Registration Nos. 33-_____
811-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT
on
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
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THE GUARDIAN SEPARATE ACCOUNT N
(Exact Name of Trust)
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THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
7 Hanover Square, New York, New York 10004
(Complete Address of Principal Executive Offices)
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RICHARD T. POTTER, JR., ESQ.
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
New York, New York 10004
(Name and address of agent for service)
Copy to:
Kimberly J. Smith, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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Flexible Premium Adjustable Survivorship Variable Life Insurance Policies --
Registration of Indefinite Amount of Securities Pursuant to Rule 24F-2 Under the
Investment Company Act of 1940 (Title, amount and proposed maximum offering
price of securities being registered)
Approximate date of proposed public offering: Upon the effective date of this
Registration Statement
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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 said Section 8(a),
may determine.
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<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
N-8B-2 Item Heading in Prospectus
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1,2,3,51(a)..................... Cover Page; Summary
4............................... Distribution of the policy and other
contractual arrangements
5............................... Summary
6(a)............................ The variable investment options
6(b)............................ The variable investment options
7............................... Not Applicable
8............................... Financial Statements of the Guardian
Separate Account N
9............................... Legal proceedings
10(a),(b)....................... Partial withdrawals; your right to Cancel
your policy; Surrendering your policy
10(d)........................... Fixed-benefit insurance during the
first 24 months; Transfers between the
investment options; Dollar cost averaging
transfer option; Decreasing the face amount
10(e)........................... Premiums (Default; Grace Period;
Reinstating your policy)
10(f)........................... Voting rights
10(g),(h)....................... Rights Reserved by GIAC
10(i),44(a),51(g)............... Premiums; Benefits and policy values; Policy
proceeds
11.............................. The variable investment options
12.............................. The variable investment options
13(a),(b),(c),51(g)............. Premiums, deductions and charges
13(d),(g)....................... Not Applicable
13(e),(f)....................... Deductions and charges; Distribution of the
policy and other contractual arrangements
14.............................. Issuing the policy
15.............................. Premiums (How your premiums are allocated;
Crediting payments)
16.............................. Premiums (How your premiums are allocated;
Transfers between the investment options);
Dollar cost averaging transfer option;
Policy loans
17.............................. Surrendering your policy; Partial
withdrawals; Your right to cancel your
policy; Policy proceeds
18.............................. The variable investment options
19.............................. Communications from GIAC
20.............................. Not Applicable
21(a),(b)....................... Policy Loans; Premiums (Automatic Premium
Loan); Policy proceeds
21(c),22,23..................... Not Applicable
24.............................. Payment options; Limits to GIAC's Right to
Challenge a Policy; Other information
25,27,29,48..................... Summary
26.............................. Not Applicable
28.............................. GIAC's Management
30,31,32,33,34,35,36,37......... Not Applicable
38,39,41(a)..................... Distribution of the policy and other
contractual arrangements
40.............................. The variable investment options (The Funds'
Investment Advisers)
41(b),(c),42,43................. Not Applicable
44(a)........................... Premiums; Benefits and policy values
44(b)........................... Exhibits
44(c)........................... Premiums
45.............................. Not Applicable
46(a),47........................ Benefits and policy values (Amounts in the
Separate Account; Net investment factor);
Policy Proceeds
46(b)........................... Not Applicable
49,50........................... Not Applicable
51(b)........................... Cover Page
51(c),(d)....................... Death benefit options; Deductions and
charges; Cost of insurance charge;
Deductions from the Separate Account
51(e),(f)....................... The Policyowner; The Beneficiary
51(h),(i),(j)................... Not Applicable
52(a),(c)....................... Rights Reserved by GIAC
52(b),(d)....................... Not Applicable
53(a)........................... GIAC's Taxes
53(b),54,55,56,57,58............ Not Applicable
59.............................. Financial Statements of the Guardian
Separate Account N
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_______________, 2000
PROSPECTUS FOR PARK AVENUE SVUL --
MILLENNIUM SERIES(SM)
Park Avenue SVUL -- Millennium Series(SM) (Park Avenue SVUL) is a survivorship
variable universal life insurance policy providing lifetime insurance
protection. It also offers flexibility in the timing and amount of the premiums
you pay, how your premiums are invested, and the amount of coverage you have,
but you bear the risk of investment losses for any premiums or cash values
allocated to the variable investment options.
A prospective purchaser should evaluate the need for life insurance and the
policy's long term investment potential before buying a policy. In addition, it
may not be advantageous to terminate existing life insurance coverage and
replace it with a Park Avenue SVUL policy. Variable life insurance is not a
short-term investment. The policy is issued by The Guardian Insurance & Annuity
Company, Inc. (GIAC), a wholly owned subsidiary of The Guardian Life Insurance
Company of America (Guardian Life) through its Separate Account N (Separate
Account). Our offices are located at 7 Hanover Square, Mail Station 215-B, New
York, New York 10004.
This prospectus sets forth information that you should know about the policy
before investing, and you should retain it for future reference. It must be
accompanied by the current prospectuses for:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aspen Aggressive Growth Portfolio
- Janus Aspen Capital Appreciation Portfolio
- Janus Aspen Growth Portfolio
- Janus Aspen Worldwide Growth Portfolio
o MFS(R) Variable Insurance TrustSM
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
These funds correspond to the policy's variable investment options. You can also
allocate premiums to a fixed-rate option. Special limits apply to transfers out
of the fixed-rate option.
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These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Commission or
any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The policy is not a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, or federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involves investment risk, including possible loss of principal amount invested.
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<PAGE>
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CONTENTS
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Summary ...................................................................1
About the Park Avenue SVUL Policy .........................................13
- - Issuing the policy .....................................................13
- - The Policyowner ........................................................14
- - The Beneficiary ........................................................14
Benefits and policy values ................................................15
- - Additional sum insured .................................................15
- - No Lapse Guarantee .....................................................16
- - Death benefit options ..................................................16
- - Changing your death benefit option .....................................16
- - Paying the death benefit ...............................................17
- - Policy values ..........................................................17
Premiums, deductions and charges ..........................................20
- - Premiums ...............................................................20
- - Deductions and charges .................................................29
Your allocation options ...................................................40
- - The variable investment options ........................................40
- - The fixed-rate option ..................................................48
Special features of your policy ...........................................49
- - Policy loans ...........................................................49
- - Decreasing the face amount .............................................51
- - Increasing the face amount .............................................52
- - Partial withdrawals ....................................................54
- - Surrendering your policy ...............................................55
- - Transfers between the investment options ...............................55
- - Transfers from the fixed-rate option ...................................56
- - Dollar cost averaging transfer option ..................................57
- - Policy proceeds ........................................................59
- - Exchanging a policy ....................................................61
- - Payment options ........................................................62
Tax considerations ........................................................64
- - Tax status of the policy ...............................................64
- - Treatment of policy proceeds ...........................................65
- - Exchanges ..............................................................66
- - Policy changes .........................................................66
- - Estate and generation skipping transfer taxes ..........................67
- - Other tax consequences .................................................67
- - Possible tax law changes ...............................................68
- - GIAC's taxes ...........................................................68
- - Income tax withholding .................................................68
<PAGE>
Rights and responsibilities ...............................................
- - Assigning the rights to your policy ....................................
- - Voting rights ..........................................................
- - Limits to GIAC's right to challenge a policy ...........................
- - Rights reserved by GIAC ................................................
- - Your right to cancel your policy .......................................
Other Information .........................................................
- - Distribution of the policy and other contractual arrangements ..........
- - Communications we'll send you ..........................................
- - Special provisions for group or sponsored arrangements .................
- - Legal considerations for employers .....................................
- - Advertising practices ..................................................
- - Legal proceedings ......................................................
- - Legal matters ..........................................................
- - Registration statement .................................................
- - Financial statements ...................................................
- - Financial and actuarial experts ........................................
- - GIAC's management ......................................................
Special terms used in this prospectus .....................................
Financial Statements ......................................................
- - Financial Statements of
The Guardian Insurance & Annuity Company, Inc. .........................
Appendices A to D .........................................................
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The Park Avenue SVUL policy may not be available in all states or jurisdictions.
This prospectus does not constitute an offering in any state or jurisdiction in
which such offering may not lawfully be made. GIAC does not authorize any
information or representations regarding the offering described in this
prospectus other than as contained in this prospectus or any supplement thereto
or in any supplemental sales material authorized by GIAC.
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SUMMARY
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THIS SUMMARY outlines the principal features of your Park Avenue SVUL
survivorship variable universal life insurance policy. It is qualified by the
detailed explanation which follows and the terms of your SVUL policy. We deliver
this prospectus with a copy of the prospectuses for each of the mutual funds
corresponding to the variable investment options in which you may invest your
Park Avenue SVUL premiums.
Please read this prospectus and the fund prospectuses carefully before
investing.
Terms we've used
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In this document, we, us, and our refer to The Guardian Insurance & Annuity
Company, Inc., and you and your refer to the policyowner. You can find
definitions of special terms used in this prospectus at the end of this
document. We've used italic script to highlight these terms the first time they
appear in the text.
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WHAT IS VARIABLE LIFE INSURANCE AND HOW DOES IT WORK?
Variable life insurance is intended to provide two important benefits:
o a death benefit that is not taxable to your beneficiary
o a cash value that can grow, with taxes on the growth being deferred.
You allocate your net premium payments and cash value among the variable
investment options and the fixed-rate option. Most of these options provide
variable returns. That's why it's called variable life insurance. Under a
variable universal life insurance policy, you are also able to change:
o the death benefit option
o your policy's face amount, and
o the frequency and amounts of payments.
If the investment options that you choose perform well, the cash value of your
policy will increase, and the death benefit may also increase. As a variable
life insurance policyowner, however, you bear the risk of investment losses to
the extent that your cash values are invested in the variable options. Your
policy has no guaranteed cash value.
WHO CAN BUY A PARK AVENUE SVUL POLICY?
You can buy an SVUL policy if:
o you live in a state or jurisdiction where we offer the policy,
o the persons being insured are between the ages of 20 and 90 and meet our
insurance requirements, and
o no more than one of the insureds is in the uninsurable risk class.
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S U M M A R Y P R O S P E C T U S 1
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<PAGE>
Consult your legal or tax adviser about the consequences of exchanging your
existing policy for a Park Avenue SVUL policy. See the sections in this
prospectus called Deductions and charges, Tax considerations, and Special
provisions for group or sponsored arrangements.
WHAT ARE THE BENEFITS UNDER YOUR POLICY?
There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the surviving insured has died while the
policy was in force. Rider benefits offer special optional coverage in addition
to the death benefit. The rider benefits you choose will determine the
additional amount, if any, that's paid to the beneficiary.
Benefits
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There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit.
Death benefits
You have a choice of three death benefit options with this policy:
o under Option 1, the death benefit is a fixed amount, your policy's face
amount.
o under Option 2, the death benefit is a variable amount, based on your
policy's face amount and the value of the investments held in your policy,
your policy account value. These values can change depending on the
performance of the investments held in your policy.
o under Option 3, the death benefit is an amount based on your policy's face
amount and the sum of your net accumulated premiums. The death benefit
amount will increase when you make premium payments, but will decrease
when you make partial withdrawals.
You may choose among these options, with some restrictions, until the policy
anniversary (the anniversary each year of the date your policy was issued)
closest to the younger insured's 100th birthday. On or after this date, the
death benefit will be the policy account value.
You can change your policy's death benefit option on any policy anniversary
after your policy has been in force for one year, and as long as either insured
is still living. If you want option 3, you must select it at issue; you cannot
change to Option 3 after that time. If you are changing from Option 1 to Option
2, you will need to prove that the insureds meet our insurance requirements. For
more information see Death benefit options.
Additional sum insured
You may purchase an additional sum insured when this policy is issued. The
additional sum insured will be part of your policy's face amount. This option
may not be available in all jurisdictions. See Benefits and Policy Values.
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2 P R O S P E C T U S S U M M A R Y
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<PAGE>
Rider benefits
Riders are a way to add to the coverage offered by your policy. The following
riders are offered under this policy. They are subject to GIAC's insurance and
policy issuing requirements, and all may not be available in all states:
o survivorship adjustable annual renewable term rider
o guaranteed coverage rider
o select security rider
o exchange of insureds rider
o single life term rider
o policy split option
Depending on your individual circumstances, it may or may not be to your
advantage to add coverage to your policy through a rider. Some of the
circumstances to consider include the premium you want to pay, the amount of
coverage and how long you want this additional coverage for, and the age and
underwriting classifications of the insureds. Your GIAC representative can help
you decide whether adding rider benefits to your policy would be in your best
interest.
The cost of any rider benefits you have added to your policy will be included in
your monthly deduction, which is withdrawn from your policy account value each
month.
HOW MUCH DO WE PAY OUT IF THE INSURED DIES?
The amount we pay when the surviving insured dies is:
o the proceeds of the death benefit option in effect as of the monthly
processing date immediately preceding the surviving insured's death, plus
o the extra insurance provided by any riders included in your policy, minus
o any outstanding policy loans, plus accrued interest, as of the date of the
surviving insured's death, minus
o as of the date of the surviving insured's death, the lesser of:
o any premium required under the no lapse guarantee, or
o the amount required to bring the cash surrender value up to zero,
and minus
o any partial withdrawals between the last monthly processing date and the
date of death of the surviving insured.
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S U M M A R Y P R O S P E C T U S 3
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<PAGE>
If Option 3 is in effect when the surviving insured dies, the amount we pay will
increase by the amount of premiums paid between the last monthly processing date
and the date of death.
We pay these benefits in a lump sum, or under one of the options described in
Payment options.
HOW MUCH DO YOU HAVE TO PAY IN PREMIUMS?
Premiums are the payments you make to buy and keep your insurance in force.
There are several types of premiums associated with your Park Avenue SVUL, which
together form your policy premium. They are:
o the initial premium, which you pay to begin your policy. It must be at
least one-sixth of your minimum annual premium,
o the minimum annual premium, which is set out in your policy. It is used to
calculate the amount of premium that must be paid as of the most recent
monthly processing date to satisfy the No Lapse Guarantee Premium Test
during the first three years of your policy,
o your planned premium, which is a premium amount that you choose when you
apply for a policy. You do not have to pay your planned premiums; however,
we will send you reminder notices for them,
o your target premium, which is based on the insureds' ages, sex (unless
gender-neutral rates are required by law), riders, face amount and
underwriting class. It is used to determine premium charges and agent
commissions. You have a separate target premium for your policy (including
any additional sum insured) and for each policy segment that you add to
your policy in order to increase its face amount. Certain riders also have
target premiums associated with them,
After you have paid the initial premium, you may pay premiums on your policy at
any time and in any amount while either insured is alive. However, if the cash
value of your policy is not sufficient to cover the monthly deduction from your
policy, your policy may lapse, unless the No Lapse Guarantee is in effect and
you have satisfied its requirements. We will warn you if your policy is in
danger of lapsing.
Paying premiums
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After you have paid the initial premium, you may pay premiums on your policy at
any time and in any amount while either insured is alive.
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4 P R O S P E C T U S S U M M A R Y
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<PAGE>
WHAT ARE YOUR ALLOCATION OPTIONS?
Allocation options
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You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of twenty allocation options at one time.
You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of twenty allocation options at one time.
Each variable investment option invests in a series of a mutual fund. The value
of these options, and your policy account value in them, will vary depending on
the performance of the mutual funds. There is no minimum guaranteed policy
account value for amounts allocated to the variable investment options.
The mutual funds that are currently available through the variable investment
options are:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aspen Aggressive Growth Portfolio
- Janus Aspen Capital Appreciation Portfolio
- Janus Aspen Growth Portfolio
- Janus Aspen Worldwide Growth Portfolio
o MFS(R) Variable Insurance Trustsm
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
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S U M M A R Y P R O S P E C T U S 5
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<PAGE>
You will find the investment objectives, policies, risks, fees and expenses for
each of these funds listed in the accompanying prospectus for that fund. You
should read the corresponding fund prospectus carefully before investing in any
variable investment option. For a summary of this information see The variable
investment options.
Amounts allocated to the fixed-rate option earn a set rate of interest. You earn
interest on the total that you have invested in the fixed-rate option, including
interest you have earned in previous years. Interest accrues daily at a minimum
annual interest rate of 4%. GIAC sets the rate of interest for the fixed-rate
option in its sole discretion and guarantees your principal and interest under
this option.
CAN YOU TRANSFER THE MONEY IN YOUR POLICY AMONG DIFFERENT ALLOCATION OPTIONS?
To the extend that the money in your policy is not being held as collateral
against a loan, you can transfer it among the variable investment options, and
into the fixed-rate option, at any time. You may choose up to twenty allocation
options at any time. We limit transfers out of the fixed-rate option. See The
fixed-rate option.
Withdrawing money
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After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. You may also
borrow up to 90% of your policy's cash surrender value less any interest due on
the outstanding policy debt and the amount borrowed at the next policy
anniversary. You may at any time surrender your policy for the net cash
surrender value.
DO YOU HAVE ACCESS TO THE MONEY YOU'VE INVESTED IN YOUR POLICY?
After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. The net cash
surrender value is your policy account value minus any surrender charges and
policy debt.
You may also borrow up to 90% of your policy's cash surrender value less: (i)
any outstanding policy debt; (ii) any interest due at the next policy
anniversary on the outstanding policy debt; and (iii) any interest that will be
due at the next policy anniversary on the amount being borrowed. The cash
surrender value is the policy account value minus any surrender charges. We will
charge you an annual interest rate of 5% on all outstanding loans that you have
taken against your policy. This rate will decrease to 4.5% after your policy's
20th anniversary.
You may at any time surrender your policy for the net cash surrender value.
After you surrender your policy, you no longer have insurance coverage.
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6 P R O S P E C T U S S U M M A R Y
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<PAGE>
HOW IS YOUR POLICY AFFECTED BY TAXES?
Increases in the value of your policy and the death benefit
We believe it is reasonable to conclude that your Park Avenue VUL policy will
receive the tax benefits generally associated with life insurance contracts
under existing federal tax laws. This means that increases in the value of your
policy should not be taxed unless you make a withdrawal in excess of your
"basis" in the policy -- which is generally equal to the total amount that you
have paid in premiums -- (or, in some cases, take a loan) or surrender your
policy before the surviving insured dies. Partial withdrawals, surrenders and
policy loans all result in money being taken out of your policy before the
surviving insured dies. We believe that the money the beneficiary receives when
the surviving insured dies generally should not be subject to federal income
tax, but may be subject to federal estate taxes or generation skipping transfer
taxes. See Tax Considerations.
Tax on increases
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Increases in the value of your policy should not be taxed unless you make a
withdrawal (or, in some cases, take a loan) or surrender your policy before the
surviving insured dies.
WHAT DEDUCTIONS AND CHARGES DO YOU HAVE TO PAY?
There are various deductions and charges associated with maintaining your Park
Avenue SVUL policy. Each of these charges is outlined below and in detail in
Deductions and charges. Some of these charges can vary, depending on certain
circumstances, and there may be a guaranteed or maximum charge, and a current
charge. The guaranteed or maximum charge is the most that we can charge you for
a particular item. The current charge is what we are now charging for that item.
We have the right to increase the current charge up to the maximum charge. We
will tell you if we increase these charges.
Charges deducted from your policy premiums
During each of the first 12 policy years after issue or after an increase in
coverage, a charge of 8% is deducted from each premium you pay until you have
paid one target premium in a policy year, and 4% is deducted from premiums paid
in excess of the target premium. After the 12th year, this charge drops to 4%
for premiums paid in a policy year, until you have paid one target premium, and
no charge for premiums paid in excess of one target.
The monthly deduction
We deduct certain charges from your policy account value on the same date each
month. The monthly deduction consists of the following:
Administrative Charges: There are two administrative charges. At the beginning
of each policy month, we will deduct an administrative charge of $7.50. In
addition, for the first 12 policy years after issue or after an increase in face
amount, we will deduct a monthly charge based on the age, sex, and underwriting
class of the younger insured and the basic sum insured amount at the time the
policy is issued or the face amount increased..
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S U M M A R Y P R O S P E C T U S 7
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<PAGE>
Mortality and expense risk charge: This charge is based on the policy account
value in the variable investment options and is guaranteed never to exceed the
current rates stated below plus 0.25% of the policy account value. Through the
twelfth policy anniversary, we will deduct a monthly charge at a current annual
rate of 0.60% of the policy account value in the variable investment options.
Starting in the thirteenth policy year, we will deduct a monthly charge at a
current annual rate of 0.40% of the policy account value in the variable
investment options, up to the account value breakpoint, and 0.20% on the amount
in excess of the account value breakpoint. See Charges and deductions (Mortality
and expense risk charge).
