense for the years were as follows:
1998 1997 1996 -------------------------------------------------------- (In Thousands) Current expense $134,344 $185,460 $164,272 Deferred expense (benefit): Deferred policy acquisition cost 33,230 27,644 21,628 Policy reserves 2,189 (27,496) (27,460) Basis differential of investments 11,969 3,769 4,129 Litigation settlement (33,983) -- -- Year 2000 (9,653) -- -- Other, net 15,623 9,347 14,091 -------------------------------------------------------- Total deferred expense 19,375 13,264 12,388 -------------------------------------------------------- Income tax expense $153,719 $198,724 $176,660 ========================================================
A reconciliation between the income tax expense computed by applying the federal income tax rate (35%) to income before taxes and the income tax expense reported in the financial statement is presented below.
1998 1997 1996 -------------------------------------------------------- (In Thousands) Income tax at statutory percentage of GAAP pretax income $164,638 $200,649 $178,939 Tax-exempt investment income (11,278) (9,493) (9,347) Goodwill 712 723 759 Other (353) 6,845 6,309 -------------------------------------------------------- Income tax expense $153,719 $198,724 $176,660 ========================================================
F-28 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. FEDERAL INCOME TAXES (CONTINUED) 5.3 TAXES PAID Income taxes paid amounted to approximately $159 million, $168 million, and $182 million in 1998, 1997, and 1996, respectively. 5.4 TAX RETURN EXAMINATIONS The Parent Company and the majority of its subsidiaries file a consolidated federal income tax return. The Internal Revenue Service ("IRS") has completed examinations of the Parent Company's tax returns through 1988. The IRS is currently examining tax returns for 1989 through 1996. In addition, the tax returns of companies recently acquired are also being examined. Although the final outcome of any issues raised in examination is uncertain, the Parent Company believes that the ultimate liability, including interest, will not materially exceed amounts recorded in the consolidated financial statements. 6. TRANSACTIONS WITH AFFILIATES Affiliated notes and accounts receivable were as follows:
DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------------------------------------------------------------ PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE ------------------------------------------------------------------------ (In Thousands) American General Corporation, 9-3/8%, due 2008 $ 4,725 $ 3,345 $ 4,725 $ 3,288 American General Corporation, Promissory notes, due 2004 14,679 14,679 17,125 17,125 American General Corporation, Restricted Subordinated Note, 13-1/2%, due 2002 29,435 29,435 31,494 31,494 ------------------------------------------------------------------------ Total notes receivable from affiliates 48,839 47,459 53,344 51,907 Accounts receivable from affiliates - 113,637 - 44,612 ------------------------------------------------------------------------ Indebtedness from affiliates $48,839 $161,096 $53,344 $96,519 ========================================================================
F-29 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 6. TRANSACTIONS WITH AFFILIATES (CONTINUED) Various American General companies provide services to the Company, principally mortgage servicing and investment management services, provided by American General Investment Management Corporation on a fee basis. The Company paid approximately $46,921,000, $33,916,000, and $22,083,000 for such services in 1998, 1997, and 1996, respectively. Accounts payable for such services at December 31, 1998 and 1997 were not material. The Company rents facilities and provides services on an allocated cost basis to various American General companies. Beginning in 1998, amounts received by the Company from affiliates include amounts received by its wholly-owned, non-life insurance subsidiary, American General Life Companies (AGLC). AGLC provides shared services, including technology and Year 2000-readiness, to a number of American General Corporation's life insurance subsidiaries. The Company received approximately $66,550,000, $6,455,000, and $1,255,000 for such services and rent in 1998, 1997, and 1996, respectively. Accounts receivable for rent and services at December 31, 1998 and 1997 were not material. The Company has 8,500 shares of $100 par value cumulative preferred stock authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per share after December 31, 2000. The holder of this stock, The Franklin Life Insurance Company ("Franklin"), an affiliated company, is entitled to one vote per share, voting together with the holders of common stock. During 1996, the Company's residential mortgage loan portfolio of $42 million was sold to American General Finance, Inc., at carrying value plus accrued interest. 7. STOCK-BASED COMPENSATION Certain officers of the Company participate in American General Corporation's stock and incentive plans which provide for the award of stock options, restricted stock awards, performance awards, and incentive awards to key employees. Stock options constitute the majority of such awards. Expense related to stock options is measured as the excess of the market price of the stock at the measurement date over the exercise price. The measurement date is the first date on which both the number of shares that the employee is entitled to receive and the exercise price are known. Under the stock option plans, no expense is recognized, since the market price equals the exercise price at the measurement date. F-30 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. STOCK-BASED COMPENSATION (CONTINUED) Under an alternative accounting method, compensation expense arising from stock options would be measured at the estimated fair value of the options at the date of grant. Had compensation expense for the stock options been determined using this method, net income would have been as follows:
1998 1997 1996 ------------------------------------------------------- (In Thousands) Net income as reported $316,674 $374,557 $334,595 Net income pro forma $315,078 $373,328 $334,029
The average fair values of the options granted during 1998, 1997, and 1996 were $15.38, $10.33, and $7.07, respectively. The fair value of each option was estimated at the date of grant using a Black-Scholes option pricing model. The weighted average assumptions used to estimate the fair value of the stock options were as follows:
1998 1997 1996 ------------------------------------------------------- Dividend yield 2.5% 3.0% 4.0% Expected volatility 23.0% 22.0% 22.3% Risk-free interest rate 5.76% 6.4% 6.2% Expected life 6 YEARS 6 years 6 years
8. BENEFIT PLANS 8.1 PENSION PLANS The Company has non-contributory defined benefit pension plans covering most employees. Pension benefits are based on the participant's compensation and length of credited service. Equity and fixed maturity securities were 56% and 30%, respectively, of the plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of plan assets were invested in general investment accounts of the Parent Company's subsidiaries through deposit administration insurance contracts. F-31 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. BENEFIT PLANS (CONTINUED) 8.1 PENSION PLANS (CONTINUED) The benefit plans have purchased annuity contracts from American General Corporation's subsidiaries to provide benefits for certain retirees. These contracts are expected to provide future annual benefits to certain retirees of American General Corporation and its subsidiaries of approximately $52 million. The components of pension expense and underlying assumptions were as follows:
1998 1997 1996 -------------------------------------------------------- (In Thousands) Service cost (benefits earned) $ 3,693 $ 1,891 $ 1,826 Interest cost 6,289 2,929 2,660 Expected return on plan assets (9,322) (5,469) (5,027) Amortization (557) 195 4 -------------------------------------------------------- Pension (income) expense $ 103 $ (454) $ (537) ======================================================== Discount rate on benefit obligation 7.00% 7.25% 7.50% Rate of increase in compensation levels 4.25% 4.00% 4.00% Expected long-term rate of return on plan assets 10.25% 10.00% 10.00%
The Company's funding policy is to contribute annually no more than the maximum deductible for federal income tax purposes. The funded status of the plans and the prepaid pension expense included in other assets at December 31 were as follows:
1998 1997 ----------------------------------- (In Thousands) Projected benefit obligation (PBO) $ 96,554 $ 43,393 Plan assets at fair value 120,898 80,102 Plan assets at fair value in excess of PBO 24,344 36,709 Other unrecognized items, net (10,176) (23,470) ----------------------------------- Prepaid pension expense $ 14,168 $ 13,239 ===================================
F-32 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. BENEFIT PLANS (CONTINUED) 8.1 PENSION PLANS (CONTINUED) The change in PBO was as follows:
1998 1997 --------------------------------- (In Thousands) PBO at January 1 $43,393 $37,389 Service and interest costs 9,982 4,820 Benefits paid (1,954) (673) Actuarial loss 17,089 1,810 Amendments, transfers, and acquisitions 28,044 47 --------------------------------- PBO at December 31 $96,554 $43,393 =================================
The change in the fair value of plan assets was as follows:
1998 1997 ---------------------------------- (In Thousands) Fair value of plan assets at January 1 $ 80,102 $65,158 Actual return on plan assets 12,269 14,990 Benefits paid (1,954) (673) Acquisitions and other 30,481 627 ---------------------------------- Fair value of plan assets at December 31 $120,898 $80,102 ==================================
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company has life, medical, supplemental major medical, and dental plans for certain retired employees and agents. Most plans are contributory, which retiree contributions adjusted annually to limit employer contributions to predetermined amounts. The Company has reserved the right to change or eliminate these benefits at any time. F-33 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. BENEFIT PLANS (CONTINUED) 8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) The life plans are insured through December 31, 1999. A portion of the retiree medical and dental plans is funded through a voluntary employees' beneficiary association (VEBA); the remainder is unfunded and self-insured. All of the retiree medical and dental plans' assets held in the VEBA were invested in readily marketable securities at its most recent balance sheet date. Postretirement benefit expense in 1998, 1997, and 1996 was $60,000, $601,000, and $844,000, respectively. The accrued liability for postretirement benefits was $19.2 million and $3.8 million at December 31, 1998 and 1997, respectively. These liabilities were discounted at the same rates used for the pension plans. 9. DERIVATIVE FINANCIAL INSTRUMENTS 9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS The Company's use of derivative financial instruments is generally limited to reducing its exposure to interest rate and currency exchange risk by utilizing interest rate and currency swap agreements, and options to enter into interest rate swap agreements (called swaptions). The Company accounts for these derivative and financial instruments as hedges. Hedge accounting requires a high correlation between changes in fair values or cash flows of the derivative financial instrument and the specific item being hedged, both at inception and throughout the life of the hedge. 9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS Interest rate swap agreements are used to convert specific investment securities from a floating to a fixed rate basis, or vice versa, and to hedge against the risk of declining interest rates on anticipated security purchases. Interest rate swap agreements are also used to convert a portion of floating-rate borrowings to a fixed rate and to hedge against the risk of rising interest rates on anticipated debt issuances. Currency swap agreements are used to convert cash flows from specific investment securities denominated in foreign currencies into U.S. dollars at specific exchange rates, and to hedge against currency rate fluctuation on anticipated security purchases. F-34 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) 9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED) The difference between amounts paid and received on swap agreements is recorded on an accrual basis as an adjustment to net investment income or interest expense, as appropriate, over the periods covered by the agreements. The related amount payable to or receivable from counterparties is included in other liabilities or assets. The fair values of swap agreements are recognized in the consolidated balance sheet if the hedge investments are carried at fair value or if they hedge anticipated purchases of such investments. In this event, changes in the fair value of a swap agreement are reported in net unrealized gains on securities included in other accumulated comprehensive income in shareholders' equity, consistent with the treatment of the related investment security. The fair values of swap agreements hedging debt are not recognized in the consolidated balance sheet. For swap agreements hedging anticipated investment purchases or debt issuances, the net swap settlement amount or unrealized gain or loss is deferred and included in the measurement of the anticipated transaction when it occurs. Swap agreements generally have terms of two to ten years. Any gain or loss from early termination of a swap agreement is deferred and amortized into income over the remaining term of the related investment or debt. If the underlying investment or debt is extinguished or sold, any related gain or loss on swap agreements is recognized in income. F-35 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) 9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED) Interest rate and currency swap agreements related to investment securities at December 31 were as follows:
1998 1997 ----------------------------------- (Dollars in Millions) Interest rate swap agreements to pay fixed rate: Notional amount $ - $ 15 Average receive rate - 6.74% Average pay rate - 6.48% Interest rate swap agreements to receive fixed rate: Notional amount $ 369 $ 144 Average receive rate 6.06% 6.89% Average pay rate 5.48% 6.37% Currency swap agreements (receive U.S. dollars/pay Canadian dollars): Notional amount (in U.S. dollars) $ 124 $ 139 Average exchange rate 1.50 1.50
9.3 CALL SWAPTIONS Options to enter into interest rate swap agreements are used to limit the Company's exposure to reduced spreads between investment yields and interest crediting rates should interest rates decline significantly over prolonged periods. During such periods, the spread between investment yields and interest crediting rates may be reduced as a result of certain limitations on the Company's ability to manage interest crediting rates. Call swaptions allow the Company to enter into interest rate swap agreements to receive fixed rates and pay lower floating rates, effectively increasing the spread between investment yields and interest crediting rates. Premiums paid to purchase call swaptions are included in investments and are amortized to net investment income over the exercise period of the swaptions. If a call swaption is terminated, any gain is deferred and amortized to insurance and annuity benefits over the expected life of the insurance and annuity contracts and any unamortized premium is charged to income. If a call swaption ceases to be an effective hedge, any related gain or loss is recognized in income. F-36 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) 9.3 CALL SWAPTIONS (CONTINUED) Swaptions at December 31 were as follows:
1998 1997 ---------------------------------- (Dollars in Billions) Call swaptions: Notional amount $1.76 $1.35 Average strike rate 3.97% 4.81% Put swaptions: Notional amount $1.05 $ - Average strike rate 8.33% -
9.4 CREDIT AND MARKET RISK Derivative financial instruments expose the Company to credit risk in the event of non-performance by counterparties. The Company limits this exposure by entering into agreements with counterparties having high credit ratings and by regularly monitoring the ratings. The Company does not expect any counterparty to fail to meet its obligation; however, non-performance would not have a material impact on the Company's consolidated results of operations or financial position. The Company's exposure to market risk is mitigated by the offsetting effects of changes in the value of the agreements and the related items being hedged. F-37 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 10. FAIR VALUE OF FINANCIAL INSTRUMENTS Carrying amounts and fair values for certain of the Company's financial instruments at December 31 are presented below. Care should be exercised in drawing conclusions based on fair value, since (1) the fair values presented do not include the value associated with all the Company's assets and liabilities, and (2) the reporting of investments at fair value without a corresponding evaluation of related policyholders liabilities can be misinterpreted.
1998 1997 -------------------------------------------------------------------------------- FAIR CARRYING FAIR CARRYING VALUE AMOUNT VALUE AMOUNT -------------------------------------------------------------------------------- (In Millions) (In Millions) Assets: Fixed maturity and equity securities * $29,118 $29,118 $27,408 $27,408 Mortgage loans on real estate $ 1,608 $ 1,557 $ 1,702 $ 1,660 Policy loans $ 1,252 $ 1,171 $ 1,127 $ 1,094 Investment in parent company $ 55 $ 55 $ 38 $ 38 Indebtedness from affiliates $ 161 $ 161 $ 97 $ 97 Liabilities: Insurance investment contracts $25,852 $25,675 $24,011 $24,497
* Includes derivative financial instruments with negative fair values of $1.0 million and $4.2 million and positive fair values of $24.3 million and $7.2 million at December 31, 1998 and 1997, respectively. F-38 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The following methods and assumptions were used to estimate the fair value of financial instruments: FIXED MATURITY AND EQUITY SECURITIES Fair values of fixed maturity and equity securities were based on quoted market prices, where available. For investments not actively traded, fair values were estimated using values obtained from independent pricing services or, in the case of some private placements, by discounting expected future cash flows using a current market rate applicable to yield, credit quality, and average life of investments. MORTGAGE LOANS ON REAL ESTATE Fair value of mortgage loans was estimated primarily using discounted cash flows, based on contractual maturities and risk-adjusted discount rates. POLICY LOANS Fair value of policy loans was estimated using discounted cash flows and actuarially determined assumptions, incorporating market rates. INVESTMENT IN PARENT COMPANY The fair value of the investment in Parent Company is based on quoted market prices of American General Corporation common stock. INSURANCE INVESTMENT CONTRACTS Fair value of insurance investment contracts was estimated using cash flows discounted at market interest rates. F-39 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) INDEBTEDNESS FROM AFFILIATES Indebtedness from affiliates is composed of accounts receivable and notes receivable from affiliates. Due to the short-term nature of accounts receivable, fair value is assumed to equal carrying value. Fair value of notes receivable was estimated using discounted cash flows based on contractual maturities and discount rates that were based on U.S. Treasury rates for similar maturity ranges. 11. DIVIDENDS PAID American General Life Insurance Company paid $244 million, $401 million, and $189 million in dividends on common stock to AGC Life Insurance Company in 1998, 1997, and 1996, respectively. The Company also paid $680 thousand per year in dividends on preferred stock to an affiliate, The Franklin Life Insurance Company, in 1998, 1997, and 1996. 12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES The Company and its insurance subsidiaries are restricted by state insurance laws as to the amounts they may pay as dividends without prior approval from their respective state insurance departments. At December 31, 1998, approximately $3.3 billion of consolidated shareholder's equity represents net assets of the Company which cannot be transferred, in the form of dividends, loans, or advances to the Parent Company. Approximately $2.5 billion of consolidated shareholders' equity is similarly restricted as to transfer from its subsidiaries to the Company. Generally, the net assets of the Company's subsidiaries available for transfer to the Parent are limited to the amounts that the subsidiaries' net assets, as determined in accordance with statutory accounting practices, exceed minimum statutory capital requirements. However, payments of such amounts as dividends may be subject to approval by regulatory authorities and are generally limited to the greater of 10% of policyholders' surplus or the previous year's statutory net gain from operations. The Company has various leases, substantially all of which are for office space and facilities. Rentals under financing leases, contingent rentals, and future minimum rental commitments and rental expense under operating leases are not material. F-40 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED) In recent years, various life insurance companies have been named as defendants in class action lawsuits relating to life insurance pricing and sales practices, and a number of these lawsuits have resulted in substantial settlements. On December 16, 1998, American General Corporation announced that certain of its life insurance subsidiaries had entered into agreements to resolve all pending market conduct class action lawsuits. The settlements are not final until approved by the courts and any appeals are resolved. If court approvals are obtained and appeals are not taken, it is expected the settlements will be final in third quarter 1999. In conjunction with the proposed settlements, the Company recorded a charge of $97.1 million ($63.1 million after-tax) in the fourth quarter of 1998. The charge covers the cost of policyholder benefits and other anticipated expenses resulting from the proposed settlements, as well as other administrative and legal costs. On December 31, 1998, the Company entered into an agreement with the Parent Company whereby the Company assigned, and the Parent Company assumed, $80.1 million of the liabilities of the Company related to the proposed resolution. The liabilities of American General Life Insurance Company of New York, which totaled $17.0 million, were not assumed by the Parent Company. As consideration for the assumption of the liabilities, the Company paid the Parent Company an amount equal to the liabilities recorded with respect to the proposed resolution of the litigation. The assignment of the liabilities was not a novation, and accordingly, the Company retains a contingent liability related to the litigation. The litigation liabilities were reduced by payments of $2.7 million, and the remaining balance of $94.4 million was included in other liabilities on the Company's balance sheet at December 31, 1998. The Company is party to various other lawsuits and proceedings arising in the ordinary course of business. Many of these lawsuits and proceedings arise in jurisdictions, such as Alabama and Mississippi, that permit damage awards disproportionate to the actual economic damages incurred. Based upon information presently available, the Company believes that the total amounts that will ultimately be paid, if any, arising from these lawsuits and proceedings will not have a material adverse effect on the Company's consolidated results of operations and financial position. However, it should be noted that the frequency of large damage awards, including large punitive damage awards, that bear little or no relation to actual economic damages incurred by plaintiffs in jurisdictions like Alabama and Mississippi continues to create the potential for an unpredictable judgment in any given suit. F-41 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED) The increase in the number of insurance companies that are under regulatory supervision has resulted, and is expected to continue to result, in increased assessments by state guaranty funds to cover losses to policyholders of insolvent or rehabilitated insurance companies. Those mandatory assessments may be partially recovered through a reduction in future premium taxes in certain states. At December 31, 1998 and 1997, the Company has accrued $6.0 million and $7.6 million, respectively, for guaranty fund assessments, net of $3.7 million and $4.3 million, respectively, of premium tax deductions. The Company has recorded receivables of $6.2 million and $9.7 million at December 31, 1998 and 1997, respectively, for expected recoveries against the payment of future premium taxes. Expenses incurred for guaranty fund assessments were $3.6 million, $2.1 million, and $6.0 million in 1998, 1997, and 1996, respectively. F-42 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 13. REINSURANCE Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996 were as follows:
CEDED TO ASSUMED PERCENTAGE OF GROSS OTHER FROM OTHER AMOUNT AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET ---------------------------------------------------------------------------------------- (In Thousands) DECEMBER 31, 1998 Life insurance in force $46,057,031 $13,288,183 $629,791 $33,398,639 1.89% ==================================================================== Premiums: Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24% Accident and health insurance 1,134 87 - 1,047 0.00% -------------------------------------------------------------------- Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24% ==================================================================== DECEMBER 31, 1997 Life insurance in force $45,963,710 $10,926,255 $ 4,997 $35,042,452 0.01% ==================================================================== Premiums: Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12% Accident and health insurance 1,208 172 - 1,036 0.00% -------------------------------------------------------------------- Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12% ==================================================================== DECEMBER 31, 1996 Life insurance in force $44,535,841 $ 8,625,465 $ 5,081 $35,915,457 0.01% ==================================================================== Premiums: Life insurance and annuities $ 104,225 $ 34,451 $ 36 $ 69,810 0.05% Accident and health insurance 1,426 64 - 1,362 0.00% -------------------------------------------------------------------- Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 0.05% ====================================================================
Reinsurance recoverable on paid losses was approximately $7.7 million, $2.3 million, and $6.9 million at December 31, 1998, 1997, and 1996, respectively. Reinsurance recoverable on unpaid losses was approximately $2.5 million, $3.2 million, and $4.3 million at December 31, 1998, 1997, and 1996, respectively. F-43 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 14. YEAR 2000 CONTINGENCY (UNAUDITED) INTERNAL SYSTEMS The Company's ultimate parent, American General Corporation, ("AGC") has numerous technology systems that are managed on a decentralized basis. AGC's Year 2000 readiness efforts are therefore being undertaken by its key business units with centralized oversight. Each business unit, including the Company, has developed and is implementing a plan to minimize the risk of a significant negative impact on its operations. While the specifics of the plans vary, the plans include the following activities: (1) perform an inventory of the Company's information technology and non-information technology systems; (2) assess which items in the inventory may expose the Company to business interruptions due to Year 2000 issues; (3) reprogram or replace systems that are not Year 2000 ready; (4) test systems to prove that they will function into the next century as they do currently; and (5) return the systems to operations. As of December 31, 1998, substantially all of the Company's critical systems are Year 2000 ready and have been returned to operations. However, activities (3) through (5) for certain systems are ongoing, with vendor upgrades expected to be received during the first half of 1999. THIRD PARTY RELATIONSHIPS The Company has relationships with various third parties who must also be Year 2000 ready. These third parties provide, or receive resources and services to (or from) the Company and include organizations with which the Company exchanges information. Third parties include vendors of hardware, software, and information services; providers of infrastructure services such as voice and data communications and utilities for office facilities; investors, customers; distribution channels; and joint venture partners. Third parties differ from internal systems in that the Company exercises less, or no, control over Year 2000 readiness. The Company has developed a plan to assess and attempt to mitigate the risks associated with the potential failure of third parties to achieve Year 2000 readiness. The plan includes the following activities (1) identify and classify third party dependencies; (2) research, analyze, and document Year 2000 readiness for critical third parties; and (3) test critical hardware and software products and electronic interfaces. As of December 31, 1998, AGC has identified and assessed more approximately 700 critical third party dependencies, including those related to the Company. A more detailed evaluation will be completed during the first quarter 1999 as part of the Company's contingency planning efforts. Due to the various stages of third parties' Year 2000 readiness, the Company's testing activities will extend through 1999. F-44 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED) CONTINGENCY PLANS The Company has commenced contingency planning to reduce the risk of Year 2000- related business failures. The contingency plans, which address both internal systems and third party relationships, include the following activities: (1) evaluate the consequences of failure of business processes with significant exposure to Year 2000 risk; (2) determine the probability of a Year 2000 related failure for those processes that have a high consequence of failure; (3) develop an action plan to complete contingency plans for those processes that rank high in consequence and probability of failure; and (4) complete the applicable actions plans. The Company is currently developing action plans and expects to substantially complete all contingency planning activities by April 30, 1999. RISKS AND UNCERTAINTIES Based on its plans to make internal systems ready for Year 2000, to deal with third party relationships, and to develop contingency action, the Company believes that it will experience at most isolated and minor disruptions of business processes following the turn of the century. Such disruptions are not expected to have a material effect on the Company's future results of operations, liquidity, or financial condition. However, due to the magnitude and complexity of this project, risks and uncertainties exist and the Company is not able to predict a most reasonably likely worst case scenario. If conversion of the Company's internal systems is not completed on a timely basis (due to non- performance by significant third party vendors, lack of qualified personnel to perform the Year 2000 work, or other unforeseen circumstances in completing the Company's plans), or if critical third parties fail to achieve Year 2000 readiness on a timely basis, the Year 2000 issue could have a material adverse impact on the Company's operation following the turn of the century. COSTS Through December 31, 1998, the Company has incurred, and anticipates that it will continue to incur, costs for internal staff, third-party vendors, and other expenses to achieve Year 2000 readiness. The cost of activities related to Year 2000 readiness has not had a material adverse effect on the Company's results of operations or financial condition. In addition, the Company has elected to accelerate the planned replacement of certain systems as part of the Year 2000 plans. Costs of the replacement systems are being capitalized and amortized over their useful lives, in accordance with the Company's normal accounting policies. F-45 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 15. DIVISION OPERATIONS 15.1 NATURE OF OPERATIONS The Company manages its business operation through two divisions, which are based on products and services offered. RETIREMENT SERVICES The Retirement Services Division provides tax-deferred retirement annuities and employer-sponsored retirement plans to employees of educational, health care, public sector, and other not-for-profit organizations marketed nationwide through exclusive sales representatives. LIFE INSURANCE The Life Insurance division provides traditional, interest-sensitive, and variable life insurance and annuities to a broad spectrum of customers through multiple distribution channels focused on specific market segments. 15.2 DIVISION RESULTS Results of each division exclude goodwill amortization, net realized investment gains, and non-recurring items. Division earnings information was as follows:
REVENUES INCOME BEFORE TAXES EARNINGS ------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1998 1997 1996 1998 1997 1996 ------------------------------------------------------------------------------------------------------------ (In Millions) Retirement Services $1,987 $1,859 $1,745 $ 469 $398 $343 $315 $261 $226 Life Insurance 870 822 774 162 147 141 107 97 92 ------------------------------------------------------------------------------------------------------------ Total divisions 2,857 2,681 2,519 631 545 484 422 358 318 Goodwill amortization - - - (2) (2) (2) (2) (2) (2) RG (L) (34) 30 29 (34) 30 29 (22) 19 19 Nonrecurring items - - - (125)(a) - - (81)(a) - - ------------------------------------------------------------------------------------------------------------ Total consolidated $2,823 $2,711 $2,548 $ 470 $573 $511 $317 $375 $335 ============================================================================================================
(a) Includes $97 million pretax ($63 million after-tax) in litigation settlements and $28 million pretax ($18 million after-tax) in Year 2000 costs. F-46 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 15. DIVISION OPERATIONS (CONTINUED) 15.2 DIVISION RESULTS (CONTINUED) Division balance sheet information was as follows:
ASSETS LIABILITIES ------------------------------------------------------------------- DECEMBER 31 ------------------------------------------------------------------- IN MILLIONS 1998 1997 1998 1997 ------------------------------------------------------------------- Retirement Services $41,347 $35,195 $38,841 $33,136 Life Insurance 8,894 8,370 7,831 7,367 ------------------------------------------------------------------- Total consolidated $50,241 $43,565 $46,672 $40,503 ===================================================================
F-47 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 5 AGLC 41 AGL 1 amount at risk 7 automatic rebalancing 5 basis 24 beneficiary 29 cash surrender value 12 close of business 31 Code 23 cost of insurance rates 7 daily charge 7 date of issue 31 death benefit 5 dollar cost averaging 4 full surrender 12 Fund 2 investment option 1 lapse 10 The One VUL Solution 1 loan, loan interest 12 maturity, maturity date 13 modified endowment contract 24 monthly deduction day 31 monthly insurance charge 7 Mutual Fund 2 option 1, 2 5 partial surrender 12 payment option 13 planned periodic premium 10 Policy 1 Policy loan 12 Policy month, year 31 preferred loan interest 13 premium payments 4 premiums 4 prospectus 1
44
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS - ---------------------------------------------- ----------- reinstate, reinstatement 10 SEC 2 separate account 1 Separate Account VL-R 23 seven-pay test 24 specified amount 5 surrender 12 telephone transactions 16 transfers 10 valuation date, period 30
We have filed a registration statement relating to Separate Account VL-R and the Policy 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 Website at http://www.sec.gov or main office in Washington, D.C. You will have to pay a fee for the material. You should rely only on the information contained in this prospectus or sales materials we have approved. We have not authorized anyone to provide you with information that is different. The policies are not available in all states. This prospectus is not an offer in any state to any person if the offer would be unlawful. 45 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 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 American General Life Insurance Company. II-1 CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following papers and documents: The facing sheet. Cross-Reference Table. Prospectus, consisting of 45 pages of text, plus 50 financial pages of American General Life Insurance Company. 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, Deputy General Counsel of American General Life Companies (b) American General Life Insurance Company's actuary (c) Independent Auditors 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 American General Life Insurance Company authorizing the establishment of Separate Account VL-R. (1) (1)(b) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of variable life insurance standards of suitability and conduct. (1) (2) Not applicable. (3)(a) Amended and Restated Distribution Agreement between American General Securities Incorporated and American General Life Insurance Company effective October 15, 1998. (4) (3)(b) Form of Selling Group Agreement. (Filed herewith) (3)(c) Schedule of Commissions (incorporated by reference from the text included under the heading "Distribution of the Policies" in the prospectus that is filed as part of this amended Registration Statement). (4) Not applicable. (5) Specimen form of the "One VUL Solution" Variable Universal Life Insurance Policy (Policy Form No. 99615). (11) II-2 (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. (5) (7) Not applicable. (8)(a)(i) Form of Participation Agreement by and Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (6) (8)(a)(ii) Form of Amendment Three to Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated dated as of February 1, 2000. (Filed herewith) (8)(b)(i) Form of Participation Agreement by and between The Variable Annuity Life Insurance Company and American General Life Insurance Company. (10) (8)(b)(ii) Amendment One to Participation Agreement by and between The Variable Annuity Life Insurance Company and American General Life Insurance Company dated as of July 21, 1998. (8) (8)(c)(i) Form of Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (6) (8)(c)(ii) Form of Amendment Three to Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company dated as of February 1, 2000. (Filed herewith) (8)(d)(i) Form of Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (6) (8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (Filed herewith) (8)(e)(i) Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen II-3 American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (9) (8)(e)(ii) Amendment One to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (8) (8)(e)(iii) Form of Amendment Five to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen Life Investment Trust, Van Kampen Asset Management Inc. and Van Kampen Funds Inc. (Filed herewith) (8)(f) Form of Participation Agreement by and among American General Life Insurance Company, Kemper Variable Series, Scudder Kemper Investments, Inc. and Kemper Distributors, Inc. (Filed herewith) (8)(g) Form of Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds, and OppenheimerFunds, Inc. (Filed herewith) (8)(h) Form of Fund Participation Agreement by and among American General Life Insurance Company, Banc One Investment Advisors Corporation, One Group Investment Trust, and One Group Administrative Services, Inc. dated February 1, 2000. (Filed herewith) (8)(i)(i) Participation Agreement by and among American General Life Insurance Company, Templeton Variable Products Series Fund, and Franklin Templeton Distributors, Inc. (8) (8)(i)(ii) Form of Amendment to Participation Agreement by and among American General Life Insurance Company, Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, and Franklin Templeton Distributors, Inc. dated February 1, 2000. (Filed herewith) (8)(j) Form of Administrative Services Agreement between American General Life Insurance Company and fund distributor. (5) (8)(k) Form of Administrative Services Agreement between American General Life Insurance Company and Van Kampen Asset Management Inc. dated January 1, 2000. (Filed herewith) (8)(l) Form of services agreement dated July 31, 1975, (limited to introduction and first two recitals, and sections 1-3) among various affiliates of American General Corporation, including American General Life Insurance Company and American General Life Companies. (7) II-4 (8)(m) Administrative Services Agreement dated as of June 1, 1998, between American General Life Insurance Company and AIM Advisors, Inc. (4) (8)(n) Form of Administrative Services Agreement by and between American General Life Insurance Company and OppenheimerFunds, Inc. (Filed herewith). (8)(o) Form of Administrative Services Agreement between American General Life Insurance Company and Scudder Kemper Investments. (Filed herewith) (8)(p) Administrative Services Agreement by and between American General Life Insurance Company and Franklin Templeton Services, Inc. dated as of March 9, 1999. (8) (9) Not applicable. (10)(a) Single Insured Life Insurance Application - Part A. (12) (10)(b) Single Insured Life Insurance Application - Part B. (12) (10)(c) Medical Exam Form Life Insurance Application. (12) (10)(d) Single Insured Simplified Life Insurance Application. (Filed herewith) (10)(e) Variable Universal Life Insurance Supplemental Application. (Filed herewith) (10)(f) Service Request Form. (Filed herewith) Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel of American General Life Companies. (Filed herewith) 2(b) Opinion and Consent of American General Life Insurance Company's actuary. (Filed herewith) 3 Not applicable. 4 Not applicable. 5 Financial Data Schedule. (Not applicable) 6 Consent of Independent Auditors. (Filed herewith) 7 Powers of Attorney. (11) II-5 27 Financial Data Schedule. (Inapplicable, because no financial statements of the Separate Account are being ) /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 American General Life Insurance Company 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 American General Life Insurance Company on April 30, 1992. /4/ Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D on January 15, 1999. /5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of the Form S-6 Registration Statement (File No. 333-53909) of American General Life Insurance Company Separate Account VL-R on August 19, 1998. /6/ 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. /7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23 to the Form N-4 Registration Statement of American General Life Insurance Company's Separate Account A (File No. 33-44745) on April 24, 1998. /8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D on March 18, 1999. /9/Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997. /10/Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 333-40637) of Separate Account D of American General Life Insurance Company filed on February 12, 1998. /11/Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-87307) of American General Life Insurance Company Separate Account VL-R on September 17, 1999. /12/Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-89897) of American General Life Insurance Company Separate Account VL-R on October 29, 1999. II-6 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 19/th/ day of January, 2000. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Registrant) BY: AMERICAN GENERAL LIFE INSURANCE COMPANY (On behalf of the Registrant and itself) BY: /s/ ROBERT F. HERBERT, JR. ------------------------------------ Robert F. Herbert, Jr. Senior Vice President [SEAL] ATTEST: /s/ JULIE A. COTTON -------------------------------- Julie A. Cotton 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 - --------- ----- ---- /s/ RONALD H. RIDLEHUBER* Principal Executive Officer January 19, 2000 - ---------------------------- and Director (Ronald H. Ridlehuber) /s/ ROBERT F. HERBERT, JR.* Principal Financial and January 19, 2000 - ------------------------------- Accounting Officer (Robert F. Herbert, Jr.) and Director II-7 Signature Title Date - --------- ----- ---- /s/ DONALD W. BRITTON* Director January 19, 2000 - ------------------------------ (Donald W. Britton) /s/ DAVID A. FRAVEL* Director January 19, 2000 - ------------------------------ (David A. Fravel) /s/ ROYCE G. IMHOFF, II* Director January 19, 2000 - ------------------------------ (Royce G. Imhoff, II) /s/ JOHN V. LAGRASSE* Director January 19, 2000 - ------------------------------ (John V. LaGrasse) /s/ RODNEY O. MARTIN, JR.