<PAGE>
As filed with the Securities and Exchange Commission on February 20, 1996
File No. 33-______
File No. 811-______
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No._________ |_|
Post-Effective Amendment No._________ |_|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. ______ |_|
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE
ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
VALLEY FORGE LIFE INSURANCE COMPANY
(Name of Depositor)
CNA Plaza, 43 South
Chicago, Illinois 60685
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (312) 822-6597
Corporate Secretary
Continental Assurance Company
CNA Plaza, 43 South
Chicago, Illinois 60685
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the registrant
has elected to register an indefinite amount of securities being offered. The
filing fee of $500 is being paid with this initial filing.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
1. Cover Page ............................ Cover Page
2. Definitions ........................... Definitions
3. Synopsis............................... Fee Table; Summary
4. Condensed Financial
Information ........................... Condensed Financial
Information
5. General Description of Registrant,
Depositor, and Portfolio Companies
(a) Depositor .................... The Company; Additional
Information About Valley
Forge Life Insurance
Company
(b) Registrant .................... The Variable Account
(c) Portfolio Company ............... The Funds
(d) Portfolio Company Prospectus .... The Funds
(e) Voting Rights ................... Voting Privileges
(f) Administrator ................... Administrative Services
6. Deductions
(a) General ......................... Contract Charges and Fees;
Summary
(b) Sales Load ...................... Contract Charges and Fees
(c) Special Purchase Plan ........... Not Applicable
(d) Commission ...................... Distribution of the
Contracts
(e) Expenses ........................ Contract Charges and Fees
(f) Organizational Expenses ......... Not Applicable
<PAGE>
7. General Description of Variable
Annuity Contracts
(a) Persons with Rights .............. Cover Page; Summary;
Description of the
Contract; Additional
Contract Information;
Selecting an Annuity
Payment Option
(b)(i) Allocation of Purchase
Payments.......................... Summary; Cancelling the
Contract; Crediting and
Allocating Purchase
Payments
(ii) Transfers ........................ Summary; Transfers; Annuit
Payments
(iii) Exchanges ........................ Not Applicable
(c) Changes .......................... The Variable Account;
Additional Contract
Information
(d) Inquiries ......................... Cover Page; Summary
8. Annuity Period ............................. Summary; Selecting an
Annuity Payment Option
9. Death Benefit .............................. Death Benefits
10. Purchases and Contract Value
(a) Purchases ......................... Summary; Purchasing a
Contract; Cancelling the
Contract; Crediting and
Allocating Purchase
Payments; Variable
Contract Value; Transfers;
Selecting an Annuity
Payment Option
(b) Valuation ........................ Summary; Description of
the Contract; Contract
Charges and Fees;
Selecting an Annuity
Payment Option
(c) Calculations ...................... Variable Contract Value;
The Guaranteed Interest
Option; Selecting an
Annuity Payment Option
(d) Underwriter ....................... Distribution of the
Contracts
<PAGE>
11. Redemptions
(a) By Owners ......................... Summary; Withdrawals;
Surrenders; Selecting an
Annuity Payment Option;
Federal Tax Considerations
By Annuitant ...................... Not Applicable
(b) Texas ORP ......................... Not Applicable
(c) Payment Delay ..................... Payments by the Company
(d) Lapse ............................. Not Applicable
(e) Free Look ......................... Summary; Cancelling the
Contract
<PAGE>
12. Taxes ...................................... Federal Tax Considerations
13. Legal Proceedings .......................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Information ..................... Statement of Additional
Information
PART B
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL
INFORMATION CAPTION
15. Cover Page ................................. Cover Page
16. Table of Contents .......................... Table of Contents
17. General Information and History ............ Additional Information
About Valley Forge Life
Insurance Company
(Prospectus)
18. Services
(a) Fees and Expenses of
Registrant ........................ Contract Charges and Fees
(Prospectus)
(b) Management Contracts .............. Not Applicable
(c) Custodian ......................... Not Applicable
Accountant ........................ Experts
(d) Assets of Registrant .............. The Variable Account
(Prospectus)
(e) Affiliated Persons ................ Administrative Services
(Prospectus); Distribution
of The Contracts
(Prospectus)
(f) Underwriter ....................... Distribution of the
Contract (Prospectus)
19. Purchase of Securities Being Offered ....... Summary (Prospectus);
Purchasing a Contract
(Prospectus); Distribution
of the Contracts
(Prospectus)
20. Underwriters ............................... Distribution of the
Contracts (Prospectus)
21. Calculation of Performance Data ............ Performance Information
22. Annuity Payments ........................... Selecting an Annuity
Payment Option
(Prospectus)
23. Financial Statements ....................... Financial Statements of
Valley Forge Life
Insurance Company
(Prospectus)
<PAGE>
PART C -- OTHER INFORMATION
ITEM OF FORM N-4 PART C CAPTION
24. Financial Statements and Exhibits .......... Financial Statements and
Exhibits
25. Directors and Officers of the
Depositor ................................... Directors and Officers
of the Company
26. Persons Controlled By or Under
Common Control with the Depositor
or Registrant ................................ Persons Controlled By or
Under Common Control
with the Depositor or
Registrant
27. Number of Contractowners ..................... Not Applicable
28. Indemnification .............................. Indemnification
29. Principal Underwriters ....................... Principal Underwriter
30. Location of Books and Records ................ Location of Books and
Records
31. Management Services .......................... Management Services
32. Undertakings ................................. Undertakings
<PAGE>
PROSPECTUS
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
issued by
VALLEY FORGE LIFE INSURANCE COMPANY AND
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE ANNUITY SEPARATE ACCOUNT
This prospectus describes a flexible premium deferred variable annuity contract
(the "Contract") issued by Valley Forge Life Insurance Company (the "Company").
The Contract may be sold to or used in connection with retirement plans,
including plans that qualify for special federal income tax treatment under the
Internal Revenue Code.
The Owner of a Contract may allocate Net Purchase Payments and Contract values
to one or more of the Subaccounts of Valley Forge Life Insurance Company
Variable Annuity Separate Account (the "Variable Account"), or to the Guaranteed
Interest Option for one or more Guarantee Periods, or to both. Assets of each of
the 18 Subaccounts of the Variable Account are invested in a corresponding
investment portfolio (each, a "Fund") of Insurance Management Series, Variable
Insurance Products Fund, Variable Insurance Products Fund II, The Alger American
Fund, MFS Variable Insurance Trust, SoGen Variable Funds, Inc., and Van Eck
Worldwide Insurance Trust. The Guaranteed Interest Option guarantees a minimum
fixed rate of interest for specified periods of time, currently 1 year, 3 years,
5 years, 7 years, and 10 years.
The Contract Value will vary daily as a function of the investment performance
of the Subaccounts and any interest credited under the Guaranteed Interest
Option. The Company does not guarantee any minimum Variable Contract Value for
amounts allocated to the Variable Account. Annuity Payments and other values
provided by this Contract, when based on the Guaranteed Interest Option, are
subject to a Market Value Adjustment, the operation of which may result in
upward or downward adjustments in amounts withdrawn, surrendered, transferred,
paid on a Death Benefit, or applied to purchase Annuity Payments.
This prospectus sets forth the information regarding the Contract, the Variable
Account, and the Guaranteed Interest Option that a prospective investor should
know before purchasing a Contract. The prospectuses for the Funds, which provide
information regarding investment objectives and policies of each of the Funds,
should be read in conjunction with this prospectus. A Statement of Additional
Information having the same date as this prospectus and providing additional
information about the Contract and the Variable Account has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. To
obtain a free copy of this document, call or write the Service Center.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS FOR EACH OF THE FUNDS.
AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE CONTRACT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF PURCHASE PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
June __, 1996
<PAGE>
TABLE OF CONTENTS
DEFINITIONS................................................................. 1
FEE TABLE................................................................... 4
SUMMARY.................................................................... 7
General Description................................................ 7
Purchasing a Contract.............................................. 7
Cancelling the Contract............................................ 8
Transfers.......................................................... 8
Withdrawals........................................................ 8
Surrenders......................................................... 8
Charges and Fees................................................... 9
CONDENSED FINANCIAL INFORMATION............................................. 9
THE COMPANY, THE VARIABLE ACCOUNT, THE FUNDS, AND
THE GUARANTEED INTEREST OPTION.............................................. 10
The Company........................................................ 10
The Variable Account............................................... 10
The Funds.......................................................... 11
The Guaranteed Interest Option..................................... 14
DESCRIPTION OF THE CONTRACT................................................. 17
Purchasing a Contract.............................................. 17
Cancelling the Contract............................................ 17
Crediting and Allocating Purchase Payments......................... 17
Variable Contract Value............................................ 18
Transfers.......................................................... 19
Withdrawals........................................................ 20
Surrenders......................................................... 21
Death Benefits..................................................... 22
Payments by the Company............................................ 24
Telephone Transaction Privileges................................... 24
CONTRACT CHARGES AND FEES................................................... 25
Surrender Charge (Contingent Deferred Sales Charge)................ 25
Annual Administration Fee.......................................... 26
Transfer Processing Fee............................................ 26
Taxes on Purchase Payments......................................... 26
Mortality and Expense Risk Charge.................................. 27
Administration Charge.............................................. 27
Fund Expenses...................................................... 27
Possible Charge for the Company's Taxes............................ 27
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<PAGE>
SELECTING AN ANNUITY PAYMENT OPTION......................................... 28
Annuity Date....................................................... 28
Annuity Payment Dates.............................................. 28
Election and Changes of Annuity Payment Options.................... 28
Annuity Payments................................................... 29
Annuity Payment Options............................................ 30
ADDITIONAL CONTRACT INFORMATION............................................. 31
Ownership.......................................................... 31
Changing the Owner or Beneficiary.................................. 31
Misstatement of Age or Sex......................................... 32
Change of Contract Terms........................................... 32
Reports to Owners.................................................. 32
Miscellaneous...................................................... 33
YIELDS AND TOTAL RETURNS.................................................... 33
FEDERAL TAX CONSIDERATIONS.................................................. 35
Introduction....................................................... 35
Tax Status of the Contract......................................... 35
Taxation of Annuities.............................................. 36
Transfers, Assignments or Exchanges of a Contract.................. 38
Withholding........................................................ 39
Multiple Contracts................................................. 39
Taxation of Qualified Plans........................................ 39
Other Tax Consequences............................................. 40
OTHER INFORMATION........................................................... 40
Distribution of the Contracts...................................... 40
Administrative Services............................................ 40
Voting Privileges.................................................. 40
Legal Proceedings.................................................. 41
Company Holidays................................................... 41
Legal Matters...................................................... 41
Experts............................................................ 42
ADDITIONAL INFORMATION ABOUT VALLEY FORGE LIFE INSURANCE COMPANY ........... 42
History and Business............................................... 42
Selected Financial Data............................................ 42
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 43
Results of Operations.............................................. 43
Liquidity and Capital Resources.................................... 43
Segment Information................................................ 43
Reinsurance........................................................ 44
Investments........................................................ 44
Competition........................................................ 44
Employees.......................................................... 44
Properties......................................................... 44
State Regulation................................................... 44
Directors and Executive Officers................................... 45
- ii -
<PAGE>
Executive Compensation............................................. 47
FINANCIAL STATEMENTS OF VALLEY FORGE LIFE INSURANCE COMPANY................. 48
STATEMENT OF ADDITIONAL INFORMATION......................................... 49
APPENDIX A ................................................................ A-1
APPENDIX B................................................................. B-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
- iii -
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: A unit of measure used to calculate Variable Contract Value.
ADJUSTED CONTRACT VALUE: The Contract Value plus or minus any applicable Market
Value Adjustment less purchase payment tax charges not previously deducted less
the annual administration fee.
AGE: The Age of any person on the birthday nearest the date for which Age is
determined.
ANNUITANT: The person or persons whose life (or lives) determines the Annuity
Payments payable under the Contract and whose death determines the death
benefit. With regard to joint and survivorship Annuity Payment Options, the
maximum number of joint Annuitants is two and provisions referring to the death
of an Annuitant mean the death of the last surviving Annuitant. Provisions
relating to an action by the Annuitant mean, in the case of joint Annuitants,
both Annuitants acting jointly.
ANNUITY DATE: The date on which Surrender Value or Adjusted Contract Value is
applied to purchase Annuity Units or a Fixed Annuity.
ANNUITY PAYMENT: One of several periodic payments made by the Company to the
Payee under an Annuity Payment Option.
ANNUITY PAYMENT DATE: The date each month, quarter, semi-annual period, or
year as of which the Company computes Annuity Payments. The Annuity Payment
Date(s) is shown on the Contract.
ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the Owner
under the Contract. The Annuity Payment Option is shown on the Contract.
ANNUITY UNIT: A unit of measure used to calculate Variable Annuity Payments.
BENCHMARK RATE OF RETURN: An annual rate of return shown on the Contract and
used by the Company to determine the degree of fluctuation in the amount of
Variable Annuity Payments in response to fluctuations in the net investment
return of selected Subaccounts by assuming (among other things) that the assets
in the Variable Account supporting the Contract will have a net annual
investment return over the anticipated Annuity Payment period equal to that rate
of return.
BENEFICIARY: The person(s) to whom the death benefit will be paid on the death
of the Owner or Annuitant prior to the Annuity Date.
CANCELLATION PERIOD: The period described on the cover page of the Contract
during which the Owner may return the Contract for a refund.
THE CODE: The Internal Revenue Code of 1986, as amended.
THE COMPANY: Valley Forge Life Insurance Company.
CONTINGENT ANNUITANT: The person designated by the Owner in the application who
becomes the Annuitant in the event that the Annuitant dies before the Annuity
Date while the Owner is still alive.
CONTINGENT BENEFICIARY: The person(s) to whom the death benefit will be paid if
the Beneficiary (or Beneficiaries) is not living.
CONTRACT ANNIVERSARY: The same date in each Contract Year as the Contract
Effective Date.
- 1 -
<PAGE>
CONTRACT EFFECTIVE DATE: The date on which the Company issues the Contract and
upon which the Contract becomes effective. The Contract Effective Date is shown
on the Contract and is used to determine Contract Years and Contract
Anniversaries.
CONTRACT YEAR: A twelve-month period beginning on the Contract Effective Date
or on a Contract Anniversary.
CONTRACT VALUE: The total amount invested under the Contract. It is the sum of
Variable Contract Value and the Guaranteed Interest Option Value.
DUE PROOF OF DEATH: Proof of death satisfactory to the Company. Due Proof of
Death may consist of the following if acceptable to the Company:
(a) a certified copy of the death record;
(b) a certified copy of a court decree reciting a finding of
death; or
(c) any other proof satisfactory to the Company.
FIXED ANNUITY PAYMENT: An Annuity Payment that is supported by the General
Account and does not vary in amount as a function of the investment return of
the Variable Account from one Annuity Payment Date to the next.
FUND: Any open-end management investment company or investment portfolio
thereof or unit investment trust or series thereof, in which a Subaccount
invests.
GENERAL ACCOUNT: The assets of the Company other than those allocated to the
Variable Account or any other separate account of the Company.
GIO ACCOUNT: Valley Forge Life Insurance Company Guaranteed Interest Option
Separate Account.
GUARANTEE AMOUNT: Before the Annuity Date, the amount equal to that part of any
Net Purchase Payment allocated to or any amount transferred to the Guaranteed
Interest Option for a designated Guarantee Period with a particular expiration
date (including interest thereon) less any withdrawals (including any applicable
surrender charges and any applicable purchase payment tax charge) or transfers
therefrom.
GUARANTEE PERIOD: A specific number of years for which the Company agrees to
credit a particular effective annual rate of interest.
GUARANTEED INTEREST OPTION: An investment option under the Contract supported
by the GIO Account. It is not part of nor dependent upon the investment
performance of the Variable Account.
GUARANTEED INTEREST OPTION VALUE: The sum of all Guarantee Amounts.
GUARANTEED INTEREST RATE: Unless a Market Value Adjustment is made, an
effective annual rate of interest that the Company will pay on a Guarantee
Amount.
HOME OFFICE: The Company's office at 401 Penn Street, Reading, PA 19601.
MARKET VALUE ADJUSTMENT: A positive or negative adjustment made to any portion
of a Guarantee Amount upon the surrender, withdrawal, transfer or application to
an Annuity Payment Option of such portion of the Guarantee Amount prior to 30
days before the expiration of the Guarantee Period applicable to that Guarantee
Amount.
- 2 -
<PAGE>
NET ASSET VALUE PER SHARE: The value per share of any Fund on any Valuation Day.
The method of computing the Net Asset Value Per Share is described in the
prospectus for the Fund.
NET PURCHASE PAYMENT: A purchase payment less any purchase payment tax charge
deducted from the purchase payment.
NON-QUALIFIED CONTRACT: A Contract that is not a "qualified contract."
OWNER: The person or persons who owns (or own) the Contract and who is (are)
entitled to exercise all rights and privileges provided in the Contract. The
maximum number of joint Owners is two. Provisions relating to action by the
Owner mean, in the case of joint Owners, both Owners acting jointly. In the
context of a Contract issued on a group basis, Owners refers to holders of
certificates under a group Contract.
PAYEE: The person entitled to receive Annuity Payments under the Contract.
QUALIFIED CONTRACT: A Contract that is issued in connection with a retirement
plan that qualifies for special federal income tax treatment under Sections 401,
408 or 457 of the Code.
SEC: The U.S. Securities and Exchange Commission.
SERVICE CENTER: The offices of the Company's administrative agent at 95 Bridge
Street (or P.O. Box 310), Haddam, Connecticut 06438.
SUBACCOUNT: A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
SUBACCOUNT VALUE: Before the Annuity Date, the amount equal to that part of any
Net Purchase Payment allocated to the Subaccount and any amount transferred to
that Subaccount, adjusted by interest income, dividends, net capital gains or
losses, realized or unrealized, and decreased by withdrawals (including any
applicable surrender charges and any applicable purchase payment tax charge) and
any amounts transferred out of that Subaccount.
SURRENDER VALUE: The Adjusted Contract Value less any applicable surrender
charges.
VALUATION DAY: For each Subaccount, each day on which the New York Stock
Exchange is open for business except for certain holidays listed in the
prospectus and days that a Subaccount's corresponding Fund does not value its
shares.
VALUATION PERIOD: The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ACCOUNT: Valley Forge Life Insurance Company Variable Annuity Separate
Account.
VARIABLE CONTRACT VALUE: The sum of all Subaccount Values.
VARIABLE ANNUITY PAYMENT: An Annuity Payment that may vary in amount from one
Annuity Payment Date to the next as a function of the investment experience of
one or more Subaccounts selected by the Owner to support such payments.
WRITTEN NOTICE: A notice or request submitted in writing in a form satisfactory
to the Company that is signed by the Owner and received at the Service Center.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
Sales load imposed on purchase payments........................................................... 0%
Maximum Surrender Charge (as a percentage of purchase payments surrendered or withdrawn) ......... 7%
Transfer Processing Fee (each, after first 12 in a Contract Year) ................................ $25
ANNUAL ADMINISTRATION FEE (waived if Contract Value exceeds $50,000) $30
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Mortality and Expense Risk Charge ............................................................... 1.25%
Administration Charge............................................................................ 0.15%
-----
Total Variable Account Expenses.................................................................. 1.40%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND EXPENSES
(as a percentage of Fund average net assets)
Management
(Advisory) Other Total Annual
Fees Expenses Expenses
<S> <C> <C> <C>
Insurance Management Series:
Corporate Bond Fund 0._% 0._% 0._%
Prime Money Fund 0._% 0._% 0._%
Utility Fund 0._% 0._% 0._%
Variable Insurance Products Fund and
Variable Insurance Products Fund II:
VIP Equity-Income Portfolio 0._% 0._% 0._%
VIP II Asset Manager Portfolio 0.-% 0.-% 0.-%
VIP II Contrafund Portfolio 0._% 0._% 0._%
VIP II Index 500 Portfolio 0._% 0._% 0._%
The Alger American Fund:
Alger American Growth Portfolio 0._% 0._% 0._%
Alger American MidCap Growth Portfolio 0._% 0._% 0._%
Alger American Small Capitalization Portfolio 0._% 0._% 0._%
MFS Variable Insurance Trust:
MFS Emerging Growth Series 0._% 0._% 0._%
MFS Growth With Income Series 0._% 0._% 0._%
- 4 -
<PAGE>
MFS Limited Maturity Series 0._% 0._% 0._%
- -
MFS Research Series 0._% 0._% 0._%
MFS Total Return Series 0._% 0._% 0._%
SoGen Variable Funds, Inc.:
SoGen Overseas Portfolio 0._% 0._% 0._%
Van Eck Worldwide Insurance Trust:
Emerging Markets Fund 0._% 0._% 0._%
Gold and Natural Resources Fund 0._% 0.% 0._%
</TABLE>
Taxes on purchase payments, currently ranging from 0% to 3.5% of purchase
payments, may be applicable, depending upon the laws of various jurisdictions.
The above tables are intended to assist the Owner in understanding the costs and
expenses that he or she will bear directly or indirectly. The table reflects the
anticipated expenses of the Variable Account and reflect the actual expenses for
each Fund for the year ended December 31, 1995. Expenses for these Funds are
estimates and are not based on past experience. For a more complete description
of the various costs and expenses, see "CONTRACT CHARGES AND FEES" and the
prospectuses for each Fund.
Examples
If you surrender your Contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 purchase payment, assuming a 5%
annual rate of return on assets:
One Year Three Years
Corporate Bond Subaccount $__ $__
Prime Money Subaccount $__ $__
Utility Subaccount $__ $__
VIP Equity-Income Subaccount $__ $__
VIP II Asset Manager Subaccount $__ $__
VIP II Contrafund Subaccount $__ $__
VIP II Index 500 Subaccount $__ $__
Alger American Growth Subaccount $__ $__
Alger American MidCap Growth Subaccount $__ $__
Alger American Small Capitalization Subaccount $__ $__
MFS Emerging Growth Subaccount $__ $__
MFS Growth With Income Subaccount $__ $__
MFS Limited Maturity Subaccount $__ $__
MFS Research Subaccount $__ $__
MFS Total Return Subaccount $__ $__
SoGen Overseas Subaccount $__ $__
- 5 -
<PAGE>
Emerging Markets Subaccount $__ $__
Gold and Natural Resources Subaccount $__ $__
================================================================================
If you do not surrender your Contract or if you annuitize, you would pay the
following expenses on a $1,000 purchase payment, assuming a 5% annual rate of
return on assets:
One Year Three Years
Corporate Bond Subaccount $__ $__
Prime Money Subaccount $__ $__
Utility Subaccount $__ $__
VIP Equity-Income Subaccount $__ $__
VIP II Asset Manager Subaccount $__ $__
VIP II Contrafund Subaccount $__ $__
VIP II Index 500 Subaccount $__ $__
Alger American Growth Subaccount $__ $__
Alger American MidCap Growth Subaccount $__ $__
Alger American Small Capitalization Subaccount $__ $__
MFS Emerging Growth Subaccount $__ $__
MFS Growth With Income Subaccount $__ $__
MFS Limited Maturity Subaccount $__ $__
MFS Research Subaccount $__ $__
MFS Total Return Subaccount $__ $__
SoGen Overseas Subaccount $__ $__
Emerging Markets Subaccount $__ $__
Gold and Natural Resources Subaccount $__ $__
================================================================================
The examples provided above assume that no transfer processing fees or purchase
payment taxes have been assessed. The examples also assume that the annual
administration fee is $30 and that the Contract Value per Contract is $10,000,
which translates the annual administration fee into an assumed .30% charge for
purposes of the examples based on a $1,000 investment.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE 5% ANNUAL
RETURN ASSUMED IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THE ASSUMED
RATE.
- 6 -
<PAGE>
SUMMARY
GENERAL DESCRIPTION
This prospectus has been designed to provide prospective Owners with the
information necessary to decide whether or not to purchase a Contract. This
summary provides a concise description of the more significant aspects of the
Contract. Further detail is provided in this prospectus, the related Statement
of Additional Information, the Contract, and the prospectuses of the Funds. For
further information, contact the Service Center.
In many jurisdictions, the Contract is issued directly to individuals. In
certain jurisdictions, however, the Contract is only available as a group
contract. Group Contracts are issued to or on behalf of groups such as employers
for their employees. Individuals who are part of groups for which a Contract is
issued receive a certificate that recites substantially all of the provisions of
the Group Contract. Throughout this prospectus, the term "Contract" refers to
individual Contracts, Group Contracts and certificates for Group Contracts.
Owners may allocate all or a portion of Net Purchase Payments or transfer
Contract Value among several Subaccounts of the Variable Account. The Contract
also offers a Guaranteed Interest Option under which Owners may allocate all or
a portion of Net Purchase Payments and transfer Contract Value among several
Guarantee Periods selected by the Owner. The Company currently offers Guarantee
Periods with durations of 1, 3, 5, 7, and 10 years. If the amount allocated or
transferred remains in a Guarantee Period until the expiration date of a
Guarantee Period, its value will be equal to the amount originally allocated or
transferred, multiplied on an annually compounded basis, by its Guaranteed
Interest Rate. Any surrender, withdrawal, transfer, or annuitization made prior
to 30 days before the expiration of a Guarantee Period will be subject to a
Market Value Adjustment that may increase or decrease the Guarantee Amount (or
portion thereof) being surrendered, withdrawn, transferred, or annuitized.
Depending on the size of the Market Value Adjustment, such an adjustment may
reduce the Guarantee Amount (or portion thereof) to less than the Net Purchase
Payment allocated to or Contract Value transferred to a Guarantee Period. (See
"THE COMPANY, THE VARIABLE ACCOUNT, THE FUNDS, AND THE GUARANTEED INTEREST
OPTION -- The Guaranteed Interest Option - Market Value Adjustment.")
The Company makes no promise that the Contract Value will increase. Depending on
the investment experience of the Subaccounts and interest credited to various
Guarantee Amounts, the Contract Value, Adjusted Contract Value, Surrender Value
and the death benefit may increase or decrease on any Valuation Day. Owners bear
the investment risk for amounts invested in the Subaccounts and for Guarantee
Amounts surrendered, withdrawn, transferred or applied to an Annuity Payment
Option before the 30-day period prior to the expiration of a Guarantee Period.
The Contract also offers a choice of Annuity Payment Options to which Owners may
apply the Adjusted Contract Value as of the Annuity Date. Beneficiaries may also
apply the death benefit to certain Annuity Payment Options. An Owner may change
the Annuity Date within certain limits.
PURCHASING A CONTRACT
The minimum initial purchase payment for a Contract is $2,000. The minimum
additional purchase payment the Company will accept is $100. The Company may
refuse to accept additional purchase payments at any time for any reason.
<PAGE>
The initial Net Purchase Payment is allocated to each Subaccount or to Guarantee
Periods of the Guaranteed Interest Option, or to both, as specified on the
application, unless the Contract is issued in a state that requires the return
of purchase payments during the Cancellation Period. In those states, that
portion of an Owner's initial Net Purchase Payment allocated to a Subaccount is
allocated to the Prime Money Subaccount (the "Money Market Subaccount") for a
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<PAGE>
period equal to the number of days in the Cancellation Period. At the expiration
of this period, such portion of the Net Purchase Payment, as adjusted to reflect
the investment performance of the Money Market Subaccount during this period, is
then allocated to the Subaccounts based on the proportion that the Owner's
allocation percentage shown in the application bears to the Variable Contract
Value. (See "DESCRIPTION OF THE CONTRACT -- Cancelling the Contract.")
If an Owner elects to invest in a particular Subaccount or Guarantee Period, at
least 1% of the Net Purchase Payment must be allocated to that Subaccount or
Guarantee Period. All percentage allocations must be in whole numbers. In
addition, allocations to a Guarantee Period must be at least $500. The Company
allocates any additional Net Purchase Payments among the Subaccounts and the
Guarantee Periods in accordance with the allocation schedule in effect when such
Net Purchase Payment is received at the Service Center unless it is accompanied
by Written Notice directing a different allocation. (See "Crediting and
Allocating Purchase Payments.")
CANCELLING THE CONTRACT
At any time during the Cancellation Period, an Owner may cancel the Contract and
receive a refund equal to the Contract Value plus fees or charges deducted
except for the mortality and expense risk charge and the administration charge.
However, if required by state law, the Company will return the purchase payments
made. The Cancellation Period is a 10-day period of time beginning when the
Contract is received by an Owner. Some states may require that the Company
provide a longer Cancellation Period. (See "DESCRIPTION OF THE CONTRACT --
Cancelling the Contract.")
TRANSFERS
Prior to the Annuity Date, an Owner may transfer all or part of any Subaccount
Value to another available Subaccount(s) or to one or more Guarantee Periods, or
transfer all or part of any Guarantee Amount to any available Subaccount(s) or
other available Guarantee Periods, subject to certain restrictions. (See
"DESCRIPTION OF THE CONTRACT -- Transfers.")
WITHDRAWALS
Upon Written Notice prior to the Annuity Date, an Owner may, subject to certain
restrictions, withdraw part of the Surrender Value. Withdrawals of Surrender
Value may result in the Company deducting from the remaining Contract Value a
Market Value Adjustment, any applicable surrender charge and any applicable
purchase payment tax charge. (See "DESCRIPTION OF THE CONTRACT -- Withdrawals.")
A withdrawal may have adverse federal income tax consequences including the
possibility of being subject to a penalty tax. (See "FEDERAL TAX
CONSIDERATIONS.")
SURRENDERS
Upon Written Notice prior to the Annuity Date, an Owner may surrender the
Contract and receive its Surrender Value. An Owner may elect to have the
Surrender Value paid in a single sum or under an Annuity Payment Option. (See
"DESCRIPTION OF THE CONTRACT -- Surrenders.") Surrenders may have adverse
federal income tax consequences including the possibility of being subject to a
penalty tax. (See "FEDERAL TAX CONSIDERATIONS.")
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<PAGE>
CHARGES AND FEES
The following charges and fees are assessed under the Contracts:
Surrender Charge. If a purchase payment is withdrawn or surrendered (or received
by a Payee as part of a lump sum payment) within five full calendar years since
the date the purchase payment was received, the Company assesses a surrender
charge. During the first five Contract Years, the Company also assesses a
surrender charge if a purchase payement is applied, as part of Contract Value,
to an Annuity Payment Option. The surrender charge is 7% of the purchase payment
if surrendered or withdrawn within two full years after the purchase payment was
received and reduces by 1% each year for the next three years and is 0% after
five full years following receipt of the purchase payment. No surrender charge
is assessed upon the withdrawal or surrender (or payment) of Contract Value in
excess of aggregate purchase payments (less prior withdrawals of purchase
payments). For purposes of determining the surrender charge, it is assumed that
purchase payments are surrendered or withdrawn before any Contract Value in
excess of purchase payments (less prior withdrawals of purchase payments) and
purchase payments are considered withdrawn on a first-in-first-out basis. (See
"Surrender Charge (Contingent Deferred Sales Charge).")
Administration Charge. The Company makes a daily charge of 0.000411%
(approximately equivalent to an effectiveannual rate of 0.15%) of the Variable
Account's net assets to cover a portion of the Company's Contract administration
costs. (See "Administration Charge.")
Mortality and Expense Risk Charge. The Company makes a daily charge of
0.003446% (approximately equivalent to an effective annual rate of 1.25%) of the
Variable Account's net assets to compensate the Company for assuming certain
mortality and expense risks. (See "Mortality and Expense Risk Charge.")
Annual Administration Fee. The Company deducts an annual administration fee of
$30 per Contract Year if an Owner's Contract Value is less than $50,000 at the
time of deduction. (See "Annual Administration Fee.")
Transfer Processing Fee. A $25 charge is assessed by the Company for each
transfer in excess of 12 during a Contract Year. (See "Transfer Processing
Fee.")
Taxes on Purchase Payments. Generally, taxes on purchase payments, if any, are
incurred as of the Annuity Date, and a charge for taxes on purchase payments is
deducted from the Contract Value as of that date. These taxes range from 0% to
3.5% of purchase payments. (See "Taxes on Purchase Payments.")
Expenses of the Funds. The investment experience of each Subaccount reflects
that of the Fund whose shares it holds. The investment experience of each Fund,
in turn, reflects its fees and other operating expenses. Please read the
prospectus for each of the Funds for details.
CONDENSED FINANCIAL INFORMATION
There is no condensed financial information included for the Variable Account
because, as of the date of this prospectus, the Variable Account had not yet
commenced operations. The audited financial statements of the Company (as well
as the auditors' reports thereon) appear elsewhere herein.
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<PAGE>
THE COMPANY, THE VARIABLE ACCOUNT, THE FUNDS, AND
THE GUARANTEED INTEREST OPTION
THE COMPANY
The Company is a life insurance company organized under the laws of the State of
Pennsylvania in 1956 and is authorized to transact business in the District of
Columbia, Puerto Rico, Guam and all states except New York. The Company's home
office is located at 401 Penn St., Reading, Pennsylvania 19601, and its
executive office is located at CNA Plaza, Chicago, Illinois 60685. The Company
is a wholly-owned subsidiary of Continental Assurance Company ("CAC"), a life
insurance company which, as of December 31, 1994, had assets of approximately
$11.1 billion. Subject to a coinsurance pooling agreement (a type of reinsurance
arrangement) with CAC, the Company assumes all insurance risks under the
Contracts, and the Company's assets, which as of December 31, 1994 exceeded
$507.7 million, support the benefits under the Contracts. See "ADDITIONAL
INFORMATION ABOUT VALLEY FORGE LIFE INSURANCE COMPANY" for more detail regarding
the Company.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company established
under Pennsylvania law on October 18, 1995. The Company owns the assets of the
Variable Account. These assets are held separate from the Company's General
Account and its other separate accounts. That portion of the Variable Account's
assets that is equal to the reserves and other Contract liabilities of the
Variable Account is not chargeable with liabilities arising out of any other
business the Company may conduct. If the assets exceed the required reserves and
other contract liabilities, the Company may transfer the excess to the Company's
General Account. The Variable Account's assets will at all times, equal or
exceed the sum of the Subaccount Values of all Contracts funded by the Variable
Account.
The Variable Account is registered with the SEC under the Investment Company Act
of 1940 (the "1940 Act") as a unit investment trust and meets the definition of
a "separate account" under the federal securities laws. Such registration does
not involve any supervision by the SEC of the management of the Variable Account
or the Company. The Variable Account also is governed by the laws of
Pennsylvania, the Company's state of domicile, and may also be governed by laws
of other states in which the Company does business.
The Variable Account has 18 Subaccounts, each of which invests in shares of a
corresponding Fund. Income, gains and losses, realized or unrealized, from
assets allocated to a Subaccount are credited to or charged against that
Subaccount without regard to other income, gains or losses of the Company.
Changes to the Variable Account. Where permitted by applicable law, the Company
may make the following changes to the Variable Account:
1. Any changes required by the 1940 Act or other applicable law
or regulation;
2. combine separate accounts, including the Variable Account;
3. add new subaccounts to or remove existing Subaccounts from the
Variable Account or combine Subaccounts;
<PAGE>
4. make Subaccounts (including new Subaccounts) available to such
classes of Contracts as the Company may determine;
5. add new Funds or remove existing Funds;
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<PAGE>
6. substitute new Funds for any existing Fund if shares of the
Fund are no longer available for investment or if the Company
determines that investment in a Fund is no longer appropriate
in light of the purposes of the Variable Account;
7. deregister the Variable Account under the 1940 Act if such
registration is no longer required; and
8. operate the Variable Account as a management investment
company under the 1940 Act or as any other form permitted by
law.
No such changes will be made without any necessary approval of the SEC and
applicable state insurance departments. Owners will be notified of any changes.
THE FUNDS
Each Subaccount invests in a corresponding Fund. Each of the Funds is either an
open-end diversified management investment company or a separate investment
portfolio of such a company and is managed by a registered investment adviser.
The Funds as well as a brief description of their investment objectives are
provided below.
Insurance Management Series
---------------------------
The Corporate Bond, Prime Money and Utility Subaccounts each invest in
shares of corresponding Funds (i.e., investment portfolios) of Insurance
Management Series ("IMS"). IMS issues five "series" or classes of shares, each
of which represents an interest in a Fund of IMS. Three of these series of
shares are available as investment options under the Contracts. The investment
objectives of these Funds are set forth below.
Corporate Bond Fund. This Fund invests primarily in lower-rated fixed-
income securities that seek to achieve high current income.
Prime Money Fund. This Fund invests in money market instruments
maturing in thirteen months or less to achieve current income
consistent with stability of principal and liquidity.
Utility Fund. This Fund invests in equity and debt securities of
utility companies to achieve high current income and moderate capital
appreciation.
IMS is advised by Federated Advisers.
Variable Insurance Products Fund and Variable Insurance Products Fund II
------------------------------------------------------------------------
The Equity-Income Subaccount invests in shares of a corresponding Fund
(i.e., investment portfolios) of Variable Insurance Products Fund ("VIP Fund").
VIP Fund issues five "series" or classes of shares, each of which represents an
interest in a Fund of VIP Fund. One of these series of shares is available as an
investment option under the Contracts. Asset Manager, Contrafund, and Index 500
Subaccounts each invest in shares of corresponding Funds (i.e., investment
portfolios) of Variable Insurance Products Fund II ("VIP Fund II"). VIP Fund II
issues five "series" or classes of shares, each of which represents an interest
in a Fund of VIP Fund II. Three of these series of shares are available as
investment options under the Contracts. The investment objectives of these Funds
are set forth below.
<PAGE>
Asset Manager Portfolio. This Fund seeks high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed-income instruments.
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<PAGE>
Contrafund Portfolio. This Fund seeks capital appreciation over the
long-term by investing in companies that are undervalued or
out-of-favor.
Equity-Income Portfolio. This Fund seeks current income by investing
primarily in income producing equity securities. In choosing these
securities, the Fund also considers the potential for capital
appreciation.
Index 500 Portfolio. This Fund seeks investment results that correspond
to the total return of common stocks publicly traded in the United
States, as represented by the Standard & Poor's 500 Composite Index of
500 Common Stocks.
VIP Fund and VIP Fund II are each advised by Fidelity Management &
Research Company.
The Alger American Fund
-----------------------
Alger American Growth, Alger American MidCap Growth and Alger American
Small Capitalization Subaccounts each invest in shares of corresponding Funds
(i.e., investment portfolios) of The Alger American Fund ("AAF"). AAF issues ___
"series" or classes of shares, each of which represents an interest in a Fund of
AAF. Three of these series of shares are available as investment options under
the Contracts. The investment objectives of these Funds are set forth below.
Alger American Growth Portfolio. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio
of equity securities, primarily of companies with total market
capitalization of $ 1 billion or greater.
Alger American MidCap Growth Portfolio. This Fund seeks long-term
capital appreciation by investing in a diversified, actively managed
portfolio of equity securities, primarily of companies with total
market capitalization between $750 million and $3.5 billion.
Alger American Small Capitalization Portfolio. This Fund seeks
long-term capital appreciation by investing in a diversified, actively
managed portfolio of equity securities, primarily of companies with
total market capitalization of less than $1 billion.
AAF is advised by Fred Alger Management, Inc.
MFS Variable Insurance Trust
----------------------------
The MFS Emerging Growth, MFS Growth with Income, MFS Limited Maturity,
MFS Research and MFS Total Return Subaccounts each invest in shares of
corresponding Funds (i.e., investment portfolios) of MFS Variable Insurance
Trust ("MFSVIT"). MFSVIT issues 12 "series" or classes of shares, each of which
represents an interest in a Fund of MFSVIT. Five of these series of shares are
available as investment options under the Contracts. The investment objectives
of these Funds are set forth below.
<PAGE>
MFS Emerging Growth Series. This Fund seeks to obtain long-term growth
of capital by investing primarily in common stocks of small and
medium-sized companies that are early in their life cycle but which
have the potential to become major enterprises.
MFS Growth With Income Series. This Fund seeks to provide reasonable
current income and long-term growth of capital and income.
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<PAGE>
MFS Limited Maturity Series. This Fund seeks to provide as high a level
of current income as is believed to be consistent with prudent
investment risk, with capital protection as a secondary objective.
MFS Research Series. This Fund seeks to provide long-term growth of
capital and future income.
MFS Total Return Series. This Fund seeks primarily to provide
above-average income consistent with prudent employment of capital and
secondarily to provide a reasonable opportunity for growth of capital
and income.
MFSVIT is advised by Massachusetts Financial Services Company.
SoGen Variable Funds, Inc.
--------------------------
The SoGen Overseas Subaccount invests in shares of a corresponding Fund
(i.e., investment portfolio) of SoGen Variable Funds, Inc. ("SGVF"). SGVF issues
___ "series" or classes of shares, each of which represents an interest in a
Fund of SGVF. One of these series of shares is available as an investment option
under the Contracts. The investment objective of this Fund is set forth below.
SoGen Overseas Portfolio. This Fund seeks long-term growth of capital
by investing primarily in securities of small and medium size non-U.S.
companies.
SGVF is advised by Societe Generale Asset Management Corp.
Van Eck Worldwide Insurance Trust
---------------------------------
The Emerging Market and Gold and Natural Resources Subaccounts each
invest in shares of corresponding Funds (i.e., investment portfolios) of Van Eck
Worldwide Insurance Trust ("VEWIT"). VEWIT issues ___ "series" or classes of
shares, each of which represents an interest in a Fund of VEWIT. Two of these
series of shares are available as investment options under the Contracts. The
investment objectives of these Funds are set forth below.
Emerging Markets Fund. This Fund seeks capital appreciation by
investing primarily in equity securities in emerging markets around
the world.
Gold and Natural Resources Fund. This Fund seeks long-term capital
appreciation by investing in equity and debt securities of companies
engaged in the exploration, development, production and distribution of
gold and other natural resources such as strategic and other metals,
minerals, forest products, oil, natural gas and coal.
VEWIT is advised by Van Eck Associates Corporation.
NO ONE CAN ASSURE THAT ANY FUND WILL ACHIEVE ITS STATED OBJECTIVES AND
POLICIES.
<PAGE>
More detailed information concerning the investment objectives, policies and
restrictions of the Funds, the expenses of the Funds, the risks attendant to
investing in the Funds and other aspects of their operations can be found in the
current prospectus for each Fund which accompanies this prospectus and the
current statement of additional information for the Funds. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of Net Purchase Payments or transfers among the Subaccounts.
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<PAGE>
Please note that not all of the Funds described in the prospectuses for the
Funds are available with the Contract. Moreover, the Company cannot guarantee
that each Fund will always be available for its variable annuity contracts, but
in the unlikely event that a Fund is not available, the Company will take
reasonable steps to secure the availability of a comparable fund. Shares of each
Fund are purchased and redeemed at net asset value, without a sales charge.