Cost of insurance charge: This charge is based on our current cost of insurance
rates for insured people of the same age, sex, policy duration (the number of
policy years that have elapsed since the policy date) and underwriting class as
each insured under your policy. The maximum that we can charge for each $1,000
of the net amount at risk (the difference between your policy's death benefit
and your policy account value) is set out in your policy. See Charges and
deductions (Cost of insurance charge).
Charges for additional insurance benefits: If you buy additional insurance
coverage by adding one or more riders to your policy, the charges will be
deducted monthly from your policy account value.
After the anniversary closest to the younger insured's 100th birthday, whether
or not the younger insured is alive, all monthly deductions cease.
Transaction deductions
We deduct these charges from the policy account value when you ask us to do
certain transactions. The charges are as follows:
Surrender charge: This charge applies if you surrender your policy or let it
lapse during the nine years following issue or an increase in face amount. The
surrender charge during the first policy year is set forth in your policy. It
declines proportionally each year until it is zero after 9 years. The charge
will vary depending on the insureds' ages when the policy was issued or the face
amount increased, sex and underwriting classes.
Transfer charge: After you make twelve transfers of policy account value among
the allocation options within a policy year, we may charge you $25 for each
additional transfer. We don't currently impose this charge.
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8 P R O S P E C T U S S U M M A R Y
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<PAGE>
Deductions associated with the Separate Account
We have the right to charge the Separate Account to cover any taxes that are
applicable to the Separate Account or the policies. We don't currently impose
this charge.
Deductions associated with the mutual funds
Daily deductions are made from the value of the mutual funds in which you invest
through the Separate Account, to cover advisory fees and other expenses. As a
result, you pay these fees and expenses indirectly. The fees and expenses vary
for each mutual fund and are described in more detail in the fund prospectuses.
Policy changes
- --------------------------------------------------------------------------------
With certain restrictions, you may:
o request an increase or decrease in the face amount of your policy
o exchange your Park Avenue SVUL Policy for a fixed benefit life insurance
policy
o cancel your policy after it has been issued.
See accompanying text for details.
WHAT CHANGES CAN YOU MAKE TO YOUR POLICY?
Decreasing the face amount of the policy
On or after your first policy anniversary you may request a decrease in the face
amount. The decrease must be at least $5,000, and at least one insured must be
alive when we receive your request. The new face amount cannot be lower than
GIAC's current minimum face amount. See Decreasing the face amount.
Increasing the face amount of the policy
Provided both insureds are living, on your first policy anniversary, and on each
anniversary up to and including the anniversary nearest the younger insured's
70th birthday, you may request an increase in your policy's face amount. The
increase is subject to evidence of insurability, and must be for at least
$10,000. The amount of each increase will be treated as a separate policy
segment, with its own underwriting class, cost of insurance rates, surrender
charges, administrative charges, target premiums, and, during the first three
policy years, minimum annual premium.
After you increase the face amount, your new premiums will be applied first to
the target premium on your original policy, and then to the target premium for
any policy segments, in the order that you bought them. See Increasing the face
amount.
----------------------
S U M M A R Y P R O S P E C T U S 9
----------------------
<PAGE>
Exchanging your Park Avenue SVUL policy for a fixed-benefit life insurance
policy
At any time prior to the second policy anniversary, you may exchange all or a
portion of your Park Avenue SVUL policy for a fixed-benefit whole life insurance
policy issued by GIAC or one of our affiliates. If you do this, you don't have
to prove that the persons being insured meet our insurance requirements for
issuing a policy. There may be a credit or a cost to be paid. See Special
Features of your policy.
Canceling your policy after it has been issued
You may cancel your policy by returning it with a written cancellation notice to
either our customer service office or the agent from whom you bought the policy.
You must do this within:
o 10 days after you receive your policy, or
o 45 days after you sign the completed application for your policy.
Longer periods may apply in some states. Once we receive your notice, we will
refund all of the premiums you paid, and your policy will be considered void
from the beginning. See Your right to cancel your policy.
Could your policy lapse?
- --------------------------------------------------------------------------------
Your policy may lapse if you don't pay enough policy premium or if you have
excess policy debt.
COULD YOUR POLICY LAPSE?
Your policy may lapse if its net cash surrender value is less than zero after
deducting the monthly deduction in a given month, and you do not make the
required premium payment within 61 days of the time the monthly deduction is
due.
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if the net cash surrender value of your policy is
insufficient to pay the policy's monthly deduction in a given month, so long as
the No Lapse Guarantee Premium Test is met. See Premiums and No Lapse Guarantee.
Your policy may also lapse if you have not made a loan repayment 61 days after
the monthly date on which the amount of any unpaid loans or interest exceeds
your policy's cash surrender value.
We will warn you at least 30 days in advance if we see that your policy is in
danger of lapsing. We will tell you the premium or the portion of your loan that
you must pay in order to keep your policy in force, and will keep your policy in
force if we receive the required payment when requested. See Grace Period.
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10 P R O S P E C T U S S U M M A R Y
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<PAGE>
HOW CAN YOU COMMUNICATE WITH US?
We cannot act on any request (except for proper telephone transfer requests)
unless it is received in writing at our customer service office, in a form
acceptable to us. Your request must include:
o your policy number
o the full name of all policyowners
o the full name of the insured, and
o your current address.
Our address for regular mail is:
The Guardian Insurance & Annuity Company, Inc.
P.O. Box 26210
Lehigh Valley, PA 18002-6210
Our address for registered, certified or express mail is:
The Guardian Insurance & Annuity Company, Inc.
3900 Burgess Place
Lehigh Valley, PA 18002-6240
If you need information on the value of your policy, you may call us at
1-800-441-6455 between 9 a.m. and 4 p.m. Eastern time.
WHO ISSUES YOUR PARK AVENUE SVUL POLICY?
Your Park Avenue SVUL policy is issued, through its Separate Account N, by The
Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware stock insurance
company formed in 1970. GIAC is licensed to sell life insurance in all 50 states
of the United States of America and the District of Columbia. As of December 31,
1999, our total assets (gaap basis) exceeded $12 billion.
We are wholly owned by The Guardian Life Insurance Company of America (Guardian
Life). The offices of both Guardian Life and GIAC are located at 7 Hanover
Square, New York, New York 10004.
Both Guardian Life and GIAC have consistently received exemplary ratings from
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
and A.M. Best. These ratings may change at any time, and only reflect GIAC's
ability to meet its insurance-related obligations and the guaranteed return on
the fixed-rate option. These ratings do not apply to the variable investment
options, which are subject to the risks of investing in any securities. Guardian
Life does not issue the Park Avenue SVUL policies, and does not guarantee the
benefits provided by the policy.
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S U M M A R Y P R O S P E C T U S 11
-----------------------
<PAGE>
The Park Avenue SVUL policy diagram(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
POLICY PREMIUMS ----- Less -------> Premium charge
|
|
|
|
POLICY ACCOUNT VALUE
THE SEPARATE ACCOUNT
Fund level expenses
THE MUTUAL FUNDS ------------ Less ------> Advisory fees and other expenses
(including any investment return)
Guardian Investor Services Corporation
The Guardian Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC High Yield Bond Fund
The Guardian VC 500 Index Fund
The Guardian Small Cap Stock Fund
The Guardian Bond Fund,
The Guardian Cash Fund,
Guardian Baillies Gifford Limited
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line, Inc.
Value Line Centurion Fund Policy level expenses
Value Line Strategic Asset Management Trust --------- Less ------> Monthly deductions
o Administrative charges
Gabelli Funds, LLC o Mortality and expense risk charge
Gabelli Capital Asset Fund o Charge for the cost of insurance
o Charge for additional insurance benefits
Davis Selected Advisers, LP
Davis Financial Portfolio
Davis Real Estate Portfolio
Davis Value Portfolio
Janus Capital Corporation
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Massachusetts Financial Services Company
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With Income Series
MFS Research Series
MFS New Discovery Series
A.I.M. Advisors, Inc
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
AIM V.I. Global Utilities Fund
Fidelity Managment & Research Company
Fidelity VIP III Growth Opportunities Portfolio
Fidelity VIP Equity Income Portfolio
Fidelity VIP II Contrafund(R) Portfolio
Fidelity VIP III Mid Cap Portfolio
FIXED-RATE OPTION LOAN ACCOUNT
(plus interest credited) (plus loan interest account)
|
|-------------------- Less-------> Transaction deductions
| o Surrender charge
---------------------------------------------
CASH SURRENDER VALUE
---------------------------------------------
|
|-------------------- Less-------> Policy Debt
|
---------------------------------------------
NET CASH SURRENDER VALUE
---------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) This diagram excludes the transfer charge which is not being imposed
currently. Interest on policy debt and repayments of policy debt are also
not reflected in the diagram.
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12 P R O S P E C T U S S U M M A R Y
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<PAGE>
- --------------------------------------------------------------------------------
ABOUT THE PARK AVENUE SVUL POLICY
- --------------------------------------------------------------------------------
This section provides detailed information about your policy. It explains your
rights and responsibilities under the policy, and those of GIAC. Because the
laws and regulations that govern the policy vary among the jurisdictions where
the policy is sold, some of the policy's terms will vary depending on where you
live. These will be outlined in the policy we send you.
Issuing the policy
- --------------------------------------------------------------------------------
A Park Avenue SVUL insurance policy must have basic sum insured coverage of at
least $250,000.
ISSUING THE POLICY
A Park Avenue SVUL insurance policy must have basic sum insured coverage of at
least $250,000. To issue a policy:
o the insureds must be between 20 and 90 and meet our insurance
requirements,
o no more than one of the insureds can be in the uninsurable risk class, and
o you must live in a state or jurisdiction in which we offer the policy.
If you have a whole life policy with a convertible term rider issued by us or by
Guardian Life, you may receive a credit of up to one minimum annual premium if
you convert it to a Park Avenue SVUL policy.
If you are interested in exchanging an existing policy for a Park Avenue SVUL
policy, we recommend that you speak with your lawyer or tax adviser first.
Replacing your existing policy may not be advantageous.
Some jurisdictions do not allow insurance companies to provide different
benefits based on the sex of the insured. For these jurisdictions we offer a
version of the Park Avenue SVUL policy with the same benefits for men and women.
Backdating your policy
Under certain circumstances we will backdate your policy if you ask us to,
giving you a policy date up to six months before the application was actually
signed. Backdating your policy will only be allowed if it would allow you to
qualify for a lower premium because the insureds were younger on an earlier
policy date. On the date the policy is actually issued, we deduct the monthly
deductions due from the backdated policy date to the issue date. We will not
backdate a policy to a date before which the policy was available in the state
of issue.
-----------------------
A B O U T T H E P O L I C Y P R O S P E C T U S 13
-----------------------
<PAGE>
THE POLICYOWNER
The Policyowner
- --------------------------------------------------------------------------------
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured.
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured. While the insured is living, only the
policyowner named in our records has the right to exercise rights granted by the
policy unless ownership of the policy has been assigned to someone else. Except
for transfers, all of the policy's joint owners must approve policy transactions
or changes in writing, including assigning ownership of the policy to someone
else. When a joint policyowner dies, we will divide his or her share of the
policy equally among the other policyowners, unless the deceased policyowner has
indicated otherwise.
If you want to change the policyowner, you must request it in writing in a form
acceptable to us. Your request must be signed and dated by all of the
policyowners. The change will be made effective on the date your request was
signed, but will not apply to any payments or actions taken before we receive
your request. If you are not an insured and die before the surviving insured,
your estate (or if there had been joint owners, the estate of the last surviving
joint owner) becomes the policyowner, unless you have named someone to take over
ownership of the policy (a successor owner). If you are both the policyowner and
the surviving insured, a successor owner may not be named, because the policy
ends when you die.
THE BENEFICIARY
The Beneficiary
- --------------------------------------------------------------------------------
The beneficiary is the person you name to receive the proceeds when the
surviving insured dies.
The beneficiary is the person you name to receive the proceeds when the
surviving insured dies. You can change the beneficiary until the insured dies.
Also, you may name a 'contingent' beneficiary, who will receive the proceeds if
the first beneficiary dies before the surviving insured, or a second or
'concurrent' beneficiary, who will receive a portion of the proceeds when the
surviving insured dies. The beneficiary must live longer than the surviving
insured to qualify as a beneficiary, and has no rights under the policy until
the surviving insured dies. If the surviving insured outlives all of the
beneficiaries named in the policy, then the policyowner or the policyowner's
estate becomes the beneficiary. If you want to change the beneficiary, you must
give us your instructions in writing in a form acceptable to us. Your request
must be signed and dated by all of the policyowners listed in our records. The
change is made effective on the date your request was signed, but will not apply
to any payments or actions taken before we receive your request.
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14 P R O S P E C T U S A B O U T T H E P O L I C Y
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<PAGE>
- --------------------------------------------------------------------------------
BENEFITS AND POLICY VALUES
- --------------------------------------------------------------------------------
ADDITIONAL SUM INSURED
If you choose death benefit Option 1 at issue, you may purchase an additional
sum insured under the policy. The additional sum insured provides a level death
benefit to age 100 of the younger insured. The amount of this coverage, if any,
plus the basic sum insured are the two components of your policy's initial face
amount. The minimum additional sum insured amount you can purchase is $25,000;
the maximum amount cannot exceed 400% of the basic sum insured.
Coverage provided by the additional sum insured will be treated like coverage
provided by the basic sum insured. In particular:
o it will affect the minimum death benefit under Section 7702 of the
Internal Revenue Code; and
o it will affect the calculation of premiums for determining whether the
policy is a modified endowment contract.
See Deductions and charges; Death benefit options; and Tax considerations.
You should consider several factors in deciding whether to purchase coverage as
basic sum insured or additional sum insured, including:
o The additional sum insured has no additional surrender charges and the
administrative charge is lower than the administrative charge for a
comparable amount of basic sum insured.
o Cost of insurance rates for the additional sum insured are the same as for
the basic sum insured.
o The target premium for the additional sum insured is zero.
o The amount of premium charges you will pay may be less if you purchase
coverage as additional sum insured, rather than basic sum insured.
o If the coverage provided by the additional sum insured is greater than the
coverage under the basic sum insured at issue, you cannot purchase the
Guaranteed Coverage rider.
o If you purchase an additional sum insured , you may not purchase coverage
under the adjustable annual renewable term insurance rider.
You may purchase additional sum insured coverage only at issue and only if you
select Option 1. If you change your death benefit option at any time, we will
terminate the additional sum insured. Once terminated, the additional sum
insured cannot be reinstated.
This option may not be available in all jurisdictions. Please check with your
registered representative.
NO LAPSE GUARANTEE
The No Lapse Guarantee ensures that your policy will not lapse, even if high
surrender charges, poor investment performance, or excess policy debt mean that
the net cash surrender value of your policy is not enough to pay the policy's
monthly deductions on a monthly processing date. This guarantee is in effect for
the first three years of your policy so long as the No Lapse Guarantee Premium
Test is met.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 15
-----------------------
<PAGE>
To meet this test, as of the most recent monthly processing date, you must have
paid at least as much into your policy (minus any withdrawals or policy debt) as
the sum of minimum annual premiums up to this date, as stated on page 3 of your
policy. To calculate your minimum annual premium for the current policy year, we
multiply your minimum annual premium by a ratio equal to the number of completed
policy months since the last policy anniversary plus 1, divided by 12.
If you increase the face amount of your policy after the first policy year, your
minimum annual premium will change, which in turn changes the amount that you
must contribute in order to meet the No Lapse Guarantee Premium Test. As of the
most recent monthly processing date, you must have paid at least as much into
your policy (minus any withdrawals or policy debt) as the original minimum
annual premium for the period up to the increase, plus the new minimum annual
premium for the period after the increase in your policy's face amount,
multiplied by the ratio of the number of completed policy months since the
increase plus 1 divided by 12.
If your policy does not meet the No Lapse Guarantee Premium Test, and the cash
value is insufficient to cover the monthly deduction, you will have a 61-day
grace period from that date to make a required premium payment or loan repayment
if there is outstanding policy debt. If you do not make the required payment,
the policy will lapse.
Death benefit options
- --------------------------------------------------------------------------------
You have a choice of three death benefit options with this policy. If a fixed
amount of insurance coverage and potentially lower monthly deductions best fits
your needs, you should choose Option 1. If you want the potential to increase
the amount of your insurance coverage beyond your policy's face amount you
should choose Option 2. If you want to recapture the premiums you have paid into
the policy, you should choose Option 3. See accompanying text for details.
DEATH BENEFIT OPTIONS
You have a choice of three death benefit options with this policy. You should
choose the death benefit option that best meets your insurance needs and
investment objectives. If a fixed amount of insurance coverage and potentially
lower monthly deductions best fit your needs you should choose Option 1. If you
want the potential to increase the amount of your insurance coverage beyond your
policy's face amount you should choose Option 2. If you want to recapture the
premiums you have paid into the policy, you should choose Option 3.*
Option 1
Under Option 1, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount; or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, if your investments perform well or you contribute more than
the minimum annual premium and the policy account
- ----------
* Option 3 may be appropriate for split dollar cases where an employer
advances premium payments on behalf of an employee under an agreement that
the employee will reimburse the premium advances.
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16 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
- -----------------------
<PAGE>
value increases by a sufficient amount, then the net amount at risk will be
lower. When this happens, the amount that we deduct for the cost of insurance
charges each month may also go down.
Option 2
Under Option 2, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount plus the policy account value, if positive, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, your death benefit will vary based on your investment
performance and the premiums you pay. Even if your investments perform poorly,
your death benefit will never be lower than the face amount. The net amount at
risk will not change unless we have to increase the death benefit to comply with
Section 7702 of the Internal Revenue Code.
Option 3
Under Option 3, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount plus net accumulated premiums, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, as under Option 1, if your investments perform well, or you
contribute more than the minimum annual premium and the policy account value
increases by a sufficient amount, then the net amount at risk will be lower.
When this happens, the amount that we deduct for the cost of insurance charges
each month may also go down.
Regardless of which option you choose, after the policy anniversary closest to
the younger insured's 100th birthday, whether or not the younger insured is
alive, the death benefit is the policy account value. The tax consequences of
continuing the policy beyond the younger insured's 100th birthday are unclear.
You should consult a tax adviser for more information.
If you make a partial withdrawal from your policy between the most recent
monthly processing date and the death of the insured, the death benefit under
all options will be reduced by the amount of your withdrawal. Under Option 3,
the death benefit will be increased by the amount of any premium paid between
the most recent monthly processing date and the date of death of the insured.
To qualify as insurance under the Internal Revenue Code, all three options must
pay at least the minimum death benefit required under Section 7702. We calculate
this minimum using the Guideline Premium and Cash Value Corridor Test (Guideline
Premium Test).
Minimum death benefit
- --------------------------------------------------------------------------------
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any monthly processing date is the policy account value multiplied by
the death benefit factor shown in your policy on page 4.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 17
-----------------------
<PAGE>
To satisfy the Guideline Premium Test the total of all premiums you pay must not
exceed certain maximums. The total of premiums paid, minus the nontaxable
portion of partial withdrawals, must not be greater than the larger of the
following:
o the guideline single premium on the date the calculation is done, or
o the sum of the guideline level premiums to the date the calculation is
done.
For the purposes of this test, the guideline single premium is the premium that
would be necessary to pay for future benefits under the policy as calculated at
the time the policy is issued or at the time of certain policy changes,
including face amount increases and decreases, death benefit option changes and
changes to rider amounts. It's generally based on "reasonable" mortality and
expense charges (as defined in Section 7702 of the Internal Revenue Code) and an
effective annual interest rate of 6%.
The guideline level premium is the level annual premium payable to age 100 that
would be necessary to pay for all future benefits under the policy as calculated
at the time the policy is issued. It's generally based on "reasonable" mortality
and expense charges (as defined in Section 7702 of the Internal Revenue Code)
and an effective annual interest rate of 4%.
Payment of premiums in excess of the guideline premium limit is permitted if
those premiums are necessary to keep the policy in force.
To satisfy the Cash Value Corridor Test, the death benefit must at least equal
the percentage of the policy account value shown in the following table:
Percentage of policy
Attained age account value *
- --------------------------------------------------------------------------------
0-40 250%
- --------------------------------------------------------------------------------
40-45 250% - 215%
- --------------------------------------------------------------------------------
45-50 215% - 185%
- --------------------------------------------------------------------------------
50-55 185% - 150%
- --------------------------------------------------------------------------------
55-60 150% - 130%
- --------------------------------------------------------------------------------
60-65 130% - 120%
- --------------------------------------------------------------------------------
65-70 120% - 115%
- --------------------------------------------------------------------------------
70-75 115% - 105%
- --------------------------------------------------------------------------------
75-90 105%
- --------------------------------------------------------------------------------
90-95 105% - 100%
- --------------------------------------------------------------------------------
95+ 100%
- --------------------------------------------------------------------------------
* The percentage decreases uniformly as attained age increases within the
age ranges.