* Director January 19, 2000 - ------------------------------- (Rodney O. Martin, Jr.) /s/ GARY D. REDDICK* Director January 19, 2000 - ------------------------------- (Gary D. Reddick) /s/ THOMAS M. ZUREK* Director January 19, 2000 - ------------------------------- (Thomas M. Zurek) */s/ ROBERT F. HERBERT, JR. - ------------------------------- By: Robert F. Herbert, Jr. Attorney-in-Fact II-8 EXHIBIT INDEX: The following exhibits: 1. Exhibits required by Article IX, paragraph A of Form N-8B-2: (1)(a) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of Separate Account VL-R. (1) (1)(b) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of variable life insurance standards of suitability and conduct. (1) (2) Not applicable. (3)(a) Amended and Restated Distribution Agreement between American General Securities Incorporated and American General Life Insurance Company effective October 15, 1998. (4) (3)(b) Form of Selling Group Agreement. (Filed herewith) (3)(c) Schedule of Commissions (incorporated by reference from the text included under the heading "Distribution of the Policies" in the prospectus that is filed as part of this amended Registration Statement). (4) Not applicable. (5) Specimen form of the "One VUL Solution" Variable Universal Life Insurance Policy (Policy Form No. 99615). (11) (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. (5) (7) Not applicable. (8)(a)(i) Form of Participation Agreement by and Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., American General Life Insurance E-1 Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (6) (8)(a)(ii) Form of Amendment Three to Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated dated as of February 1, 2000. (Filed herewith) (8)(b)(i) Form of Participation Agreement by and between The Variable Annuity Life Insurance Company and American General Life Insurance Company. (10) (8)(b)(ii) Amendment One to Participation Agreement by and between The Variable Annuity Life Insurance Company and American General Life Insurance Company dated as of July 21, 1998. (8) (8)(c)(i) Form of Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (6) (8)(c)(ii) Form of Amendment Three to Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company dated as of February 1, 2000. (Filed herewith) (8)(d)(i) Form of Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (6) (8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (Filed herewith) (8)(e)(i) Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (9) (8)(e)(ii) Amendment One to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (8) E-2 (8)(e)(iii) Form of Amendment Five to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen Life Investment Trust, Van Kampen Asset Management Inc. and Van Kampen Funds Inc. (Filed herewith) (8)(f) Form of Participation Agreement by and among American General Life Insurance Company, Kemper Variable Series, Scudder Kemper Investments, Inc. and Kemper Distributors, Inc. (Filed herewith) (8)(g) Form of Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds, and OppenheimerFunds, Inc. (Filed herewith) (8)(h) Form of Fund Participation Agreement by and among American General Life Insurance Company, Banc One Investment Advisors Corporation, One Group Investment Trust, and One Group Administrative Services, Inc. dated February 1, 2000. (Filed herewith) (8)(i)(i) Participation Agreement by and among American General Life Insurance Company, Templeton Variable Products Series Fund, and Franklin Templeton Distributors, Inc. (8) (8)(i)(ii) Form of Amendment to Participation Agreement by and among American General Life Insurance Company, Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, and Franklin Templeton Distributors, Inc. dated February 1, 2000. (Filed herewith) (8)(j) Form of Administrative Services Agreement between American General Life Insurance Company and fund distributor. (5) (8)(k) Form of Administrative Services Agreement between American General Life Insurance Company and Van Kampen Asset Management Inc. dated January 1, 2000. (Filed herewith) (8)(l) Form of services agreement dated July 31, 1975, (limited to introduction and first two recitals, and sections 1-3) among various affiliates of American General Corporation, including American General Life Insurance Company and American General Life Companies. (7) (8)(m) Administrative Services Agreement dated as of June 1, 1998, between American General Life Insurance Company and AIM Advisors, Inc. (4) E-3 (8)(n) Form of Administrative Services Agreement by and between American General Life Insurance Company and OppenheimerFunds, Inc. (Filed herewith). (8)(o) Form of Administrative Services Agreement between American General Life Insurance Company and Scudder Kemper Investments. (Filed herewith) (8)(p) Administrative Services Agreement by and between American General Life Insurance Company and Franklin Templeton Services, Inc. dated as of March 9, 1999. (8) (9) Not applicable. (10)(a) Single Insured Life Insurance Application - Part A. (12) (10)(b) Single Insured Life Insurance Application - Part B. (12) (10)(c) Medical Exam Form Life Insurance Application. (12) (10)(d) Single Insured Simplified Life Insurance Application. (Filed herewith) (10)(e) Variable Universal Life Insurance Supplemental Application. (Filed herewith) (10)(f) Service Request Form. (Filed herewith) Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel of American General Life Companies. (Filed herewith) 2(b) Opinion and Consent of American General Life Insurance Company's actuary. (Filed herewith) 3 Not applicable. 4 Not applicable. 5 Financial Data Schedule. (Not applicable) 6 Consent of Independent Auditors. (Filed herewith) 7 Powers of Attorney. (11) E-4 27 Financial Data Schedule. (Inapplicable, because no financial statements of the Separate Account are being ) /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 American General Life Insurance Company 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 American General Life Insurance Company on April 30, 1992. /4/ Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D on January 15, 1999. /5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of the Form S-6 Registration Statement (File No. 333-53909) of American General Life Insurance Company Separate Account VL-R on August 19, 1998. /6/ 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. /7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23 to the Form N-4 Registration Statement of American General Life Insurance Company's Separate Account A (File No. 33-44745) on April 24, 1998. /8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D on March 18, 1999. /9/ Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997. /10/Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4 Registration Statement (File No. 333-40637) of Separate Account D of American General Life Insurance Company filed on February 12, 1998. E-5 /11/Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-87307) of American General Life Insurance Company Separate Account VL-R on September 17, 1999. /12/Incorporated herein by reference to the initial filing of the Form S-6 Registration Statement (File No. 333-89897) of American General Life Insurance Company Separate Account VL-R on October 29, 1999. E-6 EX-3.(B) 2 SELLING GROUP AGREEMENT EXHIBIT 3(B) VARIABLE UNIVERSAL LIFE SELLING AGREEMENT This Agreement is made and entered into this __ day of ________, 1999, by and among American General Life Insurance Company, a Texas domiciled insurance company ("Company"); American General Securities Incorporated, a Texas corporation ("AGSI"); Banc One Securities Corporation ("Broker/Dealer"), of Greencrest, State of Ohio; and Banc One Insurance Services Corporation ("Insurance Agent"), of Milwaukee, State of Wisconsin. RECITALS: A. AGSI is a registered broker/dealer and the distributor of the policies identified in Schedule A of this Agreement. Company is a life insurance company. B. Pursuant to a Distribution Agreement with AGSI ("Distribution Agreement"), Company has appointed AGSI as the principal underwriter of the class or classes of variable universal life insurance policies identified in Schedule A to this Agreement at the time that this Agreement is executed, and such other class or classes of variable universal life policies or variable life insurance policies that may be added to Schedule A from time to time in accordance with Section 2(g) of this Agreement (each, a "Class of Policies"). Such Class of Policies together with any additional policies shown on Schedule A shall be referred to herein as "Policies". Each Class of Policies will be issued by Company through one or more separate accounts ("Separate Accounts") and each Class of Policies will be funded by (i) shares of beneficial interest in certain investment companies (each series of shares of beneficial interest, a "Fund" and, together, the "Funds") and/or (ii) a fixed account option(s). Company has authorized AGSI to enter into separate written agreements with broker/dealers pursuant to which such broker/dealers would be authorized to participate in the distribution of the Policies and would agree to use their best efforts to solicit applications for the Policies. C. The parties to this Agreement desire that Broker/Dealer and Insurance Agent be authorized to solicit applications for the sale of the Policies to the general public subject to the terms and conditions set forth herein. 1 NOW, THEREFORE, in consideration of the premises and of the mutual promises and covenants hereinafter set forth, the parties agree as follows: 1. ADDITIONAL DEFINITIONS (a) Registration Statement - With respect to each Class of Policies, the most recent effective registration statement(s) filed with the SEC or the most recent effective post-effective amendment(s) thereto with respect to such Class of Policies, including financial statements included therein and all exhibits thereto. There may be more than one Registration Statement in effect at a time for a Class of Policies; in such case, any reference to "the Registration Statement" for a Class of Policies shall refer to any or all, depending on the context, of the Registration Statements for such Class of Policies. (b) Prospectus - With respect to each Class of Policies, the prospectus for such Class of Policies included within the Registration Statement for such Class of Policies; provided, however, that, if the most recently filed prospectus filed pursuant to Rule 497 under the 1933 Act subsequent to the date on which the Registration Statement became effective differs from the prospectus on file at the time the Registration Statement became effective, the term "Prospectus" shall refer to the most recently filed prospectus filed under Rule 497 from and after the date on which it shall have been filed. (c) 1933 Act - The Securities Act of 1933, as amended. (d) 1934 Act - The Securities and Exchange Act of 1934, as amended. (e) 1940 Act - The Investment Company Act of 1940, as amended. (f) Agent - An individual associated with Insurance Agent and Broker/Dealer who is appointed by Company as an agent for the purpose of soliciting applications. (g) Premium - A payment made under a Policy to purchase benefits under such Policy. (h) Service Center - American General Life Insurance Company Variable Universal Life Administration Center, P. O. Box 4880, Houston, Texas 77210-4880, or such other address as may be designated from time to time by Company and provided to Insurance Agent and Broker/Dealer. (i) Operations Manual - The manual prepared and other written rules and procedures provided by Company to Agents, as revised from time to time. (j) SEC - The Securities and Exchange Commission. (k) NASD - The National Association of Securities Dealers, Inc. (l) Affiliate - With respect to a person, any other person controlling, controlled by, under common control with or licensed to use the tradename/trademark of such person. 2 (m) Broker of Record - Generally, the person or entity designated in Company's records as the person or entity, with respect to a Policy, that is entitled to receive compensation payable with respect to such Policy and is able to contact directly the owner of such Policy. In the case of compensation payable with respect to a Premium, the Broker of Record shall be the party designated as such in Company's records, at the time such Premium is accepted by Company. In the case of any payment of compensation payable with respect to Policy value, the Broker of Record shall be the party designated as such in Company's records. 2. AUTHORIZATION OF BROKER/DEALER AND INSURANCE AGENT (a) AGSI hereby authorizes Broker/Dealer under the securities laws, and Company hereby authorizes and appoints Insurance Agent under the insurance laws, in a non-exclusive capacity, to distribute or facilitate distribution of the Policies. Broker/Dealer and Insurance Agent accept such authorization and appointment and shall use their best efforts to find purchasers for the Policies, in each case acceptable to Company. (b) AGSI and Company shall notify Broker/Dealer and Insurance Agent in writing of all states and jurisdictions in which Company is licensed to sell the Policies. (c) Broker/Dealer and Insurance Agent acknowledge that no territory is exclusively assigned hereunder, and Company reserves the right in its sole discretion to establish or appoint one or more agencies in any jurisdiction in which Insurance Agent transacts business hereunder. (d) Insurance Agent is vested under this Agreement with power and authority to select and recommend individuals associated with Insurance Agent for appointment as Agents of Company, and individuals so recommended by Insurance Agent may become Agents, provided that Company reserves the right in its good faith discretion to refuse to appoint any proposed agent or, once appointed, to terminate the same at any time. (e) Neither Broker/Dealer nor Insurance Agent shall expend or contract for the expenditure of the funds of AGSI or Company. Broker/Dealer and Insurance Agent each shall pay all expenses incurred by each of them in the performance of this Agreement, unless otherwise specifically provided for in this Agreement or unless AGSI and Company shall have agreed in advance in writing to share the cost of certain expenses. Initial and renewal state appointment fees for Agents of Company shall be paid by Company. Broker/Dealer will be obligated to pay all other fees, including, but not limited to, transfer fees and termination fees, and any other fees required to be paid to obtain state insurance licenses for Insurance Agent or appointees of Insurance Agent. Neither Broker/Dealer nor Insurance Agent shall possess or exercise any authority on behalf of AGSI or Company other than that expressly conferred on Broker/Dealer or Insurance Agent by this Agreement. In 3 particular, and without limiting the foregoing, neither Broker/Dealer nor Insurance Agent shall have any authority, nor shall either grant such authority to any Agent, on behalf of AGSI or Company: to make, alter or discharge any Policy or other contract entered into pursuant to a Policy; to waive any Policy forfeiture provision; to extend the time of paying any Premiums; or to receive any monies or Premiums due to Company from applicants for or purchasers of the Policies (except for the sole purpose of forwarding monies or premiums to Company). (f) Broker/Dealer and Insurance Agent acknowledge that Company has the right in its good faith discretion to reject any applications or Premiums received by it and to return or refund to an applicant such applicant's Premium. (g) Except as otherwise provided in Section 6 herein, Schedule A to this Agreement may not be amended by AGSI and Company without the prior written consent of Insurance Agent. (h) AGSI and Company acknowledge that Broker/Dealer and Insurance Agent are each an independent contractor. Accordingly, Broker/Dealer and Insurance Agent are not obliged or expected to give full time and energies to the performance of their obligations hereunder, nor are Broker/Dealer and Insurance Agent obliged or expected to represent AGSI or Company exclusively. Nothing herein contained shall constitute Broker/Dealer, Insurance Agent, Agents or any agents or representatives of Broker/Dealer or Insurance Agent as employees of Company or AGSI in connection with solicitation of applications for the Policies. 3. LICENSING AND REGISTRATION OF BROKER/DEALER, INSURANCE AGENT AND AGENTS (a) Broker/Dealer represents that it is a broker/dealer registered with the SEC under the 1934 Act, and is a member in good standing of the NASD. Broker/Dealer must, at all times when performing its functions and fulfilling its obligations under this Agreement, be duly registered as a broker/dealer under the 1934 Act and as required by applicable law, in each state or other jurisdiction in which Broker/Dealer intends to perform its functions and fulfill its obligations hereunder, and be a member in good standing of the NASD. (b) Insurance Agent represents that it is a licensed life insurance agent as required to solicit applications, except that if Insurance Agent cannot be qualified to be a licensed life insurance agent until appointed by an insurer, the Insurance Agent represents that it is qualified to be a licensed insurance agent but for the appointment by an insurer. Insurance Agent must, at all times when performing its functions and fulfilling its obligations under this Agreement, be duly licensed and appointed by Company to sell the Policies in each state or other jurisdiction in which Insurance Agent intends to perform its functions and fulfill its obligations hereunder. 4 (c) Broker/Dealer shall ensure that no individual shall offer or sell the Policies on behalf of Broker/Dealer in any state or other jurisdiction in which the Policies may lawfully be sold unless such individual is an associated person of Broker/Dealer (as that term is defined in Section 3(a)(18) of the 1934 Act) and duly registered with the NASD and any applicable state securities regulatory authority as a registered person of Broker/Dealer qualified to distribute the Policies in such state or jurisdiction. (d) Insurance Agent shall ensure that no individual shall offer or sell the Policies in any state or other jurisdiction unless such individual is duly licensed and appointed as an Agent of Company, and appropriately licensed, registered or otherwise qualified to offer and sell the Policies to be offered and sold by such individual under the insurance laws of such state or jurisdiction. All matters concerning the licensing of any individuals recommended for appointment by Insurance Agent under any applicable state insurance law shall be a matter directly between Insurance Agent and such individual, and the Insurance Agent shall furnish Company, upon Company's request, with proof of proper licensing of such individual or other proof, reasonably acceptable to Company, of satisfaction by such individual of licensing or appointment requirements including: (i) certificate by the Insurance Agent of the character and fitness of such individual; (ii) a copy of the most recent third party credit check or character report obtained pursuant to the licensing requirements of applicable state insurance law prior to Company's appointing any such individual as an Agent of Company; and (iii) a copy of such individual's state insurance license. Insurance Agent agrees to maintain documentation regarding the background investigation of individuals conducted prior to appointment during the period the individual is appointed by Company and shall provide such information to Company as may be required by valid request of any regulatory authority. 4. BROKER/DEALER, INSURANCE AGENT, COMPANY AND AGSI'S RIGHTS AND RESPONSIBILITIES (a) Broker/Dealer and Insurance Agent hereby represent and warrant that they are duly in compliance with all applicable federal and state securities laws and regulations, and all applicable insurance laws and regulations. Broker/Dealer and Insurance Agent each shall carry out their respective obligations under this Agreement in continued compliance with such regulations. Broker/Dealer shall be responsible for securities training, supervision and control of Agents in connection with their solicitation activities with respect to the policies and shall supervise Agents' compliance with applicable federal and state 5 securities law and NASD requirements in connection with such solicitation activities. Broker/Dealer and Insurance Agent shall use reasonable best efforts to comply and ensure that Agents comply with the rules and procedures set forth in the Operations Manual, and the rules set forth below, and Broker/Dealer and Insurance Agent shall be responsible for such compliance. Insurance Agent shall train, supervise and be responsible for the conduct of Agents in their solicitation activities in connection with the Policies, and shall supervise Agents' strict compliance with the applicable rules and regulations of any governmental or other insurance agencies that have jurisdiction over variable policies activities, as well as the rules and procedures of Company pertaining to the solicitation, sale and submission of applications for the Policies, which are set forth in Company's Operations Manual, as they may be amended from time to time in Company's good faith discretion. However, changes to Company's Operations Manual will not be effective as they relate to Insurance Agent, Broker/Dealer and Agents, unless Company provides thirty (30) days' written notice to Insurance Agent. In the event of a contradiction between the provisions of this Agreement and Company's Operations Manual, the provisions of this Agreement shall prevail. Broker/Dealer shall be solely responsible for background investigations of Agents to determine their qualifications, good character, and moral fitness to sell the Policies. (b) Broker/Dealer and Insurance Agent shall comply with the Principles and Code of Ethical Market Conduct (the "Principles and Code") adopted by Company and set forth in Schedule B, which is made a part hereof. Insurance Agent agrees to make available training regarding the Principles and Code to Agents and to assure compliance with the Principles and Code by Agents. Company will provide materials that may be used in such training. Schedule B may be amended or modified by Company at any time, in any manner, and without prior notice. (c) Broker/Dealer, Insurance Agent and Agents shall not offer or attempt to offer the Policies, nor solicit applications for the Policies, nor deliver Policies, in any state or jurisdiction in which the Policies may not lawfully be sold or offered for sale. For purposes of determining where the Policies may be offered and applications solicited, Insurance Agent may rely on written notification, as revised from time to time, that Insurance Agent receives from Company. However, changes to the Principles and Code will not be effective as to Insurance Agent, Broker/Dealer and Agents without thirty days' written notice to Insurance Agent. In the event of a contradiction between the provisions of this Agreement and the Principles and Code, the provisions of this Agreement shall prevail. (d) Broker/Dealer, Insurance Agent and Agents shall not solicit applications for the Policies without delivering the then-currently effective Prospectus for the Policies, the then-currently 6 effective prospectus(es) for the underlying fund(s) and, where required by state insurance law, the then-currently effective statement of additional information for the Policies. (e) Broker/Dealer, Insurance Agent and Agents shall not recommend the purchase of a Policy to an applicant unless each has reasonable grounds to believe that such purchase is suitable for the applicant in accordance with, among other things, applicable regulations of any state insurance commission, the SEC and the NASD. (f) Insurance Agent shall return promptly or facilitate the return to Company all receipts for delivered Policies, all undelivered Policies and all receipts for cancellation. Upon issuance of a Policy by Company and delivery of such Policy to Insurance Agent or its designee, Insurance Agent shall promptly deliver or facilitate delivery of such Policy to its purchaser. For purposes of this provision "promptly" shall be deemed to mean not later than five (5) calendar days. Company will assume that a Policy issued by Company will be delivered by Insurance Agent or its designee to the purchaser of such Policy within five (5) calendar days for purposes of determining when to transfer Premiums initially allocated to the Money Market Account available under such Policy to the particular investment options specified by such purchaser. As a result, if a purchaser exercises the free look provisions under a Policy, Broker/Dealer shall indemnify Company for any loss incurred by Company that results from Insurance Agent's failure to deliver or facilitate delivery of such Policy to its purchaser within the contemplated five (5) calendar day period. (g) Neither Broker/Dealer nor Insurance Agent, nor any of their directors, partners, officers, employees, registered persons, associated persons, agents or affiliated persons, in connection with the offer or sale of the Policies, shall give any information or make any representations or statements, written or oral, concerning the Policies, a Fund or Fund Shares, other than information or representations contained in the Prospectuses, statements of additional information and Registration Statements for the Policies, or a Fund, or in reports or proxy statements therefore, or in promotional, sales or advertising material or other information supplied and approved in writing by AGSI and Company. (h) Broker/Dealer and Insurance Agent shall not use or implement any promotional, sales or advertising material relating to the Policies without the prior written approval of AGSI and Company. (i) Broker/Dealer and Insurance Agent shall be solely responsible under applicable tax laws for the reporting of compensation paid to Agents. (j) Insurance Agent represents that it maintains and shall maintain such books and records concerning the activities of Agents as may be required by the appropriate insurance regulatory agencies that have jurisdiction and that may be reasonably required by Company 7 to adequately reflect the Policies processed through Insurance Agent. Insurance Agent shall make such books and records available to Company. (k) Broker/Dealer represents that it maintains and shall maintain appropriate books and records concerning the activities of Agents as are required by the SEC, the NASD and other agencies having jurisdiction and that may be reasonably required by AGSI to reflect adequately the Policies processed through Insurance Agent. Broker/Dealer shall make such books and records available to AGSI and/or Company at any reasonable time upon written request by AGSI and/or Company. (l) Company and AGSI's Books and Records and Broker/Dealer and Insurance Agent's Right to Accounting. (i) During the term of this Agreement, Company and AGSI shall keep accurate books of account and records covering all transactions relating to this Agreement at Company's and AGSI's principal place of business for not less than two (2) years after the expiration, or earlier termination, of this Agreement and to allow Insurance Agent, Broker/Dealer and their representatives to audit those books of account and records and to make copies of them at Insurance Agent's or Broker/Dealer's expense, provided Insurance Agent or Broker/Dealer has a good faith reason to believe that the recordkeeping is inaccurate, and provided Company or AGSI receives ten (10) days' prior written notice. If the audit reveals payments and commission fees or other payments due to Insurance Agent or Broker/Dealer in excess of 10 percent more than the payments paid to Insurance Agent or Broker/Dealer for the period covered by the audit, all audit fees, costs and expenses shall be borne by Company or AGSI, in addition to interest on the amount discovered to be due, from the first dollar more than the payments actually paid. Interest charged shall be in the amount of two percentage points above the prime rate as established by Bank One Wisconsin. (ii) If Insurance Agent's or Broker/Dealer's and Company's or AGSI's auditors shall disagree on whether the amount owed exceeds 10 percent, Insurance Agent's or Broker/Dealer's auditor(s) and Company's or AGSI's auditor(s) shall jointly select a third auditor whose determination of the amount owed shall be final and binding upon the parties. (iii) Insurance Agent's or Broker/Dealer's receipt and deposit of monies shall not prevent or limit Insurance Agent's or Broker/Dealer's right to contest the accuracy of correctness of any statement for those monies. (m) Both parties shall promptly furnish to each other or its authorized agent any reports and information that it may reasonably request for the purpose of meeting its reporting and 8 record keeping requirements under the insurance laws of any state, under any applicable federal and state securities laws, rules and regulations, and the rules of the NASD. (n) Broker/Dealer shall secure and maintain a fidelity bond (including coverage for larceny, embezzlement and other defalcation), issued by a reputable bonding company, covering all of its directors, officers, agents and employees who have access to funds of Company. This bond shall be maintained at Broker/Dealer's expense in at least the amount prescribed under Rule 3020 of the NASD Conduct Rules. Upon request, Broker/Dealer shall provide AGSI with a copy of said bond. Broker/Dealer shall also self-insure or secure and maintain errors and omissions insurance and shall provide evidence of same acceptable to AGSI in its good faith discretion and covering Broker/Dealer, Insurance Agent, and Agents. Broker/Dealer hereby assigns any proceeds received from any fidelity bonding company, errors and omissions or other liability coverage, to AGSI or Company as their interests may appear, to the extent of their loss due to activities covered by the bond, policy or other liability coverage. If there is any deficiency amount, whether due to a deductible or otherwise, Broker/Dealer shall promptly pay such amount on demand. Broker/Dealer hereby indemnifies and holds harmless AGSI and Company from any such deficiency and from the costs of collection thereof, including reasonable attorney's fees. 5. SALES MATERIALS (a) During the term of this Agreement, AGSI and Company will provide Broker/Dealer and Insurance Agent, without charge, with as many copies of Prospectuses (and any supplements thereto), current Fund prospectus(es) (and any supplements thereto) except for the One Group Investment Trust materials, as Broker/Dealer or Insurance Agent may reasonably request. Upon termination of this Agreement, Broker/Dealer and Insurance Agent will promptly return to AGSI any Prospectuses, Fund prospectuses, and other materials and supplies furnished by AGSI or Company to Broker/Dealer or Insurance Agent or to Agents. (b) During the term of this Agreement, Insurance Agent will be responsible for providing or having provided all promotional, sales and advertising material to be used by Broker/Dealer and Insurance Agent, subject to Company's prior written approval. Insurance Agent will file such materials or will cause such materials to be filed with the SEC, the NASD, and/or with any state securities regulatory authorities, as appropriate. (c) During the term of this Agreement, Broker/Dealer and Insurance Agent will comply with Company advertising procedures set forth in Schedule C to this Agreement for any 9 advertising material pertaining to Company's products. Schedule C may be amended or modified at any time by Company, in any manner, with prior notice. (d) Neither Company nor AGSI shall use any advertising material, prospectus, proposal, or representation either in general or in relation to a Policy of Company referring to Insurance Agent, Broker/Dealer or its Affiliates or the Policies written under this Agreement unless furnished by Insurance Agent or until the consent of Insurance Agent shall have been first secured. Neither Broker/Dealer nor Insurance Agent shall use any advertising material, prospectus, proposal, or representation either in general or in relation to a Policy of Company referring to Company, AGSI, or the Policies written under this Agreement unless furnished by Company or until Company's consent shall have been first secured. The consideration for and the giving of consent as described above shall relate to only one specific request and shall not be construed to have applied to any subsequent materials or programs. Company and/or A.G. Distributors shall be responsible for the cost of development, marketing fees, printing and advertising costs related to this Agreement, except as otherwise provided in Section 5 hereof (e) All requests for written consent shall contain direct reproductions of all material; i.e. art work, copy, script, photographs, videotape, magnetic recording tape, etc. to be used in the reproduction of the advertisement in the printed or electronic media. In addition, all requests shall include the schedule(s) for the commencement and duration of the advertising campaign for which the subject material will be used. 6. COMMISSION AGREEMENT (a) During the term of this Agreement, AGSI and Company shall pay to Insurance Agent as compensation for Policies for which Broker/Dealer is the Broker of Record, the commissions and fees set forth in Schedule A to this Agreement, as such Schedule A may be amended or modified at any time, with prior written consent of Insurance Agent, by AGSI or Company, and subject to the other provisions of this Agreement. The payment of such commissions and fees shall be subject to the terms and conditions of this Agreement and those set forth on Schedule A. Any amendment to Schedule A will be applicable to any Policy for which an initial application or premium is received by the Service Center on or after the effective date of such amendment. Compensation with respect to any Policy shall be paid to Insurance Agent only for so long as Insurance Agent appointed on the recommendation of and affiliated with Broker/Dealer is the Broker of Record for such Policy. 10 (b) All commissions or fees payable under this Agreement shall be vested and will continue to be paid on Policies in force even after termination of this Agreement, except as otherwise provided in this subsection. No compensation shall be payable, and Insurance Agent agrees to reimburse AGSI and Company for any compensation that may have been paid to Insurance Agent or any Agents in any of the following situations: (i) Company, in its good faith discretion, determines not to issue the Policy applied for; (ii) Company refunds the premiums upon the applicant's surrender or withdrawal pursuant to any "free-look" privilege; (iii) Company refunds the premiums paid by applicant as a result of a complaint by applicant; (iv) Company determines that any person soliciting an application who is required to be licensed or any other person or entity receiving compensation for soliciting applications or premiums for the Policies is not or was not duly licensed as an insurance agent; or (v) any other situation listed in Section 8, subsections (a) (i), (ii), (iv), (vi) and (vii) of this Agreement. 7. INTERESTS IN AGREEMENT. Agents shall have no interest in this Agreement or right to any commissions to be paid by AGSI, Company, Insurance Agent or Broker/Dealer. Insurance Agent and Broker/Dealer shall be jointly responsible for the payment of any commission or consideration of any kind to Agents. Insurance Agent and Broker/Dealer shall have no right to withhold or deduct any commission from any Premiums which it may collect unless and only to the extent that Schedule D to this Agreement permits Insurance Agent or Broker/Dealer to net commissions against Premiums collected. Unless otherwise provided in this Agreement, Schedule D may not be modified at any time by Company, in any manner, without the prior written consent of Insurance Agent. Insurance Agent or Broker/Dealer shall have no interest in any compensation paid by Company to AGSI or any affiliate, now or hereafter, in connection with the sale of any Policies hereunder. 8. TERMINATION OF AGREEMENT. This Agreement may be terminated by any party hereto without cause upon thirty (30) days' prior written notice to the other parties stating the date and time of termination. (a) Company may also terminate this Agreement for cause: (i) License Suspension or Revocation. In the event of any order of suspension or revocation of Insurance Agent's license by any insurance regulatory authority or of Broker/Dealer's ceasing to be a registered broker/dealer or a member of the NASD, termination shall be effective on the date of such suspension, revocation or cessation; or (ii) Misapplication of Funds. In the event of Broker/Dealer or Insurance Agent's misapplication, misdirection or misappropriation of funds or property received under 11 this Agreement or in the event of their failure to remit promptly funds due to Company, Policy-holders or applicants, after written demand thereof, termination shall be effective immediately upon written notice; or (iii) Default. In the event of breach of this Agreement or Broker/Dealer or Insurance Agent's failure to timely and fully comply with Company's directives, rules, regulations or manuals, including the Operations Manual; or (iv) Conviction. In the event of conviction of Broker/Dealer, or Insurance Agent or any of their principal officers of a felony or of violation of the securities or insurance laws or regulations of any jurisdiction or of any law the violation of which reflects adversely upon the honesty and integrity of Broker/Dealer, or Insurance Agent or any of their principal officers, whether or not classified as a felony, termination shall be effective immediately upon written notice; or (v) Bankruptcy. In the event Broker/Dealer or Insurance Agent submits to or becomes subjected to bankruptcy, receivership or common law composition of creditors, termination shall be effective immediately upon notice; or (vi) Prejudice. In the event Broker/Dealer or Insurance Agent has otherwise acted to prejudice materially the interests of Company or AGSI in breach of this Agreement, termination shall be effective immediately upon written notice; or (vii) Replacement. In the event Broker/Dealer or Insurance Agent endeavors to induce agents of Company or AGSI to leave its services or Policy-owners of Company to relinquish their Policies, termination shall be effective immediately upon notice. (b) Broker Dealer or Insurance Agent may terminate this Agreement for cause: (i) Failure of Company or AGSI to timely pay any fees or commissions due and payable to Insurance Agent under this Agreement; or (ii) Failure of Company or AGSI to comply with its obligations under this Agreement. (c) Cure Period. In the event of termination for Cause pursuant to Section 8, subsections (a) (iii) or (b) (i) or (ii), and upon request, the other party has the right to a sixty (60) day cure period for the Breach. If the party is able to cure the Breach to the good faith satisfaction of the other party within the cure period, this Agreement will continue in effect as though it were never terminated. (d) Right To Terminate Due to Law. Notwithstanding the above, Company and AGSI reserve the right to discontinue offering any Policy or product at any time with written notice to Insurance Agent if it is prevented by law, rule or regulation from offering the product or Policy in a particular state or in its current form. 12 (e) Right to Modify Underwriting/Pricing: Company and AGSI agree that they will not modify underwriting standards or pricing for the Policies without the prior written consent of Insurance Agent, unless such modification to the underwriting standards or pricing is: (i) due to a state and/or federal law, rule, regulation or ruling; (ii) due to an action taken by a third party, which neither the Company nor AGSI has control over; or (iii) due to the Company not meeting its profit targets as a result of actual business experience. Such written consent of Insurance Agent, shall be given in good faith, and not be unreasonably withheld. In the event that the Company and AGSI modifies the underwriting standards or pricing on the Policies due to (i), (ii) or (iii), as stated herein, then the Company or AGSI shall give sixty days written notice to the Insurance Agent. Upon termination of this Agreement, all authorizations, rights and obligations shall cease, except the agreements in Sections 4 (f), 4 (k), 4 (l) and 4(m), 6, 9, 10, 12, 15, 16, 17, Schedule E, Standard 2 (last two bullet points), and the payment of any accrued and unpaid compensation to Insurance Agent. In the event of termination of this Agreement for any violation as set forth in sections 8(a), (b), (d), (f) or (g) above, no compensation of any kind shall thereafter be payable to Broker/Dealer or Insurance Agent. 9. COMPLAINTS AND INVESTIGATIONS (a) Complaint Log. Company, AGSI , Insurance Agent and Broker/Dealer shall each develop and maintain their own log containing Policyholder complaints arising out of the policies contemplated by this Agreement, in a form and substance acceptable to each other (except that affiliated companies may develop a joint log rather than two separate logs). The log will record the date and substance of each oral and written Policyholder complaint and date and substance of resolution of each such complaint. Entries in Company and AGSI's log that pertain to complaints arising out of the policies contemplated by this Agreement shall be provided to Insurance Agent by Company upon reasonable request. (b) Notification of Complaints. Each party will notify the other party upon receipt of any Policyholder complaint or other complaint against that party or its agents or producers or third party vendors arising from performance, or lack thereof, of this Agreement. For purposes of this Agreement, a Policyholder complaint includes, but is not limited to, a verbal or written notification that: (1) alleges misrepresentation of information, improper sales practices or confusion over the Policy's status as a non-FDIC insured product; or (2) unfair 13 treatment by former or current employees or agents of Insurance Agent, Broker/Dealer, Company, AGSI or Affiliates of each. Each party will, upon receipt of any summons, complaint, or notice of suit, forward such notice to the other party by facsimile transmission or by express or overnight mail. Each party will upon receipt of any inquiry from an insurance department or other regulatory body with respect to activity under this Agreement, forward such inquiry to the other party by facsimile transmission or by express or overnight mail. (c) AGSI, Company, Broker/Dealer and Insurance Agent shall cooperate fully in any insurance regulatory investigation or proceeding or judicial proceeding arising in connection with the Policies marketed under this Agreement. In addition, AGSI, Company, Broker/Dealer and Insurance Agent shall cooperate fully in any securities regulatory investigation or proceeding or judicial proceeding with respect to AGSI, Broker/Dealer, their Affiliates and their agents, to the extent that such investigation or proceeding is in connection with the Policies marketed under this Agreement. Without limiting the foregoing: (i) Broker/Dealer and Insurance Agent will be notified promptly of any customer complaint or notice of any regulatory investigation or proceeding or judicial proceeding received by AGSI or Company with respect to Insurance Agent or any Agent or which may affect the issuance of any Policy marketed under this Agreement. (ii) Broker/Dealer and Insurance Agent will promptly notify AGSI and Company of any written customer complaint or notice of any regulatory investigation or proceeding or judicial proceeding received by Broker/Dealer, Insurance Agent or their Affiliates with respect to themselves, their Affiliates, or any Agent in connection with any Policy marketed under this Agreement or any activity in connection with any such Policy. (d) In the case of a customer complaint, AGSI, Company, Broker/Dealer and Insurance Agent will cooperate in investigating such complaint and any response by Broker/Dealer or Insurance Agent to such complaint will be sent to AGSI and Company for approval not less than (5) five business days prior to its being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone or facsimile. Upon receipt of all required information needed to reasonably evaluate the response, AGSI and Company agree to review and reply in a timely manner. 10. CONFIDENTIAL INFORMATION. 