The Company has entered into agreements with the investment advisers of several
of the Funds pursuant to which each such investment adviser pays the Company a
servicing fee based upon an annual percentage of the average aggregate net
assets invested by the Company on behalf of the Variable Account. These
agreements reflect administrative services provided to the Funds by the Company.
Payments of such amounts by an adviser do not increase the fees paid by the
Funds or their shareholders.
Shares of the Funds are sold to separate accounts of insurance companies that
are not affiliated with the Company or each other, a practice known as "shared
funding." They are also sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
contracts, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners,
whose Contract Values are allocated to the Variable Account, and of owners of
other contracts whose contract values are allocated to one or more other
separate accounts investing in any one of the Funds. Shares of some of the Funds
may also be sold directly to certain qualified pension and retirement plans
qualifying under Section 401 of the Code. As a result, there is a possibility
that a material conflict may arise between the interests of Owners or owners of
other contracts (including contracts issued by other companies), and such
retirement plans or participants in such retirement plans. In the event of any
such material conflicts, the Company will consider what action may be
appropriate, including removing the Fund from the Variable Account or replacing
the Fund with another Fund. There are certain risks associated with mixed and
shared funding and with the sale of shares to qualified pension and retirement
plans, as disclosed in each Fund's prospectus.
THE GUARANTEED INTEREST OPTION
The Guaranteed Interest Option is an investment option available under the
Contract and is supported by the Company's General Account and the GIO Account
(described below). All or a portion of an Owner's Net Purchase Payments may be
allocated to and transfers of Contract Value may be made to Guarantee Periods
under the Guaranteed Interest Option. Through the Guaranteed Interest Option,
the Company offers specified effective annual rates of interest (Guaranteed
Interest Rates) that are credited daily and available for specified periods of
time selected by an Owner (Guarantee Periods). Although the Guaranteed Interest
Rate may differ among Guarantee Periods, it will never be less than the
effective annual rate shown in the Contract.
Interests issued by the Company in connection with the Guaranteed Interest
Option have been registered under the Securities Act of 1933, but neither the
Guaranteed Interest Option, the GIO Account, nor the General Account has been
registered as an investment company under the 1940 Act. Accordingly, neither the
Guaranteed Interest Option, the GIO Account, nor the General Account, nor any
interest therein are generally subject to regulation under the 1940 Act.
<PAGE>
Initial Guarantee Periods begin on the date as of which a Net Purchase Payment
is allocated to or a portion of Contract Value is transferred to the Guarantee
Period, and end when the number of years in the Guarantee Period elected
(measured from the end of the calendar month in which the amount was allocated
or transferred to the Guarantee Period) has elapsed. The last day of the
Guarantee Period is the expiration date for that Guarantee Period. Subsequent
Guarantee Periods begin on the first day following the expiration date of a
previous Guarantee Period.
Allocations of Net Purchase Payments and transfers of Contract Value to the
Guaranteed Interest Option may have different applicable Guaranteed Interest
Rates depending on the timing of such allocations or transfers. However, the
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<PAGE>
applicable Guaranteed Interest Rate does not change during a Guarantee Period.
If the allocated or transferred amount remains in the Guaranteed Interest Option
until the end of the applicable Guarantee Period, its value will be equal to the
amount originally allocated or transferred, multiplied, on an annually
compounded basis, by its Guaranteed Interest Rate. If a Guarantee Amount is
surrendered, withdrawn, transferred, or applied to an Annuity Payment Option
prior to 30 days before the expiration of the Guarantee Period, the Guaranteed
Interest Rate for that Guarantee Period is subject to a Market Value Adjustment,
as described below, the application of which may result in the payment of an
amount less than the amount originally allocated or transferred to the Guarantee
Period.
The Company will notify Owners in writing at least 30 days prior to the
expiration date of any Guarantee Period about the then currently available
Guarantee Periods and the Guaranteed Interest Rates applicable to such Guarantee
Periods. A new Guarantee Period of the same duration as the previous Guarantee
Period will commence automatically on the first day following the expiring
Guarantee Period unless the Company receives Written Notice prior to the start
of the new Guarantee Period of the Owner's election of a different Guarantee
Period from among those being offered by the Company at that time, or
instructions to transfer all or a portion of the expiring Guarantee Amount to a
Subaccount. If the Company does not receive such Written Notice and is not
offering a Guarantee Period of the same duration as the expiring Guarantee
Period or if the duration of the expiring Guarantee Period would, if renewed,
extend beyond the Annuity Date, then a new Guarantee Period of one year will
commence automatically on the first day following the expiring Guarantee Period.
The minimum Guarantee Amount is $500.
To the extent permitted by law, the Company reserves the right at any time to
offer Guarantee Periods that differ from those available when an Owner's
Contract was issued. The Company also reserves the right, at any time, to stop
accepting Net Purchase Payment allocations or transfers of Contract Value to a
particular Guarantee Period. Since the specific Guarantee Periods available may
change periodically, please contact the Service Center to determine the
Guarantee Periods currently being offered.
GIO Account. The assets in the GIO Account are used to support the values and
benefits under the Guaranteed Interest Option of the Contract and similar
contracts. The Company owns the assets in the GIO Account and holds such assets
separately from other Company assets and from the General Account. The portion
of the assets of the GIO Account equal to the reserves and other contract
liabilities of the GIO Account are not chargeable with liabilities that arise
from any other business that the Company conducts. The Company may transfer to
the General Account any assets of the GIO Account that are in excess of such
reserves and other liabilities.
Under Pennsylvania insurance law, the Company is required to maintain assets in
the GIO Account at least equal to the reserves and other contract liabilities of
the GIO Account. In the unlikely event of liquidation of the Company, if the
Company cannot satisfy all of its insurance obligations, Owners with Guaranteed
Interest Option Value will have a priority claim against assets of the GIO
Account equal to its liabilities, and a claim against the Company's general
account for any remaining Company liabilities. Thus, the GIO Account represents
a pool of assets that provides an additional measure of assurance that Owners
allocating Net Purchase Payments and Contract Value to the Guaranteed Interest
Option will receive full payment of benefits attributable to Guaranteed Interest
Option.
<PAGE>
Owners allocating Net Purchase Payments and/or Contract Value to the Guaranteed
Interest Option do not participate in the investment performance of assets of
the GIO Account, and this performance does not determine the Guaranteed Interest
Option Value or benefits relating thereto. The Guaranteed Interest Option
provides values and benefits based only upon the Net Purchase Payments and
Contract Values allocated thereto, the Guaranteed Interest Rate credited on such
amounts, and any charges or Market Value Adjustments imposed on such amounts in
accordance with the terms of the Contract.
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<PAGE>
Market Value Adjustment. A Market Value Adjustment reflects the relationship
between: (i) the current Guaranteed Interest Rate that the Company is crediting
for a Guarantee Period equal to the time remaining in the Guarantee Period from
which the Guarantee Amount is requested to be surrendered, withdrawn,
transferred or annuitized; and (ii) the Guaranteed Interest Rate being applied
to the Guarantee Period from which the Guarantee Amount will be surrendered,
withdrawn, transferred or annuitized. Any surrender, withdrawal, transfer or
application to an Annuity Payment Option of a Guarantee Amount is subject to a
Market Value Adjustment that may be positive or negative, unless the effective
date of the surrender, withdrawal, transfer or application is within 30 days
prior to the end of a Guarantee Period. The Market Value Adjustment will be
applied after the deduction of any applicable annual administration fee or
transfer processing fee, and before the deduction of any applicable surrender
charge or charge for taxes on purchase payments (also referred to as a "premium
tax" charge).
Generally, if the Guaranteed Interest Rate for the selected Guarantee Period is
lower than the Guaranteed Interest Rate currently being offered for new
Guarantee Periods of a duration equal to the balance of the selected Guarantee
Period as of the date that the Market Value Adjustment is applied, then the
application of the Market Value Adjustment will result in the payment, upon
surrender, withdrawal, transfer or application of amounts to an Annuity Payment
Option, of an amount less than the Guarantee Amount (or portion thereof) being
surrendered, withdrawn, transferred or applied to an Annuity Payment Option, or
may even result in the payment of an amount less than the Net Purchase Payment
allocated to or the portion of Contract Value transferred to the Guarantee
Period. Similarly, if the Guaranteed Interest Rate for the selected Guarantee
Period is higher than the Guaranteed Interest Rate currently being offered for
new Guarantee Periods of a duration equal to the balance of the selected
Guarantee Period as of the date that the Market Value Adjustment is applied,
then the application of the Market Value Adjustment will result in the payment,
upon surrender, withdrawal, transfer or application of amounts to an Annuity
Payment Option, of an amount greater than the Guarantee Amount (or portion
thereof) being surrendered, withdrawn, transferred or applied to an Annuity
Payment Option.
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Payment Option,
by the Market Value Adjustment Factor. The Market Value Adjustment Factor is
calculated as follows:
Market Value Adjustment = Amount multiplied by
[[(1+a)/(1+b)]^n/12 -1]
where:
"Amount" is the amount being surrendered, withdrawn, transferred or
applied to an Annuity Payment Option less any applicable
annual administration fees or transfer processing fees;
"a" is the Guaranteed Interest Rate currently being credited to the
"Amount";
<PAGE>
"b" is the Guaranteed Interest Rate that is currently being offered for a
Guarantee Period of duration equal to the time remaining to the
expiration of the Guarantee Period for the Guarantee Amount from which
the "Amount" is taken. Where the time remaining to the expiration of
the Guarantee Period is not 1, 3, 5, 7, or 10 years, "b" is the rate
found by linear interpolation of the rate for the Guarantee Period
having the duration closest to the time remaining or, if the time
remaining is less than 1 year, "b" is the rate for a 1 year period; and
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<PAGE>
"n" is the number of complete months remaining before the expiration of the
Guarantee Period for the Guarantee Amount from which the "Amount" is
taken.
Examples of computing the Market Value Adjustment are set forth in Appendix A.
DESCRIPTION OF THE CONTRACT
PURCHASING A CONTRACT
A prospective Owner may purchase a Contract by submitting an application through
a licensed agent of the Company who is also a representative of a broker-dealer
having a selling agreement with CNA Investor Services, Inc. ("CNA/ISI"), the
principal underwriter for the Contracts. The maximum Age for Owners on the
Contract Effective Date is 85. An initial purchase payment must be delivered to
the Service Center along with the Owner's application. The minimum initial
purchase payment is $2,000. The minimum additional purchase payment the Company
will accept is $100. Unless the Company gives its prior approval, it will not
accept an initial purchase payment in excess of $500,000 and reserves the right
to not accept any purchase payment for any reason. The Company will send Owners
a confirmation notice upon receipt and acceptance of the Owner's purchase
payment.
CANCELLING THE CONTRACT
Owners may cancel the Contract during the Cancellation Period, which is the
10-day period after an Owner receives the Contract. Some states may require a
longer Cancellation Period. To cancel the Contract, the Owner must mail or
deliver the Contract to the Service Center or to the agent who sold it. The
Company will refund the Contract Value plus any fees or charges deducted except
for the mortality and expense risk charge and the administration charge. If the
Owner purchased a Contract in a state that requires the return of purchase
payments during the Cancellation Period and the Owner chooses to exercise the
cancellation right, the Company will return the purchase payments.
CREDITING AND ALLOCATING PURCHASE PAYMENTS
If the application for a Contract is properly completed and is accompanied by
all the information necessary to process it, including payment of the initial
purchase payment, the initial Net Purchase Payment will be allocated, as
designated by the Owner, to one or more of the Subaccounts or to one or more
Guarantee Periods within two business days of receipt of such Net Purchase
Payment by the Company at the Service Center. If the application is not properly
completed, the Company reserves the right to retain the Net Purchase Payment for
up to five business days while it attempts to complete the application. If the
application cannot be made complete within five business days, the applicant
will be informed of the reasons for the delay and the initial purchase payment
will be returned immediately unless the applicant specifically consents to the
Company retaining the initial purchase payment until the application is made
complete. The initial Net Purchase Payment will then be credited within two
business days after receipt of a properly completed application. The Company
will credit additional Net Purchase Payments that are accepted by the Company as
of the end of the Valuation Period during which the Payment was received at the
Service Center.
<PAGE>
The initial Net Purchase Payment is allocated among the Subaccounts and
Guarantee Periods as specified on the application, unless the Contract is issued
in a state that requires the return of purchase payments during the Cancellation
Period. In those states, any portion of the initial Net Purchase Payment
allocated to the Guaranteed Interest Option will be allocated to that option
upon receipt; and any portion of the initial Net Purchase Payment allocated to
the Subaccounts will be allocated to the Money Market Subaccount for a period
equal to the number of days in the Cancellation Period. At the expiration of
this period, such portion of the Net Purchase Payment, as adjusted to reflect
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<PAGE>
the investment performance of the Money Market Subaccount during this period, is
then allocated to the Subaccounts as described above.
Owners may allocate Net Purchase Payments among any or all Subaccounts or
Guarantee Periods available. If an Owner elects to invest in a particular
Subaccount or Guarantee Period, at least 1% of the Net Purchase Payment must be
allocated to that Subaccount or Guarantee Period. All percentage allocations
must be in whole numbers. The minimum amount that may be allocated to any
Guarantee Period is $500. The Company allocates any additional Net Purchase
Payments among the Subaccounts and the Guaranteed Interest Option in accordance
with the allocation schedule in effect when such Net Purchase Payment is
received at the Service Center unless it is accompanied by Written Notice
directing a different allocation.
VARIABLE CONTRACT VALUE
Subaccount Value. The Variable Contract Value is the sum of all Subaccount
Values and therefore reflects the investment experience of the Subaccounts to
which it is allocated. The Subaccount Value for any Subaccount as of the
Contract Effective Date is equal to the amount of the initial Net Purchase
Payment allocated to that Subaccount. On subsequent Valuation Days prior to the
Annuity Date, the Subaccount Value is equal to that part of any Net Purchase
Payment allocated to the Subaccount and any amount transferred to that
Subaccount, adjusted by interest income, dividends, net capital gains or losses,
realized or unrealized, and decreased by withdrawals (including any applicable
surrender charges and any applicable purchase payment tax charge) and any
amounts transferred out of that Subaccount.
Accumulation Units. Net Purchase Payments allocated to a Subaccount or amounts
of Contract Value transferred to a Subaccount are converted into Accumulation
Units. For any Contract, the number of Accumulation Units credited to a
Subaccount is determined by dividing the dollar amount directed to the
Subaccount by the value of the Accumulation Unit for that Subaccount for the
Valuation Day on which the Net Purchase Payment or transferred amount is
invested in the Subaccount. Therefore, Net Purchase Payments allocated to or
amounts transferred to a Subaccount under a Contract increase the number of
Accumulation Units of that Subaccount credited to the Contract.
Decreases in Subaccount Value under a Contract are effected by the cancellation
of Accumulation Units of a Subaccount. Therefore, surrenders, withdrawals,
transfers out of a Subaccount, payment of a death benefit, the application of
Variable Contract Value to an Annuity Payment Option on the Annuity Date, and
the deduction of the annual administration fee all result in the cancellation of
an appropriate number of Accumulation Units of one or more Subaccounts.
Accumulation Units are cancelled as of the end of the Valuation Period in which
the Company received Written Notice regarding the event.
The Accumulation Unit value for each Subaccount was arbitrarily set initially at
$10 when the Subaccount began operations. Thereafter, the Accumulation Unit
value at the end of every Valuation Day equals the Accumulation Unit value at
the end of the preceding Valuation Day multiplied by the Net Investment Factor
(described below). The Subaccount Value for a Contract is determined on any day
by multiplying the number of Accumulation Units attributable to the Contract in
that Subaccount by the Accumulation Unit value for that Subaccount.
<PAGE>
The Net Investment Factor. The Net Investment Factor is an index applied to
measure the investment performance of a Subaccount from one Valuation Period to
the next. For each Subaccount, the Net Investment Factor reflects the investment
experience of the Fund in which that Subaccount invests and the charges assessed
against that Subaccount for a Valuation Period. The Net Investment Factor is
calculated by dividing (1) by (2) and subtracting (3) from the result, where:
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<PAGE>
(1) is the result of:
a. the Net Asset Value Per Share of the Fund held in the
Subaccount, determined at the end of the current
Valuation Period; plus
b. the per share amount of any dividend or capital gain
distributions made by the Fund held in the
Subaccount, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved
for, which is determined by the Company to have
resulted from the operations of the Subaccount.
(2) is the Net Asset Value Per Share of the Fund held in the
Subaccount, determined at the end of the last prior Valuation
Period.
(3) is a daily factor representing the mortality and expense risk
charge and the administration charge deducted from the
Subaccount, adjusted for the number of days in the Valuation
Period.
TRANSFERS
General. Prior to the Annuity Date and after the Cancellation Period, by Written
Notice, an Owner may transfer all or part of any Subaccount Value to another
Subaccount(s) (subject to its availability) or to one or more available
Guarantee Periods, or transfer all or part of any Guarantee Amount to any
Subaccount(s) (subject to its availability) or to one or more available
Guarantee Periods, subject to the following restrictions. The minimum transfer
amount is $500 or the entire Subaccount Value or Guarantee Amount, if less. The
minimum Subaccount Value or Guarantee Amount that may remain following a
transfer is $500. A transfer request that would reduce any Subaccount Value or
Guarantee Amount below $500 is treated as a transfer request for the entire
Subaccount Value or Guarantee Amount. Only four transfers may be made per
Contract Year from all or part of any Guarantee Amount. The first 12 transfers
during each Contract Year are free. The Company assesses a transfer processing
fee of $25 for each transfer in excess of 12 during a Contract Year. The
transfer processing fee is deducted from the amount being transferred. Each
Written Notice of transfer is considered one transfer regardless of how many
Subaccounts or Guarantee Periods are affected by the transfer.
Dollar-Cost Averaging Facility. If elected in the application or at any time
thereafter prior to the Annuity Date by Written Notice, an Owner may
systematically transfer (on a monthly, quarterly, semi-annual or annual basis)
specified dollar amounts from the Money Market Subaccount to other Subaccounts.
This is known as the "dollar-cost averaging" method of investment. The
fixed-dollar amount purchases more Accumulation Units of a Subaccount when their
value is lower and fewer units when their value is higher. Over time, the cost
per unit averages out to be less than if all purchases of Units had been made at
the highest value and greater than if all purchases had been made at the lowest
value. The dollar-cost averaging method of investment reduces the risk of making
purchases only when the price of Accumulation Units is high. It does not assure
a profit or protect against a loss in declining markets.
<PAGE>
Owners may only elect use the dollar-cost averaging facility if their Money
Market Subaccount Value is at least $1,000 at the time of the election. The
minimum transfer amount under the facility is $100 per month (or the
equivalent). If dollar-cost averaging transfers are to be made to more than one
Subaccount, then the Owner must indicate the dollar amount of the transfer to be
made to each. At least $50.00 must be designated to each Subaccount.
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<PAGE>
Transfers under the dollar-cost averaging facility are made as of the same
calendar day each month. If this calendar day is not a Valuation Day, transfers
are made as of the next Valuation Day. Once elected, transfers under the
dollar-cost averaging facility continue until the Money Market Subaccount Value
is depleted, the Annuity Date occurs or until the Owner cancels the election by
Written Notice at least seven days in advance of the next transfer date.
Alternatively, Owners may specify in advance a date for transfers under the
facility to cease. There is no additional charge for using the dollar-cost
averaging facility. Transfers under the facility do not count towards the 12
transfers permitted without a transfer processing fee in any Contract Year. The
Company reserves the right to discontinue offering the dollar-cost averaging
facility at any time and for any reason or to change its features.
Automatic Subaccount Value Rebalancing. If elected in the application or
requested by Written Notice at any time thereafter prior to the Annuity Date, an
Owner may instruct the Company to automatically transfer (on a quarterly,
semi-annual or annual basis) Variable Contract Value between and among specified
Subaccounts in order to achieve a particular percentage allocation of Variable
Contract Value among such Subaccounts ("automatic Subaccount Value
rebalancing"). Such percentage allocations must be in whole numbers. Once
elected, automatic Subaccount Value rebalancing begins on the first Valuation
Day of the next calendar quarter or other period (or, if later, the next
calendar quarter or other period after the expiration of the Cancellation
Period).
Owners may stop automatic Subaccount Value rebalancing at any time by Written
Notice at least seven calendar days before the first Valuation Day in a new
period. Owners may specify allocations between and among as many Subaccounts as
are available at the time automatic Subaccount Value rebalancing is elected.
Once automatic Subaccount Value rebalancing has been elected, any subsequent
allocation instructions that differ from the then-current rebalancing allocation
instructions are treated as a request to change the automatic Subaccount Value
rebalancing allocation. Owners may change automatic Subaccount Value rebalancing
allocations at any time. Allocation changes will take effect as of the Valuation
Day that instructions are received at the Service Center. Once automatic
Subaccount Value rebalancing is in effect, an Owner may only transfer Subaccount
Value among or between Subaccounts by changing the automatic Subaccount Value
rebalancing allocation instructions. Changes to automatic Subaccount Value
rebalancing must be made by Written Notice.
There is no additional charge for automatic Subaccount Value rebalancing and
rebalancing transfers do not count as one the 12 transfers available without a
transfer processing fee during any Contract Year. If automatic Subaccount Value
rebalancing is elected at the same time as the dollar-cost averaging facility or
when the dollar-cost averaging facility is being utilized, automatic Subaccount
Value rebalancing will be postponed until the first Valuation Day in the
calendar quarter or other period following the termination of dollar-cost
averaging facility. The Company reserves the right to discontinue offering
automatic Subaccount Value rebalancing at any time for any reason or to change
its features.
WITHDRAWALS
General. Prior to the Annuity Date and after the Cancellation Period, an Owner
may withdraw part of the Surrender Value, subject to certain limitations. Each
withdrawal must be requested by Written Notice. The minimum withdrawal amount is
$500. The maximum withdrawal is the amount that would leave a minimum Surrender
Value of $1,000. A withdrawal request that would reduce any Subaccount Value or
Guarantee Amount below $500 will be treated as a request for a withdrawal of all
of that Subaccount Value or Guarantee Amount.
<PAGE>
The Company withdraws the amount requested from the Contract Value as of the day
that the Company receives an Owner's Written Notice, and sends the Owner that
amount. The Company will then deduct any applicable surrender charge and any
applicable purchase payment tax charge from the remaining Contract Value. If the
withdrawal is requested from a Guarantee Amount, the Company deducts any
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<PAGE>
applicable Market Value Adjustment from, or adds any applicable Market Value
Adjustment to, remaining Contract Value. A deduction of a Market Value
Adjustment from Contract Value may result in the payment of an amount which,
when added to any remaining Guarantee Amount and amounts previously withdrawn or
transferred, is less than the amount allocated or transferred to a Guarantee
Period to create that Guarantee Amount.
A Written Notice of withdrawal must specify the amount to be withdrawn from each
Subaccount or Guarantee Amount. If the Written Notice does not specify this
information, or if any Subaccount Value or Guarantee Amount is inadequate to
comply with the request, the Company will make the withdrawal based on the
proportion that each Subaccount Value and each Guarantee Amount bears to the
Contract Value as of the day of the withdrawal.
Systematic Withdrawals. If elected in the application or requested at any time
thereafter prior to the Annuity Date by Written Notice, an Owner may elect to
receive periodic withdrawals under the Company's systematic withdrawal plan.
Under the systematic withdrawal plan, the Company will make withdrawals (on a
monthly, quarterly, semi-annual or annual basis) from Subaccounts specified by
the Owner. Systematic withdrawals must be at least $100 each and may only be
made from Variable Contract Value. Withdrawals under the systematic withdrawal
plan may only be made from Subaccounts having $1,000 or more of Subaccount Value
at the time of election. The systematic withdrawal plan is not available to
Owners using the dollar-cost averaging facility or automatic Subaccount Value
rebalancing.
The Company makes systematic withdrawals on the following basis: (1) as a
specified dollar amount, or (2) as a specified whole percent of Subaccount
Value.
Participation in the systematic withdrawal plan terminates on the earliest of
the following events: (1) the Subaccount Value from which withdrawals are being
made becomes zero, (2) a termination date specified by the Owner is reached, or
(3) the Owner requests that his or her participation in the plan cease.
Systematic withdrawals being made in order to meet the required minimum
distribution under the Code or to make substantially equal payments as required
under the Code will continue even though a surrender charge is deducted.
Tax Consequences of Withdrawals. Consult your tax adviser regarding the tax
consequences associated with making withdrawals. A withdrawal made before the
taxpayer reaches Age 59 1/2, including systematic withdrawals, may result in
imposition of a penalty tax of 10% of the taxable portion withdrawn. See
"FEDERAL TAX CONSIDERATIONS" for more details.
SURRENDERS
An Owner may surrender the Contract for its Surrender Value at any time prior to
the Annuity Date. A Contract's Surrender Value fluctuates daily as a function of
the investment experience of the Subaccounts in which an Owner is invested. The
Company does not guarantee any minimum Surrender Value for amounts invested in
the Subaccounts. Likewise, the Company does not guarantee any minimum Surrender
Value for Guarantee Amounts surrendered, withdrawn, transferred or applied to an
Annuity Payment Option before the 30-day period prior to the expiration of a
Guarantee Period.
An Owner may elect to have the Surrender Value paid in a single sum or under an
Annuity Payment Option. The Surrender Value will be determined as of the date
the Company receives the Written Notice for surrender and the Contract at the
Service Center.
<PAGE>
Consult your tax adviser regarding the tax consequences of a Surrender. A
Surrender made before age 59 1/2 may result in the imposition of a penalty tax
of 10% of the taxable portion of the Surrender Value. See "FEDERAL TAX
CONSIDERATIONS" for more details.
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<PAGE>
DEATH BENEFITS
Death Benefits on or After the Annuity Date. If an Owner dies on or after the
Annuity Date, any surviving joint Owner becomes the sole Owner. If there is no
surviving Owner, any successor Owner becomes the new Owner. If there is no
surviving or successor Owner, the Payee becomes the new Owner. If an Annuitant
or an Owner dies on or after the Annuity Date, the remaining undistributed
portion, if any, of the Contract Value will be distributed at least as rapidly
as under the method of distribution being used as of the date of such death.
Under some Annuity Payment Options, there will be no death benefit.
Death Benefits When the Owner Dies Before the Annuity Date. If any Owner dies
prior to the Annuity Date, any surviving joint Owner becomes the new sole Owner.
If there is no surviving joint Owner, any successor Owner becomes the new Owner
and if there is no successor Owner the Annuitant becomes the new Owner unless
the deceased Owner was also the Annuitant. If the sole deceased Owner was also
the Annuitant, then the provisions relating to the death of the Annuitant
(described below) will govern unless the deceased Owner was one of two joint
Annuitants, in which event the surviving Annuitant becomes the new Owner.
The following options are available to new Owners:
1. to receive the Adjusted Contract Value in a single lump sum
within five years of the deceased Owner's death; or
2. elect to receive the Adjusted Contract Value paid out under an
Annuity Payment Option provided that: (a) Annuity Payments
begin within one year of the deceased Owner's death, and (b)
Annuity Payments are made in substantially equal installments
over the life of the new Owner or over a period not greater
than the life expectancy of the new Owner; or
3. if the new Owner is the spouse of the deceased Owner, he or
she may by Written Notice within one year of the Owner's
death, elect to continue the Contract as the new Owner. If the
spouse so elects, all of his or her rights as a Beneficiary
cease and if the deceased Owner was also the sole Annuitant
and appointed no Contingent Annuitant, he or she will become
the Annuitant. The spouse will be deemed to have made the
election to continue the Contract if he or she makes no
election before the expiration of the one year period or if he
or she makes any purchase payments under the Contract.
With regard to new Owners who are not the spouse of the deceased Owner: (a) 1
and 2 apply even if the Annuitant or Contingent Annuitant is alive at the time
of the deceased Owner's death, (b) if the new Owner is not a natural person,
only option 1 is available, (c) if no election is made within one year of the
deceased Owner's death, option 1 is deemed to have been elected.
Adjusted Contract Value is computed as of the date that the Company receives Due
Proof of Death of the Owner. Payments under this provision are in full
settlement of all of the Company's liability under the Contract.
<PAGE>
Death Benefits When the Annuitant Dies Before the Annuity Date. If the Annuitant
dies before the Annuity Date while the Owner is still living, any Contingent
Annuitant will become the Annuitant. If the Annuitant dies before the Annuity
Date and no Contingent Annuitant has been named, the Company will pay the death
benefit described below to the Beneficiary. If there is no surviving
Beneficiary, the Company will pay the death benefit to any Contingent
Beneficiary. If there is no surviving Contingent Beneficiary, the Company will
immediately pay the death benefit to the Owner's estate in a lump sum.
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<PAGE>
If the Annuitant who is also an Owner dies or if the Annuitant dies and the
Owner is not a natural person, a Beneficiary (or a Contingent Beneficiary):
1. will receive the death benefit in a single lump sum within 5
years of the deceased Annuitant's death; or
2. may elect to receive the death benefit paid out under an
Annuity Payment Option provided that: (a) Annuity Payments
begin within 1 year of the deceased Annuitant's death, and (b)
Annuity Payments are made in substantially equal installments
over the life of the Beneficiary or over a period not greater
than the life expectancy of the Beneficiary; or
3. if the Beneficiary is the spouse of the deceased Annuitant, he
or she may by Written Notice within one year of the
Annuitant's death, elect to continue the Contract as the new
Owner. If the spouse so elects, all his or her rights as a
Beneficiary cease and if the deceased Annuitant was also the
sole Annuitant and appointed no Contingent Annuitant, he or
she will become the Annuitant. The spouse will be deemed to
have made the election to continue the Contract if he or she
makes no election before the expiration of the one year period
or if he or she makes any purchase payments under the
Contract.
The Death Benefit. If the Annuitant is Age 75 or younger, the death benefit is
an amount equal to the greatest of:
1. aggregate purchase payments made less any withdrawals
(including the applicable surrender charges, purchase payment
tax charge and Market Value Adjustments) as of the date that
the Company receives Due Proof of Death of the Annuitant; or
2. the Contract Value as of the date that the Company receives
Due Proof of Death of the Annuitant; or
3. the minimum death benefit described below;
less any applicable purchase payment tax charge on the date that the death
benefit is paid.
The minimum death benefit is the death benefit floor amount as of the date of
the Annuitant's death (a) adjusted, for each withdrawal made since the most
recent reset of the death benefit floor amount, multiplying that amount by the
product of all ratios of the Contract Value immediately after a withdrawal to
the Contract Value immediately before such withdrawal (b) plus any purchase
payments made since the most recent reset of the death benefit floor amount.
The death benefit floor amount is the largest Contract Value attained on any
prior death benefit floor computation anniversary. Death benefit floor
computation anniversaries are the 5th Contract Anniversary and each subsequent
5th Contract Anniversary (i.e., the 10th Contract Anniversary, the 15th Contract
Anniversary, etc.) prior to the Annuitant's Age 76. Therefore, the death benefit
floor amount is reset when, on a death benefit floor computation anniversary,
Contract Value exceeds the current death benefit floor amount.
<PAGE>
If the Annuitant is Age 76 or older, the death benefit is an amount equal to the
greater of 1 or 2 above.
Examples of the computation of the death benefit are shown in Appendix B.
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<PAGE>
PAYMENTS BY THE COMPANY
The Company generally makes payments of withdrawals, surrenders, death benefits,
or any Annuity Payments within seven days of receipt of all applicable Written
Notices and/or Due Proofs of Death. However, the Company may postpone such
payments for any of the following reasons:
1. when the New York Stock Exchange ("NYSE") is closed for
trading other than customary holiday or weekend closing, or
trading on the NYSE is restricted, as determined by the SEC;
or
2. when the SEC by order permits a postponement for the
protection of Owners; or
3. when the SEC determines that an emergency exists that would
make the disposal of securities held in the Variable Account
or the determination of their value not reasonably
practicable.
If a recent check or draft has been submitted, the Company has the right to
defer payment of surrenders, withdrawals, death benefits, or Annuity Payments
until the check or draft has been honored.
The Company may defer payment of any withdrawal, surrender, or transfer of
Guaranteed Interest Option Value up to six months after it receives an Owner's
Written Notice. The Company pays interest on the amount of any payment that is
deferred.
TELEPHONE TRANSACTION PRIVILEGES
If an Owner has elected this privilege in a form provided by the Company, an
Owner may make transfers or change allocation instructions by telephoning the
Service Center. A telephone authorization form received by the Company at the
Service Center is valid until it is rescinded or revoked by Written Notice or
until a subsequently dated form signed by the Owner is received at the Service
Center. The Company will send Owners a written confirmation of all transfers and
allocation changes made pursuant to telephone instructions.
The Service Center requires a form of personal identification prior to acting on
instructions received by telephone and also may tape record instructions
received by phone. If the Company follows these procedures, it is not liable for
any losses due to unauthorized or fraudulent transactions. The Company reserves
the right to suspend telephone transaction privileges at any time for any
reason.
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<PAGE>
CONTRACT CHARGES AND FEES
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
General. No sales charge is deducted from purchase payments at the time that
such payments are made. However, within certain time limits described below, a
surrender charge is deducted upon any withdrawal or surrender. A surrender
charge is assessed on Cash Value applied to an Annuity Payment Option during the
first five Contract Years. No surrender charge is assessed on Contract Value
applied to an Annuity Payment Option after the fifth Contract Year. If on the
Annuity Date, however, the Payee elects (or the Owner previously elected) to
receive a lump sum, this sum will equal the Surrender Value on such date.
In the event that surrender charges are not sufficient to cover sales expenses,
such expenses will be borne by the Company. Conversely, if the revenue from such
charges exceeds such expenses, the excess of revenues from such charges over
expenses will be retained by the Company. The Company does not currently believe
that the surrender charges deducted will cover the expected costs of
distributing the Contracts. Any shortfall will be made up from the Company's
general assets, which may include amounts derived from the mortality and expense
risk charge.
Charge for Surrender or Withdrawals. The surrender charge is equal to the
percentage of each purchase payment surrendered or withdrawn (or applied to an
Annuity Payment Option during the first five Contract Years) as shown in the
table below. The surrender charge is separately calculated and applied to each
purchase payment at the time that the purchase payment is surrendered or
withdrawn. No surrender charge applies to the Contract Value in excess of
aggregate purchase payments (less prior withdrawals of the payments). The
surrender charge is calculated using the assumption that purchase payments are
surrendered or withdrawn before Contract Value in excess of aggregate purchase
payments (less prior withdrawals of purchase payments) and that purchase
payments are withdrawn on a first-in-first-out basis.
Number of Full Years Elapsed Between Surrender Charge as a Percentage
Date of Receipt of Purchase Payment and of Purchase Payment Withdrawn
Date of Surrender of Withdrawal or Surrendered
0 7%
1 7%
2 6%
3 5%
4 4%
5+ 0%
Withdrawals. With regard to all withdrawals, the Company withdraws the amount
requested from the Contract Value as of the day that it receives the Written
Notice regarding the withdrawal and sends the Owner that amount. The Company
then deducts any surrender charge and any applicable purchase payment tax charge
from the remaining Contract Value. If the withdrawal is requested from a
Guarantee Amount, the Company deducts any applicable Market Value Adjustment
from, or adds any applicable Market Value Adjustment to, remaining Contract
Value. For the purpose of computing the surrender charge, the deduction of the
Market Value Adjustment, purchase payment tax charge and surrender charge is
considered to be made from Contract Value in excess of aggregate purchase
payments (less prior withdrawals of purchase payments).
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<PAGE>
Amounts Not Subject to a Surrender Charge. Each Contract Year after the first
Contract Year, an Owner may withdraw an amount equal to 15% of the aggregate
purchase payments less prior withdrawals of purchase payments as of the first
Valuation Day of that Contract Year without incurring a surrender charge. The
Company reserves the right to limit the number of such "free" withdrawals in any
Contract Year.
Waiver of Surrender Charge. The Company will waive the surrender charge in the
event that the Owner: (1) enters an "eligible nursing home," as defined in the
Contract, for a period of at least 90 days, (2) is diagnosed as having a
"terminal medical condition," as defined in the Contract, or (3) is less than
age 65 and sustains a "permanent and total disability," as defined in the
Contract. The Company reserves the right to require written proof of terminal
medical condition or permanent and total disability satisfactory to it and to
require an examination by a licensed physician of its choice. The surrender
charge waiver is not available in all states due to applicable insurance laws in
effect in various states.
ANNUAL ADMINISTRATION FEE
An annual administration fee is deducted as of each Contract Anniversary for the
prior Contract Year. The Company also deducts this fee for the current Contract
Year when determining the Surrender Value prior to the end of a Contract Year
and on the Annuity Date. If Contract Value is $50,000 or less at the time of the
fee deduction, then the annual administration fee is $30. The fee is zero for
Contracts where the Contract Value exceeds $50,000 at the time the fee would be
deducted. This fee is to cover a portion of the Company's administrative
expenses related to the Contracts. The Company does not expect to make a profit
from this fee.
The annual administration fee is assessed against Subaccount Values and
Guarantee Amounts based on the proportion that each bears to the Contract Value.
Where the fee is deducted from Subaccount Values, the Company will cancel an
appropriate number of Accumulation Units. Where the fee is obtained from a
Guarantee Amount, the Company will reduce the Guarantee Amount by the amount of
the fee.
TRANSFER PROCESSING FEE
Prior to the Annuity Date, the Company permits 12 free transfers per Contract
Year among and between the Subaccounts and the Guarantee Periods. For each
additional transfer, the Company charges $25 at the time each such transfer is
processed. The fee is deducted from the amount being transferred. The Company
does not expect to make a profit from this fee.
<PAGE>
TAXES ON PURCHASE PAYMENTS
Certain states and municipalities impose a tax on the Company in connection with
the receipt of annuity considerations. This tax can range from 0% to 3.5% of
such considerations and generally varies based on the Annuitant's state of
residence. Taxes on annuity considerations are generally incurred by the Company
as of the Annuity Date based on the Contract Value on that date, and the Company
deducts the charge for taxes on annuity considerations from the Contract Value
as of the Annuity Date. Some jurisdictions impose a tax on annuity
considerations at the time such considerations are made. In those jurisdictions,
the Company's current practice is to pay the tax on annuity considerations and
then deduct the charge for these taxes from the Contract Value upon surrender,
payment of the death benefit, or upon the Annuity Date. The Company reserves the
right to deduct any state and local taxes on annuity considerations from the
Contract Value at the time such tax is due.
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<PAGE>
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of the Variable Account to
compensate it for mortality and expense risks that it assumes under the
Contract. The daily charge is at the rate of 0.003446% (approximately equivalent
to an effective annual rate of 1.25%) of the net assets of the Variable Account.
Approximately .70% of this annual charge is for the assumption of mortality risk
and .55% is for the assumption of expense risk. If the mortality and expense
risk charge is insufficient to cover the actual cost of the mortality and
expense risks undertaken by the Company, the Company will bear the shortfall.
Conversely, if the charge proves more than sufficient, the excess will be profit
to the Company and will be available for any proper purpose including, among
other things, payment of expenses incurred in selling the Contracts.
The mortality risk that the Company assumes is the risk that Annuitants, as a
group, will live for a longer period of time than the Company estimated when it
established the guaranteed Annuity Payment rates in the Contract. Because of
these guarantees, each Payee is assured that his or her longevity will not have
an adverse effect on the Annuity Payments that he or she receives under Annuity
Payment Options based on life contingencies. The Company also assumes a
mortality risk because the Contracts guarantee a death benefit if the Annuitant
dies before the Annuity Date. The expense risk that the Company assumes is the
risk that administration charge, annual administration fee and the transfer
processing fee may be insufficient to cover the actual expenses of administering
the Contracts.
ADMINISTRATION CHARGE
The Company deducts a daily administration charge from the assets of the
Variable Account to compensate it for a portion of the expenses it incurs in
administering the Contracts. The daily charge is at a rate of 0.000411%
(approximately equivalent to an effective annual rate of 0.15%) of the net
assets of the Variable Account. The Company does not expect to make a profit
from this charge.
FUND EXPENSES
The investment performance of each Fund reflects the management fee that it pays
to its investment manager or adviser as well as other operating expenses that it
incurs. Investment management fees are generally daily fees computed as a
percent of a Fund's average daily net assets at an annual rate. Please read the
prospectus for each Fund for complete details.
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
At the present time, the Company makes no charge to the Variable Account for any
federal, state, or local taxes that the Company incurs which may be attributable
to the Variable Account or the Contracts. The Company, however, reserves the
right in the future to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be properly
attributable to the Subaccounts or to the Contracts.
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<PAGE>
SELECTING AN ANNUITY PAYMENT OPTION
ANNUITY DATE
The Owner selects the Annuity Date in the application. For Non-Qualified
Contracts, the Annuity Date must be no later than the later of the Contract
Anniversary following the Annuitant's Age 85 or 10 years after the Contract
Effective Date. For Qualified Contracts, the Annuity Date must be no later than
April 1 of the calendar year following the calendar year in which the Owner
attains age 70 1/2. An Owner may change the Annuity Date by Written Notice,
subject to the following limitations:
1. Written Notice is received at least 30 days before the current
Annuity Date; and
2. the requested new Annuity Date must be at least 30 days after
the Company receives Written Notice.
ANNUITY PAYMENT DATES
The Company computes the first Annuity Payment as of the Annuity Date and makes
the first Annuity Payment as of the initial Annuity Payment Date selected by the
Owner. The initial Annuity Payment Date is the Annuity Date unless the Annuity
Date is the 29th, 30th, or 31st day of a calendar month, in which event, the
Owner must select a different date. All subsequent Annuity Payments are computed
and payable as of Annuity Payment Dates. These dates will be the same day of the
month as the initial Annuity Payment Date. Monthly Annuity Payments will be
computed and payable as of the same day each month as the initial Annuity
Payment Date. Quarterly Annuity Payments will be computed and payable as of the
same day in the third, sixth, ninth, and twelfth month following the initial
Annuity Payment Date and on the same days of such months in each successive
Contract Year. Semi-annual Annuity Payment Dates will be computed and payable as
of the same day in the sixth and twelfth month following the initial Annuity
Payment Date and on the same days of such months in each successive Contract
Year. Annual Annuity Payments will be computed and payable as of the same day in
each Contract Year as the initial Annuity Payment Date. The frequency of Annuity
Payments selected is shown in the Contract. In the event that the Owner does not
select a payment frequency, payments will be made monthly.