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18 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
The minimum death benefit required on any monthly processing date is equal to
the policy account value on that date multiplied by the death benefit factor
shown in your policy.
CHANGING YOUR DEATH BENEFIT OPTION
On any policy anniversary you may change your death benefit option, as long as
either insured is alive when we make the change. You must send us your
instructions in writing at our customer service office. Such changes take effect
on the policy anniversary following or coinciding with our receipt of the
request. Changing the death benefit option may have adverse tax consequences.
You should consult a tax adviser before doing so.
If you change the death benefit option, we will change the policy's face amount
to keep the death benefit the same immediately before and after the change.
If you're changing from Option 1 to Option 2, we will decrease the face amount
by the lesser of (i) the policy account value on the date the change takes
effect or (ii) the face amount divided by the applicable death benefit factor
shown on page 4 of your policy. You must also prove that the insured meets our
insurance requirements and we will terminate any additional sum insured.
If you're changing from Option 2 to Option 1, we will increase the face amount
by the lesser of (i) the policy account value on the date the change takes
effect, or (ii) the face amount divided by [the applicable death benefit factor,
minus 1]. The applicable death benefit factor is shown on page 4 of your policy.
If you're changing from Option 3 to Option 1, we will increase the face amount
by the amount of net accumulated premiums on the date the change takes effect.
If you're changing from Option 3 to Option 2, we will adjust the face amount by
an amount equal to net accumulated premiums on the effective date of the change
minus the lesser of: (i) policy account value on the effective date of the
change or (ii) the face amount divided by the applicable death benefit factor
shown on page 4 of your policy.
We will not permit any change if it results in a reduction of the face amount
below our minimum face amount, currently $250,000. We will not approve any
request to change from Option 1 or Option 2 to Option 3.
Any increase is applied directly to the initial face amount. A decrease reduces
coverage in the same manner as a requested face amount decrease. See Decreasing
the face amount.
We won't deduct a surrender charge or impose new surrender charges in connection
with changes in the death benefit option.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 19
-----------------------
<PAGE>
PAYING THE DEATH BENEFIT
We will pay a death benefit to the beneficiaries named in your policy when we
receive proof that the surviving insured has died while the policy was in
effect. You must also provide us, at our customer service office, with due proof
of the death of the first of the insureds to die as soon as death occurs, or as
soon thereafter as is reasonably possible. If there is reason to dispute the
policy, then we may delay the payment of death benefits. See Limits to GIAC's
right to challenge a policy.
POLICY VALUES
The following is a detailed breakdown of how we calculate the different values
associated with your policy.
Amounts in the Separate Account
Any net premiums that you allocate or transfer to a variable investment option
are used to buy shares in the mutual fund corresponding to the variable
investment option, according to your instructions. We will sell these shares
when you make a withdrawal, transfer or take a policy loan, or when we withdraw
your monthly deduction, or make dollar cost averaging transfers. Based on the
value of each share on the transaction date, we will sell the number of shares
needed to cover the cost of that transaction. To calculate the value of your
investment in a particular variable investment option, multiply the unit value
of the option by the number of units you own. Unit values change based on the
investment performance of mutual fund shares. We calculate the unit value for
each variable investment option at the end of each business day. Note that you
bear all risks associated with the investments in the Separate Account.
Policy account value
Your policy account value is the total value of the investments held in your
policy. This includes the value of your allocations to the fixed-rate and
variable investment options, and any policy values that may be in the Loan
Account or the Loan Interest Account as collateral for a policy loan. It is
calculated as:
o net premiums that you contribute to your policy; plus or minus
o any profit or loss generated by your policy account value in the variable
investment options; plus
o any interest you earn on allocations to the fixed-rate option or interest
we credit on the Loan Account and the loan interest account; minus
o your total monthly deductions; minus
o any partial withdrawals you've made, minus
o any transfer charges.
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20 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
Cash surrender value and net cash surrender value
- --------------------------------------------------------------------------------
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy or any face amount increase has
been in effect for a maximum of 9 years. The net cash surrender value is the
amount you would actually receive if you surrendered your life insurance policy.
Cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy or any face amount increase has
been in effect for a maximum of 9 years. Net cash surrender value is the amount
you would actually receive if you surrendered your life insurance policy. It is
your policy account value minus any surrender charges and policy debt.
The value of any investments in the variable investment options may increase or
decrease daily depending on how well the investments perform. A combination of
partial withdrawals, policy loans, unfavorable investment performance, surrender
charges and the ongoing monthly deduction can cause a policy's net cash
surrender value to drop below zero. Even if this happens, the policy will not
lapse during the first three policy years if the No Lapse Guarantee is in effect
and the No Lapse Guarantee Premium Test is satisfied. See No Lapse Guarantee.
Certain rider benefits available under the policy may also prevent your policy
from lapsing. See Appendix C.
Net investment factor
We calculate the unit value of each variable investment option on each business
day by multiplying the option's immediately preceding unit value by the net
investment factor for that day. We calculate the net investment factor as
follows on each business day:
o the net asset value of one share of the mutual fund corresponding to the
variable investment option at the close of the current business day, plus
o the amount per share of any dividends or capital gains distributed by the
fund on the current business day, minus any federal, state or local taxes
payable by GIAC and allocated by GIAC to the variable investment option;
divided by
o the net asset value of one share of the same mutual fund at the close of
the previous business day.
The accompanying prospectuses for each fund describe how they calculate the net
asset values of their mutual fund shares.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 21
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
PREMIUMS, DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
PREMIUMS
Your policy will take effect once you have paid your initial premium, but not
before your policy's issue date. Once it has taken effect you decide the amount
of your premium payments and when you want to make them. However, your premiums
must meet certain requirements for your policy to remain in force.
Your initial premium must equal at least one sixth of your minimum annual
premium. The minimum annual premium is outlined in your policy, and is used to
calculate your initial premium and compliance with the No Lapse Guarantee
Premium Test.
When you set up your policy, you must choose a planned premium. This is the
premium that you intend to pay periodically. We will send you a reminder when
your planned premium is due, annually, semi-annually or quarterly, as requested
unless you are paying your premiums through a pre-authorized checking plan. You
are under no obligation to pay this premium as long as the net cash surrender
value is sufficient to pay the monthly deduction when due.
All premiums must be paid to GIAC's customer service office. Each premium you
pay must be at least $100, unless you are paying through a pre-authorized
checking plan, in which case each premium must be at least $25. No premiums may
be paid after the policy anniversary closest to the insured's 100th birthday.
We may limit the amount that you can pay into your policy, including refusing or
refunding premiums you pay, to attempt to preserve your policy's treatment as
life insurance under federal tax laws.
Under the guideline premium test, the maximum premium we will accept in any
policy year is the greatest amount that will not violate Section 7702. We will
refund to you any portion of a premium payment that violates these section 7702
limits with interest at an annual rate of 6% within 60 days of receipt of such
premium.
Crediting payments
When you make a payment towards your policy, we will credit it according to your
instructions. If you do not provide specific instructions, we will use the
payment:
o first to repay any policy debt
o then, as a premium payment.
We normally credit your payment and allocate the net premium as
of the business day we receive it, as long as we receive it at our customer
service office by the close of the business day, which is 4:00 p.m. New York
time. However, any payments that we receive before your policy has been issued
will be held and credited on the policy issue date, and any payments that we
receive after your policy has been issued that require additional underwriting
will be held and credited as of the date the underwriting process is complete.
- -----------------------
22 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
See How your premiums are allocated and Policy loans for specific information on
how your payments are distributed among the fixed-rate and variable investment
options.
Investing net premiums
- --------------------------------------------------------------------------------
When you make a payment towards your policy, the amount that remains after we
deduct the premium charge is the net premium. We invest your net premiums
according to your instructions. When net premiums have been invested, they
become part of your policy account value.
How your premiums are allocated
When you make a payment towards your policy, the amount that remains after we
deduct the premium charge (see Deductions and charges) is the net premium. We
invest your net premiums in the fixed-rate and/or variable investment options
according to your instructions. When net premiums have been invested they become
part of your policy account value.
As part of your initial application, you tell us how you would like your net
premiums distributed among the various allocation options. The percentage you
choose for each allocation option must be in whole numbers, and the total must
equal 100%. You may change how your net premiums are invested at any time by
telling us in writing. The change will be effective on and after the date we
receive your instructions at our customer service office, but will not affect
any existing policy values. To change the allocation of these amounts, you must
effect a transfer. See Transfers between the investment options.
Currently you may invest your net premiums and policy account value in up to 20
different allocation options, although we reserve the right to change this
number from time to time.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 23
A N D C H A R G E S -----------------------
<PAGE>
Default
During the first three years of your policy, it is protected from lapsing by the
No Lapse Guarantee as long as the No Lapse Guarantee Premium Test is met. This
feature guarantees that your policy will not lapse, even if its net cash
surrender value is not enough to pay your policy's monthly deduction on a
monthly processing date. See No Lapse Guarantee.
If your policy does not meet this test, and your net cash surrender value isn't
enough to cover your monthly deduction (or you have borrowed too much--see
below), you will have a 61-day grace period to make a required payment. We will
tell you that your policy is in danger of lapsing, and the premium payment or
loan repayment you must pay to keep it from lapsing, at least 30 days before the
end of this grace period. If you must make a premium payment, the premium
required will be the lesser of (i) the amount of the deficiency in the net cash
surrender value, plus three times your policy's current monthly deduction or
(ii) the amount necessary for your policy to meet the no lapse Guarantee Premium
Test, plus one quarter of the minimum annual premium. If we do not receive the
requested payment by the end of the 61-day grace period, the policy will lapse.
After the No Lapse Guarantee has ended, your policy will go into default if its
net cash surrender value is less than the monthly deduction due at each monthly
processing date. We will give you a 61-day grace period from the date of default
to make a required payment. We will tell you that your policy is in danger of
lapsing, and the premium or loan repayment you must pay to keep it from lapsing,
at least 30 days before the end of this grace period. The required premium will
be an amount equal to the difference between the monthly deduction due and the
net cash surrender value, plus three times your policy's current monthly
deduction.
If we do not receive the required payment by the end of the 61-day grace period,
your policy will lapse without value.
Your policy will also go into default if the amount of any unpaid policy loans
and interest, which is your policy debt, exceeds the value of the investments in
your policy, minus any surrender charges. We will then tell you that a loan
repayment is required. Your policy will lapse 61 days from the default date if
you do not make the required loan repayment. The required repayment will be the
amount by which policy debt exceeds cash surrender value. If the insured person
dies after we have mailed our notice that a loan repayment is due, but before
the 61-day grace period is up, we will pay the beneficiary the policy's death
proceeds minus the unpaid policy debt.
- -----------------------
24 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
SVUL policy. These charges cover certain costs we incur with respect to the
policies, including
o the cost of underwriting, issuing and maintaining the policies, including
preparing and sending billing notices, reports and policy owner
statements, communications with insurance agents and other overhead costs.
o the risk that those insured under the policies may not live as long as we
estimated when we issued the policy, and our administrative expenses may
also be higher than expected.
o the cost of paying death benefits, especially in the early policy years
when the policy account value may be far below the death benefit we pay if
the insured dies.
o our sales and promotional expenses, commissions, and local, state and
federal taxes. You may not claim the portion of these charges used to pay
taxes as a federal income tax deduction.
The amount of a charge does not necessarily correspond to our costs in providing
the service or benefits associated with a particular policy. For example, the
premium charge and the surrender charge may not cover all of our actual sales
expenses for the policies, and proceeds from other charges, including the
mortality and expense risk charge and cost of insurance charges, may be used in
part to cover sales expenses. Once deductions and charges are taken from your
policy they do not contribute to the value of your policy.
All of the deductions and charges are summarized and explained below.
Premium charge
During each of the first 12 policy years after issue or after an increase in
coverage, a charge of 8% is deducted from each premium you pay until you have
paid one target premium in a policy year and 4% is deducted from premiums paid
in excess of the target premium. After the 12th year, this charge drops to 4%
for premiums paid in a policy year until you have paid one target premium in a
policy year and no charge for premiums paid in excess of one target.
Your policy has a separate target premium for the initial face amount and for
any additional coverage you have added through policy segments. The premium
charge will be applied in the order that these were issued. In order to
calculate your premium charge, we will allocate each premium you pay as follows:
o first to your policy's initial face amount, up to the target premium for
that amount
o then to any policy segments that are in force, in the order that they were
purchased, up to the target premium for each segment
o then proportionately, based on the target premium, among the initial face
amount and any policy segments that are in force.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 25
A N D C H A R G E S -----------------------
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE
A 50 year-old male and 45 year-old female (both Preferred Plus underwriting
class) buy a policy with a face amount of $500,000 on January 1, 2000. Five
years later, on January 1, 2005, the same insureds, now ages 55 and 50 (still
Preferred Plus underwriting class), request an increase in the face amount of
$250,000. The initial target premium is $4,663, and the target premium for the
increase is $2,998, bringing the total target premium to $7,661. Assume the
policyowner pays $5,000 per year for the first 10 years and $8,000 per year for
the next 10 years. The premiums are allocated as follows:
Years 1-5: All premiums are allocated to the initial face amount since that is
the only coverage.
Years 6-10: Premiums up to the target for the initial face amount ($4,663) are
allocated to the initial face amount, and the excess ($5,000 -
$4,663 = $337) is allocated to the face amount increase.
Years 11-20: Again, premiums up to the target for the initial face amount
($4,663) are allocated to the initial face amount. The excess
amount up to the target premium for the face amount increase
($2,998) is allocated to the face amount increase. The remaining
premium ($8,000 - 4,663 - 2,998 = $339) is allocated proportionally
based on the target premium for each segment: Initial face amount:
$339 x (4,663 / 7,661) = $206 Face amount increase segment: $339 x
(2,998 / 7,661) = $133 Therefore, the total premium allocated to
the initial face amount is $4,663 + 206 = $4,869, and the total
allocated to the face amount increase segment is $2,998 + 133 =
$3,131.
- --------------------------------------------------------------------------------
Note that all figures above are rounded to the nearest dollar.
The following chart shows the allocation of premiums and calculation of premium
charges.
Premium Allocation
Initial Face Amount First Face Amount Increase
- --------------------------------------------------------------------------------
Premium Premium
Date Premium Charge Premium Charge
- --------------------------------------------------------------------------------
2000-2004 $5,000.00 $386.52 $ 0 $ 0
- --------------------------------------------------------------------------------
2005-2009 4,663.00 373.04 337.00 27.00
- --------------------------------------------------------------------------------
2010-2011 4,869.00 381.28 3,131.00 245.16
- --------------------------------------------------------------------------------
2012-2016 4,869.00 186.52 3,131.00 245.16
- --------------------------------------------------------------------------------
2017-2019 4,869.00 186.52 3,131.00 119.92
- --------------------------------------------------------------------------------
- -----------------------
26 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Monthly deductions
- --------------------------------------------------------------------------------
We deduct from the policy account value, on the same date each month, amounts
for administrative costs, the cost of insuring the insured, the mortality and
expense risk charge and any riders. These deductions are made proportionately
from your investments in the fixed-rate and variable investment options.
Monthly deductions from the policy account value
We deduct from the policy account value, on the same date each month, amounts to
cover administrative costs, the cost of insuring the insured, the mortality and
expense risk charge and the cost of any riders. These deductions are made
proportionately from your policy account value in the fixed-rate and variable
investment options. We do not make these monthly deductions after the policy
anniversary closest to the younger insured's 100th birthday.
Administrative charges
We deduct a monthly charge of $7.50.
We also deduct a monthly charge based on the basic sum insured portion of the
face amount on each monthly processing date for the first 12 policy years after
issue or after any increase in face amount. The amount of this charge depends on
the younger insured's age, sex and underwriting class when the policy is issued
or the face amount is increased. This charge is not reduced if you decrease your
face amount.
The charge will range from $0.09 to $0.65 per $1,000 of the basic sum insured.
Representative monthly rates per $1,000 are shown in Appendix D. Your policy's
charge is set forth in your policy.
There is also a charge of $0.01 per $1,000 of the additional sum insured and
survivorship adjustable annual renewal term rider per month for the first 12
years after issue.
Mortality and expense risk charge
We deduct this charge based on the policy account value in the variable
investment options. Through the twelfth policy anniversary, we deduct a monthly
charge at a current annual rate of 0.60% of the policy account value in the
variable investment options. Starting in the thirteenth policy year, we deduct a
monthly charge at a current annual rate of 0.40% of the policy account value in
the variable investment options, up to the account value breakpoint, and 0.20%
on the amount in excess of the account value breakpoint. The account value
breakpoint is equal to $100,000 less any policy account value allocated to the
fixed-rate option, but not less than zero. This charge is guaranteed never to
exceed the current charge stated above plus 0.25% of the policy account value.
Cost of insurance charge
This charge is based on our cost of insurance rates for insured people of the
same age, sex, duration, and underwriting class as each insured. Any additional
rating charges which are applied to the insureds because either does not satisfy
our insurance requirements for standard insurance are added to the cost of
insurance charge. The maximum that we can charge for each $1,000 of net amount
at risk is set out in your policy and is based on the 1980 Commissioners'
Standard Ordinary Mortality Tables published by the National Association of
Insurance Commissioners. Our current cost of insurance rates are lower than the
guaranteed maximum.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 27
A N D C H A R G E S -----------------------
<PAGE>
We calculate the cost of insurance charge by multiplying your policy's net
amount at risk each month by the current cost of insurance rate that applies to
the insureds, and dividing the result by $1,000. Your policy's cost of insurance
charge is calculated before the calculation of the administrative charges, the
mortality and expense risk charge and the cost of any additional benefit riders.
A cost of insurance charge is determined separately for the basic sum insured,
additional sum insured and each policy segment, and any survivorship adjustable
annual renewable term coverage.
After the first policy year, we may change the cost of insurance rates
prospectively, at our discretion, up to the guaranteed maximum rate listed in
your policy. Changes in the health of either insured will not cause your cost of
insurance charge to increase. Increases in the cost of insurance rates are not
made to an individual policy, but are made equally to all policies where the
insured people are of the same attained age, sex, policy or segment duration,
and underwriting class. We may increase this charge when we expect:
o a higher number of deaths among people in a certain group
o higher expenses or federal income taxes
o a higher number of policies that are allowed to lapse by their
policyowners
o an increase in state or local premium taxes
o lower earnings
Cost of insurance charge
- --------------------------------------------------------------------------------
This charge allows us to pay death benefits, especially in the early policy
years when the policy account value is far below the death benefit we pay if the
insured dies.
Generally, reducing the net amount at risk results in lower charges for cost of
insurance. Decreasing the net amount at risk partly depends on the death benefit
option you choose. The three options are explained under Death benefit options.
If you choose Option 1, in which the death benefit is the face amount of your
policy, you reduce the net amount at risk when you pay premiums. That's because
premiums increase the policy account value. If you choose Option 2, in which the
death benefit can increase to more than the face amount, paying premiums will
not affect the net amount at risk.
- -----------------------
28 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
If you choose Option 3, in which the death benefit is the face amount of your
policy plus your net accumulated premiums, your net amount at risk could be
lower if your investments perform well.
The net amount at risk can increase, for example, when we increase a policy's
death benefit to meet the requirements of the Internal Revenue Code. See Death
benefit options. Having a higher net amount at risk results in higher deductions
for cost of insurance.
There will be different cost of insurance rates for the initial face amount of
your policy and for each subsequent increase in the face amount. As a result, we
calculate the net amount at risk separately for each segment of coverage.
Your policy account value is allocated first to your policy's basic sum insured,
then to the additional sum insured, and finally to each of the policy segments
in the order that they were added to the policy. The maximum amount of your
policy account value that will be allocated to any one policy segment or to the
initial face amount is the amount that the policy segment or initial face amount
provides as a death benefit, divided by 1.0032737. For the purposes of
determining the net amount at risk, if the death benefit is increased due to the
operation of death benefit Option 2 or 3, the increase will be allocated to the
basic sum insured. If the death benefit is further increased due to Section 7702
of the Internal Revenue Code the increase will be allocated to the most recent
policy segment.
Charges for additional insurance benefits
If you acquire additional insurance benefits by buying one or more riders to the
policy, we will deduct rider costs. We deduct these from the policy account
value monthly.
TRANSACTION DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
When you ask us to make certain transactions, we will take a transaction
deduction from your policy account value. Except as described differently below,
we will make these deductions from your policy account value invested in the
variable investment options, until these are exhausted, and then from your
fixed-rate option.