14 (a) Information Defined. Company, AGSI, Broker/Dealer and Insurance Agent each possess certain information, including, without limitation, pricing information, computer and operational systems, marketing strategies and intellectual property rights that attach to products and services, customer lists and customer account information prepared or furnished by each party ("Information"). However, Information shall not include any portion of Information: (i) which, at the time of disclosure, is known to the receiving party or is generally available to the public; (ii) which, after disclosure, through no act on the part of the receiving party becomes generally available to the public; or (iii) which is furnished to the receiving party on a non- confidential basis by any third party having a bona fide right to do so; or (iv) that is required to be furnished to any governmental agency, by law or regulation or by order of a court of law. (b) Exchange of Confidential Information. All Information provided by Company or AGSI to Insurance Agent or Broker/Dealer or by Broker/Dealer or Insurance Agent to Company or AGSI pursuant to this Agreement is the confidential Information of the party providing such Information. The party receiving such Information agrees to hold such Information in confidence for the term of this Agreement and for a period of two (2) years thereafter, upon the following conditions, which are understood to be acceptable by each party: (i) The receiving party will receive and hold in confidence Information disclosed and will not use it except for the purposes stated in this Agreement. Accordingly, without limiting the foregoing, each party agrees that it will not use this Information in connection with any other person, firm, or corporation. (ii) The receiving party will take such steps as may be reasonably necessary to prevent the disclosure of Information to any third party. (iii) Each party will confine Information to those employees or agents (including employees of affiliates) who are directly concerned with the evaluation or use of the same, and will make disclosures only after informing the employee or agent (including employees of affiliates) of the obligations under this Agreement. (iv) Neither party shall analyze, reverse engineer or otherwise use for independent development any Information submitted to it by the other party. Any written materials submitted to Insurance Agent or Broker/Dealer by Company or AGSI or by Company or AGSI to Insurance Agent or Broker/Dealer shall, at the written request of the other, be returned to the other party within ten days, by secure delivery 15 means. 11. MODIFICATION OF AGREEMENT. This Agreement supersedes all prior agreements, either oral or written, between the parties relating to the Policies and, except as otherwise provided herein, may not be modified in any way unless by written agreement signed by all of the parties hereto. 12. INDEMNIFICATION. (a) Broker/Dealer and Insurance Agent, jointly and severally, shall indemnify and hold harmless AGSI and Company and each person who controls or is associated with AGSI or Company within the meaning of such terms under the federal securities laws, and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon any actual or alleged: (i) violation(s) by Broker/Dealer, Insurance Agent, or an Agent of federal or state securities law or regulation(s), insurance law or regulation(s), or any rule or requirement of the NASD; (ii) unauthorized use of sales or advertising material, any oral or written misrepresentations, or any unlawful sales practices concerning the Policies, by Broker/Dealer, Insurance Agent or an Agent; (iii) claims by Agents or other agents or representatives of Insurance Agent or Broker/Dealer for commissions or other compensation or remuneration of any type; (iv) any failure on the part of Broker/Dealer, Insurance Agent, or an Agent to submit Premiums or applications to Company, or to submit the correct amount of a Premium, on a timely basis and in accordance with Schedule D of this Agreement and the Operations Manual; (v) any failure on the part of Broker/Dealer, Insurance Agent, or an Agent to deliver Policies to purchasers thereof on a timely basis and in accordance with Section 4 of this Agreement and the Operations Manual; or (vi) a breach by Broker/Dealer or Insurance Agent of any provision of this Agreement; 16 (vii) the gross negligence or intentional act or omissions of Insurance Agent or Broker/Dealer. This indemnification will be in addition to any liability which Broker/Dealer and Insurance Agent may otherwise have. (b) AGSI and Company, jointly and severally, shall indemnify and hold harmless Broker/Dealer and Insurance Agent and each person who controls or is associated with Broker/Dealer or Insurance Agent within the meaning of such terms under the federal securities laws, and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon: (i) violation(s) by AGSI or Company of federal or state securities law or regulation(s), insurance law or regulation(s), or any rule or requirement of the NASD; (ii) unauthorized use of sales or advertising material, any oral or written misrepresentations, or any unlawful sales practices concerning the Policies, by AGSI or Company; (iii) claims for unpaid commissions or other compensation or remuneration of any type due to Broker/Dealer or Insurance Agent; (iv) a breach by AGSI or Company of any provision of this Agreement; (v) the gross negligence or intentional acts or omissions of AGSI or Company. This indemnification will be in addition to any liability which AGSI and Company, jointly and severally, may otherwise have. (C) WARRANTY OF 21ST CENTURY COMPLIANCE. Company and AGSI warrant to use their best efforts to ensure all software and hardware utilized by Company or AGSI which affect the offering and servicing of the Policies under this Agreement will be 21st Century Compliant. 17 "21st Century Compliant" shall be defined as software and hardware systems and services that (i) correctly processed date fields and internal date field dependent logic to accurately process and utilize dates beyond December 31, 1999; and (ii) store and represent dates in a manner which enables Company and AGSI (or Insurance Agent or Broker/Dealer, if necessary) to easily identify or use the century portion of any date fields without any special processing; (iii) otherwise performs all 21st Century Compliant functions in regular processing as required in order to perform the regular processing and servicing of the Policies hereunder. Company and AGSI will indemnify Insurance Agent and Broker/Dealer for any loss, cost, or liability incurred by either or both arising from a failure to provide such 21st Century Compliant software and hardware systems as required in this Agreement. Notwithstanding the foregoing, Insurance Agent and Broker/Dealer shall not be entitled to any recovery herein to the extent that the damages are solely caused by Insurance Agent or Broker/Dealer's failure to be 21st Century Compliant. (d) TIME OF COMPLETION (i) The parties to this Agreement desire that the Broker/Dealer and Insurance Agent be authorized to solicit applications for the sale of the Class of Policies relating to the One VUL Solution product Policy to the general public at the earliest possible time, subject to the terms and conditions set forth herein; therefore, the parties hereto agree as follows: (A) The Insurance Agent and the Broker/Dealer have approved all of the terms and conditions of the One VUL Solution Product Policy in the form that such policy exists as of September 20, 1999 and understand that any changes to such terms and conditions requested by Insurance Agent, Broker/Dealer or as required by law would cause a delay in the approval of the Policy with the various state departments of insurance; (B) The Company will file the appropriate pre-effective registration statement regarding the One VUL Solution product with the Securities and Exchange Commission no later than September 20, 1999 and will use its best efforts to have such registration statement declared effective within 120 days of filing; (C) The Company will begin filing the One VUL Solution product Policy with the appropriate state departments of insurance no later than October 1, 1999 and will have completed all initial filings by October 20, 1999, and will use its best efforts 18 to obtain approvals of the Policy from the various state departments of insurance as soon as possible; (D) The One VUL Solution product will be issue ready at the earliest possible time and in accordance with this Agreement, but in no event later than February 15, 2000; provided,however, that the Company and AGSI obtain all necessary federal and state regulatory authority approvals before February 8, 2000; that Insurance Agent and Broker/Dealer use their best efforts in assisting the Company in the development and implementation of the One VUL Solution product; and that no other event beyond the reasonable control of the Company and which has a material effect on the ability of Company to carry out the terms of the Agreement occurs that would delay the One VUL Solution product from being issue ready on February 15, 2000. (ii) The parties hereto understand and agree that Insurance Agent will suffer damages in the event that the One VUL Solution product is not issue ready on February 15, 2000; therefore, in the event that the One VUL Solution product is not issue ready on February 15, 2000, the Company will pay Insurance Agent, as liquidated damages, an amount equal to $250,000 per Month ("Month" to be defined as each thirty day period) for such delay (the "Delay Payment"); provided however, that the Company shall not owe to Insurance Agent any Delay Payment if such delay is as a result of (x) changes to the terms and conditions of the form of the One VUL Solution product policy that exists as of September 20, 1999 if such changes were requested by Insurance Agent, Broker/Dealer or as required by law; (y) the Company's inability to obtain all necessary federal and state regulatory authority approvals before February 8, 2000; or (z) an event that is beyond the reasonable control of the Company and which has a material effect on the ability of Company to carry out the terms of the Agreement has occurred. (iii) The Delay Payment shall be pro-rated, if necessary, and the total amount due for any one Month, including any pro-rated amounts, shall be due and payable within five days after the end of each Month. This provision for liquidated damages is solely applicable to the failure by the Company to complete the work in a timely manner and is not applicable to a breach or default by the Company of any other provision of this Agreement. (iv) The parties agree to use reasonable good faith efforts to continue development of the One VUL Solution product as well as modifications thereof which would enable Insurance 19 Agent to offer simplified issue to a greater number of Customers, and as otherwise agreed to by the parties from time to time. (e) After receipt by a party entitled to indemnification ("indemnified party") under this Section 12 of notice of the commencement of any action, if a claim in respect thereof is to be made against any person obligated to provide indemnification under this Section 12 ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission so as to notify the indemnifying party will not relieve it from any liability under this Section 12, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceedings. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if such proceeding is settled with such consent or if final judgment is entered in such proceeding for the plaintiff, the indemnifying party shall indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. 13. Rights, Remedies, etc. are Cumulative. 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. Failure of either party to insist upon strict compliance with any of the conditions of this Agreement shall not be construed as a waiver of any of the conditions, but the same shall remain in full force and effect. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. 20 14. NOTICES. All notices hereunder are to be made in writing and shall be given: if to AGSI, to: American General Securities Incorporated Attention: Chief Compliance Officer 2727 Allen Parkway Houston, Texas 77019 if to Company, to: American General Life Insurance Company Attention: General Counsel 2929 Allen Parkway Houston, Texas 77019 if to Broker/Dealer, to: if to Insurance Agent, to: Banc One Securities Corp. Banc One Insurance Services Corp 733 Greencrest Drive 111 East Wisconsin Avenue Westerville, OH 43081 Milwaukee, WI 53202 Attention: _________________ Attention: Glen J. Milesko, President & CEO or such other address as such party may hereafter specify in writing. Each such notice to a party shall be either hand delivered or transmitted by registered or certified United States mail with return receipt requested, and shall be effective upon delivery. 15. INTERPRETATION, JURISDICTION, ETC. This Agreement and any proprietary variable universal life agreement constitute the whole agreement between the parties hereto with respect to the subject matter hereof, and supersede all prior oral or written understandings, agreements or negotiations between the parties with respect to the subject matter hereof. No prior writings by or between the parties hereto with respect to the subject matter hereof shall be used by either party in connection with the 21 interpretation of any provision of this Agreement. Time is of the essence with respect to any time periods or dates agreed upon in the Agreement. This Agreement shall be construed and its provisions interpreted under and in accordance with the internal laws of the State of Wisconsin without giving effect to principles of conflict of laws. 16. CUSTOMER CONFIDENTIALITY: (a) Company and AGSI agree that the names and addresses of all customers and prospective customers of the Insurance Agent, Broker/Dealer, and of Insurance Agent and Broker/Dealer's parent company and of any Affiliated company which may come to the attention of the Company or AGSI as the result of disclosure by Insurance Agent or Broker/Dealer are confidential and will remain confidential for a period of two years following termination of this Agreement, regardless of the cause of termination. Such customer information shall not be used during such time period, without the prior written consent of the Insurance Agent, by Company or AGSI for any purpose whatsoever except as may be necessary in connection with the administration and servicing of the Policies sold by or through the Insurance Agent or Broker/Dealer pursuant to this Agreement. (b) In no event shall the names and addresses of such customers and prospective customers be furnished by Company or AGSI to any other company or person including, but not limited to: (1) any of its managers, agents or brokers which are not associated with the Insurance Agent or Broker/Dealer, (2) any company affiliated with Company or AGSI or any manager, agent or broker of such company, or (3) any securities broker-dealer or any insurance agent affiliated with such broker-dealer, except as is necessary to effectuate the terms of this Agreement (the parties referred to in subsections (1)- (3) are hereinafter referred to as "Company Affiliates"). If such information is furnished by Company or AGSI to Company Affiliates pursuant to this section, the Company Affiliates must agree to treat this information as confidential and will not use this information except in accordance with this section. Company and AGSI and Company Affiliates agree that they shall not solicit any customers whose names it is agreed constitute confidential information pursuant to this Section, except where this business is solicited for Insurance Agent or Broker/Dealer, and is agreed to by Insurance Agent. (c) The intent of this paragraph is that Company, AGSI and Company Affiliates shall not utilize, or knowingly permit to be utilized, the information, gained through this Agreement, of Insurance Agent, Broker/Dealer or of its parent company or of any Affiliates or of the customers of any of the foregoing for the solicitation of sales of any product or service. 22 (d) Notwithstanding the above, Company and AGSI and Company Affiliates shall be free to comply with any proper regulatory demand for information which relates to this Agreement and Insurance Agent and Broker/Dealer and to provide on a customary and routine basis, communications which are sent, generally, by Company, AGSI or Company Affiliates to its Policyholders. (e) This section 16 shall survive termination of this Agreement. 17. SETOFFS; CHARGEBACKS. Broker/Dealer and Insurance Agent hereby authorize AGSI and Company to set off from all amounts otherwise payable to Broker/Dealer and Insurance Agent all liabilities of Broker/Dealer, Insurance Agent or Agents. Broker/Dealer and Insurance Agent shall be jointly and severally liable for the payment of all monies due to AGSI and/or Company which may arise out of this Agreement or any other agreement between Broker/Dealer, Insurance Agent and AGSI or Company including, but not limited to, any liability for any chargebacks or for any amounts advanced by or otherwise due AGSI or Company hereunder. AGSI and Company do not waive any of their rights to pursue collection of any indebtedness owed by Broker/Dealer or Insurance Agent or its Agents to AGSI or Company. In the event AGSI or Company initiates legal action to collect any indebtedness of Broker/Dealer, Insurance Agent or its Agents, Broker/Dealer and Insurance Agent shall reimburse AGSI and Company for reasonable attorney fees and expenses in connection therewith. [Neither AGSI nor the Company shall be required to pay any commissions as compensation for the Policies in advance of such compensation becoming due to Insurance Agent. 18. HEADINGS. The headings 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. 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument. 20. SEVERABILITY. This is a severable Agreement. In the event that any provision of this Agreement would require a party to take action prohibited by applicable federal or state law or prohibit a party from taking action required by applicable federal or state law, then it is the intention of the parties hereto that such provision shall be enforced to the extent permitted under the law, and, in any event, that all other provisions of this Agreement shall remain valid and duly enforceable as if the provision at issue had never been a part hereof. 23 21.MOST FAVORED CUSTOMER/EXCLUSIVITY. (a) For the period covered by this Agreement, Company and AGSI agree to treat Insurance Agent and Broker/Dealer as a most favored bank- related insurance agency and broker/dealer. Company and AGSI agree that they will not reassign staff to work on any other project to the detriment of Insurance Agent or Broker/Dealer without consulting with Insurance Agent or Broker/Dealer. (b) Company and AGSI represent that the prices, terms, benefits, warranties and payments, structures and features of the variable universal life products authorized herein under this Agreement are comparable to or better than terms of a similar nature offered by Company or AGSI to any current bank-related insurance agency or broker/dealer for a similar class of variable universal life products. If, during the term of this Agreement, Company or AGSI offer an arrangement not included in this Agreement for a similar class of variable universal life products authorized herein to any other bank- related insurance agent or broker/dealer which is similarly situated to Insurance Agent providing such bank-related agency or broker/dealer with more favorable terms, Company and AGSI agree the same or similar arrangement will be offered if Insurance Agent and/or Broker/Dealer meet or exceed the same criteria and this Agreement shall thereupon be deemed amended to provide the same or similar terms or arrangement to Insurance Agent and/or Broker/Dealer. (c) Company and AGSI agree that the product design, features, benefits and structure of the variable universal life product hereunder is confidential to and proprietary to Insurance Agent. Accordingly, Company and AGSI agree that they will not market and distribute the variable universal life product designed under the program pursuant to this Agreement either by themselves or through Company Affiliates, associations and business partners. Insurance Agent and Broker/Dealer, in turn, agree to use reasonable best efforts to promote the variable universal life products available under this Agreement to generate reasonable annual sales based on agreed upon production objectives. 22. The parties agree that the attached Schedule E shall be incorporated herein. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. 24 BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES "Broker/Dealer" CORPORATION "INSURANCE AGENT" By: By: ----------------------------- ------------------------------ Name: Name: Glen J. Milesko --------------------------- (Printed Name) Title: Title: President and CEO -------------------------- Date: Date: --------------------------- ---------------------------- AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES COMPANY INCORPORATED By: By: ----------------------------- ------------------------------ Name: Name: --------------------------- ---------------------------- (Printed Name) (Printed Name) Title: Title: -------------------------- --------------------------- 25 EXHIBITS FOR VARIABLE UNIVERSAL LIFE SELLING AGREEMENT Schedule A - Commissions Schedule Schedule B - Principles and Code Schedule C - Advertising Procedures Schedule D - Net Premiums Schedule E - Marketing and Customer Service Compliance Standards 26 SCHEDULE A TO THE VARIABLE UNIVERSAL LIFE SELLING AGREEMENT DATED ____________________AMONG BANC ONE SECURITIES CORPORATION ("BROKER/DEALER"), BANC ONE INSURANCE SERVICES CORPORATION ("INSURANCE AGENT"), AMERICAN GENERAL LIFE INSURANCE COMPANY ("COMPANY") AND AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI") The Selling Agreement described above is hereby supplemented as provided in the section titled "Commission Agreement," to define the current rate of gross commissions payable on the authorized products shown below. PRODUCTS Insurance Agent's authority as a soliciting agent of the Company shall be for the following product(s): The One(R) VUL Solution/(SM)/ (Policy Form No. 99615) COMMISSIONS The Commissions Schedule below is subject to the terms and conditions of the Agreement to which it is attached. In no event shall the Company be liable for payment of any commissions with respect to any solicitation made, in whole or in part, by any person not appropriately licensed and appointed prior to the commencement of the solicitation. 1. ANNUAL COMMISSIONS TO BE PAID TO INSURANCE AGENCY. (a) FOR A POLICY ISSUED BASED ON SIMPLIFIED UNDERWRITING. For a Policy issued based on simplified underwriting, compensation will be paid based on either (i) Percent of Premium or (ii) Policy Accumulation Value (Trail). (i) Compensation based on Percent of Premium. . 6% of premiums paid (ii) Compensation based on Accumulation Value. . Non-Modified Endowment Contract Policies. Beginning with 1 the first Policy year, a trail commission of 1.20% of each Policy's accumulation value (reduced by any outstanding loans), in the variable investment options. The trail commission will be reduced by 0.25% beginning in Policy Year 11. Thus, the schedule in effect is as follows: (i) 1.20% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 1 through 10; and (2) 0.95% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 11 through 15. . Modified Endowment Contract Policies. Beginning with the first Policy year, a trail commission of 1.20% of each Policy's accumulation value (reduced by any outstanding loans), in the variable investment options. The trail commission will be reduced by 0.15% beginning in Policy Year 6. Thus, the schedule in effect is as follows: (i) 1.20% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 1 through 5; and (2) 1.05% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 6 through 10. (b) FOR A POLICY ISSUED BASED ON FULL UNDERWRITING. For a Policy issued based on full underwriting, compensation will be paid based on either (i) Percent of Premium or (ii) Policy Accumulation Value (Trail), (i) Compensation based on Percent of Premium. . 6% of premiums paid in the first Policy year through Policy Year 3 up to the Target Premium; and . 3% of premiums paid in Policy years 4+ up to the Target Premium. (ii) Compensation based on Accumulation Value. Beginning with the first Policy year, a trail commission of 2.50% of each Policy's accumulation value (reduced by any outstanding loans), in the variable investment options. The trail commission will be reduced by 1.50% beginning in Policy year 2, with further reductions of 0.50% in Policy year 11 and 0.25% in Policy year 21. Thus, the schedule in effect is as follows: (i) 2.50% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy year 1; (ii) 1.00% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 2 through 10; (iii) 0.50% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 11 2 through 20; and (iv) 0.25% of each Policy's accumulation value (reduced by any outstanding loans) in the variable investment options for Policy years 21+. 2. CHARGEBACKS. The following commission chargebacks shall apply on Policy surrender: . 100% of commissions paid on a Policy surrendered during the first Policy year; and . 75% of commissions paid on a Policy surrendered during the second Policy year. This commission chargeback schedule shall only apply to compensation paid based on percent of premium. 3. TARGET PREMIUM. The Target Premium is the maximum amount of premium to which the first year commission rate applies. Commissions paid on premiums received in excess of the Target Premium are paid at the excess rate. The Target Premium is an amount calculated in accordance with the method of calculation and rates from the American General Life Target Premium schedules. The Company may change the Target Premium schedules from time to time. The Target Premium applicable to a particular coverage shall be determined from the schedule in force when the first premium for such coverage is entered as paid in accounting records of the Company. 4. TRAIL COMMISSIONS: WHEN PAID. The annual trail commissions, as set forth in above, are calculated on a quarterly basis and are applied to the entire unloaned accumulation value on each quarterly Policy anniversary. Payment will be made at the end of the calendar quarter immediately following the corresponding quarterly Policy anniversary. For example, for Policies issued November 1, 1999, the first trail payment is based on the unloaned accumulation value as of February 1, 2000, but is not payable until the calendar quarter ending March 31, 2000, and mailed shortly thereafter. 5. CHANGE OF BROKER-DEALER. A Policy owner may elect to change representation to another broker-dealer subsequent to the sale of the Policy, solely in the Policy owner's discretion. After such change, further compensation paid for the Policy will be paid to the new broker-dealer. 6. GUIDELINES AND COMMISSIONS ON INTERNAL EXCHANGES. Generally, no commissions will be earned on the initial exchange of any Company contract or any contract issued by a company which is affiliated with the Company for The One(R) VUL Solution/(sM)./ All subsequent premium payments will receive commissions calculated in accordance with the administrative rules established by the Company in its sole discretion and in effect at the time of the exchange. EFFECTIVE DATE: This SCHEDULE A shall be effective for authorized products sold on and after __________________________, and shall continue in effect until amended, supplemented, or superseded by written agreement of all the parties. Acknowledged and Agreed: 3 BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES, INC. By: By: ----------------------------- ------------------------------ Name: Name: --------------------------- ---------------------------- (Printed Name) (Printed Name) Title: Title: -------------------------- --------------------------- AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES COMPANY INCORPORATED By: By: ----------------------------- ------------------------------ Name: Name: --------------------------- ---------------------------- (Printed Name) (Printed Name) Title: Title: -------------------------- --------------------------- 4 SCHEDULE B AMERICAN GENERAL LIFE INSURANCE COMPANY PRINCIPLES AND CODE OF ETHICAL MARKET CONDUCT DATED JUNE 24, 1997 NOTE: The principles appear in bold. The remaining text constitutes the code. 1. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL CONDUCT BUSINESS ACCORDING TO HIGH STANDARDS OF HONESTY AND FAIRNESS AND WILL RENDER THAT SERVICE TO THEIR CUSTOMERS WHICH, IN THE SAME CIRCUMSTANCES, THEY WOULD APPLY TO OR DEMAND FOR THEMSELVES. To conduct business according to high standards of honesty and fairness, American General Life Insurance Company will implement policies and procedures designed to provide reasonable assurance that: a. Insofar as individual products or those marketed on an individual basis are concerned, American General's distributors make reasonable efforts to determine the insurable needs or financial objectives of American General's customers based upon relevant information obtained from the customer and enter into transactions which assist the customer in meeting his or her insurable needs or financial objectives. b. American General maintains compliance with applicable laws and regulations. c. In cooperation with consumers, regulators and others, American General affirmatively seeks to improve the practices for sales and marketing of life and annuity products. d. The Principles of Ethical Market Conduct are reflected in American General's policies and practices. 2. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE COMPETENT AND CUSTOMER- FOCUSED SALES AND SERVICE. To provide for competent sales and services of life and annuity products, American General Life Insurance Company will develop policies and procedures designed to provide reasonable assurance that: a. American General's distributors are of good character and business repute, and have appropriate qualifications and training. b. American General's distributors are duly licensed or otherwise qualified under state law. c. American General's distributors and employees involved in the sales process are adequately trained, as appropriate to American General's distribution system, to focus on customers' needs and objectives. d. American General's distributors have adequate knowledge of American General's products and their operation. e. American General's distributors and employees involved in the sales process are trained, as appropriate to its distribution system, in the need to comply with applicable insurance laws and regulations and the concepts in the Principles and Code of Ethical Market Conduct. f. American General's distributors and employees involved in the sales process participate, as appropriate to American General's distribution system, in continuing education. 3. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL ENGAGE IN ACTIVE AND FAIR COMPETITION. American General Life Insurance Company is committed to competition as the most effective and efficient means of providing products and services to customers. Competition is also the most efficient regulator of activities. To maintain and enhance competition in the marketplace for life and annuity products, American General will develop policies and procedures designed to provide reasonable assurance that: a. American General maintains compliance with applicable state and federal laws fostering fair competition. b. American General's distributors do not replace existing life insurance policies and annuity policies without first communicating to the customer, in a manner consistent with Principle 4, information that he or she needs in order to ascertain whether such replacement of existing policies or contracts may or may not be in his or her best interest. c. American General's distributors and employees involved in the sales process refrain from disparaging competitor insurers. 4. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE ADVERTISING AND SALES MATERIALS THAT ARE CLEAR AS TO PURPOSE AND HONEST AND FAIR AS TO CONTENT. To provide sales and advertising materials which are clear as to purpose and honest and fair as to content, American General Life Insurance Company will develop policies and procedures designed to provide reasonable assurance that: a. Presentation of any material designed to lead to sales or solicitation of life and annuity products is done in a manner consistent with the best interests of the customer. All such sales or solicitation communications should be based upon the principles of fair dealing and good faith, and will have a sound basis in fact. b. Materials presented as part of a sale are comprehensible in light of the complexity of the product being sold. c. American General maintains compliance with applicable laws and regulations related to advertising, unfair trade practices, sales illustrations, and other similar provisions. d. Illustrations of premiums and considerations, costs, values, and benefits are accurate and fair, and contain appropriate disclosure of amounts which are not guaranteed and those which are guaranteed in the policy or contract. 2 5. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE FOR FAIR AND EXPEDITIOUS HANDLING OF CUSTOMER COMPLAINTS AND DISPUTES. To resolve any complaints and disputes that may arise concerning market conduct, American General Life Insurance Company will develop policies and procedures designed to provide reasonable assurance that: a. Complaints are identified, evaluated, and handled in compliance with applicable state law and regulations related to consumer complaint handling. b. Good faith efforts are made to resolve complaints and disputes without resorting to civil litigation. 6. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL MAINTAIN A SYSTEM OF SUPERVISION AND REVIEW THAT IS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THESE PRINCIPLES OF ETHICAL MARKET CONDUCT. American General Life Insurance Company will develop or assign responsibilities designed to provide reasonable assurance, as appropriate to American General's size and distribution system, that: a. American General establishes and enforces policies and procedures reasonably designed to comply with the Principles and Code of Ethical Market Conduct. b. There is an adequate system of supervision of the market activities of its distributors and employees involved in the sales process in order to monitor their compliance with these Principles and Code and applicable laws and regulations. c. Compliance training sessions are conducted for employees involved in the sales process and instruction on American General's compliance requirements is made available to all distributors. d. Policies and procedures provide for auditing and monitoring of information related to sales practices of its employees involved in the sales process and distributors. 3 SCHEDULE C AMERICAN GENERAL LIFE INSURANCE COMPANY ("COMPANY") ADVERTISING PROCEDURES ADVERTISING GENERALLY INCLUDES: (a) printed or published materials; (b) audiovisual material and descriptive literature; (c) newspaper, radio, television, and billboard ads; (d) prepared sales talks; (e) sales presentations; (f) illustrations and form letters; (g) representations made by agents; (h) circulars and leaflets; (i) letters of solicitation; (j) direct mail solicitations; (k) telephone solicitation, both inbound and outbound; (l) web sites; (m) any material used to sell, retain, or modify an insurance policy; and (n) material used for the recruitment, training, and education of Company's personnel and agents that is designed to be used or is used to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy. ADVERTISING GENERALLY DOES NOT INCLUDE: (a) interorganizational materials used by an insurer and not for public distribution; (b) communications with policyholders other than materials urging policyholders to purchase, increase, modify, or retain a policy; (c) a general announcement sent by a group policyholder to members of the eligible group that a policy has been written or arranged; (d) correspondence between a prospective group policyholder and an insurer in the course of negotiating a group Policy; (e) materials used solely for the recruitment, training, and education of an insurer's personnel and agents provided that the material does not induce the public to purchase, increase, modify or retain a policy of insurance. ALL ADVERTISEMENTS MUST: (a) Not be misleading, confusing, or deceptive; (b) Must be factually accurate; (c) Clearly identify the full name of the insurer; (d) Make clear that insurance is the subject of the solicitation; (e) Clearly identify the type of insurance being sold; (f) Not give the appearance of selling stock or other securities; (g) Except for variable products, not give the appearance of being a solicitation of or by an investment department; (h) Not state that the policy is available for a limited time only, unless such is truly the case; 1 (i) Include policy form numbers if a specific policy is advertised (place in bottom right corner); (j) Include a Control Number designation with blank to be completed by Company, in bottom left corner. (This indicates Company's approval of the ad.); (k) Conform to Associated Press (AP) style; (l) Indicate that available endorsements and/or riders may be subject to additional costs, if such is true; (m) Verify that all testimonials, appraisals and analyses are genuine; (n) Not state, imply or create an impression that the insurer is recommended by U. S. Government or any state or other governmental agency; (o) Not advertise benefits that do not match the policy benefits contained in the Policy; (p) Not disparage competitors, their policies, services, business methods, or practices; (q) Not make inaccurate comparisons with competitors; (r) Not make unfair or incomplete comparisons of policies, benefits, dividends, or rates; (s) Not include the term "savings," "investment," "investment plan," "savings plan," "interest plan," "founders plan," "dividends," "cash dividends," "surplus," "units of participation," "profit sharing," or "charter plan" to imply that the product advertised is something other than insurance; (t) Not refer to premiums as deposits, savings, or contributions, unless the use of these terms is not misleading in the context in which they are used; (u) Not imply that policyholders are part of an introductory, initial or special offer, unless such is truly the case; (v) Not indicate that the agent is a financial planner, investment adviser, or other expert unless the agent has appropriate credentials to support such a statement; REQUIRED DISCLOSURES: (a) All policy benefits advertised must include limitations and exclusions; (b) The guaranteed rate must be disclosed with EQUAL PROMINENCE if the current rate is displayed, if advertising is to be used in states that require equal prominence (see attached list for current list of states); (c) If rates are advertised, the time period during which they will be offered must be included; (d) Ads which are invitations to contract or which describe the policy features must disclose all expenses and policy fees (including but not limited to surrender charges and 10% federal income tax penalty for withdrawals of interest prior to age 59 1/2); (e) Ads for products offered through financial institutions must include the OCC disclosure: ---------------------------- |NOT | MAY LOSE VALUE| |FDIC- | NO BANK | |INSURED | GUARANTEE | ---------------------------- This disclosure should be at least as large as the text describing the financial institution's investment products. The disclosure should appear on the cover of the brochure or on the first part of the relevant written text; (f) Ads must clearly identify the company selling the insurance product and not suggest that a financial institution or other entity is the seller; (g) Advertisements containing insurer ratings must identify the scope/extent of the ratings; (h) Any use of the word "guaranteed" must be accompanied by a statement that clearly identifies what is guaranteed and by whom; 2 (i) Printed product advertisements that will be distributed exclusively in California must include the individual agent's or the agency's California license number. The license number must be the same size as the telephone or fax number or address printed on the advertisement; (j) Advertisements that will be distributed in Florida must include the name of the Florida licensed soliciting agent. This requirement may be satisfied by attaching the agent's business card to the advertisement. APPROVAL AND SUBMISSION PROCEDURES: All advertising materials referencing Company or an annuity or insurance product issued by Company must be approved in writing by Company prior to use. All requests for written consent of advertisement must be forwarded to: American General Life Insurance Company Attn: Theresa Jacoby 2929 Allen Parkway Houston, TX 77019 Please allow for 10 business days' turnaround from the time that the request for written consent is received by Company. STATES THAT REQUIRE EQUAL PROMINENCE IN ADVERTISING: Alabama Maryland North Carolina Florida Michigan North Dakota Georgia Missouri Oklahoma Indiana Nebraska South Dakota Iowa Nevada Texas Kansas New Mexico Washington Louisiana New York Wisconsin Note: In Minnesota, you cannot advertise the interest rate unless the effective net annual yield is disclosed in an equally prominent manner. 3 SCHEDULE D TO THE VARIABLE UNIVERSAL LIFE SELLING AGREEMENT DATED ____________________ AMONG BANC ONE SECURITIES CORPORATION ("BROKER/DEALER"), BANC ONE INSURANCE SERVICES CORPORATION ("INSURANCE AGENT"), AMERICAN GENERAL LIFE INSURANCE COMPANY ("COMPANY") AND AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI ") The Selling Agreement described above is hereby supplemented as provided in the section titled "Interests in Agreement," to define the current method of accounting and payment requirements of the Company. Insurance Agent and/or Broker/Dealer agrees to render to Company or its designated third-party administrator ("TPA") detailed policy transaction reports identifying the insured, Policy number, premium amount, and such other specific data as Company may request. Insurance Agent and/or Broker/Dealer agrees to provide Company or its TPA with Policy transaction reports via submission of properly completed Daily Premium Reports and copies of applications for all Policies issued. Insurance Agent and/or Broker/Dealer agrees to deposit the gross premiums hereunder in Company's designated accounts established at Banc One branches no later than the close of each business day for business issued on the business day last preceding the date of the Daily Premium Report. Such Company designated accounts shall be established solely for the Company products on Schedule A to the Selling Agreement described herein, and shall be separate from any accounts set up by any affiliates of the Company. Insurance Agent and Broker/Dealer agree that no maintenance fees, service charges, or any other fees or charges will be assessed against Company by Agent and Broker/Dealer; however any applicable fees from other affiliates of Insurance Agent and Broker/Dealer will not be waived. Insurance Agent and Broker/Dealer agree that neither Insurance Agent nor Broker/Dealer is authorized to issue checks on Company's account. This Schedule D shall in no way provide for gross premiums received, hereunder, in Company's designated accounts to be netted against any payable compensation as set forth in Schedule A to the Selling Agreement described herein. EFFECTIVE DATE: This SCHEDULE D shall be effective for authorized products sold on and after ___________________________, and shall continue in effect until amended, supplemented, or superseded. Acknowledged and Agreed: "BROKER/DEALER" "INSURANCE AGENT" BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES CORPORATION By: By: ------------------------------ ------------------------------- Name: Name: ---------------------------- ----------------------------- (Printed Name) (Printed Name) Title: Title: --------------------------- ---------------------------- AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES COMPANY INCORPORATED By: By: ------------------------------ ------------------------------- Name: Name: ---------------------------- ----------------------------- (Printed Name) (Printed Name) Title: Title: --------------------------- ---------------------------- 2 INSERT SCHEDULE E MARKETING AND CUSTOMER SERVICE COMPLIANCE STANDARDS American General Life Insurance Company ("Company"), Banc One Securities Corporation ("Broker/Dealer"), and Banc One Insurance Services Corporation ("Insurance Agent") acknowledge that marketing insurance products through financial institutions presents unique customer service and compliance challenges. Primarily, in marketing insurance products through financial institutions the Company, Broker/Dealer and Insurance Agent must ensure that their clients understand that they are purchasing an insurance product underwritten by the Company and not an FDIC insured financial institution product. Secondly, the Company, Broker/Dealer and Insurance Agent recognize that the insurance products made available in the financial institution market are typically purchased by older consumers. The Company, Broker/Dealer and Insurance Agent must ensure that their insurance purchasing clients understand the nature and terms of the insurance product they are considering. Further, the Company, Broker/Dealer and Insurance Agent must exercise reasonable care to ensure that the insurance product purchased by the client is suitable for that particular client. The Company, Broker/Dealer and Insurance Agent recognize and understand these compliance and customer services challenges. Company, Broker/Dealer and Insurance Agent accept the responsibility of appropriately servicing the financial institution markets and have established the following compliance and customer service standards ("Standards"). The Standards discussed below are intended to establish a criteria to allow the Company, Broker/Dealer and Insurance Agent to present a level of customer service and compliance to their customers that should be expected of insurance product providers in the financial institution market. These Standards have been established consistent with and in furtherance of Company's commitment to conducting itself with the highest standards of responsibility and upholding its values: people make the difference, straightforward communication, commitment to integrity, and energy and drive to succeed. These Standards should be read as supplementary to the terms and conditions of the Variable Universal Life Selling Agreement ("Agreement") and the schedules attached thereto. If there is any conflict between the language in the Standards and the terms and conditions of the Agreement, the terms and conditions of the Agreement will control, specifically the Insurance Agents' Duties and Responsibilities in Section 4 of the Agreement. STANDARD 1: COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL PROVIDE EFFECTIVE AND EFFICIENT CUSTOMER SERVICE. . Company, Broker/Dealer and Insurance Agent acknowledge that they must provide exemplary customer service to customers. . Company, Broker/Dealer and Insurance Agent will respond to all customer inquiries and complaints as quickly as practical so to provide customers with a meaningful response. . Company, Broker/Dealer and Insurance Agent will, in responding to customer inquiries and complaints, utilize straightforward communication in addressing that customers' inquiry or complaint. . Insurance Agent will, when appropriate, direct customer inquiries and complaints directly to Company for response and not advise customers to address inquiries or complaints to state or federal 2 regulators. . Insurance Agent will work with Company to promptly obtain and remit all information required to provide a complete response to a customer complaint or inquiry. STANDARD 2: COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY SELL A CUSTOMER PRODUCTS THAT MEET THE CUSTOMER'S FINANCIAL AND INSURANCE NEEDS. . Company, Broker/Dealer and Insurance Agent will sell an insurance product to a customer only after conducting a thorough review of the customers' insurance needs and determining that the insurance product recommended meets that customer's need. . Insurance Agent will establish procedures to ensure that its selling representative utilizes appropriate suitability tools to determine if an insurance product is acceptable for the customer. . Company will refund to the customer all premium payments received by Company if it is later determined that an insurance product sold to a customer did not meet the customer's stated needs. Such refunds shall be made under applicable Company policies and procedures. . If the Company refunds the customer's premium payments because it is determined that the insurance product did not meet the customer's stated needs the Insurance Agent will refund to Company all commissions earned by Insurance Agent for the sale of that insurance product in compliance with the Company's chargeback policies and procedures which shall not be contrary to the terms of this Agreement. STANDARD 3: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY MARKET THROUGH QUALIFIED SALES REPRESENTATIVES. . Insurance Agent will provide to Company a certification that it has conducted background checks of each individual selling representative to verify that they are qualified to be appointed to the Company pursuant to all state and federal requirements including, the Federal Violent Crime Control and Law Enforcement Act of 1994. STANDARD 4: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY MARKET THROUGH TRAINED SALES REPRESENTATIVES. . Insurance Agent will provide to Company a certification that it has provided to its sales representatives sufficient and adequate training with regard to the insurance products the Insurance Agent markets and compliance issues relevant to those insurance products and the financial institution market. Included in this training will be instruction addressing issues specifically relating to insurance sales to older customers. STANDARD 5: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL MONITOR THE SALES PROCESS. To ensure compliance with Company and state and federal regulatory and IMSA requirements: . Company, Broker/Dealer and Insurance Agent will allow each other to conduct reasonable audits of their respective marketing and operations area. 3 EX-8.(A)(II) 3 AMGEN/AIM PART. AGR. EXHIBIT (8)(a)(ii) AMENDMENT NO. 3 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 1, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation, American General Life Insurance Company, a Texas Life Insurance Company and American General Securities Incorporated, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS ALL OF THE FUNDS - ------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity American General Life Insurance . Platinum Investor I Flexible Premium Fund Company Separate Account VL-R Variable Life Insurance Policy AIM V.I. Value Fund Established: May 1, 1997 - Policy Form No. 97600 . Platinum Investor II Flexible Premium Variable Life Insurance Policy - Policy Form No. 97610 . Corporate America - Variable Flexible Premium Variable Life Insurance - Policy Form No. 99301 . Platinum Investor Survivor Last Survivor Flexible Premium Variable Life Insurance Policy - Policy Form No. 99206 - -------------------------------- ---------------------------------------------- AIM V.I. Value Fund . Legacy Plus Flexible Premium Variable Life Insurance Policy - Policy Form No. 98615 AIM V.I. Capital Appreciation Fund . The One VUL Solution Flexible Premium AIM V.I. Government Securities Variable Life Insurance Policy Fund - Policy Form No. 99615 AIM V.I. High Yield Fund AIM V.I. International Equity Fund . Key Legacy Plus Flexible Premium AIM V.I. International Equity Variable Life Insurance Policy Fund - Policy Form No. 99616 - ------------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity American General Life Insurance . Platinum Investor Variable Annuity Fund Company Separate Account D - Policy Form No. 98020 AIM V.I. Value Fund Established: November 19, 1973 - -------------------------------------------------------------------------------------------------------------------