ELECTION AND CHANGES OF ANNUITY PAYMENT OPTIONS
On the Annuity Date, the Surrender Value or Adjusted Contract Value is applied
under an Annuity Payment Option, unless the Owner elects to receive the
Surrender Value in a lump sum. If the Annuity Date falls during the first five
Contract Years, Surrender Value is applied under an Annuity Payment Option. If
the Annuity Date falls after the fifth Contract Anniversary, Adjusted Contract
Value is applied under an Annuity Payment Option. The Annuity Payment Option
specifies the type of annuity to be paid and determines how long the annuity
will be paid, the frequency, and the amount of each payment. The Owner may elect
or change the Annuity Payment Option by Written Notice at any time prior to the
Annuity Date. The Owner may elect to apply any portion of the Surrender Value or
Adjusted Contract Value to provide either Variable Annuity Payments or Fixed
Annuity Payments or a combination of both. If Variable Annuity Payments are
selected, the Owner must also select the Subaccounts to which Surrender Value or
Adjusted Contract Value will be applied. If no selection has been made by the
Annuity Date, Surrender Value or Adjusted Contract Value from any Guaranteed
Interest Option Value will be applied to purchase Fixed Annuity Payments and
Surrender Value or Adjusted Contract Value from each Subaccount Value will be
<PAGE>
applied to purchase Variable Annuity Payments from that Subaccount. If no
Annuity Payment Option has been selected by the Annuity Date, Surrender Value or
Adjusted Contract Value will be applied under Annuity Payment Option 5 (Life
Annuity with Period Certain) with a designated period of 10 years. Any death
benefit applied to purchase Annuity Payments is allocated among the Subaccounts
and/or the Guaranteed Interest Option as instructed by the Beneficiary unless
the Owner previously made the foregoing elections.
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<PAGE>
ANNUITY PAYMENTS
Fixed Annuity Payments. Fixed Annuity Payments are periodic payments from the
Company to the designated Payee, the amount of which is fixed and guaranteed by
the Company. The dollar amount of each Fixed Annuity Payment depends on the form
and duration of the Annuity Payment Option chosen, the Age of the Annuitant, the
sex of the Annuitant (if applicable), the amount of Adjusted Contract Value
applied to purchase the Fixed Annuity Payments and, for Annuity Payment Options
3-6, the applicable annuity purchase rates. The annuity purchase rates in the
Contract are based on a Guaranteed Interest Rate of not less than 3.0%. The
Company may, in its sole discretion, make Fixed Annuity Payments in an amount
based on a higher interest rate. If Fixed Annuity Payments are computed based on
an interest rate in excess of the minimum Guaranteed Interest Rate, then, for
the period of the higher rate, the dollar amount of such Fixed Annuity Payments
will be greater than the dollar amount based on 3.0%. The Company guarantees
that any higher rate will be in effect for at least 12 months.
Except for Annuity Payment Options 1 and 2, the dollar amount of the first Fixed
Annuity Payment is determined by dividing the dollar amount of Adjusted Contract
Value being applied to purchase Fixed Annuity Payments by $1,000 and multiplying
the result by the annuity purchase rate in the Contract for the selected Annuity
Payment Option. Subsequent Fixed Annuity Payments are of the same dollar amount
unless the Company makes payments based on an interest rate different from that
used to compute the first payment.
Variable Annuity Payments. Variable Annuity Payments are periodic payments from
the Company to the designated Payee, the amount of which varies from one Annuity
Payment Date to the next as a function of the net investment experience of the
Subaccounts selected by the Owner or Payee to support such payments. The dollar
amount of the first Variable Annuity Payment is determined in the same manner as
that of a Fixed Annuity Payment. Therefore, provided that the interest rate on
which Fixed Annuity Payments are based equals the Benchmark Rate of Return on
which Variable Annuity Payments are based, for any particular amount of Adjusted
Contract Value applied to a particular Annuity Payment Option, the dollar amount
of the first Variable Annuity Payment would be the same as the dollar amount of
each Fixed Annuity Payment. Variable Annuity Payments after the first Payment
are similar to Fixed Annuity Payments except that the amount of each Payment
varies to reflect the net investment experience of the Subaccounts selected by
the Owner or Payee.
The dollar amount of the initial Variable Annuity Payment attributable to each
Subaccount is determined by dividing the dollar amount of the Adjusted Contract
Value to be allocated to that Subaccount on the Annuity Date by $1,000 and
multiplying the result by the annuity purchase rate in the Contract for the
selected Annuity Payment Option. The dollar value of the total initial Variable
Annuity Payment is the sum of the initial Variable Annuity Payments attributable
to each Subaccount.
The number of Annuity Units attributable to a Subaccount is derived by dividing
the initial Variable Annuity Payment attributable to that Subaccount by the
Annuity Unit Value for that Subaccount for the Valuation Period ending on the
Annuity Date or during which the Annuity Date falls if the Valuation Period does
not end on such date. The number of Annuity Units attributable to each
Subaccount under a Contract remains fixed unless there is an exchange of Annuity
Units.
<PAGE>
The dollar amount of each subsequent Variable Annuity Payment attributable to
each Subaccount is determined by multiplying the number of Annuity Units of that
Subaccount credited under the Contract by the Annuity Unit Value (described
below) for that Subaccount for the Valuation Period ending on the Annuity
Payment Date, or during which the Annuity Payment Date falls if the Valuation
Period does not end on such date. The dollar value of each subsequent Variable
Annuity Payment is the sum of the subsequent Variable Annuity Payments
attributable to each Subaccount.
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<PAGE>
The Annuity Unit Value of each Subaccount for any Valuation Period is equal to
(a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for
which the Annuity Unit Value is being calculated;
(b) is the Annuity Unit Value for the preceding Valuation Period;
and
(c) is a daily Benchmark Rate of Return factor (for the 3%
benchmark rate of return) adjusted for the number of days in
the Valuation Period.
The Benchmark Rate of Return factor is equal to one plus 3%, or 1.03. The annual
factor can be translated into a daily factor of 1.00008098.
If the net investment return of the Subaccount for an Annuity Payment period is
equal to the pro-rated portion of the 3% Benchmark Rate of Return, the Variable
Annuity Payment attributable to that Subaccount for that period will equal the
Payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of return of 3% for a Payment period, the Payment for
that period will be greater than the Payment for the prior period and to the
extent that such return for a period falls short of an annualized rate of 3%,
the Payment for that period will be less than the Payment for the prior period.
Exchange of Annuity Units. By Written Notice at any time after the Annuity Date,
the Payee may exchange the dollar value of a designated number of Annuity Units
of a particular Subaccount for an equivalent dollar amount of Annuity Units of
another Subaccount. On the date of the exchange, the dollar amount of a Variable
Annuity Payment generated from the Annuity Units of either Subaccount would be
the same. Exchanges of Annuity Units are treated as transfers for the purpose of
computing any transfer processing fee.
ANNUITY PAYMENT OPTIONS
OPTION 1. INTEREST PAYMENTS. The Company holds the Adjusted Contract Value as
principal and pays interest to the Payee. The interest rate is 3% per year
compounded annually. The Company pays interest every 1 year, 6 months, 3 months
or 1 month, as specified at the time this option is selected. At the death of
the Payee, the value of the remaining payments are paid in a lump sum to the
Payee's estate. Only Fixed Annuity Payments are available under Annuity Payment
Option 1.
OPTION 2. PAYMENTS OF A SPECIFIED AMOUNT. The Company pays the Adjusted
Contract Value in equal payments every 1 year, 6 months, 3 months or 1 month.
The amount and frequency of the payments is specified at the time this option is
selected. After each payment, interest is added to the remaining amount applied
under this option that has not yet been paid. The interest rate is 3% per year
compounded annually. Payments are made to the Payee until the amount applied
under this option, including interest, is exhausted. The total of the payments
made each year must be at least 5% of the amount applied under this option. If
the Payeedies before the amount applied is exhausted, the Company pays the value
of the remaining payments in a lump sum to the Payee's estate. Only Fixed
Annuity Payments are available under Annuity Payment Option 2.
<PAGE>
ADDITIONAL INTEREST EARNINGS. The Company may pay interest at rates in excess
of the rates guaranteed in Annuity Payment Options 1 and 2.
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<PAGE>
OPTION 3. PAYMENTS FOR A SPECIFIED PERIOD. The Company pays the lump sum in
equal payments for the number of years specified when the option is selected.
Payments are made every 1 year, 6 months, 3 months or 1 month, as specified when
the option is selected. If the Payee dies before the expiration of the specified
number of years, the Company pays the commuted value of the remaining payments
in a lump sum to the Payee's estate.
OPTION 4. LIFE ANNUITY. The Company makes monthly payments to the Payee for as
long as the Annuitant lives. UNDER THIS OPTION, A PAYEE COULD RECEIVE ONLY ONE
PAYMENT IF THE ANNUITANT DIES AFTER THE FIRST PAYMENT, TWO PAYMENTS IF THE
ANNUITANT DIES AFTER THE SECOND PAYMENT, ETC.
OPTION 5. LIFE ANNUITY WITH PERIOD CERTAIN. The Company makes monthly payments
to the Payee for as long as the Annuitant lives. At the time this option is
selected, a period certain of 5, 10, 15, or 20 years must also be selected. If
the Annuitant dies before the specified period certain ends, the payments to the
Payee will continue until the end of the specified period. The amount of the
monthly payments therefore depends on the period certain selected.
OPTION 6. JOINT LIFE AND SURVIVORSHIP ANNUITY. The Company makes monthly
payments to the Payee while both Annuitants are living. After the death of
either Annuitant, payments continue to the Payee for as long as the other
Annuitant lives. UNDER THIS OPTION, THE PAYEE COULD RECEIVE ONLY ONE PAYMENT IF
BOTH ANNUITANTS DIE AFTER THE FIRST PAYMENT, TWO PAYMENTS IF BOTH ANNUITANTS DIE
AFTER THE SECOND PAYMENT, ETC.
ADDITIONAL CONTRACT INFORMATION
OWNERSHIP
The Contract belongs to the Owner. An Owner may exercise all of the rights and
options described in the Contract.
Subject to more specific provisions elsewhere herein, an Owner's rights include
the right to: (1) select or change a successor Owner, (2) select or change any
Beneficiary or Contingent Beneficiary, (3) select or change the Payee prior to
the Annuity Date, (4) select or change the Annuity Payment Option, (5) allocate
Net Purchase Payments among and between the Subaccounts and Guarantee Periods,
(6) transfer Contract Value among and between the Subaccounts and Guarantee
Periods, and (7) select or change the Subaccounts on which Variable Annuity
Payments are based.
The rights of Owners of Qualified Contracts may be restricted by the terms of a
related employee benefit plan. For example, such plans may require an Owner of a
Qualified Contract to obtain the consent of his or her spouse before exercising
certain ownership rights or may restrict withdrawals. See "FEDERAL TAX
CONSIDERATIONS" for more details.
Selection of an Annuitant or Payee who is not the Owner may have tax
consequences. See "FEDERAL TAX CONSIDERATIONS" for more details.
<PAGE>
CHANGING THE OWNER OR BENEFICIARY
Prior to the Annuity Date and after the Cancellation Period, an Owner may
transfer ownership of the Contract subject to the Company's published rules at
the time of the change. A new Owner must be less than Age 76.
At any time before a death benefit is paid, the Owner may name a new Beneficiary
by Written Notice unless an irrevocable Beneficiary has previously been named.
When an irrevocable Beneficiary has been designated, the Owner must provide the
irrevocable Beneficiary's written consent to the Company before a new
Beneficiary is designated.
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<PAGE>
These changes take effect as of the day the Written Notice is received at the
Service Center and the Company is not liable for any payments made under the
Contract prior to the effectiveness of any change. For possible tax consequences
of these changes, see "FEDERAL TAX CONSIDERATIONS."
MISSTATEMENT OF AGE OR SEX
If an Age or sex of the Annuitant given in the application is misstated, the
Company will adjust the benefits it pays under the Contract to the amount that
would have been payable at the correct Age or sex. If the Company made any
underpayments because of any such misstatement, it shall pay the amount of such
underpayment plus interest at an annual effective rate of 3%, immediately to the
Payee or Beneficiary in one sum. If the Company makes any overpayments because
of a misstatement of Age or sex, it shall deduct from current or future payments
due under the Contract, the amount of such overpayment plus interest at an
annual effective rate of 3%.
CHANGE OF CONTRACT TERMS
Upon notice to the Owner, the Company may modify the Contract to:
1. conform the Contract or the operations of the Company or of
the Variable Account to the requirements of any law (or
regulation issued by a government agency) to which the
Contract, the Company or the Variable Account is subject;
2. assure continued qualification of the Contract as an annuity
contract or a Qualified Contract under the Code;
3. reflect a change (as permitted in the Contract) in the
operation of the Variable Account; or
4. provide additional Subaccounts and/or Guarantee Periods.
In the event of any such modification, the Company will make appropriate
endorsements to the Contract.
Only one of the Company's officers may modify the Contract or waive any of the
Company's rights or requirements under the Contract. Any modification or waiver
must be in writing. No agent may bind the Company by making any promise not
contained in the Contract.
REPORTS TO OWNERS
Prior to the Annuity Date, the Company will send each Owner a report at least
annually, or more often as required by law, indicating: the number of
Accumulation or Annuity Units credited to the Contract and the dollar value of
such units; the Contract Value, Adjusted Contract Value and Surrender Value; any
purchase payments, withdrawals, or surrenders made, death benefits paid and
charges deducted since the last report; the current interest rate applicable to
each Guarantee Amount; and any other information required by law.
The reports, which will be mailed to Owners at their last known address, will
include any information that may be required by the SEC or the insurance
supervisory official of the jurisdiction in which the Contract is delivered.
The Company will also send any other reports, notices or documents required by
law to be furnished to Owners.
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<PAGE>
MISCELLANEOUS
Non-Participating. The Contract does not participate in the surplus or profits
of the Company and the Company does not pay dividends on the Contract.
Protection of Proceeds. To the extent permitted by law, no benefits payable
under the Contract to a Beneficiary or Payee are subject to the claims of an
Owner's or a Beneficiary's creditors.
Discharge of Liability. Any payments made by the Company under any Annuity
Payment Option or in connection with the payment of any withdrawal, surrender or
death benefit, shall discharge the Company's liability to the extent of each
such payment.
Proof of Age and Survival. The Company reserves the right to require proof of
the Annuitant's Age prior to the Annuity Date. In addition, for life contingent
Annuity Options, the Company reserves the right to require proof of the
Annuitant's survival before any Annuity Payment Date.
Contract Application. The Company issues the Contract in consideration of the
Owner's application and payment of the initial purchase payment. The entire
Contract is made up of the Contract, any attached endorsements or riders, and
the application. In the absence of fraud, the Company considers statements made
in the application to be representations and not warranties. The Company will
not use any statement in defense of a claim or to void the Contract unless it is
contained in the application. The Company will not contest the Contract.
YIELDS AND TOTAL RETURNS
From time to time, the Company may advertise or include in sales literature
certain performance related information for the Subaccounts, including yields
and average annual total returns. Certain Funds have been in existence prior to
the commencement of the offering of the Contracts. The Company may advertise or
include in sales literature the performance of the Subaccounts that invest in
these Funds for these prior periods. The performance information of any period
prior to the commencement of the offering of the Contracts is calculated as if
the Contract had been offered during those periods, using current charges and
expenses.
Performance information discussed herein is based on historic results and does
not indicate or project future performance. For a description of the methods
used to determine yield and total return for the Subaccounts, see the Statement
of Additional Information.
Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Funds. The performance of a Fund in
part reflects its expenses. See the prospectuses for the Funds for Fund expense
information.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the Subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
<PAGE>
The yield of a Subaccount other than the Money Market Subaccount refers to the
annualized income generated by an investment in the Subaccount over a specified
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<PAGE>
30-day or one-month period. The yield is calculated by assuming that the income
generated by the investment during that 30-day or one-month period is generated
each period over a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time including, but not limited to, a period measured from the date the
Subaccount commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the Subaccount from the beginning date of the
measuring period to the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all charges
and deductions applied against the Subaccount (including any surrender charge
that would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes). When a Subaccount,
other than the Money Market Subaccount, has been in operation for one, five and
ten years respectively, the standard version average annual total return for
these periods will be provided.
In addition to the standard version described above, total return performance
information computed on two different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, the Company may from time to
time disclose cumulative total return for Contracts funded by Subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the Funds may be disclosed, including such
disclosures for periods prior to the date the Variable Account commenced
operations.
Non-standard performance data will only be disclosed if the standard performance
data for the required periods is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount may be
compared with the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
similar to the Subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
<PAGE>
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper, VARDS and Morningstar each
rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
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<PAGE>
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
The Company may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs or charts.
FEDERAL TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION IS GENERAL AND
IS NOT INTENDED AS TAX ADVICE
INTRODUCTION
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the Contract issued by the Company. Any person concerned
about these tax implications should consult a competent tax adviser before
initiating any transaction. This discussion is based upon the Company's
understanding of the present federal income tax laws, as they are currently
interpreted by the Internal Revenue Service ("IRS"). No representation is made
as to the likelihood of the continuation of the present federal income tax laws
or of the current interpretation by the IRS. Moreover, no attempt has been made
to consider any applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used in
connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds from and/or contributions under retirement plans
that are intended to qualify as plans entitled to special income tax treatment
under sections 401(a), 408, or 457 of the Code. The ultimate effect of federal
income taxes on the amounts held under a Contract, or Annuity Payments, and on
the economic benefit to the Owner, the Annuitant, or the Beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on the Company's tax status. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract with proceeds from a
tax-qualified plan and receiving distributions from a Qualified Contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of a Contract for their situation, the applicable requirements, and
the tax treatment of the rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special federal income tax treatment.
TAX STATUS OF THE CONTRACT
Diversification Requirements. Section 817(h) of the Code provides that separate
account investments underlying a contract must be "adequately diversified" in
accordance with Treasury Department regulations in order for the contract to
qualify as an annuity contract under Section 72 of the Code. The Variable
Account, through each underlying Fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Subaccounts may be
invested. Although the Company does not have direct control over the Funds in
which the Variable Account invests, the Comapny believes that each Fund will
meet the diversification requirements, and therefore, the Contract will be
treated as an annuity contract under the Code.
<PAGE>
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
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<PAGE>
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of several Subaccounts in which
to allocate Net Purchase Payments and Contract Values, and may be able to
transfer among Subaccounts more frequently than in such rulings. These
differences could result in an Owner being treated as the owner of the assets of
the Variable Account. In addition, the Company does not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the Contract as necessary to attempt to prevent the Owner from
being considered the owner of the Variable Account's assets.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Annuity Date but prior to the time the entire interest in the Contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
Owner's death; and (b) if any Owner dies prior to the Annuity Date, the entire
interest in the Contract will be distributed within five years after the date of
the Owner's death. These requirements will be considered satisfied as to any
portion of the Owner's interest that is payable to or for the benefit of a
"designated beneficiary," and that is distributed over the life of such
beneficiary or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
Owner's death. The Owner's "designated beneficiary" is the person designated by
such Owner as a beneficiary and to whom ownership of the contract passes by
reason of death and must be a natural person. However, if the Owner's
"designated beneficiary" is the surviving spouse of the Owner, the Contract may
be continued with the surviving spouse as the new Owner.
Non-Qualified Contracts contain provisions that are intended to comply with the
requirements of section 72(s) of the Code, although no regulations interpreting
these requirements have yet been issued. The Company intends to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code section 72(s) when clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
<PAGE>
TAXATION OF ANNUITIES
In General. Section 72 of the Code governs taxation of annuities in general. The
Company believes that an Owner who is a natural person is not taxed on increases
in Contract Value until distribution occurs by withdrawing all or part of the
Contract Value (e.g., withdrawals and surrenders) or as Annuity Payments under
the Annuity Payment Option elected. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the Contract Value (and in the case
of a Qualified Contract, any portion of an interest in the qualified plan)
- 36 -
<PAGE>
generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or payment option) is taxable
as ordinary income.
The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the contract value over the
"investment in the contract" during the taxable year. There are some exceptions
to this rule, and a prospective Owner that is not a natural person may wish to
discuss these with a competent tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
Withdrawals. In the case of a withdrawal from a Qualified Contract, under
section 72(e) of the Code, a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
participant's total accrued benefit or balance under the retirement plan. The
"investment in the contract" generally equals the portion, if any, of any
purchase payments paid by or on behalf of the individual under a Contract that
was not excluded from the individual's gross income. For Contracts issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from Qualified
Contracts.
In the case of a withdrawal from a Non-Qualified Contract, under section 72(e),
any amounts received are generally first treated as taxable income to the extent
that the Contract Value immediately before the withdrawal exceeds the
"investment in the contract" at that time. Any additional amount withdrawn is
not taxable.
In the case of a surrender under a Qualified or Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."
Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the owner's investment in the contract will continue to apply to amounts
allocable to investments in that contract prior to August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to section 1035 transactions.
Prospective Owners wishing to take advantage of section 1035 should consult
their tax adviser.
Annuity Payments. Although tax consequences may vary depending on the payment
option elected under an annuity contract, under Code section 72(b), generally
(prior to recovery of the investment in the contract) gross income does not
include that part of any amount received as an annuity under an annuity contract
that bears the same ratio to such amount as the investment in the contract bears
to the expected return at the annuity starting date. For variable annuity
payments, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
<PAGE>
no tax on the portion of each payment that represents the same ratio that the
"investment in the contract" bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each annuity
payment is taxable until the recovery of the investment in the contract, and
thereafter the full amount or each annuity payment is taxable. If death occurs
before full recovery of the investment in the contract, the unrecovered amount
may be deducted on the annuitant's final tax return.
- 37 -
<PAGE>
Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of an Owner. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in a lump sum, they are
taxed in the same manner as a full surrender of the Contract or (ii) if
distributed under an Annuity Payment Option, they are taxed in the same way as
Annuity Payments.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
2. made on or after the death of the holder (or if the holder is
not an individual, the death of the primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and his or her designated
beneficiary;
5. made under certain annuities issued in connection with
structured settlement agreements; and
6. made under an annuity contract that is purchased with a single
purchase payment when the annuity date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during
the annuity payment period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. In past years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of non-qualified
annuities that did not have "substantial life contingencies" by taxing income as
it is credited to the annuity. Although as of the date of this prospectus
Congress is not considering any legislation regarding taxation of annuities,
there is always the possibility that the tax treatment of annuities could change
by legislation or other means (such as IRS regulations, revenue rulings,
judicial decisions, etc.). Moreover, it is also possible that any change could
be retroactive (that is, effective prior to the date of the change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership of a Contract, the designation of an Annuitant, Payee or
other Beneficiary who is not also the Owner, the selection of certain Annuity
Dates or the exchange of a Contract may result in certain tax consequences to
the Owner that are not discussed herein. An Owner contemplating any such
transfer, assignment, or exchange of a Contract should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
- 38 -
<PAGE>
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is withheld.
MULTIPLE CONTRACTS
All non-qualified deferred annuity contracts that are issued by the Company (or
its affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in gross
income under section 72(e) of the Code. The effects of this rule are not yet
clear; however, it could affect the time when income is taxable and the amount
that might be subject to the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of section 72(e) of the Code through the serial purchase of annuity
contracts or otherwise. There may also be other situations in which the Treasury
Department may conclude that it would be appropriate to aggregate two or more
annuity contracts purchased by the same owner. Accordingly, a Contract Owner
should consult a competent tax adviser before purchasing more than one annuity
contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Owners, Annuitants, and
Beneficiaries are cautioned that the rights of any person to any benefits under
these qualified retirement plans may be subject to the terms and conditions of
the plans themselves, regardless of the terms and conditions of the Contract,
but the Company shall not be bound by the terms and conditions of such plans to
the extent such terms contradict the Contract, unless the Company consents to be
bound. Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. The Company will amend the Contract as
necessary to conform it to the requirements of such plan.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish these
plans for themselves and their employees. Such retirement plans may permit the
purchase of the Contract to provide benefits under the plans. Employers
intending to use the Contract with such plans should seek competent advice.
<PAGE>
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the IRS. Employers may establish Simplified Employee Pension
(SEP) Plans to provide IRA contributions on behalf of their employees.
- 39 -
<PAGE>
Deferred Compensation Plans. Section 457 of the Code provides for certain
deferred compensation plans. These plans may be offered with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities, certain affiliates of such entities, and tax exempt
organizations. The plans may permit participants to specify the form of
investment for their deferred compensation account. All investments are owned by
the sponsoring employer and are subject to the claims of the general creditors
of the employer.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax consequences under
these Contracts are not exhaustive, and special rules are provided with respect
to other tax situations not discussed in the prospectus. Further, the federal
income tax consequences discussed herein reflect the Company's understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
OTHER INFORMATION
DISTRIBUTION OF THE CONTRACTS
CNA/ISI, which is located at CNA Plaza, Chicago, Illinois 60685, is principal
underwriter and distributor of the Contracts. CNA/ISI is an affiliate of the
Company, is registered with the SEC as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The Company pays
CNA/ISI for acting as principal underwriter under a distribution agreement. The
Contract are offered on a continuous basis and the Company does not anticipate
discontinuing the offer.
Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell the Company's insurance contracts
and who are also registered representatives of a broker-dealer having a selling
agreement with CNA/ISI. Such broker-dealers will generally receive commissions
based on a percent of purchase payments made (up to a maximum of 7%). The
writing agent will receive a percentage of these commissions from the respective
broker-dealer, depending on the practice of that broker-dealer. Owners do not
pay these commissions.
ADMINISTRATIVE SERVICES
Financial Administration Services, Inc. administers the Contract on behalf of
the Company at the Service Center. In this capacity, Financial Administration
Services, Inc. is responsible for the following: processing purchase payments,
Annuity Payments, death benefits, surrenders, withdrawals, and transfers;
preparing confirmation notices and periodic reports; calculating mortality and
expense risk charges; calculating Accumulation and Annuity Unit Values;
distributing voting materials and tax reports; and generally assisting Owners.
<PAGE>
VOTING PRIVILEGES
In accordance with current interpretations of applicable law, the Company votes
Fund shares held in the Variable Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
- 40 -
<PAGE>
The number of votes that an Owner or Annuitant has the right to instruct are
calculated separately for each Subaccount, and may include fractional votes.
Prior to the Annuity Date, the Owner holds a voting interest in each Subaccount
to which Variable Contract Value is allocated. After the Annuity Date, the Payee
has a voting interest in each Subaccount from which Variable Annuity Payments
are made.
For each Owner, the number of votes attributable to a Subaccount will be
determined by dividing the Owner's Subaccount Value by the Net Asset Value Per
Share of the Fund in which that Subaccount invests. For each Payee, the number
of votes attributable to a Subaccount is determined by dividing the liability
for future Variable Annuity Payments to be paid from that Subaccount by the Net
Asset Value Per Share of the Fund in which that Subaccount invests. This
liability for future payments is calculated on the basis of the mortality
assumptions, the selected Benchmark Rate of Return and the Annuity Unit Value of
that Subaccount on the date that the number of votes is determined. As Variable
Annuity Payments are made to the Payee, the liability for future payments
decreases as does the number of votes.
The number of votes available to an Owner or Payee are determined as of the date
coinciding with the date established by the Fund for determining shareholders
eligible to vote at the relevant meeting of the Fund's shareholders. Voting
instructions are solicited by written communication prior to such meeting in
accordance with procedures established for the Fund. Each Owner or Payee having
a voting interest in a Subaccount will receive proxy materials and reports
relating to any meeting of shareholders of the Funds in which that Subaccount
invests.
Fund shares as to which no timely instructions are received and shares held by
the Company in a Subaccount as to which no Owner or Payee has a beneficial
interest are voted in proportion to the voting instructions that are received
with respect to all Contracts participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon are applied to reduce the
total number of votes eligible to be cast on a matter. Under the 1940 Act,
certain actions affecting the Variable Account may require Contract Owner
approval. In that case, an Owner will be entitled to vote in proportion to his
Variable Contract Value.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Variable Account are subject. The Company, as an
insurance company, is ordinarily involved in litigation. The Company does not
believe that any current litigation is material to its ability to meet its
obligations under the Contract or to the Variable Account nor does the Company
expect to incur significant losses from such actions.
COMPANY HOLIDAYS
The Company is closed on the following days in 1996: New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving
Day, and Christmas Day.
<PAGE>
LEGAL MATTERS
All matters relating to Pennsylvania law pertaining to the Contracts,
including the validity of the Contracts and the Company's authority to issue the
Contracts, have been passed upon by Lynne Gugenheim, Esquire, Vice President and
Associate General Counsel of the Company. Sutherland, Asbill & Brennan of
Washington, D.C. has provided advice on certain matters relating to the federal
securities laws.
- 41 -
<PAGE>
EXPERTS
The balance sheets of the Company as of December 31, 1995 and 1994, and the
related statements of income, stockholder's equity, and cash flows for the years
ended December 31, 1995, 1994 and 1993, which are included in the prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their report therein, and are included therein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION ABOUT VALLEY FORGE LIFE INSURANCE COMPANY
HISTORY AND BUSINESS
Valley Forge Life Insurance Company was incorporated under the laws of the state
of Pennsylvania on August 9, 1956 and began its operations on December 1, 1956.
The Company markets a full range of insurance products, including group medical
and life, universal life, traditional life, annuities, and guaranteed investment
contracts.
Formation of the Company was sponsored American Casualty Company of Reading,
Pennsylvania, which owned 50% of the 44,000 outstanding shares of the Company.
The remaining 50% interest was held by the Valley Forge Insurance Company, a
wholly owned subsidiary of American Casualty Company.
In late 1963, control of the parent companies was acquired by Continental
Casualty Company of Chicago, Illinois. In 1967, all outstanding shares of
Continental Casualty Company were exchanged for stock of CNA Financial
Corporation, the parent company of the CNA pool of life insurance companies. On
December 30, 1983, all outstanding shares of the Company were acquired by
Continental Assurance Company, a life insurance company subsidiary of CNA
Financial Corporation. Controlling interest of CNA Financial Corporation is held
by Loews Corporation.
Effective December 31, 1985, pursuant to a __________agreement entered into
on____________________ , the Company began ceding all of its business to its
parent, Continental Assurance Company. This business was then pooled
with the business of Continental Assurance Company, excluding Continental
Assurance Company's participating contracts and separate accounts, and 10% of
the combined net pool was retroceded to the Company.
The nature and results of any other reclassification, merger or consolidation,
acquisitions and dispositions of material amounts of the Company's assets, as
well as any material changes in the Company's mode of conducting business are as
follows: [ ].
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus.
Selected Financial Data
For the Periods Ended December 31,
----------------------------------------
1995 1994 1993 1992 1991
Net Investment Income $ $ $ $ $
Net Earnings $ $ $ $ $
Total Assets $ $ $ $ $
- 42 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Financial Statements and Notes
to Financial Statements included herein.
RESULTS OF OPERATIONS
The following are comparisons of 1995 to 1994, 1994 to 1993, and 1993 to 1992
with respect to net earnings, net investment income and interest credited to
policyholders' account balances, net realized investment gains or losses, policy
charge revenue, reinsurance premium ceded, amortization of deferred policy
acquisition costs, and insurance expenses and taxes.
[To be added by amendment]
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements include the payment of sales commissions
and other underwriting expenses and the funding of its contractual obligations
for the life insurance it has in-force. The Company has developed and utilizes
[a cash flow projection system and regularly performs asset/liability duration
matching in the management of its asset and liability portfolios.]
In order to continue to market life insurance and annuity products, the Company
must meet or exceed the statutory capital and surplus requirements of the
insurance departments of the states in which it conducts business. Statutory
accounting practices differ from generally accepted accounting principles in two
major respects: under statutory accounting practices, the acquisition costs of
new business are charged to expenses; and the required additions to statutory
reserves for new business in some cases may initially exceed the statutory
revenues attributable to such business. These practices result in a reduction of
statutory income and surplus at the time of recording new business.
The National Association of Insurance Commissioners ("NAIC") has developed and
implemented effective December 31, 1993, the Risk Based Capital ("RBC") adequacy
monitoring system. The RBC calculates the amount of adjusted capital that a life
insurance company should have based upon that company's risk profile. The NAIC
has established four different levels of regulatory action with respect to the
RBC adequacy monitoring system. Each of these levels may be triggered if an
insurer's total adjusted capital is less than a corresponding level of RBC. As
of December 31, 1995 and 1994, based on the RBC formula, the Company's total
adjusted capital level was [in excess] of the minimum amount of capital required
to avoid regulatory action.
The Company believes that it will be able to fund the capital and surplus
requirements of projected new business from current statutory earnings and
existing statutory capital and surplus. If sales of new business significantly
exceed projections, the Company may have to look to its parent and other
affiliated companies to provide the capital or borrowings necessary to support
its current marketing efforts. The Company's future marketing efforts could be
hampered should its parent and/or affiliates be unwilling to commit additional
funding.
<PAGE>
SEGMENT INFORMATION
The Company's operations consist of [one] business segment, which is the sale of
life insurance. The Company is not dependent upon any single customer, and no
single customer accounted for more than 10% of the Company's revenues during
1995.
- 43 -
<PAGE>
REINSURANCE
Portions of the Company's life insurance risks are reinsured with other
companies. The Company has reinsurance agreements with other insurance companies
for individual life insurance. The maximum retention on any one life is
approximately $20 million.
INVESTMENTS
As of December 31, 1995, the Company had total invested assets of $_______
million consisting of $_________ million of short-term securities and
$________ million of bonds and other long-term investments. The Company's assets
must be invested in accordance with applicable state laws. These laws govern
the nature and quality of investments that may be made by life insurance
companies and the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit investments,
within specified limits and subject to certain qualifications, in federal,
state, and municipal obligations, corporate bonds, preferred or common
stocks, real estate mortgages, real estate and certain other investments.
All of the Company's assets, except for the separate account assets supporting
variable products, are available to meet its obligations under the
Contracts.
The Company makes investments in accordance with investment guidelines that take
into account investment quality, liquidity and diversification, and invests
assets supporting Contract guarantees primarily in U.S. Government agency and
corporate issues.
COMPETITION
The Company is engaged in a business that is highly competitive due to the large
number of stock and mutual life insurance companies and other entities marketing
insurance products. Based upon total assets, a substantial number of these
insurers are larger than the Company.
EMPLOYEES
As of December 31, 1995, the Company had approximately ______ employees at
its Home Office in Reading, Pennsylvania, and approximately ______employees at
its executive office in Chicago, Illinois. [IN ADDITION THERE ARE
APPROXIMATELY ________ COMPANY EMPLOYEES AT VARIOUS BRANCH AND MARKETING OFFICES
THROUGHOUT THE UNITED STATES.]
PROPERTIES
The Company [owns/leases] its home office located at 401 Penn St. Reading,
Pennsylvania 19601. In addition, the Company [owns/leases] its executive office
which is located at CNA Plaza, Chicago, Illinois 60685. The Company also
[own/leases] its business offices located at ___________, Nashville, Tennessee.
<PAGE>
STATE REGULATION
The Company is subject to the laws of the Commonwealth of Pennsylvania governing
insurance companies and to the regulations of the Pennsylvania Department of
Insurance (the "Insurance Department"). A detailed financial statement in the
prescribed form (the "Statement") is filed with the Insurance Department each
year covering the Company's operations for the preceding year and its financial
condition as of the end of that year. Regulation by the Insurance Department
includes periodic examination to determine contract liabilities and reserves so
that the Insurance Department may certify that these items are correct. The
Company's books and accounts are subject to review by the Insurance Department
at all times. A full examination of the Company's operations is conducted
periodically by the Insurance Department and under the auspices of the NAIC.
- 44 -
<PAGE>
In addition, the Company is subject to regulation under the insurance laws of
all jurisdictions in which it operates. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. The Company is required to file the Statement with
supervisory agencies in each of the jurisdictions in which it does business, and
its operations and accounts are subject to examination by these agencies at
regular intervals.
The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results in
their Statement. It is anticipated that these standards will have no significant
effect upon the Company.
Further, many states regulate affiliated groups of insurers, such as the Company
and its affiliates, under insurance holding company legislation. Under such
laws, inter-company transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or approval, depending on the size
of the transfers and payments in relation to the financial positions of the
companies involved.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred by other insurance companies that have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would threaten
an insurer's own financial strength.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Certain insurance products of the Company are subject to
various federal securities laws and regulations. In addition, current and
proposed federal measures that may significantly affect the insurance business
include regulation of insurance company solvency, employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies and the tax
treatment of insurance products and its impact on the relative desirability of
various personal investment vehicles.
DIRECTORS AND EXECUTIVE OFFICERS
The name, age, positions and offices, term as director, and business experience
during the past five years for the Company's directors and executive officers
are listed in the following table:
Name (Age) Position(s) with the Company and Business Experience
Dennis H. Chookaszian ( ) Director, Chairman of the Board
--
Philip L. Engel ( ) Director, President
<PAGE>
--
Peter E. Jokiel ( ) Director, Senior Vice President,
-- Chief Financial Officer
Donald M. Lowry ( ) Director, Senior Vice President,
-- General Counsel and Secretary
Donald C. Rycroft ( ) Director, Senior Vice President, Treasurer
--
William H. Sharkey, Jr. ( ) Director, Senior Vice President
--
Floyd E. Brady ( ) Senior Vice President
--
Bruce B. Brodie ( ) Senior Vice President
--
Thomas E. Donnelly ( ) Senior Vice President
--
James P. Flood ( ) Senior Vice President
--
- 45 -
<PAGE>
Michael C. Garner ( ) Senior Vice President
--
Bernard L. Hengesbaugh ( ) Senior Vice President
--
Jack Kettler ( ) Senior Vice President
--
Carolyn L. Murphy ( ) Senior Vice President
--
Wayne R. Smith, III ( ) Senior Vice President
--
Adrian M. Tocklin ( ) Senior Vice President
--
Jae L. Wittlich ( ) Senior Vice President
--
William J. Adamson, Jr. ( ) Group Vice President
--
Danielle Barcilon ( ) Group Vice President
--
Michael J. Berkery ( ) Group Vice President
--
Carolyn A. Boyle ( ) Group Vice President
--
Daniel A. Cacchione ( ) Group Vice President
--
James P. Carollo ( ) Group Vice President
--
Michael L. Connelly ( ) Group Vice President
--
Peter P. Conway, Jr. ( ) Group Vice President
--
David T. Cumming ( ) Group Vice President
--
Gary R. Dittman ( ) Group Vice President
--
Steven Freund ( ) Group Vice President
--
David A. Froelich ( ) Group Vice President
--
Roy German ( ) Group Vice President
--
Thomas M. Gill ( ) Group Vice President
--
Roger Graham ( ) Group Vice President
--
Thomas J. Grzelinski ( ) Group Vice President
--
Allan C. Hamann, Jr. ( ) Group Vice President
--
Paul F. Hourihan ( ) Group Vice President
--
Thomas B. Johnson ( ) Group Vice President
--
Jonathan D. Kantor ( ) Group Vice President
--
Patricia L. Kubera ( ) Group Vice President, Controller
--
Ernest A. Lausier ( ) Group Vice President
--
<PAGE>
Jon Levy ( ) Group Vice President
--
John R. Lusk ( ) Group Vice President
--
Glenn A. Mateja ( ) Group Vice President
--
Edward J. McCabe, Jr. ( ) Group Vice President
--
James W. Macdonald ( ) Group Vice President
--
Tim I. Madden ( ) Group Vice President
--
Gerald Maskowsky ( ) Group Vice President
--
Michael S. McGavick ( ) Group Vice President
--
Timothy P. Mitchell ( ) Group Vice President
--
James G. Pettorini ( ) Group Vice President
--
Thomas J. Prendergast ( ) Group Vice President
--
Richard W. Quehl ( ) Group Vice President
--
Robert P. Rego ( ) Group Vice President
--
Richard E. Ruddick ( ) Group Vice President
--
David L. Stone ( ) Group Vice President
--
John J. Sullivan, Jr. ( ) Group Vice President
--
Thomas F. Taylor ( ) Group Vice President
--
Robert J. Teske ( ) Group Vice President
--
Allen Uyeda ( ) Group Vice President
--
Mark C. Vonnahme ( ) Group Vice President
--
Douglas Walters ( ) Group Vice President
--
Frank R. Waters ( ) Group Vice President
--
John H. Wehner ( ) Group Vice President
--
- 46 -
<PAGE>
Each director is elected to serve until [______] or until his or her successor
is elected and shall have qualified. Some directors have held various
executive positions with insurance company affiliates of the Company.
[BUSINESS EXPERIENCE TO BE ADDED]
EXECUTIVE COMPENSATION
The salaries and any other compensation of the chairman of the board and the
four most highly compensated executive officers whose compensation exceeded
$100,000 for the fiscal year ended December 31, 1995 is provided below.
[TO BE ADDED]
<TABLE>
SUMMARY COMPENSATION TABLE
|===========|========|==================================|====================================|============|
| | | | | |
| | | Annual Compensation | Long-Term Compensation | |
| | |---------|----------|-------------|-------------------------|----------| |
| | | | | | | | |
| | | | | | Awards | Payouts| |
| | | | | |-----------|-------------|----------| |
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | | | |
| Name and | | | | | | Securities | | |
| Principal| | | | Other | | Under-Lying | | |
| Position | | | | Annual | Restricted| Options/ | | All Other |
| | | | |Compensation | Stock | SARs | LTIP |Compensation|
| | Year | Salary | Bonus | ($) | Award(s) | (#) | Payouts | ($) |
| | | ($) | ($) | | ($) | | ($) | |
| | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|CEO....... | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|A......... | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|B......... | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|C......... | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|D......... | | | | | | | | |
|-----------|--------|---------|----------|-------------|-----------|-------------|----------|------------|
| | | | | | | | | |
|===========|========|=========|==========|=============|===========|=============|==========|============|
</TABLE>
- 47 -
<PAGE>
FINANCIAL STATEMENTS OF VALLEY FORGE LIFE INSURANCE COMPANY
[TO BE ADDED BY AMENDMENT]
- 48 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning subjects discussed in this prospectus. The following is the Table of
Contents for that Statement of Additional Information.
PERFORMANCE INFORMATION..................................................... 1
Money Market Subaccount Yields..................................... 1
Other Subaccount Yields............................................ 2
Average Annual Total Returns....................................... 3
Other Total Returns................................................ 4
Effect of the Annual Administration Fee on Performance Data........ 5
VARIABLE ANNUITY PAYMENTS................................................... 5
Annuity Unit Value................................................. 5
Illustration of Calculation of Annuity Unit Value.................. 5
Illustration of Variable Annuity Payments.......................... 6
VALUATION DAYS.............................................................. 6
OTHER INFORMATION........................................................... 6
FINANCIAL STATEMENTS........................................................ 6
ISSUED BY:
Valley Forge Life Insurance Company
CNA Plaza
Chicago, Illinois 60684
DISTRIBUTED BY:
CNA Investor Services, Inc.