Surrender charge
During a period of time that will not exceed the first 9 policy years of the
initial face amount and each policy segment, we impose a surrender charge if
you:
o surrender your policy, or
o let your policy lapse.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 29
A N D C H A R G E S -----------------------
<PAGE>
The period during which the charge will be imposed depends on the age of the
younger insured when the policy is issued or the face amount increased.
Surrender charges range from $2.74 to $51.30 per $1,000 of the basic sum
insured. Your policy's surrender charge is set forth on page 3 of your policy.
The amount of the surrender charge shown in your policy is based on the
insureds' ages, sexes, and underwriting classes, the basic sum insured, and a
number of actuarial assumptions. The surrender charge grades down each policy
year over a maximum of 9 years as shown in the following chart:
Percentage of Initial Surrender Charge
ISSUE AGE OF YOUNGER INSURED
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Coverage Up to Age 70
Year age 60 61 62 63 64 65 66 67 68 69 & over
- --------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
2 88.9% 88.8% 88.6% 88.5% 88.4% 88.2% 88.1% 88.0% 87.8% 87.7% 87.5%
3 77.8% 77.5% 77.3% 77.0% 76.7% 76.5% 76.2% 75.9% 75.6% 75.3% 75.0%
4 66.7% 65.7% 64.8% 63.8% 62.8% 61.8% 60.7% 59.6% 58.5% 57.4% 56.3%
5 55.6% 53.9% 52.3% 50.6% 48.8% 47.1% 45.2% 43.4% 41.5% 39.5% 37.5%
6 44.4% 42.1% 39.8% 37.4% 34.9% 32.4% 29.8% 27.1% 24.4% 21.6% 18.8%
7 33.3% 30.3% 27.3% 24.1% 20.9% 17.6% 14.3% 10.8% 73.% 3.7% 0.0%
8 16.7% 12.9% 9.1% 5.2% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
9 5.6% 1.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
10+ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
(all percentages rounded to nearest 0.1%)
Surrender charges are not affected by a change in death benefit option or by
partial withdrawals. We will not deduct a surrender charge if you reduce or
eliminate your coverage under a term rider, or reduce your face amount.
A separate surrender charge is also calculated for each new policy segment,
based on the coverage it provides and the insured's ages, sexes, underwriting
classes when it is added to your policy. This means that the total surrender
charges under your policy will be the sum of the different surrender charges for
your initial face amount and each policy segment. The surrender charge
compensates us for administrative and sales-related expenses.
- -----------------------
30 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Surrender charges
EXAMPLE (Policy with initial face amount only)
The example on the right shows how the surrender charge declines over a maximum
nine year period so that in year 10 it equals $0.
- --------------------------------------------------------------------------------
Male Insured, Age 50 and Female Insured, Age 45
- --------------------------------------------------------------------------------
Male: Preferred Plus Underwriting Class, Nonsmoker
Female: Preferred Plus Underwriting Class, Nonsmoker
- --------------------------------------------------------------------------------
Face Amount: $500,000
- --------------------------------------------------------------------------------
All figures in the table following are rounded to the nearest dollar.
- --------------------------------------------------------------------------------
Actual
surrender
Policy charge
year ($)
- --------------------------------------------------------------------------------
1 4,227
- --------------------------------------------------------------------------------
2 3,757
- --------------------------------------------------------------------------------
3 3,287
- --------------------------------------------------------------------------------
4 2,817
- --------------------------------------------------------------------------------
5 2,348
- --------------------------------------------------------------------------------
6 1,878
- --------------------------------------------------------------------------------
7 1,409
- --------------------------------------------------------------------------------
8 704
- --------------------------------------------------------------------------------
9 235
- --------------------------------------------------------------------------------
10 0
- --------------------------------------------------------------------------------
Assume in the above example you effect a face amount increase of $250,000 at the
beginning of policy year 6 (attained age 55 Male and 50 Female) and another face
amount increase of $250,000 at the beginning of policy year 11 (attained age 60
Male and 55 Female). At the time of the first increase, both insureds are again
classified in the Preferred Plus underwriting class, but at the time of the
second increase the male is classified in the Standard underwriting class.
For the purposes of calculating the applicable surrender charges, each face
amount increase is treated separately based on the insureds' attained ages and
underwriting classes at the time of the increase. Therefore, for each increase
the policy will incur a new set of surrender charges. Surrender charges are
calculated as if the policyowner has purchased a policy with the amount of the
increase being the face amount; in other words, they are calculated just as in
the first example. The total surrender charge for a particular policy year
equals the sum of the surrender charge for the initial face amount and the
applicable surrender charge for each policy segment.
First year
Age at Policy face surrender charge
Beginning beginning amount rate per $1000
of year of year ($) ($)
- --------------------------------------------------------------------------------
Initial face amount 1 45 250,000 12.609
- --------------------------------------------------------------------------------
1st increase 6 50 200,000 16.029
- --------------------------------------------------------------------------------
2nd increase 11 55 100,000 26.973
- --------------------------------------------------------------------------------
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 31
A N D C H A R G E S -----------------------
<PAGE>
The following is a calculation of the surrender charge for this example. Note
that the surrender charges are shown for policy years 1 through 20 only as,
after the 20th policy year, surrender charges equal zero for the initial face
amount as well as for the two face amount increases.
Total Surrender Charge
- --------------------------------------------------------------------------------
Total policy
Initial First Second surrender
Policy coverage increase increase charge
year ($) ($) ($) ($)
- --------------------------------------------------------------------------------
1 4,227 NA NA 4,227
- --------------------------------------------------------------------------------
2 3,757 NA NA 3,757
- --------------------------------------------------------------------------------
3 3,287 NA NA 3,287
- --------------------------------------------------------------------------------
4 2,818 NA NA 2,818
- --------------------------------------------------------------------------------
5 2,348 NA NA 2,348
- --------------------------------------------------------------------------------
6 1,878 2,635 NA 4,514
- --------------------------------------------------------------------------------
7 1,409 2,342 NA 3,751
- --------------------------------------------------------------------------------
8 704 2,049 NA 2,754
- --------------------------------------------------------------------------------
9 235 1,757 NA 1,992
- --------------------------------------------------------------------------------
10 0 1,464 NA 1,464
- --------------------------------------------------------------------------------
11 0 1,171 3,644 4,815
- --------------------------------------------------------------------------------
12 0 878 3,239 4,118
- --------------------------------------------------------------------------------
13 0 439 2,834 3,273
- --------------------------------------------------------------------------------
14 0 146 2,429 2,576
- --------------------------------------------------------------------------------
15 0 0 2,024 2,024
- --------------------------------------------------------------------------------
16 0 0 1,620 1,620
- --------------------------------------------------------------------------------
17 0 0 1,215 1,215
- --------------------------------------------------------------------------------
18 0 0 607 607
- --------------------------------------------------------------------------------
19 0 0 202 202
- --------------------------------------------------------------------------------
20 0 0 0 0
- --------------------------------------------------------------------------------
- -----------------------
32 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Transfer charge
You may transfer your policy account value among the allocation options. If you
make more than 12 transfers within a policy year, we reserve the right to charge
you $25 for each additional transfer. We will deduct the transfer charge from
the allocation options from which you are making the transfer, and will use this
amount for our processing costs.
We will not deduct a transfer charge when:
o you make multiple transfers under your policy's dollar cost averaging
feature
o you transfer amounts as part of taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
We have the right to charge the Separate Account, the account through which we
invest your premiums in the variable investment option, for any federal, state
or local income taxes relating to the Separate Account. We also have the right
to impose additional charges if there is a change in our tax status, if the
income tax treatment of variable life insurance changes for insurance companies,
or for any other tax-related charges associated with the Separate Account or the
policies. We don't currently charge for taxes attributable to the Separate
Account.
Deductions from mutual funds
Daily deductions are made from the assets of the mutual funds to cover advisory
fees and other expenses. As a result, you pay these fees and expenses
indirectly. These expenses vary from year to year. Except as noted below, the
following chart shows the actual fees and expenses for each fund for the year
ended December 31, 1999 as a percentage of the fund's average daily net assets.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 33
A N D C H A R G E S -----------------------
<PAGE>
Fees and expenses for mutual funds
<TABLE>
<CAPTION>
Other Total
expenses expenses
(after any (after any
applicable waivers applicable waivers
Advisory and expense and expense
Fund name fee reimbursements) reimbursements)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guardian Stock Fund 0.50% 0.02% 0.52%
- ---------------------------------------------------------------------------------------
Guardian Small Cap Stock Fund 0.75% 0.08% 0.83%
- ---------------------------------------------------------------------------------------
Guardian Cash Fund 0.50% 0.03% 0.53%
- ---------------------------------------------------------------------------------------
Guardian Bond Fund(1) 0.50% 0.05% 0.55%
- ---------------------------------------------------------------------------------------
Guardian VC 500 Index Fund(1) 0.25% 0.03% 0.28%
- ---------------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund(1) 0.50% 0.17% 0.67%
- ---------------------------------------------------------------------------------------
Guardian VC High Yield Bond Fund 0.60% 0.39% 0.99%
- ---------------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80% 0.16% 0.96%
- ---------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00% 0.44% 1.44%
- ---------------------------------------------------------------------------------------
Value Line Centurion Fund(1) 0.50% 0.09% 0.59%
- ---------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust(1) 0.50% 0.08% 0.58%
- ---------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 1.00% 0.08% 1.08%
- ---------------------------------------------------------------------------------------
MFS Emerging Growth Series(1) 0.75% 0.09% 0.84%
- ---------------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75% 0.15% 0.90%
- ---------------------------------------------------------------------------------------
MFS Growth With Income Series 0.75% 0.13% 0.88%
- ---------------------------------------------------------------------------------------
MFS New Discovery Series(1) 0.90% 0.27% 1.17%
- ---------------------------------------------------------------------------------------
MFS Research Series(1) 0.75% 0.11% 0.86%
- ---------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
- ---------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% 0.49% 1.14%
- ---------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.15% 0.76%
- ---------------------------------------------------------------------------------------
Davis Financial Portfolio(1) 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------
Davis Real Estate Portfolio(1) 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------
Davis Value Portfolio1 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities
Portfolio (Service Class 2)(1) 0.58% 0.38% 0.96%
- ---------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio (Service Class 2)(1) 0.48% 0.35% 0.83%
- ---------------------------------------------------------------------------------------
Fidelity VIP III
Mid Cap Portfolio (Service Class 2)(1) 0.57% 0.68% 1.25%
- ---------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio
(Service Class 2)(1) 0.58% 0.37% 0.95%
- ---------------------------------------------------------------------------------------
Janus Aspen Aggressive
Growth Portfolio1 0.65% 0.02% 0.67%
- ---------------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio(1) 0.65% 0.04% 0.69%
- ---------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(1) 0.65% 0.02% 0.67%
- ---------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio(1) 0.65% 0.05% 0.70%
- ---------------------------------------------------------------------------------------
</TABLE>
(1) See Notes to fees and expense table
- -----------------------
34 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Notes to fees and expense table
These percentages reflect the actual fees and expenses incurred by each Fund
during the year ended December 31, 1999 except for the Fidelity Portfolios,
whose expenses are estimated for the year ending December 31, 2000, and except
for Janus Funds and Guardian VC 500 Index Fund whose expenses are restated as
described below.
Guardian VC Asset Allocation Fund. Expenses do not include expenses of the
underlying funds in which the Asset Allocation Fund invests its assets.
Including the expense of the underlying funds, the Fund's total expenses would
be 0.98%.
The Guardian Bond Fund, Inc. Expenses do not include interest expense. If
interest expense were included, total expenses would be 0.57%.
The Guardian VC 500 Index Fund. Expenses are based upon expenses for the fiscal
year ended December 31, 1999, restated to reflect a reduction in the management
fee for the Fund. Expenses for the year ended December 31, 1999 were 0.29% after
applicable waivers and expense reimbursements, and 0.36% before applicable
waivers and expense reimbursements.
The Guardian VC High Yield Bond Fund. Expenses have been grossed up to include
the effects of custody credits received by the Funds. Without these credits
total expenses would have been 1.14%.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. Total
expenses have been grossed up to include custody credit arrangements. However,
the credit received does not affect the funds' total expenses.
MFS Emerging Growth Series, MFS Total Return Series, MFS New Discovery Series,
MFS Research Series. All of the MFS funds have expense offset arrangements which
reduce their custodian fees based upon the amount of cash maintained by each
fund with its custodian. The "Total expenses" in the table do not take into
account this expense reduction and are therefore higher than the actual expenses
of each fund.
The expenses shown for MFS New Discovery Series reflect an agreement by the
Fund's adviser to bear expenses, subject to reimbursement by the Fund, such that
the Fund's "Other expenses" will not exceed 0.25% of the Fund's average daily
net assets during 1999. Reimbursement by the Fund will be accomplished by the
payment of an expense reimbursement fee by the Fund to the adviser, subject to
the maximum 0.25% described above. Effective May 1, 2000, the adviser has
contractually agreed, subject to reimbursement, to bear expenses for the New
Discovery Series such that the New Discovery Series' "Other expenses" (after
taking into effect expense offset arrangements referred to above) will not
exceed 0.15%. This arrangement will continue until at least May 1, 2001,
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 35
A N D C H A R G E S -----------------------
<PAGE>
unless changed with the consent of the board of trustees which oversees the
Series.
Please see the Fund's prospectus for a complete explanation of the Fund's fees
and expenses.
Davis Value Portfolio, Davis Financial Portfolio and Davis Real Estate
Portfolio. Had the adviser not absorbed certain expenses, the ratio of expenses
to average net assets would have been 2.29%, 4.24%, and 11.70% for Davis Value
Portfolio, Davis Financial Portfolio and Davis Real Estate Portfolio,
respectively.
Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP III Mid Cap Portfolio, and Fidelity VIP II Contrafund
Portfolio. Service Class 2 share expenses are based on estimated expenses for
the first year and are without reimbursement.
Janus Aspen Aggressive Growth Portfolio, Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, and Janus Aspen Worldwide Growth
Portfolio. Expenses are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for these
Portfolios. All expenses are shown without the effect of expense offset
arrangements.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. The
operational expenses for Value Line Strategic Asset Management Trust and Value
Line Centurion Fund reflect expense reimbursements paid by those funds to us for
certain administrative and shareholder servicing expenses that we incur on their
behalf. For the year ended December 31, 1999, we were reimbursed $857,868 by
Value Line Strategic Asset Management Trust, and $586,401 by Value Line
Centurion Fund.
We have also entered into agreements with certain fund advisers under which we
will be reimbursed for certain administrative, distribution or other expenses
that we incur as a result of offering certain funds, including the MFS, AIM,
Davis, Fidelity and Janus funds, to our policyowners. The amount of compensation
may be based on assets of the fund attributable to policies we issue and may
vary from adviser to adviser.
- -----------------------
36 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
- --------------------------------------------------------------------------------
YOUR ALLOCATION OPTIONS
- --------------------------------------------------------------------------------
As part of your policy you are able to direct where a portion of your premiums
are allocated. There are several variable investment options and a fixed-rate
option. You may choose up to 20 allocation options at any time.
- --------------------------------------------------------------------------------
THE VARIABLE INVESTMENT OPTIONS
The variable investment options give you the opportunity to invest a portion of
your net premiums, indirectly, in a series of mutual funds offering variable
rates of return. The value of your investments will vary depending on the
performance of the mutual funds. There is no minimum guaranteed policy account
value for the portion of your policy that is held in the variable investment
options.
The Separate Account
The Separate Account is the account through which we invest your net premiums in
the variable investment options. We are the record owner of the assets in the
Separate Account, and use them exclusively to support the variable life
insurance policies issued through the Separate Account. The Separate Account
consists of 31 investment divisions, each corresponding to a mutual fund in
which the Separate Account invests. The Separate Account was established by
GIAC's Board of Directors on September 23, 1999 under the insurance law of the
state of Delaware, and meets the definition of a separate account under the
federal securities laws. Our Separate Account is registered with the SEC as a
unit investment trust - a type of investment company under the Investment
Company Act of 1940 (the 1940 Act). Registration under the 1940 Act does not
involve any supervision by the SEC of the investment management or programs of
the Separate Account or GIAC. However, both GIAC and the Separate Account are
subject to regulation under Delaware law. GIAC is also subject to the insurance
laws and regulations of all states and jurisdictions where the company is
authorized to do business.
GIAC owns the assets held in the Separate Account. The assets equal to the
reserves and other liabilities of the Separate Account are used only to support
the variable life insurance policies issued through the Separate Account.
Delaware insurance law provides that these assets may not be used to satisfy
liabilities arising from any other business that GIAC may conduct. This means
that the assets supporting policy account values maintained in the variable
investment options are not available to meet the claims of GIAC's general
creditors. GIAC may also retain in the Separate Account assets that exceed the
reserves and other liabilities of the Separate Account. Such assets can include
GIAC's direct contributions to the Account, accumulated charges for mortality
and expense risks or the investment results attributable to GIAC's retained
assets. Because such retained assets do not support policy account values, GIAC
may transfer them from the Separate Account to its general account.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 37
-----------------------
<PAGE>
Each mutual fund is described briefly below. Complete information can be found
in the accompanying fund prospectuses.
The Funds
Each of the funds corresponding to a variable investment option is either an
open-end diversified management company or a series of an open-end diversified
management company registered with the Securities and Exchange Commission. The
funds don't charge us for buying or selling their shares, allowing us to buy and
sell them at their net asset value in response to your instructions and other
policy-related transactions.
Currently, other investment products that we and other insurers offer are also
able to invest in certain of the mutual funds through the Separate Account.
While the Board of Directors of each fund monitors activities in an effort to
avoid or correct any material irreconcilable conflicts arising out of this
arrangement, we may also take actions to protect the interests of our
policyowners. For more information see Rights reserved by GIAC, and the
prospectuses for the individual mutual funds.
Investment objectives and policies of the funds
Each fund has a different investment objective that it tries to achieve by
following certain investment policies. These objectives affect the potential
risks and returns for each fund, and there is no guarantee that a fund will be
able to meet its investment objectives fully. Some funds have similar investment
objectives and policies to other funds managed by the same adviser. The
investment results of the funds, however, may be higher or lower than the
adviser's other funds. There is no assurance, and we make no representation,
that the performance of any fund will be comparable to the performance results
of any other fund.
The table below summarizes each fund's investment objective, along with the
typical investments that make up that fund.
- -----------------------
38 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Variable investment options
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Guardian Stock Fund Long-term growth of capital U.S. common stocks
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC 500 Index Fund Seeks to match the investment performance Common stocks of companies in the S&P
of the Standard & Poor's 500 Corporate Index, which emphasizes large U.S.
Stock Price Index ("the S&P Index") Companies
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund Long-term growth of capital U.S. common stocks of companies
with small market capitalization
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue Investment grade debt obligations
risk of principal; capital appreciation
is a secondary objective
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund Current income; capital appreciation is Corporate bonds and other debt
a secondary objective securities rated below investment grade
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income consistent Money market instruments
with liquidity and preservation of
capital
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund Long-term total investment return Shares of The Guardian Stock Fund, The
consistent with moderate investment risk Guardian Bond Fund, and The Guardian
Cash Fund
- --------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Fund Long-term capital appreciation Common stocks and convertible securities
issued by foreign companies
- --------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Long-term capital appreciation Common stocks and convertible securities of
emerging market companies
- --------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund Long-term growth of capital U.S. common stocks with selections based on
rankings of the Value Line Ranking System
- --------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset High total investment return (current U.S. common stocks with selections
Management Trust income and capital appreciation) based on rankings of the Value Line
consistent with reasonable risk Ranking System, bonds and money
market instruments
- --------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income as U.S. common stocks and convertible
a secondary objective securities
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital Common stocks of medium and
small-sized growth companies
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund High current income; growth of capital Common and preferred stocks
as a secondary objective of domestic or foreign public utilities
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital; Equity securities judged to be
income as a secondary objective undervalued by the investment advisor
- --------------------------------------------------------------------------------------------------------------------------------
Davis Financial Portfolio Growth of capital Common stocks of financial companies
- --------------------------------------------------------------------------------------------------------------------------------
Davis Real Estate Portfolio Total return through a combination of Securities issued by companies that are
growth and income "principally engaged" in real estate
- --------------------------------------------------------------------------------------------------------------------------------
Davis Value Portfolio Growth of capital U.S. common stocks of companies with
at least $5 billion market capitalization
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio Long-term capital appreciation U.S. and foreign common stocks of
companies believed to be undervalued
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Reasonable income; also considers Income-producing equity securities
potential for capital appreciation
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Capital growth U.S. and foreign common stocks
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio Long-term growth of capital Common stocks with medium market
capitalization, both U.S. and foreign
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 39
-----------------------
<PAGE>
Variable investment options (Continued)
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Janus Aspen Aggressive Long-term growth of capital Equity securities of medium-sized
Growth Portfolio companies; may concentrate in a small
number of issuers
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Capital Long-term growth of capital Equity securities of companies of any size;
Appreciation Portfolio may concentrate in a small number of
issuers
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio Long term growth of capital Common stocks of issuers of any size
in a manner consistent with
preservation of capital
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Long term growth of capital Common stocks of foreign and U.S.