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: February 1, 2000 1 AIM VARIABLE INSURANCE FUNDS, INC. Attest: By: ______________________ ___________________________ Name: Nancy L. Martin Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) A I M DISTRIBUTORS, INC. Attest: By: ______________________ ___________________________ Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President (SEAL) AMERICAN GENERAL LIFE INSURANCE COMPANY Attest:______________________ By:___________________________ Name:________________________ Name:_________________________ Title:_______________________ Title:________________________ (SEAL) AMERICAN GENERAL SECURITIES INCORPORATED Attest:______________________ By:___________________________ Name:________________________ Name:_________________________ Title:_______________________ Title:________________________ (SEAL) 2 EX-8.(C)(II) 4 MFS/AMGEN/MFSC PART. AGR. EXHIBIT (8)(c)(ii) AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT Pursuant to the Participation Agreement, made and entered into as of the 13th day of April, 1998 by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Company, the parties do hereby agree to an amended Schedule A as attached hereto. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the Participation Agreement to be executed in its name and on its behalf by its duly authorized representative. The Amendment shall take effect on February 1, 2000. AMERICAN GENERAL LIFE INSURANCE COMPANY By its authorized officer, By: ______________________________________ Title: ____________________________________ MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer, By: ______________________________________ James R. Bordewick, Jr. Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, By: ______________________________________ Jeffrey L. Shames Chairman and Chief Executive Officer #30480 As of February 1, 2000 SCHEDULE A ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT --------------------------------------
- ----------------------------------------------------------------------------------------------------- NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES - ----------------------------------------------------------------------------------------------------- American General Life Insurance Platinum Investor I Flexible Premium MFS Emerging Growth Company Separate Account VL-R Life Insurance Policy Series (May 1, 1997) Policy Form No. 97600 Platinum Investor II Flexible Premium Life Insurance Policy Policy Form No. 97610 Legacy Plus Variable Life Insurance Policy Policy Form No. 98615 Corporate America-Variable Life Insurance Policy Policy Form No. 99301 Platinum Investor Survivor Variable Life Insurance Policy Policy Form No. 90787 The One VUL Solution MFS Growth With Income Variable Life Insurance Policy Series Policy Form No. 99615 Key Legacy Plus MFS Total Return Series Variable Life Insurance Policy Policy Form No. 99616 American General Life Insurance Platinum Investor Variable Annuity MFS Emerging Growth Company Policy Form No. 98020 Series Separate Account D (November 19, 193) - -----------------------------------------------------------------------------------------------------
#30480 EX-8.(D)(II) 5 PUTNAM/AMGEN PART. AGR. Exhibit (8)(d)(ii) FIRST AMENDMENT TO AMONG PARTICIPATION AGREEMENT PUTNAM VARIABLE TRUST, PUTNAM MUTUAL FUNDS CORP., AND AMERICAN GENERAL LIFE INSURANCE COMPANY, THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of February 1, 2000, amends the Participation Agreement dated as of June 1, 1998 (the "Agreement") among AMERICAN GENERAL LIFE INSURANCE COMPANY ("Company"), a Texas corporation, on its own behalf and on behalf of each separate account of the Company set forth on Schedule A, as such Schedule may be amended from time to time (each such account hereinafter referred to as the "Account"), PUTNAM VARIABLE TRUST (the "Trust") a Massachusetts business trust, and PUTNAM MUTUAL FUNDS CORP. (the "Underwriter"), a Massachusetts corporation. WITNESSETH THAT: WHEREAS, pursuant to the Agreement, the Trust authorizes certain of its Funds, as set forth in Schedule B hereto, as such schedule may be amended from time to time, to be made available to serve as underlying investment media for the Contracts; WHEREAS, the Trust desires that shares of additional Fund be made available to the Company to serve as underlying investment media for the Contracts; and NOW, THEREFORE, in consideration of the mutual promises herein, the Company, the Trust and the Underwriter agree as follows: 1. The Agreement shall be amended to include Schedule B in the form attached hereto and incorporated herein. 2. Except as amended hereby, the Agreement dated as of June 1, 1998 is hereby ratified in all respects. 2. IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed in its name and on its behalf by its duly authorized representative hereto as of the date specified above. AMERICAN GENERAL LIFE INSURANCE COMPANY By its authorized officer, ------------------------------ Name: Title: PUTNAM VARIABLE TRUST By its authorized officer, ----------------------------- Name: Title: PUTNAM MUTUAL FUNDS CORP. By its authorized officer, ----------------------------- Name: Title: SCHEDULE B Authorized Funds (AS OF FEBRUARY 1, 2000) Fund Service Fee Rate (per annum rate) PVT Diversified Income Fund 0.15% PVT Growth & Income Fund 0.15% PVT International Growth & Income Fund 0.15% PVT Vista Fund 0.15% EX-8.(E)(III) 6 VAN KAMPEN/AMGEN PART. AGR. Exhibit (8)(e)(iii) AMENDMENT NUMBER 5 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT AMONG VAN KAMPEN LIFE INVESTMENT TRUST, VAN KAMPEN FUNDS INC., VAN KAMPEN ASSET MANAGEMENT INC., AMERICAN GENERAL LIFE INSURANCE COMPANY, AND AMERICAN GENERAL SECURITIES INCORPORATED This Amendment No. 5 ("Amendment No. 5") executed as of the 1st day of February, 2000 to the Amended and Restated Participation Agreement dated as of January 24, 1997, as amended (the "Agreement"), among Van Kampen Life Investment Trust (the "Fund"), Van Kampen Funds Inc., Van Kampen Asset Management Inc., American General Life Insurance Company (the "Company"), and American General Securities Incorporated. WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A of the Agreement the Contracts of the Company relating to the Company's Platinum Investor Survivor VUL, Form No. 99236, The One VUL Solution, Form No. 99615, and Key Legacy Plus VUL, Form No. 99616 (collectively, the "AVUL Policies"); and (ii) solely to the extent the Agreement relates to the VUL Policies, amend the provisions of Article III of the Agreement as described below. NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Schedule A to the Agreement, a revised copy of which is attached hereto, is hereby amended to add the VUL Policies; and 2. Solely to the extent the Agreement relates to the VUL Policies, Article III of the Agreement is hereby deleted and replaced with the following: "ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting 3.1. The Fund shall provide the Company with as many printed copies of the Fund's current prospectus and statement of additional information as the Company may reasonably request. If requested by the Company in lieu of providing printed copies the Fund shall provide camera-ready film or computer diskettes containing the Fund's prospectus and statement of additional information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or statement of additional information for the Fund is amended during the year) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document or separately. The Company may elect to print the Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information. 3.2(a). Except as otherwise provided in this Section 3.2., all expenses of preparing, setting in type and printing and distributing Fund prospectuses and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of setting in type, printing and distributing shall be borne by the Fund. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Fund's prospectus and/or statement of additional information, the Fund shall bear the cost of typesetting to provide the Fund's prospectus and/or statement of additional information to the Company in the format in which the Fund is accustomed to formatting prospectuses and statements of additional information, respectively, and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses and/or statements of additional information. In such event, the Fund will reimburse the Company in an amount equal to the product of x and y where x is the number of such prospectuses distributed to owners of the Contracts, and y is the Fund's per unit cost of printing the Fund's prospectuses. The same procedures shall be followed with respect to the Fund's statement of additional information. The Fund shall not pay any costs of typesetting, printing and distributing the Fund's prospectus and/or statement of additional information to prospective Contract owners. 3.2(b). The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and statements of additional information, which are covered in Section 3.2(a) above) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. The Fund shall not pay any costs of distributing such proxy-related material, reports to shareholders, and other communications to prospective Contract owners. 3.2(c). The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund's expenses do not include the cost of typesetting, printing or distributing any of the foregoing documents other than those actually distributed to existing Contract owners. 3.2(d). The Fund shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing. 3.2(e). All expenses, including expenses to be borne by the Fund pursuant to Section 3.2 hereof, incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares. 3.3. The Fund's statement of additional information shall be obtainable from the Fund, the Underwriter, the Company or such other person as the Fund may designate. 3.4. If and to the extent required by law the Company shall distribute all proxy material furnished by the Fund to Contract Owners to whom voting privileges are required to be extended and shall: (i) solicit voting instructions from Contract owners; (ii) vote the Fund shares in accordance with instructions received from Contract owners; and (iii) vote Fund shares for which no instructions have been received in the same proportion as Fund shares of such Portfolio for which instructions have been received, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The Company reserves the right to vote Fund shares held in any segregated asset account in its own right, to the extent permitted by law. The Fund and the Company shall follow the procedures, and shall have the corresponding responsibilities, for the handling of proxy and voting instruction solicitations, as set forth in Schedule C attached hereto and incorporated herein by reference. Participating Insurance Companies shall be responsible for ensuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule C, which standards will also be provided to the other Participating Insurance Companies. 3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings (except insofar as the Securities and Exchange Commission may interpret Section 16 not to require such meetings) or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in accordance with the Securities and Exchange Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the Commission may promulgate with respect thereto." 4. Except as amended hereby, the Agreement is hereby ratified and confirmed in all respects. IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 5 as of the date first written above. AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and each of its Accounts named in Schedule A to the Agreement, as amended from time to time By: _______________________________ AMERICAN GENERAL SECURITIES INCORPORATED By: _______________________________ VAN KAMPEN LIFE INVESTMENT TRUST By: _______________________________ VAN KAMPEN FUNDS INC. By: _______________________________ VAN KAMPEN ASSET MANAGEMENT INC. By: _______________________________ SCHEDULE A SEPARATE ACCOUNTS AND CONTRACTS Name of Separate Account and Form Numbers and Names of Contracts Date Established by Board of Directors Funded by Separate Account - -------------------------------------- --------------------------------- American General Life Insurance Contract Form Nos.: Company Separate Account D ------------------- Established: November 19, 1973 95020 Rev 896 95021 Rev 896 Name of Contract: ----------------- Generations Combination Fixed and Variable Annuity Contract Contract Form Nos.: ------------------- 91010 91011 93020 93021 Name of Contract: ----------------- Variety Plus Combination Fixed and Variable Annuity Contract Contract Form Nos.: ------------------- 74010 74011 76010 76011 80010 80011 81010 81011 83010 83011 Name of Contract: None ----------------- Contract Form Nos.: ------------------- 98020 Name of Contract: ----------------- Platinum Investor Variable Annuity Contract SCHEDULE A (CONTINUED) Name of Separate Account and Form Numbers and Names of Contracts Date Established by Board of Directors Funded by Separate Account - -------------------------------------- --------------------------------- American General Life Insurance Contract Form Nos.: Company Separate Account VL-R ------------------- Established: May 6, 1997 97600 97610 Name of Contract: ----------------- Platinum I and Platinum II Flexible Premium Variable Life Insurance Policies Contract Form Number: -------------------- 99301 Name of Contract: ---------------- Corporate America - Variable Life Insurance Policy Contract Form Number: --------------------- 99206 Name of Contract: ----------------- Platinum Investor Survivor VUL Contract Form Number: --------------------- 99615 Name of Contract: ----------------- The One VUL Solution Contract Form Number: --------------------- 99616 Name of Contract: ----------------- Key Legacy Plus VUL SCHEDULE B PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS ---------------------------------------------- Asset Allocation Portfolio Comstock Portfolio Emerging Growth Portfolio Enterprise Portfolio Growth and Income Portfolio Domestic Income Portfolio Government Portfolio Money Market Portfolio Morgan Stanley Real Estate Securities Portfolio Strategic Stock Portfolio EX-8.(F) 7 KEMPER/AMGEN PART. AGR. EXHIBIT (8)(f) PARTICIPATION AGREEMENT AMONG KEMPER VARIABLE SERIES SCUDDER KEMPER INVESTMENTS, INC. KEMPER DISTRIBUTORS, INC. and AMERICAN GENERAL LIFE INSURANCE COMPANY THIS AGREEMENT, made and entered into as of this ___ day of _______, 1999 by and among American General Life Insurance Company (hereinafter, the "Company"), a Texas insurance company, on its own behalf and on behalf of each separate account of the Company set forth on Schedule A hereto as may be amended from time to time (each account hereinafter referred to as an "Account"), Kemper Variable Series, a business trust organized under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund"), Scudder Kemper Investments, Inc. (hereinafter the "Adviser"), a Delaware corporation, and Kemper Distributors, Inc. (hereinafter the "Underwriter"), a Delaware corporation. WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance and variable annuity contracts (hereinafter the "Variable Insurance Products") offered by insurance companies that have entered into participation agreements with the Fund (hereinafter "Participating Insurance Companies"); WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each designated a "Portfolio" and representing the interest in a particular managed portfolio of securities and other assets; WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission ("SEC") granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (SEC Release No. IC-17164; File No. 812-7345; hereinafter the "Shared Funding Exemption Order"); WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and shares of the Portfolios are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); WHEREAS, the Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws; WHEREAS, the Company has registered or will register certain variable life insurance and variable annuity contracts supported wholly or partially by the Accounts (the "Contracts") under the 1933 Act, and said Contracts are listed in Schedule A hereto, as it may be amended from time to time by mutual written agreement; WHEREAS, each Account is duly established and maintained as a separate account, established by resolution of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid Contracts; WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; WHEREAS, the Underwriter is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares of the Portfolios listed in Schedule A hereto, as it may be amended from time to time by mutual written agreement ("Designated Portfolios"), on behalf of the Accounts to fund the aforesaid Contracts, and the Underwriter is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company also intends to purchase shares in other open-end investment companies or series thereof not affiliated with the Fund ("Unaffiliated Funds") on behalf of the Accounts to fund the Contracts; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund, the Adviser and the Underwriter agree as follows: 1ARTICLE Sale of Fund Shares 1.1 The Underwriter agrees to sell to the Company those shares of the Designated Portfolios that the Accounts order, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Designated Portfolios. 1.2 The Fund agrees to make shares of each Designated Portfolio available for purchase at the applicable net asset value per share by the Company and the Accounts on those days on which the Fund calculates such Designated Portfolio's net asset value pursuant to rules of the SEC, and the Fund shall use reasonable efforts to calculate such net asset value on each day when the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund ("Board") may refuse to sell shares of any Designated Portfolio to any person, or suspend or terminate the offering of shares of any Designated Portfolio if such action is required by law or by regulatory authorities having jurisdiction, or is, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary in the best interest of the shareholders of such Designated Portfolio. 1.3 1.4 The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies or their separate accounts. No shares of any Designated Portfolios will be sold to the general public. The Fund and the Underwriter will not sell shares of any Designated Portfolio to any insurance company or separate account unless an agreement containing provisions substantially the same as Sections 2.1, 3.4, 3.5 and 3.6 and Article VII of this Agreement is in effect to govern such sales. 1.5 1.6 The Fund agrees to redeem, on the Company's request, any full or fractional shares of the Designated Portfolios held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the request for redemption, except that the Fund reserves the right to suspend the right of redemption or postpone the date of payment or satisfaction upon redemption consistent with Section 22(e) of the 1940 Act and any rules thereunder, and in accordance with the procedures and policies of the Fund as described in the Fund's then current prospectus. 1.7 1.8 For purposes of Sections 1.1 and 1.4, the Company shall be the designee of the Fund for receipt of purchase and redemption orders from the Accounts, and receipt by such designee shall constitute receipt by the Fund; provided that the Company receives the order prior to the determination of net asset value as set forth in the Fund's then current prospectus and the Fund receives notice of such order by 10:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the SEC. 1.9 1.10 The Company agrees to purchase and redeem the shares of each Designated Portfolio offered by the Fund's then current prospectus in accordance with the provisions of such prospectus. 1.11 1.12 The Company shall pay for shares of a Designated Portfolio on the next Business Day after receipt of an order to purchase shares of such Designated Portfolio. Payment shall be in federal funds transmitted by wire by 11:00 a.m. New York time. If payment in federal funds for any purchase is not received or is received by the Fund after 11:00 a.m. New York time on such Business Day, the Company shall promptly, upon the Fund's request, reimburse the Fund for any charges, costs, fees, interest or other expenses incurred by the Fund in connection with any advances to, or borrowing or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a result of portfolio transactions effected by the Fund based upon such purchase request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. The Fund shall normally pay for redemptions of a Designated Portfolio on the next Business Day after receipt of an order to redeem shares of such Designated Portfolio. 1.13 Issuance and transfer of the shares of a Designated Portfolio will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares of a Designated Portfolio ordered from the Fund will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account. 1.14 1.15 The Fund shall furnish same-day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on shares of the Designated Portfolios. The Company hereby elects to receive all such income, dividends, and capital gain distributions as are payable on shares of a Designated Portfolio in additional shares of that Designated Portfolio. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. The Fund shall use its best efforts to furnish advance notice of the day such dividends and distributions are expected to be paid. 1.16 1.17 The Fund shall make the net asset value per share for each Designated Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. New York time) and shall use its best efforts to make such net asset value per share available by 7:00 p.m. New York time. In the event that the Fund is unable to meet the 7:00 p.m. time stated immediately above, then the Fund shall provide the Company with a corresponding amount of additional time to notify the Fund of purchase or redemption orders pursuant to Section 1.1 and 1.4, respectively above. 1.18 1.19 The Parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the shares of the Designated Portfolios (and other Portfolios of the Fund) may be sold to other insurance companies (subject to Section 1.3 and Article VII hereof) and the cash value of the Contracts may be invested in other investment companies. 1.20 1.21 The Fund shall provide written confirmation to the Company of the amount of shares traded and the associated cost per share (NAV) total trade amount and the outstanding share balances held by the Account in each Designated Portfolio as of the end of each Business Day provided that the Company's orders for the purchase and redemption of shares are in a form reasonably acceptable to the Fund. Such confirmation will normally be furnished by 1:00 p.m. Eastern time on the next Business Day. 1ARTICLE Representations and Warranties 1.1 The Company represents and warrants that the Contracts are or will be registered under the 1933 Act; that the Contracts will be continually issued, offered for sale and sold in compliance in all material respects with all applicable federal and state laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established each Account prior to any issuance or sale thereof as a separate account under the Texas Insurance Law and the regulations thereunder, and has registered or, prior to any issuance or sale of the Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for the Contracts. 1.1 The Fund represents and warrants that shares of the Designated Portfolios sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with all applicable federal securities laws and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares of the Designated Portfolios for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund after taking into consideration any state insurance law requirements that the Company advises the Fund may be applicable. 1.2 1.3 The Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may make such payments in the future subject to applicable law, including the requirements of Rule 12b-1. 1.4 1.5 The Fund makes no representations as to whether any aspect of its operation, including but not limited to, investments policies, fees and expenses, complies with the insurance and other applicable laws of the various states, except that the Fund represents that the investment policies, fees and expenses of the Designated Portfolios are and shall at all times remain in compliance with the Texas Insurance Law to the extent required to perform this Agreement. The Company will advise the Fund in writing as to any requirements of Texas Insurance Law that affect the Designated Portfolios, and the Fund will be deemed to be in compliance with this Section 2.4 so long as the Fund complies with such advice of the Company. 1.6 1.7 The Fund represents that it is lawfully organized and validly existing as a business trust under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act. 1.8 1.9 The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the shares of the Designated Portfolios in accordance with any applicable state and federal securities laws. 1.10 1.11 The Adviser represents and warrants that it is and shall remain duly registered as an investment adviser under all applicable federal and state securities laws and that the Adviser shall perform its obligations for the Fund in compliance in all material respects with any applicable state and federal securities laws. 1.12 1.13 The Fund, the Adviser and the Underwriter represent and warrant that all their directors, officers, employees, investment advisers, and other individuals or entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimum coverage required currently by Rule 17g-1 of the 1940 Act or such related provisions as may be promulgated from time to time. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 1.14 1.15 The Company represents and warrants that all its directors, officers, employees, investment advisers, and other individuals or entities employed or controlled by the Company dealing with the money and/or securities of the Fund are covered by a blanket fidelity bond or similar coverage in an amount not less than $20 million. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. The Company agrees that this bond or another bond containing these provisions will always be in effect, and agrees to notify the Fund, the Adviser and the Underwriter in the event that such coverage no longer applies. 1.16 1.172.10 The Company represents and warrants that all shares of the Designated Portfolios purchased by the Company will be purchased on behalf of one or more unmanaged separate accounts that offer interests therein that are registered under the 1933 Act and upon which a registration fee has been or will be paid; and the Company acknowledges that the Fund intends to rely upon this representation and warranty for purposes of calculating SEC registration fees payable with respect to such shares of the Designated Portfolios pursuant to Instruction B.5 to Form 24F-2 or any similar form or SEC registration fee calculation procedure that allows the Fund to exclude shares so sold for purposes of calculating its SEC registration fee. The Company agrees to cooperate with the Fund on no less than an annual basis to certify as to its continuing compliance with this representation and warranty. 1ARTICLE Prospectuses, Statements of Additional Information, and Proxy Statements; Voting 1.1 The Fund shall provide the Company with as many copies of the Fund's current prospectus for the Designated Portfolios as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund shall provide such documentation (including a final copy of the new prospectus) and other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for a Designated Portfolio is amended) to have the prospectus for the Contracts and the prospectus for the Designated Portfolios printed together in one document. Expenses with respect to the foregoing shall be borne as provided under Article V. 1.1 The Fund's prospectus shall disclose that (a) the Fund is intended to be a funding vehicle for all types of variable annuity and variable life insurance contracts offered by Participating Insurance Companies, (b) material irreconcilable conflicts of interest may arise, and (c) the Fund's Board will monitor events in order to identify the existence of any material irreconcilable conflicts and determine what action, if any, should be taken in response to such conflicts. The Fund hereby notifies the Company that disclosure in the prospectus for the Contracts regarding the potential risks of mixed and shared funding may be appropriate. Further, the Fund's prospectus shall state that the current Statement of Additional Information ("SAI") for the Fund is available from the Company (or, in the Fund's discretion, from the Fund), and the Fund shall provide a copy of such SAI to any owner of a Contract who requests such SAI and to the Company in such quantities as the Company may reasonably request. Expenses with respect to the foregoing shall be borne as provided under Article V. 1.2 1.3 The Fund shall provide the Company with copies of its proxy material, reports to shareholders, and other communications to shareholders for the Designated Portfolios in such quantity as the Company shall reasonably require for distributing to Contract owners. Expenses with respect to the foregoing shall be borne as provided under Article V. 1.1 The Company shall: 1.2 (i) solicit voting instructions from Contract owners; (i) vote the shares of each Designated Portfolio in accordance with instructions received from Contract owners; and (i) vote shares of each Designated Portfolio for which no instructions have been received in the same proportion as shares of such Designated Portfolio for which instructions have been received, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners or to the extent otherwise required by law. The Company reserves the right to vote shares of each Designated Portfolio held in any separate account in its own right, to the extent permitted by law. 1.1 The Company shall be responsible for assuring that each of its separate accounts participating in a Designated Portfolio calculates voting privileges as required by the Shared Funding Exemption Order and consistent with any reasonable standards that the Fund has adopted or may adopt. 1.2 The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, Section 16(b). Further, the Fund will act in accordance with the SEC's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the SEC may promulgate from time to time with respect thereto. The Fund reserves the right, upon prior written notice to the Company (given at the earliest practicable time), to take all actions, including but not limited to, the dissolution, termination, merger and sale of all assets of the Fund or any Designated Portfolio upon the sole authorization of the Board, to the extent permitted by the laws of the Commonwealth of Massachusetts and the 1940 Act. 1.3 1.4 It is understood and agreed that, except with respect to information regarding the Fund, the Underwriter, the Adviser or Designated Portfolios provided in writing by the Fund, the Underwriter or the Adviser, none of the Fund, the Underwriter or the Adviser is responsible for the content of the prospectus or statement of additional information for the Contracts. 1ARTICLE Sales Material and Information 1.1 The Company shall furnish, or shall cause to be furnished, to the Fund or the Underwriter, each piece of sales literature or other promotional material ("sales literature") that the Company develops or uses and in which the Fund (or a Designated Portfolio thereof) or the Adviser or the Underwriter is named, at least eight business days prior to its use. No such material shall be used if the Fund or its designee reasonably objects to such use within eight business days after receipt of such material. The Fund or its designee reserves the right to reasonably object to the continued use of such material, and no such material shall be used if the Fund or its designee so object. 1.1 The Company shall not give any information or make any representation or statement on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement, prospectus or SAI for the shares of the Designated Portfolios, as such registration statement, prospectus or SAI may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature approved by the Fund or its designee or by the Underwriter, except with the permission of the Fund or the Underwriter or the designee of either. 1.2 1.3 The Fund or the Underwriter shall furnish, or shall cause to be furnished, to the Company, each piece of sales literature that the Fund or Underwriter develops or uses in which the Company and/or its Account is named, at least eight business days prior to its use. No such material shall be used if the Company reasonably objects to such use within eight business days after receipt of such material. The Company reserves the right to reasonably object to the continued use of such material and no such material shall be used if the Company so objects. 1.4 1.5 The Fund and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account, or the Contracts other than the information or representations contained in a registration statement, prospectus, or statement of additional information for the Contracts, as such registration statement, prospectus or statement of additional information may be amended or supplemented from time to time, or in published reports for the Accounts which are the public domain or approved by the Company for distribution to Contract owners, or in sales literature approved by the Company or its designee, except with the permission of the Company. 1.6 1.7 The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, SAIs, reports, proxy statements, sales literature, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Designated Portfolios, contemporaneously with the filing of such document(s) with the SEC or other regulatory authorities. 1.8 1.9 The Company will provide to the Fund at least one complete copy of all registration statements, prospectuses, statements of additional information, shareholder reports, solicitations for voting instructions, sales literature, applications for exemptions, request for no-action letters, and all amendments to any of the above, that relate to the Contracts or the Accounts, contemporaneously with the filing of such document(s) with the SEC or other regulatory authorities. 1.10 1.11 For purposes of this Agreement, the phrase "sales literature" includes, but is not limited to, any of the following: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, electronic media, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article) and educational or training materials or other communications distributed or made generally available to some or all agents or employees. 1.12 1.13 At the request of any party to this Agreement, any other party will make available to the requesting party's independent auditors all records, data and access to operating procedures that may reasonably be requested in connection with compliance and regulatory requirements related to this Agreement or any party's obligations under this Agreement. 1.14 1.15 The Fund will provide the Company with as much notice as is reasonably practicable of any proxy solicitation for the Fund, and of any material change in the Fund's registration statement or prospectus, particularly any change resulting in a change to the registration statement or prospectus for any Account. The Fund will work with the Company so as to enable the Company to solicit proxies from Contract owners, or to mark changes to its registration statement a prospectus, in an orderly manner. 2ARTICLE Fees and Expenses 1.1 All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund, except and as further provided in Schedule B. The Fund shall see to it that all shares of the Designated Portfolios are registered, duly authorized for issuance and sold in compliance with applicable federal securities laws and, if and to the extent deemed advisable by the Fund, in accordance with applicable state securities laws prior to their sale. 1.2 1.3 The parties hereto shall bear the expenses of typesetting, printing and distributing the Fund's prospectus, SAI, proxy materials and reports as provided in Schedule B. 1.4 1.5 Administrative services to variable Contract owners shall be the responsibility of the Company and shall not be the responsibility of the Fund, Underwriter or Adviser. The Fund recognizes the Company as the sole shareholder of shares of the Designated Portfolios issued under the Agreement. 1.6 1.7 The Fund shall not pay and neither the Adviser nor the Underwriter shall pay any fee or other compensation to the Company under this Agreement, although the parties will bear certain expenses in accordance with Schedule B and other provisions of this Agreement. 1ARTICLE Diversification and Qualification 1.1 The Fund will invest the assets of each Designated Portfolio in such a manner as to ensure that the Contracts will be treated as annuity or life insurance contracts, whichever is appropriate, under the Internal Revenue Code of 1986, as amended ("Code") and the regulations issued thereunder (or any successor provisions). Without limiting the scope of the foregoing, the Fund will, with respect to each Designated Portfolio, comply with Section 817(h) of the Code and Treasury Regulation (S)1.817-5, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts, and any amendments or other modifications or successor provisions to such Section or Regulations. In the event of a breach of this Article VI, the Fund will take all reasonable steps (a) to notify the Company of such breach and (b) to adequately diversify the affected Designated Portfolio so as to achieve compliance within the grace period afforded by Treasury Regulation (S)1.817-5. 1.1 The Fund represents that each Designated Portfolio is currently qualified (and for new Designated Portfolios, intends to qualify) as a Regulated Investment Company under Subchapter M of the Code, and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provisions) and that it will notify the Company immediately upon having a reasonable basis for believing that a Designated Portfolio has ceased to so qualify or that a Designated Portfolio might not so qualify in the future. 