CNA Plaza
Chicago, Illinois 60684
SERVICE CENTER:
Financial Administration Services, Inc.
95 Bridge Street
Haddam, Connecticut 06438
- 49 -
<PAGE>
APPENDIX A
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Payment Option, by
the Market Value Adjustment Factor. The Market Value Adjustment factor is
calculated as follows:
Market Value Adjustment = Amount multiplied by
[[(1+a)/(1+b)]^n/12 -1]
where:
"Amount" is the amount being surrendered, withdrawn, transferred or
applied to an Annuity Payment Option less any applicable
annual administration fees or transfer processing fees;
"a" is the Guaranteed Interest Rate currently being credited to the
"Amount"; and
"b" is the Guaranteed Interest Rate that is currently being offered for a
Guarantee Period of duration equal to the time remaining to the
expiration of the Guarantee Period for the Guarantee Amount from which
the "Amount" is taken. Where the time remaining to the expiration of
the Guarantee Period is not 1, 3, 5, 7, or 10 years, "b" is the rate
found by linear interpolation of the rate for the Guarantee Period
having the duration closest to the time remaining or, if the time
remaining is less than 1 year, "b" is the rate for a 1 year period; and
"n" is the number of complete months remaining before the expiration of the
Guarantee Period for the Guarantee Amount from which the "Amount" is
taken.
As an example of calculating "b" by linear interpolation, if the time remaining
to the expiration of the Guarantee Period is 4.5 years, the interpolated
Guaranteed Interest Rate is equal to the sum of one-fourth of the three-year
Guaranteed Interest Rate and three-fourths of the five-year Guaranteed Interest
Rate. If the three-year Guaranteed Interest Rate is 4.5% and the five-year
Guaranteed Interest Rate is 5%, the interpolated Guaranteed Interest Rate equals
4.875% -- that is, 4.5% multiplied by 0.25 plus 5% multiplied by 0.75.
The Market Value Adjustment is computed as in the following examples:
1. Assume that the Owner selects a 7 year Gurantee Period and that the Company
is crediting a 4.5% effective annual interest rate on the amount allocated or
transferred to such Guarantee Period. Assume also that 55 months into the 7-year
Period (seven months into the fifth year), the Owner withdraws $7,500.
<PAGE>
If at the time of the withdrawal the Company is offering a 2.5%
effective annual rate of interest on Guarantee Periods of 3 years and a 2.0%
effective annual rate of interest on Guarantee Periods of 1 year, then:
i = 0.04500
j = 0.02354 = (0.025 * 17/24) + (0.02 * 7/24) = linear interpolation
between the 3 year rate and the 1 year rate
The MVA factor = [(1.045000)/(1.02354)]^(29/12) -1 = 0.05142
MVA = $7,500.00 * 0.05142 = $385.65
Amount received = $7,500 + $385.65 = $7,885.65
A - 1
<PAGE>
If at the time of the withdrawal the Company is offering a 5.75%
effective annual rate of interest on Guarantee Periods of 3 years and a 6.5%
effective annual rate of interest on Guarantee Periods of 1 year, then:
i = 0.04500
j = 0.05969 = (0.0575 * 17/24) + (0.065 * 7/24) = linear interpolation
between the 3 year rate and the 1 year rate
The MVA factor = [(1.045000)/(1.05969)]^(29/12) -1 = 0.03317
MVA = $7,500.00 * -0.03317 = -$248.78
Amount received = $7,500 - $248.78 = $7,251.22
A - 2
<PAGE>
APPENDIX B
DEATH BENEFIT EXAMPLES
Assume that an Owner makes purchase payments on the first day of certain
Contract Years as shown in the table below. Assume also that the Owner withdraws
$7,500 during the seventh month of Contract Year five and $5,000 at the begining
of Contract Years thirteen and fifteen. Assume that the Annuitant is younger
that age 76 for all twenty years. All "begining of year death benefits" are
computed as of the first day of the Contract Year except for the figure for
Contract Year 5 which is computed as of the seventh month of that year (i.e., as
of the time of the $7,500 withdrawal).
Explanations:
The Death Benefit at the beginning of Contract Years 1 through 4 is
determined from the Contract Value at the end of the prior Contract
Year plus the purchase payment made at the beginning of the year for
which the computation is being made.
The Death Benefit at the end of month 7 of Contract Year 5 is
determined from the prior year's Contract Value plus the purchase
payment made at the beginning of that year, minus the $7,500 withdrawn
in the seventh month minus a $318.75 surrender charge assessed in
connection with the withdrawal.
The Death Benefit at the beginning of Contract Years 6 through 10 is
determined from the Contract Value at the end of the prior Contract
Year plus the purchase payment made at the beginning of the Year for
which the computation is being made. Since the first day of Contract
Year 6 is a minimum death benefit floor computation anniversary, a new
death benefit floor amount is set at $8,506.
The Death Benefit at the beginning of Contract Year 11 is determined
solely from the prior Year's Contract Value. Since this is a minimum
death benefit floor computation anniversary, a new death benefit floor
amount is set at $42,610.
The Death Benefit at the beginning of Contract Year 12 is determined
from the minimum death benefit which is the most recently reset death
benefit floor amount of $42,610. This is so because the Contract Value
declined and no purchase payments or withdrawals occured since the
prior reset of the death benefit floor amount.
The Death Benefit at the beginning of Contract Year 13 is determined
from the minimum death benefit which is the most recently reset death
benefit floor amount of $42,610 adjusted for the $5,000 withdrawal. The
$36,762 results from $42,610 being multiplied by $31,432/$36,432.
The Death Benefit at the beginning of Contract Year 14 is the minimum
death benefit which is the most recently reset death benefit floor
amount adjusted for the $5,000 withdrawal made since that floor amount
was set, or $36,762.
<PAGE>
The Death Benefit at the beginning of Contract Year 15 is the minimum
death benefit which is the most recently reset death benefit floor
amount of $42,610 adjusted for both $5,000 withdrawals made since that
floor amount was set. The $28,372 results from $42,610 being multiplied
by $31,432/$36,432, and this result multiplied by $16,908/$21,908.
The Death Benefit at the beginning of Contract Year 16 is the minimum
death benefit which is the most recently reset death benefit floor
amount of $42,610 adjusted for both $5,000 withdrawals made since that
floor amount was set. The $28,372 results from $42,610 being multiplied
by $31,432/$36,432, and this result multiplied by $16,908/$21,908. Even
though this is a death benefit floor computation anniversary, the death
benefit floor amount is not reset since the Contract Value has not
exceeded its previous high of $42,610 occurring in Contract Year 10. No
purchase payments or withdrawals were made.
B - 1
<PAGE>
The Death Benefit at the beginning of Contract Year 17 through 20 is
the minimum death benefit which is the most recently reset death
benefit floor amount of $42,610 adjusted for both $5,000 withdrawals
made since that floor amount was set and adjusted further for the
$10,000 purchase payment made on the first day of Contract Year 17.
<TABLE>
<CAPTION>
|==============|==============|================|=================|=================|===============|==============|
<S> <C> <C> <C> <C> <C> <C>
|Beginning of | Purchase | Withdrawals | Accumulated Net| End of Year | End of Year | Beginning of |
|Contract Year | Payments | | Purchase | Accumulation | Contract Value| Year Death |
| | | | Payments | Unit Value | | Benefit |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 1 | $ 2,000 | $ 0 | $ 2,000 | 10.50000 | $ 2,100 | $ 2,000 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 2 | $ 2,000 | $ 0 | $ 4,000 | 11.23500 | $ 4,387 | $ 4,100 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 3 | $ 2,500 | $ 0 | $ 6,500 | 12.13380 | $ 7,438 | $ 6,887 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 4 | $ 3,000 | $ 0 | $ 9,500 | 13.34718 | $11,482 | $10,438 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 5 | $ 4,000 | $ 7,500 | $ 6,000 | 14.81537 | $ 8,506 | $ 7,663 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 6 | $ 5,000 | $ 0 | $11,000 | 16.59321 | $15,127 | $13,506 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 7 | $ 5,000 | $ 0 | $16,000 | 18.25254 | $22,139 | $20,127 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 8 | $ 5,000 | $ 0 | $21,000 | 19.71274 | $29,310 | $27,139 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 9 | $ 5,000 | $ 0 | $26,000 | 20.89550 | $36,369 | $34,310 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 10 | $ 5,000 | $ 0 | $31,000 | 21.52237 | $42,610 | $41,369 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 11 | $ 0 | $ 0 | $31,000 | 20.44625 | $40,480 | $42,610 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 12 | $ 0 | $ 0 | $31,000 | 18.40162 | $36,432 | $42,610 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 13 | $ 0 | $ 5,000 | $26,000 | 15.64138 | $26,717 | $36,762 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 14 | $ 0 | $ 0 | $26,000 | 12.82593 | $21,908 | $36,762 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 15 | $ 0 | $ 5,000 | $21,000 | 13.46723 | $17,753 | $28,372 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 16 | $ 0 | $ 0 | $21,000 | 14.14059 | $18,641 | $28,372 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 17 | $10,000 | $ 0 | $31,000 | 14.14059 | $28,641 | $38,372 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 18 | $ 0 | $ 0 | $31,000 | 13.43356 | $27,209 | $38,372 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 19 | $ 0 | $ 0 | $31,000 | 13.43356 | $27,209 | $38,372 |
|--------------|--------------|----------------|-----------------|-----------------|---------------|--------------|
| 20 | $ 0 | $ 0 | $31,000 | 13.97090 | $28,297 | $38,372 |
|==============|==============|================|=================|=================|===============|==============|
</TABLE>
B- 2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Flexible Premium Deferred Variable Annuity Contract
Issued by
Valley Forge Life Insurance Company
and
Valley Forge Life Insurance Company Variable Annuity Separate Account
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED JUNE _____, 1996, IS NOT A
PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS DATED JUNE_____, 1996 FOR THE VALLEY FORGE LIFE
INSURANCE COMPANY FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT WHICH IS
REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE PURCHASING A CONTRACT. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN
REQUEST TO THE SERVICE CENTER AT 95 BRIDGE STREET, HADDAM, CONNECTICUT 06438, OR
TELEPHONE 1- - - .
<PAGE>
TABLE OF CONTENTS
PERFORMANCE INFORMATION .................................................... 1
Money Market Subaccount Yields .................................... 1
Other Subaccount Yields ........................................... 2
Average Annual Total Returns ...................................... 3
Other Total Returns ............................................... 4
Effect of the Annual Administration Fee on Performance Data ....... 5
VARIABLE ANNUITY PAYMENTS .................................................. 5
Annuity Unit Value ................................................ 5
Illustration of Calculation of Annuity Unit Value ................. 5
Illustration of Variable Annuity Payments ......................... 6
VALUATION DAYS ............................................................. 6
OTHER INFORMATION .......................................................... 6
FINANCIAL STATEMENTS ....................................................... 6
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Company may disclose yields, total returns, and other
performance data pertaining to the Contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
Because of the charges and deductions imposed under a Contract, the yield for
the Subaccounts will be lower than the yield for their respective Funds. The
calculations of yields, total returns and other performance data do not reflect
the effect of any premium tax that may be applicable to a particular Contract.
Premium taxes currently range from 0% to 3.5% of the annuity considerations
(purchase payments) based on the jurisdiction in which the Contract is sold.
MONEY MARKET SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner that does not take into consideration any realized or unrealized gains or
losses on shares of the Money Market Fund or on that Fund's portfolio
securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of one unit of the
Money Market Subaccount at the beginning of the period, dividing such net change
in account value by the value of the hypothetical account at the beginning of
the period to determine the base period return, and annualizing this quotient on
a 365-day basis. The net change in account value reflects: 1) net income from
the Subaccount attributable to the hypothetical account; and 2) charges and
deductions imposed under the Contract that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: 1) the annual administration fee; 2) the mortality and
expense risk charge; and 3) the asset-based administration charge. For purposes
of calculating current yields for a Contract, an average per unit annual
administration fee is used based on the $30 annual administration fee deducted
for the prior Contract Year as of the Contract Anniversary. Current Yield is
calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) x (365/7)
Where:
NCS = the net change in the value of the Money Market
Subaccount (exclusive of realized gains or losses on
the sale of securities and unrealized appreciation
and depreciation) for the seven-day period
attributable to a hypothetical account having a
balance of 1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
- 1 -
<PAGE>
Effective Yield = (1 + ((NCS-ES)/UV))^365/7 - 1
Where:
NCS = the net change in the value of the Money Market
Subaccount (exclusive of realized gains or losses on
the sale of securities and unrealized appreciation
and depreciation) for the seven-day period
attributable to a hypothetical account having a
balance of 1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
Because of the charges and deductions imposed under the Contract, the yield for
the Money Market Subaccount is lower than the yield for the Money Market Fund.
The current and effective yields on amounts held in the Money Market Subaccount
normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED YIELD FOR ANY
GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR
RATES OF RETURN. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Money Market Fund, the types and quality of portfolio securities held by
the Fund and the Fund's operating expenses. Yields on amounts held in the Money
Market Subaccount may also be presented for periods other than a seven-day
period.
Yield calculations do not take into account the surrender charge under the
Contract equal to 4% to 7% of certain purchase payments during the five full
years between the date of receipt of the purchase payment and the date of
surrender or withdrawal.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one-month periods. The annualized yield
of a Subaccount refers to income generated by the Subaccount during a 30-day or
one-month period and is assumed to be generated each period over a 12-month
period.
The yield is computed by: 1) dividing the net investment income of the Fund
attributable to the Subaccount units less Subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period times the
daily average number of units outstanding for the period; by 3) compounding that
yield for a six-month period; and by 4) multiplying that result by 2. Expenses
attributable to the Subaccount include the annual administration fee, the
asset-based administration charge and the mortality and expense risk charge. The
yield calculation assumes an annual administration fee of $30 per year per
Contract deducted for the prior Contract Year as of the Contract Anniversary.
For purposes of calculating the 30-day or one-month yield, an average
administration fee based on the average Variable Account Value is used to
determine the amount of the charge attributable to the Subaccount for the 30-day
or one-month period. The 30-day or one-month yield is calculated according to
the following formula:
- 2 -
<PAGE>
Yield = 2 X (((NI - ES)/(U X UV) + 1)^6 - 1)
Where:
NI = net income of the Fund for the 30-day or one-month
period attributable to the Subaccount's units.
ES = expenses of the Subaccount for the 30-day or
one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last
day in the 30-day or one-month period.
Because of the charges and deductions imposed under the Contracts, the yield for
the Subaccount is lower than the yield for the corresponding Fund.
The yield on the amounts held in the Subaccounts normally fluctuates over time.
THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR
REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A Subaccount's actual yield
is affected by the types and quality of the securities held by the corresponding
Fund and that Fund's operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract equal to 4% to 7% of certain purchase payments during the five full
years between the date of receipt of the purchase payment and the date of
surrender or withdrawal.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may quote standard average
annual total returns for one or more of the Subaccounts for various periods of
time.
When a Subaccount or Fund has been in operation for 1, 5, and 10 years,
respectively, the standard average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount unit
values which the Company calculates on each Valuation Day based on the
performance of the Subaccount's underlying Fund, the deductions for the
mortality and expense risk charge, and the deductions for the asset-based
administration charge and the annual administration fee. The calculation assumes
that the annual administration fee is $30 per year per Contract deducted for the
prior Contract Year as of the Contract Anniversary. For purposes of calculating
standard average annual total return, an average per-dollar per-day annual
administration fee attributable to the hypothetical account for the period is
- 3 -
<PAGE>
used. The calculation also assumes surrender of the Contract at the end of the
period for the return quotation. Standard average annual total returns will
therefore reflect a deduction of the surrender charge for any period less than
six years. The standard average annual total return is calculated according to
the following formula:
TR = ((ERV/P)^1/N) - 1
Where:
TR = the average annual total return net of Subaccount
recurring charges.
ERV = the ending redeemable value (net of any applicable
surrender charge) of the hypothetical account at the
end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
From time to time, sales literature or advertisements may quote standard average
annual total returns for periods prior to the date the Variable Account
commenced operations. Such performance information for the Subaccounts is
calculated based on the performance of the various Funds and the assumption that
the Subaccounts were in existence for the same periods as those indicated for
the Funds, with the level of Contract charges that were in effect at the
inception of the Subaccounts.
Fund total return information used to calculate the standard average annual
total returns of the Subaccounts for periods prior to the inception of the
Subaccounts has been provided by the Funds. The Funds are not affiliated with
the Company. While the Company has no reason to doubt the accuracy of these
figures provided by the Funds, the Company has not independently verified the
accuracy of these figures.
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as standard average annual total returns
described above, except that the ending redeemable value of the hypothetical
account for the period is replaced with an ending value for the period that does
not take into account any charges on amounts surrendered or withdrawn.
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges
for the period.
- 4 -
<PAGE>
ERV = The ending redeemable value of the hypothetical
investment at the end of the period.
P = A hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL ADMINISTRATION FEE ON PERFORMANCE DATA
The Contract provides for a $30 annual administration fee to be deducted
annually for each prior Contract Year as of the Contract Anniversary, from the
Subaccount Values and Guarantee Amounts based on the proportion that each bears
to the Contract Value. For purposes of reflecting the change in yield and total
return quotations, the charge is converted into a per-dollar per-day charge
based on the average Subaccount Value and Guarantee Amount of all Contracts on
the last day of the period for which quotations are provided. The per-dollar
per-day average charge will then be adjusted to reflect the basis upon which the
particular quotation is calculated.
VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Annuity Payments" in the Prospectus.)
The Annuity Unit Value for each Subaccount's first Valuation Period was set at
$10. The Annuity Unit Value for a Subaccount for each subsequent Valuation
Period is equal to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for
which the Annuity Unit Value is being calculated;
(b) is the Annuity Unit Value for the preceding Valuation Period;
and
(c) is a daily Benchmark Rate of Return factor (for the 3%
benchmark rate of return) adjusted for the number of days in
the Valuation Period.
The Benchmark Rate of Return factor is equal to one plus 3%, or 1.03. The annual
factor can be translated into a daily factor of 1.00008098.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit Value and the amount of several Variable Annuity
Payments based on one Subaccount.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Annuity Unit Value for immediately preceding
Valuation Period 10.00000000
2. Net Investment Factor 1.00036164
3. Daily factor to compensate for Benchmark Rate of
Return of 3% 1.00008099
- 5 -
<PAGE>
4. Adjusted Net Investment Factor (2)/(3) 1.00028063
5. Annuity Unit Value for current Valuation Period
(4)x(1) 10.00280630
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(assuming no premium tax is applicable)
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit Value 12.55548000
3. Adjusted Contract Value (1)x(2) $12,555.48
4. First monthly Annuity Payment per $1,000 of
adjusted Contract Value $ 9.63
5. First monthly Annuity Payment (3)x(4)/1,000 $ 120.91
6. Annuity Unit Value 10.00280630
7. Number of Annuity Units (5)/(6) 12.08760785
8. Assume Annuity Unit value for second month
equal to 10.04000000
9. Second Monthly Annuity Payment (7)X(8) $ 121.36
10. Assume Annuity Unit value for third month
equal to 10.05000000
11. Third Monthly Annuity Payment (7)X(10) $ 121.48
VALUATION DAYS
As defined in the prospectus, for each Subaccount a Valuation Day is each day on
which the New York Stock Exchange is open for business, except for certain
holidays listed in the prospectus and days that a Subaccount's corresponding
Fund does not value its shares.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are summaries. For a complete statement of the terms of these documents,
reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
This Statement of Additional Information contains no financial statements for
the Variable Account because the Variable Account had not yet commenced
operations, had no assets or liabilities, and had received no income nor
incurred any expenses as of the date of this Statement of Additional
Information. Financial statements of the Company are presented in the
prospectus.
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<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial statements for Valley Forge Life Insurance Company (the
"Company") are included in Part A. Financial Statements for Valley
Forge Life Insurance Company Variable Annuity Separate Account (the
"Variable Account") are not included in Part B because the Variable
Account had not yet commenced operations as of the date of this
Registration Statement.
(b) Exhibits
(1) (a) Certified resolution of the board of directors of the
Company dated October 18, 1995, establishing the
Variable Account.
(2) Not applicable.
(3) Form of underwriting agreement between the Company and CNA
Investor Services, Inc. ("CNA/ISI").*
(4) (a) Form of Flexible Premium Deferred Variable Annuity
Contract (the "Contract").
(b) Form of Qualified Plan Endorsement.
(c) Form of IRA Endorsement.
(d) Form of Nursing Home Confinement, Terminal Medical
Condition, Total Disability Endorsement.
(5) Contract Application.
(6) (a) Articles of Incorporation of the Company.
(b) By-Laws of the Company.
(7) Not applicable.
(8) (a) Form of Participation Agreement between the Company
and Insurance Management Series.*
(b) Form of Participation Agreement between the Company
and Variable Insurance Products Fund.*
(c) Form of Participation Agreement between the Company
and The Alger American Fund.*
<PAGE>
(d) Form of Participation Agreement between the Company
and MFS Variable Insurance Trust.*
(e) Form of Participation Agreement between the Company
and SoGen Variable Funds, Inc.*
(f) Form of Participation Agreement between the Company
and Van Eck Worldwide Insurance Trust.*
(9) Opinion and Consent of Lynne Gugenheim, Esquire.*
(10) (a) Consent of Sutherland, Asbill & Brennan.*
(b) Consent of Deloitte & Touche LLP.*
(11) Not applicable.
(12) Not applicable.
(13) Performance Data Schedule.*
(14) Financial Data Schedule for Electronic Filers.*
* To be filed by amendment.
ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY
Incorporated herein by reference to the section titled "Directors and
Executive Officers" of the prospectus filed as Part A of this
registration statement.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT
The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. The Company is a stock
life insurance company and therefore is controlled by its sole
stockholder, Continental Assurance Company. Continental Assurance
Company is a subsidiary of CNA Financial Corporation. CNA Financial
Corporation is controlled by Loews Corporation. Various companies and
other entities controlled CNA Financial Corporation may be considered
to be under common control with the registrant or the Company. Such
other companies and entities, together with the identity of their
controlling persons (where applicable), are set forth below:
[ORGANIZATION CHART TO BE ADDED BY AMENDMENT]
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<PAGE>
ITEM 27. NUMBER OF CONTRACTOWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
The registrant has no officers, directors or employees. The depositor
and the registrant do not indemnify the officers, directors of
employees of the depositor. CNA-Financial Corporation, ("CNAFC") a
parent of the depositor, indemnifies the depositor's officers,
directors and employees in their capacity as such. Most of the
depositor's officers, directors and employees are also officers,
directors and/or employees of CNAFC.
CNAFC indemnifies any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of CNAFC) by reason of the
fact that he is or was a director, officer, employee or agent of CNAFC,
or was serving at the request of CNAFC as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of CNAFC, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
CNAFC indemnifies any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit
by or in the right of CNAFC to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or
agent of CNAFC, or was serving at the request of CNAFC as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of CNAFC. No indemnification is made,
however, in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to CNAFC unless and only to
the extent that a court determines that, despite the adjudication of
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<PAGE>
liability but in view of all of the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the court deems proper.
To the extent that any person referred to above is successful on the
merits or otherwise in defense of any action, suit or proceeding
referred to above, or in defense of any claim, issue or matter therein,
CNAFC will indemnify such person against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
CNAFC may advance to such a person, expenses incurred in defending a
civil or criminal action, suit or proceeding as authorized by CNAFC's
board of directors upon receipt of an undertaking by (or on behalf of)
such person to repay the amount advanced unless it is ultimately
determined that he is entitled to be indemnified.
Indemnification and advancement of expenses described above (unless
pursuant to a court order) is only made as authorized in the specific
case upon a determination that such indemnification or advancement of
expenses is proper in the circumstances because he has met the
applicable standard of conduct. Such determination must be made by a
majority vote of a quorum of CNAFC's board of directors who are not
parties to the action, suit or proceeding or by independent legal
counsel in a written opinion or by CNAFC's stockholders.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
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<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) CNA/ISI is the registrant's principal underwriter and also
serves as the principal underwriter of certain variable life
insurance contracts issued by the Company and certain variable
annuity contracts and variable life insurance contracts issued
by affiliates of the Company.
(b) Officers and Directors of CNA/ISI.
Name and Principal Positions and Offices
Business Address With the Underwriter
- ------------------ ----------------------
(c) Not applicable
ITEM 30. LOCATION BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at CNA Plaza, Chicago,
Illinois 60684, or 100 CNA Drive, Nashville, Tennessee 37214-3439, by
Financial Administration Services, Inc. at 95 Bridge Street, Haddam,
Connecticut 06438, and by CNA/ISI at CNA Plaza, Chicago, Illinois
60684.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for as long as purchase payments under the Contracts offered
herein are being accepted.
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<PAGE>
(b) The registrant undertakes that it will include either (1) as
part of any application to purchase a Contract offered by the
prospectus, a space that an applicant can check to request a
statement of additional information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a
statement of additional information.
(c) The registrant undertakes to deliver any statement of
additional information and any financial statements required
to be made available under this Form N-4 promptly upon written
or oral request to the Company at the address or phone number
listed in the prospectus.
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<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has caused this registration statement to be signed on its
behalf, in the City of Chicago, and the State of Illinois, on this 20th day of
February, 1996.
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE ANNUITY SEPARATE ACCOUNT
(Registrant)
S/DONALD M. LOWRY By: S/PETER E. JOKIEL
Attest: __________________ ____________________________
Donald M. Lowry Peter E. Jokiel
Senior Vice President, Senior Vice President,
Secretary and General Counsel Chief Financial Officer,
Director
VALLEY FORGE LIFE INSURANCE COMPANY
(Depositor)
S/DONALD M. LOWRY By: S/PETER E. JOKIEL
Attest: ___________________ ___________________________
Donald M. Lowry Peter E. Jokiel
Senior Vice President, Senior Vice President,
Secretary and General Counsel Chief Financial Officer,
Director
As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
_____________________________ ________________________________ __________________
S/DENNIS H. CHOOKASZIAN
_____________________________ Chairman of the Board, February 20, 1996
Dennis H. Chookaszian Chief Executive Officer, Director
S/PHILIP L. ENGEL
_____________________________ President, Director February 20, 1996
Philip L. Engel
S/FLOYD E. BRADY
_____________________________ Senior Vice President February 20, 1996
Floyd E. Brady
S/BRUCE B. BRODIE
_____________________________ Senior Vice President February 20, 1996
Bruce B. Brodie
S/THOMAS E. DONNELLY
_____________________________ Senior Vice President February 20, 1996
Thomas E. Donnelly
S/JAMES P. FLOOD
_____________________________ Senior Vice President February 20, 1996
James P. Flood
S/MICHAEL C. GARNER
_____________________________ Senior Vice President February 20, 1996
Michael C. Garner
S/BERNARD L. HENGESBAUGH
_____________________________ Senior Vice President February 20, 1996
Bernard L. Hengesbaugh
S/PETER E. JOKIEL
_____________________________ Senior Vice President,
Peter E. Jokiel Chief Financial Officer, Director February 20, 1996
S/JACK KETTLER
_____________________________ Senior Vice President February 20, 1996
Jack Kettler
S/PATRICIA L. KUBERA
_____________________________ Group Vice President, February 20, 1996
Patricia L. Kubera Controller, Director
S/DONALD M. LOWRY
____________________________ Senior Vice President, February 20, 1996
Donald M. Lowry General Counsel, Secretary,
Director
S/CAROLYN L. MURPHY
_____________________________ Senior Vice President February 20, 1996
Carolyn L. Murphy
<PAGE>
SIGNATURES CONTINUED
S/DONALD C. RYCROFT
_____________________________ Senior Vice President, February 20, 1996
Donald C. Rycroft Treasurer, Director
S/WILLIAM H. SHARKEY, JR.
_____________________________ Senior Vice President, February 20, 1996
William H. Sharkey, Jr. Director
_____________________________ Senior Vice President February 20, 1996
Wayne R. Smith, III
_____________________________ Senior Vice President February 20, 1996
Adrian M. Tocklin
_____________________________ Senior Vice President February 20, 1996
Jae L. Wittlich
</TABLE>
EXHIBIT b(1a)
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
MARY A. RIBIKAWSKIS, being duly sworn, deposes and says that she is
Assistant Secretary of Valley Forge Life Insurance Company, a Pennsylvania
insurance company; that the following is a true and correct copy of a resolution
duly adopted by the Board of Directors of Valley Forge Life Insurance Company by
unanimous written consent dated October 18, 1995, and that said resolution has
not been amended or repealed and is now in full force and effect:
(1) RESOLVED: That the Board of Directors of VALLEY FORGE LIFE
INSURANCE COMPANY, a stock insurance company organized under the laws
of the Commonwealth of Pennsylvania ("VFL"), hereby establishes two
separate accounts, pursuant to the provisions of Chapter 82 of the
regulations of the Insurance Commissioner of the Commonwealth of
Pennsylvania, designated (i) the VFL Variable Annuity Separate Account
and (ii) the VFL Variable Life Separate Account (hereinafter the
"Separate Accounts") for the following use and purposes, and subject to
such conditions as hereinafter set forth; and it is further
(2) RESOLVED: That VFL be and hereby is authorized to enter into and
carry on the business of offering to the public for sale variable
annuity and variable life insurance contracts of any type or
description that may lawfully be so offered; and it is further
(3) RESOLVED: That the Separate Accounts are established for the
purpose of providing for the issuance by VFL of the VFL Flexible
Premium Deferred Variable Annuity Contract and the VFL Variable Life
Contract and such other variable annuity and variable life insurance
contracts, respectively, as the Board of Directors of VFL may authorize
to utilize the Separate Accounts (collectively, the "Contracts"), and
shall constitute a funding medium to support reserves under such
Contracts issued by VFL; and it is further
(4) RESOLVED: That the income, gains and losses, whether or not
realized, from assets allocated to each of the Separate Accounts shall,
in accordance with the Contracts, be credited to or charged against the
respective Separate Accounts without regard to other income, gains or
losses of VFL; and it is further
(5) RESOLVED: That to the extent provided under the Contracts, that
portion of the assets of each of the Separate Accounts equal to the
reserves and other contract liabilities with respect to such Separate
Accounts shall not be chargeable with liabilities arising out of any
other business VFL may conduct; and it is further
(6) RESOLVED: That the investment policy and objectives of the Separate
Accounts shall be to offer to holders of the Contracts a selection of
portfolios (the "Portfolios"), each of which shall be part of an
investment company (a "Fund") registered under the Investment Company
Act of 1940 (the "1940 Act") and shall be designated in the schedule
page for the respective Contract, and which shall provide holders of
Contracts the opportunity to allocate premiums and Contract values
among multiple separate Portfolios, including, but not limited to,
Portfolios investing primarily in equity securities, fixed income
securities and money market instruments; and it is further
(7) RESOLVED: That each Separate Account shall be divided into
investment subaccounts, each of which will invest in one or more Funds,
<PAGE>
and that net premiums under the Contracts shall be allocated to the
eligible subaccounts and Portfolios in accordance with instructions
received from owners of the Contracts; and it is further
(8) RESOLVED: That the VFL Board of Directors expressly reserves the
right to add or remove any investment subaccount of a Separate Account
or substitute one designated subaccount, Fund or Portfolio for another
as it may hereafter deem necessary or appropriate, upon any necessary
approval of such change by the Securities and Exchange Commission,
whether by filing of an amendment to the registration statement
therefor or otherwise, upon the approval of such change by any
regulatory authorities whose approval is necessary, and upon proper
notice as necessary to other regulatory authorities and to holders of
Contracts; and it is further
(9) RESOLVED: That the VFL Board of Directors reserves the right to
change the designation of any of the Separate Accounts hereafter to
such other designation as it may deem necessary or appropriate, upon
any necessary approval of such change by the Securities and Exchange
Commission, whether by filing of an amendment to the registration
statement therefor or otherwise, upon the approval of such change by
any regulatory authorities whose approval is necessary, and upon proper
notice as necessary to other regulatory authorities and to holders of
Contracts; and it is further
(10) RESOLVED: That the income, gains and losses, whether or not
realized, from assets allocated to each investment subaccount of each
of the Separate Accounts shall, in accordance with the Contracts, be
credited to or charged against such investment subaccount of the
Separate Accounts without regard to other income, gains or losses of
any other investment subaccount of the Separate Accounts; and it is
further
(11) RESOLVED: That the Chief Executive Officer, any Senior Vice
President, any Group Vice President or the Secretary of VFL (the
"Officers") be and each of them hereby is authorized, singly, to
execute and deliver such documents, and to take such actions, as may be
necessary or appropriate to implement the purposes of the foregoing and
following resolutions with respect to the Separate Accounts; and its is
further
(12) RESOLVED: That each officer and director of VFL who may be
required to sign and execute (whether on behalf of VFL, as an officer
or director of VFL, or otherwise) documents with respect to the
Separate Accounts or to take actions with respect thereto is hereby
authorized to execute a Power of Attorney appointing the Senior Vice
President, General Counsel and Secretary and the Senior Vice President,
Life Operations, or either of them acting individually his true and
lawful attorney to sign in such officer's or such director's name,
place and stead (including in any such capacity) such documents or to
take such actions, and that each such attorney is hereby authorized to
sign such documents and take such actions in the name, place and stead
of each such officer and director who shall have executed such Power of
Attorney (whether acting on behalf of VFL, as an officer or director of
VFL or otherwise); and it is further
(13) RESOLVED: That the Officers be and each of them hereby is
authorized, singly, to invest such amount or amounts of VFL's cash in
the Separate Accounts or in any investment subaccount thereof as may be
deemed necessary or appropriate to facilitate the commencement of the
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<PAGE>
Separate Accounts' operations and to meet any minimum capital
requirements under the 1940 Act and under the laws and regulations of
the states of the United States of America or of any other
jurisdiction; and it is further
(14) RESOLVED: That the Officers be and each of them hereby is
authorized, singly, to transfer cash from time to time between VFL's
general account and the Separate Accounts as deemed necessary or
appropriate and consistent with the terms of the Contracts; and it is
further
(15) RESOLVED: That the Officers with assistance from VFL's independent
certified public accountants, legal counsel and independent consultants
or others as any of them may require, be and each of them hereby is
authorized and directed, singly, to take all action necessary to: (a)
register each of the Separate Accounts as a unit investment trust under
the 1940 Act; (b) register the Contracts in such amounts, which may be
an indefinite amount, as the Officers may, from time to time deem
appropriate under the Securities Act of 1933 (the "1933 Act"); and (c)
take all other actions that are necessary in connection with the
offering of the Contracts for sale and the operation of the Separate
Accounts in order to comply with the 1940 Act, the Securities Exchange
Act of 1934, the 1933 Act, and other applicable Federal laws, including
the filing of any amendments to registration statements, any
undertakings, and any applications for exemptions from the 1940 Act or
other applicable federal laws as the Officers shall deem necessary or
appropriate; and it is further
(16) RESOLVED: That the Officers be and each of them hereby is
authorized and empowered to prepare, execute and cause to be filed with
the Securities and Exchange Commission on behalf of each of the
Separate Accounts, and by VFL as sponsor and depositor, a Notification
of Registration on Form N-8A, a registration statement registering the
Account as an investment company under the 1940 Act and the Contracts
under the 1933 Act, and any and all amendments to the foregoing on
behalf of each of the Separate Accounts and VFL and on behalf of and as
attorneys-in-fact for the principal executive officer and/or the
principal financial officer and/or the principal accounting officer
and/or any other officer of VFL; and it is further
(17) RESOLVED: That the Senior Vice President, General Counsel and
Secretary of VFL is duly appointed as agent for service under any such
registration statement, duly authorized to receive communications and
notice from the Securities and Exchange Commission with respect
thereto; and it is further
(18) RESOLVED: That the Officers be and each of them hereby is
authorized on behalf of each of the Separate Accounts and on behalf of
VFL to take any and all action that each of them may deem necessary or
advisable in order to offer and sell the Contracts, including any
registrations, filings and qualifications both of VFL, its officers,
agents and employees, and of the Contracts, under the insurance and
securities laws of any of the states of the United States of America or
other jurisdictions, and in connection therewith to prepare, execute,
deliver and file all such applications, reports, covenants,
resolutions, applications for exemptions, consents to service of
process and other papers and instruments as may be required under such
laws, and to take any and all further action which such Officers or
legal counsel of VFL may deem necessary or desirable (including
entering into whatever agreements and contracts may be necessary) in
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<PAGE>
order to maintain such registrations or qualifications for as long as
the Officers or legal counsel deem it to be in the best interests of
the Separate Accounts and VFL; and it is further
(19) RESOLVED: That the Officers be and hereby are authorized in the
names and on behalf of each of the Separate Accounts and VFL to execute
and file irrevocable written consents on the part of each of the
Separate Accounts and of VFL to be used in such states wherein such
consents to service of process may be requisite under the insurance or
securities laws therein in connection with the registration or
qualification of the Contracts and to appoint the appropriate state
official, or such other person as may be allowed by insurance or
securities laws, agent of such Separate Account and of VFL for the
purpose of receiving and accepting process, so that service upon such
state official shall have the same effect as if personally served upon
the Separate Account or VFL as applicable and shall be deemed
sufficient service on the Separate Account or VFL, such consents to
remain in effect for so long as any liability of the Separate Account
or VFL shall remain in any such state; and it is
(20) RESOLVED: That the Officers be and each of them hereby is
authorized, singly, to establish procedures under which VFL will
provide voting privileges for owners of the Contracts with respect to
securities owned by each of the Separate Accounts; and it is further
(21) RESOLVED: That the Officers be and each of them hereby is
authorized, singly, to execute such agreement or agreements as deemed
necessary and appropriate (i) with CNA Investors Services, Inc. ("ISI")
or other qualified entity under which ISI or such other entity will be
appointed principal underwriter and distributor for the Contracts, (ii)
with one or more qualified entities to provide administrative and/or
custody services in connection with the establishment and maintenance
of the Separate Account and the design, issuance, and administration of
the Contracts, and (iii) with the Funds and/or the principal
underwriter and distributor of the Funds for the purchase and
redemption of Fund shares; and it is further
(22) RESOLVED: That VFL hereby adopts and establishes the following
Standards of Suitability for its officers, directors, and employees and
affiliates regarding the conduct of business of the Separate Account:
(1) No recommendation shall be made to an applicant to purchase a
Contract, and no Contract shall be issued, in the absence of reasonable
grounds to believe that the purchase of the Contract is suitable for
the applicant on the basis of information furnished after reasonable
inquiry of the applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and any other
information known to VFL or to the agent making the recommendation;
(2) VFL through its agents, will use diligence to learn the essential
facts relative to each applicant;
(3) VFL's primary policy is that the customer's interest comes first.
In any areas where there are conflicts between the customer's interests
and the interest of VFL or its agents, the customer's interests must
always take precedence;
(4) VFL through its agents will give each customer the time and
attention needed to find the products and services most suitable for
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<PAGE>
the customer's needs and will provide timely and accurate information
that is not in any way misleading; and .
(5) VFL's agents, as registered representatives, are subject to
supervision respecting suitability and other sales practices under
rules of the National Association of Securities Dealers, Inc.; and it
is further
(23) RESOLVED: That VFL hereby adopts and establishes the following
Standards of Conduct for itself and its officers, directors, employees
and affiliates (each, a "VFL Representative") with respect to the
purchase or sale of investments of the Separate Accounts:
No VFL Representative shall:
(1) Employ any device, scheme or artifice to defraud the Separate
Accounts or the owners of the Contracts;
(2) Make any untrue statement of a material fact with respect to the
investments of the Separate Accounts or omit to state a material fact
necessary in order to make the statement made, in light of the
circumstances in which they were made, not misleading;
(3) Engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Separate Accounts or the
owners of the Contracts;
(4) Engage in any manipulative practice with respect to the Separate
Accounts or the owners of the Contracts;
(5) Sell to, or purchase from, the Separate Accounts any securities or
other property, except as permitted under applicable laws, rules,
regulations, orders, or other interpretation of any government, agency,
or self-regulatory organization;
(6) Purchase or allow to be purchased for the Separate Accounts any
securities of which VFL or an affiliated company is the issuer, except
as permitted under applicable laws, rules, regulations, order, or other
interpretation of any government, agency, or self-regulatory
organization;
(7) Accept any compensation other than a regular salary or wages from
VFL or an affiliated company for the sale or purchase of investment
securities to or from the Separate Accounts;
(8) Engage in any joint transaction, participation or common
undertaking whereby VFL or an affiliated company participates with the
Separate Accounts in any transaction in which VFL or an affiliated
company obtains an advantage in the price or quality of the item
purchased, the service received or in the cost of such service, and the
Separate Accounts or the owners of the Contracts are disadvantaged in
any of these respects by the same transaction; or
<PAGE>
(9) Borrow money or securities from the Separate Accounts other than
under a policy loan provision.
S/MARY A. RIBIKAWSKIS
------------------------------
Mary A. Ribikawskis
Assistant Secretary
Subscribed and Sworn to Before
Me this 12 Day of February, 1996.
S/SUSAN CAROL COGHLAN
- ---------------------------------
Notary Public
- 5 -
Exhibit b(4a)
Valley Forge Life Insurance Company
_______________________________________________________________________________
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
_______________________________________________________________________________
In this Contract, Valley Forge Life Insurance Company is referred to as "We,"
"Us," "Our," or the "Company." "You" and "Your" refer to the Owner of the
Contract.
We agree to pay the benefits as described in this Contract in accordance with
its provisions.
PLEASE READ THIS CONTRACT CAREFULLY It
is a legal contract between You and Us.
NOTICE OF 10-DAY CANCELLATION PERIOD
If for any reason You are not satisfied with this Contract, You may return it to
Us for cancellation by delivering or mailing it to:
1. Valley Forge Life Insurance Company Service Center, 95 Bridge
Street, Haddam, Connecticut 06438, or
2. the agent through whom it was purchased.
To cancel this Contract, You must return it to Us no later than 10 days after
You first receive it. Upon delivery or mailing, this Contract will be void as of
the date We receive it and Your request for cancellation and We will promptly
return Your purchase payments.
Signed for the Valley Forge Life Insurance Company at its Executive Office, CNA
Plaza, Chicago, Illinois 60685.
Chairman of the Board Secretary
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNT, MAY INCREASE OR DECREASE DAILY
AS A FUNCTION OF THE INVESTMENT PERFORMANCE OF SUBACCOUNTS SELECTED BY THE OWNER
AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. NO MINIMUM CONTRACT VALUE IS
GUARANTEED.