Growth Portfolio in a manner consistent with issuers; usually invests in at least five
preservation of capital countries, including the U.S.
- --------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Long-term growth of capital Common stocks of emerging growth
companies of any size
- --------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series Reasonable current income and long- Equity securities issued by U.S. and
term growth of capital and income foreign companies
- --------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series To seek capital appreciation Equity securities of companies that offer
superior prospects for growth, both U.S.
and foreign
- --------------------------------------------------------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital Equity securities of companies
and future income believed to possess better than average
prospects for long-term growth
- --------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series Above average income consistent Broad list of securities, including a
with prudent employment of capital; combination of equity and fixed-
as a secondary objective, to provide income, both U.S. and foreign
reasonable opportunity for growth of
capital and income
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Some of these Funds may not be available in your state.
- -----------------------
40 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Total returns do not reflect deductions
- --------------------------------------------------------------------------------
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, or transaction deductions.
Including the effects of these deductions reduces returns under the policy. See
Special terms used in this prospectus and Deductions and charges for additional
information.
Investment performance of the Funds
The table below shows the average annual total returns for the mutual funds for
years ended December 31, 1999. The performance figures reflect the deduction of
fund investment advisory fees and operating expenses, and assume that any
dividends and capital gains are reinvested in the fund. These figures do not
reflect how the funds' investment performance will affect the value of your
policy, because they do not take into account the insurance and other charges we
deduct from your policy. If these charges were taken into account, total returns
would be lower. Also, past returns should not be used to predict future
performance. Total returns for The Guardian Cash Fund are not presented here.
Years ended December 31, 1999
----------------------------------
10 Years
or since
Fund name inception,
and inception date 1 Year 5 Years if less
- --------------------------------------------------------------------------------
The Guardian Stock Fund(1)
(4/13/83) 31.17% 29.48% 20.04%
- --------------------------------------------------------------------------------
The Guardian VC 500 Index Fund
(9/13/99) N/A N/A 6.38%*
- --------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund
(7/16/97) 35.04% N/A 16.25%*
- --------------------------------------------------------------------------------
The Guardian Bond Fund(1)
(5/1/83) -0.84% 7.16% 7.27%
- --------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund
(9/13/99) N/A N/A 2.78%*
- --------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund
(9/13/99) N/A N/A 8.67%*
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
(2/8/91) 39.11% 19.35% 16.01%*
- --------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94) 72.30% 9.76% 6.71%*
- --------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83) 28.23% 26.67% 19.48%
- --------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87) 24.32% 22.24% 16.94%
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund(2)
(5/1/95) 19.81% N/A 19.49%*
- --------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund(3)
(5/5/93) 44.61% 25.59% 22.33%*
- --------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund(3)
(5/2/94) 33.56% 21.87% 18.45%*
- --------------------------------------------------------------------------------
AIM V.I. Value Fund(3)
(5/5/93) 29.90% 27.23% 23.07%*
- --------------------------------------------------------------------------------
Davis Financial Portfolio(4)
(7/1/99) N/A N/A -7.17%*
- --------------------------------------------------------------------------------
Davis Real Estate Portfolio(4)
(7/1/99) N/A N/A -10.79%*
- --------------------------------------------------------------------------------
Davis Value Portfolio(4)
(7/1/99) N/A N/A 2.64%*
- --------------------------------------------------------------------------------
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 41
-----------------------
<PAGE>
Years ended December 31, 1999
----------------------------------
10 Years
or since
Fund name inception,
and inception date 1 Year 5 Years if less
- --------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio
(Service Class 2)(5)
(1/3/95) N/A N/A N/A
- --------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio
(Service Class 2)(5)
(10/9/96) N/A N/A N/A
- --------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities
Portfolio (Service Class 2)(5)
(1/3/95) N/A N/A N/A
- --------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio
(Service Class 2)(5)
(12/28/98) N/A N/A N/A
- --------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio(6)
(9/13/93) 125.40% 36.23% 34.42%*
- --------------------------------------------------------------------------------
Janus Aspen Capital Appreciation Portfolio(6)
(5/1/97) 67.00% N/A 57.18%*
- --------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(6)
(9/13/93) 43.98% 29.89% 24.28%*
- --------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio(6)
(9/13/93) 64.45% 33.60% 29.71%*
- --------------------------------------------------------------------------------
MFS Emerging Growth Series(7)
(7/24/95) 76.71% N/A 36.44%*
- --------------------------------------------------------------------------------
MFS Growth with Income Series(7)
(10/9/95) 6.69% N/A 21.12%*
- --------------------------------------------------------------------------------
MFS New Discovery Series(7)
(5/1/98) 73.41% N/A 40.91%*
- --------------------------------------------------------------------------------
MFS Research Series(7)
(7/26/95) 24.05% N/A 22.86%*
- --------------------------------------------------------------------------------
MFS Total Return Series(7)
(1/3/95) 3.08% N/A 15.42%*
- --------------------------------------------------------------------------------
* since inception
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
any deductions from the Separate Account. Including the effects of these
deductions reduces returns. See Special terms used in this prospectus and
Deductions and charges for additional information.
(1) Results for The Guardian Bond Fund and The Guardian Stock Fund reflect
effects of expense reimbursements that occurred during the years ended
December 31, 1984 and 1985. Without these expense reimbursements, results
for these funds would be lower. The inception date for The Guardian Small
Cap Stock Fund is the date of commencement of the public offering of the
fund.
(2) For the period from May 1, 1995 through December 31, 1995, the Manager and
the Adviser of Gabelli Capital Asset Fund absorbed a portion of the fund's
operating expenses. Total returns for this period would have been lower if
these expenses had not been absorbed.
(3) Total returns for AIM V.I. Value Fund, AIM V.I. Capital Appreciation Fund
and AIM V.I. Global Utilities Fund reflect the effects of fee waivers
and/or expense offset arrangements. In the absence of such arrangements
total returns would have been lower.
(4) Total returns for Davis Financial, Davis Real Estate and Davis Value
Portfolios reflect the effects of fee waivers and/or expense offset
arrangements. In the absence of such arrangements, total returns would
have been lower.
(5) Service Class 2 is a new class of shares issued by the Portfolio and no
historical performance is yet available.
(6) Total returns for Janus Aspen Aggressive Growth, Janus Aspen Capital
Appreciation, Janus Aspen Growth and Janus Aspen Worldwide Growth
Portfolios reflect the effects or fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower.
(7) Total returns for the MFS Growth With Income Series, Emerging Growth
Series, New Discovery Series, Research Series and Total Return Series
reflect the agreement by the series' Adviser to bear expenses for the
series, subject to reimbursement by the series, such that the operational
expenses shall not exceed 0.25% of the average daily net assets of the
series for each fiscal year since inception. In the absence of this
agreement, except where a series is reimbursing its adviser for previous
years' expense payments on its behalf, total returns would be lower.
- -----------------------
42 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
The funds' investment advisers
All of the funds' investment advisers are registered as investment advisers
under the Investment Advisers Act of 1940 (Advisers Act).
Guardian Investor Services Corporation
The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian Bond
Fund, The Guardian Cash Fund, The Guardian VC Asset Allocation Fund, The
Guardian VC High Yield Bond Fund, and The Guardian VC 500 Index Fund (the
Guardian funds) are advised by Guardian Investor Services Corporation (GISC), 7
Hanover Square, New York, New York, 10004. GISC is wholly owned by GIAC.
Guardian Baillie Gifford Limited
Baillie Gifford International Fund and Baillie Gifford Emerging Markets Fund are
advised by Guardian Baillie Gifford Limited (GBG), 1 Rutland Court, Edinburgh,
EH3 8EY, Scotland. GBG is a member of Great Britain's Investment Management
Regulatory Organization Limited (IMRO). GBG was incorporated in Scotland by GIAC
and Baillie Gifford Overseas Limited (BG Overseas) in November 1990. BG Overseas
is wholly owned by Baillie Gifford & Co., which is currently one of the largest
investment management partnerships in the United Kingdom.
Baillie Gifford Overseas Limited
GBG has appointed BG Overseas to serve as sub-investment adviser to Baillie
Gifford International Fund and Baillie Gifford Emerging Markets Fund. Like GBG,
BG Overseas is located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG
Overseas is also a member of IMRO. No separate or additional fee is paid by the
fund to BG Overseas.
Value Line, Inc.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund are
advised by Value Line, Inc., 220 East 42nd Street, New York, New York 10017.
Gabelli Funds, LLC
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, LLC as the investment adviser to the Fund. The adviser has its principal
offices at One Corporate Center, Rye, New York 10580. No separate or additional
fee is paid by the Fund to the adviser.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 43
-----------------------
<PAGE>
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS Total Return
Series, MFS Research Series, and MFS New Discovery Series are advised by
Massachusetts Financial Services Company (MFS), 500 Boylston Street, Boston, MA.
MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings,
Inc. which is itself an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada.
A I M Advisors, Inc.
AIM V.I. Value Fund, AIM V.I. Global Utilities Fund, and AIM V.I. Capital
Appreciation Fund are advised by A I M Advisors, Inc. (AIM), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
Fidelity Management & Research Company
The Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Contrafund Portfolio, and Fidelity VIP III Mid Cap
Portfolio are advised by Fidelity Management & Research Company (FMR), 82
Devonshire Street, Boston, Massachusetts 02109.
On behalf of the Fidelity VIP II Contrafund Portfolio, Fidelity VIP III Growth
Opportunities Portfolio, and Fidelity VIP III Mid Cap Portfolio, FMR has
sub-advisory agreements with two affiliates, FMR U.K. and FMR Far East. No
separate or additional fee is paid by the portfolios to the sub-adviser.
Davis Selected Advisers, LP
Davis Financial Portfolio, Davis Real Estate Portfolio, and Davis Value
Portfolio are advised by Davis Selected Advisers, LP, 2949 East Elvira Road,
Suite 101, Tucson, Arizona 85706 (Davis). Davis Selected Advisers-NY, Inc. acts
as sub-adviser to the Funds. It is located at 609 Fifth Avenue, New York 10017.
Janus Capital Corporation
Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth Portfolio, Janus
Aspen Capital Appreciation Portfolio, and Janus Aspen Worldwide Growth Portfolio
are advised by Janus Capital Corporation (Janus), 100 Fillmore Street, Denver,
Colorado 80206.
- -----------------------
44 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Fixed-rate option
- --------------------------------------------------------------------------------
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
THE FIXED-RATE OPTION
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. You may allocate some or all of your net premiums to the fixed-rate
option, and may transfer some or all of your investments in the variable
investment options into the fixed-rate option. There are restrictions on making
transfers out of the fixed-rate option. See Transfers between the investment
options. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
We have not registered the fixed-rate option or our general account as
investment companies, and interests in the fixed-rate option are not registered
under the Securities Act of 1933. The SEC staff does not review the prospectus
disclosure about the fixed-rate option or the general account, but the
information we present may be subject to certain generally applicable provisions
of the federal securities laws regarding the accuracy and completeness of
information appearing in a prospectus.
Amounts in the fixed-rate option
The total amount that you have invested in the fixed-rate option consists of:
o the portion of your net premiums and any loan repayments that you have
allocated to this option, plus
o any amounts that you have transferred to this option from the variable
investment options, plus
o the interest paid on your policy account value in this option, minus
o any deductions or withdrawals from the fixed-rate option, including
applicable charges.
Because different interest rates may be in effect as you make transfers and
contributions, your effective interest rate at any time may be a weighted
average of the different rates which apply to the portions of your policy
account value in the fixed-rate option. Interest accrues daily on the total that
you have invested in the fixed-rate option, including interest you have earned
in previous years. The minimum annual interest rate for the fixed-rate option is
4%. Interest rates may be changed at any time in our discretion. We are not
obliged to pay more than 4% in interest, although we may choose to do so.
Deductions from the fixed-rate option are made from amounts in the fixed-rate
option in the order in which they were added, beginning with amounts held there
the longest.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 45
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
- --------------------------------------------------------------------------------
Policy loans
- --------------------------------------------------------------------------------
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan.
POLICY LOANS
While either insured is alive, you may borrow all or a portion of the loan value
of your policy, by assigning your policy to us as collateral for your loan. Your
policy's loan value is:
o 90% of the cash surrender value of your policy on the date we receive your
written request, minus
o the amount of any outstanding policy debt, minus
o any interest due at the next policy anniversary on the outstanding policy
debt, minus
o any interest that will be due at the next policy anniversary on the amount
being borrowed.
The minimum loan amount is $500, or your policy's loan value, whichever is less.
We will normally pay loan proceeds to you within seven days of receiving your
request (see Policy proceeds for exceptions to this general rule).
We will not process any loan request that does not specify the variable
investment options from which the loan should be taken, or that exceeds the
amount available.
When taking out a policy loan, you should consider:
o amounts transferred out of the variable and fixed-rate options and into
our Loan Account are no longer affected by the investment experience,
positive or negative, or interest crediting, of those allocation options
o as a result, taking a policy loan will have a permanent effect on your
policy account value, even after the loan is repaid in full
o the amount of your policy that is available for withdrawal or surrender,
and your policy's death benefit proceeds, will also be reduced
dollar-for-dollar by the amount of any policy debt
o if your policy is considered to be a modified endowment contract under the
Internal Revenue Code, there may be tax consequences associated with
taking a policy loan. See Tax considerations for a discussion of modified
endowment contracts and the effects on policy loans
When you request a loan, we will first transfer that amount from the policy
account value in the variable investment options that you specify in your
request. If the amount of the loan requested exceeds the policy account value in
all variable investment options, we will transfer the excess from your policy
account value in the fixed-rate option into our Loan Account.
The investments in the Loan Account will earn interest at a minimum annual rate
of 4%. We credit this interest monthly to the Loan Interest Account.
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46 P R O S P E C T U S S P E C I A L F E A T U R E S
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Interest on policy loans
- --------------------------------------------------------------------------------
We charge interest at an annual rate of 5% on all outstanding policy debt,
payable in arrears, until the 20th anniversary of your policy. After this point
the annual rate falls to 4.5% for all existing and new policy loans.
Interest on your policy loan
We charge simple interest that accrues daily at an annual rate of 5% on all
outstanding policy debt, payable in arrears, until the 20th anniversary of your
policy. After this, the annual rate falls to 4.5% for all existing and new
policy loans. Interest accrues daily and is due on each policy anniversary. If
you do not pay the interest on your loan when it is due, the amount will be
capitalized and added to the Loan Account. The maximum amount of loan interest
that can be capitalized and added to the Loan Account is 100% of the policy's
net cash surrender value.
We transfer the required amount from the Loan Interest Account to the Loan
Account. After the transfer, any amount remaining in the Loan Interest Account
is transferred to the variable investment options and the fixed-rate option in
accordance with the current premium allocation instructions. If the amount in
the Loan Interest Account is not sufficient to cover the loan interest due, any
deficiency will be transferred proportionately from the amounts in the variable
investment options and the fixed-rate option.
Repaying your policy loan
Except for required loan repayments, you may repay all or part of any
outstanding policy debt at any time while the insured is alive and the policy is
in force. The minimum loan repayment amount is $100 or the outstanding balance
of your policy debt, whichever is lower.
If the surviving insured has died and the death benefit proceeds have not been
paid, either in cash or under a payment option, you have 60 days after his or
her death to repay any policy debt. If you do, we will then increase the amount
payable to the beneficiary by the amount of your repayment.
Except for required loan repayments (see below), we will apply a loan repayment
first to the payment of loan interest due but not yet capitalized, then to
reduce amounts in the Loan Account and then to policy interest accrued since the
last policy anniversary but not yet due. We credit any repayment applied to
reduce amounts in the Loan Account to the variable investment options and the
fixed-rate option according to your current allocation instructions. The amount
credited to the fixed-rate option will earn the interest rate in effect at that
time until the next policy anniversary.
Transfers under your policy that are made in connection with policy loans are
not subject to transfer charges. Also, loan repayments are not subject to
premium charges, so it may be to your advantage, if you have outstanding loans
or interest, to make loan repayments rather than premium payments.
If, on any monthly processing date, you owe more in loans and interest than your
cash surrender value, we will notify you that a loan repayment is required for
your policy to remain in force. Your policy will lapse without value 61 days
after the default date set out
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in our notice if we do not receive a payment equal to the amount by which your
policy debt exceeds the cash surrender value on the monthly processing date in
question.
If the surviving insured dies after we have sent this notice, but before the 61
days are up, we will pay the beneficiary the death benefit proceeds, minus any
policy debt and unpaid interest.
There may be adverse tax consequences if your policy lapses and you have
outstanding policy debt.
Decreasing the face amount
- --------------------------------------------------------------------------------
On and after the first policy anniversary, you may request a reduction in its
face amount, which is the guaranteed minimum amount your policy will pay at
death or maturity.
DECREASING THE FACE AMOUNT
On and after the first policy anniversary, you may request a reduction in face
amount, which is the guaranteed minimum amount your policy will pay at death. To
do this we require that:
o you make your request in writing and we receive it at our customer service
office
o at least one insured is alive when we receive your request
o the reduction is at least $5,000 unless it is caused by a partial
withdrawal, in which case the partial withdrawal rules apply, and
o the new face amount is not lower than our minimum face amount, currently
$250,000.
We reduce your face amount on the monthly processing date coinciding with or
next following the date we approve your request.
Your death benefit option will determine how your policy is affected by a
reduction in the face amount due to a partial withdrawal:
o under Option 1, a partial withdrawal will typically cause an immediate
reduction in your policy's face amount
o under Option 2, a partial withdrawal will not reduce your policy's face
amount. However, the amount of your death benefit will decline with each
partial withdrawal.
o under Option 3, a partial withdrawal will typically not cause an immediate
reduction in your policy's face amount. However, the amount of your death
benefit will decline with each partial withdrawal.
If you have made one or more increases to the initial face amount by adding
policy segments and then request a face amount decrease, we will apply the
decrease to your policy segments as follows. We start with the most recent
policy segment, followed by the next most recent, and so on, and then reduce the
additional sum insured portion of the initial face amount and, finally, reduce
the basic sum insured portion of the initial face amount.
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48 P R O S P E C T U S S P E C I A L F E A T U R E S
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Since we do not deduct a surrender charge when you decrease the face amount, the
surrender charge does not change. Your policy account value must always be
greater than the surrender charge. Further, the administrative charge per $1,000
of coverage is not reduced by a decrease in face amount.
We will send you policy pages that reflect the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may have tax consequences, including
possibly causing it to be considered a modified endowment contract under the
Internal Revenue Code. A decrease in face amount may also reduce federal tax law
limits on what you can put into the policy. In these cases you may need to have
a portion of the policy's cash value paid to you to comply with federal tax law.
See Tax considerations.
You can also reduce or cancel coverage provided by the Survivorship Adjustable
Annual Renewable Term rider. A reduction in the face amount of the Survivorship
Adjustable Annual Renewable Term rider will not affect the face amount of your
policy. Likewise, you can decrease the face amount of your policy without
reducing the coverage of your term rider.
Consult your sales representative for advice. See Appendix C for more
information on the Survivorship Adjustable Annual Renewable Term rider.
INCREASING THE FACE AMOUNT
Provided both insureds are living, on any policy anniversary up to and including
the anniversary closest to the younger insured's 70th birthday, you may ask us
to increase your policy's face amount. To do this we require that:
o you make your request in writing and we receive it at our customer service
office at least 30 days before your policy anniversary
o at the time of the increase, the younger insured must be at most age 70
and the other insured at most age 90
o you prove that the insureds meet our insurance requirements, and
o the increase be for at least $10,000.
If we approve the increase, it will take effect on the policy anniversary on or
after we receive the request, provided the insureds are alive on that date.
We'll send you revised policy pages reflecting the changes to your policy.
We'll issue the increase in the form of a separate policy segment. Each policy
segment has its own underwriting class, rate for cost of insurance, surrender
charges, administrative charges, premium charge, target premium, and, during the
first three policy years,
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<PAGE>
minimum annual premium.