1.2 1.3 The Company represents that the Contracts are currently, and at the time of issuance shall be, treated as life insurance or annuity insurance contracts, under applicable provisions of the Code, and that it will make every effort to maintain such treatment, and that it will notify the Fund, the Adviser and the Underwriter immediately upon having a reasonable basis for believing the Contracts have ceased to be so treated or that they might not be so treated in the future. The Company agrees that any prospectus offering a contract that is a "modified endowment contract" as that term is defined in Section 7702A of the Code (or any successor or similar provision), shall identify such contract as a modified endowment contract. 1ARTICLE Potential Conflicts 1.1 The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Designated Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 1.1 The Company and the Adviser will report any potential or existing conflicts of which each is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemption Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded. At least annually, and more frequently if deemed appropriate by the Board, the Company shall submit to the Adviser, and the Adviser shall at least annually submit to the Board, such reports, materials and data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the conditions contained in the Shared Funding Exemption Order; and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Board. The responsibility to report such information and conflicts to the Board will be carried out with a view only to the interests of the contract owners. 1.2 1.3 If it is determined by a majority of the Board, or a majority of its disinterested members, that a material irreconcilable conflict exists, the Company and any other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (a), withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Designated Portfolio and reinvesting such assets in a different investment medium, which may include another Designated Portfolio of the Fund, or submitting to a vote of all affected contract owners the question whether such segregation should be implemented and, as appropriate, segregating the assets of any appropriate group (i.e. annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (b), establishing a new registered management investment company or managed separate account. 1.4 1.5 If a material irreconcilable conflict arises because of a decision by the Company to disregard contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund's election, to withdraw the affected Account's investment in any Designated Portfolio and terminate this Agreement with respect to such Account provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. The Company will bear the cost of any remedial action, including such withdrawal and termination. No penalty will be imposed by the Fund upon the affected Account for withdrawing assets from the Fund in the event of a material irreconcilable conflict. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the effective date of such termination the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of such Designated Portfolio. 1.6 1.7 If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in the affected Designated Portfolio and terminate this Agreement with respect to such Account within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the effective date of such termination the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of such Designated Portfolios. 1.8 1.9 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict; but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contract if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw an Account's investment in any Designated Portfolio and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested members of the Board. 1.10 1.11 If and to the extent the Shared Funding Exemption Order contains terms and conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement, then the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with the Shared Funding Exemption Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of the Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in the Shared Funding Exemption Order or any amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Shared Funding Exemption Order) on terms and conditions materially different from those contained in the Shared Funding Exemption Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. 1ARTICLE Indemnification 1.1 Indemnification by the Company. 1.2 (a) The Company agrees to indemnify and hold harmless the Fund, the Adviser, the Underwriter and each of their officers, trustees and directors and each person, if any, who controls the Fund, the Adviser or the Underwriter within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the shares of the Designated Portfolios or the Contracts and; (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement, prospectus, or statement of additional information for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Fund for use in the Registration Statement, prospectus or statement of additional information for the Contracts or in the Contracts or sales literature for the Contracts (for any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or shares of the Designated Portfolios; or (i) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus, SAI or sales literature of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its authorization or control, with respect to the sale or distribution of the Contracts or shares of the Designated Portfolios; or (i) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, prospectus, SAI or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Fund by or on behalf of the Company; or (i) arise as a result of any material failure by the Company to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the qualification requirements specified in Article VI of this Agreement); or (v) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in any Registration Statement, prospectus, statement of additional information or sales literature for any Unaffiliated Fund, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or otherwise pertain to or arise in connection with the availability of any Unaffiliated Fund as an underlying funding vehicle in respect of the Contracts; or (vi) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c). (a) The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of its obligations or duties under this Agreement. (b) (c) The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability that it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Company has been prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action and to settle the claim at its own expense provided, however, that no such settlement shall, without the Indemnified Parties' written consent, include any factual stipulation referring to the Indemnified Parties or their conduct. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. (d) (e) The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the shares of the Designated Portfolios or the Contracts or the operation of the Fund. 1.1 Indemnification by the Underwriter 1.2 (a) The Underwriter agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute 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 shares of the Designated Portfolios or the Contracts; and (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, prospectus or SAI of the Fund or sales literature of the Fund developed by the Underwriter (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter or Fund by or on behalf of the Company for use in the Registration Statement or prospectus for the Fund or its sales literature (or any amendment or supplement thereto) or otherwise for use in connection with the sale of the Contracts or shares of the Designated Portfolios; or (i) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Fund or Underwriter or person under their control with respect to the sale or distribution of the Contracts or shares of the Designated Portfolios; or (i) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus or sales literature for the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund; or (i) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or (i) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof. (a) The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance or such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company or the Accounts, whichever is applicable. (b) (c) The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Underwriter has been prejudiced by such failure to give notice. In case any such action is brought against the Indemnified Party, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action and to settle the claim at is own expense; provided, however, that no such settlement shall, without the Indemnified Parties' written consent, include any factual stipulation referring to the Indemnified Parties or their conduct. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. (d) (e) The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of the Account. 1.1 Indemnification By the Fund (a) The Fund agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, expenses, damages, liabilities (including amounts paid in settlement with the written consent of the Fund); or litigation (including legal and other expenses) to which the Indemnified Parties may be required to pay or may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages, liabilities or expenses (or actions in respect thereof) or settlements, are related to the operations of the Fund and: (i) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and qualification requirements specified in Article VI of this Agreement); or (i) arise out of or result from any material breach of any representation and/or warranty made by the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund; as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. (a) The Fund shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Fund, the Underwriter, the Adviser or the Accounts, whichever is applicable. (b) (c) The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve the Fund from any liability that it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Fund has been prejudiced by such failure to give notice. In case any such action is brought against the Indemnified Parties, the Fund will be entitled to participate, at its own expense, in the defense thereof. The Fund also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action and to settle the claim at its own expense; provided, however, that no such settlement shall, without the Indemnified Parties' written consent, include any factual stipulation referring to the Indemnified Parties or their conduct. After notice from the Fund to such party of the Fund's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. (d) (e) The Company, the Adviser and the Underwriter agree to notify the Fund promptly of the commencement of any litigation or proceeding against it or any of its respective officers or directors in connection with the Agreement, the issuance or sale of the Contracts, the operation of any Account, or the sale or acquisition of shares of the Designated Portfolios. 1ARTICLE Applicable Law 1.1 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 1.1 This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from the statutes, rules and regulations as the SEC may grant (including, but not limited to, the Shared Funding Exemption Order) and the terms hereof shall be interpreted and construed in accordance therewith. 1ARTICLE Termination 1.1 This Agreement shall continue in full force and effect until the first to occur of: 1.2 (a) termination by any party, for any reason with respect to any Designated Portfolio, by one hundred eighty (180) days' advance written notice delivered to the other parties; or (a) termination by the Company by written notice to the Fund, the Adviser and the Underwriter with respect to any Designated Portfolio based upon the Company's reasonable and good faith determination that shares of such Designated Portfolio are not reasonably available to meet the requirements of the Contracts; or (b) (c) termination by the Company by written notice to the Fund, the Adviser and the Underwriter with respect to any Designated Portfolio if the shares of such Designated Portfolio are not registered, issued or sold in accordance with applicable state and/or federal securities laws or such law precludes the use of such shares to fund the Contracts issued or to be issued by the Company; or (d) (e) termination by the Fund, the Adviser or Underwriter in the event that formal administrative proceedings are instituted against the Company or any affiliate by the NASD, the SEC, or the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the shares of a Designated Portfolio or the shares of any Unaffiliated Fund, provided, however, that the Fund, the Adviser or Underwriter determines in its sole judgement exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or (f) (g) termination by the Company in the event that formal administrative proceedings are instituted against the Fund, the Adviser or Underwriter by the NASD, the SEC, or any state securities or insurance department or any other regulatory body, provided, however, that the Company determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund or Underwriter to perform its obligations under this Agreement; or (h) (i) termination by the Company by written notice to the Fund, the Adviser and the Underwriter with respect to any Designated Portfolio in the event that such Designated Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M or fails to comply with the Section 817(h) diversification requirements specified in Article VI hereof, or if the Company reasonably believes that such Designated Portfolio may fail to so qualify or comply; or (j) (k) termination by the Fund, the Adviser or Underwriter by written notice to the Company in the event that the Contracts fail to meet the qualifications specified in Article VI hereof; or (l) (m) termination by any of the Fund, the Adviser or the Underwriter by written notice to the Company, if any of the Fund, the Adviser or the Underwriter, respectively, shall determine, in their sole judgement exercised in good faith, that the Company has suffered a material adverse change in its business, operations, financial condition, insurance company rating or prospects since the date of this Agreement or is the subject of material adverse publicity; or (n) (o) termination by the Company by written notice to the Fund, the Adviser and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that the Fund, the Adviser or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity and that material adverse change or publicity will have a material adverse effect on the Fund's or the Underwriter's ability to perform its obligations under this Agreement; or (p) (q) at the option of Company, as one party, or the Fund, the Adviser and the Underwriter, as one party, upon the other party's material breach of any provision of this Agreement upon 30 days' notice and opportunity to cure; or (r) (s) termination by any party by advance written notice upon the "assignment" of the Agreement (as defined under the 1940 Act) unless made with the written consent of each party to the Agreement; or (t) (u) termination by the Company arising from the substitution of Fund shares with the shares of another investment company for the Contracts for which the Fund shares have been selected to serve as the underlying investment medium, subject to compliance with applicable regulations of the SEC, Company will give 60 days' written notice to the Fund and the Underwriter of any proposed action to replace Fund shares. (v) 1.2 Effect of Termination. Notwithstanding any termination of this Agreement, the Fund and the Underwriter shall, at the option of the Company, continue to make available additional shares of a Designated Portfolio pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, the owners of the Existing Contracts may in such event be permitted to reallocate investments in the Designated Portfolios, redeem investments in the Designated Portfolios and/or invest in the Designated Portfolios upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any termination under Article VII and the effect of such Article VII termination shall be governed by Article VII of this Agreement. The parties further agree that this Section 10.2 shall not apply to any termination under Section 10.1(g) of this Agreement. 1.3 Notwithstanding any termination of this Agreement, each party's obligation under Article VIII to indemnify the other parties shall survive. 1ARTICLE Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Fund: Kemper Variable Series 222 South Riverside Plaza Chicago, Illinois 60606 Attention: Secretary If to the Company: American General Insurance Company 2929 Allen Parkway Houston, Texas 77019 Attention: General Counsel If to the Adviser: Scudder Kemper Investments, Inc. 222 South Riverside Plaza Chicago, Illinois 60606 Attention: Secretary If to the Underwriter: Kemper Distributors, Inc. 222 South Riverside Plaza Chicago, Illinois 60606 Attention: Secretary 1ARTICLE Miscellaneous 1.1 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. 1.1 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 1.2 1.3 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. 1.4 1.5 Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the Delaware Insurance Commissioner with any information or reports in connection with services provided under this Agreement that such Commissioner may request in order to ascertain whether the variable annuity operations of the Company are being conducted in a manner consistent with the Delaware variable annuity laws and regulations and any other applicable law or regulations. 1.6 1.7 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. 1.8 1.9 This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto. 1.10 1.11 All persons are expressly put on notice of the Fund's Agreement and Declaration of Trust and all amendments thereto, all of which on file with the Secretary of the Commonwealth of Massachusetts, and the limitation of shareholder and trustee liability contained therein. This Agreement has been executed by and on behalf of the Fund by its representatives as such representatives and not individually, and the obligations of the Fund with respect to a Designated Portfolio hereunder are not binding upon any of the trustees, officers or shareholders of the Fund individually, but are binding upon only the assets and property of such Designated Portfolio. All parties dealing with the Fund with respect to a Designated Portfolio shall look solely to the assets of such Designated Portfolio for the enforcement of any claims against the Fund hereunder. 1.12 1.13 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name and on behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below. 1.1 1.2 COMPANY: American General Life Insurance Company By: Title: Date: FUND: Kemper Variable Series By: Title: Date: ADVISER Scudder Kemper Investments, Inc. By: Title: Date: UNDERWRITER Kemper Distributors, Inc. By: Title: Date: SCHEDULE A NAME OF SEPARATE ACCOUNT AND DATE ESTABLISHED BY BOARD OF DIRECTORS - --------------------------------- American General Life Insurance Company Separate Account VL-R (Date Established May 1, 1997) CONTRACTS UNDER THE AGREEMENT FUNDED BY SEPARATE ACCOUNT - -------------------------- The One(R) VUL Solution (sm) (Policy Form No. 99615) DESIGNATED PORTFOLIOS - --------------------- . Kemper International Portfolio . Kemper Small Cap Value Portfolio SCHEDULE B EXPENSES =============================================================================== ITEM FUNCTION RESPONSIBLE PARTY =============================================================================== PROSPECTUS - ------------------------------------------------------------------------------ Update Typesetting Fund - ------------------------------------------------------------------------------ New Sales: Printing Company Distribution Company - ------------------------------------------------------------------------------ Existing Printing Fund Owners: Distribution Fund - ------------------------------------------------------------------------------ STATEMENTS OF Same as Prospectus Same ADDITIONAL INFORMATION - ------------------------------------------------------------------------------ PROXY MATERIALS OF THE Typesetting Fund FUND Printing Fund Distribution Fund - ------------------------------------------------------------------------------ ANNUAL REPORTS & OTHER COMMUNICATIONS WITH SHAREHOLDERS OF THE FUND - ------------------------------------------------------------------------------ All Typesetting Fund - ------------------------------------------------------------------------------ Marketing/1/ Printing Company Distribution Company - ------------------------------------------------------------------------------ Existing Owners: Printing Fund Distribution Fund - ------------- /1/Solely as it relates to the contracts listed on Schedule A, as it is attached to the same Agreement as this Schedule B. - ------------------------------------------------------------------------------ OPERATIONS All operations and related expenses, including the Fund OF FUND cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, the preparation of all statements and notices required by any federal or state law and all taxes on the issuance of the Fund's shares, and all costs of management of the business affairs of the Fund. =============================================================================== EX-8.(G) 8 OPPENHEIMER/AMGEN PART. AGR. EXHIBIT (8)(G) PARTICIPATION AGREEMENT ----------------------- Among OPPENHEIMER VARIABLE ACCOUNT FUNDS, ----------------------------------- OPPENHEIMERFUNDS, INC. ---------------------- and AMERICAN GENERAL LIFE INSURANCE COMPANY --------------------------------------- THIS AGREEMENT (the "Agreement"), made and entered into as of the 1st day of December, 1999 by and among American General Life Insurance Company (hereinafter the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule 1 to this Agreement, as may be amended from time to time by mutual consent (hereinafter collectively the "Accounts"), Oppenheimer Variable Account Funds (hereinafter the "Fund") and OppenheimerFunds, Inc. (hereinafter the "Adviser"). WHEREAS, the Fund is an open-end management investment company and is available to act as the investment vehicle for separate accounts now in existence or to be established at any date hereafter for variable life insurance policies and variable annuity contracts (collectively, the "Variable Insurance Products") offered by insurance companies (hereinafter "Participating Insurance Companies"); WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each designated a "Portfolio", and each representing the interests in a particular managed pool of securities and other assets; WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission, dated July 16, 1986 (File No. 812-6324) granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (hereinafter the "Mixed and Shared Funding Exemptive Order") WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); WHEREAS, the Adviser is duly registered as an investment adviser under the federal Investment Advisers Act of 1940; WHEREAS, the Company has registered or will register certain variable annuity and/or life insurance contracts under the 1933 Act (hereinafter "Contracts") (unless an exemption from registration is available); WHEREAS, the Accounts are or will be duly organized, validly existing segregated asset accounts, established by resolution of the Board of Directors of the Company, to set aside and invest assets attributable to the aforesaid variable contracts (the Contract(s) and the Account(s) covered by the Agreement are specified in Schedule 2 attached hereto, as may be modified by mutual consent from time to time); WHEREAS, the Company has registered or will register the Accounts as unit investment trusts under the 1940 Act (unless an exemption from registration is available); WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios (the Portfolios covered by this Agreement are specified in Schedule 2 attached hereto as may be modified by mutual consent from time to time), on behalf of the Accounts to fund the Contracts named in Schedule 3, as may be amended from time to time by mutual consent, and the Fund is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; and NOW, THEREFORE, in consideration of their mutual promises, the Fund, the Adviser and the Company agree as follows: -2- ARTICLE I. Sale of Fund Shares 1.1. The Fund agrees to sell to the Company those shares of the Fund which the Company orders on behalf of the Account, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee in proper form of the order for the shares of the Fund. For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives written (or facsimile) notice of such order by 10:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the SEC. "Proper form" means that amounts to be invested or redeemed are identified on the Company's computer system by Participant, Contract and Fund in accordance with the Company's standard procedures for processing transactions. The Company agrees to provide the Fund and the Adviser with at least ten Business Days' notice of any change in the Company's standard procedures for processing transactions. 1.2. If the Company requests the purchase of Fund shares, the Company shall pay for such purchase by wiring federal Funds to the Fund or its designated account or as otherwise instructed by the Fund's treasurer, on the day the order is transmitted by the Company. If the Company requests a net redemption resulting in a payment of redemption proceeds to the Company, the Fund shall wire the redemption proceeds to the Company on the day the order is transmitted by the Company, unless doing so would require the Fund to dispose of portfolio securities or otherwise incur additional costs, but in such event, proceeds shall be wired to the Company within three business days and the Fund shall notify the person designated in writing by the Company as the recipient for such notice of such delay by 3:00 p.m. Eastern time the same Business Day that the Company transmits the redemption order to the Fund. If the Company's order requests the application of redemption proceeds from the redemption of shares of one Portfolio to the purchase of shares of another Portfolio, the Fund shall so apply such proceeds the same Business Day that the Company transmits such order to the Fund. -3- 1.3. The Fund shall make the Portfolio's net asset value per share available to the Company on a daily basis as soon as reasonably practical 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. Eastern time. If the Fund provides the Company with the incorrect share net asset value information through no fault of the Company, the 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 error in the calculation of net asset value, dividend and capital gain information greater than or equal to $.01 per share of that Portfolio, shall be reported immediately upon discovery to The Company. Any error of a lesser amount shall be corrected in net asset value per share of that Portfolio or the next Business Day after discovery by the Fund. 1.4. The Fund agrees to redeem for cash, upon the Company's request, any full or fractional shares of the Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the request for redemption in proper form. For purposes of this Section 1.4, the Company shall be the designee of the Fund for receipt of requests for redemption and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives written (or facsimile) notice of such request for redemption by 9:30 a.m. New York time on the next following Business Day. Payment shall be made within the time period specified in the Fund's prospectus or statement of additional information, in federal funds transmitted by wire to the Company's account as designated by the Company in writing from time to time. 1.5. The Company agrees to purchase and redeem the shares of the Portfolios named in Schedule 3 in accordance with the provisions of the then current prospectus and statement of additional information of the Fund. The Company shall not permit any person other than a Contract owner to give instructions to the Company which would require the Company to redeem or exchange shares of the Fund. -4- 1.6 Issuance and transfer of Fund Shares will be by book entry only. Stock certificates will not be issued to the Company. Shares ordered from the Fund will be recorded in an appropriate title for the Company, on behalf of its Account. 1.7 The Fund shall furnish same day notice (by wire, telecopier, or telephone, and if by telephone, followed by confirmation in writing or by telecopier) to the Company of any income, dividends or capital gain distributions payable on the Fund's shares. The Company hereby elects to receive all such income, dividends and capital gain distributions of the Fund in the form of additional shares of that the Fund. The Company reserves the right to revoke this election and to receive all such income, dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. ARTICLE II. Sales Material, Prospectuses and Other Reports 2.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, each piece of sales literature or other promotional material in which the Fund or the Adviser is named, at least ten Business Days prior to its use. No such material shall be used if the Fund or its designee reasonably object in writing or by telecopier to such use within ten Business Days after receipt of such material. "Business Day" shall mean any day in which the New York Stock Exchange is open for trading and in which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 2.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sale literature or other promotional material approved by the Fund or its designee, except with the permission of the Fund. 2.3. For purposes of this Article II, the phrase "sales literature or other promotional material" means advertisements (such as material published, or designed for use in, a newspaper, -5- magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboard or electronic media), and sales literature (such as brochures, circulars, market letters and form letters), distributed or made generally available to customers or the public. 2.4. The Fund shall provide a copy of its current prospectus within a reasonable period of its filing date, and provide other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for the Fund is supplemented or amended) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document (such printing to be at the Company's expense). The Adviser shall be permitted to review and approve the typeset form of the Fund's Prospectus prior to such printing. 2.5. The Fund or the Adviser shall provide the Company with either: (i) a copy of the Fund's proxy material, reports to shareholders, other information relating to the Fund necessary to prepare financial reports, and other communications to shareholders for printing and distribution to Contract owners at the Company's expense, or (ii) camera ready and/or printed copies, if appropriate, of such material for distribution to Contract owners at the Company' expense, within a reasonable period of the filing date for definitive copies of such material. The Adviser shall be permitted to review and approve the typeset form of such proxy material and shareholder reports prior to such printing provided such materials have been provided within a reasonable period. ARTICLE III. Fees and Expenses 3.1. The Fund and Adviser shall pay no fee or other compensation to the Company under this agreement, and the Company shall pay no fee or other compensation to the Fund or Adviser, except as provided herein. -6- 3.2. All expenses incident to performance by each party of its respective duties under this Agreement shall be paid by that party. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, and the preparation of all statements and notices required by any federal or state law. 3.3. The Company shall bear the expenses of typesetting, printing and distributing the Fund's prospectus, proxy materials and reports to owners of Contracts issued by the Company. 3.4. In the event the Fund adds one or more additional Portfolios and the parties desire to make such Portfolios available to the respective Contract owners as an underlying investment medium, a new Schedule 3 or an amendment to this Agreement shall be executed by the parties authorizing the issuance of shares of the new Portfolios to the particular Account. The amendment may also provide for the sharing of expenses for the establishment of new Portfolios among Participating Insurance Companies desiring to invest in such Portfolios and the provision of funds as the initial investment in the new Portfolios. ARTICLE IV. Potential Conflicts 4.1. The Board of Trustees of the Fund (the "Board") will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the Contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to -7- disregard the voting instructions of Contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 4.2. The Company has reviewed a copy of the Mixed and Shared Funding Exemptive Order, and in particular, has reviewed the conditions to the requested relief set forth therein. The Company agrees to be bound by the responsibilities of a participating insurance companies as set forth in the Mixed and Shared Funding Exemptive Order, including without limitation the requirement that the Company report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities in monitoring such conflicts under the Mixed and Shared Funding Exemptive Order, by providing the Board in a timely manner with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded and by confirming in writing, at the Fund's request, that the Company are unaware of any such potential or existing material irreconcilable conflicts. 4.3. If it is determined by a majority of the Board, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists, the Company shall, at its expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. -8- 4.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund's election, to withdraw the Account's investment in the Fund and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of the six month period the Fund shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Fund. 4.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the Account's investment in the Fund and terminate this Agreement within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the end of the foregoing six month period, the Fund shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Fund, subject to applicable regulatory limitation. 4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 4.3 to establish a new funding medium for Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the particular Account's investment in the Fund and terminate this -9- Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination, provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested members of the Board. ARTICLE V. Applicable Law 5.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. 5.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE VI. Termination 6.1 This Agreement shall terminate with respect to some or all Portfolios: (a) at the option of any party upon three month's advance written notice to the other parties, unless a shorter time is agreed to by the parties; (b) at the option of the Company to the extent that shares of Portfolios are not reasonably available to meet the requirements of its Contracts or are not appropriate funding vehicles for the Contracts, as determined by the Company reasonably and in good faith. Prompt notice of the election to terminate for such cause and an explanation of such cause shall be furnished by the Company and termination shall be effective ten days after the Fund's receipt of said notice unless the Fund makes available a sufficient number of shares to meet the requirements of the Contracts within said ten-day period; or (c) as provided in Article IV. 6.2. It is understood and agreed that the right of any party hereto to terminate this Agreement pursuant to Section 6.1(a) may be exercised for cause or for no cause. -10- ARTICLE VII. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify to the other party. If to the Fund: Oppenheimer Variable Account Funds c/o OppenheimerFunds, Inc. 6803 S. Tucson Way Englewood, CO 80112 Attn: Brian W. Wixted, Treasurer If to the Adviser: OppenheimerFunds, Inc. 2 World Trade Center New York, NY 10048-0203 Attn: Andrew J. Donohue, General Counsel If to the Company: American General Life Insurance Company 2929 Allen Parkway Houston, TX 77019 Attn: General Counsel ARTICLE VIII. Indemnification 8.1 Indemnification By The Company 8.1(a) The Company agrees to indemnify and hold harmless the Fund and each director of the Board and officers (collectively, the "Indemnified Parties" for purposes of this Section 8.1) and any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, -11- damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund's share or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement or prospectus for the Contracts or contained in the Contracts or advertisements or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the Registration Statement or prospectus for the Contracts or in the Contracts or advertisements or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature of the Fund not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, advertisements or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Fund by or on behalf of the Company; or -12- (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, as limited by and in accordance with the provisions of Section 8.1(b) and 8.1(c) hereof. 8.1(b) The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement or to the Fund, whichever is applicable. 8.1(c) The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. -13- 8.1(d) The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Fund shares or the Contracts or the operation of the Fund. 8.2 Indemnification by the Adviser 8.2(a) The Adviser agrees to indemnify and hold harmless the Company and the principal underwriter for the Contracts and each of their respective directors and officers and the principal underwriter for the Contracts and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Adviser) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund's shares or the Contracts and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or prospectus or advertisements or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Adviser or Fund by or on behalf of the Company for use in the Registration Statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature for -14- the Contracts not supplied by the Adviser or persons under its control) or wrongful conduct of the Fund, Adviser or Adviser or persons under their control, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, advertisements or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund; or (iv) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Section 817(h) of the Internal Revenue Code (the "Code") and Treasury Regulation 1.817-5 and any amendments or other modifications to such Section or Regulation, or to qualify as a regulated investment company under Subchapter M of the Code); or (v) arise out of or result from any material breach of any representation or warranty made by the Fund or the Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund or the Adviser; as limited by and in accordance with the provisions of Section 8.2(b) and 8.2(c) hereof. 8.2(b) The Adviser shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason or such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to each Company or the Account, whichever is applicable. -15- 8.2(c) The Adviser shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Adviser also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Adviser to such party of the Adviser's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Adviser will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.2(d) The Company agrees promptly to notify the Adviser of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of each Account. 8.3 Indemnification By the Fund 8.3(a) The Fund agrees to indemnify and hold harmless the Company and the principal underwriter for Contracts and each of their respective directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Fund) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) -16- or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Fund and: (i) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Section 817(h) of the Code and Treasury Regulation 1.817-5 and any amendments or other modifications to such Section or Regulation, or to qualify as a regulated investment company under Subchapter M of the Code); or (ii) arise out of or result from any material breach of any representations or warranty made by the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund; as limited by and in accordance with the provisions of Sections 8.3(b) and 83(c) hereof. 8.3(b) The Fund shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against on Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Fund, the Adviser or each Account, whichever is applicable. 8.3(c) The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund or any such claim shall not relieve the Fund from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Fund will be entitled to participate, at its -17- own expense, in the defense thereof. The Fund also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Fund to such party of the Fund's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d) The Company agrees promptly to notify the Fund of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of either Account, or the sale or acquisition of shares of the Fund. ARTICLE IX. Miscellaneous 9.1. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information without the express written consent of the affected party until such time as it may come into the public domain. 9.2. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 9.3. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 9.4. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 9.5. Each party hereto shall cooperate with, and promptly notify each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange -18- Commission, the National Association of Securities Dealers, Inc. 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. 9.6. 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. -19- 9.7. It is understood by the parties that this Agreement is not an exclusive arrangement in any respect. 9.8. The Company and the Adviser each understand and agree that the obligations of the Fund under this Agreement are not binding upon any shareholder of the Fund personally, but bind only the Fund and the Fund's property; the Company and the Adviser each represent that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder liability for acts or obligations of the Fund. 9.9. This Agreement shall not be assigned by any party hereto without the prior written consent of all the parties. 9.10. This Agreement sets forth the entire agreement between the parties and supercedes all prior communications, agreements and understandings, oral or written, between the parties regarding the subject matter hereof. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed as of the date specified below. AMERICAN GENERAL LIFE INSURANCE COMPANY By: ------------------------------- Title: ---------------------------- Date: ----------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS By: ------------------------------- Title: ---------------------------- Date: ----------------------------- -20- OPPENHEIMERFUNDS, INC. By: ------------------------------- Title: ---------------------------- Date: ----------------------------- -21- SCHEDULE 1 . American General Life Insurance Company Separate Account VL-R . American General Life Insurance Company Separate Account D -22- SCHEDULE 2 Portfolios of Oppenheimer Variable Account Funds: Oppenheimer High Income Fund/VA -23- SCHEDULE 3 Legacy Plus Variable Life Insurance Policy Policy Form No. 98615 -24- EX-8.(H) 9 BANC ONE/AMGEN PART. AGR. EXHIBIT (8)(h) FUND PARTICIPATION AGREEMENT ---------------------------- This Fund Participation Agreement (the "Agreement"), effective as of February 2, 2000, is made by and among American General Life Insurance Company ("Company"), One Group(R) Investment Trust (the "Trust"), the Trust's investment advisor, Banc One Investment Advisors Corporation (the "Adviser"), and the Trust's administrator, One Group Administrative Services, Inc. (the "Administrator"). WHEREAS, the Trust engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established by insurance companies for individual and group life insurance policies and annuity contracts with variable accumulation and/or pay-out provisions (hereinafter referred to individually and/or collectively as "Variable Insurance Products"); WHEREAS, insurance companies desiring to utilize the Trust as an investment vehicle under their Variable Insurance Products are required to enter into participation agreements with the Trust and the Administrator (the "Participating Insurance Companies"); WHEREAS, shares of the Trust are divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available for Variable Insurance Products of Participating Insurance Companies; WHEREAS, the Trust intends to offer shares of the series set forth on Schedule B (each such series hereinafter referred to as a "Portfolio") as may be amended from time to time by mutual agreement of the parties hereto under this Agreement to the accounts of the Company specified on Schedule A (hereinafter referred to individually as an "Account"; collectively, the "Accounts") WHEREAS, the Trust has obtained an order from the Securities and Exchange Commission, granting the Trust exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940 Act") and Rules 6e- 2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Trust to be sold to and held by Variable Insurance Product separate accounts of both affiliated and unaffiliated insurance companies (hereinafter the "Shared Funding Exemptive Order"); WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); WHEREAS, the Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws; WHEREAS, the Adviser is the investment adviser of the Portfolios of the Trust; WHEREAS, the Company has registered certain Variable Insurance Products under the 1933 Act; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios on behalf of each Account to fund certain of the aforesaid Variable Insurance Products and the Trust is authorized to sell such shares to each such Account at net asset value. 