PAYMENTS MADE AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE GUARANTEED
INTEREST OPTION, ARE SUBJECT TO A MARKET VALUE ADJUSTMENT, THE OPERATION OF
WHICH MAY RESULT IN UPWARD OR DOWNWARD ADJUSTMENTS IN AMOUNTS WITHDRAWN,
SURRENDERED, TRANSFERRED, PAID AS A DEATH BENEFIT AND APPLIED TO PURCHASE
ANNUITY PAYMENTS. AMOUNTS WITHDRAWN, SURRENDERED, TRANSFERRED, PAID AS A DEATH
BENEFIT OR APPLIED TO PURCHASE ANNUITY PAYMENTS FROM GUARANTEE AMOUNTS THAT ARE
WITHIN 30 DAYS PRIOR TO THE END OF A GUARANTEE PERIOD ARE NOT SUBJECT TO THE
MARKET VALUE ADJUSTMENT.
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
TABLE OF CONTENTS
Page
----
CONTRACT SPECIFICATIONS..................................................... 3
SECTION 1: DEFINITIONS..................................................... 5
SECTION 2: GENERAL PROVISIONS.............................................. 8
SECTION 3: OWNERSHIP....................................................... 9
SECTION 4: THE VARIABLE ACCOUNT............................................ 10
SECTION 5: THE GUARANTEED INTEREST OPTION.................................. 12
SECTION 6: ALLOCATIONS AND TRANSFERS....................................... 14
SECTION 7: CONTRACT VALUES................................................. 15
SECTION 8: FEES AND CHARGES................................................ 16
SECTION 9: PAYMENT OF BENEFITS............................................. 17
SECTION 10: DEATH BENEFITS................................................. 18
SECTION 11: ANNUITY PROVISIONS AND PAYMENT OPTIONS......................... 20
- 2 -
<PAGE>
CONTRACT SPECIFICATIONS
OWNER: ANNUITANT: ANNUITANT'S AGE:
BENEFICIARY: CONTRACT EFFECTIVE DATE: OWNER'S AGE:
CONTRACT NUMBER: ANNUITY DATE: PAYEE:
ANNUITY PAYMENT DATES: INITIAL ANNUITY PAYMENT DATE:
ANNUITY PAYMENT OPTION:
Minimum Initial Purchase Payment: $ 2,000
Minimum Additional Purchase Payment: $ 100
Minimum Withdrawal Amount: $ 500
Minimum Transfer Amount: $ 500
Minimum Guarantee Amount: $ 500
Minimum Subaccount Value Following
Transfer or Withdrawal: $ 500
Minimum Surrender Value: $ 1,000
Minimum Guaranteed Interest Rate:
Benchmark Rate of Return: 3.0%
Currently Available Guarantee Periods: 1 year, 3 years, 5 years, 7 years
and 10 years.
The minimum percentage of Net Purchase Payment that may be allocated to a
Subaccount or to a Guarantee Period is 1%.
The minimum amount that may be allocated to a Guarantee Period is $500
CHARGES AND FEES
----------------
Premium Tax Charge: $
Mortality and Expense Risk Charge: .003446% (daily factor); 1.25%
(approximate annual rate)
Administration Charge: .000411% (daily factor); 0.15%
(approximate annual rate)
Annual Administration Fee: $30.00 (waived if Contract Value
exceeds $50,000 on Contract
Anniversary)
Transfer Processing Fee: $25 each after first 12 in a
Contract Year
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<PAGE>
Surrender Charge:
The surrender charge is equal to the percentage of each purchase payment
surrendered or withdrawn (or during the First Five contract Years, applied to an
Annuity Payment Option) as specified in the table below. The surrender charge is
separately calculated and applied to each purchase payment at any time that the
payment is surrendered or withdrawn (or applied to an Annuity Payment Option
during the First Five Contract Years). No surrender charge applies to the
Contract Value in excess of aggregate purchase payments (less prior withdrawals
of purchase payments). The surrender charge is calculated using the assumption
that all purchase payments are surrendered or withdrawn before any Contract
Value in excess of aggregate purchase payments (less prior withdrawals of
purchase payments) and that purchase payments are surrendered or withdrawn on a
first-in, first-out basis.
Number of Full Years Elapsed Surrender Charge as
Between Date of Receipt of Payment a Percentage of Purchase
and Date of Surrender or Withdrawal Payment Withdrawn or Surrendered
------------------------------------ --------------------------------
0 7%
1 7%
2 6%
3 5%
4 4%
5+ 0%
For the first Contract Year, the surrender charge applies to any purchase
payment withdrawn or surrendered (or applied to an Annuity Payment Option during
the First Five Contract Years). After the first Contract Year, the charge
applies to all purchase payments withdrawn or surrendered (or applied to an
Annuity Payment Option during the First Five Contract Years) in excess of an
amount equal to 15% of aggregate purchase payments (less prior withdrawals of
purchase payments) as of the first Valuation Day of such Contract Year.
CURRENT SUBACCOUNTS
-------------------
Federated Corporate Bond Subaccount Fidelity Asset Manager Subaccount
Federated Prime Money Subaccount Fidelity Contrafund Subaccount
Federated Utility Subaccount Fidelity Equity-Income Subaccount
Fidelity Index 500 Subaccount
Alger Growth Subaccount MFS Emerging Growth Subaccount
Alger Midcap Growth Subaccount MFS Growth With Income Subaccount
Alger Small Capitalization Subaccount MFS Limited Maturity Subaccount
MFS Research Subaccount
MFS Total Return Subaccount
SoGen Overseas Subaccount Van Eck Emerging Markets Subaccount
Van Eck Gold and Natural Resources
Subaccount
- 4 -
<PAGE>
SECTION 1: DEFINITIONS
ACCUMULATION UNIT: A unit of measure used to calculate Variable Contract Value.
ADJUSTED CONTRACT VALUE: The Contract Value plus or minus any applicable Market
Value Adjustment less Premium Tax Charges not previously deducted less the
annual administration fee.
AGE: The Age of any person on the birthday nearest the date for which Age is
determined.
ANNUITANT: The person or persons whose life (or lives) determines the Annuity
Payments payable under the Contract and whose death determines the death
benefit. With regard to joint and survivorship Annuity Payment Options, the
maximum number of joint Annuitants is two and provisions referring to the death
of an Annuitant mean the death of the last surviving Annuitant. Provisions
relating to an action by the Annuitant mean, in the case of joint Annuitants,
both Annuitants acting jointly.
ANNUITY DATE: The date on which Adjusted Contract Value or Surrender Value is
applied to purchase Annuity Units or a Fixed Annuity.
ANNUITY PAYMENT: One of several periodic payments made by the Company to the
Payee under an Annuity Payment Option.
ANNUITY PAYMENT DATE: The date each month, quarter, semi-annual period or year
as of which the Company computes Annuity Payments. The Annuity Payment Date(s)
is shown on the Contract Specifications page.
ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the Owner
under the Contract. The Annuity Payment Option is shown on the Contract
Specifications page.
ANNUITY UNIT: A unit of measure used to calculate Variable Annuity Payments.
BENCHMARK RATE OF RETURN: An annual rate of return shown on the Contract
Specifications page and used by the Company to determine the degree of
fluctuation in the amount of Variable Annuity Payments in response to the
fluctuations in the net investment return of the selected Subaccounts by
assuming (among other things) that the assets in the Variable Account supporting
the Contract will have a net annual investment return over the anticipated
Annuity Payment period equal to that rate of return.
BENEFICIARY: The person(s) to whom the death benefit will be paid on the death
of the Owner or Annuitant prior to the Annuity Date.
CANCELLATION PERIOD: The period described on the cover page of this Contract
during which the Owner may return the Contract for a refund.
THE CODE: The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT: The person designated by the Owner in the application who
becomes the Annuitant in the event that the Annuitant dies before the Annuity
Date while the Owner is still alive.
CONTINGENT BENEFICIARY: The person(s) to whom the death benefit will be paid
if the Beneficiary (or Beneficiaries) is not living.
<PAGE>
CONTRACT ANNIVERSARY: The same date in each Contract Year as the Contract
Effective Date.
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<PAGE>
CONTRACT EFFECTIVE DATE: The date on which the Company issues the Contract and
upon which the Contract becomes effective. The Contract Effective Date is set
forth on the Contract Specifications page and is used to determine Contract
Years and Contract Anniversaries.
CONTRACT YEAR: A twelve-month period beginning on the Contract Effective Date
or on a Contract Anniversary.
CONTRACT VALUE: The total amount invested under the Contract. It is the sum
of Variable Contract Value and the Guaranteed Interest Option Value.
DUE PROOF OF DEATH: Proof of death satisfactory to the Company. Due Proof of
Death may consist of the following if acceptable to the Company:
(a) a certified copy of the death record;
(b) a certified copy of a court decree reciting a finding of
death; or
(c) any other proof satisfactory to the Company.
FIXED ANNUITY PAYMENT: An Annuity Payment that is supported by the General
Account and does not vary in amount as a function of the investment return of
the Variable Account from one Annuity Payment Date to the next.
FUND: Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series thereof, in which a Subaccount
invests.
GENERAL ACCOUNT: The assets of the Company other than those allocated to the
Variable Account or any other separate account of the Company.
GIO ACCOUNT: Valley Forge Life Insurance Company Guaranteed Interest Option
Separate Account.
GUARANTEE AMOUNT: Before the Annuity Date, the amount equal to that part of any
Net Purchase Payment allocated to or any amount transferred to the Guaranteed
Interest Option for a designated Guarantee Period with a particular expiration
date (including interest thereon) less any withdrawals (including any applicable
surrender charges and any applicable Premium Tax Charge) or transfers therefrom.
GUARANTEE PERIOD: A specific number of years for which the Company agrees to
credit a particular effective annual rate of interest.
GUARANTEED INTEREST OPTION: An investment option under the Contract supported
by the GIO Account. It is not part of nor dependent upon the investment
performance of the Variable Account.
GUARANTEED INTEREST OPTION VALUE: The sum of all Guarantee Amounts.
GUARANTEED INTEREST RATE: Unless a Market Value Adjustment is made, an
effective annual rate of interest that the Company will pay on a Guarantee
Amount.
HOME OFFICE: The Company's office at 401 Penn Street, Reading, PA 19601.
<PAGE>
NET ASSET VALUE PER SHARE: The value per share of any Fund on any Valuation Day.
The method of computing the Net Asset Value Per Share is described in the
prospectus for the Fund.
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<PAGE>
NET PURCHASE PAYMENT: Your purchase payment less any Premium Tax Charge
deducted from the purchase payment.
NON-QUALIFIED CONTRACT: A Contract that is not a "qualified contract."
OWNER: The person or persons who owns (or own) the Contract and who is (are)
entitled to exercise all rights and privileges provided in the Contract. Also
referred to herein as "You" or "Your." The maximum number of joint Owners is
two. Provisions relating to action by the Owner mean, in the case of joint
Owners, both Owners acting jointly.
PAYEE: The person entitled to receive Annuity Payments under the Contract.
PREMIUM TAX CHARGE: A charge shown on the Contract Specifications page that is
deducted either from purchase payments or from Contract Value prior to
surrender, annuitization or death of the Owner or Annuitant.
QUALIFIED CONTRACT: A Contract that is issued in connection with a retirement
plan that qualifies for special federal income tax treatment under Sections 401,
408 or 457 of the Code.
SEC: The U.S. Securities and Exchange Commission.
SERVICE CENTER: The Company's service center at 95 Bridge Street, Haddam,
Connecticut 06438.
SUBACCOUNT: A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
SUBACCOUNT VALUE: Before the Annuity Date, the amount equal to that part of any
Net Purchase Payment allocated to the Subaccount and any amount transferred to
that Subaccount, adjusted by interest income, dividends, net capital gains or
losses, realized or unrealized, and decreased by withdrawals (including any
applicable surrender charges and any applicable Premium Tax Charge) and any
amounts transferred out of that Subaccount.
SURRENDER VALUE: The Adjusted Contract Value less any applicable surrender
charges.
THE COMPANY, WE, US OR OUR: Valley Forge Life Insurance Company.
VALUATION DAY: For each Subaccount, each day on which the New York Stock
Exchange is open for business except for certain holidays listed in the
prospectus and days that a Subaccount's corresponding Fund does not value its
shares.
Valuation Period: The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ACCOUNT: Valley Forge Life Insurance Company Variable Annuity Separate
Account.
VARIABLE CONTRACT VALUE: The sum of all Subaccount Values.
<PAGE>
VARIABLE ANNUITY PAYMENT: An Annuity Payment that may vary in amount from one
Annuity Payment Date to the next as a function of the investment experience of
one or more Subaccounts selected by the Owner to support such payments.
WRITTEN NOTICE: A notice or request submitted in writing in a form satisfactory
to the Company that is signed by the Owner and received at the Service Center.
- 7 -
<PAGE>
SECTION 2: GENERAL PROVISIONS
2.1 THE CONTRACT - We have issued this Contract in consideration of Your
application and Your payment of the initial purchase payment. The
entire Contract is made up of this Contract, any attached endorsements,
and the attached copy of the application. In the absence of fraud, We
consider statements made in the application to be representations and
not warranties. We will not use any statement in defense of a claim or
to void this Contract unless it is contained in the attached
application. Only one of Our officers may modify this Contract or waive
any of Our rights or requirements under this Contract. Any modification
or waiver must be in writing. No agent may bind the Company by making
any promise not contained in this Contract.
2.2 INCONTESTABILITY - We will not contest this Contract.
2.3 MISSTATEMENT OF AGE OR SEX - If the Age or sex of the Annuitant has
been misstated, the Company will adjust the benefits it pays under this
Contract to the amount that would have been payable at the correct Age
and sex. If the Company made any underpayments because of any such
misstatement, it shall pay the amount of such underpayment plus
interest at an annual effective rate of 3%, immediately to the Payee or
Beneficiary in one sum. If the Company makes any overpayments because
of a misstatement of Age or sex, it shall deduct from current or future
payments due under this Contract, the amount of such overpayment plus
interest at an annual effective rate of 3%.
2.4 PERIODIC REPORTS - At least annually, or more often as required by law,
the Company will mail to Owners at their last known address a report
showing the following items as of a date shown on the report:
1. the number of Accumulation or Annuity Units credited to this
Contract and the dollar value of such units;
2. the Contract Value, Adjusted Contract Value and Surrender
Value;
3. any purchase payments, withdrawals, or surrenders made, death
benefits paid and charges deducted since the last report;
4. the current interest rate applicable to each Guarantee Amount;
and
5. any other information required by law.
2.5 MODIFICATION - Upon notice to the Owner, the Company may modify the
Contract to:
1. conform the Contract or the operations of the Company or of
the Variable Account to the requirements of any law (or
regulation issued by a government agency) to which the
Contract, the Company or the Variable Account is subject;
2. assure continued qualification of the Contract as an annuity
contract under the Code;
<PAGE>
3. reflect a change (as permitted in this Contract) in the
operation of the Variable Account; or
4. provide additional Subaccounts and/or Guarantee Periods.
In the event of any such modification, the Company will make
appropriate endorsements to the Contract.
- 8 -
<PAGE>
2.6 NON-PARTICIPATING - This Contract does not participate in the surplus
or profits of the Company and the Company does not pay dividends on it.
2.7 PROTECTION OF PROCEEDS - To the extent permitted by law, no benefits
payable under this Contract to a Beneficiary or Payee are subject to
the claims of an Owner's or a Beneficiary's creditors.
2.8 DISCHARGE OF LIABILITY - Any payments made by Us under any Annuity
Payment Option or in connection with the payment of any withdrawal,
surrender or death benefit, shall discharge Our liability to the extent
of each such payment.
2.9 MINIMUM INITIAL PURCHASE PAYMENT - The minimum initial purchase payment
is shown on the Contract Specifications page. The Company will not
issue the Contract until it receives the minimum initial purchase
payment.
2.10 SUBSEQUENT PURCHASE PAYMENTS - Owners may make additional purchase
payments of at least the minimum amount shown on the Contract
Specifications page. Notwithstanding the foregoing, the Company
reserves the right to not accept additional purchase payments at any
time for any reason.
2.11 PROOF OF AGE AND SURVIVAL - The Company reserves the right to require
proof of the Annuitant's Age prior to the Annuity Date. In addition,
for life contingent Annuity Options, the Company reserves the right to
require proof of the Annuitant's survival before any Annuity Payment
Date.
SECTION 3: OWNERSHIP
3.1 OWNERSHIP - This Contract belongs to the Owner. The Owner, as shown on
the Contract Specifications page, or as subsequently changed, may
exercise all rights under this Contract. Subject to more specific
provisions elsewhere herein, these rights include the right to: (1)
select or change a successor Owner, (2) select or change any
Beneficiary or Contingent Beneficiary, (3) select or change the Payee
prior to the Annuity Date, (4) select or change the Annuity Payment
Option, (5) allocate Net Purchase Payments among and between the
Subaccounts and Guarantee Periods, (6) transfer Contract Value among
and between the Subaccounts and Guarantee Periods, and (7) select or
change the Subaccounts on which Variable Annuity Payments are based.
3.2 ASSIGNMENT - At any time before the Annuity Date while the Annuitant is
still living, the Owner may assign this contract by Written Notice. We
are not responsible for the validity or sufficiency of any assignment.
Your rights and the rights of any Beneficiary will be affected by an
assignment. The Company is not bound by the assignment until it
receives a duplicate of the original of the assignment at the Service
Center.
3.3 SUCCESSOR OWNER - If a successor Owner is named in the application or
by subsequent Written Notice and the Owner is not the Annuitant, the
successor Owner shall become the new Owner should the Owner die before
the Annuitant.
<PAGE>
3.4 CHANGING THE BENEFICIARY - The Owner may change the Beneficiary by
Written Notice at any time before a death benefit is paid. If, however,
the Owner previously irrevocably named a Beneficiary, that
Beneficiary's written consent must be provided to the Company before a
new Beneficiary is designated. Any change of Beneficiary is effective
as of the date Written Notice is received at the Service Center and the
Company is not liable for any payments made under the Contract prior to
the effectiveness of any Beneficiary change.
- 9 -
<PAGE>
3.5 THE ANNUITY DATE - The Owner selects the Annuity Date in the
application. For Non-Qualified Contracts, the Annuity Date can be no
later than the later of the Contract Anniversary following the
Annuitant's Age 85 or 10 years after the Contract Effective Date.
3.6 CHANGING THE ANNUITY DATE - Subject to section 3.5, the Owner may
change the Annuity Date by Written Notice, subject to the following
limitations:
1. Written Notice is received at least 30 days before the current
Annuity Date; and
2. the requested new Annuity Date must be at least 30 days after
We receive Written Notice.
3.7 PAYEE - The Annuitant is the Payee unless the Owner designates a
different person as Payee.
SECTION 4: THE VARIABLE ACCOUNT
4.1 VARIABLE ACCOUNT - The Variable Account is registered with the SEC as a
unit investment trust under the Investment Company Act of 1940, as
amended (the "Act"). The Variable Account is also subject to the laws
of the Commonwealth of Pennsylvania.
Although We own the assets in the Variable Account, these assets are
held separately from Our other assets and are not part of Our General
Account. The assets in the Variable Account are used to support the
operation of and provide the variable values and benefits for this
Contract and similar contracts. The portion of the assets of the
Variable Account equal to the reserves and other contract liabilities
of the Variable Account are not chargeable with liabilities that arise
from any other business that We conduct. We have the right to transfer
to Our General Account any assets of the Variable Account that are in
excess of such reserves and other liabilities.
4.2 SUBACCOUNTS - The Variable Account consists of Subaccounts. The income,
gains and losses, realized or unrealized, from the assets allocated to
a Subaccount are credited to or charged against such Subaccount,
without regard to other income, gains or losses of the Company.
Those Subaccounts currently available under this Contract are listed on
the Contract Specifications page. Each Subaccount invests exclusively
in shares of a corresponding Fund. Shares of a Fund are purchased and
redeemed for a Subaccount at their net asset value. Any amounts of
income, dividends and gains distributed from the shares of a Fund are
reinvested in additional shares of that Fund at net asset value.
The dollar amounts of values and benefits of this Contract provided by
the Variable Account vary as a function of the investment performance
of the Subaccounts that You have selected. We do not guarantee the
investment performance of the Subaccounts. You bear the full investment
risk for Subaccount Value in the selected Subaccounts.
<PAGE>
4.3 CHANGES TO THE VARIABLE ACCOUNT - Where permitted by applicable law,
the Company may:
1. create new separate accounts;
2. combine separate accounts, including the Variable Account;
3. add new subaccounts to or remove existing Subaccounts from the
Variable Account or combine Subaccounts;
- 10 -
<PAGE>
4. make Subaccounts (including new Subaccounts) available to such
classes of Contracts as We may determine;
5. add new Funds or remove existing Funds;
6. substitute new Funds for any existing Fund if shares of the
Fund are no longer available for investment or if We determine
that investment in a Fund is no longer appropriate in light of
the purposes of the Variable Account;
7. deregister the Variable Account under the Act if such
registration is no longer required; and
8. operate the Variable Account as a management investment
company under the Act or as any other form permitted by law.
4.4 VARIABLE CONTRACT VALUE - Variable Contract Value reflects the
investment experience of the Subaccounts to which it is allocated, any
purchase payments allocated to the Subaccounts, transfers in or out of
the Subaccounts, or any withdrawals of Variable Contract Value. There
is no guaranteed minimum Variable Contract Value.
4.5 ACCUMULATION UNITS - For each Subaccount, Net Purchase Payment(s)
allocated to a Subaccount or amounts of Contract Value transferred to a
Subaccount are converted into Accumulation Units. The number of
Accumulation Units credited to a Contract is determined by dividing the
dollar amount directed to each Subaccount by the value of the
Accumulation Unit for that Subaccount for the Valuation Day on which
the Net Purchase Payment(s) or transferred amount is invested in the
Subaccount. Therefore, Net Purchase Payments allocated to or amounts
transferred to a Subaccount under a Contract increase the number of
Accumulation Units of that Subaccount credited to the Contract.
Certain events will reduce the number of Accumulation Units of a
Subaccount credited to a Contract. Withdrawals or transfers of
Subaccount Value from a Subaccount will result in the cancellation of
the appropriate number of Accumulation Units of that Subaccount as
will: surrender of the Contract; payment of a death benefit; the
application of Variable Contract Value to an Annuity Payment Option on
the Annuity Date; and the deduction of the annual administration fee.
Accumulation Units are cancelled as of the end of the Valuation Period
in which the Company receives Written Notice regarding the event.
4.6 ACCUMULATION UNIT VALUE - The Accumulation Unit value for each
Subaccount was arbitrarily set initially at $10 when the Subaccount
began operations. Thereafter, the Accumulation Unit value at the end of
every Valuation Day is the Accumulation Unit value at the end of the
previous Valuation Day multiplied by the net investment factor, as
described below. The Subaccount Value for a Contract is determined on
any day by multiplying the number of Accumulation Units attributable to
the Contract in that Subaccount by the Accumulation Unit value for that
Subaccount.
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<PAGE>
4.7 NET INVESTMENT FACTOR - The Net Investment Factor is an index applied
to measure the investment performance of a Subaccount from one
Valuation Period to the next. The Net Investment Factor for any
Subaccount for any Valuation Period is determined by dividing (1) by
(2) and subtracting (3) from the result, where:
(1) is the result of:
a. the Net Asset Value Per Share of the Fund held in the
Subaccount, determined at the end of the current
Valuation Period; plus
b. the per share amount of any dividend or capital gain
distributions made by the Fund held in the
Subaccount, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved
for, which is determined by Us to have resulted from
the operations of the Subaccount.
(2) is the Net Asset Value Per Share of the Fund held in the
Subaccount, determined at the end of the last prior Valuation
Period.
(3) is a daily factor representing the mortality and expense risk
charge and the administration charge deducted from the
Subaccount adjusted for the number of days in the Valuation
Period.
SECTION 5: THE GUARANTEED INTEREST OPTION
5.1 GUARANTEED INTEREST OPTION - The Guaranteed Interest Option is an
investment option available under the Contract and is supported by the
GIO Account and Our General Account. Net Purchase Payments may be
allocated to and transfers of Contract Value may be made to the
Guaranteed Interest Option. Guaranteed Interest Option Value is not
determined by and does not reflect the investment performance of the
GIO Account and does not vary as a function of the investment
performance of the Variable Account.
Through the Guaranteed Interest Option, the Company offers specified
effective annual rates of interest (Guaranteed Interest Rates) that are
compounded and credited daily and available for specified periods of
time selected by You (Guarantee Periods). Although the Guaranteed
Interest Rate may differ among Guarantee Periods, it will never be less
than the effective annual rate shown of 3.0%.
Initial Guarantee Periods begin on the date as of which a Net Purchase
Payment is allocated or an amount of Contract Value is transferred to
the Guarantee Period and end when the number of years in the Guarantee
Period elected (measured from the end of the calendar month in which
the amount was allocated or transferred to the Guarantee Period) has
elapsed. The last day of the Guarantee Period is the expiration date
for that Guarantee Period. Subsequent Guarantee Periods begin on the
first day following the expiration date of a previous Guarantee Period.
<PAGE>
Allocations of Net Purchase Payments and transfers of Contract Value to
the Guaranteed Interest Option may have different applicable Guaranteed
Interest Rates depending on the timing of such allocations or
transfers. However, the applicable Guaranteed Interest Rate does not
change during a Guarantee Period.
- 12 -
<PAGE>
The Company will notify Owners in writing at least 30 days prior to the
expiration date of any Guarantee Period. A new Guarantee Period of the
same duration as the previous Guarantee Period will commence
automatically on the first day following the expiring Guarantee Period
unless the Company receives Written Notice prior to the start of the
new Guarantee Period of the Owner's election of a different Guarantee
Period from among those being offered by the Company at that time, or
instructions to transfer all or a portion of the expiring Guarantee
Amount to a Subaccount. If the Company does not receive the Written
Notice described in the preceding sentence and the Company is not
offering a Guarantee Period of the same duration as the expiring
Guarantee Period or if the duration of the expiring Guarantee Period
would, if renewed, extend beyond the Annuity Date, a new Guarantee
Period of one year will commence automatically on the first day
following the expiring Guarantee Period. The Company's notice to the
Owner of the expiration of a Guarantee Period will contain information
about the then currently available Guarantee Periods and the Guaranteed
Interest Rates applicable to such Guarantee Periods.
If the allocated or transferred amount remains in the Guaranteed
Interest Option until the end of the applicable Guarantee Period, its
value will be equal to the amount originally allocated or transferred,
multiplied, on an annually compounded basis, by its Guaranteed Interest
Rate. If a Guarantee Amount is surrendered, withdrawn, transferred, or
applied to an Annuity Payment Option prior to the expiration of the
Guarantee Period, the Guaranteed Interest Rate for that Guarantee
Period is subject to a Market Value Adjustment, as described below.
To the extent permitted by law, We reserve the right at any time to
offer Guarantee Periods that differ from those available when Your
Contract was issued. We also reserve the right, at any time, to stop
accepting Net Purchase Payment allocations or transfers of Contract
Value to a particular Guarantee Period. Since the specific Guarantee
Periods available may change periodically, please contact the Service
Center to determine the Guarantee Periods currently being offered.
5.2 GIO ACCOUNT - Although We own the assets in the GIO Account, these
assets are held separately from Our other assets and are not part of
Our General Account. The assets in the GIO Account are used to support
the values and benefits under the Guaranteed Interest Option of this
Contract and similar contracts. The portion of the assets of the GIO
Account equal to the reserves and other contract liabilities of the GIO
Account are not chargeable with liabilities that arise from any other
business that We conduct. We have the right to transfer to Our General
Account any assets of the GIO Account that are in excess of such
reserves and other liabilities.
Notwithstanding the foregoing, the Company's obligations under (and the
values and benefits under) the Guaranteed Interest Option of the
Contracts does not vary as a function of the investment performance of
the GIO Account. Owners, Beneficiaries and Payees with rights under a
Contract do not participate in the investment gains or losses of the
assets of the GIO Account. Such gains or losses accrue solely to the
Company. The Company retains the risk that the value of the assets in
the GIO Account may fall below the reserves and other liabilities that
it must maintain in connection with its obligations under the
Guaranteed Interest Option under the Contracts. In such an event, the
<PAGE>
Company will transfer assets from its General Account to the GIO
Account to make up the difference. The GIO Account is not registered as
an investment company under the Act.
5.3 MARKET VALUE ADJUSTMENT - Any surrender, withdrawal, transfer or
application to an Annuity Payment Option of a Guarantee Amount is
subject to a Market Value Adjustment that may be positive or negative,
unless the effective date of the surrender, withdrawal, transfer or
application is within 30 days prior to the end of a Guarantee Period. A
Market Value Adjustment reflects the change in the value of the
Company's assets supporting the Guarantee Amount due to changes in
prevailing current interest rates since the date of allocation or
transfer to that Guarantee Period. Generally, if the Guaranteed
Interest Rate for the selected Guarantee Period is lower than the
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<PAGE>
Guaranteed Interest Rate currently being offered for new Guarantee
Periods of a duration equal to the balance of the selected Guarantee
Period as of the date that the Market Value Adjustment is applied, then
the application of the Market Value Adjustment will result in the
payment, upon surrender, withdrawal, transfer or application of amounts
to an Annuity Payment Option, of an amount less than the Guarantee
Amount (or portion thereof) being surrendered, withdrawn, transferred
or applied to an Annuity Payment Option. Similarly, if the Guaranteed
Interest Rate for the selected Guarantee Period is higher than the
Guaranteed Interest Rate currently being offered for new Guarantee
Periods of a duration equal to the balance of the selected Guarantee
Period as of the date that the Market Value Adjustment is applied, then
the application of the Market Value Adjustment will result in the
payment, upon surrender, withdrawal, transfer or application of amounts
to an Annuity Payment Option, of an amount greater than the Guarantee
Amount (or portion thereof) being surrendered, withdrawn, transferred
or applied to an Annuity Payment Option.
The Market Value Adjustment will be applied after the deduction of any
applicable annual administration fee or transfer processing fee, and
before the deduction of any applicable surrender charge or Premium Tax
Charge.
5.4 MARKET VALUE ADJUSTMENT FACTOR - The Market Value Adjustment is
computed by multiplying the amount being surrendered, withdrawn,
transferred, or applied to an Annuity Payment Option, by the Market
Value Adjustment Factor. The Market Value Adjustment factor is
calculated as follows:
Market Value Adjustment = Amount multiplied by
[[(1+a)/(1+b)]^n/12 -1]
where:
"Amount" is the amount being surrendered, withdrawn,
transferred or applied to an Annuity Payment Option
less any applicable annual administrative fees or
transfer processing fees;
"a" is the Guaranteed Interest Rate currently being credited to
the "Amount"; and
"b" is the Guaranteed Interest Rate that is currently being
offered for a Guarantee Period of duration equal to the time
remaining to the expiration of the Guarantee Period for the
Guarantee Amount from which the "Amount" is taken. Where the
time remaining to the expiration of the Guarantee Period is
not 1, 3, 5, 7 or 10 years, "b" is the rate found by linear
interpolation of the rate for the Guarantee Period having the
duration closest to the time remaining or, if the time
remaining is less than 1 year, "b" is the rate for a 1 year
period; and
"n" is the number of complete months remaining before the
expiration of the Guarantee Period for the Guarantee Amount
from which the "Amount" is taken.
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<PAGE>
SECTION 6: ALLOCATIONS AND TRANSFERS
6.1 NET PURCHASE PAYMENT ALLOCATION - In the application, the Owner must
select how the initial Net Purchase Payment is to be allocated among
the Subaccounts and the Guarantee Periods.
We will allocate that portion of the initial Net Purchase Payment which
is to be allocated to any Subaccount to the Money Market Subaccount for
a period equal to the number of days in the Cancellation Period. At the
end of this period, We will reallocate the Money Market Subaccount
Value to each other Subaccount selected by the Owner based on the
proportion that the Owner's allocation percentage (shown in the
application) bears to the Variable Contract Value.
You may change the allocation schedule from that shown in the
application by Written Notice. Any additional Net Purchase Payments
will be allocated in accordance with the allocation schedule in effect
when such Net Purchase Payment is received at the Service Center unless
it is accompanied by Written Notice directing a different allocation.
The portion of a Net Purchase Payment that may be applied to a
Subaccount or Guarantee Period must be a whole percentage. The minimum
percentage that may be allocated to a Subaccount or a Guarantee Period
is shown on the Contract Specifications page as is the minimum dollar
amount that may be allocated to a Guarantee Period.
6.2 TRANSFER PRIVILEGE - Before the Annuity Date, by Written Notice You may
transfer all or part of any Subaccount Value to another Subaccount(s)
(subject to its availability) or a Guarantee Period, or transfer all or
part of any Guarantee Amount to any Subaccount(s), (subject to its
availability) subject to the following restrictions and the additional
restrictions in section 6.3 below:
1. the minimum transfer amount is shown in the Contract
Specifications page (or, the entire Subaccount Value or
Guarantee Amount, if less); and
2. a transfer request that would reduce any Subaccount Value or
Guarantee Amount below the amount shown on the Contract
Specifications page is treated as a transfer request for the
entire Subaccount Value or Guarantee Amount.
A transfer processing fee will be deducted from the transferred amount
for certain transfers. See "Transfer Processing Fee" below. Transfers
are made as of the date that Your request is received at the Service
Center.
6.3 RESTRICTIONS ON TRANSFERS FROM GUARANTEED INTEREST OPTION - You may
make up to 4 transfers per Contract Year of all or part of any
Guarantee Amount to a Subaccount or a new Guarantee Period.
6.4 TRANSFER PROCESSING FEE. A number of transfers during each Contract
Year are free as shown on the Contract Specifications page. We will
assess a transfer processing fee for each transfer in excess of that
number during a Contract Year. The amount of this fee also is shown on
the Contract Specifications page. For the purposes of assessing the
transfer processing fee, each Written Notice of transfer is considered
to be one transfer, regardless of the number of Subaccounts or
Guarantee Periods affected by the transfer. The transfer processing fee
will be deducted from the amount being transferred.
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<PAGE>
SECTION 7: CONTRACT VALUES
7.1 SURRENDER - You may surrender this Contract for its Surrender Value at
any time before the Annuity Date. You may elect to have the Surrender
Value paid in a single sum or under an Annuity Payment Option. The
Contract ends when We pay the Surrender Value or apply such sum to an
Annuity Payment Option. The Surrender Value will be determined as of
the date We receive Your Written Notice for surrender and this Contract
at Our Service Center.
7.2 WITHDRAWALS - You may withdraw part of the Surrender Value at any time
before the Annuity Date, subject to these limits:
1. the minimum withdrawal amount is shown on the Contract
Specifications page;
2. the maximum withdrawal is the amount that would leave a
minimum Surrender Value of the amount shown on the Contract
Specifications page; and
3. a withdrawal request that would reduce any Subaccount Value or
Guarantee Amount below the amount shown on the Contract
Specifications page will be treated as a request for a
withdrawal of all of that Subaccount Value or Guarantee
Amount.
We will withdraw the amount You request from the Contract Value as of
the day that We receive Your Written Notice and send that amount to
You. We will then deduct any applicable surrender charge and any
applicable Premium Tax Charge shown on the Contract Specifications page
from the remaining Contract Value. If the withdrawal is requested from
a Guarantee Amount, We will deduct any applicable Market Value
Adjustment from, or add any applicable Market Value Adjustment to,
remaining Contract Value.
Your Written Notice must specify the amount to be withdrawn from each
Subaccount or Guarantee Amount. If the Written Notice does not specify
this information, or any Subaccount Value or Guarantee Amount is
inadequate to comply with Your request, We will make the withdrawal
based on the proportion that each Subaccount Value and each Guarantee
Amount bears to the Contract Value as of the day of the withdrawal.
7.3 TERMINATION - We may terminate this Contract and pay You the Surrender
Value if, before the Annuity Date, all of the following simultaneously
exist:
1. You have not paid any purchase payments for at least two
Contract years;
2. Your Contract Value is less than $2,000; and
3. aggregate purchase payments less withdrawals total less than
$2,000.
<PAGE>
We will mail You a notice of Our intent to terminate this Contract at
least six months in advance of such termination. This Contract will
automatically terminate on the date specified in the notice unless We
receive an additional purchase payment before the termination date
specified in the notice. This additional purchase payment must be for
at least the minimum additional purchase payment amount specified in
the Contract Specifications page.
7.4 BASIS OF VALUES - Any paid-up annuity, surrender or death benefits that
may be available are at least equal to the minimum required by law in
the jurisdiction in which this Contract is delivered. A detailed
statement of the method used to compute the minimum values has been
filed, where required, with the insurance officials of the jurisdiction
in which this Contract is delivered.
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<PAGE>
SECTION 8: FEES AND CHARGES
8.1 SURRENDER CHARGE - We will deduct a surrender charge upon any surrender
or withdrawal (or upon the application of any Adjusted Contract Value to an
Annuity Payment Option during the First Five Contract Years). The charge is a
percentage of each purchase payment surrendered or withdrawn (or applied to an
Annuity Payment Option during the First Five Contract Years) as shown on the
surrender charge table on the Contract Specifications page. The surrender charge
is separately calculated and applied to each purchase payment at any time that
the purchase payment is surrendered or withdrawn (or applied to an Annuity
Payment Option during the First Five Contract Years). No surrender charge
applies to the Contract Value in excess of aggregate purchase payments (less
prior withdrawals of purchase payments). The surrender charge is calculated
using the assumption that purchase payments are surrendered or withdrawn before
Contract Value in excess of aggregate purchase payments (less prior withdrawals
of purchase payments) and that purchase payments are surrendered or withdrawn on
a first-in, first-out basis. Notwithstanding the foregoing, in each Contract
Year after the first Contract Year, You may withdraw an amount up to 15% of
aggregate purchase payments less prior withdrawals of purchase payments as of
the first Valuation Day of that Contract Year without incurring a surrender
charge. With regard to the preceding sentence, We reserve the right to limit the
number of withdrawals in any Contract Year that are not subject to a surrender
charge.
With regard to all withdrawals, We will withdraw the amount You request
from the Contract Value as of the day that We receive Your Written
Notice and send to You that amount. We will then deduct applicable any
surrender charge and any applicable Premium Tax Charge shown on the
Contract Specifications page from the remaining Contract Value. If the
withdrawal is requested from a Guarantee Amount, We will deduct any
applicable Market Value Adjustment from, or add any applicable Market
Value Adjustment to, remaining Contract Value. For the purpose of
computing the surrender charge, the deduction of the Market Value
Adjustment, Premium Tax Charge and surrender charge is considered to be
made from Contract Value in excess of aggregate purchase payments (less
prior withdrawals of purchase payments).
No surrender charge is assessed on Contract Value applied to an Annuity
Payment Option oftent he first Five Contract Years. If on the Annuity Date,
however, the Payee elects (or the Owner previously elected) to receive a lump
sum, this sum will equal the Surrender Value on such date.
8.2 ANNUAL ADMINISTRATION FEE - We will assess the annual administration
fee shown on the Contract
Specifications page:
1. for the prior Contract Year, as of the Contract Anniversary;
or
2. for the current Contract Year (a) as of the date of any
surrender, or (b) on the Annuity Date.
The fee will be assessed against Subaccount Values and Guarantee
Amounts based on the proportion that each bears to the Contract Value.
Where the fee is deducted from Subaccount Values, We will cancel the
appropriate number of Accumulation Units. Where the fee is obtained
from a Guarantee Amount, We will reduce the Guarantee Amount by the
amount of the fee.
<PAGE>
8.3 OTHER TAX CHARGES - The Company reserves the right to deduct a charge
from purchase payments or from the Variable Account for any federal,
state or municipal taxes (or other economic burden resulting from the
application of the tax laws) that it incurs that may be attributable to
the Variable Account or the Contract.
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<PAGE>
SECTION 9: PAYMENT OF BENEFITS
9.1 PAYMENT OF BENEFITS - We will usually pay the proceeds of any
surrender, withdrawals, death benefit, or any Annuity Payments within
seven business days after receipt of all applicable Written Notices
and/or Due Proofs of Death. However, We can postpone such payments if:
1. the New York Stock Exchange is closed, other than customary
weekend and holiday closing, or trading on the exchange is
restricted as determined by the SEC; or
2. the SEC permits, by an order, the postponement for the
protection of Owners; or
3. the SEC determines that an emergency exists that would make
the disposal of securities held in the Variable Account or the
determination of their value not reasonably practicable.
If a recent check or draft has been submitted, We have the right to
defer payment of surrenders, withdrawals, death benefits, or Annuity
Payments until such check or draft has been honored.
We have the right to defer payment of any surrender, withdrawal, or
transfer of Guaranteed Interest Option Value for up to six months from
the date We receive Your Written Notice.
9.2 INTEREST ON DELAYED PAYMENTS - We will pay interest on the amount of
any payment that is delayed pursuant to section 9.1 of this Contract:
1. within 30 days after the payment becomes payable; or
2. within the time required by the applicable jurisdiction, if
less than 30 days.
This interest will accrue from the date that the payment becomes
payable to the date of payment, but not for more than one year, at an
annual rate of 3%, or the rate and time required by law, if greater.
SECTION 10: DEATH BENEFITS
10.1 DEATH BENEFITS ON OR AFTER THE ANNUITY DATE - If an Owner dies on or
after the Annuity Date, any surviving joint Owner becomes the sole
Owner. If there is no surviving Owner, any successor Owner becomes the
new Owner. If there is no surviving or successor Owner, the Payee
becomes the new Owner. If an Annuitant or an Owner dies on or after the
Annuity Date, the remaining undistributed portion, if any, of the
Contract Value will be distributed at least as rapidly as under the
method of distribution being used as of the date of such death. Under
some Annuity Payment Options, there will be no death benefit.
<PAGE>
10.2 DEATH BENEFIT BEFORE THE ANNUITY DATE -
DEATH OF AN OWNER
If any Owner dies prior to the Annuity Date, any surviving Owner
becomes the new sole Owner. If there is no surviving Owner, any
successor Owner becomes the new Owner and if there is no successor
Owner the Annuitant becomes the new Owner unless the deceased Owner was
also the Annuitant. If the sole deceased Owner was also the Annuitant,
then the provisions relating to the death of the Annuitant (described
below) will govern unless the deceased Owner was one of two joint
Annuitants, in which event the surviving Annuitant becomes the new
Owner.
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<PAGE>
The following options are available to new Owners:
1. to receive the Adjusted Contract Value in a single lump sum
within 5 years of the deceased Owner's death; or
2. elect to receive the Adjusted Contract Value paid out under an
Annuity Payment Option provided that: (a) Annuity Payments
begin within 1 year of the deceased Owner's death, and (b)
Annuity Payments are made in substantially equal installments
over the life of the new Owner or over a period not greater
than the life expectancy of the new Owner; or
3. if the new Owner is the spouse of the deceased Owner, he or
she may by Written Notice within one year of the Owner's
death, elect to continue the Contract as the new Owner. If the
spouse so elects, all of his or her rights as a Beneficiary
cease and if the deceased Owner was also the sole Annuitant
and appointed no Contingent Annuitant, he or she will become
the Annuitant. The spouse will be deemed to have made the
election to continue the Contract if he or she makes no
election before the expiration of the one year period or if he
or she makes any purchase payments under the Contract.