After an increase in the face amount takes effect, to calculate premium charges
we will allocate premium payments first to the initial face amount and then to
each policy segment, starting with the oldest policy segment and ending with the
most recent one. We'll allocate premiums in such a way that they won't exceed
the annual target premium for the initial face amount or for each policy
segment. When the sum of the premiums paid during a policy year exceeds the
target premium for the initial face amount, we will allocate the excess to the
first policy segment. If the premiums you pay during a policy year exceed the
target premiums for all the policy segments and the initial face amount, we'll
allocate the excess proportionately according to the target premiums for the
initial face amount and each policy segment.
If you increase the face amount of your policy, it will be subject to new
surrender charges. We'll calculate the surrender charges as if you had bought a
new policy for the increase in the face amount. A new 9-year surrender charge
will apply to the policy segment that increased the face amount. We'll notify
you about the new surrender charge after any increase in the face amount.
You don't have to pay an additional premium to increase the face amount.
However, you may have to make a premium payment to prevent the policy from going
into default. That's because the new surrender charges triggered by an increase
in the face amount would automatically reduce the net cash surrender value of
the policy. Depending on your circumstances, a premium payment may be necessary
to keep the net cash surrender value above zero.
Increasing the face amount of your policy may have tax consequences, including
possibly causing your policy to be considered a modified endowment contract. The
tax consequences associated with your policy being classified as a modified
endowment contract are discussed in Tax considerations.
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50 P R O S P E C T U S S P E C I A L F E A T U R E S
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Partial withdrawals
- --------------------------------------------------------------------------------
After the first policy year, you may withdraw part of your policy's net cash
surrender value. The minimum partial withdrawal is $500.
PARTIAL WITHDRAWALS
After the first policy year, you may withdraw part of your policy's net cash
surrender value. You must make your request for withdrawal in writing, and at
least one insured must be alive when you make the withdrawal. The minimum
partial withdrawal is $500. We have the right to limit the number of partial
withdrawals you make in a policy year to 12.
If we approve your request, it will be effective as of the business day we
receive it at our customer service office. The proceeds will normally be paid
within seven days of the time we receive your request. For exceptions to this
general rule see Policy proceeds. We will not approve or process a partial
withdrawal if:
o your remaining net cash surrender value would be insufficient to cover
three times the most recent monthly deduction, or
o you have chosen death benefit Option 1 or Option 3 and the partial
withdrawal would cause your policy's face amount to fall below our minimum
face amount, or
o you do not specify the variable investment options from which the
withdrawal is to be deducted, or
We will tell you if these conditions apply.
A partial withdrawal will reduce your policy account value by the amount of the
partial withdrawal. In addition the face amount will be reduced by the amount of
any partial withdrawal that exceeds the reduction-free partial withdrawal
amount. So if you wish to make a partial withdrawal that does not reduce your
face amount, you should make a reduction-free partial withdrawal. The amount of
your reduction-free partial withdrawal depends on the death benefit option in
effect and is calculated as shown below. If you have increased your policy's
face amount by adding policy segments, we will reduce the face amount starting
with the most recent policy segment, and ending with the additional sum insured
and the basic sum insured, in that order. See Decreasing the face amount.
We will calculate the reduction-free partial withdrawal amount as of the close
of business on the date we receive your request. This amount will be affected by
which death benefit option you have chosen.
If you have chosen death benefit Option 1, your reduction-free partial
withdrawal amount is any positive amount resulting from:
o your policy account value, minus
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o your policy's face amount divided by the death benefit factor outlined in
your policy.
If you have chosen death benefit Option 2, all partial withdrawals are
reduction-free.
If you have chosen death benefit Option 3, your reduction-free partial
withdrawal amount is the greater of:
o your net accumulated premiums immediately prior to the partial withdrawal,
or
o any positive amount resulting from:
o your policy account value, minus
o your policy's face amount divided by the death benefit factor
outlined in your policy.
We deduct the amount of your withdrawal from the policy account value
attributable to the variable investment options that you specified in your
request. If the partial withdrawal exceeds the policy account value attributable
to all variable investment options, we will deduct the excess amount from the
policy account value attributable to the fixed-rate option.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
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52 P R O S P E C T U S S P E C I A L F E A T U R E S
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Surrendering your policy
- --------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while the insured
is alive. Your policy's net cash surrender value will normally be paid within
seven days of the time we receive your request.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while either
insured is alive. We will calculate your policy's net cash surrender value as of
the close of the business day we receive your written request, which must
include your policy, or an acceptable affidavit confirming that you've lost your
policy, at our customer service office. Your policy's net cash surrender value
will normally be paid within seven days of the time we receive your request.
Your policy's net cash surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan Account
and Loan Interest Account, minus
o any surrender charges, minus
o any outstanding policy debt.
Your total surrender charges will be the total of the surrender charges for the
initial face amount, and for any policy segments. See Deductions and charges.
- --------------------------------------------------------------------------------
Example
Surrender in policy year 5
--------------------------------------------------------------------------
Male insured, Age 50; Female insured, Age 45
--------------------------------------------------------------------------
Male: Preferred Plus Underwriting Class
Female: Preferred Plus Underwriting Class
--------------------------------------------------------------------------
Face Amount: $500,000
--------------------------------------------------------------------------
Annual Policy Premium: $4,696
--------------------------------------------------------------------------
Assuming, 6% hypothetical gross return: (5.19% net return)
(See Appendix A)
--------------------------------------------------------------------------
Policy Account Value $19,132
------------------------------- -----------------------------
Surrender Charge 2,348
------------------------------- -----------------------------
Policy Debt 0
------------------------------- -----------------------------
Net Cash Surrender Value $16,784
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All insurance coverage will end on the day we calculate your policy's net cash
surrender value. For a discussion of the tax consequences of surrendering your
policy, see Tax considerations.
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Transfers
- --------------------------------------------------------------------------------
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. Each transfer
must be for a minimum of $500, or the total amount you have invested in the
option you are transferring funds out of, whichever is lower.
TRANSFERS BETWEEN THE INVESTMENT OPTIONS
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. We will make
transfers based on the unit values at the end of the business day on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our customer service office or by calling 1-800-441-6455.
Before you can request transfers over the telephone, you must first send us a
written authorization form.
Your policy account value may not be invested in more than twenty of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. If you make more than twelve transfers within a
policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. We will accept transfer instructions by
telephone between 9:00 a.m. and 3:30 p.m. New York time on each business day. We
will ask callers to provide identification and a personal security code for the
policy, and will accept the instructions of anyone who can provide this
information. We may also record telephone transfer requests without notifying
the caller. If we reasonably believe that telephone instructions are genuine, we
are not liable for any losses, damages or costs resulting from a transaction. As
a result, you bear the risk of any losses caused by unauthorized or fraudulent
telephone transactions.
The rules for telephone transfers are subject to change, and we reserve the
right to suspend or withdraw this service without notice. During periods of
financial market or economic volatility, it may be difficult to contact us in
order to make a transfer by telephone. If this happens, you should send your
request to us in writing.
Transfers from the fixed-rate option
You may only transfer your policy account value out of the fixed-rate option
once each policy year. We must receive your request within 30 days of your
policy anniversary. If we receive your request in the 30 days before your policy
anniversary, we will make the transfer on your policy anniversary. If we receive
your request in the 30 day period after your policy anniversary, we will make
the transfer on the business day we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
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54 P R O S P E C T U S S P E C I A L F E A T U R E S
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When you request a transfer from the fixed-rate option, the amounts that you
have held in the fixed-rate option longest will be withdrawn first.
The maximum that you may transfer out of the fixed-rate option each policy year
is either 33 1/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
Dollar cost averaging
- --------------------------------------------------------------------------------
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular variable investment option or options each month, over a
period of time. Dollar cost averaging may reduce the impact of price
fluctuations on unit values of the variable investment options over the period
that automatic transfers are made, but cannot guarantee an increase in the
overall value of your investments or offer protection against losses in a
declining market.
DOLLAR COST AVERAGING TRANSFER OPTION
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular option or options each month, over a period of time. Using
dollar cost averaging, you purchase more units in the variable investment
options when their share prices are lower, and fewer units when prices are
higher. In this way, dollar cost averaging may reduce the impact of price
fluctuations on unit values of the variable investment options over the period
that automatic transfers are made. However, this strategy cannot guarantee an
increase in the overall value of your investments or offer protection against
losses in a declining market.
The amount of your monthly transfer under this option must be at least $100 for
each option you wish to invest in. Amounts will be transferred automatically on
each monthly processing date from The Guardian Cash Fund into the variable
investment options you have chosen.
Before the program can begin, you must submit an authorization form.
We will stop your dollar cost averaging program when:
o the period of time listed on your dollar cost averaging authorization form
ends
o your policy account value in The Guardian Cash Fund is insufficient to
cover your monthly investment in the variable investment options you have
chosen. If this happens we will divide what you do have in The Guardian
Cash Fund proportionally among the variable investment options you have
chosen, leaving a balance of zero in The Guardian Cash Fund
o you tell us in writing to end the program, and we receive this notice at
least three days before the next monthly processing date, or
o your policy lapses or you surrender it.
You may change your transfer instructions or reinstate the dollar cost averaging
program, subject to the rules above, if we receive a new authorization form at
least three business days before your policy's next monthly processing date.
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<PAGE>
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the surviving
insured is determined as explained under Death benefit options, and is payable
when we receive proof that both insureds have died while the policy was in
effect. It is calculated as follows:
o the death proceeds based on the death benefit option in effect as of the
monthly processing date immediately preceding the surviving insured's
death, plus
o the proceeds of any coverage you have added to your policy through riders,
plus
o if you have chosen death benefit Option 3, any premiums paid between the
monthly processing date and the surviving insured's date of death, minus,
as of the date of the surviving insured's death,
o any outstanding policy debt, minus
o as of the date of the surviving insured's death, the lesser of:
o any premium required under the No Lapse Guarantee; or
o the amount required to bring the cash surrender value up to zero,
and minus
o any partial withdrawals between the monthly processing date and the
surviving insured's date of death.
We may adjust the death proceeds paid to the beneficiaries if:
o the age or sex of an insured listed on the policy application is incorrect
o an insured commits suicide within two years of the policy issue date, a
change in the face amount, or the date a change in the death benefit from
Option 1 or Option 3 to Option 2 takes effect (but only for any increase
in the death benefit over your policy's face amount that was a result of
the change)
o there are limits imposed by riders to the policy.
If the younger insured has or would have reached the attained age of 100 or
older, the death proceeds will be the policy account value minus any policy debt
as of the surviving insured's date of death.
The amount of all other transactions will be calculated at the end of the
business day on which we receive the necessary instructions, information or
documentation at our customer service office.
If the proceeds are being taken from your policy account value in the variable
investment options, we will normally pay proceeds within seven days of receiving
the necessary information. However,
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56 P R O S P E C T U S S P E C I A L F E A T U R E S
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we may delay any transfers, loans or other payments made from the variable
investment options when:
o the New York Stock Exchange is closed, except for weekends or holidays, or
when trading has been restricted
o the Securities and Exchange Commission determines that a state of
emergency exists, making policy transactions impracticable, or
o when one or more of the mutual funds corresponding to the variable
investment options legally suspends payment or redemption of their shares.
We will pay interest on the death proceeds from the date of the surviving
insured's death until the proceeds are paid, either in a lump sum or through a
payment option.
If the proceeds are from your policy account value in the fixed-rate option,
they will normally be paid promptly once we have received the necessary
information. However, we may delay any transfers, loans or other payments made
from the fixed-rate option for up to six months from the date of your request.
If we do this, we will pay interest of at least 3% per year on payments that we
delay for 30 days or more. Please note that requests for transfers from the
fixed-rate option may only be made during certain periods. See Transfers from
the fixed-rate option.
EXCHANGING A POLICY
Exchanging a policy
- --------------------------------------------------------------------------------
You may exchange all or a portion of your Park Avenue VUL policy for a
fixed-benefit whole life policy issued by us or one of our affiliates, without
having to prove that the insureds meet our insurance requirements.
EXCHANGE FOR FIXED-BENEFIT WHOLE LIFE INSURANCE OPTION
At any time prior to the second policy anniversary, you have the right to
exchange all or a portion of your Park Avenue SVUL policy for a fixed-benefit
whole life policy on the lives of the insureds issued by us or our affiliate,
Guardian Life, without having to prove that the insureds meet our insurance
requirements. Once exercised, this right terminates. Under the new policy, your
policy value will be held in the issuer's general account. Your face amount
cannot exceed the face amount of this policy on the date you make the exchange
nor be less than the minimum face amount under GIAC's or its affiliate's rules.
If you exchange a portion of the face amount, the face amount remaining must
meet GIAC's minimum face amount requirements. The insureds' ages when the Park
Avenue SVUL policy took effect will also be carried over. Before you can make
any exchange, however, you must repay any outstanding policy debt on your Park
Avenue SVUL policy, and all due monthly deductions must be paid. See your policy
for details. Both insureds must be alive on the date of the exchange.
The exchange may result in a cost or credit to you. The exchange cost or credit
is the greater of (a) or (b) where:
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S P E C I A L F E A T U R E S P R O S P E C T U S 57
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<PAGE>
o (a) is the cumulative premiums for the new policy (i.e., the premiums that
would have been paid to the date of exchange if the new policy had been in
force from the policy date) accumulated at an annual interest rate of 6%,
less the pro-rata portion of the cumulative premiums for this policy
(i.e., the actual premiums paid for this policy to the date of the
exchange) applicable to the face amount exchanged accumulated at an annual
interest rate of 6%; and
o (b) is the cash value of the new policy, less the pro-rata portion of this
policy's net cash surrender value on the exchange date applicable to the
face amount exchanged.
If this amount is greater than zero, you must pay the exchange cost to the
issuing company. If this amount is less than zero, the issuing company will pay
an exchange credit to you.
The new policy will be issued and effective either on the business day that we
receive your written exchange request at our customer service office along with
your policy, or on the date that any exchange cost is received by the issuer of
your new policy, whichever is later.
Additional rider benefits are available only if you provide the issuer of your
new policy with satisfactory evidence of insurability for the insureds, and will
be subject to the issuing company's rules on the exchange date.
EXCHANGE FOR FIXED BENEFIT PAID-UP INSURANCE OPTION (AVAILABLE IN NEW YORK ONLY)
On any policy anniversary, you may elect the Fixed Benefit Paid-Up Insurance
Option. To be eligible for this option, we must receive your written request to
elect this option at our customer service office on or within 30 days prior to a
policy anniversary, the insureds must be living, and the policy must have a cash
surrender value.
If you elect this option, we will transfer your policy account value to the
general account. If any policy debt is outstanding, you may apply a portion of
the policy account value to repay the policy debt. Any policy debt still
outstanding on the date this option takes effect will continue as policy debt
under this option with the same rate of interest. You may not make further
premium payments under this option and any riders attached to the policy will be
cancelled.
This option provides a level death benefit. The death benefit will be the amount
the net cash surrender value, if policy debt is being repaid, otherwise the cash
surrender value, will purchase as a net single premium at the insureds' attained
ages, sexes and underwriting classes.
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58 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
The Fixed Benefit Paid-Up Insurance Option will have a cash value and a policy
loan value. We will send you policy pages reflecting the table of guaranteed
values. The death benefit under this option will be reduced by the amount of any
outstanding policy debt. The cash value and the death benefit will be reduced
after a partial withdrawal. The new death benefit will be the current death
benefit multiplied by the ratio of the cash value after the partial withdrawal
to the cash value before the partial withdrawal. No monthly administration
charges will be deducted when this option is in effect. We will send you policy
pages reflecting the new values.
You should consult with legal and tax advisers before exchanging your policy
under either of the above options.
Payment options
- --------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options specified in the accompanying text.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
an insured is living. If the surviving insured has died and you have not chosen
a payment option, the beneficiaries may choose the payment options, up to one
year after the surviving insured's death. If you are surrendering your policy,
you have 60 days after the proceeds of your policy become payable within which
to choose a payment option. You, or the beneficiaries, may choose to distribute
the proceeds under more than one payment option at a time, but you must
distribute at least $5,000 through each option selected. Monthly payments under
each option must be at least $50.
The proceeds of your policy must be paid to a `natural person'. Payments will
not be made to his or her estate if he or she dies before the proceeds have been
fully paid. You may name a second person to receive any remaining payments if
this happens.
The proceeds that we hold in order to make payments under the payment options do
not share in the income, gains or losses of the variable investment options, nor
do they earn interest in the same way or amount as funds in the fixed-rate
option.
Under Payment Option 1, we will hold the proceeds and make monthly interest
payments at a guaranteed annual rate of 3%.
Under Payment Option 2, we will make monthly payments of a specified amount
until the proceeds and interest are fully paid. At least 10% of the original
proceeds must be paid each year. Guaranteed interest of 3% will be added to the
proceeds each year.
Under Payment Option 3, we will make monthly payments for a specified number of
years. The amount of the payments will include interest at 3% per year.
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Under Payment Option 4, we will make monthly payments for the longer of the life
of the payee or 10 years. The minimum amount of each payment will include
interest at 3% per year.
Under Payment Option 5, we will make monthly payments until the amount paid
equals the proceeds settled, and for the remaining life of the payee. The
minimum amount of each payment will include interest at 3% per year.
Under Payment Option 6, we will make monthly payments for 10 years and for the
remaining life of the last surviving of two payees. The minimum amount of each
payment will include interest at 3% per year.
Payment option tables for Options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female) projected 20 years to the year 2020 by 100%
of the male scale G Factors (for males) and 50% of the female scale G Factors
(for females).
Your policy lists the monthly payment for every $1,000 of proceeds that the
payee applies under Options 3 to 6.
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TAX CONSIDERATIONS
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THIS DISCUSSION of tax considerations for your Park Avenue SVUL policy is
general in nature, does not purport to be complete or to cover all tax
situations, and should not be considered as tax advice. It is based on our
understanding of federal income tax laws as they are currently being
interpreted. We cannot guarantee that these laws will not change while this
prospectus is in use, or while your policy is in force. If you are interested in
purchasing a policy, taking a policy loan or effecting policy transactions, you
should consult a legal or tax adviser regarding your particular circumstances.
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TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under federal tax law, a life insurance policy must satisfy certain requirements
which are set forth in Section 7702 of the Internal Revenue Code. Guidance as to
how these requirements are to be applied is limited. Accordingly, there is some
uncertainty about the application of Section 7702 to a policy, particularly so
with respect to policies issued on an insured who does not meet our insurance
requirements for standard coverage. Nevertheless, we believe it is reasonable to
conclude that your policy should satisfy the applicable requirements. If it is
subsequently determined that a policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the policy into compliance
with such requirements and we reserve the right to modify the policy as
necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have been
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the policyowners
have been currently taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the Park
Avenue SVUL policy, such as your flexibility to allocate premiums and the policy
account value, have not been explicitly addressed in published rulings. While we
believe that the policy does not give policyowners investment control over the
Separate Account's assets, we reserve the right to modify the policy as
necessary to prevent the policyowner from being treated as the owner of the
Separate Account assets supporting the policy.
In addition, the Code requires that the investments of the investment divisions
of our Separate Account be "adequately diversified" in order for the policy to
be treated as a life insurance contract for federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual funds, will satisfy these diversification requirements.
Tax status
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To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in the
Internal Revenue Code. For example, the underlying investments must be
"adequately diversified" in order for the policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that the
investment divisions of the Separate Account, through the mutual funds, will
satisfy these diversification requirements.
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Treatment of policy proceeds
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We believe that the death benefits under your policy should be excludable from
the gross income of the beneficiary. Generally, under the existing federal tax
laws, increases in the value of your policy will not be taxed federally unless
you make a withdrawal before the insured dies.
The following discussion assumes that the policy will qualify as a life
insurance contract for federal income tax purposes.
TREATMENT OF POLICY PROCEEDS
We believe that the death benefits under your policy generally should be
excludable from the gross income of the beneficiary. Generally, under the
existing federal tax laws, increases in the value of your policy will not be
taxed federally unless you make a withdrawal before the insured dies. The money
that you receive when the insured dies is not subject to federal income tax, but
may be subject to federal estate taxes or generation skipping taxes.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. How this money is taxed depends on
whether your policy is classified as a modified endowment contract.
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," with less favorable tax treatment than other
life insurance contracts. Due to the flexibility of the policy as to premiums
and benefits, the individual circumstances of each policy will determine whether
it is classified as a modified endowment contract. The rules are too complex to
be summarized here, but generally depend on the amount of premium payments made
during the first seven policy years. Certain changes in a policy after it is
issued could also cause it to be classified as a modified endowment contract.
You should consult with a competent tax adviser to determine whether a policy
transaction will cause your policy to be classified as a modified endowment
contract.