1 NOW, THEREFORE, in consideration of their mutual promises, the Company, the Trust, the Adviser, and the Administrator agree as follows: ARTICLE 1 The Contracts ------------- 1. The Company represents that it has established each of the Accounts specified on Schedule A as a separate account under Texas law, and has registered each such Account as a unit investment trust under the 1940 Act to serve as an investment vehicle for variable annuity contracts and/ or variable life contracts offered by the Company (the "Contracts"). The Contracts provide for the allocation of net amounts received by the Company to separate divisions of the Account for investment in the shares of the Portfolios. Selection of a particular division is made by the Contract owner who may change such selection from time to time in accordance with the terms of the applicable Contract. The Company agrees to make every reasonable effort to market its Contracts. In marketing its Contracts, the Company will comply with all applicable state or Federal laws. ARTICLE 2 Trust Shares ------------ 2.1 The Trust agrees to make available for purchase by the Company shares of the Portfolios and shall execute orders placed for each Account on a daily basis at the net asset value next computed after receipt by the Trust or its designee of such order. For purposes of this Section 2.1, the Company shall be the designee of the Trust for receipt of such orders from the Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust's designated transfer agent receives notice of such order by 10:00 a.m. Eastern Time on the next following Business Day ("Trade Date plus 1"). Notwithstanding the foregoing, the Company shall use its best efforts to provide the Trust's designated transfer agent with notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission, as set forth in the Trust's prospectus and statement of additional information. Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter the "Board") may refuse to permit the Trust to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 2.2. The Trust agrees that shares of the Trust will be sold only to Participating Insurance Companies for their Variable Insurance Products and, in the Trust's discretion, to qualified pension and retirement plans. No shares of any Portfolio will be sold to the general public. 2.3. The Trust agrees to redeem for cash, on the Company's request, any full or fractional shares of the Trust held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the request for redemption. For purposes of this Section 2.3, the Company shall be the designee of the Trust for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust's designated transfer agent receives notice of such request for redemption on Trade Date plus 1 in accordance with the timing rules described in Section 2.1. 2.4. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus of the Trust shall be made in accordance with the provisions of such prospectus. The Accounts of the Company, under which amounts may be invested in the Trust are listed on Schedule A attached hereto and incorporated herein by reference, as such Schedule A may be amended from time to time by mutual written agreement of all of the parties hereto. The Company will give the Trust and the Adviser 2 concurrent written notice of its intention to make available in the future, as a funding vehicle under the Contracts, any other investment company. 2.5. The Company will place separate orders to purchase or redeem shares of each Portfolio. Each order shall describe the net amount of shares and dollar amount of each Portfolio to be purchased or redeemed. In the event of net purchases, the Company shall pay for Portfolio shares on Trade Date plus 1. Payment shall be in federal funds transmitted by wire. In the event of net redemptions, the Portfolio shall pay the redemption proceeds in federal funds transmitted by wire by 2:00 p.m. Eastern Time on Trade Date plus 1. Notwithstanding the foregoing, if the payment of redemption proceeds on the next Business Day would require the Portfolio to dispose of Portfolio securities or otherwise incur substantial additional costs, and if the Portfolio has determined to settle redemption transactions for all shareholders on a delayed basis, proceeds shall be wired to the Company within seven (7) days and the Portfolio shall notify in writing the person designated by the Company as the recipient for such notice of such delay by 3:00 p.m. Eastern Time on Trade Date plus 1. 2.6. Issuance and transfer of the Trust's shares will be by book entry only. Share certificates will not be issued to the Company or any Account. Shares ordered from the Trust will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account. 2.7. The Administrator shall use its best efforts to furnish same day notice by 5:00 p.m. Eastern Time (by wire or telephone, followed by written confirmation) to the Company of any dividends or capital gain distributions payable on the Trust's shares. The Company hereby elects to receive all such dividends and capital gain distributions as are payable on the Portfolio shares in additional shares of that Portfolio. The Company reserves the right to revoke this election and to receive all such dividends and capital gain distributions in cash. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 2.8. The Administrator shall make the net asset value per share of each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6:30 p.m. Eastern Time. In the event that the Administrator is unable to meet the 6:30 p.m. time stated immediately above, then the Administrator shall provide the Company with additional time to notify the Administrator of purchase or redemption orders pursuant to Sections 2.1 and 2.3, respectively, above. Such additional time shall be equal to the additional time that the Administrator takes to make the net asset values available to the Company. 2.9. If the Administrator provides materially incorrect share net asset value information through no fault of the Company, the Company shall be entitled to an adjustment with respect to the Trust shares purchased or redeemed to reflect the correct net asset value per share as subsequently determined by the Administrator. The determination of the materiality of any net asset value pricing error shall be based on the Trust's policy for correction of pricing errors (the "Pricing Policy"). The Company shall correct such error in its records and in the records prepared by it for Contract owners in accordance with information provided by the Administrator. Any material error in the calculation or reporting of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to the Company. 2.10. The Administrator shall provide written confirmation to the Company of the amount of shares traded and the associated cost per share (NAV) total trade amount and the outstanding share balances held by the Account in each Portfolio as of the end of each Business Day. Such confirmation will be furnished by 1:00 p.m. Eastern time on the next Business Day. ARTICLE 3 Prospectuses, Reports to Shareholders and Proxy Statements, Voting ------------------------------------------------------------------ 3.1. The Trust shall provide the Company with as many printed copies of the Trust's current prospectus as the Company may reasonably request. The Administrator will provide the Company with a copy of the statement of additional information suitable for duplication. If requested by the Company, in lieu of 3 providing printed copies, the Trust shall provide camera-ready film or computer diskettes containing the Trust's prospectus and statement of additional information in order for the Company once each year (or more frequently if the prospectus and/or statement of additional information for the Trust is amended during the year) to have the prospectus for the Contracts and the Trust's prospectus printed together in one document or separately. The Company may elect to print the Trust's prospectus and/or its statement of additional information in combination with other investment companies' prospectuses and statements of additional information. 3.2(a). Except as otherwise provided in this Section 3.2, all expenses of preparing, setting in type and printing and distributing Trust prospectuses and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of setting in type, printing and distributing shall be borne by the Trust. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Trust's prospectus and/or statement of additional information, the Trust shall bear the cost of typesetting to provide the Trust's prospectus and/or statement of additional information to the Company in the format in which the Trust is accustomed to formatting prospectuses and statements of additional information, respectively, and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses and/or statements of additional information. In such event, the Trust will reimburse the Company in an amount equal to the product of x and y where x is the number of such prospectuses distributed to owners of the Contracts, and y is the Trust's per unit cost of printing the Trust's prospectuses. The same procedures shall be followed with respect to the Trust's statement of additional information. The Trust shall not pay any costs of typesetting, printing and distributing the Trust's prospectus and/or statement of additional information to prospective Contract owners. 3.2(b). The Trust, at the Company's expense, shall provide the Company with copies of Annual and Semi-Annual Reports (the "Reports") in such quantity as the Company shall reasonably require for distributing to Contract owners. The Trust, at its expense, shall provide the Contract owners designated by the Company with copies of its proxy statements and other communications to shareholders (except for prospectuses and statements of additional information, and which are covered in Section 3.2(a) above, and Reports). The Trust shall not pay any costs of distributing Reports and other communications to prospective Contract owners. 3.2(c). The Company agrees to provide the Trust or its designee with such information as may be reasonably requested by the Trust to assure that the Trust's expenses do not include the cost of typesetting, printing or distributing any of the foregoing documents other than those actually distributed to existing Contract owners. 3.2(d). The Trust shall pay no fee or other compensation to the Company under this Agreement, except that if the Trust or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Trust may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Trust in writing. 3.2(e) All expenses, including expenses to be borne by the Trust pursuant to Section 3.2 hereof, incident to performance by the Trust under this Agreement shall be paid by the Trust. The Trust shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Trust, in accordance with applicable state laws prior to their sale. The Trust shall bear the expenses for the cost of registration and qualification of the Trust's shares. 3.3. If and to the extent required by law, the Company shall with respect to proxy material distributed by the Trust to Contract owners designated by the Company to whom voting privileges are required to be extended: (i) solicit voting instructions from Contract owners; 4 (ii) vote the Trust shares in accordance with instructions received from Contract owners; and (iii) vote Trust shares for which no instructions have been received in the same proportion as Trust shares of such Portfolio for which instructions have been received, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The Company reserves the right to vote Trust shares held in any segregated asset account in its own right, to the extent permitted by law. ARTICLE 4 Sales Material and Information ------------------------------ 4.1. The Company shall furnish, or shall cause to be furnished, to the Trust, the Adviser or their designee, drafts of the separate accounts prospectuses and statements of additional information and each piece of sales literature or other promotional material prepared by the Company or any person contracting with the Company to prepare such material in which the Trust, the Adviser or the Administrator is described, at least ten Business Days prior to its use. No such material shall be used if the Trust, the Adviser, the Administrator or their designee reasonably objects to such use within ten Business Days after receipt of such material. 4.2. Neither the Company nor any person contracting with the Company to prepare sales literature or other promotional material shall give any information or make any representations or statements on behalf of the Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement or Trust prospectus, as such registration statement or Trust prospectus may be amended or supplemented from time to time, or in reports to shareholders or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust or its designee, except with the permission of the Trust or its designee. 4.3. The Adviser shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material prepared by the Trust in which the Company or its Accounts, are described at least ten Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within ten Business Days after receipt of such material. 4.4. Neither the Trust, the Administrator, nor the Adviser shall give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts, other than the information or representations contained in a registration statement or prospectus for the Contracts, as such registration statement or prospectus may be amended or supplemented from time to time, or in published reports or solicitations for voting instruction for each Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5. The Trust will provide to the Company at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Trust or its shares, promptly after the filing of such document with the Securities and Exchange Commission or other regulatory authorities. 4.6. The Company will provide to the Trust, upon the Trust's request, at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the investment in an Account or Contract, contemporaneously with the filing of such documents with the Securities and Exchange Commission or other regulatory authorities. 5 4.7. For purposes of this Article 4, the phrase "sales literature or other promotional material" includes, but is not limited to, any of the following: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape, display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), and educational or training materials or other communications distributed or made generally available to some or all agents or employees. 4.8. The Company and its agents shall make no representations concerning the Trust except those contained in the then-current prospectus and Statement of Additional Information of the Trust and in current printed sales literature of the Trust. ARTICLE 5 Administrative Services to Contract owners ------------------------------------------ 5. Administrative services to Contract owners shall be the responsibility of the Company and shall not be the responsibility of the Trust, the Adviser or the Administrator. The Trust and the Administrator recognize that the Company will be the sole shareholder of Trust shares issued pursuant to the Contracts. ARTICLE 6 Representations and Warranties ------------------------------ 6.1. The Trust represents that it believes, in good faith, that each Portfolio is currently qualified as a regulated investment companies under Subchapter M of the Internal Revenue Code of 1986,as amended (the "Code") and that it will make every effort to maintain such qualification of the Trust and that it will notify the Company immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or that it might not so qualify in the future. 6.2. The Company represents that it believes, in good faith, that the Contracts will at all times be treated as annuity contracts under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify the Trust immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 6.3. The Trust represents that it believes, in good faith, that the Funds will at all times comply with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code, and that it will make every effort to maintain the Trust's' compliance with such diversification requirements, and that it will notify the Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that a Fund might not so qualify in the future. 6.4 . The Company represents and warrants that the interests of the Contracts are or will be registered unless exempt and that it will maintain such registration under the 1933 Act and the regulations thereunder to the extent required by the 1933 Act and that the Contracts will be issued and sold in compliance with all applicable federal and state laws and regulations. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established each Account prior to any issuance or sale thereof as a segregated asset account under the Texas Insurance Code and the regulations thereunder and has registered or, prior to any issuance or sale of the Contracts, will maintain the registration of each Account as a unit investment trust in accordance with and to the extent required by the provisions of the 1940 Act and the regulations thereunder, unless exempt therefrom, to serve as a segregated investment account for the Contracts. The Company shall amend its registration statement for its contracts under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts. 6.5. The Company represents that it believes, in good faith, that the Variable Account is a "segregated asset account" and that interests in the Variable Account are offered exclusively through the purchase of a "variable contract," within the meaning of such terms under Section 1.817-5(f) (2) of the 6 regulations under the Code, and that it will make every effort to continue to meet such definitional requirements, and that it will notify the Trust immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. 6.6. The Trust represents and warrants that it is and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount no less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. Such bond shall include coverage for larceny and embezzlement and shall be issued by a relevant bonding company. The Trust will notify the Company immediately upon having a reasonable basis for believing that a Portfolio no longer has the coverage required by this Section 6.6. 6.7. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other entities dealing with the money or securities of the Trust are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust, in an amount not less than five million dollars ($5,000,000). Such bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect and agrees to notify the Trust immediately upon having a reasonable basis for believing that the Company no longer has the coverage required by this Section 6.7. 6.8. The Trust represents that to the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust undertakes to have a majority of the disinterested members of the Board, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 6.9. The Adviser and the Administrator each represents and warrants that it complies with all applicable federal and state laws and regulations and that it will perform its obligations for the Trust and the Company in compliance with the laws and regulations of its state of domicile and any applicable state and federal laws and regulations. ARTICLE 7 Statements and Reports ---------------------- 7.1. The Administrator or its designee shall provide the Company within five (5) business days after the end of each month a monthly statement of account confirming all transactions made during that month in the Account. 7.2. The Trust and Administrator agree to provide the Company no later than March 1 of each year with the investment advisory and other expenses of the Trust incurred during the Trust's most recently completed fiscal year, to permit the Company to fulfill its prospectus disclosure obligations under the SEC's variable annuity fee table requirements. ARTICLE 8 Potential Conflicts ------------------- 8.1. The Board will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Trust. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract owners and variable life insurance contract owners; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners. The Board shall 7 promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 8.2. The Company will report in writing any potential or existing material irreconcilable conflict of which it is aware to the Administrator. Upon receipt of such report, the Administrator shall report the potential or existing material irreconcilable conflict to the Board. The Administrator shall also report to the Board on a quarterly basis whether the Company has reported any potential or existing material irreconcilable conflicts during the previous calendar quarter. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded. 8.3. If it is determined by a majority of the Board, or a majority of its disinterested trustees, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Trust or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Trust, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance policy owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. No charge or penalty will be imposed as a result of such withdrawal. The Company agrees that it bears the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict and the cost of such remedial action, and these responsibilities will be carried out with a view only to the interests of Contract owners. 8.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account (at the Company's expense); provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. No charge or penalty will be imposed as a result of such withdrawal. The Company agrees that it bears the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict and the cost of such remedial action, and these responsibilities will be carried out with a view only to the interests of Contract owners. 8.5. For purposes of Sections 8.3 through 8.4 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Trust be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 8.3 through 8.4 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. 8.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. 8.7. Each of the Company and the Adviser shall at least annually submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon them by the provisions hereof and in the Shared Funding Exemptive Order, and said 8 reports, materials and data shall be submitted more frequently if deemed appropriate by the Board. Without limiting the generality of the foregoing or the Company's obligations under Section 8.2, the Company shall provide to the Administrator a written report to the Board no later than January 15th of each year indicating whether any material irreconcilable conflicts have arisen during the prior fiscal year of the Trust. All reports received by the Board of potential or existing conflicts, and all Board action with regard to determining the existence of a conflict, notifying Participating Insurance Companies of a conflict, and determining whether any proposed action adequately remedies a conflict, shall be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records shall be made available to the Securities and Exchange Commission upon request. ARTICLE 9 Indemnification --------------- 9.1. Indemnification By The Company ------------------------------ 9.1 (a). The Company agrees to indemnify and hold harmless the Trust, the Administrator, the Adviser, and each member of their respective Boards and officers and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 9.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Trust's shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Trust for use in the registration statement or prospectus for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of the Trust not supplied by the Company, or persons under its control and other than statements or representations authorized by the Trust) or unlawful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Trust shares; or (iii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of the 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 a statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; as limited by and in accordance with the provisions of Section 9.1(b) and 9.1(c) hereof. 9 9.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 9.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at as own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the Indemnified Party named in the action. After notice from the Company to such Indemnified Party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company shall not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other than reasonable costs of investigation. 9.1(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust. 9.2. Indemnification by Administrator -------------------------------- 9.2(a). The Administrator agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 9.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Administrator) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the 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 to the Trust or the Administrator by or on behalf of the Company, the Adviser, Counsel for the Trust , the independent public accountant to the Trust, or any person or entity that is not acting as agent for or controlled by the Administrator for use in the registration statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Portfolio shares; or (ii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Administrator; or (iii) arise as a result of any failure by the Administrator to provide the services and furnish the materials under the terms of this Agreement; or 10 (iv) arise out of or result from any material breach of any representation and/or warranty made by the Administrator in this Agreement or arise out of or result from any other material breach of this Agreement by the Administrator; as limited by and in accordance with the provisions of Section 9.2(b) and 9.2(c) hereof. 9.2(b). The Administrator shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 9.2(c). The Administrator shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Administrator in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Administrator of any such claim shall not relieve the Administrator from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Administrator will be entitled to participate, at its own expense, in the defense thereof. The Administrator also shall be entitled to assume the defense thereof, with counsel satisfactory to the Indemnified Party named in the action. After notice from the Administrator to such Indemnified Party of the Administrator's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Administrator will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other than reasonable costs of investigation. 9.2(d). The Company agrees promptly to notify the Administrator of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of each Account in which the Portfolios are made available. 9.3. Indemnification by the Adviser ------------------------------ 9.3(a). The Adviser agrees to indemnify and hold harmless the Company and its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the "Indemnified Parties" and individually, "Indemnified Party," for purposes of this Section 9.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Adviser) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the 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 to the Adviser or the Trust by or on behalf of the Company, the Administrator, Counsel for the Trust, the independent public accountant to the Trust, or any person or entity that is not acting as agent for or controlled by the Adviser for use in the registration statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Portfolio shares; or (ii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged 11 omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Adviser; or (iii) arise as a result of any failure by the Adviser to provide the services and furnish the materials under the terms of this Agreement; or (iv) arise out of or result from any material breach of any representation and/or warranty made by the Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Adviser; as limited by and in accordance with the provisions of Section 9.3(b) and 9.3(c) hereof. 9.3(b). The Adviser shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 9.3(c). The Adviser shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Adviser will be entitled to participate, at its own expense, in the defense thereof. The Adviser also shall be entitled to assume the defense thereof, with counsel satisfactory to the Indemnified Party named in the action. After notice from the Adviser to such Indemnified Party of the Adviser's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Adviser will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other then reasonable costs of investigation. 9.3(d). The Company agrees to promptly notify the Adviser of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of each Account, or the sale or acquisition of shares of the Trust. 9.4. Indemnification by the Trust ---------------------------- 9.4(a). The Trust agrees to indemnify and hold harmless the Company and its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the "Indemnified Parties" and individually, "Indemnified Party," for purposes of this Section 9.4) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the 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 the Trust by or on behalf of the Adviser, the Company, or the Administrator for use in the registration statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Portfolio shares; or 12 (ii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Trust; or (iii) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement; or (iv) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; as limited by and in accordance with the provisions of Section 9.4(b) and 9.4(c) hereof. 9.4(b). The 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 as may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 9.4(c). The 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 the 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 the Trust of any such claim shall not relieve the 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, the Trust will be entitled to participate, at its own expense, in the defense thereof. The Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the Indemnified Party named in the action. After notice from the Trust to such Indemnified Party of the 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 the Trust will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other then reasonable costs of investigation. 9.4(d). The Company agrees to promptly notify the Trust of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of each Account, or the sale or acquisition of shares of the Trust. ARTICLE 10 Applicable Law -------------- 10.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Massachusetts. 10.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE 11 Termination ----------- 11.1. This Agreement shall continue in full force and effect until the first to occur of: 13 (a) termination by any party for any reason upon ninety days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Trust, the Adviser, and the Administrator with respect to any Portfolio based upon the Company's determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts. Reasonable advance notice of election to terminate shall be furnished by the Company, said termination to be effective ten (10) days after receipt of notice unless the Trust makes available a sufficient number of shares to reasonably meet the requirements of the Account within said ten (10) day period; or (c) termination by the Company upon written notice to the Trust, the Adviser, and the Administrator with respect to any Portfolio in the event any of the Portfolio's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment medium of the Contracts issued or to be issued by the Company. The terminating party shall give prompt notice to the other parties of its decision to terminate; or (d) termination by the Company upon written notice to the Trust, the Adviser and the Administrator with respect to any Portfolio in the event that such portfolio ceases to qualify as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision; or (e) termination by the Company upon written notice to the Trust, the Adviser, and the Administrator with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Section 6.3 hereof; or (f) termination by either the Trust, the Adviser, or the Administrator by written notice to the Company, if either one or more of the Trust, the Adviser, or the Administrator, shall determine, in its or their sole judgment exercised in good faith, that the Company and/or their affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity, provided that the Trust, the Adviser, or the Administrator will give the Company sixty (60) days' advance written notice of such determination of its intent to terminate this Agreement, and provided further that after consideration of the actions taken by the Company and any other changes in circumstances since the giving of such notice, the determination of the Trust, the Adviser, or the Administrator shall continue to apply on the 60th day since giving of such notice, then such 60th day shall be the effective date of termination; or (g) termination by the Company by written notice to the Trust, the Adviser, and the Administrator, if the Company shall determine, in its sole judgment exercised in good faith, that either the Trust, the Adviser, or the Administrator has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity, provided that the Company will give the Trust, the Adviser, and the Administrator sixty (60) days' advance written notice of such determination of its intent to terminate this Agreement, and provided further that after consideration of the actions taken by the Trust, the Adviser, or the Administrator and any other changes in circumstances since the giving of such notice, the determination of the Company shall continue to apply on the 60th day since giving of such notice, then such 60th day shall be the effective date of termination; or (h) termination by the Trust, the Adviser, or the Administrator by written notice to the Company, if the Company gives the Trust, the Adviser, and the Administrator the written notice specified in Section 2.4 hereof and at the time such notice was given there was no notice of termination outstanding under any other provision of this Agreement; provided, however any termination under this Section 11.1(h) shall be effective sixty (60) days after the notice specified in Section 2.4 was given; or 14 (i) termination by any party upon the other party's breach of any representation in Article 6 or any material provision of this Agreement, which breach has not been cured to the satisfaction of the terminating party within ten (10) days after written notice of such breach is delivered to the Trust or the Company, as the case may be; or (j) termination by the Trust, the Adviser, or Administrator by written notice to the Company in the event an Account or Contract is not registered (unless exempt from registration) or sold in accordance with applicable federal or state law or regulation, or the Company fails to provide pass-through voting privileges as specified in Section 3.3. 11.2. Effect of Termination. Notwithstanding any termination of this Agreement, the Trust shall at the option of the Company, continue to make available additional shares of the Trust pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts") unless such further sale of Trust shares is proscribed by law, regulation or applicable regulatory body, or unless the Trust determines that liquidation of the Trust following termination of this Agreement is in the best interests of the Trust and its shareholders. Specifically, without limitation, the owners of the Existing Contracts shall be permitted to direct reallocation of investments in the Trust, redemption of investments in the Trust and/or investment in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 11.2 shall not apply to any terminations under Article 8 and the effect of such Article 8 terminations shall be governed by Article 8 of this Agreement. 11.3. The Company shall not redeem Trust shares attributable to the Contracts (as distinct from Trust shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption") or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the Trust, the Adviser and the Administrator the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Trust and the Adviser) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving the Trust or the Adviser 30 days notice of its intention to do so. ARTICLE 12 Notices ------- Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: One Group Investment Trust 1111 Polaris Parkway, Suite B2 Columbus, Ohio 43240 Attn: Fund President If to the Administrator: One Group Administrative Services, Inc. 1111 Polaris Parkway, Suite B2 Columbus, Ohio 43240 Attention: President 15 If to the Adviser: Banc One Investment Advisors Corporation 1111 Polaris Parkway, Suite B2 Columbus, Ohio 43271-0211 Attn: Peter Atwater If to the Company: American General Life Insurance Company 2929 Allen Parkway, A40-04 Houston, Texas 77019 Attn: General Counsel ARTICLE 13 Miscellaneous ------------- 13.1. All persons dealing with the Trust must look solely to the property of the Trust for the enforcement of any claims against the Trust as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Trust. Each of the Company, the Adviser, and the Administrator acknowledges and agrees that, as provided by the Trust's Amended and Restated Declaration of Trust, the shareholders, trustees, officers, employees and other agents of the Trust and the Portfolios shall not personally be bound by or liable for matters set forth hereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. The Trust's Amended and Restated Declaration of Trust is on file with the Secretary of State of Massachusetts. 13.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party. 13.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 13.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 13.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange Commission, the National Association of Securities Dealers and state insurance regulators) and shall permit such authorities (and other parties hereto) reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 13.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations at law or in equity, which the parties hereto are entitled to under state and federal laws. 13.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Adviser may, with advance written notice to the other parties hereto, assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Adviser if such assignee is duly licensed and registered to perform the obligations of the Adviser under this Agreement. 16 13.9. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee upon request, copies of the following reports: (a) the Company's annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles ("GAAP"), if any), as soon as practical and in any event within 90 days after the end of each fiscal year; (b) the Company's June 30th quarterly statements (statutory), as soon as practical and in any event within 45 days following such period; (c) any financial statement, proxy statement, stockholders and/or policyholders, as soon as notice or report of the Company sent to practical after the delivery thereof to stockholders; (d) any registration statement (without exhibits) and financial reports the Company filed with the Securities and Exchange Commission or any state insurance regulator, as soon as practical after the filing thereof; and (e) any other public report submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, as soon as practical after the receipt thereof. 13.10. The names "One Group(R) Investment Trust" and `Trustees of One Group(R) Investment Trust" refer respectively to the Trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated June 7, 1993 to which reference is hereby made and a copy of which is on file at the office of the Secretary of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of `One Group Investment Trust' entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. 13.11. The Trust and the Administrator agree to consult with the Company concerning whether any Portfolio of the Trust qualifies to provide a foreign tax credit pursuant to Section 853 of the Code. [SIGNATURE PAGES FOLLOW] 17 AMERICAN GENERAL LIFE INSURANCE COMPANY By:_________________________________________ Title: _______________________________________ ONE GROUP INVESTMENT TRUST By:_________________________________________ Title: _______________________________________ BANC ONE INVESTMENT ADVISORS CORPORATION By:_________________________________________ Title: _______________________________________ ONE GROUP ADMINISTRATIVE SERVICES, INC. By:_________________________________________ Title: _______________________________________ 18 SCHEDULE A SEPARATE ACCOUNTS AND CONTRACTS -------------------------------
Name of Separate Account and Date Established by Form Numbers Board of Directors Funded by Separate Account - ------------------------------------------------------------------------------------------ Contract Form Nos: ------------------------------------- American General Life Insurance Company Separate 99615 Account VL-R, May 6, 1997 ------------------------------------- - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
19 SCHEDULE B ---------- PORTFOLIOS OF THE TRUST - ----------------------- One Group Investment Trust Government Bond Portfolio One Group Investment Trust Large Cap Growth Portfolio One Group Investment Trust Equity Index Portfolio One Group Investment Trust Diversified Equity Portfolio One Group Investment Trust Mid Cap Growth Portfolio 20 EX-8.(I)(II) 10 AMENDMENT TO FUND PARTICIPATION AGREEMENT EXHIBIT (8)(i)(ii) AMENDMENT TO FUND PARTICIPATION AGREEMENT American General Life Insurance Company, Templeton Variable Products Series Fund, and Franklin Templeton Distributors, Inc. hereby amend their Fund Participation Agreement dated as of April 1, 1999, ("Agreement"), by: 1. Adding Franklin Templeton Variable Insurance Products Trust ("VIP"), an open-end management investment company organized as a business trust under Massachusetts law, as a party to the Agreement between and among Templeton Variable Products Series Fund ("TVP"), an open- end management investment company organized as a business trust under Massachusetts law (both Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust shall hereinafter be referred to as the "Trust"), Franklin Templeton Distributors, Inc., a California corporation, the Trust's principal underwriter (the "Underwriter") and American General Life Insurance Company, a life insurance company organized as a corporation under Texas law (the "Company"). 2. Adding Article IX, "Agreement" AGREEMENT 9.1 Form of Agreement. This Agreement shall create a separate agreement for each Trust and the Underwriter as though each Trust and the Underwriter had separately executed an identical Fund Participation Agreement with the Company. No rights, responsibilities or liabilities arising under the Agreement as it pertains to one Trust shall be enforceable by or against any party to the Agreement as it pertains to another Trust. 3. Adding Franklin Templeton Variable Insurance Products Trust to Article VII, "Notices" If to the Trust: Franklin Templeton Variable Insurance Products Trust 777 Mariners Island Boulevard San Mateo, CA 94404 Attention: Karen L. Skidmore, Assistant Vice President & Assistant Secretary 4. Replacing Schedules A, B, and C with amended Schedule A-C, attached; 5. Replacing Schedule D with amended Schedule D, attached; 6. Replacing Schedule E with amended Schedule E, attached. 1 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment to Fund Participation Agreement, to be effective as of [ ], 1999.