With regard to new Owners who are not the spouse of the deceased Owner:
(a) 1 and 2 apply even if the Annuitant or Contingent Annuitant is
alive at the time of the deceased Owner's death, (b) if the new Owner
is not a natural person, only option 1 is available, (c) if no election
is made within one year of the deceased Owner's death, option 1 is
deemed to have been elected.
Adjusted Contract Value is computed as of the date that the Company
receives Due Proof of Death of the Owner. Payments under this provision
are in full settlement of all of the Company's liability under this
Contract.
DEATH OF THE ANNUITANT
----------------------
If the Annuitant dies before the Annuity Date while the Owner is still
living, any Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Date and no Contingent Annuitant has
been named, the Company will pay the death benefit described below to
the Beneficiary. If there is no surviving Beneficiary, the Company will
pay the death benefit to any Contingent Beneficiary. If there is no
surviving Contingent Beneficiary, the Company will immediately pay the
death benefit to the Owner's estate in a lump sum.
If the Annuitant who is also an Owner dies or if the Annuitant dies and
the Owner is not a natural person, a Beneficiary (or a Contingent
Beneficiary):
1. will receive the death benefit in a single lump sum within 5
years of the deceased Annuitant's death; or
<PAGE>
2. may elect to receive the death benefit paid out under an
Annuity Payment Option provided that: (a) Annuity Payments
begin within 1 year of the deceased Annuitant's death, and (b)
Annuity Payments are made in substantially equal installments
over the life of the Beneficiary or over a period not greater
than the life expectancy of the Beneficiary; or
3. if the Beneficiary is the spouse of the deceased Annuitant, he
or she may by Written Notice within one year of the
Annuitant's death, elect to continue the Contract as the new
Owner. If the spouse so elects, all his or her rights as a
Beneficiary cease and if the deceased Annuitant was also the
sole Annuitant and appointed no Contingent Annuitant, he or
she will become the Annuitant. The spouse will be deemed to
have made the election to continue the Contract if he or she
makes no election before the expiration of the one year period
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<PAGE>
or if he or she makes any purchase payments under the
Contract.
THE DEATH BENEFIT
-----------------
If the Annuitant is Age 75 or younger, the death benefit is an amount
equal to the greatest of:
1. aggregate purchase payments paid less any withdrawals
(including the applicable surrender charges, Premium Tax
Charge and Market Value Adjustments) as of the date that the
Company receives Due Proof of Death of the Annuitant, or
2. the Contract Value as of the date that the Company receives
Due Proof of Death of the Annuitant, or
3. the minimum death benefit described below;
less any applicable Premium Tax Charge on the date that the death
benefit is paid.
The minimum death benefit is the death benefit floor amount as of the
date of the Annuitant's death (a) adjusted, for each withdrawal made
since the most recent reset of the death benefit floor amount, by
multiplying it by the product of all ratios of the Contract Value
immediately after a withdrawal to the Contract Value immediately before
such withdrawal (b) plus any purchase payments made since the most
recent reset of the death benefit floor amount.
The death benefit floor amount is the largest Contract Value attained
on any prior death benefit floor computation anniversary. Death benefit
floor computation anniversaries are the 5th Contract Anniversary and
each subsequent 5th Contract Anniversary (i.e., the 10th Contract
Anniversary, the 15th Contract Anniversary, etc.) prior to the
Annuitant's Age 76. Therefore, the death benefit floor amount is reset
when, on a death benefit floor computation anniversary, Contract Value
exceeds the current death benefit floor amount.
If the Annuitant is Age 76 or older, the death benefit is an amount
equal to the greater of 1 or 2 above.
SECTION 11: ANNUITY PROVISIONS AND PAYMENT OPTIONS
11.1 PURCHASE OF ANNUITY PAYMENTS - If the Annuity Date occurs within the
first five Contract Years then, as of the Annuity Date, Surrender Value
is applied to purchase Annuity Payments. If the Annuity Date occurs in
Contract Year six or later then as of the Annuity Date, Adjusted
Contract Value is applied to purchase Annuity Payments.
11.2 INITIAL ANNUITY PAYMENT DATE - The Initial Annuity Payment Date You
selected is shown on the Contract Specifications page. The initial
Annuity Payment Date may not be the 29th, 30th, or 31st day of a month.
The first Annuity Payment will be computed as of the Annuity Date and
paid as of the initial Annuity Payment Date. The initial Annuity
Payment Date is the Annuity Date unless the Annuity Date is the 29th,
30th or 31st of a month.
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<PAGE>
11.3 ANNUITY PAYMENT DATES - All subsequent Annuity Payments will be
computed and payable as of Annuity Payment Dates. These dates will be
the same day of the month as the initial Annuity Payment Date. Monthly
Annuity Payments will be computed and payable as of the same day each
month as the initial Annuity Payment Date. Quarterly Annuity Payments
will be computed and payable as of the same day in the third, sixth,
ninth, and twelfth month following the initial Annuity Payment Date and
on the same days of such months in each successive Contract Year.
Semi-annual Annuity Payment Dates will be computed and payable as of
the same day in the sixth and twelfth month following the initial
Annuity Payment Date and on the same days of such months in each
successive Contract Year. Annual Annuity Payments will be computed and
payable as of the same day in each Contract Year as the initial Annuity
Payment Date. The frequency of Annuity Payments You have selected also
is shown on the Contract Specifications page.
11.4 FIXED ANNUITY PAYMENTS - Fixed Annuity Payments are periodic payments
from Us to the designated Payee, the minimum amount of which is fixed
and guaranteed by Us. The amount of these payments depends only on the
form and duration of the Annuity Payment Option selected, the amount of
Surrender Value or Adjusted Contract Value applied to purchase the
Annuity Payments, the Age of the Annuitant (Options 4 - 6), the sex of
the Annuitant (if applicable)(Options 4 - 6), and the applicable
annuity purchase rates in tables 1 - 7 below (Options 3 - 6). The
annuity purchase rates in the Contract are based on a Guaranteed
Interest Rate of not less than 3.0%. We may, in Our sole discretion,
make Fixed Annuity Payments in an amount based on a higher rate.
For Annuity Payment Options 3 through 6, the dollar amount of the first
Fixed Annuity Payment is determined by dividing the dollar amount of
Surrender Value or Adjusted Contract Value being applied on the Annuity
Date to purchase Fixed Annuity Payments by $1,000 and multiplying the
result by the annuity purchase rate in the table for the selected
Annuity Payment Option. Subsequent Fixed Annuity Payments are of the
same dollar amount unless the Company makes payments based on an
interest rate different from that used to compute the first payment.
11.5 VARIABLE ANNUITY PAYMENTS - The dollar amount of the initial Variable
Annuity Payment attributable to each Subaccount is determined by
dividing the dollar amount of Surrender Value or Adjusted Contract
Value to be allocated to that Subaccount on the Annuity Date by $1,000
and multiplying the result by the annuity purchase rate in this
Contract for the selected Annuity Payment Option. The dollar value of
the total initial Variable Annuity Payment is the sum of the initial
Variable Annuity Payments attributable to each Subaccount.
<PAGE>
The dollar amount of each subsequent Variable Annuity Payment
attributable to each Subaccount is determined by multiplying the number
of Annuity Units of that Subaccount credited under the Contract by the
Annuity Unit Value for that Subaccount for the Valuation Period ending
on the Annuity Payment Date or during which the Annuity Payment Date
falls if the Valuation Period does not end on such date.
The number of Annuity Units attributable to a Subaccount is derived
by dividing the initial Variable Annuity Payment attributable to that
Subaccount by the Annuity Unit Value for that Subaccount for the
Valuation Period ending on the Annuity Date or during which the
Annuity Date falls if the Valuation Period does not end on such date.
The number of Annuity Units attributable to each Subaccount under a
Contract remains fixed unless there is an exchange of Annuity Units.
11.6 ANNUITY UNIT VALUE - The Annuity Unit Value of each Subaccount for any
Valuation Period is equal to (a) multiplied by (b) divided by (c)
where:
(a) is the Net Investment Factor for the Valuation Period
for which the Annuity Unit Value is being calculated;
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<PAGE>
(b) is the Annuity Unit Value for the preceding Valuation
Period; and
(c) is a daily Benchmark Rate of Return factor (for the
3% benchmark rate of return) adjusted for the number
of days in the Valuation Period.
The Benchmark Rate of Return factor is equal to one plus 3%, or 1.03.
The annual factor can be translated into a daily factor of 1.00008098.
11.7 EXCHANGE OF ANNUITY UNITS - By Written Notice at any time after the
Annuity Date, the Payee may exchange the dollar value of a designated
number of Annuity Units of a particular Subaccount for an equivalent
dollar amount of Annuity Units of another Subaccount. On the date of
the exchange, the dollar amount of a Variable Annuity Payment generated
from the Annuity Units of either Subaccount would be the same.
11.8 PAYMENT OPTION RATE TABLES - The amount of the monthly payments per
$1,000 applied is shown for a Fixed Annuity in these tables. For a
Variable Annuity, the tables show the amount of the first Variable
Annuity Payment only. Subsequent Variable Annuity Payments will vary in
amount as explained in section 11.5 above. Amounts for ages not shown
will be determined on a basis consistent with those shown in these
tables.
11.9 DEATH OF PAYEE - Unless instructed otherwise at the time that the
Annuity Payment Option is selected, at the death of the Payee the
Company pays the amounts below in a lump sum to the Payee's estate:
1. Under Annuity Payment Option 1, the amount left on deposit
with the Company to accumulate interest.
2. Under Annuity Payment Option 2, 3, or 5, the commuted value of
the amount payable at the Payee's death as provided under the
Option selected. Where the Payee was receiving Fixed Annuity
Payments, the commuted value is based on interest at the rate
that would have been used to compute the first of the
remaining payments under that Option. Where the Payee was
receiving Variable Annuity Payments, the commuted value is
based on interest at a rate equal to the Benchmark Rate of
Return.
11.10 OPTION 1, INTEREST PAYMENTS - The Company holds the Surrender Value or
Adjusted Contract Value as principal and pays interest to the Payee.
The interest rate is 3% per year compounded annually. The Company pays
interest every 1 year, 6 months, 3 months or 1 month, as specified at
the time this option is selected. At the death of the Payee, the value
of the remaining payments are paid as stated in section 11.9. Only
Fixed Annuity Payments are available under Annuity Payment Option 1.
11.11 OPTION 2, PAYMENTS OF A SPECIFIED AMOUNT - The Company pays the
Surrender Value or Adjusted Contract Value in equal payments every 1
year, 6 months, 3 months or 1 month. The amount and frequency of the
payments is specified at the time this option is selected. After each
payment, interest is added to the remaining amount applied under this
option that has not yet been paid. The interest rate is 3% per year
compounded annually. Payments are made to the Payee until the amount
<PAGE>
applied under this option, including interest, is exhausted. The total
of the payments made each year must be at least 5% of the amount
applied under this option. If the Payee dies before the amount applied
is exhausted, the Company pays the value of the remaining payments as
stated in section 11.9. Only Fixed Annuity Payments are available under
Annuity Payment Option 2.
11.12 ADDITIONAL INTEREST EARNINGS - The Company may pay interest at rates
in excess of the rates guaranteed in Annuity Payment Options 1 and 2.
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<PAGE>
11.13 OPTION 3, PAYMENTS FOR A SPECIFIED PERIOD - The Company pays the lump
sum in equal payments for the number of years specified when the option
is selected. Payments are made every 1 year, 6 months, 3 months or 1
month, as specified when the option is selected. The amount of each
Fixed Annuity Payment (and the amount of the first Variable Annuity
Payment) for each $1,000 applied under this option is shown in the
tables 1 and 2. These amounts are calculated at an interest rate of 3%
per year compounded annually. If the Payee dies before the expiration
of the specified number of years, the Company pays the value of the
remaining payments as stated in section 11.9.
11.14 OPTION 4, LIFE ANNUITY - The Company makes monthly payments to the
Payee for as long as the Annuitant lives. The amount of each Fixed
Annuity Payment (and the amount of the first Variable Annuity Payment)
for each $1,000 applied under this option is shown in table 3 below.
11.15 OPTION 5, LIFE ANNUITY WITH PERIOD CERTAIN - The Company makes monthly
payments to the Payee for as long as the Annuitant lives. At the time
this option is selected, a period certain of 5, 10, 15, or 20 years
must also be selected. If the Annuitant dies before the specified
period certain ends, the payments to the Payee will continue until the
end of the specified period. The amount of the monthly payments
therefore depends on the period certain selected. The amount of each
Fixed Annuity Payment (and the amount of the first Variable Annuity
Payment) for each period certain available is shown in tables 4 and 5
below. The amounts shown are for each $1,000 applied under this option.
If at any age the amount of the payments is the same for two or more
periods certain, payment will be made as if the longest period certain
was selected.
11.16 OPTION 6, JOINT LIFE AND SURVIVORSHIP ANNUITY - The Company makes
monthly payments to the Payee while both Annuitants are living. After
the death of either Annuitant, payments continue to the Payee for as
long as the other Annuitant lives. The amount of each Fixed Annuity
Payment (and the amount of the first Variable Annuity Payment) for each
$1,000 applied under this option is shown in tables 6 and 7 below.
- 23 -
<PAGE>
<TABLE>
<CAPTION>
Table 1
|==========|======================|==========|==================|=========|=========|=======|
<S> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | |
| Number | Amount of Payments | Number | Amount of | Number |Amount of| |
| of Years |-----------|----------| of Years | Payments |of Years |Payments | |
| Specified| | | Specified| |Specified| | |
| | | | |----------|-------|---------|---------|-------|
| | Annual | S.A. | | Annual | S.A. | | Annual | S.A. |
|----------|-----------|----------|----------|----------|-------|---------|---------|-------|
| 1 | $1,000.00 | $503.70 | 9 | $124.69 | $62.81| 17 | $73.74 | $37.14|
| 2 | 507.39 | 255.57 | 10 | 113.82 | 57.33| 18 | 70.59 | 35.56|
| 3 | 343.23 | 172.89 | 11 | 104.93 | 52.85| 19 | 67.78 | 34.14|
| 4 | 261.19 | 131.56 | 12 | 97.54 | 49.13| 20 | 65.26 | 32.87|
| 5 | 211.99 | 106.78 | 13 | 91.29 | 45.98| 25 | 55.76 | 28.08|
| 6 | 179.22 | 90.27 | 14 | 85.95 | 43.29| 30 | 49.53 | 24.95|
| 7 | 155.83 | 78.49 | 15 | 81.33 | 40.96| | | |
| 8 | 138.31 | 69.67 | 16 | 77.29 | 38.93| | | |
|==========|===========|==========|==========|==========| ======|=========|=========|=======|
</TABLE>
- 24 -
<PAGE>
<TABLE>
<CAPTION>
Table 2
|==========|======================|==========|==================|=========|=========|=======|
<S> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | |
| Number | Amount of Payments | Number | Amount of | Number |Amount of| |
| of Years |-----------|----------| of Years | Payments |of Years |Payments | |
| Specified| | | Specified| |Specified| | |
| | | | |----------|-------|---------|---------|-------|
| | Quarterly | Monthly | | Quarterly|Monthly| |Quarterly|Monthly|
|----------|-----------|----------|----------|----------|-------|---------|---------|-------|
| 1 | $252.78 | $ 84.47 | 9 | $31.52 | $10.53| 17 | $18.64 | $6.23|
| 2 | 128.26 | 42.86 | 10 | 28.77 | 9.61| 18 | 17.84 | 5.96|
| 3 | 86.76 | 28.99 | 11 | 26.52 | 8.86| 19 | 17.13 | 5.73|
| 4 | 66.02 | 22.06 | 12 | 24.66 | 8.24| 20 | 16.50 | 5.51|
| 5 | 53.59 | 17.91 | 13 | 23.08 | 7.71| 25 | 14.09 | 4.71|
| 6 | 45.30 | 15.14 | 14 | 21.73 | 7.26| 30 | 12.52 | 4.18|
| 7 | 39.39 | 13.16 | 15 | 20.56 | 6.87| | | |
| 8 | 34.96 | 11.68 | 16 | 19.54 | 6.53| | | |
|==========|===========|==========|==========|==========| ======|=========|=========|=======|
</TABLE>
- 25 -
<PAGE>
<TABLE>
Table 3
|====================|=========|=================|===========|===================|============|
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | |
| Age |Option 4 | Age | Option 4 | Age | Option 4 |
| of Annuitant* | Monthly | of Annuitant* | Monthly | of Annuitant* | Monthly |
| | Life | | Life | | Life |
| |Annuity | | Annuity | | Annuity |
|-----------|--------| |--------|--------| |---------|---------| |
| Male | Female | | Male | Female| | Male | Female | |
|-----------|--------|---------|--------| -------|-----------|---------| --------|============|
| 16 and | 21 and| | 39 | 44 | $3.78 | 63 | 68 | $6.39 |
| under | under| $3.02 | 40 | 45 | 3.83 | 64 | 69 | 6.61 |
| 17 | 22 | 3.04 | 41 | 46 | 3.89 | 65 | 70 | 6.84 |
| 18 | 23 | 3.06 | 42 | 47 | 3.95 | 66 | 71 | 7.08 |
| 19 | 24 | 3.08 | 43 | 48 | 4.02 | 67 | 72 | 7.35 |
| 20 | 25 | 3.10 | 44 | 49 | 4.09 | 68 | 78 | 7.63 |
| 21 | 26 | 3.12 | 45 | 50 | 4.16 | 69 | 74 | 7.94 |
| 22 | 27 | 3.15 | 46 | 51 | 4.24 | 70 | 75 | 8.27 |
| 23 | 28 | 3.17 | 47 | 52 | 4.32 | 71 | 76 | 8.59 |
| 24 | 29 | 3.19 | 48 | 53 | 4.40 | 72 | 77 | 8.91 |
| 25 | 30 | 3.22 | 49 | 54 | 4.94 | 73 | 78 | 9.23 |
| 26 | 31 | 3.25 | 50 | 55 | 4.58 | 74 | 79 | 9.55 |
| 27 | 32 | 3.28 | 51 | 56 | 4.68 | 75 | 80 | 9.89 |
| 28 | 33 | 3.32 | 52 | 57 | 4.78 | 76 | 81 | 10.36 |
| 29 | 34 | 3.35 | 53 | 58 | 4.88 | 77 | 82 | 10.83 |
| 30 | 35 | 3.38 | 54 | 59 | 5.00 | 78 | 83 | 11.30 |
| 31 | 36 | 3.42 | 55 | 60 | 5.11 | 79 | 84 | 11.77 |
| 32 | 37 | 3.46 | 56 | 61 | 5.24 | 80 | 85 | 12.25 |
| 33 | 38 | 3.50 | 57 | 62 | 5.38 | 81 | and | 12.92 |
| 34 | 39 | 3.54 | 58 | 63 | 5.52 | 82 | over | 13.59 |
| 35 | 40 | 3.58 | 59 | 64 | 5.67 | 83 | | 14.26 |
| 36 | 41 | 3.63 | 60 | 65 | 5.83 | 84 | | 14.93 |
| 37 | 42 | 3.67 | 61 | 66 | 6.01 | 85 | | 15.62 |
| 38 | 43 | 3.72 | 62 | 67 | 6.19 | and | | |
| | | | | | | over | | |
|===========|========|=========|========|========|===========|=========|=========|============|
</TABLE>
* Use the Annuitant's age nearest the Annuity Date
- 26 -
<PAGE>
<TABLE>
Table 4
|===================|=======|======|==============|==============|===============|===============|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| | Number of | | Number Of | | Number of |
| Age | Years | Age | Years | Age | Years |
| of Annuitant* | Specified | of Annuitant*| Specified | of Annuitant*| Specified |
|--------|----------|-------|------|-------|------|------|-------|------|--------|-------|-------|
| Male | Female | 5 | 10 | Male |Female| 5 | 10 | Male | Female | 5 | 10 |
|--------|----------|-------|------|-------|------|------|-------|------|--------|-------|-------|
| 16 and | 21 and | | | 39 | 44 | $3.78| $3.77 | 63 | 68 | $6.30 | $6.03 |
| | | | | | | | | | | | |
| under | under | $3.02 |$3.02 | 40 | 45 | 3.83| 3.82 | 64 | 69 | 6.50 | 6.19 |
| 17 | 22 | 3.04 | 3.04 | 41 | 46 | 3.89| 3.87 | 65 | 70 | 6.71 | 6.36 |
| 18 | 23 | 3.06 | 3.06 | 42 | 47 | 3.95| 3.93 | 66 | 71 | 6.94 | 6.53 |
| 19 | 24 | 3.08 | 3.08 | 43 | 48 | 4.01| 3.99 | 67 | 72 | 7.18 | 6.70 |
| 20 | 25 | 3.10 | 3.10 | 44 | 49 | 4.08| 4.06 | 68 | 73 | 7.43 | 6.88 |
| 21 | 26 | 3.12 | 3.12 | 45 | 50 | 4.15| 4.13 | 69 | 74 | 7.71 | 7.07 |
| 22 | 27 | 3.15 | 3.15 | 46 | 51 | 4.23| 4.20 | 70 | 75 | 8.00 | 7.26 |
| 23 | 28 | 3.17 | 3.17 | 47 | 52 | 4.31| 4.27 | 71 | 76 | 8.29 | 7.45 |
| 24 | 29 | 3.20 | 3.20 | 48 | 53 | 4.39| 4.35 | 72 | 77 | 8.58 | 7.64 |
| 25 | 30 | 3.23 | 3.23 | 49 | 54 | 4.47| 4.43 | 73 | 78 | 8.86 | 7.83 |
| 26 | 31 | 3.26 | 3.25 | 50 | 55 | 4.56| 4.51 | 74 | 79 | 9.15 | 8.01 |
| 27 | 32 | 3.29 | 3.28 | 51 | 56 | 4.66| 4.60 | 75 | 80 | 9.44 | 8.20 |
| 28 | 33 | 3.32 | 3.31 | 52 | 57 | 4.76| 4.69 | 76 | 81 | 9.79 | 8.37 |
| 29 | 34 | 3.35 | 3.35 | 53 | 58 | 4.86| 4.79 | 77 | 82 | 10.14 | 8.54 |
| 30 | 35 | 3.38 | 3.38 | 54 | 59 | 4.97| 4.89 | 78 | 83 | 10.49 | 8.70 |
| 31 | 36 | 3.42 | 3.42 | 55 | 60 | 5.09| 4.99 | 79 | 84 | 10.84 | 8.84 |
| 32 | 37 | 3.46 | 3.45 | 56 | 61 | 5.21| 5.10 | 80 | 85 | 11.19 | 8.98 |
| 33 | 38 | 3.50 | 3.49 | 57 | 62 | 5.34| 5.22 | 81 | and | 11.60 | 9.10 |
| 34 | 39 | 3.54 | 3.53 | 58 | 63 | 5.47| 5.34 | 82 | over | 12.01 | 9.20 |
| 35 | 40 | 3.58 | 3.57 | 59 | 64 | 5.62| 5.46 | 83 | | 12.42 | 9.29 |
| 36 | 41 | 3.62 | 3.62 | 60 | 65 | 5.77| 5.60 | 84 | | 12.83 | 9.37 |
| 37 | 42 | 3.67 | 3.67 | 61 | 66 | 5.94| 5.73 | 85 | | 13.22 | 9.42 |
| 38 | 43 | 3.72 | 3.71 | 62 | 67 | 6.11| 5.88 | and | | | |
| | | | | | | | | | | over | |
|========|==========|=======|======|=======|======|======|=======|======|========|=======|=======|
</TABLE>
- ----------------------------
* Use the Annuitant's age nearest the Annuity Date.
- 27 -
<PAGE>
<TABLE>
Table 5
|=================|===============|==============|============|=================|==============|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | |
| | Number of | | Number Of | | Number of |
| Age | Years | Age | Years | Age | Years |
| of Annuitant* | Specified | of Annuitant*| Specified | of Annuitant* | Specified |
|-------|---------|-------|-------|------|-------|------|-----|--------|--------|-------|------|
| Male | Female | 15 | 20 | Male | Female| 15 | 20 | Male | Female | 5 | 20 |
|-------|---------|-------|-------|------|-------|------|-----|--------|--------|-------|------|
| 16 and| 21 and | | | 39 | 44 |$3.74 |$3.71| 63 | 68 | $5.62 | $5.12|
| | | | | | | | | | | | |
| under | under | $3.01 | $3.01 | 40 | 45 | 3.79 | 3.75| 64 | 69 | 5.72 | 5.17|
| 17 | 22 | 3.03 | 3.03 | 41 | 46 | 3.84 | 3.80| 65 | 70 | 5.83 | 5.22|
| 18 | 23 | 3.05 | 3.05 | 42 | 47 | 3.90 | 3.85| 66 | 71 | 5.93 | 5.27|
| 19 | 24 | 3.07 | 3.07 | 43 | 48 | 3.96 | 3.90| 67 | 72 | 6.03 | 5.31|
| 20 | 25 | 3.10 | 3.09 | 44 | 49 | 4.02 | 3.95| 68 | 73 | 6.13 | 5.35|
| 21 | 26 | 3.12 | 3.11 | 45 | 50 | 4.08 | 4.01| 69 | 74 | 6.22 | 5.38|
| 22 | 27 | 3.14 | 3.14 | 46 | 51 | 4.14 | 4.06| 70 | 75 | 6.31 | 5.41|
| 23 | 28 | 3.17 | 3.16 | 47 | 52 | 4.21 | 4.12| 71 | 76 | 6.39 | 5.43|
| 24 | 29 | 3.19 | 3.19 | 48 | 53 | 4.28 | 4.18| 72 | 77 | 6.47 | 5.45|
| 25 | 30 | 3.22 | 3.21 | 49 | 54 | 4.35 | 4.24| 73 | 78 | 6.54 | 5.47|
| 26 | 31 | 3.25 | 3.24 | 50 | 55 | 4.42 | 4.30| 74 | 79 | 6.60 | 5.48|
| 27 | 32 | 3.28 | 3.27 | 51 | 56 | 4.50 | 4.36| 75 | 80 | 6.65 | 5.49|
| 28 | 33 | 3.31 | 3.30 | 52 | 57 | 4.58 | 4.42| 76 | 81 | 6.70 | 5.50|
| 29 | 34 | 3.34 | 3.33 | 53 | 58 | 4.66 | 4.49| 77 | 82 | 6.74 | 5.51|
| 30 | 35 | 3.37 | 3.36 | 54 | 59 | 4.75 | 4.55| 78 | 83 | 6.77 | 5.51|
| 31 | 36 | 3.40 | 3.39 | 55 | 60 | 4.83 | 4.62| 80 | 85 | 6.82 | 5.51|
| 33 | 38 | 3.48 | 3.46 | 57 | 62 | 5.02 | 4.75| 81 | and | 6.83 | 5.51|
| 34 | 39 | 3.52 | 3.50 | 58 | 63 | 5.11 | 4.81| 82 | over | 6.85 | 5.51|
| 35 | 40 | 3.56 | 3.54 | 59 | 64 | 5.21 | 4.88| 83 | | 6.85 | 5.51|
| 36 | 41 | 3.60 | 3.58 | 60 | 65 | 5.31 | 4.94| 84 | | 6.86 | 5.51|
| 37 | 42 | 3.65 | 3.62 | 61 | 66 | 5.41 | 5.00| 85 | | 6.86 | 5.51|
| 38 | 43 | 3.69 | 3.66 | 62 | 67 | 5.51 | 5.06| and | | | |
| | | | | | | | | over | | | |
|=======|=========|=======|=======|======|=======|======|=====|========|========|=======|======|
</TABLE>
- ----------------------------
* Use the Annuitant's age nearest the Annuity Date.
- 28 -
<PAGE>
<TABLE>
<CAPTION>
Table 6
|==========|========|=======|======|========|========|=======|========|========|
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | | | |
|Age | | | | | | | | |
|of | Male | 55 | 56 | 57 | 58 | 59 | 60 | 61 |
|Annuitants| | | | | | | | |
|==========|========|=======|======|========|========|=======|========|========|
|Male | Female | 65 | 61 | 62 | 63 | 64 | 65 | 66 |
|==========|========|=======|======|========|========| ======|========|========|
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|51 | 56 | $4.14 | $4.17| $4.20 | $4.23 | $4.26 | $4.29 | $4.32 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|52 | 57 | 4.19 | 4.22| 4.25 | 4.29 | 4.32 | 4.35 | 4.38 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|53 | 58 | 4.23 | 4.26| 4.30 | 4.34 | 4.37 | 4.41 | 4.44 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|54 | 59 | 4.27 | 4.31| 4.35 | 4.39 | 4.43 | 4.46 | 4.50 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|55 | 60 | 4.32 | 4.36| 4.40 | 4.44 | 4.48 | 4.52 | 4.56 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
| | | | | | | | | |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|56 | 61 | 4.36 | 4.41| 4.45 | 4.50 | 4.54 | 4.58 | 4.62 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|57 | 62 | 4.40 | 4.45| 4.50 | 4.55 | 4.59 | 4.64 | 4.69 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|58 | 63 | 4.44 | 4.50| 4.55 | 4.60 | 4.65 | 4.70 | 4.75 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|59 | 64 | 4.48 | 4.54| 4.59 | 4.65 | 4.70 | 4.76 | 4.81 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|60 | 65 | 4.52 | 4.58| 4.64 | 4.70 | 4.76 | 4.82 | 4.88 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
| | | | | | | | | |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|61 | 66 | 4.56 | 4.62| 4.69 | 4.75 | 4.81 | 4.88 | 4.94 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|62 | 67 | 4.60 | 4.66| 4.73 | 4.80 | 4.87 | 4.93 | 5.00 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|63 | 68 | 4.63 | 4.70| 4.77 | 4.85 | 4.92 | 4.99 | 5.06 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|64 | 69 | 4.67 | 4.74| 4.82 | 4.89 | 4.97 | 5.04 | 5.12 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|65 | 70 | 4.70 | 4.78| 4.86 | 4.94 | 5.01 | 5.10 | 5.18 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
| | | | | | | | | |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|66 | 71 | 4.73| 4.81| 4.90| 4.98 | 5.06 | 5.15 | 5.24 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|67 | 72 | 4.76| 4.85| 4.93| 5.02 | 5.11 | 5.20 | 5.29 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|68 | 73 | 4.79| 4.88| 4.97| 5.06 | 5.15 | 5.25 | 5.35 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|69 | 74 | 4.82| 4.91| 5.00| 5.10 | 5.20 | 5.30 | 5.40 |
|----------|--------|-------|------|--------|--------|-------|--------|--------|
|70 | 75 | 4.85| 4.94| 5.03| 5.13 | 5.23 | 5.34 | 5.45 |
|==========|========|=======|======|========|========|=======|========|========|
</TABLE>
- 29 -
<PAGE>
<TABLE>
<CAPTION>
Table 7
|======|========|========|===========|==========|========|==========|=========|=======|==========|=========|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | | | | | |
|Age of| | | | | | | | | | |
|Annui | | | | | | | | | | |
|tants | Male | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 |
|======|========|========|===========|==========|========|==========|=========|=======|==========|=========|
|Male |Female | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 |
|======|========|========|===========|==========|========|==========|=========|=======|==========|=========|
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|51 |56 | $4.34| $4.37 | $4.37 | $4.41 | $4.43 | $4.45| $4.47| $4.49 | $4.51 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|52 |57 | 4.41| 4.43 | 4.46 | 4.48 | 4.51 | 4.53| 4.55| 4.57 | 4.59 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|53 |58 | 4.47| 4.50 | 4.53 | 4.55 | 4.58 | 4.61| 4.63| 4.65 | 4.67 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|54 |59 | 4.53| 4.57 | 4.60 | 4.63 | 4.66 | 4.68| 4.71| 4.73 | 4.76 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|55 |60 | 4.60| 4.63 | 4.67 | 4.70 | 4.73 | 4.76| 4.79| 4.82 | 4.85 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
| | | | | | | | | | | |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|56 |61 | 4.66| 4.70 | 4.74 | 4.78 | 4.81 | 4.85| 4.88| 4.91 | 4.94 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|57 |62 | 4.73| 4.77 | 4.82 | 4.86 | 4.90 | 4.93| 4.97| 5.00 | 5.03 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|58 |63 | 4.80| 4.85 | 4.89 | 4.94 | 4.98 | 5.02| 5.06| 5.10 | 5.13 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|59 |64 | 4.87| 4.92 | 4.97 | 5.02 | 5.06 | 5.11| 5.15 | 5.20 | 5.23 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|60 |65 | 4.93| 4.99 | 5.04 | 5.10 | 5.15 | 5.20| 5.25| 5.30 | 5.34 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
| | | | | | | | | | | |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|61 |66 | 5.00| 5.06 | 5.12 | 5.18 | 5.24 | 5.29| 5.35| 5.40 | 5.45 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|62 |67 | 5.07| 5.13 | 5.20 | 5.26 | 5.33 | 5.39| 5.45| 5.50 | 5.56 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|63 |68 | 5.13| 5.20 | 5.28 | 5.35 | 5.41 | 5.48| 5.55| 5.61 | 5.67 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|64 |69 | 5.20| 5.28 | 5.35 | 5.43 | 5.50 | 5.58| 5.65| 5.72 | 5.79 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|65 |70 | 5.26| 5.35 | 5.43 | 5.51 | 5.59 | 5.67| 5.75| 5.83 | 5.90 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
| | | | | | | | | | | |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|66 |71 | 5.33| 5.41 | 5.50 | 5.59 | 5.68 | 5.77| 5.85| 5.94 | 6.02 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|67 |72 | 5.39| 5.48 | 5.58 | 5.67 | 5.77 | 5.86| 5.96| 6.05 | 6.14 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|68 |73 | 5.45| 5.55 | 5.65 | 5.75 | 5.85 | 5.96 | 6.06 | 6.16 | 6.26 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|69 |74 | 5.50| 5.61 | 5.72 | 5.83 | 5.94 | 6.05| 6.16| 6.27 | 6.38 |
|------|--------|--------|-----------|----------|--------|----------|---------|-------|----------|---------|
|70 |75 | 5.56| 5.67 | 5.79 | 5.90 | 6.02 | 6.14| 6.26| 6.38 | 6.50 |
|======|========|========|===========|==========|========|==========|=========|=======|==========|=========|
</TABLE>
- 30 -
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Valley Forge Life Insurance Company
Service Center: 95 Bridge Street, Haddam, Connecticut 06438
<PAGE>
VALLEY FORGE LIFE INSURANCE COMPANY
_______________________________________________________________________________
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
_______________________________________________________________________________
In this Contract, Valley Forge Life Insurance Company is referred to as "We,"
"Us," "Our," or the "Company." "You" and "Your" refer to the Owner of the
Contract.
We agree to pay the benefits as described in this Contract in accordance with
its provisions.
PLEASE READ THIS CONTRACT CAREFULLY
It is a legal contract between You and Us.
NOTICE OF 10-DAY CANCELLATION PERIOD
If for any reason You are not satisfied with this Contract, You may return it to
Us for cancellation by delivering or mailing it to:
1. Valley Forge Life Insurance Company Service Center, 95 Bridge
Street, Haddam, Connecticut 06438, or
2. the agent through whom it was purchased.
To cancel this Contract, You must return it to Us no later than 10 days after
You first receive it. Upon delivery or mailing, this Contract will be void as of
the date We receive it and Your request for cancellation and We will promptly
refund an amount equal to the Contract Value plus fees or charges deducted
except for the mortality and expense risk charge and the administration charge.
This amount may be more or less than the aggregate purchase payments made under
the Contract.
Signed for the Valley Forge Life Insurance Company at its Executive Office, CNA
Plaza, Chicago, Illinois 60685.
Chairman of the Board Secretary
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNT, MAY INCREASE OR DECREASE DAILY
AS A FUNCTION OF THE INVESTMENT PERFORMANCE OF SUBACCOUNTS SELECTED BY THE OWNER
AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. NO MINIMUM CONTRACT VALUE IS
GUARANTEED.
<PAGE>
PAYMENTS MADE AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE GUARANTEED
INTEREST OPTION, ARE SUBJECT TO A MARKET VALUE ADJUSTMENT, THE OPERATION OF
WHICH MAY RESULT IN UPWARD OR DOWNWARD ADJUSTMENTS IN AMOUNTS WITHDRAWN,
SURRENDERED, TRANSFERRED, PAID AS A DEATH BENEFIT AND APPLIED TO PURCHASE
ANNUITY PAYMENTS. AMOUNTS WITHDRAWN, SURRENDERED, TRANSFERRED, PAID AS A DEATH
BENEFIT OR APPLIED TO PURCHASE ANNUITY PAYMENTS FROM GUARANTEE AMOUNTS THAT ARE
WITHIN 30 DAYS PRIOR TO THE END OF A GUARANTEE PERIOD ARE NOT SUBJECT TO THE
INTEREST RATE ADJUSTMENT.
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
SECTION 6: ALLOCATIONS AND TRANSFERS
6.1 NET PURCHASE PAYMENT ALLOCATION - In the application, the Owner must
select how the initial Net Purchase Payment is to be allocated among
the Subaccounts and the Guarantee Periods.
You may change the allocation schedule from that shown in the
application by Written Notice. Any additional Net Purchase Payments
will be allocated in accordance with the allocation schedule in effect
when such Net Purchase Payment is received at the Service Center unless
it is accompanied by Written Notice directing a different allocation.
The portion of a Net Purchase Payment that may be applied to a
Subaccount or Guarantee Period must be a whole percentage. The minimum
percentage that may be allocated to a Subaccount or a Guarantee Period
is shown on the Contract Specifications page as is the minimum dollar
amount that may be allocated to a Guarantee Period.
6.2 TRANSFER PRIVILEGE - Before the Annuity Date, by Written Notice You may
transfer all or part of any Subaccount Value to another Subaccount(s)
(subject to its availability) or a Guarantee Period, or transfer all or
part of any Guarantee Amount to any Subaccount(s), (subject to its
availability) subject to the following restrictions and the additional
restrictions in section 6.3 below:
1. the minimum transfer amount is shown in the Contract
Specifications page (or, the entire Subaccount Value or
Guarantee Amount, if less); and
2. a transfer request that would reduce any Subaccount Value or
Guarantee Amount below the amount shown on the Contract
Specifications page is treated as a transfer request for the
entire Subaccount Value or Guarantee Amount.
A transfer processing fee will be deducted from the transferred amount
for certain transfers. See "Transfer Processing Fee" below. Transfers
are made as of the date that Your request is received at the Service
Center.
6.3 RESTRICTIONS ON TRANSFERS FROM GUARANTEED INTEREST OPTION - You may
make up to 4 transfers per Contract Year of all or part of any
Guarantee Amount to a Subaccount or a new Guarantee Period.
6.4 TRANSFER PROCESSING FEE. A number of transfers during each Contract
Year are free as shown on the Contract Specifications page. We will
assess a transfer processing fee for each transfer in excess of that
number during a Contract Year. The amount of this fee also is shown on
the Contract Specifications page. For the purposes of assessing the
transfer processing fee, each Written Notice of transfer is considered
to be one transfer, regardless of the number of Subaccounts or
Guarantee Periods affected by the transfer. The transfer processing fee
will be deducted from the amount being transferred.
- 15 -
EXHIBIT b(4b)
VALLEY FORGE LIFE INSURANCE COMPANY
QUALIFIED PLAN RIDER
--------------------
This Rider is part of the Contract. This Contract is issued to
or purchased by the trustee of a pension or profit-sharing plan intended to
qualify under section 401(a) of the Code. The following provisions apply and
replace any contrary Contract provisions:
(1) Except as allowed by the qualified pension or
profit-sharing plan of which this Contract is a part, the
Contract may not be transferred, sold, assigned, discounted or
pledged, either as collateral for a loan or as security for
the performance of an obligation or for any other purpose, to
any person other than the Company.
(2) This Contract shall be subject to the provisions, terms
and conditions of the qualified pension or profit-sharing plan
of which the Contract is a part. Any payment, distribution or
transfer under this Contract shall comply with the provisions,
terms and conditions of such plan as determined by the plan
administrator, trustee or other designated plan fiduciary. The
Company shall be under no obligation under or by reason of
issuance of this Contract either (a) to determine whether any
such payment, distribution or transfer complies with the
provisions, terms and conditions of such plan or with
applicable law, or (b) to administer such plan, including,
without limitation, any provisions required by the Retirement
Equity Act of 1984.
(3) Notwithstanding any provision to the contrary in this
Contract or the qualified pension or profit-sharing plan of
which this Contract is a part, the Company reserves the right
to amend or modify this Contract or Rider to the extent
necessary to comply with any law, regulation, ruling or other
requirement deemed by the Company to be necessary to establish
or maintain the qualified status of such pension or
profit-sharing plan.
Except as otherwise set forth above, this Rider is subject to
the exclusions, definition, and provisions of the Contract.
EXHIBIT b(4c)
VALLEY FORGE LIFE INSURANCE COMPANY
INDIVIDUAL RETIREMENT ANNUITY RIDER
-----------------------------------
This Rider is part of the Contract. The Contract as amended is
intended to qualify as an individual retirement annuity under Section 408(b) of
the Code. The following provisions apply and replace any contrary provisions of
the Contract:
(1) You shall be the Owner. Any provision of the Contract that
would allow joint ownership, or that would allow more than 1
person to share distributions, is deleted.
(2) The Contract is not transferable or assignable (other than
pursuant to a divorce decree in accordance with applicable
law) and is established for the exclusive benefit of You and
Your beneficiaries. It may not be sold, assigned, alienated,
or pledged as collateral for a loan or as security.
(3) Your entire interest in the Contract shall be
nonforfeitable.
(4) Purchase payments shall be in cash. The following purchase
payments shall be accepted under this Contract:
(a) Rollover contributions described in Sections
402(c), 403(a)(4), 403(b)(8) and 408(d)(3) of
the Code;
(b) Amounts transferred from another individual
retirement account or annuity;
[(c) Contributions pursuant to a Simplified Employee
Pension as provided in Section 408(k) of
the Code;]
[(d) Other premium payments in an amount not in
excess of $2,000 for any year.]
You shall have the sole responsibility for determining whether
any purchase payment meets applicable income tax requirements.
(5) This Contract does not require any particular number or
amount of purchase payments. Any refund of purchase payments
(other than those attributable to excess contributions) must
be applied before the close of the calendar year following the
year of the refund toward additional purchase payments or the
purchase of additional benefits.