If your policy is not considered a modified endowment contract:
o money that you withdraw from your policy will generally be taxed only if
the total that you withdraw exceeds your "basis" in the policy - which is
generally equal to the total amount that you have paid in premiums. The
difference between what you have put in and what you take out will be
taxed as ordinary income. When you withdraw money from your policy, your
basis is reduced by any amount withdrawn that is not taxed
o if you surrender your policy, you will generally be taxed only on the
amount by which the value of your policy, including any policy debt, is
greater than your basis in the policy. The tax consequences of
surrendering your policy may vary if you receive the proceeds under one of
the payment plans. Losses are generally not tax deductible
o policy loans are generally not taxable because they must be paid back. The
interest you pay on these loans is generally not tax deductible. However,
if your policy lapses while you have an outstanding policy loan, you may
have to pay tax on the amount that you still owe to your policy. The tax
consequences of a policy
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loan are unclear if the difference between the rate we charge on the loan
and the interest rate earned on the loan is very small. You should consult
a tax adviser regarding these consequences.
If your policy is considered a modified endowment contract:
o all distributions other than death benefits, including partial
withdrawals, surrenders, assignments and policy loans, will be treated
first as distributions of gain, taxable as ordinary income to the extent
of any gain; and as a tax free recovery of basis only after all the gain
in the contract has been distributed.
o all modified endowment contracts issued by GIAC or its affiliates during
any calendar year will be treated as one modified endowment contract to
determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 59 1/2 years of age or older; is attributable to
a disability; or is received as substantially equal periodic payments made
over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same person is being insured. Paying
additional premiums under the new policy may cause it to be treated as a
modified endowment contract. Your policy may also lose any "grandfathering"
privilege, where you would be exempt from certain legislative or regulatory
changes made after your original policy was issued, if you exchange your policy.
You should consult with a tax adviser if you are considering exchanging any life
insurance policy.
POLICY SPLIT OPTION
The policy split option permits a policy to be split into two single life
insurance policies. It is not clear whether exercising the policy split option
will be treated as a taxable transaction or whether the individual policies that
result would be classified as modified endowment contracts. A competent tax
adviser should be consulted before exercising the policy split option.
POLICY CHANGES
We will make changes to policies and their riders where necessary to attempt to
ensure that they continue to qualify as life insurance under the Internal
Revenue Code, and policyowners are not considered the direct owners of the
mutual funds held in the Separate Account. Any changes will be made uniformly to
all policies affected. We will provide advance notice in writing of these
changes when required by state insurance regulators.
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Transfer taxes
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If you are both the policyowner and the insured, the death benefit under your
Park Avenue SVUL policy will generally be included in the value of your gross
estate for federal estate tax purposes. If the beneficiary of the policy is
someone who is two or more generations younger than the policyowner, the
generation-skipping transfer (GST) tax may be imposed.
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue
SVUL policy, please consult a legal or tax adviser.
ESTATE AND GENERATION SKIPPING TRANSFER TAXES
If you are both the policyowner and the surviving insured, the death benefit
under your Park Avenue SVUL policy will generally be included in the value of
your gross estate for federal estate tax purposes. If you are not the insured,
the value of the policy will be included in your gross estate.
Also, if the beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax may be
imposed.
The individual situation of a policyowner or beneficiary will determine how the
ownership of a policy or the receipt of policy proceeds will affect their tax
situation. Because the rules are complex, a legal or tax adviser should be
consulted for specific information.
Other tax consequences
Park Avenue SVUL policies can be used in various ways, including:
o as non-qualified deferred compensation or salary continuance plans
o in split-dollar insurance plans, and
o as part of executive bonus plans, retiree medical benefits plans, or other
similar plans.
The tax consequences of these plans will vary depending on individual
arrangements and circumstances. We recommend that anyone considering buying a
Park Avenue SVUL policy with the expectation of favorable tax consequences
should consult with a qualified tax adviser before investing.
In addition, new rules have recently been passed by Congress relating to life
insurance owned by businesses. Any business should consult with a qualified tax
adviser before buying a policy, and before making any changes or transactions
under the policy.
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POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We may pay taxes at the state and local level, as well as premium taxes, but at
present these are not substantial. If they increase, we reserve the right to
recover these costs by charging the Separate Account or the policy.
INCOME TAX WITHHOLDING
We are generally required to withhold money for income taxes when you make a
transaction on which you will have to pay tax. You can request in writing that
we not withhold any amount for income tax purposes. If we do not, or if we fail
to withhold enough to cover the taxes that are due, you could be penalized. You
would also be responsible for any unpaid taxes when you file your regular income
tax return. We may similarly withhold generation skipping transfer taxes unless
you tell us in writing that these taxes are not required.
Possible tax law changes
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Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
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RIGHTS AND RESPONSIBILITIES
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Assigning policy rights
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You may assign the rights under your Park Avenue SVUL policy to another person
or business, subject to certain restrictions discussed in the accompanying text.
ASSIGNING THE RIGHTS TO YOUR POLICY
You may assign the rights under your Park Avenue SVUL policy to another person
or business. This is often done, for example, to secure a loan. We will only be
bound by such an agreement when we have received a copy of the assignment
papers, signed by you, as well as the business or person to whom you are
assigning your rights, and your policy's beneficiaries, if applicable.
Assignments are subject to all payments made or actions we have taken on or
before the date we receive the assignment papers. We are not responsible for
determining whether the transfer of your policy's rights is legally valid.
The entity or person to whom you assign your rights may exercise all rights
granted under the policy except the right to:
o change the policyowner or beneficiary
o change a payment option, and
o direct where your net premiums will be invested or make transfers among
the fixed-rate and variable investment options.
VOTING RIGHTS
As explained in The variable investment options, we are the owner of the fund
shares held in the Separate Account. As a result, we have the right to vote at
any meeting of the funds' shareholders.
Where we are required to by law, we will vote fund shares based on the
instructions we receive from Park Avenue SVUL policyowners. If we do not receive
instructions from some policyowners, we will vote fund shares attributable to
their policies, and any shares we own in our own right, in the same proportion
as the shares attributable to the policyowners from whom we do receive
instructions. This proportion could include policyowners and contract owners
from other separate accounts.
If changes in the law or its interpretation allow us to make voting decisions in
our own right, or to restrict the voting of policyowners, we reserve the right
to do so. We will ask you for your voting instructions if, on the record date
set by the fund's directors, part of your policy account value is invested in
the variable investment option of the Separate Account that corresponds to the
mutual fund holding a shareholders' meeting.
The number of votes that you have will be based on the number of shares that you
hold. We will calculate the number of shares, or fraction of a share, that you
hold on the record date by dividing the dollar value of your investment in the
division of the Separate Account corresponding to the mutual fund, by the net
asset value of the variable investment option's shares on that date.
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If, after careful examination, we reasonably disapprove of a proposed change to
a mutual fund's investment adviser, its advisory contract, or its investment
objectives or policies, we may disregard policyowners' voting instructions, if
the law allows us to do so. If the change affects the investment adviser or
investment policy, we will only exercise this right if we determine in good
faith that the proposed change is contrary to state law or is inappropriate in
view of the fund's investment objective and purpose. If we exercise this right,
we will provide a detailed explanation of our actions in the next semi-annual
report to policyowners.
Certain activities related to the operation of the Separate Account may require
the approval of policyowners. See Rights reserved by GIAC. If a vote is
required, you will be given one vote for every $100 of your policy that is held
in the variable investment options. For any investments that we hold on our own
behalf, we will vote in the same proportion as our policyowners.
You do not have the right to vote on the operations of the fixed-rate option.
LIMITS TO GIAC'S RIGHT TO CHALLENGE A POLICY
Incontestability
Generally, we cannot challenge your policy or any face amount increase once it
is in force during a given insured's lifetime for two years. This policy will
terminate upon our successful contest with respect to either insured. If you
change your policy's death benefit from Option 1 or Option 3 to Option 2, we
cannot challenge the amount of the increase in death benefit that results from
this change once it has been in effect during a given insured's lifetime for two
years from the date the change took effect. If we are successful in our
challenge, your death benefit will revert to what it would have been under
Option 1 or Option 3, whichever is applicable.
Misstatement of age or sex
If we find that the information in the application regarding the age or sex of
an insured is wrong, we will adjust the death benefit to that which would have
been purchased by the most recent deduction for cost of insurance under the
policy and any rider costs using the correct age or sex.
Incontestability
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Generally, we cannot challenge your policy once it is in force for two years.
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Suicide exclusion
If the insured commits suicide within two years of the policy's issue date, we
will cancel the policy and no death benefit proceeds will be paid, regardless of
whether he or she is considered sane at the time. The amount that we must pay in
death benefits will be limited to the greater of
o the net cash surrender value as of the date of death, or
o the policy premiums paid, minus
o any policy debt, minus
o any partial withdrawals.
If an insured commits suicide, while sane or insane within two years from the
effective date of any increase in the face amount, our liability will be limited
to the cost of insurance for such increase.
If an insured commits suicide within two years of an increase in your policy's
death benefit due to a change from Option 1 or Option 3 to Option 2, the death
benefit will be limited to the original death benefit under Option 1 or Option
3, whichever is applicable, plus the additional cost of insurance charges paid
for the increased death benefit.
RIGHTS RESERVED BY GIAC
We reserve the right to make changes or take actions that we feel are in the
best interests of the policyowners and their beneficiaries, or are appropriate
for the policy. We will follow applicable laws and regulations in exercising our
rights, and will seek the approval of policyowners or regulators when necessary.
Some of the changes or actions we may take include:
o operating the Separate Account in any form permitted by law
o taking any action that will allow the Separate Account either to comply
with or be exempt from sections of the 1940 Act
o de-registering the Separate Account under the 1940 Act
o transferring the assets from one division of the Separate Account into
other divisions, or to one or more separate accounts, or to our general
account, and adding, combining, or removing investment divisions in the
Separate Account
o substituting the shares of one mutual fund held through the Separate
Account for shares of a different class in the same mutual fund, shares of
a different mutual fund, or any other investment allowed by law
o adding to, suspending or eliminating your ability to direct how your net
premiums are invested, or to transfer your investments among the variable
investment options or the fixed-rate option
o changing the way we make deductions or collect charges, consistent with
the limits outlined in the policy
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o changing the policy as required to ensure that it continues to qualify as
life insurance under the Internal Revenue Code, or to preserve favorable
tax treatment for your benefits under the policy, or
o making any changes necessary to the policy so that it conforms with any
action we are permitted to take.
We will inform you if we make a change that affects the basic nature of the
investments in any of the variable investment options. If this occurs, you will
have 60 days from the postmark on our notice to transfer your investments out of
this option and into one of the other investment options, without charge. See
Transfers between the investment options.
YOUR RIGHT TO CANCEL YOUR POLICY
You may cancel your policy by returning it with a written cancellation notice to
either our customer service office or the agent from whom you bought the policy.
You must do this within the later of:
o 10 days of receiving your policy, or
o 45 days of signing your completed policy application.
Longer periods may apply in some states. If a cancellation notice is sent by
mail, it will be effective on the date of the postmark. Once we receive your
notice, we will refund all of the premiums you have made towards your policy,
and it will be considered void from the beginning. We may delay refunding any
payments you made by check until your check has cleared.
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OTHER INFORMATION
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DISTRIBUTION OF THE POLICY AND OTHER CONTRACTUAL ARRANGEMENTS
We have an agreement with Guardian Investor Services Corporation (GISC) for GISC
to act as the principal underwriter of the SVUL policies, as well as the other
variable life insurance policies and variable annuity contracts that we offer.
GISC is a broker-dealer registered under the Securities and Exchange Act of
1934, and a member of the National Association of Securities Dealers. GISC is a
New York corporation.
Agents and commissions
GIAC agents who are licensed by state insurance authorities to sell variable
life insurance policies must also be registered representatives of GISC, or of
broker-dealer firms which have entered into agreements with GIAC and GISC to
sell Park Avenue SVUL policies, which may include our affiliate Park Avenue
Securities LLC. Our agents receive a maximum sales commission of:
o 55% of the policy premium paid for the first policy year or the first year
of a policy segment up to one target premium, and 3% of any policy
premiums in excess of one target premium, then
o 4% of the policy premiums paid for policy years two through ten or years
two through ten of any policy segment up to one target premium, and 3% of
any policy premiums in excess of one target premium, then
o 0.15% per annum of the policy account value (excluding loans) paid monthly
after policy year 10.
In certain group and sponsored arrangements, commissions are levelized to 20% of
premiums paid up to one target premium in each of the first five policy years.
We may also compensate our agents in the form of commission overrides, expense
allowances, bonuses, wholesaler fees and training allowances. In addition,
agents may qualify for non-cash compensation such as expense-paid trips or
educational seminars.
If you return your policy under the right to cancel provisions, the agent may
have to return some or all of any commissions we have paid.
Administrative services
Through an agreement with our parent company, Guardian Life, to carry out the
administration of Park Avenue SVUL policies, we are billed quarterly for the
time that their staff spends on GIAC business, and for the use of their
centralized services and sales force.
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Other agreements
We have entered into several other agreements, including:
o an agreement with Value Line, Inc. under which we are compensated for
marketing the Value Line Centurion Fund and the Value Line Strategic Asset
Management Trust to our policyowners, and
o agreements with MFS, AIM, Davis, Fidelity and Janus under which we are
compensated for certain administrative costs and expenses connected to the
offering and sale of their funds to our policyholders. The amount we
receive is based on a percentage of assets under management.
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
Where state insurance laws allow us to, we may sell Park Avenue SVUL policies
under a group or sponsored arrangement.
A group arrangement is one in which a group of individuals is covered under a
single policy. This might be arranged, for example, by an employer, a trade
union, or a professional association.
A sponsored arrangement is one in which we are allowed to offer members of a
group, such as employees of a company or members of an association, insurance
policies on an individual basis.
Communications we'll send you
Shortly after your policy anniversary each year, we will send you an updated
statement showing the following information:
o the amount of your current death benefit
o the instructions we have on file regarding where to invest your net
premiums, and how much you have invested in each of the allocation options
o your policy account value, cash surrender value and net cash surrender
value
o the amount you have paid in policy premiums and the charges that we have
deducted, since the last anniversary of your policy
o a summary of any transfers or partial withdrawals, loans or loan
repayments that you have made since your last annual statement
o the total of any outstanding policy debt that you owe us, and
o the interest rate for allocations to the fixed-rate option.
Twice a year we will also send you reports containing the financial statements
of the mutual funds and the Separate Account through which you invest in these
funds. Of these reports, the annual reports will contain audited financial
statements.
We will confirm in writing receipt of your policy premiums and any transfers or
other transactions. We will also write you to request a premium or loan
repayment to keep your policy from lapsing.
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We may reduce or eliminate certain deductions and charges outlined in this
prospectus for policies bought under group or sponsored arrangements including
policies issued in connection with certain business insurance arrangements. We
may, for instance, sell policies without surrender charges and/or with reduced
or eliminated fees and charges to employees, officers, directors and agents of
Guardian Life and its subsidiaries and their immediate family members. We may
reduce or waive policy charges and deductions in accordance with the rules in
effect as of the date an application for a policy is approved. In addition, GIAC
may permit groups and persons purchasing under a sponsored arrangement to apply
for simplified issue and multi-life underwriting. To qualify for a reduction in
the policy's charges or deductions certain criteria must be met. These may
include:
o the size of the group
o the expected number of participants
o the expected amount of premium payments.
o the expected number of policies to be issued
o the amount of coverage
The amount of any reduction in charges or deductions and the criteria to qualify
for a reduction will reflect our reduced cost of selling and/or maintaining the
policies in group or sponsored arrangements.
From time to time we may change the amount of any reduction in charges or
deductions, or the criteria that a group must meet to qualify for these
reductions. Any change will be made on a non-discriminatory basis.
LEGAL CONSIDERATIONS FOR EMPLOYERS
The Park Avenue SVUL policy estimates different risks for men and women in
establishing a policy's premiums, benefits and deductions, except in states
where gender-neutral standards must be used. In 1983, the United States Supreme
Court held that optional annuity benefits offered under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Anyone interested in buying Park
Avenue SVUL policies in connection with insurance or benefits programs should
consult with their legal advisers to determine if the policy is appropriate for
this purpose.
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ADVERTISING PRACTICES
In our advertisements and sales materials for Park Avenue SVUL policies we may
include:
o articles or reports on variable life insurance in general, or Park Avenue
SVUL specifically, and any other information published in business or
general information publications.
o relevant indices or rankings of investment securities or similar groups of
funds
o comparisons of the variable investment options with the mutual funds
offered through the separate accounts of other insurance companies, or
those with similar investment objectives and policies, and
o comparisons with other investments, including those guaranteed by various
governments.
We may use the past performance of the variable investment options and funds to
promote the policies. This data is not indicative of the performance of the
funds or the policies in the future or the investment experience of individual
policyowners.
We may feature individual funds and their managers, and describe the asset
levels and sales volumes of GIAC, GISC and others in the investment industry. We
may also refer to past, current, or prospective economic trends and investment
performance, and any other information that may be of interest.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards for sales and service of individually sold life insurance and
annuities.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings that would threaten our
financial position or that of the Separate Account.
LEGAL MATTERS
The legal validity of the Park Avenue SVUL policy, as described in this
prospectus, has been confirmed by Richard T. Potter, Jr., Vice President and
Counsel of GIAC.
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REGISTRATION STATEMENT
We have omitted some information from this prospectus, which is contained in our
registration with the Securities and Exchange Commission (SEC), relating to the
Separate Account and the Park Avenue SVUL policy. You can obtain this
information by contacting the SEC's main office in Washington, DC, and paying
the required fee.
FINANCIAL STATEMENTS
The GIAC financial statements contained in this prospectus should only be used
to determine our ability to meet our obligations under the Park Avenue SVUL
policies, and not as an indication of the investment experience of the Separate
Account.
FINANCIAL AND ACTUARIAL EXPERTS
The consolidated financial statements as of December 31, 1999 and 1998 and for
each of the three years in the period ended 1999 included in the prospectus,
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants given on the authority of said firm as experts in
auditing and accounting. PricewaterhouseCoopers LLP is located at 1177 Avenue of
the Americas, New York, New York 10036.
The actuarial matters contained in this prospectus have been examined by Charles
G. Fisher, FSA, Vice President and Actuary of GIAC. His opinion on actuarial
matters is filed as an exhibit to the registration statement filed with the
Securities and Exchange Commission.
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74 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
GIAC'S MANAGEMENT
The directors and officers of GIAC are named below together with information
about their principal occupations and affiliations during the past five years.
The business address of each director and officer is 7 Hanover Square, New York,
New York 10004. The "Guardian Fund Complex" referred to in the biographical
information is comprised of (1) The Guardian Variable Contract Funds, Inc. (a
series fund that issues its shares in four series), (2) The Guardian Bond Fund,
(3) The Guardian Cash Fund, (4) The Park Avenue Portfolio (a series trust that
issues its shares in nine series) and (5) GIAC Funds, Inc. (a series fund that
issues its shares in three series).
Name Title Business History
- --------------------------------------------------------------------------------
Joseph A. Caruso Vice President Vice President and Corporate
and Secretary Secretary, The Guardian Life
Insurance Company of America 3/96 -
present; Second Vice President and
Corporate Secretary 1/95 - 2/96;
Vice President and Secretary,
Guardian Investor Services
Corporation, Secretary, Guardian
Asset Management Corporation,
Guardian Baillie Gifford Limited,
Park Avenue Securities LLC and
various mutual funds within the
Guardian Fund Complex.
Philip H. Dutter Director Management Consultant
(self-employed). Director of The
Guardian Life Insurance Company of
America 3/88 - present. Director of
Guardian Investor Services
Corporation.
Earl C. Harry Treasurer Treasurer, The Guardian Life
Insurance Company of America 11/96 -
present. Assistant Treasurer prior
thereto. Treasurer of Guardian
Investor Services Corporation,
Guardian Asset Management
Corporation and Park Avenue
Securities LLC.
Arthur V. Ferrara Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America 1/93 - 12/95; Director
1/81 - present. Director (Trustee)
of Guardian Investor Services
Corporation, Guardian Asset
Management Corporation, Gabelli
Capital Asset Fund, Park Avenue
Securities LLC and various mutual
funds within the Guardian Fund
Complex.
Charles G. Fisher Vice President Second Vice President and Actuary,
and Actuary The Guardian Life Insurance Company
of America.
Leo R. Futia Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America; Director 5/70 - present.
Director (Trustee) of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and various
mutual funds within the Guardian
Fund Complex.
Peter L. Hutchings Director Executive Vice President and Chief
Financial Officer, The Guardian Life
Insurance Company of America 5/87 -
present. Director of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and Guardian
Asset Management Corporation.