American General Life Insurance Company Templeton Variable Products Series Fund - --------------------------------------- --------------------------------------- By its authorized officer By its authorized officer By:____________________________________ By:______________________________ Name: Name: Karen L. Skidmore Title: Title: Assistant Vice President and Assistant Secretary Franklin Templeton Variable Insurance Products Trust ------------------------------------------------------- By its authorized officer By:_______________________________ Name: Karen L. Skidmore Title: Assistant Vice President and Assistant Secretary Franklin Templeton Distributors, Inc. ------------------------------------- By its authorized officer By:__________________________________ Name: Deborah Gatzek Title: Senior Vice President
2 SCHEDULE A-C Contracts Issued by American General Life Insurance Company -----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- CONTRACT 1 CONTRACT 2 CONTRACT 3 - ----------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME Platinum Investor Legacy Plus VUL Key Legacy Plus VUL AND TYPE Variable Annuity - ----------------------------------------------------------------------------------------------------------- REGISTERED (Y/N) Yes Yes Yes - ----------------------------------------------------------------------------------------------------------- SEC REGISTRATION 333-70667 333-53909 333-89897 NUMBER -1933 ACT - ----------------------------------------------------------------------------------------------------------- REPRESENTATIVE FORM 98020 98615 99616 NUMBERS - ----------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT American General Life American General Life American General Life NAME/DATE ESTABLISHED Insurance Company Insurance Company Insurance Company Separate Account D Separate Account VL-R - Separate Account VL-R - May 6, 1997 May 6, 1997 - ----------------------------------------------------------------------------------------------------------- SEC REGISTRATION 811-02441 811-08561 811-08561 NUMBER - 1940 ACT - ----------------------------------------------------------------------------------------------------------- TEMPLETON VARIABLE TVP - Templeton Asset TVP - Templeton TVP - Templeton PRODUCTS SERIES FUND Allocation Fund - Developing Markets Fund - International Fund - ("TVP"), FRANKLIN Class 2 (Templeton Class 2 (Templeton Asset Class 2 (Templeton TEMPLETON VARIABLE Investment Counsel, Management Ltd.) Investment Counsel, Inc.) INSURANCE PRODUCTS Inc.) TRUST ("VIP") TVP - Templeton VIP - Franklin Small Cap -PORTFOLIOS, CLASSES TVP - Templeton International Fund - Fund - Class 2 (Franklin AND ADVISER International Fund - Class 2 (Templeton Advisers, Inc.) Class 2 (Templeton Investment Counsel, Inc.) Investment Counsel, Inc.) TVP - Franklin Small Cap Investments Fund - Class 2 (Franklin Advisers, Inc.) - -----------------------------------------------------------------------------------------------------------
3 SCHEDULE A-C Contracts Issued by American General Life Insurance Company -----------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- CONTRACT 4 CONTRACT 5 CONTRACT 6 - ---------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME The One Solution VUL AND TYPE - ----------------------------------------------------------------------------------------------------------- REGISTERED (Y/N) Yes - ----------------------------------------------------------------------------------------------------------- SEC REGISTRATION 333-87307 NUMBER -1933 ACT - ----------------------------------------------------------------------------------------------------------- REPRESENTATIVE FORM 99615 NUMBERS - ----------------------------------------------------------------------------------------------------------- SEPARATE ACCOUNT American General Life NAME/DATE ESTABLISHED Insurance Company Separate Account VL-R - May 6, 1997 - ----------------------------------------------------------------------------------------------------------- SEC REGISTRATION 811-08561 NUMBER - 1940 ACT - ----------------------------------------------------------------------------------------------------------- TEMPLETON VARIABLE TVP - Templeton PRODUCTS SERIES FUND Developing Markets ("TVP"), FRANKLIN Fund - Class 2 TEMPLETON VARIABLE (Templeton Asset INSURANCE PRODUCTS Management Ltd.) TRUST ("VIP") -PORTFOLIOS, CLASSES VIP - Franklin Small AND ADVISER Cap Fund - Class 2 (Franklin Advisers, Inc.) - -----------------------------------------------------------------------------------------------------------
4 SCHEDULE D OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS ----------------------------------------------
Platinum Investor Variable Annuity: Legacy Plus VUL: - ----------------------------------- ---------------- AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc. AIM V.I. International Equity Fund V.I. International Equity Fund AIM V.I. Value Fund V.I. Value Fund American General Series Portfolio Company American General Series Portfolio Company International Equities Fund Money Market Fund MidCap Index Fund Money Market Fund Stock Index Fund Dreyfus Variable Investment Fund BT Insurance Funds Trust Quality Bond Portfolio Equity 500 Index Small Cap Portfolio EAFE Equity Index Dreyfus Socially Responsible Growth Fund, Inc. MFS Variable Insurance Trust Morgan Stanley Universal Funds, Inc. MFS Emerging Growth Series Equity Growth Morgan Stanley Universal Funds, Inc. MFS Variable Insurance Trust Equity Growth Portfolio MFS Emerging Growth Series High Yield Portfolio SAFECO Resource Series Trust Putnam Variable Trust Equity Portfolio Putnam VT Diversified Income Fund Growth Portfolio Putnam VT Growth & Income Fund Van Kampen American Capital Life Investment Trust Strategic Stock Portfolio Oppenheimer Variable Account Funds Oppenheimer High Income
5
SCHEDULE D OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS ---------------------------------------------- (CONTINUED) Key Legacy Plus The One VUL Solution - --------------- -------------------- AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc. - ---------------------------------- ----------------------------------- AIM V.I. International Equity Fund AIM V.I. Capital Appreciation Fund -------------------------------------------- AIM V.I. Government Securities Fund --------------------------------------------- AIM V.I. High Yield Fund ---------------------------------- AIM V.I. International Equity Fund -------------------------------------------- American Century Variable Portfolios, Inc. American General Series Portfolio Company - ------------------------------------------ ----------------------------------------- VP Value Fund Money Market Fund American General Series Portfolio Company Kemper Variable Series - ----------------------------------------- ---------------------- Money Market Fund Kemper International Portfolio Kemper Small Cap Value Portfolio MFS Variable Insurance Trust MFS Variable Insurance Trust - ---------------------------- ---------------------------- MFS Total Return Series MFS Growth With Income Series Neuberger Berman Advisers Management Trust Oppenheimer Variable Account Funds - ------------------------------------------ ---------------------------------- Partners Portfolio Oppenheimer High Income Fund/VA Oppenheimer Variable Account Funds One Group Investment Trust - ---------------------------------- -------------------------- Oppenheimer High Income Fund/VA One Group Investment Trust Diversified Equity Portfolio One Group Investment Trust Equity Index Portfolio One Group Investment Trust Government Bond Portfolio One Group Investment Trust Large Cap Growth Portfolio One Group Investment Trust Mid Cap Growth Portfolio Putnam Variable Trust Putnam Variable Trust - --------------------- -------------------------------------------------------------- Putnam VT Diversified Income Fund Putnam VT Vista Fund Van Kampen Life Investment Trust Van Kampen Life Investment Trust - -------------------------------- -------------------------------------------------------------- Emerging Growth Portfolio Emerging Growth Portfolio Victory Variable Insurance Funds - -------------------------------- Diversified Stock Fund Investment Quality Bond Fund Small Cap Opportunity Fund
6 SCHEDULE E RULE 12B-1 PLANS Compensation Schedule --------------------- Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2. Trust and Portfolio Maximum Annual Payment Rate - --------------------------------------------------------------------------- TVP - FRANKLIN SMALL CAP INVESTMENTS FUND 0.25% TVP - TEMPLETON ASSET ALLOCATION FUND 0.25% TVP - TEMPLETON DEVELOPING MARKETS FUND 0.25% TVP - TEMPLETON INTERNATIONAL FUND 0.25% VIP - FRANKLIN SMALL CAP FUND 0.25% Agreement Provisions -------------------- If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") you provide administrative and other services which assist in the promotion and distribution of Eligible Shares or Variable Contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Administrative and other services" may include, but are not limited to, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, maintaining customer accounts and records, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares 7 as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to- year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule E relating to the Plans will also terminate. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Fund. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule E, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the contracts. 8 EX-8.(K) 11 VAN KAMPEN/AMGEN SERVICES AGR. EXHIBIT (8)(k) AGREEMENT THIS AGREEMENT ("Agreement") made as of January 1, 2000, is by and between VAN KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and AMERICAN GENERAL LIFE INSURANCE COMPANY, a Texas corporation ("AGL"). W I T N E S S E T H: WHEREAS, each of the investment companies listed on Schedule One hereto ("Schedule One," as the same may be amended from time to time), is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act") (such investment companies are hereinafter collectively called the "Funds," or each a "Fund"); and WHEREAS, each of the Funds is available as an investment vehicle for AGL for certain of its separate accounts to fund variable life insurance policies and/or variable annuity contracts identified on Schedule Two hereto ("Schedule Two," as the same may be amended from time to time) (the "Contracts"); and WHEREAS, AGL has entered into a participation agreement dated January 24, 1997, among AGL, American General Securities Incorporated, Adviser, Van Kampen Funds Inc. ("Underwriter"), and the Funds (the "Participation Agreement," as the same may be amended from time to time); and WHEREAS, Adviser provides, among other things, investment advisory and/or administrative services to the Funds; and WHEREAS, Adviser desires AGL to provide the administrative services specified in the attached Exhibit A ("Administrative Services"), in connection with the Contracts for the benefit of persons who maintain their ownership interests in the separate account, whose interests are included in the master account ("Master Account") referred to in paragraph 1 of Exhibit A ("Shareholders"), and AGL is willing and able to provide such Administrative Services on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, each party hereto severally agrees as follows: 1. AGL agrees to perform the Administrative Services specified in Exhibit A hereto for the benefit of the Shareholders. 2. AGL represents and agrees that it will maintain and preserve all records as required by law to be maintained and preserved in connection with providing the Administrative Services, and will otherwise comply with all laws, rules and regulations applicable to the Administrative Services. 1 3. AGL agrees to provide copies of all the historical records relating to transactions between the Funds and Shareholders, and all written communications and other related materials regarding the Fund(s) to or from such Shareholders, as reasonably requested by Adviser or its representatives (which representatives, include, without limitation, its auditors, legal counsel or the Underwriter, as the case may be), to enable Adviser or its representatives to monitor and review the Administrative Services performed by AGL, or comply with any request of the board of directors, or trustees or general partners (collectively, the "Directors") of any Fund, or of a governmental body, self-regulatory organization or Shareholder. In addition, AGL agrees that it will permit Adviser, the Funds or their representatives, to have reasonable access to its personnel and records in order to facilitate the monitoring of the quality of the Administrative Services. 4. AGL may, with the consent of Adviser, contract with or establish relationships with other parties for the provision of the Administrative Services or other activities of AGL required by this Agreement, or the Participation Agreement, provided that AGL shall be fully responsible for the acts and omissions of such other parties. 5. AGL hereby agrees to notify Adviser promptly if for any reason it is unable to perform fully and promptly any of its obligations under this Agreement. 6. AGL hereby represents and covenants that it does not, and will not, own or hold or control with power to vote any shares of the Funds which are registered in the name of AGL or the name of its nominee and which are maintained in AGL variable annuity or variable life insurance accounts. AGL represents further that it is not registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the"1934 Act"), and it is not required to be so registered, including as a result of entering into this Agreement and performing the Administrative Services, and other obligations of AGL set forth in this Agreement. 7. The provisions of the Agreement shall in no way limit the authority of Adviser, or any Fund or Underwriter to take such action as any of such parties may deem appropriate or advisable in connection with all matters relating to the operations of any of such Funds and/or sale of its shares. 8. In consideration of the performance of the Administrative Services by AGL with respect to the Contracts, beginning on the date hereof and during the term of the Participation Agreement, Adviser agrees to pay AGL an annual fee which shall equal .25% of the value of each Fund's assets in the Contracts maintained in the Master Account for the Shareholders (excluding all assets invested during the guarantee periods available under the Contracts). The determination of applicable assets shall be made by averaging assets in applicable Funds as of the last Valuation Date (as defined in the prospectus relating to the Contracts) of each month falling within the applicable calendar year. The foregoing fee will be paid by Adviser to AGL on a calendar year basis, and in this regard, payment 2 of such fee will be made by Adviser to AGL within thirty (30) days following the end of each calendar year. Notwithstanding anything in this Agreement or the Participation Agreement appearing to the contrary, the payments by Adviser to AGL relate solely to the performance by AGL of the Administrative Services described herein only, and do not constitute payment in any manner for services provided by AGL to AGL policy or contract owners, or to any separate account organized by AGL, or for any investment advisory services, or for costs associated with the distribution of any variable annuity or variable life insurance contracts. 9. AGL shall indemnify and hold harmless each of the Funds, Adviser and Underwriter and each of their respective officers, Directors, employees and agents from and against any and all losses, claims, damages, expenses, or liabilities that any one or more of them may incur including without limitation reasonable attorneys' fees, expenses and costs arising out of or related to the performance or non-performance by AGL of the Administrative Services under this Agreement. 10. This Agreement may be terminated without penalty at any time by AGL or by Adviser as to one or more of the Funds collectively, upon one hundred and eighty days (180) written notice to the other party. Notwithstanding the foregoing, the provisions of paragraphs 2, 3, 9 and 11 of this Agreement, shall continue in full force and effect after termination of this Agreement. This Agreement shall not require AGL to preserve any records (in any medium or format) relating to this Agreement beyond the time periods otherwise required by the laws to which AGL or the Funds are subject provided that such records shall be offered to the Funds in the event AGL decides to no longer preserve such records following such time periods. 11. After the date of any termination of this Agreement in accordance with paragraph 10 of this Agreement, no fee will be due with respect to any amounts in the Contracts first placed in the Master Account for the benefit of Shareholders after the date of such termination. However, notwithstanding any such termination, Adviser will remain obligated to pay AGL the fee specified in paragraph 8 of this Agreement, with respect to the value of each Fund's average daily net assets maintained in the Master Account with respect to the Contracts as of the date of such termination, for so long as such amounts are held in the Master Account and AGL continues to provide the Administrative Services with respect to such amounts in conformity with this Agreement. This Agreement, or any provision hereof, shall survive termination to the extent necessary for each party to perform its obligations with respect to amounts for which a fee continues to be due subsequent to such termination. 12. AGL understands and agrees that the obligations of Adviser under this Agreement are not binding upon any of the Funds, upon any of their Board members or upon any shareholder of any of the Funds. 13. It is understood and agreed that in performing the services under this Agreement AGL, acting in its capacity described herein, shall at no time be acting as an agent for Adviser, Underwriter or any of the Funds. AGL agrees, and agrees to cause its agents, not to make 3 any representations concerning a Fund except those contained in the Fund's then-current prospectus; in current sales literature furnished by the Fund, Adviser or Underwriter to AGL; in the then current prospectus for a variable annuity contract or variable life insurance policy issued by AGL or then current sales literature with respect to such variable annuity contract or variable life insurance policy, approved by Adviser. 14. This Agreement, including the provisions set forth herein in paragraph 8, may only be amended pursuant to a written instrument signed by the party to be charged. This Agreement may not be assigned by a party hereto, by operation of law or otherwise, without the prior written consent of the other party. 15. This Agreement shall be governed by the laws of the State of Illinois, without giving effect to the principles of conflicts of law of such jurisdiction. 16. This Agreement, including Exhibit A and Schedules One and Two, constitutes the entire agreement between the parties with respect to the matters dealt with herein and supersedes any previous agreements and documents with respect to such matters. The parties agree that Schedules One and Two may be replaced from time to time with new Schedule One and Two, as appropriate to accurately reflect any changes in the Funds available as investment vehicles under the Participation Agreement. 4 IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. AMERICAN GENERAL LIFE INSURANCE COMPANY By: _____________________________ Authorized Signatory ----------------------------- Print or Type Name VAN KAMPEN ASSET MANAGEMENT INC. By: _____________________________ Authorized Signatory ----------------------------- Print or Type Name 5 SCHEDULE ONE INVESTMENT COMPANY NAME: FUND NAME(S): - ----------------------- ------------ Van Kampen Life Investment Trust Strategic Stock Portfolio Emerging Growth Portfolio 6 SCHEDULE TWO LIST OF CONTRACTS 1. Platinum Investor I and II, Form Nos. 97600 and 97610 2. Platinum Investor Variable Annuity, Form No. 98020 3. Corporate America Variable Life Insurance Form No. 93301 4. Platinum Investor Survivor VUL; Form No. 99206 5. The ONE VUL Solution; Form No. 99615 6. Key Legacy Plus VUL; Form No. 99616 7 EXHIBIT A Pursuant to the Agreement by and among the parties hereto, AGL shall perform the following Administrative Services: 1. Maintain separate records for each Shareholder, which records shall reflect shares purchased and redeemed for the benefit of the Shareholder and share balances held for the benefit of the Shareholder. AGL shall maintain the Master Account with the transfer agent of the Fund on behalf of Shareholders and such Master Account shall be in the name of AGL or its nominee as the record owner of the shares held for such Shareholders. 2. For each Fund, disburse or credit to Shareholders all proceeds of redemptions of shares of the Fund and all dividends and other distributions not reinvested in shares of the Fund or paid to the Separate Account holding the Shareholders' interests. 3. Prepare and transmit to Shareholders periodic account statements showing the total number of shares held for the benefit of the Shareholder as of the statement closing date (converted to interests in the Separate Account), purchases and redemptions of Fund shares for the benefit of the Shareholder during the period covered by the statement, and the dividends and other distributions paid for the benefit of the Shareholder during the statement period (whether paid in cash or reinvested in Fund shares). 4. Transmit to Shareholders proxy materials and reports and other information received by AGL from any of the Funds and required to be sent to Shareholders under the federal securities laws and, upon request of the Fund's transfer agent, transmit to Shareholders material Fund communications deemed by the Fund, through its Board of Directors or other similar governing body, to be necessary and proper for receipt by all Fund beneficial shareholders. 5. Transmit to the Fund's transfer agent purchase and redemption orders on behalf of Shareholders. 6. Provide to the Funds, or to the transfer agent for any of the Funds, or any of the agents designated by any of them, such periodic reports as shall reasonably be concluded to be necessary to enable each of the Funds and its Underwriter to comply with any applicable State Blue Sky requirements. EX-8.(N) 12 OPPENHEIMER/AMGEN SERVICES AGR. EXHIBIT (8)(N) December 1, 1999 Mr. Don Ward Senior Vice President American General Life Insurance Company 2727 Allen Parkway Houston, TX 77019 Dear Don: The following constitutes a letter of understanding (the "Agreement") whereby OppenheimerFunds, Inc. ("OFI") intends to compensate American General Life Insurance Company ("American General") for providing the administrative support services described in Schedule A hereto, which is made a part hereof, to contract owners of any American General variable annuity and/or variable life insurance product described in Schedule C hereto, which is made a part hereof ("American General Products") that are indirect shareholders of Oppenheimer Variable Account Funds ("OVAF"), a series investment company dedicated to insurance company separate accounts for which OFI acts as investment manager. This Agreement will be effective as of December 1, 1999. All other terms and conditions of this Agreement are described in Schedule C hereto, which is made a part hereof. We look forward to a long and prosperous relationship. If this Agreement meets with your approval, please have the enclosed duplicate copy of this letter signed on behalf of American General, and return it to my attention. Sincerely, Michael F.X. Keogh Title: Vice President, OppenheimerFunds, Inc. Agreed to and accepted on behalf of American General Life Insurance Company By: ------------------------------ Title: --------------------------- SCHEDULE A TO DECEMBER 1, 1999 LETTER AGREEMENT BY AND BETWEEN AMERICAN GENERAL LIFE INSURANCE COMPANY AND OPPENHEIMERFUNDS, INC. (THE "AGREEMENT") Maintenance of Books and Records Assist as necessary to maintain book entry records on behalf of the Funds regarding issuance to, transfer within (via net purchase orders) and redemption by the Accounts of Fund shares. Maintain general ledgers regarding the Accounts' holdings of Fund shares, coordinate and reconcile information, and coordinate maintenance of ledgers by financial institutions and other contract owner service providers. Communication with the Funds Serve as the designee of the Funds for receipt of purchase and redemption orders from the Account and to transmit such orders, and payment therefor, to the Funds. Coordinate with the Funds' agents respecting daily valuation of the Funds' shares and the Accounts' units. Purchase Orders -- Determine net amount available for investment in the Funds. -- Deposit receipts at the Funds or the Funds' custodian (generally by wire transfer). -- Notify the Funds of the estimated amount required to pay dividend or distribution. Redemption Orders -- Determine net amount required for redemption by the Funds. Notify the custodian and Funds of cash required to meet payments. Purchase and redeem shares of the Funds on behalf of the Accounts at the then current price in accordance with the terms of each Fund's then current prospectus. Assistance in enforcing procedures adopted on behalf of the Trust to reduce, discourage, or eliminate market timing transactions in a Fund's shares in order to reduce or eliminate adverse effects on the Fund or its shareholders. Processing Distributions from the Funds Process ordinary dividends and capital gains. Reinvest the Funds' distributions. Reports Periodic information reporting to the Funds, including, but not limited to, furnishing registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, and any other SEC filings with respect to the Accounts invested in the Funds, as not otherwise provided for. Periodic information reporting about the Funds, including any necessary delivery of the Funds' prospectus and annual and semi-annual reports to contract owners, as not otherwise provided for. Fund-related Contract Owner Services Maintain adequate fidelity bond or similar coverage for all Company officers, employees, investment advisors and other individuals or entities controlled by the Company who deal with the money and/or securities of the Funds. Provide general information with respect to Fund inquiries (not including information about performance or related to sales). Provide information regarding performance of the Funds and the subaccounts of the Accounts to existing contract owners. Oversee and assist the solicitation, counting and voting or contract owner voting interests in the Funds pursuant to Fund proxy statements. Other Administrative Support Provide other administrative and legal compliance support for the Funds as mutually agreed upon by the Company and the Funds or the Fund Administrator. Relieve the Funds of other usual or incidental administrative services provided to individual contract owners. SCHEDULE B TO DECEMBER 1, 1999 LETTER AGREEMENT BY AND BETWEEN AMERICAN GENERAL LIFE INSURANCE COMPANY AND OPPENHEIMERFUNDS, INC. (THE "AGREEMENT") Separate Accounts Products - ----------------- -------- American General Life Insurance Company Legacy Plus Variable Life Insurance Policy Form No. 98615 Separate Account VL-R American General Life Insurance Company Separate Account D SCHEDULE C TO DECEMBER 1, 1999 LETTER AGREEMENT BY AND BETWEEN AMERICAN GENERAL LIFE INSURANCE COMPANY AND OPPENHEIMERFUNDS, INC. (THE "AGREEMENT") 1. The Agreement may be cancelled by any party upon ten days of written notice: (1) if the participation agreement for American General Products between OFI, American General and OVAF is terminated; (2) if neither American General nor any underwriter under its control actively promotes American General Products with OVAF as underlying options to new investors; (3) if either party is subject to a change of control; or (4) if it is not permissible to continue this Agreement under laws, rules or regulations applicable to OVAF, OFI or American General. Either party may also cancel this Agreement upon six months written notice. 2. Payment will be made to American General quarterly during the term this Agreement is in effect, no later than thirty days after the end of the quarter starting with the quarter ending December 31, 1999. Payments shall be separately computed on the average net assets of OVAF held by American General Products variable account during the prior quarter, subject to a limit of one- third of the average management fee paid by that OVAF series to OFI during the prior quarter, subject to a limit of one-third of the average management fee paid by that series to OFI during the prior quarter, at the annual rate of: 0.20% of the first $100 million of average net assets, plus 0.25% of average net assets held by American General Products variable account(s) in excess of $100 million during that prior quarter. For purposes of determining whether the breakpoint described in the preceding sentence has been achieved, the net asset value of OVAF shares held by separate accounts of American General Life Insurance Company will be aggregated with shares held by American General. 3. Except to the extent that American General's, OFI's or OVAF's counsel may deem it necessary or advisable to disclose in their respective prospectuses or elsewhere, the terms of this Agreement will be held confidential by each party. The party making such disclosure shall provide advance written notification, including particulars, to the other party that it is making such disclosure. 4. No other fees or expenses will be required of OFI or OVAF for the sponsorship within American General product line, except as mutually agreed to by the parties. 5. On advance written notice, OFI or a subsidiary may pay all or a portion of the fees provided for in this Agreement under any service fee or Rule 12b-1 plan hereafter adopted by OVAF, which shall satisfy that portion of OFI's payment obligation hereunder. 6. OFI will be responsible for calculating the fees payable hereunder. 7. Each party shall provide each other party or its designated agent reasonable access to its records to permit it to audit or review the accuracy of the charges submitted for payment under this Agreement. 8. This Agreement does not modify or replace the November 23, 1998 Agreement by and between American General Annuity Insurance Company and OFI (the "1998 Agreement"), or any other agreement with American General Life Insurance Company pertaining to any Oppenheimer fund other than OVAF. The parties hereto agree that OVAF assets that qualify for payment under the 1998 Agreement shall not qualify for payment under this Agreement. EX-8.(O) 13 SCUDDER/AMGEN SERVICES AGR. EXHIBIT (8)(o) January, 2000 Dear Sir or Madam: This letter sets forth the agreement between Scudder Kemper Investments, Inc. ("Scudder Kemper") and American General Life Insurance Company (the "Company") concerning certain administrative services to be provided by you on a sub-administration basis, with respect to Portfolios (as defined below) of the Kemper Variable Series (the "Fund"). 1. Administrative Services and Expenses. Administrative services for the Accounts (as defined below) which invest in Portfolios of the Fund pursuant to the Participation Agreement among the Company, the Fund, Kemper Distributors, Inc., ("KDI"), and Scudder Kemper (the "Participation Agreement") and for purchasers of Variable Insurance Products (as defined below) are the responsibility of the Company. Administrative services for the Portfolios, in which the Accounts invest, and for purchasers of shares of the Portfolios, are the responsibility of the Fund, KDI or Scudder Kemper. Capitalized terms not defined herein shall have the meanings ascribed to them in the Participation Agreement. The Company has agreed to assist Scudder Kemper, as Scudder Kemper may request from time to time, with the provision of administrative services ("Administrative Services") to the Portfolios, on a sub- administration basis, as they may relate to the investment in the Portfolios by the Accounts. It is anticipated that Administrative Services may include (but shall not be limited to) the mailing of Fund reports, notices, proxies and proxy statements and other informational materials to holders of the Variable Insurance Products supported by the Accounts with allocations to the Portfolios; the provision of various reports for the Fund and for submission to the Fund's Board of Trustees; the provision of shareholder support services with respect to the Portfolios; such services listed on Schedule A attached hereto and made a part hereof. 2. Administrative Expense Payments. In consideration of the anticipated administrative expense savings resulting from the arrangements set forth in this Agreement, Scudder Kemper agrees to pay the Company on a quarterly basis an amount set forth in Schedule B attached hereto and made a part hereof. January, 2000 Page 2 The expense payment contemplated by this Paragraph 2 shall be calculated by Scudder Kemper at the end of each calendar quarter. Payment will be accompanied by a statement showing the calculation of the quarterly amount payable by Scudder Kemper and such other supporting data as may be reasonably requested by American General. Scudder Kemper shall make the quarterly expense payment to the Company within 20 days after the end of each calendar quarter. 3. Nature of Payments. The parties to this letter agreement recognize and agree that Scudder Kemper's payments to the Company relate to Administrative Services only. The amount of administrative expense payments made by Scudder Kemper to the Company pursuant to Paragraph 2 of this letter agreement shall not be deemed to be conclusive with respect to actual administrative expenses or savings of Scudder Kemper. 4. Term. This letter agreement shall remain in full force and effect for so long as the assets of the Portfolios are attributable to amounts invested by the Accounts under the Participation Agreement, unless terminated in accordance with Paragraph 5 of this letter agreement. 5. Termination. This letter agreement may be terminated by either party upon 90 days' advance written notice or immediately upon termination of the Participation Agreement or upon the mutual agreement of the parties hereto in writing. In the event of a termination of this letter agreement, the administrative expense payments made by Scudder Kemper to the Company pursuant to Paragraph 2 of this letter agreement shall continue with respect to assets of the Portfolios attributable to Accounts of the Company (not including investments made after the date of termination) for a period of one year from the date of termination of this letter agreement; provided however, that Scudder Kemper shall not be required to make such payments for any time period where Scudder Kemper has ceased to serve as investment manager for the Fund. 6. Representation. The Company represents and agrees that it will maintain and preserve all records as required by law to be maintained and preserved in connection with providing the Administrative Services, and will otherwise comply with all laws, rules and regulations applicable to the Administrative Services. January, 2000 Page 3 7. Subcontractors. The Company may, with the consent of Scudder Kemper, contract with or establish relationships with other parties for the provision of the Administrative Services or other activities of the Company required by this letter agreement, provided that the Company shall be fully responsible for the acts and omissions of such other parties. 8. Authority. This letter agreement shall in no way limit the authority of the Fund, KDI or Scudder Kemper to take such action as any of such parties may deem appropriate or advisable in connection with all matters relating to the operations of the Fund and/or sale of its shares. The Company understands and agrees that the obligations of Scudder Kemper under this letter agreement are not binding upon the Fund. 9. Indemnification. This letter agreement will be subject to the indemnification provisions in Article VIII of the Participation Agreement. 10. Miscellaneous. This letter agreement may be amended only upon mutual agreement of the parties hereto in writing. This letter agreement may not be assigned by either party hereto, by operation of law or otherwise, without the prior written consent of the other party, except that either party may assign this agreement to an affiliate. This letter agreement, including Schedule A and Schedule B, constitutes the entire agreement between the parties with respect to the matters dealt with herein, and supersedes any previous agreements and documents with respect to such matters. This letter agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same instrument. The Company agrees to notify Scudder Kemper promptly if for any reason it is unable to perform fully and promptly any of its obligations under this letter agreement. 11. Notice. Any notice required to be sent hereunder shall be sent in accordance with the Participation Agreement. January, 2000 Page 4 If this letter is consistent with the Company's understanding of the matters discussed herein concerning administrative expense payments, kindly sign below and return a signed copy to Scudder Kemper. Very truly yours, Scudder Kemper Investments, Inc. By:_____________________________________ Name:___________________________________ Title:__________________________________ American General Life Insurance Company Acknowledged and Agreed this _____th day of January, 2000 By:_____________________________________ Name:___________________________________ Title:__________________________________ Attachment: Schedule A Schedule B SCHEDULE A I. Fund related contractowner services . Certain costs associated with dissemination of Fund prospectus to existing contractowners, as provided in the Participation Agreement. . Fund proxies (including facilitating distribution of proxy material to contractowners, tabulation and reporting). . Telephonic support for contractowners with respect to inquiries about the Fund (not including information related to sales). . Communications to contractowners regarding performance of the account and the Designated Portfolios. II. Sub-Accounting Services . Aggregating purchase and redemption orders of the Account for sales of the Portfolios. . Processing and reinvesting dividends and distributions of the Portfolios held by the Account. III. Other administrative Support . Providing other administrative support to the Fund as mutually agreed between the Company and the Fund, Scudder Kemper or KDI. SCHEDULE B Scudder Kemper agrees to pay the Company a quarterly amount based on the following: 4.25 basis points (.0425%) [i.e., 0.17% on an annual basis] of the average daily net asset balance of Fund shares held in the Accounts. For the month and year in which this letter agreement becomes effective or the expense payment terminates, there shall be an appropriate proration on the basis of the number of days that the expense payment is in effect during the quarter. EX-10.(D) 14 SINGLE APPLICATION Exhibit 10(d) American |General |Financial Group Part A Single Insured Life Insurance Application [_] American General Life Insurance Company, Houston, TX [_] The Old Line Life Insurance Company of America, Milwaukee, WI [_] All American Life Insurance Company, Springfield, IL [_] The Franklin Life Insurance Company, Springfield, IL [_] The American Franklin Life Insurance Company, Springfield, IL Members of American General Financial Group. American General Financial Group is a marketing name for American General Corporation and its subsidiaries. In this application, the "Company" refers to the insurance company whose name is checked above. The insurance company checked above is solely responsible for the obligation and payment of benefits under any policy that it may issue. No other company shown is responsible for such obligations or payments. - ------------------------------------------------------------------------------ Personal Information Proposed Name Social Security # insured ----------------------------- ----------------------------------- Address Zip ---------------------------------------- ------------------------ Home phone # Work phone # ------------------------------ ---------------------------------- E-mail address ----------------------------------------------------------------- Sex: [_] male [_] female Birthplace (city, state, country) ----------------------------------------------------------------- Date of birth Drivers license # State --------------------- ----------------------------- ------------ U.S. citizen: [_] yes [_] no If no, date of entry Type of visa ----------------------------------- ----------------------------- Employer ----------------------------------------------------------------- Occupation and duties Income: ------------------------------------- --------------------------- Tobacco use Have you ever used any form of tobacco or nicotine products? [_] yes [_] no Date of last use ----------------------------------------------------------------- Type of tobacco or nicotine products ----------------------------------------------------------------- - ------------------------------------------------------------------------------ Product Information Product name ----------------------------------------------------------------- (If a variable product, complete appropriate supplement.) Amount applied for $ ----------------------------------------------------------------- Reason for insurance (If more space is needed, use "Remarks" section.) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ - ------------------------------------------------------------------------------ Business Does the proposed insured have an ownership interest coverage in the business? [_] yes [_] no If yes, what is proposed insured's percentage (Complete only of ownership? % if applying ----------------------- for business If buy-sell, stock redemption, or key person insurance, coverage) will all partners or key people be covered? [_] yes [_] no Describe any special circumstances. ------------------------------------------------------------ ------------------------------------------------------------ - ------------------------------------------------------------------------------ Riders [_] Waiver of premium [_] Waiver of monthly deduction [_] Waiver of monthly guarantee premium [_] Accidental death benefit $ ------------------------------------------------------------ [_] Other rider(s) ------------------------------------------------------------ ------------------------------------------------------------ - ------------------------------------------------------------------------------ Dividend options For participating policy only [_] Cash [_] Premium reduction [_] Paid-up additions [_] Deposit earning interest [_] Other (explain) - ------------------------------------------------------------------------------ Death benefit For universal life only options [_] Level [_] Increasing ------------------------------ -------------------------- AGLC 0033-99 Page 1 Beneficiary Primary Name Relationship % share ------------------------ -------------------- ------------- Name Relationship % share ------------------------ -------------------- ------------- Contingent Name Relationship % share ------------------------ -------------------- ------------- Name Relationship % share ------------------------ -------------------- ------------- Complete if beneficiary is a trust. Exact name of trust ----------------------------------------------------------- Trust ID # Date of trust --------------------------- ------------------------------- Current trustee(s) ----------------------------------------------------------- - ------------------------------------------------------------------------------- Other life Indicate life insurance policies or annuities in force or insurance or pending for the proposed insured. annuities Type: i = individual, b = business, g = group, p = pending life insurance or annuity
Policy Insurance Type Year of Amount Replacement* number company issue [_] Check if none ------------- -------------- ----------- ------------ $__________ [_] yes [_] no ------------- -------------- ----------- ------------ $__________ [_] yes [_] no ------------- -------------- ----------- ------------ $__________ [_] yes [_] no ------------- -------------- ----------- ------------ $__________ [_] yes [_] no
* Replacement means that the insurance being applied for may replace, change, or use any monetary value of any existing or pending life insurance policy or annuity. If replacement may be involved, complete and submit replacement-related forms. - ------------------------------------------------------------------------------ Owner [_] Primary proposed insured [_] Someone other than [_] Trust a proposed insured or trust Complete if owner is a trust. Exact name of trust ----------------------------------------------------------- Trust ID # Date of trust ------------------------------ ---------------------------- Current trustee(s) ----------------------------------------------------------- Complete if someone other than a proposed insured or trust is the owner. Name Home phone # ----------------------------- ----------------------------- Address City, State Zip -------------------------- ------------------ ------------- Social Security or Tax ID # Date of birth ----------------------------------------- ----------------- Relationship to proposed insured ----------------------------------------------------------- - ------------------------------------------------------------------------------
Premium payment [_] Single premium: $ [_] Modal premium: $ [_] Additional initial premium: $ ------------------------------- ----------------------------- ------------------------------------------- Frequency of modal premium [_] Annual [_] Semi-annual [_] Quarterly [_] Monthly Amount submitted with application $ ----------- Method [_] Direct billing [_] Automatic bank draft [_] List bill: number [_] Other --------------------------------------------------------------------------------------------------------- Premium payor Complete if other than owner. Name Social Security # -------------------------------------------------------------------- ------------------------------------- Address ---------------------------------------------------------------------------------------------------------- Zip Home phone # ------------------------------------ ---------------------------------------------------------------------
- ------------------------------------------------------------------------------ Remarks ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- ----------------------------------------------------------- AGLC 0033-99 Page 2 Your Signature - ------------------------------------------------------------------------------- Authorization to obtain and disclose information and declaration I hereby give my consent to any of the entities listed below to give to the Company or its legal representative, all information they have pertaining to: my medical consultations, treatments, or surgeries; hospital confinements, which concern my physical and mental condition; my use of drugs or alcohol; or any other non-medical information. Non-medical information could include items such as: personal finances; habits; hazardous avocations; motor vehicle or court records; or foreign travel, etc. The list of entities for which I give my consent to provide the information above is as follows: any physical or medical practitioner; any hospital, clinic or other health care facility; any insurance or reinsurance company; any consumer reporting agency or insurance support organization; my employer; or the Medical Information Bureau (MIB). I understand the information obtained will be used by the Company to determine eligibility for insurance and eligibility for benefits under an existing policy. The Company may disclose such information and any information developed during its evaluation of my application to: its reinsurers; MIB; other insurance companies; other persons or organizations performing business or legal services in connection with my application or claim; me; any physician designated by me; or any person or entity required to receive such information by law or as I may further consent. I, as well as any person authorized to act on my behalf, may upon written request, obtain a copy of this consent from the Company. This consent will be valid for 30 months from the date of this application. I agree that a photocopy of this consent will be as valid as the original. I authorize the Company to obtain an investigative consumer report on me. I understand that I may: request to be interviewed in connection with the preparation of the report; and receive, upon written request, a copy of such report. [_] Check if you wish to be interviewed. I have read the above statements or they have been read to me. The above statements are true and complete to the best of my knowledge and belief. I understand that this application: (1) will consist of Part A, Part B, and, if applicable, Part C and related forms; and (2) shall be the basis for any policy issued on this application. I understand that any misrepresentation contained in this application and relied on by the Company may be used to: reduce or deny a claim or void the policy, if it is within its contestable period and if such misrepresentation materially affects the acceptance of the risk. Except as may be provided in a Limited Temporary Life Insurance Agreement (LTLIA) for which all eligibility requirements are met, I understand and agree that no insurance will be in effect pursuant to this application, or under any policy issued by the Company, unless or until: the policy has been delivered and accepted; the full first modal premium for the issued policy has been paid; and there has been no change in the health of any proposed insured that would change the answers to any questions in the application. I understand and agree that no agent is authorized to: accept risks or pass upon insurability; make or modify contracts; or waive any of the Company's rights or requirements. I have received a copy of the Notice to Proposed Insured regarding Fair Credit Reporting Act; the MIB; Insurance information practices; and telephone interview information. Limited Temporary Life Insurance - If eligible, I have received and accepted the LTLIA. Temporary insurance is available only if: the full first modal premium is submitted with this application and only "no" answers have been given by proposed insured to the "Health and Age" questions in the LTLIA. Under penalties of perjury, I certify: that the number shown on this application is my correct Social Security or Tax ID number; and that I am not subject to backup withholding under Section 3406(a)(1)(C) of the Internal Revenue Code. The Internal Revenue Service does not require my consent to any provision of this document other than the certifications required to avoid backup withholding. - ------------------------------------------------------------------------------ Signatures X Owner Date --------------------------------------- ------------------- Signed at (city, state) ----------------------------------------------------------- X Witness Date ---------------------------------------- ------------------ X Proposed insured Date ---------------------------------------- ------------------ (If under age 15, signature of parent or guardian) If the Company needs to contact the proposed insured, when would be the best time to call? Time Day of the week ---------------------------------------- ------------------ Date Phone number ---------------------------------------- ------------------ I certify that I have truthfully and accurately recorded on the Part A application the information supplied by the proposed insured. Agent name (please print) ----------------------------------------------------------- Agent # State license # --------------------------------- ------------------------- X Agent Date ----------------------------------------- ----------------- AGLC 0033-99 Page 3 Agent's Report Number of years you have known proposed insured ---------------------------------------------------------------- Have you scheduled a medical exam, inspection report, blood profile, urinalysis, or APS? [_] yes [_] no If yes, please provide name of examiner, clinic, date, and the type of report ordered. ---------------------------------------------------------------- ---------------------------------------------------------------- - ------------------------------------------------------------------------------ Statements Did you personally see the proposed insured on the date of this application, ask each question, and accurately record the answers yourself? [_] yes [_] no If no, please provide details in the "Remarks" section below. Do you have any information that indicates that the proposed insured may replace, change, or use any monetary value of any existing or pending life insurance policy or annuity with any company in connection with the purchase of insurance? [_] yes [_] no If yes, please provide details in the "Remarks" section below and attach all replacement-related forms. Are you aware of any information that would adversely affect any proposed insured's eligibility, acceptability, or insurability? [_] yes [_] no If yes, please provide details in the "Remarks" section below, and do not provide limited temporary life insurance. Did you provide client with LTLIA? [_] yes [_] no Has the proposed insured or the owner submitted an application for coverage with any of the American General life insurance companies within the last 30 days? [_] yes [_] no If proposed insured is a child, what amount of insurance is in force on the father $___________ and/or mother $________? Are you related by blood or marriage to the proposed insured? [_] yes [_] no (If yes, relationship)________________________ Remarks (Please include information on any split dollar, collateral assignment, etc.) ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ - ------------------------------------------------------------------------------