(6) The Annuity Date is the date your entire Contract Value
will be distributed or commence to be distributed to you. Your
Annuity Date shall be no later than April 1 of the calendar
year following the calendar year in which you attain age 70
1/2. You shall have the sole responsibility for requesting a
distribution that complies with this Rider and applicable law.
<PAGE>
(7) With respect to any amount which becomes payable under the
Contract during your lifetime, such payment shall commence on
or before the Annuity Date and shall be payable in
substantially equal amounts, no less frequently than annually.
Payments shall be made in the manner as follows:
(a) in a lump sum, or
<PAGE>
(b) over your life, or
(c) over the lives of you and your designated
Beneficiary, or
(d) over a period certain not exceeding your life
expectancy, or
(e) over a period certain not exceeding the joint
and last survivor expectancy of you and your
designated Beneficiary.
If your entire interest is to be distributed in other than a
lump sum, then the minimum amount to be distributed each year
(commencing with the calendar year following the calendar year
in which you attain age 70 1/2 and each year thereafter) shall
be determined in accordance with Code Section 408(b)(3) and
the regulations thereunder, including the incidental death
benefit requirements of section 401(a)(9)(G) of the Code, the
regulations thereunder, and the minimum distribution
incidental benefit requirement of Proposed Income Tax
Regulation section 1.401(a)(9)-2. Payments must be either
nonincreasing or may increase only as provided in Proposed
Income Tax Regulation section 1.401(a)(9)-1, Q&A F-3.
(8) If you die after distribution of your interest has
commenced, the remaining portion of such interest will
continue to be distributed at least as rapidly as under the
method of distribution being used prior to your death.
If you die before distribution has begun, the entire interest
must be distributed no later than December 31 of the calendar
year in which the fifth anniversary of your death occurs.
However, proceeds which are payable to a named Beneficiary who
is a natural person may be distributed in substantially equal
installments over the lifetime of the Beneficiary or a period
certain not exceeding the life expectancy of the Beneficiary
provided such distribution begins not later than December 31
of the calendar year in which your death occurred. If the
Beneficiary is your surviving spouse, the Beneficiary may
elect not later than December 31 of the calendar year in which
the fifth anniversary of your death to receive equal or
substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the
date on which you would have attained age 70 1/2. Minimum
payments will be calculated in accordance with Code Section
408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any
of your children will be treated as if it had been paid to
your surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age
of majority.
<PAGE>
If you die before your entire interest has been distributed,
no additional purchase payments will be accepted under this
Contract after your death unless the Beneficiary is your
surviving spouse.
(9) If your spouse is not the named Beneficiary, the method of
distribution selected will assure that at least 50% of the
present value of the amount available for distribution is paid
within your life expectancy and that such method of
distribution complies with the requirements of Code Section
408(b)(3) and the regulations thereunder.
(10) For purposes of the foregoing provisions, life expectancy
and joint and last survivor expectancy shall be determined by
use of the expected return multiples in Tables V and VI of
Treasury Regulation ss.1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. In the case of
distributions under paragraph (7) of this Rider, your life
expectancy of you and your Beneficiary will be initially
determined on the basis of your attained ages in the year you
- 2 -
<PAGE>
reach 70 1/2. In the case of a distribution under paragraph
(8) of this Rider, life expectancy will be initially
determined on the basis of your Beneficiary's attained age in
the year distributions are required to commence. Unless you
(or your spouse) elect otherwise prior to the time
distributions are required to commence, your life expectancy
and, if applicable, your spouse's life expectancy will be
recalculated annually based on your attained ages in the year
for which the required distribution is being determined. The
life expectancy of a nonspouse Beneficiary will not be
recalculated.
The annual distribution required to be made by your Annuity
Date is for the calendar year in which your reached age 70
1/2. Annual payments for subsequent years, including the year
in which your Annuity Date occurs, must be made by December 31
of that year. The amount distributed for each year shall equal
or exceed the Contract Value as of the close of business on
December 31 of the preceding year, divided by the applicable
life expectancy or joint and last survivor expectancy.
You may satisfy the minimum distribution requirements under
section 408(b)(3) of the Code by receiving a distribution from
one IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more IRAs. For
this purpose, if you own two or more IRAs, you may use the
alternative method described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements.
(11) We reserve the right to amend this Contract or Rider to
the extent necessary to qualify as an individual retirement
annuity for federal income tax purposes.
(12) This Rider is effective as of the Contract Effective
Date.
This Rider is subject to all the exclusions, definitions and provisions of the
Contract which are not inconsistent herewith.
- 3 -
EXHIBIT b(4d)
VALLEY FORGE LIFE INSURANCE COMPANY
WAIVER OF SURRENDER CHARGE RIDER
NURSING HOME CONFINEMENT - TERMINAL MEDICAL CONDITION - TOTAL DISABILITY
This rider is part of the Contract and is issued in consideration of the
application. The rider is subject to all terms and conditions of the Contract
unless the Company states otherwise.
Waiver of Surrender Charge - The Company will waive the surrender charge upon
any surrender or withdrawal if:
1. The Owner has been confined to an eligible nursing home for a
period of at least 90 consecutive days and remains confined at
the time of the surrender or withdrawal; or
2. The Owner has a terminal medical condition; or
3. The Owner is less than age 65, and has sustained a permanent
and total disability since the Contract Effective Date.
"Confined" means confined as an inpatient. Confinement must commence while the
Contract is in force and must be required by a physical or mental sickness or
disease that first manifests itself while the Contract is in force, or by an
accidental bodily injury sustained while the Contract is in force.
An "eligible nursing home" means an institution or special nursing unit of a
hospital that meets at least one of the following requirements:
1. The facility is approved by Medicare or Medicaid as a provider
of skilled nursing care services; or
2. The facility is licensed as a skilled nursing home or as an
intermediate care facility by the state in which it is
located; or
3. The facility meets all of the requirements listed below:
a. It is licensed as a nursing home facility by the
state in which it is located;
b. Its primary function is to provide skilled,
intermediate, or custodial nursing care to persons
who are unable to care for themselves due to age,
illness, or physical or mental infirmity;
c. It is engaged in providing continuous room and board
accommodations to three or more persons;
d. It is under the supervision of a registered nurse or
licensed practical nurse;
e. It maintains a daily medical record of each patient;
and
f. It maintains control and records for all medications
dispensed.
<PAGE>
A "terminal medical condition" means a non-correctable medical condition that
was first diagnosed by a licensed physician while the Contract is in force and
that, with reasonable medical certainty, is expected to result in death within
12 months or less from the date of the diagnosis.
A "licensed physician" means a medical practitioner holding a currently
effective license issued by the appropriate medical doctor licensing and
accreditation board of the state where the Owner is treated, and practicing
within the scope of his or her license. A licensed physician must be someone
other than the Owner, the Annuitant, or a person who is related to either the
Owner or the Annuitant by blood or marriage.
"Permanent and total disability" means complete inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that with reasonable medical certainty is expected to be
irreversible, and that has continued for a period of at least 90 consecutive
days.
To request a waiver of the Surrender Charge based on confinement in an eligible
nursing home, an Owner must provide the Company with a certification signed by a
licensed physician and stating that the Owner has been confined to an eligible
nursing home for at least 90 consecutive days and remains so confined as of the
date of the certification. The certification also must contain any other
information required by the Company. The Company may require a second medical
opinion by a licensed physician chosen and compensated by the Company.
To request a waiver of the Surrender Charge based on the existence of a terminal
medical condition, an Owner must provide the Company with a certification signed
by a licensed physician and stating that the Owner has been diagnosed with a
terminal medical condition. The certification also must contain any other
information required by the Company. The Company may require a second medical
opinion by a licensed physician chosen and compensated by the Company.
To request a waiver of the Surrender Charge based on a total disability, an
Owner must provide the Company with a certification signed by a licensed
physician and stating that the Owner has been diagnosed with a totally disabling
medical condition. The certification also must contain any other information
required by the Company. The Company may require a second medical opinion by a
licensed physician chosen and compensated by the Company.
This rider will terminate upon the earlier of the termination of the Contract or
a request by an Owner, provided that the Company receives Written Notice at
least 30 days prior to the date such termination is to take effect.
Signed for the Valley Forge Life Insurance Company
CNA Plaza, Chicago, Illinois 60685
______________________
Chairman of the Board
Exhibit b (5)
APPLICATION
FOR AN INDIVIDUAL DEFERRED ANNUITY CONTRACT
In this application Valley Forge Life Insurance Company is referred to as "we",
"our" or "us".
<TABLE>
<CAPTION>
<S> <C> <C>
1. Desired Contract:_________________________________________________
2. Proposed Annuitant:
Name:______________________________________________________________ Social Security #:_______________________________
(Last) (First) (Initial)
Address:_____________________________________________________________________________________________________________________
(Street) (City) (State) (Zip)
Sex: |_| Male |_| Female Date of Birth:
(Month) (Day) (Year)
3. Proposed Owner (if other than proposed annuitant):
Name:______________________________________________________________________________________________________________________
_____________________________________________________Tax I.D. or Social Security #:___________________________________
Address:_____________________________________________________________________________________________________________________
(Street) (City) (State) (Zip)
4. Proposed Contingent Owner
Name: ____________________________________________________Tax I.D. or Social Security #:___________________________________
Address:_____________________________________________________________________________________________________________________
(Street) (City) (State) (Zip)
5. Beneficiary (include name and relationship to proposed annuitant):___________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
6. Desired Annuity Date:________________________________________________________________________________________________________
(Month) (Day) (Year)
7. Desired Annuity Option. (If no box is checked, the contract will be issued with the Life Annuity with 10 Year Certain Period
as the annuity option.)
|_| Life Annuity
|_| Life Annuity with 10 Year Certain Period
|_| Life Annuity with 20 Year Certain Period
|_| Joint Life and Survivorship Annuity
|_| Joint Life Annuity with Payments Reduced One-Half at Payee's Death
|_| Other______________________________________________________________
If a joint life annuity is elected, complete the following for the joint
payee:
Name:_________________________________________________________________ Social Security #:_______________________________
(Last) (First) (Initial)
Sex: |_| Male |_| Female Date of Birth:_____________________________________________________
(Month) (Day) (Year)
8. The annuity will be used in the type of plan checked below:
|_|Corporate Qualified Pension Plan |_|Rollover Individual Retirement Annuity
|_|HR-10 |_|Tax Sheltered Annuity
|_|Simplified Employee Pension Plan |_|Contract will not be used in tax-qualified plan
|_|Regular Individual Retirement Annuity |_|Other:__________________________________________
|_|Spousal Individual Retirement Annuity
V206-356-A (also complete other side)
<PAGE>
9. Contribution Submitted with Application: $_________________________
10. Will the contract applied for replace or change any life insurance or annuity coverage in force on the life of the proposed
annuitant? |_| Yes |_|
No
11. Corrections, notations, and changes made by us.____________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
The proposed annuitant will be the owner of the contract unless a different
owner is named in item 3 above. The proposed annuitant declares that all
statements and answers above are made a part of this application and that they
are complete and true, to the best of his or her knowledge and belief, and
correctly recorded. If we accept this application, the entire contract will
consist of this application, the contract to which it is attached and riders
attached to the contract. If the owner accepts the contract it means he or she
agrees to corrections, notations and changes made in item 11 above, except in
those states where written consent is required.
Dated at___________________________________________________ Signed______________________________________________________
Proposed Annuitant
This_______________Day of______________________ , 19_______ Signed______________________________________________________
Applicant (if other than proposed annuitant)
Witness____________________________________________________ By__________________________________________________________
Agent Signed and title of person signing for
corporation, partnership or trust as
applicant
V206-356-A
AGENT'S REPLACEMENT QUESTION
Do you have knowledge or reason to believe that the annuity applied for by this
application will replace or change any insurance or annuity coverage currently
in force on the life of the proposed annuitant? |_| Yes |_| No
Dated___________________________________________________________ Signed_________________________________________________________
Agent
AGENT TRANSMITTAL
NOTE: THE WRITING AGENT'S NAME MUST BE PRINTED. THE NAME ENTERED MUST BE IDENTICAL TO THE SA NAME ON
THE AGENT'S STATE LICENSE.
Agent Name______________________________________________________ Agent Code _______________________ Percent_____________________
Agent Name______________________________________________________ Agent Code _______________________ Percent_____________________
</TABLE>
<PAGE>
VFL MAST
SUPPLEMENT TO APPLICATION
(To Be Signed By the Applicant and Returned With the Application)
1. ALLOCATIONS: On issued contracts, your initial Net Purchase Payment
will be allocated as indicated below. Selections must total 100%. Minimum
initial allocation to any single subaccount is 1%. No fractional percentages.
These percentages will apply in future years but may be changed at any time
by the owner. (If no allocation is indicated, Prime Money Fund will be
automatically selected.)
Federated Advisers MFS Asset Management, Inc.
___% Corporate Bond Fund ___% Emerging Growth Series
___% Prime Money Fund ___% Growth with Income Series
___% Utility Fund ___% Limited Maturity Series
___% Research Series
___% Total Return Series
Fidelity Management and Research Company
___% Asset Manager Portfolio SoGen
___% Contrafund Portfolio ___% Overseas Portfolio
___% Equity-Income Portfolio
___% Index 500 Portfolio Van Eck Associates Corporation
___% Emerging Markets Fund
Fred Alger Management, Inc. ___% Gold and Natural Resources Fund
___% Growth Portfolio
___% MidCap Growth Portfolio Guaranteed Interest Option
___% Small Capitalization Portfolio ___% 1 Year ___% 7 Year
___% 3 Year ___% 10 Year
___% 5 Year
2. SUITABILITY:
A. Do you understand that the death benefit and surrender value may
increase or decrease depending on the investment experience of the
variable account? Yes___ No___
B. Do you believe that this policy will meet your insurance needs
and financial objectives? Yes ___ No ___
C. Have you received a current copy of the prospectus? Yes ___ No ___
Date___________________ Signed______________________________
Mo/Day/Year
Exhibit b (6a)
CERTIFICATION OF AMENDMENT
TO THE ARTICLES OF AGREEMENT OF
VALLEY FORGE LIFE INSURANCE COMPANY
372957-010
--------------------------
TO THE INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA:
Sir:
In compliance with the requirements of Section 322 of the Act of the
General Assembly of the Commonwealth of Pennsylvania approved the seventeenth
day of May, 1921, as amended, the following amendment to the Articles of
Agreement of Valley Forge Life Insurance Company, located at Reading,
Pennsylvania, (the Articles of which were approved August 9, 1956, and recorded
in the Department of State at 3-1-56.24, Film 231 to 236, inclusive, and amended
from time to time) together with a copy of the resolutions authorizing the same
and the number of votes cast for or against the same by Written Consent of the
Stockholders, in lieu of a meeting, are hereby certified for approval.
Valley Forge Life Insurance Company does hereby certify: That the
stockholders of said Company, representing all of the 48,000 authorized and
issued shares, by Written Consent, waived notice of a special meeting of
stockholders and consented to the following actions as of February 15, 1989, in
lieu of a meeting:
WHEREAS the Board of Directors of Valley Forge Life Insurance Company,
by written consent of all of the Directors, effective February 15,
1989, duly adopted resolutions proposing and recommending the adoption
of an amendment to the Articles of Agreement of the Company.
RESOLVED: That Article 5th of the Articles of Agreement of the Company
now reading as follows:
"5th. The amount of capital stock of the Company is One
Million Two Hundred Thousand Dollars ($1,200,000) divided into
Forty-eight Thousand Shares (48,000) of the par value of
Twenty-five Dollars ($25.00) each."
<PAGE>
be amended to read as follows:
"5th. The authorized capital of the Company shall be Ten
Million Dollars ($10,000,000). The number of authorized common
shares shall be Two Hundred Thousand (200,000). The par value
of each common share shall be Fifty Dollars ($50.00)."
FURTHER RESOLVED: That the President, or any Vice President, is
authorized and empowered, when and if such amendment to the Articles of
Agreement of the Company shall become effective, to (1) sell an
additional Two Thousand Shares (2,000) to Continental Assurance Company
at a price of Fifty Dollars ($50.00) per share, and upon delivery of
such shares to Continental Assurance Company to add the purchase price
of One Hundred Thousand Dollars ($100,000) to paid-up capital; and (2)
transfer from unassigned funds (surplus) to paid-up capital One Million
Two Hundred Thousand Dollars ($1,200,000) representing the increase in
par value of the Forty-eight Thousand (48,000) outstanding shares from
Twenty-five Dollars ($25.00) per share to Fifty Dollars ($50.00) per
share.
That there were cast in favor of the foregoing resolutions 48,000
votes, representing all of the authorized and issued shares of the Company, and,
therefore, as the vote in favor was unanimous, the resolutions were duly
approved. Said resolutions and the number of votes cast for or against the
resolutions aforesaid were spread upon the records of the Company.
IN WITNESS WHEREOF, the said Company has to these presents affixed its
corporate seal and has caused the same to be subscribed and attested by its
President and Corporate Secretary on the 31st day of May, 1989.
VALLEY FORGE LIFE INSURANCE COMPANY
By S/EDWARD J. NOHA
----------------------------------------
Edward J. Noha, President
ATTEST:
S/THOMAS R. IGLESKI
- --------------------------------------------------------------
Thomas R. Igleski, Corporate Secretary
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
Thomas R. Igleski, being duly sworn, deposes and says that the facts
set forth in the foregoing certificate are correct.
S/THOMAS R. IGLESKI
----------------------------------------------
Thomas R. Igleski
Subscribed and sworn to before me this 31st day of May, 1989.
S/MARQUERITE J. MILLER
-------------------------------------
Notary Public
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
Thomas R. Igleski, being duly sworn, deposes and says that he is the
Vice President and Corporate Secretary of Valley Forge Life Insurance Company,
an insurance corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, with its Home office in Reading, Pennsylvania; and
further certifies that the following is a true and correct copy of resolutions
adopted by the unanimous written consent of the Board of Directors of said
Valley Forge Life Insurance Company, dated February 15, 1989, in lieu of a
meeting, and that the same have not been altered, amended or repealed and are
now in force and effect:
WHEREAS Section 409 of the Maine Insurance Code has been amended to
increase the minimum capital stock requirement for companies authorized
to do business in that state to $2,500,000; and
WHEREAS the Articles of Agreement of Valley Forge Life Insurance
Company provide for capital stock in the amount of $1,200,000 and
additional capital of $1,300,000 is necessary to retain the Company's
authority to write insurance in Maine.
RESOLVED: That Article 5th of the Articles of Agreement of the Company,
as heretofore amended, be further amended to read as follows:
"5th. The authorized capital of the Company shall be Ten
Million Dollars ($10,000,000). The number of authorized common
shares shall be Two Hundred Thousand (200,000). The par value
of each common share shall be Fifty Dollars ($50.00)."
FURTHER RESOLVED: That the Board of Directors hereby directs that said
proposed amendment be submitted to the stockholders of the Company on
February 15, 1989 for their unanimous consent.
FURTHER RESOLVED: That the President, or any Vice President, is
authorized and empowered, when and if such amendment to the Articles of
Agreement of the Company shall become effective, to (1) sell an
additional Two Thousand Shares (2,000) to Continental Assurance Company
at a price of Fifty Dollars ($50.00) per share, and upon delivery of
such shares to Continental Assurance Company to add the purchase price
of One Hundred Thousand Dollars ($100,000) to paid-up capital; and (2)
transfer from unassigned funds (surplus) to paid-up capital One Million
Two Hundred Thousand Dollars ($1,200,000) representing the increase in
par value of Forty-eight Thousand (48,000) outstanding shares from
<PAGE>
Twenty-five Dollars ($25.00) per share to Fifty Dollars ($50.00) per
share.
S/THOMAS R. IGLESKI
----------------------------------------------
Vice President and
Corporate Secretary
Subscribed and sworn to before me this 31st day of May, 1989.
S/MARQUERITE J. MILLER
-----------------------------------------------------
Notary Public
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
Thomas R. Igleski, being duly sworn, deposes and says that he is the
Vice President and Corporate Secretary of Valley Forge Life Insurance Company,
an insurance corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, with its home office in Reading, Pennsylvania; and
further certifies that attached hereto is a true and exact copy of the unanimous
written consent of the stockholders of said Valley Forge Life Insurance Company,
dated February 15, 1989, in lieu of a special meeting of the stockholders.
S/THOMAS R. IGLESKI
----------------------------------------------
Vice President and
Corporate Secretary
Subscribed and sworn to before me this 31st day of May, 1989.
S/MARQUERITE J. MILLER
-----------------------------------------------------
Notary Public
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE STOCKHOLDERS
OF
VALLEY FORGE LIFE INSURANCE COMPANY
The undersigned, being all of the stockholders of Valley Forge Life Insurance
Company, waive notice of a special meeting of stockholders and consent to the
following actions in lieu of a meeting:
WHEREAS the Board of Directors of Valley Forge Life Insurance Company,
by written consent of all of the Directors, effective February 15,
1989, duly adopted resolutions proposing and recommending the adoption
of an amendment to the Articles of Agreement of the Company.
RESOLVED: That Article 5th of the Articles of Agreement of the Company
now reading as follows:
"5th. The amount of capital stock of the Company is One
Million Two Hundred Thousand Dollars ($1,200,000) divided into
Forty-eight Thousand Shares (48,000) of the par value of
Twenty-five Dollars ($25.00) each."
be amended to read as follows:
"5th. The authorized capital of the Company shall be Ten
Million Dollars ($10,000,000). The number of authorized common
shares shall be Two Hundred Thousand (200,000). The par value
of each common share shall be Fifty Dollars ($50.00)."
FURTHER RESOLVED: That the President, or any Vice President, is
authorized and empowered, when and if such amendment to the Articles of
Agreement of the Company shall become effective, to (1) sell an
additional Two Thousand Shares (2,000) to Continental Assurance Company
at a price of Fifty Dollars ($50.00) per share, and upon delivery of
such shares to Continental Assurance Company to add the purchase price
of One Hundred Thousand Dollars ($100,000) to paid-up capital; and (2)
transfer from unassigned funds (surplus) to paid-up capital One Million
Two Hundred Thousand Dollars ($1,200,000) representing the increase in
par value of the Forty-eight Thousand (48,000) outstanding shares from
Twenty-five Dollars ($25.00) per share to Fifty Dollars ($50.00) per
share.
<PAGE>
The undersigned direct that this Consent be filed with the corporate records of
the Company and be considered for all purposes as if voted upon at a special
meeting of stockholders held February 15, 1989.
CONTINENTAL ASSURANCE COMPANY (47,991 Votes)
By: S/THOMAS R. IGLESKI
---------------------------------------------
Vice President and
Corporate Secretary
S/DENNIS H. CHOOKASZIAN (1 Vote)
----------------------------------------------
Dennis H. Chookaszian
S/BERNARD L. HENGESBAUGH (1 Vote)
---------------------------------------------
Bernard L. Hengesbaugh
S/THOMAS R. IGLESKI (1 Vote)
---------------------------------------------
Thomas R. Igleski
S/DONALD M. LOWRY (1 Vote)
--------------------------------------------
Donald M. Lowry
S/KEVIN J. MCHUGH (1 Vote)
--------------------------------------------
Kevin J. McHugh
S/CAROLYN L. MURPHY (1 Vote)
--------------------------------------------
Carolyn L. Murphy
S/EDWARD J. NOHA (1 Vote)
--------------------------------------------
Edward J. Noha
S/LAURENCE A. TISCH (1 Vote)
--------------------------------------------
Laurence A. Tisch
S/PRESTON R. TISCH (1 Vote)
---------------------------------------------
Preston R. Tisch
Dated: February 15, 1989
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
INSURANCE DEPARTMENT
Harrisburg, PA
July 3 , 1989
------------------------------
TO THE SECRETARY OF STATE OF THE
COMMONWEALTH OF PENNSYLVANIA
In accordance with the provisions and requirements of Sections 322 of
the Act of the General Assembly of the Commonwealth of Pennsylvania, entitled
"An Act relating to insurance; amending, revising and consolidating the law
providing for the incorporation of insurance companies, and the regulation,
supervision and protection of home and foreign insurance companies." etc.,
approved the 17th day of May, 1921, I am submitting herewith an Amendment to the
Charter of Valley Forge Life Insurance Company.
I hereby certify that I have examined the above and foregoing
Amendment, and find this instrument complies with all procedural and material
requirements of this Department. This Amendment should be approved.
S/CONSTANCE B. FOSTER
--------------------------
CONSTANCE B. FOSTER
INSURANCE COMMISSIONER
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
Secretary's Office
Pennsylvania ss:
Witness my Hand and Seal of the Office, at Harrisburg, Pennsylvania,
this 10th day of July A.D. 1989.
S/JAMES J. HAGGERTY
-----------------------------
Secretary Of The Commonwealth
<PAGE>
CERTIFICATION OF AMENDMENT
TO THE ARTICLES OF AGREEMENT OF
VALLEY FORGE LIFE INSURANCE COMPANY
372957
--------------------------
TO THE INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA:
Sir:
In compliance with the requirements of Section 322 of the Act of the
General Assembly of the Commonwealth of Pennsylvania approved the seventeenth
day of May, 1921, as amended, the following amendment to the Articles of
Agreement of Valley Forge Life Insurance Company, located at Reading,
Pennsylvania, (the Articles of which were approved August 9, 1956, and recorded
in the Department of State at 3-1-56.24, Film 231 to 236, inclusive, and amended
from time to time) together with a copy of the resolutions authorizing the same
and the number of votes cast for or against the same by Written Consent of the
Stockholders, in lieu of a meeting, are hereby certified for approval.
Valley Forge Life Insurance Company does hereby certify: That the
stockholders of said Company, representing all of the 44,000 authorized and
issued shares, by Written Consent, waived notice of the annual meeting of
stockholders scheduled to be held on the 8th day of April, 1987, and consented
to the following action in lieu of a meeting:
RESOLVED: That the Articles of Agreement of Valley Forge Life Insurance
Company, as heretofore amended, be further amended to provide for an
increase in the capital stock of the Company from $1,100,000 to
$1,200,000 as set forth in Article 5th, so that said Article shall, as
amended, read as follows:
"5th. The amount of capital stock of the Company is One
Million Two Hundred Thousand Dollars ($1,200,000) divided into
Forty-eight Thousand Shares (48,000) of the par value of
Twenty-five Dollars($25.00) each."
FURTHER RESOLVED: That the President, Corporate Secretary, and any
other corporate officers of the Company be and hereby are authorized
and directed to take any and all action which may be necessary or
proper to effectuate the foregoing amendment of the Articles of
<PAGE>
Agreement of the Company, including, but without being limited to, the
execution, certification, filing and recording of all documents, with
or without the seal of the Company, required by law for said purpose.
That there were cast in favor of the foregoing resolutions 44,000
votes, representing all of the authorized and issued shares of the Company, and,
therefore, as the vote in favor was unanimous, the resolutions were duly
approved. Said resolutions and the number of votes cast for or against the
resolutions aforesaid were spread upon the records of the Company.
IN WITNESS WHEREOF, the said Company has to these presents affixed its
corporate seal and has caused the same to be subscribed and attested by its
President and Corporate Secretary on the 19th day of May, 1987.
VALLEY FORGE LIFE INSURANCE COMPANY
By S/E. J. NOHA
----------------------------------------
President
ATTEST:
S/THOMAS R. IGLESKI
- --------------------------------------------------------------
Corporate Secretary
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
Thomas R. Igleski, being duly sworn, deposes and says that the facts
set forth in the foregoing certificate are true and correct.
S/THOMAS R. IGLESKI
----------------------------------------------
Thomas R. Igleski
Subscribed and sworn to before me this 19th day of May, 1987.
S/MARQUERITE J. MILLER
----------------------------------------------
Notary Public
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
INSURANCE DEPARTMENT
Harrisburg, PA, May 28 ,1987
------------------------------
TO THE SECRETARY OF STATE OF
THE COMMONWEALTH OF PENNSYLVANIA:
In accordance with the provisions and requirements of Section 322 of
the Act of the General Assembly of the Commonwealth of Pennsylvania, entitled
"An Act relating to insurance; amending, revising and consolidating the law
providing for the incorporation of insurance companies, and the regulation,
supervision and protection of home and foreign insurance companies," etc.,
approved the 17th day of May 1921, I am submitting herewith a Certificate of
Amendment of the Articles of Agreement of Valley Forge Life Insurance Company,
Reading, Pennsylvania.
I hereby certify that I have examined the above and foregoing Amendment
of the Articles of Agreement of Valley Forge Life Insurance Company, Reading,
Pennsylvania, and find this instrument complies with all procedural and material
requirements of this Department. This Amendment should be approved.
S/CONSTANCE B. FOSTER
----------------------------------------------
Constance B. Foster
Insurance Commissioner
<PAGE>
DEPARTMENT OF STATE
Secretary's Office
Pennsylvania SS:
Witness my Hand and Seal of Office at
- --------------------------------------------------------------------
this day of June 4, 1987.
- ------------------------------
S/JAMES J. HAGGERTY
---------------------------------------------
Secretary of the Commonwealth
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
June 11, 1987
TO ALL TO WHOM THESE PRESENTS SHALL COME: GREETING:
IN RE: "VALLEY FORGE LIFE INSURANCE COMPANY"
I, James J. Haggerty, SECRETARY OF THE COMMONWEALTH OF THE COMMONWEALTH
OF PENNSYLVANIA DO HEREBY CERTIFY THAT THE FOREGOING AND ANNEXED IS A TRUE AND
CORRECT PHOTOCOPY OF Articles of Amendment to the Articles of Agreement
which appear of record in this Department.
IN TESTIMONY WHEREOF, I
HAVE HEREUNTO SET MY HAND
AND CAUSED THE SEAL OF THE
SECRETARY'S OFFICE TO BE
AFFIXED, THE DAY AND YEAR
ABOVE WRITTEN.
S/JAMES J. HAGGERTY
------------------------------
Secretary of the Commonwealth
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
INSURANCE DEPARTMENT
I, MICHAEL L. BROWNE Insurance Commissioner of the Commonwealth of
Pennsylvania, do hereby certify that the attached is a full, true and correct
copy of the Certification of Amendment to the Articles of Agreement, of
VALLEY FORGE LIFE INSURANCE COMPANY
located in Reading, Pennsylvania, as the same appears of record and remains on
file with this Department.
IN WITNESS WHEREOF, I
have hereunto set my
hand, and affixed the
Official Seal of this
Department at the City
of Harrisburg this
23rd day of December 19 81
----- ------------- -----
S/MICHAEL L BROWNE
-------------------------------------------------
Insurance Commissioner
-------------------------------------------------
Deputy Insurance Commissioner
<PAGE>
CERTIFICATION OF AMENDMENT
TO THE ARTICLES OF AGREEMENT OF
VALLEY FORGE LIFE INSURANCE COMPANY
--------------------------
TO THE INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA:
Sir:
In compliance with the requirements of Section 322 of the Act of the
General Assembly of the Commonwealth of Pennsylvania approved the seventeenth
day of May, 1921, as amended, the following amendments to the Articles of
Agreement of Valley Forge Life Insurance Company, located at Reading,
Pennsylvania, (the Articles of which were approved August 9, 1956, and recorded
in the Department of State at 3-1-56.24, Film 231 and 236, inclusive, and
amended from time to time) together with a copy of the resolutions authorizing
the same and the number of votes cast for or against the same at a Special
Meeting of the Stockholders called for that purpose, are hereby certified for
approval.
Valley Forge Life Insurance does hereby certify: That a Special Meeting
of Stockholders of said Company was held at the office of the Company, 412
Washington Street, Reading, Pennsylvania, on the 15th day of June, 1972, at the
call of the directors and that notice thereof of the object of said meeting as
may be required by the laws of the Commonwealth of Pennsylvania and by the
By-Laws was duly waived by all Stockholders of the Company.
That at the said meeting there were presented the following
resolutions:
RESOLVED: That the Articles of Agreement, as heretofore
amended, be further amended to restate the powers of the
Company as set forth in Article 2nd and Article 6th and to
provide for an increase of its capital stock from $1,000,000
to $1,100,000 as set forth in Article 5th, so that said
Articles shall, as amended, read as follows:
"2nd. The class of insurance for which the Company is
constituted is Clause 1 and 2, Paragraph (a), as
provided in Section 202 of the above recited Act,
viz:
<PAGE>
(1) To insure the lives of persons, and
every insurance appertaining thereto;
to grant and dispose of annuities,
including variable annuity contracts
under which values or payments or both
vary in relation to the investment
experience of the issuer or a separate
account or accounts maintained by the
issuer and to insure against personal
injury, disablement, or death
resulting from traveling or general
accidents, and against disablement
resulting from sickness, and every
insurance appertaining thereto, when
written as a part of a policy of life
insurance.
(2) To insure against personal injury,
disablement, or death resulting from
<PAGE>
traveling or general accidents, and
against disablement resulting from
sickness, and every insurance
appertaining thereto.
"5th. The amount of capital stock of the Company is
One Million One Hundred Thousand Dollars ($1,100,000)
divided into Forty-four Thousand Shares (44,000) of
the par value of Twenty-five Dollars ($25.00) each.
"6th. The general objects of the Company are to make
insurance on the Joint Stock Principal against loss
as provided in Clause 1 and 2, Paragraph (a), Section
202 of the above recited Act."
FURTHER RESOLVED: That the President, Secretary, and any other
corporate officers of the Company be and they hereby are
authorized and directed to take any and all action which in
the opinion of the President may be necessary or proper to
effectuate the foregoing amendments of the Articles of
Agreement of the Company, including, but without being limited
to, the execution, certification, filing and recording of all
documents, with or without the seal of the Company, required
by law for said purpose.
That there were cast in favor of the foregoing resolutions 40,000
votes, representing all of the authorized and outstanding capital shares of the
Company, and, therefore, as the vote in favor was unanimous, the resolutions
were duly approved. Said resolutions and the number of votes cast for or against
the resolutions aforesaid were spread upon the records of the Company.
IN WITNESS WHEREOF, the said Company has to these presents affixed its
corporate seal and has caused the same to be subscribed and attested by its
President and Secretary on the 11th day of September, 1972.
VALLEY FORGE LIFE INSURANCE COMPANY
By S/JACQUE W. SAMMET
----------------------------------------------
President
Attest S/R. GREGORY DENNE
-------------------------------------------
Secretary
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
R. Gregory Denne, being duly sworn, deposes and says that the
facts set forth in the foregoing certificate are correct.
S/R. GREGORY DENNE
----------------------------------------------
R. Gregory Denne
Subscribed and sworn to before me this 11th day of September, 1972.
S/MARQUERITE J. MILLER
----------------------------------------------
Notary Public
My Commission Expires December 4, 1972
<PAGE>
INSURANCE DEPARTMENT
Harrisburg, Pa.
October 18, 1972
------------------
TO THE ATTORNEY GENERAL OF THE COMMONWEALTH OF PENNSYLVANIA:
In accordance with the provisions and requirements of #322 of the Act
of the General Assembly of the Commonwealth of Pennsylvania, entitled, "An Act
relating to insurance; amending, revising and consolidating the law providing
for the incorporation of insurance companies, and the regulation, supervision,
and protection of home and foreign insurance companies." etc., approved the 17th
day of May, A. D., 1921, I am submitting herewith amendment to the Articles of
Agreement of Valley Forge Life Insurance Company.
S/HERBERT DENENBY
-------------------------------
Insurance Commissioner
ATTORNEY GENERAL'S OFFICE
Harrisburg, Pa.
November 13, 1942
------------------------------
TO HIS EXCELLENCY, THE GOVERNOR OF THE COMMONWEALTH OF PENNSYLVANIA:
I hereby certify that I have examined the above and foregoing
certificate of amendment to the Articles of Agreement of Valley Forge Life
Insurance Company and find this instrument to be in accordance with the
provisions of an Act of the General Assembly of the Commonwealth of Pennsylvania
entitled, "An Act relating to insurance; amending, revising and consolidating
the law providing for the incorporation of insurance companies, and the
regulation, supervision, and protection of home and foreign insurance companies,
etc.," approved the 17th day of May, A. D., 1921, and not inconsistent with the
Constitution of this Commonwealth and of the United States, and the same is
hereby approved.
---------------------------
Attorney General
<PAGE>
EXECUTIVE CHAMBER
Harrisburg, Pa.
Amendment to the Charter of Valley Forge Life Insurance Company
November 17, 1972
-----------------------
APPROVED:
-----------------------------------------------------------
Governor
ATTEST:
S/C. DELORES TUCKER
- -------------------------------------------------------------
Secretary of the Commonwealth
SECRETARY'S OFFICE
Pennsylvania ss:
WITNESS my Hand and Seal of Office, at Harrisburg, Pa., this 17th day
of November, 1972.
S/C. DELORES TUCKER
--------------------------------
Secretary of the Commonwealth
fmk
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
INSURANCE DEPARTMENT
I, AUDREY R. KELLY Insurance Commissioner of the Commonwealth of Pennsylvania,
do hereby certify that the attached is a full, true and correct photo-copy of
the Articles of Agreement and Amendments thereto of
VALLEY FORGE LIFE INSURANCE COMPANY
located in Reading, Pennsylvania, as the same appears of record and remains on
file in this Department.
IN WITNESS WHEREOF, I
have hereunto set my
hand, and affixed the
Official Seal of this
Department at the City
of Harrisburg this
27th day of August 19 64
------ --------- ----
S/AUDREY R. KELLY
--------------------------------
Insurance Commissioner
--------------------------------
Deputy Insurance Commissioner
<PAGE>
Articles of Agreement
OF THE
VALLEY FORGE LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
Know all Men by these presents:--being of full age, ten of whom are citizens of
the United States, or its territories or possessions,
We, the undersigned, do hereby associate to form an incorporated
company for the purpose of transacting the business of life insurance in
accordance with the provisions of an Act of the General Assembly of the
Commonwealth of Pennsylvania, entitled "An act relating to insurance; amending,
revising and consolidating the law; providing for the incorporation of insurance
companies and the regulation, supervision and protection of home and foreign
insurance companies, Lloyds Associations, reciprocal and inter-insurance
exchanges and fire insurance rating bureaus and the regulation and supervision
of insurance carried by such companies, associations and exchanges, including
insurance carried by the State Workmen's Insurance Fund; providing penalties and
repealing existing laws," approved the seventeenth day of May, A.D. 1921, and
for that purpose do make and sign these as our Articles of Agreement:
1st. The name by which the company shall be known is - - - - - - - - - - -
VALLEY FORGE LIFE INSURANCE COMPANY
------------------------------------------------------------------------------
2nd. The class of insurance for which the company is constituted in Clause 1
--
Paragraph 2 as provided for in Section 202 of the above recited Act, viz: For
----
making insurances
on the lives of persons, and every insurance appertaining thereto; to grant and
-------------------------------------------------------------------------------
dispose of annuities; and to insure against person injury, disablement, or
------------------------------------------------------------------------------
death resulting from traveling or general accidents, and against disablement
-----------------------------------------------------------------------------
resulting from sickness, and very insurance appertaining thereto.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
3rd. The plan or principle on which the business is to be conducted is
the joint stock plan or principle.
<PAGE>
4th. The place in which the company is to be established or located is
Reading, Berks County, Pennsylvania
-----------------------------------------------------------------------------
5th. The amount of capital stock of the Company is Three Hundred Thousand
----------------------
Dollars ($300,000.00)
------------------------------------------------------------------------------
divided into twelve thousand Shares of the par value of twenty-five ($25.00)
---------------- --------------------
dollars each.
6th. The general objects of the Company are to make insurance on the Joint
Stock Principal against loss as provided in Clause 1, , Paragraph(a), Section
----- ----
202 of the above recited Act.
7th. The proposed duration of the Company is perpetual.
8th. The powers which the Company proposes to have and exercise are: To
have succession as herein-before provided; to adopt and have a common seal;
and the same to alter at pleasure; to sue and be sued; and, in general,
to exercise the powers of a corporate body, and make such contracts as may
be necessary to carry out the objects of life insurance on the plan
-----
provided for in this agreement; to purchase or lease such real estate as
may be necessary for a place of business, and for the security of
investments; and to adopt such By-Laws as may from time to time be deemed
necessary.
9th. The subscribers to these articles of agreement have chosen from
their number a President, a Secretary, a Treasurer, and a Board of 11
-------
Directors, who shall continue in office until the first annual meeting of
the stockholders, and until their successors are duly chosen and
qualified, and whose names and residences are as follows:
Name Residence
Harold G. Evans Reading, Pennsylvania President
- ------------------------------- -------------------------------------
Harry W. Lee Reading, Pennsylvania Secretary
- ------------------------------- -------------------------------------
Lewis H. Bernet Reading, Pennsylvania Treasurer
- ------------------------------- -------------------------------------
<PAGE>
Directors
Lewis H. Bernet Dr. Walter A. Rigg
- ----------------------------------- ------------------------------------
Harold G. Evans Kenneth E. Ryan
- ----------------------------------- ------------------------------------
John H. Guenther Albert C. Simmonds, Jr.
- ----------------------------------- ------------------------------------
Sidney D. Kline Paul Thorin
- ----------------------------------- ------------------------------------
Harry W. Lee Ormrod Titus
- ----------------------------------- ------------------------------------
Samuel R. Milbank
- ----------------------------------- -------------------------------------
10th. It is understood and agreed that this instrument shall be executed in
two exact counterparts, each of which so executed shall be deemed to be an
original, and such counterparts shall, together, constitute but one and
the same instrument.
IN WITNESS WHEREOF, The subscribers to 21st day of June ,1956
these articles of agreement have
hereunto subscribed their
------------------ ------
names and places of residence, this
S/LEWIS H. BERNER
...............................................................................
Lewis H. Berner Box 52, Lessport, Reading, Pennsylvania
S/HAROLD G. EVANS 607 Trent Avenue, Wyomissing, Reading, Pennsylvania
- -------------------------------------------------------------------------------
Harold G. Evans
S/JOHN H. GUENTHER 1025 Penn Street, Reading, Pennsylvania
- -------------------------------------------------------------------------------
John H. Guenther
S/SIDNEY D. KLINE 62 Grandview Boulevard, Wyomissing Hills, Pennsylvania
- -------------------------------------------------------------------------------
Sidney D. Kline
S/HARRY W. LEE Muhlenberg Park, R. D. #2, Reading, Pennsylvania
- -------------------------------------------------------------------------------
Harry W. Lee
S/SAMUEL R. MILBANK One East End Avenue, New York 21, New York Pennsylvania
- -------------------------------------------------------------------------------
Samuel R. Milbank
S/DR. WALTER A. RIGG 220 South Fifth Street, Reading, Pennsylvania
- -------------------------------------------------------------------------------
Dr. Walter A. Rigg
S/KENNETH E. RYAN Seafield Lane, West Hampton Beach, New York
- -------------------------------------------------------------------------------
Kenneth E. Ryan
<PAGE>
S/ALBERT C. SIMMONDS, JR. Indian Trail, Harrison, New York
- -------------------------------------------------------------------------------
Albert C. Simmonds, Jr.
Winterthur, Switzerland and 111 John Street,
S/PAUL THORIN New York 38, New York
- -------------------------------------------------------------------------------
Paul Thorin
S/ORMROD TITUS Van Reed Road, R. D. #1, Sinking Spring, Pennsylvania
- -------------------------------------------------------------------------------
Ormrod Titus
Commonwealth of Pennsylvania ss:
County of Berks
-----------------
Before me, the subscriber, a person empowered to receive
acknowledgment of deeds, residing in Reading , in said Commonwealth,
-----------
personally came the within named
Lewis H. Bernet, Harold G. Evans, John H. Guenther, Sidney D. Kline,
- ------------------------------------------------------------------------------
Harry W. Lee, Dr. Walter A. Rigg, Kenneth E. Ryan, Paul Thorin, Ormrod Titus
- ------------------------------------------------------------------------------
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
Before me, the subscriber, a person empowered to receive acknowledgment
of deeds, residing in New York, in said State, personally came the within named
Albert C. Simmonds, Jr. who, in due form of law, acknowledged the within
instrument of writing to be his act and deed, and desires that the same may be
recorded as such.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, this
26th day of June, 1956.
William H. Bode
----------------------------------------------
WILLIAM H. BODE
Notary Public State of New York
No. 41-5364400
Qualified in Queens County
Certificate filed in N. Y. County
Term Expires March 30, 1958
----------------------------------------------
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
Before me, the subscriber, a person empowered to receive acknowledgment
of deeds, residing in Harrison, New York City, personally came the within named
SAMUEL R. MILBANK who, in due form on law, acknowledged the within instrument of
writing to be his act and deed, and desires that the same may be recorded as
such.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, this
26th day of June, 1956.
- -----
S/EDWIN D.C. MARKERT
---------------------------------
Notary Public State of New York
---------------------------------
<PAGE>
who, in due form of law, acknowledged the within instrument of writing to be
their act and deed, and desire that the same may be recorded as such.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, this
21st day of June , 1956.
- ---- ---- --
My commission expires: S/ANNE MAGEE
-----------------------------
January 29, 1959. Anne Magee
(Seal) Notary Public
-----------------------------
-------------------------------
INSURANCE DEPARTMENT
Harrisburg, Pa., July 3, , 19 56
------- -----
To the Attorney General of the Commonwealth of Pennsylvania:
The title of the Company named in the within articles of agreement, namely,
VALLEY FORGE LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
is hereby approved; and I do hereby certify that all of the requirements of an
Act of the General Assembly of the Commonwealth of Pennsylvania, entitled "An
Act relating to insurance; amending, revising and consolidating the law;
providing for the incorporation of insurance companies and the regulation,
supervision and protection of home and foreign insurance companies," &c.,
approved the seventeenth day of May, 1921, in relation to the incorporation of
insurance companies, have been complied with by the - - - - - - - - - - - -
VALLEY FORGE LIFE INSURANCE COMPANY
- ------------------------------------------------------------------------------
S/THOMAS R. BALAKAN
--------------------------------
Deputy Insurance Commissioner
<PAGE>
-------------------------------
ATTORNEY GENERAL'S OFFICE
Harrisburg, Pa., July 26, , 19 56
------- -------
To his Excellency, The Governor of the Commonwealth of Pennsylvania:
- -------------------------------------------------------------------------------
I do hereby certify, that I have examined the above and foregoing
articles of agreement of the VALLEY FORGE LIFE INSURANCE COMPANY
-------------------------------------------
and find this instrument to be in accordance with the provisions of an Act
of the General Assembly of the Commonwealth of Pennsylvania, entitled
"An Act relating to insurance; amending, revising and consolidating the
law; providing for the incorporation of insurance companies and the
regulation, supervision and protection of home and foreign insurance
companies," &c., approved the seventeenth day of May, 1921, and not
inconsistent with the Constitution of this Commonwealth and of the United
States, and the same is hereby approved.
---------------------------------
S/EDWARD L. SPRINGER
---------------------------------
Edward L. Springer
---------------------------------
Deputy Attorney General
<PAGE>
3-1-56.24 235
ENDORSEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ARTICLES OF AGREEMENT
- -------------------------------------------------------------------------------
OF THE
VALLEY FORGE LIFE
- -------------------------------------------------------------------------------
INSURANCE COMPANY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Reading, Pennsylvania
EXECUTIVE DEPARTMENT
OFFICE OF THE GOVERNOR
Harrisburg, Pa., August 9, 1956
--------------------------------------------------------
APPROVED:
Let Letters Patent Issue
S/GEORGE M. LEADER
----------------------------
Governor
Pennsylvania ss:
Witness my Hand and Seal of Office, at Harrisburg, this 9th day of
August A.D. 1956.
S/C.W. TROUT
--------------------------------------
Deputy Secretary of the Commonwealth
--------------------------------------
--------------------------------------
<PAGE>
In the Name and by Authority of the
Commonwealth of Pennsylvania
EXECUTIVE DEPARTMENT
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
WHEREAS, in and by an Act of the General Assembly of the Commonwealth
of Pennsylvania entitled "An Act relating to insurance; amending, revising and
consolidating the law; providing for the incorporation of insurance companies,
and the regulation, supervision, and protection of home and foreign insurance
companies, Lloyds Association, reciprocal and inter-insurance exchanges, and
fire insurance rating bureaus, and the regulation and supervision of insurance
carried by such companies, associations, and exchanges, including insurance
carried by the State Workmen's Insurance Fund; providing penalties; and
repealing existing laws" approved the seventeenth day of May Anno Domini, one
thousand nine hundred and twenty-one, the Governor of this Commonwealth is
authorized and required to issue his L E T T E R S P A T E N T to all
associations formed under the provisions of said Act, in the manner and at the
time therein specified.
AND WHEREAS, The stipulations, conditions and things directed to be
performed in said Act of the General Assembly have been fully compiled with by
VALLEY FORGE LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
THEREFORE, KNOW YE, That under authority of the Constitution and laws
of said Commonwealth in such case made and provided, I DO BY THESE PRESENTS,
which I have caused to be made PATENT, and sealed with the Great Seal of the
Commonwealth, create the association aforesaid a body corporate with power to
use and enjoy all the powers and privileges conferred by the said Act,
aforesaid, and by the said name the said association shall have perpetual
succession and all the privileges and franchises incident to a corporation. And
the said association so incorporated, their successors and assigns, are
generally to be invested with all the rights, powers and privileges, with full
force and effect, and be subject to all the duties, requisites and restrictions
specified and enjoined in and by the said Act of the General Assembly and all
other applicable laws of this Commonwealth.
<PAGE>
GIVEN under my Hand and
the Great Seal of
the Commonwealth, at
the City of
Harrisburg, this 9th
day of August, in
the year of our Lord
one thousand nine
hundred and
fifty-six, and of
the Commonwealth the
one hundred and
eighty-first.
BY THE GOVERNOR: S/GEORGE M. LEADER
------------------------------------------
S/C.W. TROUT
------------------------------------------
Deputy Secretary of the Commonwealth
<PAGE>
Commonwealth Of Pennsylvania
Department of State
OFFICE of the SECRETARY of the COMMONWEALTH
Harrisburg, PA, August 14, 1956
------------------------
Pennsylvania, ss:
I DO HEREBY CERTIFY, From a comparison with the original record or copy thereof,
of which I am by law the designated legal custodian, that the foregoing and
annexed transcript is a full, true and correct copy of Articles of Agreement of
"VALLEY FORGE LIFE INSURANCE COMPANY", dated August 9, 1956, and Letters Patent
issued thereon, and recorded in the Department of State at 3-1-56.24 Film 231 to
236, inclusive.
IN TESTIMONY WHEREOF, I
HAVE HEREUNTO SET MY HAND
AND CAUSED THE SEAL OF THE
SECRETARY'S OFFICE TO BE
AFFIXED, THE DAY AND YEAR
ABOVE WRITTEN.
S/HENRY E. HARNER
------------------------------
Secretary of the Commonwealth
<PAGE>
VALLEY FORGE LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
ELECTION RETURN AUTHORIZING AN INCREASE OF AUTHORIZED CAPITAL STOCK
--------------------------
WAIVER OF NOTICE
To the Directors of VALLEY FORGE LIFE INSURANCE Company
--------------------------------------
We, the undersigned stockholders in the VALLEY FORGE LIFE INSURANCE
---------------------------------
Company, who are holders of the stock of said company, to the
- ------------------
amount set opposite our several names, request that you, by resolution, declare
that it is the desire of the corporation to increase its authorized capital
------------------
stock from $300,000.00 to $1,000,000.00 , and that you, by resolution, call
- ----- ----------- ----------------
a meeting of the stockholders in company to be held on the 19th day of
------------
October ,19 56
- --------------------
for the purpose of voting for or against such increase. And we do hereby waive
the notice of such meeting of the stockholders, required to be given by the
Seventh Section of the Sixteenth Article of the Constitution of the Commonwealth
of Pennsylvania, and by the laws thereof, relating to the increase of capital
stock or indebtedness of corporations, as well as by any By-Law of the Company
requiring notice of such meeting to be given:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
|------------------------|---------------|-------------------------|----------------|
| NAME | No. of Shares |NAME | No. of Shares |
|------------------------|---------------|-------------------------|----------------|
|American Casualty | | | |
|Company of | 11,989 | | |
|Reading, Pennsylvania | | | |
|------------------------|---------------|-------------------------|----------------|
| | | | |
|By: | | | |
|------------------------|---------------|-------------------------|----------------|
| | | | |
| President | | | |
|------------------------|---------------|-------------------------|----------------|
|S/HAROLD G. EVANS | | | |
|Harold G. Evans |1 | Harold G. Evans | |
|------------------------|---------------|-------------------------|----------------|
|S/LEWIS H. BERNET | | | |
|Lewis H. Bernet |1 | Lewis H. Bernet | |
|------------------------|---------------|-------------------------|----------------|
|S/HARRY W. LEE | | | |
|Harry W. Lee |1 | Harry W. Lee | |
|------------------------|---------------|-------------------------|----------------|
|S/JOHN H. GUENTHER | | | |
|John H. Guenther |1 | John H. Guenther | |
|------------------------|---------------|-------------------------|----------------|
|S/WALTER A. RIGG | | | |
|Walter A. Rigg |1 | Walter A. Rigg | |
|------------------------|---------------|-------------------------|----------------|
|S/SIDNEY D. KLINE | | | |
|Sidney D. Kline |1 | Sidney D. Kline | |
|------------------------|---------------|-------------------------|----------------|
|S/ORMROD TITUS | | | |
|Ormrod Titus |1 | Ormrod Titus | |
|------------------------|---------------|-------------------------|----------------|
|S/KENNETH E. RYAN | | | |
|Kenneth E. Ryan |1 | Kenneth E. Ryan | |
|------------------------|---------------|-------------------------|----------------|
|S/ALBERT C. SIMMONDS,JR.| | | |
|Albert C. Simmonds, Jr. |1 | Albert C. Simmonds, Jr. | |
|------------------------|---------------|-------------------------|----------------|
|S/SAMUEL R. MILBANK | | | |
|Samuel R. Milbank |1 | Samuel R. Milbank | |
|------------------------|---------------|-------------------------|----------------|
|S/PAUL THORIN | | | |
|Paul Thorin |1 | Paul Thorin | |
|------------------------|---------------|-------------------------|----------------|
| | | | |
|------------------------|---------------|-------------------------|----------------|
| | | | |
|------------------------|---------------|-------------------------|----------------|
</TABLE>
NOTE: A TYPEWRITTEN LIST OF ALL SIGNATURES MUST ACCOMPANY THIS PAPER. THE
FEE FOR FILING THIS PAPER IS $35.00.
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
County of Berks ) ss:
--------------------------------------
Harry W. Lee being duly sworn or affirmed, doth depose and say that he
is the Secretary of the VALLEY FORGE LIFE INSURANCE Company, that the stock
ledger of said Company is in his custody and under his control, and that the
list of stockholders given in the above waiver of notice of a meeting to be held
for the purpose of voting for or against the increase of the authorized capital
stock of said Company, is a complete list of such stockholders, and that they
are the owners of the entire issue of the stock of said Company, and that the
signatures to said wavier are genuine and in the proper handwriting of the
subscribers.
S/HARRY W. LEE
----------------------------------------------
Harry W. Lee Secretary
SWORN TO, OR AFFIRMED, AND SUBSCRIBED BEFORE ME, THIS 29TH DAY OF OCTOBER.
------ -------
S/EDITH B. GEDDES
----------------------------------------------
Notary Public
--------------------------------------------
My Commission Expires
April 25, 1957
<PAGE>
RESOLUTIONS OF THE BOARD OF DIRECTORS
Reading , Pa., October 19 56
--------------- --------------
I HEREBY CERTIFY, that the following resolutions were adopted by a majority
of the entire Board of Directors of the VALLEY FORGE LIFE INSURANCE
------------------------------------
Company, at a meeting held at the principal office of the company on the 17th
-------
day of October 19 56.
---------------------------- ------
"Resolved, That the authorized capital stock of this company be
--------------------------
increased from $300,000.00 to $1,000,000.00;
------------------ ----------------
"Resolved, That a meeting of the stockholders be called to convene at the
general office of this company on the 19th day of October A.D. 19 56,
--------- ---------- --------
to take action on approval or disapproval of the proposal increase of the
authorized capital stock of this Company, the notice by publication, required
- -------------------------
to be given by the Constitution and laws of this Commonwealth, having been
waived by the unanimous consent of the stockholders."
Attest: S/HARRY W. LEE
----------------------
Harry W. Lee
--------------------------
OATH OF JUDGES
COMMONWEALTH OF PENNSYLVANIA )
County of Berks ) ss:
--------------------------------------
On this 17th day of October A. D. 19 56,
------------ -------------- ------
personally appeared before me, a notary public in and for the county aforesaid
-------------
Harry W. Lee, John H. Guenther and Lewis H. Bernet
- -------------------------------------------------------------------------------
, stockholders duly
- ------------------------------------------------------------
appointed judges, by the board of directors of the VALLEY FORGE LIFE INSURANCE
---------------------------
- -------------------------------------------------------------------------------
Company, to conduct an election of said Company, to be held on the 19th day of
-----
October , 19 56 , who being duly sworn, or affirmed, do depose and
- --------------- ----
say that they will well and truly, according to law, conduct said election
to the best of their ability and true return make of the same.
Sworn to or affirmed, and subscribed | |
before me, the day and year | |
aforesaid. | S/HARRY W. LEE |
|----------------------------|
| |
| |
| S/JOHN H. GUENTHER | JUDGES
|----------------------------|
| |
| S/LEWIS H. BERNET |
- --------------------------------------|----------------------------|
MY COMMISSION EXPIRES
MARCH 23, 1987
- --------------------------------------
<PAGE>
JUDGES' RETURN
We, the undersigned judges, appointed by the board of directors of the VALLEY
---------
FORGE LIFE INSURANCE Company to conduct an election by the
- -------------------------------------------------------------------------------
stockholders thereof, for or against an increase of the authorized capital stock
-------------------------
of the said Company, from $ 300,000.00 to $ $1,000,000.00
-------------- ----------------
do hereby certify, that after being durly sworn, or
affirmed, we held the said election, on the 19th day of October , 19 56
--------- ------- ------
at the office of said Company the time and place fixed for holding the same, of
which sixty days' previous notice by publication was duly waived, and in due
form and manner we received the votes of the stockholders of the said Company in
favor of or against such increase; and at the said election there were voted in
favor of such
increase 11,998 shares, and against such increase no
------------------
shares, thereby evincing the consent of the persons or bodies corporate, holding
the larger amount in value of the capital stock of the said Company, to the said
increase.
S/HARRY W. LEE |
-----------------------------------|
|
|
|
S/JOHN H. GUENTHER | JUDGES
-----------------------------------|
|
|
S/LEWIS H.BERNET
19 , ...................................................................
<PAGE>
===============================================================================
==============================================================================
(Name of Company)
VALLEY FORGE LIFE
- ------------------------------------------------------------------------------
INSURANCE COMPANY
- ------------------------------------------------------------------------------
Reading, Pennsylvania
- ------------------------------------------------------------------------------
ELECTION RETURN
WITH WAIVER
AUTHORIZING
increase of authorization capital stock from $300,000.00 to $1,000,000.00
===============================================================================
...............................................................................
===============================================================================
Filed in the office of the Secretary of the Commonwealth, on the 14th day
------
of November A. D. 19 56.
------------- ----------
HENRY E. HARNER ta
- -------------------------------------------------------------------------------
Secretary of the Commonwealth
===============================================================================
.........
===============================================================================
Recorded in Miscellaneous Corporation Record Book, No , Page
--------- --------
- -------------------------------------------------------------------------------
===============================================================================
THE FEE FOR FILING THIS PAPER IS $35.00
===============================================================================
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
OFFICE of the SECRETARY of the COMMONWEALTH
Harrisburg, November 20, 1956
------------------------------
Pennsylvania, ss:
I DO HEREBY CERTIFY, From a comparison with the original record or copy thereof,
of which I am by law the designated legal custodian, that the foregoing and
annexed transcript is a full, true and correct copy of Election Return
Authorizing an Increase of Capital Stock of "VALLEY FORGE LIFE INSURANCE
COMPANY", dated November 14, 1956, and recorded in the Department of State at
3-1-56.33 Film 663 to 666, inclusive.
IN TESTIMONY WHEREOF, I
HAVE HEREUNTO SET MY HAND
AND CAUSED THE SEAL OF THE
SECRETARY'S OFFICE TO BE
AFFIXED, THE DAY AND YEAR
ABOVE WRITTEN.
S/HENRY E. HARNER
----------------------------
Secretary of the Commonwealth
<PAGE>
RETURN OF ACTUAL INCREASE OF CAPITAL STOCK
TO THE SECRETARY OF THE COMMONWEALTH:
1. Name of Corporation: VALLEY FORGE LIFE INSURANCE COMPANY.
2. Registered Office: 412 Washington Street, Reading, Pennsylvania.
3. Date of Incorporation: August 9, 1956.
4. By virtue of an amendment of articles authorizing the increase of Common
capital of said corporation from $300,000.00 to $1,000,000.00 filed in the
Office of the Secretary of the Commonwealth on the 14th Day of November
1956, the following ACTUAL INCREASE has been made in the capital stock or
stated capital:
Increase from Increase to
Class of Number of Total Prior Actual Total Present
Stock Issued Shares Par Value Issue Actual Issue
- ------------ ---------- --------- ------------------ --------------
Common 12,000 $25.00 $300,000.00 $600,000.00
5. Itemize here amount of Bonus or interest payable at time of filing this
return. (Bonus is charged at rate of 1/5 or 1% on capital stock or stated
capital. Interest is charged on unpaid bonus at the rate of 6% per annum
for a period computed from 30 days after issuance of the stock until date
of payment.)
No Bonus due: Account of payment made to Secretary of Commonwealth on
November 7, 1956, for increase to $1,000,000.00 (Check #28103).
6. After giving effect to the above return of actual increase in capital
stock, the issued and outstanding capital stock at the time of filing this
return is as follows:
Total Par Value and
Class of Stock No. of Shares Par Value Stated Capital
- ---------------- ------------- ----------- ----------------
Common 24,000 $25.00 $600,000.00
S/ H.G. EVANS
---------------------------------------------------------
President
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS
COUNTY OF BERKS )
H. G. EVANS President of the
- --------------------------------------------------------------
above name corporation being duly sworn, says that the facts set forth in the
above certificate are true and correct.
Sworn and subscribed before me this 30th day of November 1956.
----------
ANNE M. MAGEE, NOTARY PUBLIC
READING, BERKS COUNTY S/ANNE M. MAGEE
-----------------------
MY COMMISSION EXPIRES JAN. 29, 1959
Filed in the office of the Secretary of the Commonwealth on the 4th day of
------
December 1956.
- ---------
S/HENRY E. HARNER
----------------------------------
Secretary of the Commonwealth DFM
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
OFFICE of the SECRETARY of the COMMONWEALTH
Harrisburg, PA, March 21, 1957
------------------------------
Pennsylvania, ss:
I DO HEREBY CERTIFY, From a comparison with the original record or copy thereof,
of which I am by law the designated legal custodian, that the foregoing and
annexed transcript is a full, true and correct copy of President's Return of
Actual Increase of Capital Stock of "VALLEY FORGE LIFE INSURANCE COMPANY", dated
December 4, 1956, and recorded in the Department of State at 3-1-56.35 Film 413.
IN TESTIMONY WHEREOF, I
HAVE HEREUNTO SET MY HAND
AND CAUSED THE SEAL OF THE
SECRETARY'S OFFICE TO BE
AFFIXED, THE DAY AND YEAR
ABOVE WRITTEN.
S/JAMES A. FINNEGAN
-----------------------------
Secretary of the Commonwealth
<PAGE>
RETURN OF ACTUAL INCREASE OF CAPITAL STOCK
TO THE SECRETARY OF THE COMMONWEALTH:
1. Name of Corporation: VALLEY FORGE LIFE INSURANCE COMPANY.
2. Registered Office: 412 Washington Street, Reading, Pennsylvania.
3. Date of Incorporation: August 9, 1956.
4. By virtue of an amendment of articles authorizing the increase of Common
capital of said corporation from $300,000.00 to $1,000,000.00 filed in the
Office of the Secretary of the Commonwealth on the 7th Day of November
1956, the following ACTUAL INCREASE has been made in the capital stock or
stated capital:
Increase from Increase to
Class of Number of Total Prior Actual Total Present
Stock Issued Shares Par Value Issue Actual Issue
- ------------ --------- ---------- ------------------- --------------
Common 16,000 $25.00 $600,000.00 $1,000,000.00
5. Itemize here amount of Bonus or interest payable at time of filing this
return. (Bonus is charged at rate of 1/5 or 1% on capital stock or stated
capital. Interest is charged on unpaid bonus at the rate of 6% per annum
for a period computed from 30 days after issuance of the stock until date
of payment.)
No Bonus due: Account of payment made to Secretary of Commonwealth on
November 7, 1956, for increase to $1,000,000.00 (Check #28103).
6. After giving effect to the above return of actual increase in capital
stock, the issued and outstanding capital stock at the time of filing this
return is as follows:
Total Par Value and
Class of Stock No. of Shares Par Value Stated Capital
- -------------- -------------- --------- ----------------
Common 40,000 $25.00 $1,000,000.00
(SEAL)
S/ H.G. EVANS
-------------------------------------
H.G. Evans, President
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS
COUNTY OF BERKS )
H. G. Evans, President of the above named corporation being duly sown, says
that the facts set forth in the above certificate are true and correct.
Sworn and subscribed before me this 31st day of December, 1957.
------------------
MY COMMISSION EXPIRES: S/ANNE M. MAGEE
----------------------------------------
January 29, 1959. Anne M. Magee, Notary Public
Filed in the office of the Secretary of the Commonwealth on the 2nd day of
-----
January 1958.
- -------
S/JAMES A. FINNEGAN
Secretary of the Commonwealth DFM
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
OFFICE of the SECRETARY of the COMMONWEALTH
Harrisburg, February 6, 1958
---------------------------
Pennsylvania, ss:
I DO HEREBY CERTIFY, From a comparison with the original record or copy thereof,
of which I am by law the designated legal custodian, that the foregoing and
annexed transcript is a full, true and correct copy of President's Return of
Actual Increase of Capital Stock of "VALLEY FORGE LIFE INSURANCE COMPANY" filed
January 2, 1958 and recorded at 3-1-58.02 film 1033.
IN TESTIMONY WHEREOF, I
HAVE HEREUNTO SET MY HAND
AND CAUSED THE SEAL OF THE
SECRETARY'S OFFICE TO BE
AFFIXED, THE DAY AND YEAR
ABOVE WRITTEN.
S/JAMES A. FINNEGAN
------------------------------
Secretary of the Commonwealth
EXHIBIT b(6b)
VALLEY FORGE LIFE INSURANCE COMPANY
BY-LAWS
-------
(As Amended February 17, 1993)
ARTICLE I. OFFICES.
SECTION 1. PRINCIPAL OFFICE. The principal office shall be
in the City of Reading, County of Berks, Commonwealth of
Pennsylvania. The Company may also have offices at such
other places as the Board of Directors may from time to
time appoint, or as the business of the Company may, in
the judgment of the Chairman of the Board of Directors,
require.
ARTICLE II. STOCKHOLDERS' MEETINGS.
SECTION 1. ANNUAL MEETING. The Annual Meeting of the
Stockholders of the Company shall be held on the second
Wednesday in April of each year, at 1:00 P.M., for the
purpose of electing Directors for the ensuing year, and
for the transaction of such other business as may properly
be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
Stockholders may be held at any time upon the call of the
Chairman of the Board of Directors, the President, or the
Board of Directors. At all special meetings no business
shall be acted upon other than that specified in the
notice of the meeting.
SECTION 3. PLACE OF MEETINGS. The meetings of the
Stockholders shall be held at the principal office of the
Company in the City of Reading, Pennsylvania, or at such
other place, within or without the Commonwealth of
Pennsylvania, as may be stated in the notice of the
meeting.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice
of the annual or other regular meeting of the Stockholders
shall be sent by mail, postage prepaid, addressed to each
Stockholder at his last known post office address as it is
recorded on the books of the Company at least thirty days
prior to said meeting (or, sixty days if so required by
the laws of the Commonwealth of Pennsylvania) and notice
of the meeting shall be advertised in daily newspapers,
and legal periodicals when required by the law of the
Commonwealth of Pennsylvania.
<PAGE>
Notice of any special meeting shall be sent to each
Stockholder by telegram, letter, radio or cable at least
two days before such meeting or shall be received by him
at least one day before such meeting, unless the Laws of
the Commonwealth of Pennsylvania otherwise require. Such
notice of meeting shall state the time, place, and
purposes of the meeting.
SECTlON 5. WAIVER OF NOTICE. Except as hereinafter
provided and as otherwise provided by law, meetings of the
Stockholders of the Company may be held without notice if
all of the Stockholders entitled to vote at the meeting
are present in person or represented by proxy at the
meeting, or if notice is waived in writing by those not so
present or represented except as may be otherwise provided
by the laws of the Commonwealth of Pennsylvania.
1
<PAGE>
SECTION 6. QUORUM. At every meeting of the Stockholders
the holders of record of a majority of the issued and
outstanding shares of the Company which are entitled to
vote at the meeting, present in person or represented by
proxy, shall constitute a quorum.
If at any meeting there shall be no quorum, the holders of
a majority of such shares so present or represented by
proxy may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a
quorum shall have been obtained, at which time any
business may be transacted which might have been
transacted at the meeting as first convened had there been
a quorum.
SECTION 7. VOTING. Stockholders meetings for and
manner of voting on, particular subjects shall be
held in conformity with the laws of the
Commonwealth of Pennsylvania.
The voting for the election of Directors and all other
matters on which a vote shall be taken by ballot shall be
conducted by three (3) judges who shall have been
appointed by the Board of Directors. No person who is a
candidate for office shall act as a judge.
SECTION 8. ORDER OF BUSINESS. The order of business at
all meetings of the Stockholders, so far as appropriate
to the purposes of the meeting, shall be as follows:
1. Proof of notice of meeting and quorum.
2. Election of Chairman.
3. Election of Secretary.
4. Recording of names of Stockholders present
and represented by proxy.
5. Reading and approval of minutes of previous
meeting.
6. Report of President.
7. Report of Treasurer.
8. Report of Committees.
9. Nominations for Directors.
10. Qualifying for election officers.
11. Unfinished business.
12. New business.
13. Report of election officers.
14. Adjournment.
SECTION 9. RECORD OF STOCKHOLDERS. The Board of Directors
shall have power to close the stock transfer books of the
Company for a period not exceeding thirty days preceding
the date of any meeting of Stockholders or the date for
payment of any dividend or the date for the allotment of
rights or the date when any change or conversion or
exchange of capital stock shall go into effect; or, in
lieu of closing the stock transfer books, the Board of
2
<PAGE>
Directors may fix in advance a date, not exceeding forty
days preceding the date of any meeting of Stockholders, or
the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into
effect, as record date for the determination of the
Stockholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such
dividend, or any such allotment of rights, or to exercise
the rights in respect to any such change, conversion or
exchange of capital stock, and in such case Stockholders
of record on the date so fixed shall be exclusively
entitled to such notice of, and to vote at, such meeting,
or to receive payment of such dividend, or allotment of
rights, or exercise such rights, as the case may be, and
notwithstanding any transfer of any stock on the books of
the Company after any such record date fixed as aforesaid.
ARTICLE III. BOARD OF DIRECTORS.
SECTION 1. NUMBER AND QUALIFICATION. At the Annual Meeting
of the Stockholders there shall be elected by ballot, from
their own number not less than seven but not more than
fifteen Directors, two-thirds of whom shall be citizens of
the United States, to serve for one year and until their
successors are duly chosen. Vacancies shall be filled by
an election by the Board of Directors for the unexpired
term.
Any Director may be removed, and the vacancy filled, at
any time, by vote of the Stockholders, at a special
meeting called for that purpose. In the event of
membership, by reason of vacancies, falling below the
number necessary for a quorum, a special meeting of the
Stockholders shall be called for the election of such
number of Directors as may be necessary to restore full
membership of the Board.
SECTION 2. AUTHORITY AND DUTIES. The management, control,
and disposition of all the property, business and affairs
of the Company shall be exercised by the Board of
Directors, which shall have power to make all needful
rules and regulations for the conduct of the business
affairs of the Company, not inconsistent with these
By-Laws.
The Directors shall elect annually from their membership a
Chairman of the Board of Directors, a President, and shall
also elect a Treasurer and Secretary. The Directors may
elect from time to time Executive, Senior or Group Vice
Presidents, and such additional officers as it may deem
necessary and proper for the conduct of the Company's
business.
<PAGE>
SECTION 3. MEETINGS. The meetings of the board of
Directors may be held at such place within the
Commonwealth of Pennsylvania or elsewhere as a majority of
the Directors may from time to time appoint, or as may be
designated in the notice calling the meeting, but not less
often than once in each period of six successive calendar
months.
Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors, by
the President, or by two Directors. Notice of any special
3
<PAGE>
meeting shall be sent to each Director by telegram,
letter, radio or cable at least two days before such
meeting or shall be received by him at least one day
before such meeting, unless the Laws of the Commonwealth
of Pennsylvania shall otherwise require.
SECTION 4. QUORUM. A majority of Directors in office shall
be necessary to constitute a quorum for the transaction of
business, providing that a less number than a quorum,
present at any meeting, may adjourn the meeting until a
quorum shall have been obtained.
SECTION 5. POLICYHOLDERS' PARTICIPATION. The Board of
Directors shall have power and authority to permit
policyholders of the Company from time to time to
participate in the profits of its operations through
distributions to policyholders, and for the purpose of
carrying this provision into effect, may, from time to
time, make reasonable classifications of policies.
ARTICLE IV. COMMITTEES.
SECTION 1. FINANCE COMMITTEE--ELECTION AND MEMBERSHIP. The
Board of Directors, at its first meeting after the Annual
Meeting of Stockholders in each year, or at any special
meeting held for the purpose, shall elect from their
number a Finance Committee consisting of not less than
three or more than five members, of which Committee the
Chairman of the Board of Directors and the President shall
be members.
The Finance Committee, during the intervals between
meetings of the Board, shall have, and may exercise, all
the powers of the Board of Directors in the control,
management and business affairs and property of the
Company.
The Board of Directors shall have the power to fill
vacancies in, to change the membership of, or to dissolve
the Finance Committee.
The Finance Committee shall make rules for the conduct of
its business, the time and place of meetings, and a
majority of the members present shall constitute a quorum.
All action taken by the Finance Committee shall be
reported to the Board of Directors at its meeting next
succeeding such action.
SECTION 2. OTHER COMMITTEES. The Board of Directors may
appoint other committees, which shall exercise such powers
as shall be conferred or authorized by the action
appointing them. A majority of such committee may
determine its action and fix the time and place of its
meetings. The Board shall have power to change the
membership of any such committee, to fill vacancies, and
to discharge any such committee.
<PAGE>
ARTICLE V. CAPITAL STOCK.
SECTION 1. CERTIFICATES OF SHARES. The interest of each
Stockholder shall be evidenced by a certificate or
certificates for shares of stock of the Company in such
form as required by law and as the Board of Directors may
from time to time prescribe. The certificates of stock,
certifying the number of shares owned by the Stockholder
4
<PAGE>
in the Company, shall be signed by the Chairman of the
Board of Directors, the President, or any Executive,
Senior or Group Vice President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant
Secretary and sealed with the seal of the Company, which
may be a facsimile, engraved or printed, and shall be
countersigned and registered in such manner, if any, as
the Board may by resolution prescribe; provided that, if
such certificates are signed by a transfer agent or an
assistant transfer agent or by a transfer clerk on behalf
of the Company and a registrar, the signatures of the
above mentioned officers upon such certificates may be
facsimiles.
In case any officer or officers who shall have signed, or
whose facsimile signatures shall have been used on any
such certificate or certificates shall cease to be such
officer or officers of the Company, before such
certificate or certificates shall have been delivered by
the Company, such certificate or certificates shall be
deemed to have been adopted by the Company and may be
issued and delivered as though the person who shall have
signed such certificate or certificates or whose facsimile
signature or signatures shall have been used thereon had
not ceased to be such officer or officers of the Company
before the time of such delivery.
SECTION 2. TRANSFERS. Shares in the Capital Stock of the
Company shall be transferable on the books of the Company,
by the holder thereof in person or by duly authorized
attorney, upon surrender for cancellation of the
certificates therefor, with an assignment and power of
transfer endorsed thereon, duly executed, with such proof
or guarantee of authenticity as the Company or its
transfer agents may in their discretion require.
SECTION 3. LOST OR DESTROYED STOCK CERTIFICATES. A
duplicate certificate of stock may be issued for such as
may have been lost or destroyed upon the applicant's
furnishing affidavit that he is the owner of said
certificates and that the same has been lost or destroyed,
together with bond of indemnity, with satisfactory
security of the Company, conditioned upon loss in
consequence of issue of said duplicate certificate.
SECTION 4. REGULATIONS. The Board of Directors shall have
power and authority to make all such rules and regulations
as it may deem expedient concerning the issue, transfer,
conversion and registration of certificates for shares of
the capital stock of the Company, not inconsistent with
the Laws of the Commonwealth of Pennsylvania, the Letters
Patent and these By-Laws.
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ARTICLE VI. OFFICERS.
SECTION 1. OFFICERS AND AGENTS. The elected officers of
the Company shall consist of a Chairman of the Board of
Directors, President, Secretary and Treasurer, and Senior
or Group Vice Presidents. The Board of Directors may also
elect an Executive Vice President. Additional officers may
be appointed from time to time as may be deemed necessary
and proper for the conduct of the Company's business.
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The elected officers shall be elected by the Directors at
the first meeting of the Directors held after the Annual
Meeting of the Stockholders or any special meeting called
for that purpose. The elected officers shall hold their
respective offices until the next Annual Meeting of the
Stockholders, or until their successors are duly elected
and qualified. The Board of Directors may at any time
remove and revoke the authority of any such officers.
The Board of Directors may at any time fill vacancies
occurring in the elected officers of the Company.
The Board of Directors shall require the Treasurer to give
bond for the faithful discharge of his duties in the sum
of not less than $50,000, and may require any or all of
the other officers and employees to give bond for the
faithful discharge of their duties with such surety or
sureties as the Board of Directors may from time to time
prescribe.
No agreement of employment with any officer, Director, or
salaried employee for services rendered or to be rendered
shall extend for a period beyond twelve months from the
date of such employment agreement.
No Director shall receive any compensation or emolument,
other than a fee for attendance at Committee or Board
Meetings and for expenses legitimately incurred for travel
and maintenance to attend such meetings.
SECTION 2. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors shall be the Chief
Executive Officer of the Company and shall have general
and active control of its business and affairs. He shall
preside at all meetings of the Stockholders, the Board of
Directors, and the Finance Committee and may exercise any
and all of the powers of the President.
SECTION 3. THE PRESIDENT. The President shall have general
supervision and direction of all other officers of the
Company, subject to the direction of the Board of
Directors, and shall carry into effect the orders of the
Board of Directors and the Chairman of the Board of
Directors. He shall have power to sign and acknowledge all
deeds and instruments for the transfer or conveyance or
assignment of corporate property, discharge of mortgages
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and all other instruments or contracts or evidences of
obligations necessary for the transaction of the corporate
business, including all policies of insurance; and to sign
all annual or other statements required by the Insurance
Departments of the various states, territories, districts,
countries or jurisdictions in which the Company may apply
for or be granted permission to transact business. The
President may delegate any or all of such powers to a
Senior or Group Vice President except those limited by
statute, the By-Laws or the Board of Directors. In the
absence or disability for any reason of the Chairman of
the Board of Directors, he shall assume the duties of the
Chairman of the Board of Directors.
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The President shall have power and authority, or he may
delegate to a Senior or Group Vice President the power to
appoint such Attorneys-in-Fact, Managers, Agents, and
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other employees as shall be necessary in the conduct of
the Company's business. The President, or the delegated
Senior or Group Vice President, may at any time remove and
revoke the authority of any such appointee.
SECTION 4. POWERS AND DUTIES OF EXECUTIVE VICE PRESIDENT.
The Executive Vice President, if one is elected, shall
assist the President in the performance of such of his
duties as pertain to the insurance operations of the
Company, and he shall perform such other duties as may be
assigned to him by the Board of Directors, the Finance
Committee or the President. In the absence of the
President, the Executive Vice President shall have, and
exercise, all the rights and powers and be charged with
all the duties of the President.
SECTION 5. THE SENIOR VICE PRESIDENTS. The Senior Vice
Presidents shall assist the President in the performance
of such of his duties as pertain to the insurance
operations of the Company, and shall also perform such
other duties as may be assigned to them by the Board of
Directors, the Finance Committee or the President.
A Senior Vice President may be designated Chief Financial
Officer, who, subject to the supervision of the Board of
Directors, shall be the Chief Investment Officer of the
Company and shall administer the investment of its funds.
SECTION 6. THE SECRETARY. The Secretary shall keep full
minutes of all of the meetings of the Stockholders, of the
Board of Directors, and of the Finance Committee; shall
issue and transmit all notices of meetings, and notify all
Directors, Officers and Committees of their election;
shall have the custody of the seal of the Company, and
affix the same to certificates of stock and to such other
instruments as may require such seal; shall have charge of
the keeping of the stock certificate books and stock
record and other books of the Company; shall prepare,
record, transfer, issue, countersign, seal and cancel
certificates of stock as may be required; shall make such
reports to the Board of Directors and Finance Committee as
they may require; shall prepare such reports and
statements as may be required of the Company by law. He
shall sign or countersign all such other documents as may
require his signature.
SECTION 7. THE TREASURER. The Treasurer shall receive and
safely keep all moneys, bonds, securities and other
articles of value belonging to the Company. He shall keep
correct and accurate books of account of the same. He
shall deposit all moneys and bankable papers in the name
of the Company in such bank or banks as shall be
designated by the Directors.
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SECTION 8. THE OTHER GROUP VICE PRESIDENTS. It shall be
the duty of the other Group Vice Presidents to assist the
President in the performance of his duties and to perform
such other duties as may be assigned to them by the Board
of Directors, the Finance Committee, the President, or the
Senior Vice Presidents.
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ARTICLE VII. EXECUTION OF OBLIGATIONS.
All undertakings, policies of insurance, stipulations,
reinsurance treaties, agreements, certificates or renewals
thereof, and all other writings obligatory in the nature
thereof, shall be valid when signed by the Chairman of the
Board of Directors, the President or any Executive, Senior
or Group Vice President, duly elected or appointed
pursuant to the By-Laws and sealed with the seal of the
Company duly attested by the Secretary or an Assistant
Secretary. Provided, however, that any policy of
insurance, related endorsement or certificate may bear
either the manual or facsimile signature of such officers,
with or without the seal of the Company, and when
countersigned by the issuing authority in the Home Office,
shall be valid and binding on the Company in all respects
as though signed and sealed by said Officers.
ARTICLE VIII. DIVIDENDS.
Dividends upon the Capital Stock of the Company, subject
to the provisions of the Charter relating thereto, if any,
may be declared by the Board of Directors at any regular
or special meeting pursuant to law. Dividends may be paid
in cash, in property, or in shares of the Company.
ARTICLE IX. INVESTMENT OF CAPITAL, SURPLUS AND RESERVES.
The capital, surplus and reserves of the Company shall
conform with the applicable laws of the Commonwealth of
Pennsylvania.
ARTICLE X. REAL ESTATE AND INVESTMENTS.
The Company may own and deal in real estate; and may
engage in investment transactions; all as may be permitted
by the laws of the Commonwealth of Pennsylvania.
ARTICLE XI. GENERAL PROVISIONS
SECTION 1. CHECKS, NOTES, ETC.. All checks and drafts on
the Company's bank accounts and all bills of exchange and
promissory notes and all acceptances, obligations and
other instruments for the payment of money, shall be
signed by such Officer or Officers or Agent or Agents as
shall be thereunto authorized from time to time by the
Board of Directors.
SECTION 2. FISCAL YEAR. The fiscal year of the Company
shall begin on the First day of January in each year and
shall end on the Thirty-first day of December following.
SECTION 3. CORPORATE SEAL. The Seal of the Company shall
be circular in form, with the words "VALLEY FORGE LIFE
INSURANCE COMPANY" on the circumference and the lettering
in the center shall be "INCORPORATED AUGUST 9, 1956".
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ARTICLE XII. STATUTORY AGENTS--POWERS OF ATTORNEY--QUALIFICATION.
The Chairman of the Board of Directors, the President or
any Executive, Senior or Group Vice President and the
Secretary or an Assistant Secretary are authorized to
appoint statutory agents of the Company, and to execute
powers of attorney in evidence thereof, authorizing them
to accept service of process against the Company; to
execute any and all papers and to comply with all
applicable requirements of law in order to qualify the
Company to do business in any state, territory, district,
country or jurisdiction and to take any other action on
behalf of the Company necessary or proper to be taken in
compliance with law or with rules or regulations of the
supervisory authorities in order to qualify the Company to
do business.
ARTICLE XIII. AMENDMENTS.
These By-Laws may be altered, amended, rescinded or
suspended at any meeting of the Board of Directors by a
majority vote of the entire Board of Directors.
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