Commission Please list servicing agent first. Agent(s) to receive commission Agency number Agent number Percent of commission --------------------------------------- ------------------- ------------------ ------------------------ --------------------------------------- ------------------- ------------------ ------------------------ --------------------------------------- ------------------- ------------------ ------------------------ --------------------------------------- ------------------- ------------------ ------------------------ X Writing agent Date ------------------------------------------------------------ -------------------------------------------- Social Security or Tax ID # Phone # ------------------------------------------------------------ -------------------------------------------- Primary appointing company ---------------------------------------------------------------------------------------------------------- Client # ---------------------------------------------------------------------------------------------------------- If applicable: Broker-Dealer(s) ---------------------------------------------------------------------------------------------------------- Contact person Processing center ------------------------------------------------------------ -------------------------------------------- Phone # Fax # ------------------------------------------------------------ -------------------------------------------- If other than writing agent, send policy/delivery requirements to: ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------
AGLC 0033-99 AR Limited Temporary Life Insurance Agreement [_] American General Life Insurance Company, Houston, TX [_] The Old Line Life Insurance Company of America, Milwaukee, WI [_] All American Life Insurance Company, Springfield, IL [_] The Franklin Life Insurance Company, Springfield, IL [_] The American Franklin Life Insurance Company, Springfield, IL In this application, the "Company" refers to the insurance company whose name is checked above. The insurance company checked above is solely responsible for the obligation and payment of benefits under any policy that it may issue. No other company shown is responsible for such obligations or payments. - ------------------------------------------------------------------------------ Health and If the proposed insured answers "yes" to either Proposed Age questions question, temporary insurance is not available, insured this agreement will be void, and any payment submitted will be refunded. During the last two years, have you had a heart attack, stroke, cancer, diabetes, or disorder of the immune system; or have you been confined in a hospital or other health care facility or been advised to have any diagnostic test or surgery not yet performed? [_] yes [_] no Are you age 71 or above? [_] yes [_] no - ------------------------------------------------------------------------------ Premium payment Received $ Date ---------------------------------------- ----------------------- All premium checks must be made payable to the Company. Do not make check payable to the agent or leave payee blank. Note: Agent does not have the authority to accept a premium (including automatic bank draft check, salary savings, or government allotment) with this application if the conditions in "Authorization to obtain and disclose information and declaration" cannot be met or if any part of the "Health and Age questions" have been answered "yes" by the proposed insured, answered falsely, or left blank. - ------------------------------------------------------------------------------ Conditions 1. The first modal premium must be paid with Part A of the of temporary application. life insurance 2. The answer to both of the above "Health and Age questions" must be "no". 3. Upon receiving proof of the death of the proposed insured during the period covered by this agreement, the total amount that will be paid by the Company pursuant to this and any other limited temporary life insurance agreements covering the proposed insured will be the lesser of: . the plan amount the proposed insured applied for; or . $500,000 plus the amount of any premium paid for coverage in excess of $500,000. The Company will pay this sum to the beneficiary named in the application. If death is due to suicide, payment will be limited to the amount of premium paid. 4. Coverage under this agreement will begin on the date the later of the following events have been completed: . this Limited Temporary Life Insurance Agreement (LTLIA) has been signed by the proposed insured; or . all required medical examinations have been taken. 5. Coverage under this agreement will end on the earliest of the following dates: . the date the policy as applied for is delivered and accepted; . the date the Company declines the application; . the date the Company states the application will not be considered on a prepaid basis; . 60 days from the date coverage begins under this agreement; or . the date the Company issues a policy other than as applied for. 6. The prepayment for this temporary insurance will be: . applied to the first premium due if the policy is issued as applied for; or . refunded if the Company declines the application or if the owner does not accept the policy; or . applied to the first premium if a policy is issued other than as applied for and is accepted. 7. Any misrepresentation contained in this agreement and relied on by the Company may be used to deny a claim on or void this agreement. No changes may be made in the terms and conditions of this agreement. No statement that tries to make such a change will bind the Company. X Owner Date -------------------------------------- ------------------------- Signed at (city, state) ---------------------------------------------------------------- X Witness Date --------------------------------------- ------------------------ X Proposed insured Date --------------------------------------- ------------------------ (If under age 15, signature of parent or guardian) I certify that I have truthfully and accurately recorded on the LTLIA the information supplied by the proposed insured. Agent name (please print) ---------------------------------------------------------------- Agent # State license # ---------------------------------------------------------------- X Agent Date ----------------------------------------- ---------------------- AGLC 0033-99 TIA Bank Draft Information [_] American General Life Insurance Company, Houston, TX [_] The Old Line Life Insurance Company of America, Milwaukee, WI [_] All American Life Insurance Company, Springfield, IL [_] The Franklin Life Insurance Company, Springfield, IL [_] The American Franklin Life Insurance Company, Springfield, IL The company checked above will withdraw the premiums from the specified account. This company will be referred to hereafter as the "Company." "You," "your," "I," and "me" refer to the accountholder whose name appears below. - ------------------------------------------------------------------------------ How automatic bank draft works Automatic bank draft is a debit service that offers a convenient way to pay life insurance premiums. The Company will collect the life insurance premiums from your bank account electronically - you do not need to write checks or mail in any payments. Premium withdrawals will appear on your bank statement, and your statements will be your receipt for payment of your premium. - ------------------------------------------------------------------------------ Automatic bank draft agreement I authorize the Company to electronically withdraw money from my account at (name of bank) ___________________________________________________________ (bank address)____________________________________________________________ (Type of account [_] Checking [_] Savings) for the payment of premiums and other charges on the insurance policy. I authorize the Company to continue to make these withdrawals if there is a conversion, renewal, or other change in the policy. I will compensate the Company for any loss, claim, or liability caused by these withdrawals and will not hold the Company responsible for any such loss, claim, or liability. This authorization will not affect the terms of the policy. If the premiums are not paid within the grace period allowed, the policy may lapse, and it will be subject to any applicable nonforfeiture provision. Authorizing this automatic payment plan does not put the insurance policy into effect. This authorization may be retracted by me or the Company at any time for any reason by giving written notice. The Company may retract the authorization immediately, without giving me written notice, if any debt is not paid by the bank stated above for any reason. Name of proposed insured - ------------------------------------------------------------------------------ Premium amount $ - ------------------------------------------------------------------------------ Frequency: [_] annual [_] semi-annual [_] quarterly [_] monthly Preferred withdrawal date - ------------------------------------------------------------------------------ [_] Please debit my account for all outstanding premiums due. X Signature of accountholder - ------------------------------------------------------------------------------ Print name - ------------------------------------------------------------------------------ Please attach voided check. AGLC 0033-99 BDI Detach this page and leave it with the proposed insured. Notice To The Proposed Insured You have applied for life insurance with one of the following companies: American General Life Insurance Company, The Old Line Life Insurance Company of America, All American Life Insurance Company, The Franklin Life Insurance Company, or The American Franklin Life Insurance Company. "Company" refers to the company with which you have applied for insurance. This notice is provided on behalf of that company. - ------------------------------------------------------------------------------ Fair Credit Reporting Act Pursuant to the Federal Fair Credit Reporting Act, as amended (15 U.S.C. 1681d), notice is hereby given that, as a component of our underwriting process relating to your application for life insurance, the Company may request an investigative consumer report that may include information about your character, general reputation, personal characteristics, and mode of living. This information may be obtained through personal interviews with your neighbors, friends, associates, and others with whom you are acquainted or who may have knowledge concerning any such items of information. You have a right to request in writing, within a reasonable period of time after receiving this notice, a complete and accurate disclosure of the nature and scope of the investigation the Company requests. You should direct this written request to the Company at: P. O. Box 1931 Houston, TX 77251-1931 Upon receipt of such a request, the Company will respond by mail within five business days. To make it easier to use its products and services, the Company may share information about you with its affiliates beyond the 30 month period described in "Authorization to Obtain and Disclose Information and Declaration." You should notify the Company in writing at the address above if you do not want the Company to share this information with its affiliates. - ------------------------------------------------------------------------------ Medical Information Bureau The designated insurer or its reinsurers may make a brief report regarding your insurability to the Medical Information Bureau (MIB), a non-profit membership organization of life insurance companies, that operates an information exchange on behalf of its members. If you apply to another MIB-member company for life or health insurance or a claim for benefits is submitted to such a company, the MIB will supply such company with the information they have about you. At your request, the MIB will disclose any information it has in your file. If you question the accuracy of information in the MIB's file, you may seek a correction in accordance with the procedures set forth in the Federal Fair Credit Reporting Act. The address and phone number of the MIB's information office are: P. O. Box 105 Essex Station Boston, Massachusetts 01112 (617) 426-3660 The designated insurer, or its reinsurer, may also release information in its file to other life insurance companies to whom you may apply for life or health insurance, or to whom a claim for benefits may be submitted. - ------------------------------------------------------------------------------ Insurance information practices To issue an insurance policy, we need to obtain information about you. Some of that information will come from you, and some will come from other sources. This information may in certain circumstances be disclosed to third parties without your specific authorization as permitted by law. You have the right to access and correct this information, except information that relates to a claim or a civil or criminal proceeding. Upon your written request, the Company will provide you with a more detailed written notice explaining the types of information that may be collected, the types of sources and investigative techniques that may be used, the types of disclosures that may be made and the circumstances under which they may be made without your authorization, a description of your rights to access and correct information, and the role of insurance support organizations with regard to your information. If you desire additional information on Insurance Information Practices you should direct your requests to the Company at: P. O. Box 1931 Houston, TX 77251-1931 - ------------------------------------------------------------------------------ Telephone interview information To help process your application as soon as possible, the Company may have one of its representatives call you by telephone, at your convenience, and obtain additional underwriting information. AGLC 0033-99 NPI EX-10.(E) 15 VARIABLE APPLICATION
EXHIBIT 10(e) AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") Home Office: Houston, Texas VARIABLE UNIVERSAL LIFE INSURANCE SUPPLEMENTAL APPLICATION (This supplement must accompany the appropriate application for life insurance.) - ------------------------------------------------------------------------------------------------------------------------------------ PART 1. APPLICANT INFORMATION - ------------------------------------------------------------------------------------------------------------------------------------ Supplement to the application on the life of John Doe dated 10/1/99 ________________________________________________ _____________________________. - ------------------------------------------------------------------------------------------------------------------------------------ PART 2. INITIAL ALLOCATION PERCENTAGES - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT OPTIONS: In the "Premium Allocation" column, indicate how each premium received is to be allocated. In the "Deduction Allocation" column, indicate which investment options are to be used for the deduction of monthly account charges. Total allocations in each column must equal 100%. Use whole percentages only. PREMIUM DEDUCTION PREMIUM DEDUCTION DIVISIONS ALLOCATION ALLOCATION DIVISIONS ALLOCATION ALLOCATION - ---------------------------------------------------------------- ------------------------------------------------------------------ [AIM Variable Insurance Funds, Inc. One Group(R) Investment Trust AIM V.I. Capital Appreciation (59) 100% 100% One Group Investment Trust Diversified Equity (68) ___% ___% AIM V.I. Government Securities (60) ___% ___% One Group Investment Trust Equity Index (69) ___% ___% AIM V.I. High Yield (61) ___% ___% One Group Investment Trust Government Bond (70) ___% ___% AIM V.I. International Equity (62) ___% ___% One Group Investment Trust Large Cap Growth (71) ___% American General Series Portfolio Company One Group Investment Trust Mid Cap Growth (72) ___% ___% Money Market (63) ___% ___% Putnam Variable Trust Kemper Variable Series Putnam VT Vista (73) ___% ___% Kemper International (64) ___% ___% Franklin Templeton Variable Insurance Products Trust Kemper Small Cap Value (65) ___% ___% Franklin Small Cap (74) ___% ___% MFS(R) Variable Insurance Trust Templeton Variable Products Series Fund MFS Growth With Income (66) ___% ___% Templeton Developing Markets (75) ___% ___% Oppenheimer Variable Account Funds Van Kampen Life Investment Trust Oppenheimer High Income (67) ___% ___% Emerging Growth (76) ___% ___% OTHER: ________________________________ ___% ___%] - ------------------------------------------------------------------------------------------------------------------------------------ PART 3. DOLLAR COST AVERAGING - ------------------------------------------------------------------------------------------------------------------------------------ Dollar Cost Averaging: ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) An amount can be systematically transferred from the [Money Market Division (63)] and transferred to one or more of the investment options below. Please refer to the prospectus for more information on the Dollar Cost Averaging option. Day of the month for transfers: __________________________ (Choose a day of the month between 1-28.) Frequency of transfers: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually Transfer $__________________ ($100 MINIMUM, WHOLE DOLLARS ONLY) from the [Money Market (63)] to the following division(s): [AIM V.I. Capital Appreciation (59) $______ One Group Investment Trust Equity Index (69) $______ AIM V.I. Government Securities (60) $______ One Group Investment Trust Government Bond (70) $______ AIM V.I. High Yield (61) $______ One Group Investment Trust Large Cap Growth (71) $______ AIM V.I. International Equity (62) $______ One Group Investment Trust Mid Cap Growth (72) $______ Kemper International (64) $______ Putnam VT Vista (73) $______ Kemper Small Cap Value (65) $______ Franklin Small Cap (74) $______ MFS Growth With Income (66) $______ Templeton Developing Markets (75) $______ Oppenheimer High Income (67) $______ Emerging Growth (76) $______ One Group Investment Trust Diversified Equity (68) $______ Other: ________________________________ $______ ] - ------------------------------------------------------------------------------------------------------------------------------------ PART 4. AUTOMATIC REBALANCING - ------------------------------------------------------------------------------------------------------------------------------------ Automatic Rebalancing: ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) Variable division assets will be automatically rebalanced based on the premium percentages designated in Part 2. Please refer to the prospectus for more information on the Automatic Rebalancing option. [_] CHECK HERE FOR AUTOMATIC REBALANCING. Frequency: [_] Quarterly [_] Semiannually [_] Annually NOTE: Automatic Rebalancing is not available if the Dollar Cost Averaging option has been chosen. - ------------------------------------------------------------------------------------------------------------------------------------ AGLC 0087 PAGE 1 of 2
AMERICAN GENERAL LIFE INSURANCE COMPANY Home Office: Houston, Texas - ------------------------------------------------------------------------------------------------------------------------------------ PART 5. TELEPHONE AUTHORIZATION - ------------------------------------------------------------------------------------------------------------------------------------ I (or we, if Joint Owners), hereby authorize American General Life Insurance Company ("AGL") to act on telephone instructions to transfer values among the variable divisions and to change allocations for future purchase payments and monthly deductions given by: (Initial appropriate box below.) [ ] Policy Owner(s) only -- if Joint Owners, either of us acting independently. [ ] Policy Owner(s) or the Agent/Registered Representative who is appointed to represent AGL and the firm authorized to service my policy. AGL and any person designated by this authorization will not be responsible for any claim, loss or expense based upon telephone instructions received and acted on in good faith, including losses due to telephone instruction communication errors. AGL's liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction of the allocations on a current basis. If an error, objection or other claim arises due to a telephone transaction, I will notify AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I understand that this authorization is subject to the terms and provisions of my variable universal life insurance policy and its related prospectus. This authorization will remain in effect until my written notice of its revocation is received by AGL and its home office. [ ] INITIAL HERE TO DECLINE THE ABOVE TELEPHONE AUTHORIZATION. - ------------------------------------------------------------------------------------------------------------------------------------ PART 6. MODIFIED ENDOWMENT CONTRACT - ------------------------------------------------------------------------------------------------------------------------------------ If any premium payment causes the policy to be classified as a modified endowment contract under Section 7702A of the United States Internal Revenue Code, there may be potentially adverse U.S. tax consequences. Such consequences include: (1) withdrawals or loans being taxed to the extent of gain; and (2) a 10% penalty tax on the taxable amount. In order to avoid modified endowment status, I request any excess premium that could cause such status to be refunded. [_] YES [_] NO - ------------------------------------------------------------------------------------------------------------------------------------ PART 7. SUITABILITY (All questions must be answered.) - ------------------------------------------------------------------------------------------------------------------------------------ YES NO --- -- 1. Have you, the Proposed Insured or Owner (if different), received the variable universal life insurance policy prospectus and the prospectuses describing the investment options? [ ] [_] (If "yes," please furnish the Prospectus dates.) Variable Universal Life Insurance Policy Prospectus: _______________ Supplements (if any): _______________ 2. Do you understand that under the Policy applied for: a. THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT? [_] [_] b. THE POLICY VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT AND CERTAIN EXPENSE DEDUCTIONS? [_] [_] c. The Policy is designed to provide life insurance coverage and to allow for the accumulation of values in the Separate Account? [_] [_] 3. Do you believe the Policy you selected meets your insurance and investment objectives and your anticipated financial needs? [_] [_] Signed at: Any Town USA Date: 10/1/99 ______________________________________________________________________ _______________________________ CITY STATE X John Doe X __________________________________________________________ ____________________________________________________________ SIGNATURE OF PRIMARY PROPOSED INSURED SIGNATURE OF REGISTERED REPRESENTATIVE X__________________________________________________________ X____________________________________________________________ SIGNATURE OF OWNER (if different from Proposed Insured) PRINT NAME OF BROKER/DEALER X__________________________________________________________ SIGNATURE OF JOINT OWNER (if applicable) - ------------------------------------------------------------------------------------------------------------------------------------ AGLC 0087 PAGE 2 of 2
EX-10.(F) 16 SERVICE REQUEST FORM EXHIBIT 10(f) SERVICE REQUEST THE ONE(R) VUL Solution(SM) - ---------------------------- AMERICAN GENERAL LIFE - -------------------------------------------------------------------------------- The One VUL Solution--Variable Divisions AIM Variable Insurance Funds, Inc. - ---------------------------------------- . Division 59 - AIM V.I. Capital Appreciation Fund . Division 60 - AIM V.I. Government Securities Fund . Division 61 - AIM V.I. High Yield Fund . Division 62 - AIM V.I. International Equity Fund American General Series Portfolio Company - ----------------------------------------- . Division 63 - Money Market Fund Kemper Variable Series - ---------------------- . Division 64 - Kemper International Portfolio . Division 65 - Kemper Small Cap Value Portfolio MFS(R) Variable Insurance Trust - ------------------------------- . Division 66 - MFS Growth With Income Series Oppenheimer Variable Account Funds - ---------------------------------- . Division 67 - Oppenheimer High Income Fund/VA One Group(TM) Investment Trust - ------------------------------ . Division 68 - One Group Investment Trust Diversified Equity Portfolio . Division 69 - One Group Investment Trust Equity Index Portfolio . Division 70 - One Group Investment Trust Government Bond Portfolio . Division 71 - One Group Investment Trust Large Cap Growth Portfolio . Division 72 - One Group Investment Trust Mid Cap Growth Portfolio Putnam Variable Trust - --------------------- . Division 73 - Putnam VT Visa Fund Franklin Templeton Variable Insurance Products Trust - ---------------------------------------------------- . Division 74 - Franklin Small Cap Fund Templeton Variable Products Series Fund - --------------------------------------- . Division 75 - Templeton Developing Markets Fund Van Kampen Life Investment Trust - -------------------------------- . Division 76 - Emerging Growth Portfolio
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") Complete and return this request to: ----------------------------------------------- Variable Universal Life Operations A Subsidiary of American General Corporation AMERICAN PO Box 4880 Houston, TX 77210-4880 ----------------------------------------------- |GENERAL (888) 436-5255 or Houston, Texas |Financial Group Hearing Impaired (TDD) (888) 436-5258 Toll Free Fax: (887) 445-3098 VARIABLE UNIVERSAL LIFE INSURANCE SERVICE REQUEST - ------------------------------------------------------------------------------------------------------------------------------------ [ ] POLICY 1.| POLICY #:___________________________________________________ INSURED:_________________________________ IDENTIFICATION | | ADDRESS:________________________________________________________________________ New Address (yes)(no) COMPLETE THIS SECTION | FOR ALL REQUESTS. | Primary Owner (If other than insured):__________________________________________ | | Address:________________________________________________________________________ New Address (yes)(no) | | Primary Owner's S.S. No. or Tax I.D. No._____________________________ Phone Number: ( )____ - ______ | | Joint Owner (If applicable):____________________________________________________ | | Address:________________________________________________________________________ New Address (yes)(no) - ----------------------------------------------------------------------------------------------------------------------------------- [ ] NAME 2.| CHANGE | Change Name Of: (Circle One) Insured Owner Payor Beneficiary | Complete this section if | Change Name From: (First, Middle, Last) Change Name To: (First, Middle, Last) the name of the Insured, | Owner, Payor or Beneficiary| _________________________________________ _________________________________________________ has changed. (Please note,| this does not change the | Insured, Owner, Payor or | Reason for Change: (Circle One) Marriage Divorce Correction Other (Attach copy of legal proof) Beneficiary designation) | - ----------------------------------------------------------------------------------------------------------------------------------- [ ] MODE OF PREMIUM 3.| PAYMENT/BILLING | Indicate frequency and premium amount desired: $______ Annual $______ Semi-Annual $_______ Quarterly METHOD CHANGE | | $______ Monthly (Bank Draft Only) Use this section to change | the billing frequency and/ | Indicate billing method desired:_____ Direct Bill ______ Pre-Authorized Bank Draft (attach a Bank Draft or method of premium pay- | Authorization Form and "Void" Check) ment. Note, however, that | AGL will not bill you on a | Start Date: ______/______/_____ direct monthly basis. Refer| to your policy and its | related prospectus for | further information | concerning minimum premiums| and billing options. | - ----------------------------------------------------------------------------------------------------------------------------------- [ ] DOLLAR COST 4.| Designate the day of the month for transfers:_________(choose a day from 1-28) AVERAGING | ($5,000 minimum initial | Frequency of transfers (check one): _______Monthly _______Quarterly ______Semi-Annually _____Annually accumulation value) An | amount may be deducted | I want: $___________($100 minimum) taken from the Money Market Division (63) and transferred to the periodically from the | following Divisions: Money Market Division and | placed in one or more of | AIM Variable Insurance Funds, Inc. One Group Investment Trust the Divisions listed. This | $_________(59) AIM V.I. Capital Appreciation $________(68) One Group Investment Trust Diversified option is not available | $_________(60) AIM V.I. Government Securities Equity while the Automatic Re- | $_________(61) AIM V.I. High Yield $________(69) One Group Investment Trust Equity balancing option is in use.| $_________(62) AIM V.I. International Equity Index Please refer to the pros- | Kemper Variable Series $________(70) One Group Investment Trust Government pectus for more infor- | $_________(64) Kemper International Bond mation on the Dollar Cost | $_________(65) Kemper Small Cap Value $________(71) One Group Investment Trust Large Averaging Option. | MFS(R) Variable Insurance Trust Cap Growth | $_________(66) MFS Growth With Income $________(72) One Group Investment Trust Mid Cap | Oppenheimer Variable Account Funds Growth | $_________(67) Oppenheimer High Income Putnam Variable Trust | $________(73) Putnam VT Vista | Franklin Templeton Variable Insurance Products | Trust | $________(74) Franklin Small Cap Investments | Templeton Variable Products Series Fund | $________(75) Templeton Developing Markets | Van Kampen Life Investment Trust | $________(76) Emerging Growth | | ________INITIAL HERE TO REVOKE DOLLAR COST AVERAGING ELECTION. - ----------------------------------------------------------------------------------------------------------------------------------- VUL 0008 PAGE 2 OF 4
- ------------------------------------------------------------------------------------------------------------------------------------ [ ] TELEPHONE 5.| I(/we if Joint Owners) hereby authorize AGL to act on telephone instructions to transfer values among PRIVILEGE | Divisions and to change allocations for future purchase payments and monthly deductions. AUTHORIZATION | | Complete this section if | Initial the designation you prefer: you are applying for or | revoking current telephone| __________Policy Owner(s) only--If Joint Owners, either one acting independently. privileges. | __________Policy Owner(s) or Agent/Registered Representative who is appointed to represent AGL and the | firm authorized to service my policy. | | AGL and any person designated by this authorization will not be responsible for any claim, loss or | expense based upon telephone transfer or allocation instructions received and acted upon in good faith, | including losses due to telephone instruction communication errors. AGL's liability for erroneous | transfers or allocations, unless clearly contrary to instructions received, will be limited to | correction of the allocations on a current basis. If an error, objection or other claim arises due to a | telephone transaction, I will notify AGL in writing within five working days from the receipt of the | confirmation of the transaction from AGL. I understand that this authorization is subject to the terms | and provisions of my policy and its related prospectus. This authorization will remain in effect until | my written notice of its revocation is received by AGL at the address printed on the top of this | service request form. | |___________INITIAL HERE TO REVOKE TELEPHONE PRIVILEGE AUTHORIZATION. - ----------------------------------------------------------------------------------------------------------------------------------- [ ] CORRECT AGE 6.| | Name of Insured for whom this correction is submitted:___________________________________ | Use this section to correct| Correct DOB: ________/________/________ the age of any person | covered under this policy. | Proof of the correct date | of birth must accompany | this request. | - ----------------------------------------------------------------------------------------------------------------------------------- [ ] TRANSFER OF 7.| (Division Name or Number) (Division Name or Number) ACCUMULATED VALUES | | | Use this section if you | want to move money between | Transfer $________ or _______% from_______________________________to__________________________________ divisions. If a transfer | causes the balance in any | Transfer $________ or _______% from_______________________________to__________________________________ division to drop below | $500, AGL reserves | Transfer $________ or _______% from_______________________________to__________________________________ the right to transfer | the remaining balance. | Transfer $________ or _______% from_______________________________to__________________________________ Amounts to be transferred | should be indicated in | Transfer $________ or _______% from_______________________________to__________________________________ dollar or percentage | amounts, maintaining | Transfer $________ or _______% from_______________________________to__________________________________ consistency throughout. | There is a $500 minimum | Transfer $________ or _______% from_______________________________to__________________________________ amount for division | transfers. | ----------------------------------------------------------------------------------------------------------------------------------- [ ] CHANGE IN 8.| INVESTMENT DIVISION PREM % DED % INVESTMENT DIVISION PREM % DED % ALLOCATION | AIM Variable Insurance Funds, Inc. One Group Investment Trust PERCENTAGES | (59) AIM V.I. Capital Appreciation ______ ______ (68) One Group Investment Trust Diversified | (60) AIM V.I. Government Securities ______ ______ Equity ______ ______ Use this section to | (61) AIM V.I. High Yield ______ ______ (69) One Group Investment Trust Equity indicate how premiums or | (62) AIM V.I. International Equity ______ ______ Index ______ ______ monthly deductions are to | American General Series Portfolio Company (70) One Group Investment Trust Government be allocated. Total | (63) Money Market ______ ______ Bond ______ ______ allocation in each | Kemper Variable Series (71) One Group Investment Trust Large Cap column must equal 100%; | (64) Kemper International ______ ______ Growth ______ ______ whole numbers only | (65) Kemper Small Cap Value ______ ______ (72) One Group Investment Trust Mid Cap | MFS Variable Insurance Trust Growth ______ ______ | (66) MSF Growth With Income ______ ______ Putnam Variable Trust | Oppenheimer Variable Account Funds (73) Putnam VT Vista ______ ______ | (67) Oppenheimer High Income ______ ______ Franklin Templeton Variable Insurance | Products Trust | (74) Franklin Small Cap ______ ______ | Templeton Variable Products Series Fund | (75) Templeton Developing Markets | ______ ______ | Van Kampen Life Investment Trust | (76) Emerging Growth ______ ______ - ----------------------------------------------------------------------------------------------------------------------------------- [ ] AUTOMATIC 9.| Indicate frequency: _______ Quarterly ______ Semi-Annually ______ Annually REBALANCING | | (Division Name or Number) (Division Name or Number) | ($5,000 minimum | _________% _______________________________________: _________% __________________________________: accumulation value) Use | this section to apply for | _________% _______________________________________: _________% __________________________________: or make changes to | Automatic Rebalancing of | _________% _______________________________________: _________% __________________________________: the divisions. | Please refer to the | _________% _______________________________________: _________% __________________________________: prospectus for more | information on the | _________% _______________________________________: _________% __________________________________: Automatic Rebalancing | Option. This option is not | _________% _______________________________________: _________% __________________________________: available while the Dollar | Cost Averaging Option is | in use. | _________INITIAL HERE TO REVOKE AUTOMATIC REBALANCING ELECTION. - ----------------------------------------------------------------------------------------------------------------------------------- VUL 0008 PAGE 3 OF 4
- ------------------------------------------------------------------------------------------------------------------------------------ | - ----------------------------------------------------------------------------------------------------------------------------------- [ ] REQUEST FOR 10.| _________I request a partial surrender of $_________ or %_________ of the net cash surrender value. PARTIAL | SURRENDER/ | _________I request a loan in the amount of $________. POLICY LOAN | | _________I request the maximum loan amount available from my policy. Use this section to apply | for a partial surrender | Unless you direct otherwise below, proceeds are allocated according to the deduction allocation or policy loan. | percentages in effect, if available; otherwise they are taken pro-rata from the Divisions in use. If applying for a partial | surrender, be sure to | complete the Notice of | ______________________________________________________________________________________________________ Withholding section of this| Service Request in addition| ______________________________________________________________________________________________________ to this section. | There will be a charge not | ______________________________________________________________________________________________________ to exceed 2% of the amount | withdrawn or $25. The min- | ______________________________________________________________________________________________________ imum surrender amount is | $500. Refer to your policy | ______________________________________________________________________________________________________ and its related prospectus | for further information. | - ------------------------------------------------------------------------------------------------------------------------------------ [ ] NOTICE OF 11.| The taxable portion of the distribution you receive from your variable universal life insurance policy WITHHOLDING | is subject to federal income tax withholding unless you elect not to have withholding apply. | Withholding of state income tax may also be required by your state of residence. You may elect not to Complete this section if | have withholding apply by checking the appropriate box below. If you elect not to have withholding you have applied for a | apply to your distribution or if you do not have enough income tax withheld, you may be responsible for partial surrender in | payment of estimated tax. You may incur penalties under the estimated tax rules, if your withholding Section 10. | and estimated tax are not sufficient. | | Check one: _______ I DO want income tax withheld from this distribution. | | _______ I DO NOT want income tax withheld from this distribution. | - ------------------------------------------------------------------------------------------------------------------------------------ [ ] LOST POLICY 12.| WITHHOLDING | I/we hereby certify that the policy of insurance for the listed policy has been _________LOST | __________DESTROYED ________OTHER. Complete this section if | applying for a Certificate | Unless I/we have directed cancellation of the policy, I/we request that a: of Insurance or duplicate | policy to replace a lost | _______ Certificate of Insurance at no charge or misplaced policy. If a | full duplicate policy is | _______ Full Duplicate policy at a charge of $25 being requested, a check | or money order for $25 | be issued to me/us. If the original policy is located, I/we will return the Certificate or payable to AGL must be | duplicate policy to AGL for cancellation. submitted with this | request. | - ------------------------------------------------------------------------------------------------------------------------------------ [ ] AFFIRMATION/ 13.| CERTIFICATION: Under penalties of perjury, I certify: (1) that the number shown on this form is my SIGNATURE | correct taxpayer identification number and; (2) that I am not subject to backup withholding under | Section 3406(a)(1)(C) of the Internal Revenue Code. The Internal Revenue Service does not require your Complete this section for | consent to any provision of this document other than the certification required to avoid backup ALL requests. | withholding. | | Dated at __________________________________ this _________ day of ________________________, ________. | (MONTH) (YEAR) | | X_________________________________________________ X_____________________________________________ | SIGNATURE OF OWNER SIGNATURE OF WITNESS | | X_________________________________________________ X_____________________________________________ | SIGNATURE OF JOINT OWNER SIGNATURE OF WITNESS | | X_________________________________________________ X_____________________________________________ | SIGNATURE OF ASSIGNEE SIGNATURE OF WITNESS - ----------------------------------------------------------------------------------------------------------------------------------- PAGE 4 OF 4
EX-2.(A) 17 PAULETTA P. COHN CONSENT AMERICAN GENERAL EXHIBIT (2)(a) LIFE COMPANIES 2929 ALLEN PARKWAY (A40-04), HOUSTON, TEXAS 77019 PAULETTA P. COHN DEPUTY GENERAL COUNSEL Direct Line (713) 831-1230 FAX (713) 620-3878 E-mail: pcohn@aglife.com January 20, 2000 American General Life Insurance Company 2727-A Allen Parkway Houston, TX 77019 Dear Ladies and Gentlemen: As Deputy General Counsel of American General Life Companies, I have acted as counsel to American General Life Insurance Company (the "Company") in connection with the filing of Pre-effective Amendment No. 1 to the Registration Statement on Form S-6, File Nos. 333-87307 and 811-08561 ("Registration Statement") for Separate Account VL-R ("Separate Account VL-R") of the Company with the Securities and Exchange Commission. The Registration Statement relates to the proposed issuance of The One VUL Solution - Variable (policy form No. 99615) flexible premium variable life insurance policies by the Company ("Policies"). Net premiums received under the Policies are allocated by the Company to Separate Account VL-R to the extent directed by owners of the Policies. Net premiums under other policies that may be issued by the Company may also be allocated to Separate Account VL-R. The Policies are designed to provide retirement protection and are to be offered in the manner described in the prospectus and the prospectus supplements included in the Registration Statement. The Policies will be sold only in jurisdictions authorizing such sales. In connection with rendering this opinion, I have examined and am familiar with originals or copies, certified or otherwise identified to my satisfaction, of the corporate records of the Company and all such other documents as I have deemed necessary or appropriate as a basis for the opinion expressed herein and have assumed that prior to the issuance or sale of any Policies, the Registration Statement, as finally amended, will be effective. American General Life Insurance Company January 20, 2000 Page 2 Based on and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, I am of the opinion that: l. The Company is a corporation duly organized and validly existing under the laws of the State of Texas. 2. Separate Account VL-R was duly established and is maintained by the Company pursuant to the laws of the State of Texas, under which income, gains and losses, whether or not realized, from assets allocated to Separate Account VL-R, are, in accordance with the Policies, credited to or charged against Separate Account VL-R without regard to other income, gains or losses of the Company. 3. Assets allocated to Separate Account VL-R will be owned by the Company. The Company is not a trustee with respect thereto. The Policies provide that the portion of the assets of Separate Account VL-R equal to the reserves and other Policy liabilities with respect to Separate Account VL-R will not be chargeable with liabilities arising out of any other business the Company may conduct. The Company reserves the right to transfer assets of Separate Account VL-R in excess of such reserves and other Policy liabilities to the general account of the Company. 4. When issued and sold as described above, the Policies (including any units of Separate Account VL-R duly credited thereunder) will be duly authorized and will constitute validly issued and binding obligations of the Company in accordance with their terms. I am admitted to the bar in the State of Texas, and I do not express any opinion as to the laws of any other jurisprudence. This opinion is being furnished in accordance with the requirements of Item 601(b)(5), Regulation S-K of the Securities Act of 1933 and I hereby consent to the use of this opinion as an exhibit to the Registration Statement. Sincerely, /s/ PAULETTA P. COHN ------------------------- PPC:mlc EX-2.(B) 18 AMGEN ACTUARY CONSENT EXHIBIT 2(b) Writer's Direct Number (713) 831-2738 January 19, 2000 American General Life Insurance Company 2727-A Allen Parkway Houston, Texas 77019 Dear Ladies and Gentlemen: This opinion is furnished in connection with the Registration Statement on Form S-6, File No. 333-87307 ("Registration Statement") of Separate Account VL-R ("Separate Account VL-R") of American General Life Insurance Company ("AGL") covering an indefinite number of units of interest in Separate Account VL-R under The One VUL Solution (policy form No. 99615) flexible premium variable life insurance policies ("Policies"). Net premiums received under the Policies may be allocated to Separate Account VL-R as described in the prospectus included in the Registration Statement. I participated in the preparation of the Policies and I am familiar with their provisions. I am also familiar with the description contained in the prospectus. In my opinion: The Illustrations of Hypothetical Policy Benefits appearing on page 18 of the Prospectus (the "Illustrations") are consistent with the provisions of the Policies. The assumptions upon which these Illustrations are based, including the current charges and the currently planned .25% and .50% reductions in the daily charges after a specified number of years, are stated in the prospectus and are reasonable. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in the Illustrations, appear disproportionately more favorable to prospective purchasers of Policies for preferred risk (the best risk class offered by AGL) non-tobacco user males age 45, than to prospective purchasers of Policies for males at other ages within this risk class or any other risk class, or for females. The particular Illustrations shown were not selected for the purpose of making the relationship appear more favorable. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Accounting and Actuarial Experts" in the prospectus. /s/ ROBERT M. BEUERLEIN ------------------------------------- Robert M. Beuerlein Senior Vice President & Chief Actuary EX-6 19 IND. AUDITORS CONSENT EXHIBIT 6 CONSENT OF INDEPENDENT AUDITORS We consent to the reference made to our firm under the caption "Independent Auditors" and to the use of our report dated February 16, 1999, as to American General Life Insurance Company, in Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6, Nos. 333-87307 and 811-08561) of American General Life Insurance Company. /s/ ERNST & YOUNG LLP --------------------- ERNST & YOUNG LLP Houston, Texas January 19, 2000 -----END PRIVACY-ENHANCED MESSAGE-----