Frank J. Jones Executive Executive Vice President and Chief
Vice President, Investment Officer, The Guardian
Chief Investment Life Insurance Company of America,
Officer, and Director, Guardian Investor Services
Director Corporation, Guardian Baillie
Gifford Limited, Park Avenue
Securities LLC, Director and
President Guardian Asset Management
Corporation. Executive Vice
President, GIAC Funds, Inc.. Officer
of various mutual funds within the
Guardian Fund Complex.
-----------------------
O T H E R I N F O R M A T I O N P R O S P E C T U S 75
-----------------------
<PAGE>
Name Title Business History
- --------------------------------------------------------------------------------
Edward K. Kane Executive Executive Vice President, The
Vice President Guardian Life Insurance Company of
and Director America 1/97 - present; Senior Vice
President and General Counsel prior
thereto. Director, Guardian Asset
Management Corporation.
Bruce C. Long Director and Senior Vice President, The Guardian
Executive Life Insurance Company of America
Vice President 9/99 - present; President, New
Equity Products England Annuities 2/94-6/99;
Director and President, Guardian
Investor Services Corporation;
Director, Guardian Baillie Gifford
Limited.
Frank L. Pepe Vice President Vice President and Controller,
and Controller Equity Products, The Guardian Life
Insurance Company of America 1/96 -
present; Second Vice President and
Controller, Equity Products prior
thereto. Vice President and
Controller of Guardian Investor
Services Corporation. Vice President
and Treasurer, GIAC Funds, Inc..
Officer of various mutual funds
within the Guardian Fund Complex.
Richard T. Potter, Jr. Vice President Vice President and Equity Counsel,
and Counsel The Guardian Life Insurance Company
of America 1/96 - present; Second
Vice President and Equity Counsel
prior thereto. Vice President and
Counsel of Guardian Investor
Services Corporation. Counsel of
Guardian Asset Management
Corporation, Park Avenue Securities
LLC, and various mutual funds within
the Guardian Fund Complex.
Joseph D. Sargent President, President, Chief Executive Officer
Chief Executive and Director The Guardian Life
Officer and Insurance Company of America 1/96 -
Director present; President prior thereto;
Director 1/93 - present. Chairman of
the Board of Guardian Investor
Services Corporation and Guardian
Asset Management Corporation and
various mutual funds within the
Guardian Fund Complex. Director of
Guardian Baillie Gifford Limited and
Park Avenue Securities LLC.
William C. Warren Director Retired. Dean Emeritus, Columbia Law
School. Former Chairman of the
Board, Sandoz, Inc.; Director of The
Guardian Life Insurance Company of
America since 1/57, Park Avenue
Securities LLC, and Director of
Guardian Investor Services
Corporation.
No officer or director of GIAC
receives any compensation from the
Separate Account. No separately
allocable compensation has been
paid by GIAC, or any of its
affiliates, to any person listed
above for services rendered to the
Separate Account.
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76 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
- --------------------------------------------------------------------------------
SPECIAL TERMS USED IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
Some of the special terms used in this prospectus are defined below.
Additional sum insured
This is additional insurance coverage that provides a level death benefit to the
policy anniversary nearest the insured's 100th birthday.
Age
The insured's age on the birthday closest to the date the policy takes effect.
Attained age
Each insured's Age plus the number of policy years completed since the policy
date.
Basic policy
The policy, including the basic sum insured, additional sum insured,
endorsements and applications, but excluding any additional benefit riders.
Basic sum insured
The amount of coverage provided by the Basic policy, excluding any additional
sum insured. The minimum basic sum insured is currently $250,000.
Business day
Each day that GIAC processes transactions, currently including each day on which
the New York Stock Exchange or its successor is open for trading and GIAC is
open for business. GIAC's close of business is 4 p.m. New York time. If any
transaction or event occurs or is scheduled to occur on a day that is not a
business day, or if a transaction request is received after GIAC's close of
business, such transaction or event will be deemed to occur as of the next
following business day unless otherwise specified.
Face amount
The sum of the basic sum insured plus the additional sum insured and the amount
of any policy segments in force at the time of determination.
Initial face amount
The face amount in force on the policy's issue date. The minimum initial face
amount is currently $250,000.
Internal Revenue Code
The Internal Revenue Code of 1986, as amended, and its related rules and
regulations.
Issue date
The date your policy is issued at GIAC's customer service Office.
-----------------------
S P E C I A L T E R M S P R O S P E C T U S 77
-----------------------
<PAGE>
Loan account
An account to which values from the variable investment options and the
fixed-rate option are transferred when a policy loan is taken. The Loan Account
is equal to the loan.
Loan amount
The sum of any amounts borrowed plus any capitalized loan interest less any loan
repayment.
Loan interest account
An account that represents the interest earnings credited by GIAC on the Loan
Account.
Minimum annual premium
An amount used to determine whether your policy meets the No Lapse Guarantee
Premium Test, and in setting your policy's initial premium. It is shown in your
policy.
Monthly processing date
The day of each policy month on which the monthly deduction is deducted from the
policy account value and certain policy benefits and values are calculated. The
monthly processing date is the same date of each calender month as the policy
date, or the last day of a calender month if that is earlier. If such calendar
day is not a business day, the monthly processing date will be the next
following business day.
Net accumulated premiums
At issue, net accumulated premiums equals the value of the initial premium
payment. Thereafter, net accumulated premiums will increase, as a result of
premium payments made, and decrease, as a result of partial withdrawals. After a
premium payment, net accumulated premiums will be equal to the value of net
accumulated premiums before the premium payment plus the amount of the premium
paid. After a partial withdrawal, net accumulated premiums is equal to the
greater of (i) the value of net accumulated premiums before the withdrawal,
decreased by the amount of the partial withdrawal, or (ii) zero.
Net amount at risk
The difference between the amount that you would be paid under a policy segment
under the policy's death benefit and the policy account value allocated to that
segment.
Net Premium
The amount of premium that remains after we deduct premium charges from the
premiums you pay.
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78 P R O S P E C T U S S P E C I A L T E R M S
- -----------------------
<PAGE>
No Lapse Guarantee
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if the net cash surrender value of your policy is not
enough to pay the policy's monthly deduction in a given month, so long as the No
Lapse Guarantee Premium Test is met.
No Lapse Guarantee Premium Test
This test is used to determine whether your policy qualifies for the No Lapse
Guarantee. It states that, as of the most recent monthly processing date, you
must have paid at least as much into your policy (minus any withdrawals or
policy debt) as the minimum annual premiums up to this date, as outlined in your
policy. To calculate your minimum annual premium for the current policy year,
multiply your minimum annual premium by a ratio equal to the number of completed
policy months since the last policy anniversary plus 1 over 12.
Policy anniversary
The same date each year as the policy date.
Policy date
The date your policy comes into effect. This date is used to measure policy
months, policy years, policy anniversaries, and monthly processing dates.
Policy debt
The unpaid policy loan amount plus the accumulated and unpaid interest on those
loans.
Surviving insured
The insured remaining alive after the first death that occurs while this policy
is in force.
Target premium
A measure of premium used to determine your policy's premium charges and agent
commissions. Your policy's basic sum insured and any policy segments you buy
each have their own target premium. The target premium associated with the basic
sum insured is based on both insureds' ages, underwriting classes and sex
(unless gender-neutral rates are required by law). The target premium associated
with any policy segment is based on the insureds' attained ages and the
underwriting classes for each policy segment.
The target premium for any rider, except the guaranteed coverage rider, is based
on the monthly deduction for that rider during the first policy year.
Younger insured
The younger of the two insureds on the policy date.
-----------------------
S P E C I A L T E R M S P R O S P E C T U S 79
-----------------------
<PAGE>
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80 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
- --------------------------------------------------------------------------------
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
---------------------
1999 1998
--------- ---------
(In millions)
<S> <C> <C>
Assets:
Bonds, available for sale at fair
value (cost $572.7 million; $538.6 million, respectively) .. $ 554.8 $ 549.0
Affiliated mutual funds ....................................... 78.0 42.9
Joint ventures ................................................ 0.5 0.4
Policy loans .................................................. 80.1 72.9
Short-term investments ........................................ 7.1 --
--------- ---------
Total invested assets ......................................... 720.5 665.2
--------- ---------
Cash and cash equivalents ..................................... 63.6 18.5
Deferred acquisition costs .................................... 357.5 313.6
Deferred software costs ....................................... 11.6 --
Uncollected and unpaid premiums ............................... 3.4 2.1
Amounts receivable from reinsurers ............................ 46.5 42.5
Investment income due and accrued ............................. 9.9 9.4
Other assets .................................................. 5.1 3.3
Accounts receivable ........................................... 37.5 22.2
Separate account assets ....................................... 11,063.8 8,841.7
--------- ---------
Total Assets .................................................. $12,319.4 $ 9,918.5
========= =========
Liabilities:
Future policy benefits and other policyholder liabilities ..... $ 547.9 $ 480.0
Due to parent and mutual fund affiliates ...................... 69.6 32.2
Current federal income taxes .................................. 18.2 25.8
Deferred federal income taxes ................................. 102.8 98.8
Accrued expenses and other liabilities ........................ 110.0 47.5
Separate account liabilities .................................. 10,970.4 8,764.8
--------- ---------
Total Liabilities ............................................. 11,818.9 9,449.1
--------- ---------
Stockholder's equity:
Common stock, 1999 - $100 par value, 25,000 shares authorized,
issued and outstanding; 1998 - $100 par value, 20,000 shares
authorized, issued and oustanding .......................... 2.5 2.0
Additional paid-in capital .................................... 136.9 137.4
Retained earnings ............................................. 347.9 310.6
Accumulated other comprehensive income ........................ 13.2 19.4
--------- ---------
Stockholder's equity .......................................... 500.5 469.4
--------- ---------
Total Liabilities & Stockholder's Equity ...................... $12,319.4 $ 9,918.5
========= =========
</TABLE>
See notes to consolidated financial statements.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 81
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Revenues:
Premiums ........................................ $ 12.0 $ 9.1 $ 3.7
Net investment income ........................... 45.4 41.4 38.7
Realized capital (losses) gains on investments .. (1.7) 2.1 0.9
Income from brokerage operations ................ 67.1 39.7 31.1
Administrative service fees ..................... 217.1 173.6 130.5
Other income .................................... 17.5 24.0 20.3
------ ------ ------
Total revenues .................................. 357.4 289.9 225.2
------ ------ ------
Benefits and other deductions:
Policyholder benefits ........................... 21.2 23.7 20.3
Amortization of deferred policy acquisition costs 67.1 55.3 36.6
Amortization of deferred software costs ......... 1.8 -- --
Other operating costs and expenses .............. 165.6 105.1 73.3
------ ------ ------
Total benefits and other deductions ............. 255.7 184.1 130.2
------ ------ ------
Income before income taxes ...................... 101.7 105.8 95.0
Federal income taxes:
Current expense ................................. 12.1 24.4 17.2
Deferred expense ................................ 12.3 12.0 16.2
------ ------ ------
Total federal income taxes ...................... 24.4 36.4 33.4
------ ------ ------
Net income ...................................... 77.3 69.4 61.6
Other comprehensive income, net of income tax:
Change in unrealized investment (losses) gains .. (6.2) 3.2 12.6
------ ------ ------
Comprehensive income ............................ $ 71.1 $ 72.6 $ 74.2
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
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82 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Common stock at par value, beginning of year .... $ 2.0 $ 2.0 $ 2.0
Increase in par value ........................... 0.5 -- --
------ ------ ------
Common stock at par value, end of year .......... 2.5 2.0 2.0
------ ------ ------
Capital in excess of par value, beginning of year 137.4 137.4 137.4
(Decrease) in capital ........................... (0.5) -- --
------ ------ ------
Capital in excess of par value, end of year ..... 136.9 137.4 137.4
------ ------ ------
Retained earnings, beginning of year ............ 310.6 241.2 179.6
Net income ...................................... 77.3 69.4 61.6
Dividends to parent ............................. (40.0) -- --
------ ------ ------
Retained earnings, end of year .................. 347.9 310.6 241.2
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, beginning of year ..... 19.4 16.2 3.6
Change in unrealized investment (losses) gains,
net of deferred taxes ........................ (6.2) 3.2 12.6
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, end of year ........... 13.2 19.4 16.2
------ ------ ------
Total stockholder's equity, end of year ......... $500.5 $469.4 $396.8
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 83
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Operating activities
Net income ........................................... $ 77.3 $ 69.4 $ 61.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in
Deferred policy acquisition costs ................. (43.9) (46.2) (45.9)
Deferred software costs ........................... (11.6) -- --
Uncollected premiums .............................. (1.3) 2.4 0.5
Amounts receivable from reinsurers ................ (4.0) (13.4) 24.9
Investment income due and accrued ................. (0.5) (0.5) (0.3)
Other assets ...................................... (1.8) 0.1 0.6
Accounts receivable ............................... (15.3) 8.6 (10.4)
Separate accounts, net ............................ (16.5) (14.8) (5.1)
Future policy benefits and policyholder liabilities 20.9 21.9 (17.0)
Payable to parent ................................. 10.7 5.7 8.9
Federal income taxes:
Current ......................................... (7.6) 9.1 6.9
Deferred ........................................ 4.0 14.1 19.2
Accrued expenses and other liabilities ............ 62.5 (1.5) (14.0)
Realized losses(gains) on investments ............. 1.7 (2.1) (0.9)
Other, net ........................................ (0.7) 1.0 (3.8)
------ ------ ------
Net cash provided by operating activities ....... 73.9 53.8 25.2
------ ------ ------
Investment activities
Proceeds from investments sold
Bonds ............................................. 142.2 280.9 315.4
Other items, net .................................. -- -- (1.3)
Investments purchased
Bonds ............................................. (180.1) (331.7) (310.5)
Affiliated mutual funds ........................... (24.6) (3.3) (20.5)
------ ------ ------
Net cash used by investing activities ........... (62.5) (54.1) (16.9)
------ ------ ------
Financing activities
Additions to policyholder contract deposits .......... 107.7 54.8 61.7
Withdrawals from policyholder contract deposits ...... (60.7) (64.4) (61.8)
Dividend to parent ................................... (13.3) -- --
------ ------ ------
Net cash provided (used) by financing activities 33.7 (9.6) (0.1)
------ ------ ------
(Decrease) Increase in cash ............................. 45.1 (9.9) 8.2
Cash and cash equivalents, at beginning of year ......... 18.5 28.4 20.2
------ ------ ------
Cash and cash equivalents, at end of year ............... $ 63.6 $ 18.5 $ 28.4
====== ====== ======
Supplemental disclosure:
Federal income taxes paid ............................ $ 19.7 $ 15.4 $ 10.2
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
- -----------------------
84 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Guardian Insurance & Annuity Company, Inc. (GIAC or the Company) is a
wholly owned subsidiary of The Guardian Life Insurance Company of America (The
Guardian). The Company, domiciled in the state of Delaware, is licensed to
conduct life and health insurance business in all fifty states and the District
of Columbia. The Company's primary business is the sale of variable deferred
annuity contracts and variable and term life insurance policies. For variable
products, other than 401(k) products, contracts are sold by insurance agents who
are licensed by GIAC and are either Registered Representatives of Park Avenue
Securities, LLP (PAS) or of broker dealer firms that have entered into sales
agreements with GIAC. The Company's general agency distribution system is used
for the sale of other products and policies.
PAS, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934. PAS was established as a
broker dealer during 1999 and has assumed the registered representatives
formally affiliated with Guardian Investor Services Corporation (GISC).
GISC, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934 and is a registered investment
advisor under the Investment Adviser's Act of 1940. GISC is the distributor and
underwriter for GIAC's variable products, and is the investment advisor to
certain mutual funds sponsored by GIAC which are investment options for the
variable products.
The Company has established fourteen insurance separate accounts primarily
to support the variable annuity, universal variable life and variable life
insurance products it offers. The majority of the separate accounts are unit
investment trusts registered under the Investment Company Act of 1940. Proceeds
from the sale of variable products are invested through these separate accounts
in certain mutual funds specified by the contractholders. Of these separate
accounts the Company maintains two separate accounts whose sole purpose is to
fund certain employee benefits plans of The Guardian.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company's consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the
United States (GAAP). All significant intercompany balances and transactions
have been eliminated.
Accounting Changes: In March 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", which requires capitalization of external and certain internal
costs incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP 98-1
prospectively effective January 1, 1999. The adoption of SOP 98-1 resulted in
$14.9 million of software costs being capitalized. Capitalized internal use
software is amortized on a straight-line basis over the estimated useful life of
the software.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES:
Bonds and common stocks are classified as available for sale and carried
at estimated fair value, with unrealized appreciation or depreciation recorded
net of applicable deferred taxes are included in a separate component of equity,
"Accumulated other comprehensive income". The investment portfolio is reviewed
for investments that may have experienced a decline in value considered to be
other than temporary.
Joint ventures are carried on the equity basis of accounting.
Policy loans are stated at unpaid principal balance. The carrying amount
approximates fair value since loans on policies have no defined maturity date
and reduce the amount payable at death or surrender of the contract.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 85
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Securities purchase under agreements to resell and securities sold under
agreements to repurchase are treated as financing arrangements and are carried
at the amounts at which the securities will be subsequently resold or
reacquired, including accrued interest, as specified in the respective
agreements. The Company's policy is to take possession of securities purchased
under agreements to resell. The market value of securities to be repurchased or
resold is monitored, and additional collateral is requested, where appropriate,
to protect against credit exposure.
Securities repurchase and resale agreements and securities borrowed and
loaned transactions are used to generate net investment income and facilitate
trading activity. These instruments are short-term in nature (usually 30 days or
less) and are collateralized principally by U.S. Government and mortgage-backed
securities. The carrying amounts of these instruments approximate fair value
because of the relatively short period of time between the origination of the
instruments and their expected realization.
Realized investment gains, net are computed using the specific
identification method. Costs of bonds and stocks are adjusted for impairments
considered other than temporary. Allowances for losses on mortgage loans and
real estate are netted against asset categories to which they apply and
provisions for losses on investments are included in "Realized investment gains,
net." Decreases in lower of depreciated cost or fair value less selling costs of
investment real estate held for sale are recorded in "Realized investment gains,
net."
Short-term investments are stated at amortized cost and consist primarily
of investments with maturities as of purchase date of six months or less. Market
values for such investments approximate carrying value.
Cash and cash equivalents include cash on hand and highly liquid debt
instruments purchased with an original maturity of three months or less.
Deferred Policy Acquisition Costs are costs of acquiring new business,
principally commissions, underwriting, agency and policy issue expenses, all of
which vary with and are primarily related to the production of new business, are
deferred. Deferred policy acquisition costs are subject to recoverability
testing at the time of policy issue and loss recognition testing at the end of
each accounting period.
For investment-type products, deferred policy acquisition costs are
amortized over the shorter of the expected average life of the contracts or
thirty years, as a constant percentage of estimated gross profits arising
principally from investment results, mortality and expense margins and surrender
charges based on actual results and anticipated future experience, updated at
the end of each accounting period. The effect on the amortization of deferred
policy acquisition costs of revisions to estimated gross profits is reflected in
earnings in the period such estimated gross profits are revised.
For life insurance products, deferred policy acquisition costs are
amortized in proportion to anticipated premiums. Assumptions as to anticipated
premiums are estimated at the date of policy issue and are consistently applied
during the life of the contracts. Deviations from estimated experience are
reflected in earnings in the period such deviations occur. For these contracts,
the amortization periods generally are for the estimated life of the policy.
Separate account assets and liabilities are reported at market value, and
represent policyholder funds maintained in accounts having specific investment
objectives. The assets of each account are legally segregated and are not
subject to claims that arise out of any other business of the Company.
Investment risks associated with market value changes are generally borne by the
customers, except to the extent of minimum guarantees made by the Company with
respect to certain amounts. The investment results of separate accounts are
reflected in separate account liabilities. The amounts provided by the Company
to establish separate account investment portfolios (seed money) are included in
separate account assets.
Insurance Revenue and Expense Recognition consists of premiums and
benefits. Premiums for term life and certain annuity insurance products are
recognized as revenue when due and collected. The reserve for future policy
benefits has been provided on a net-level premium method based upon estimated
investment yields, mortality, and other assumptions which were appropriate at
the time the policies were issued. Benefits and expenses are associated with
earned premiums so as to result in recognition of profits over the life of the
contract. This association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition costs.
Revenues for variable life and for individual and group variable annuity
products consist of net investment income and cost of insurance, policy
administration and surrender charges that have been earned and assessed against
policyholder account balances during the period. Policy benefits and claims that
are charged to expense include benefits and
- -----------------------
86 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
claims incurred in the period in excess of related policy account balances,
maintenance costs and interest credited to policyholder account balances. The
policyholder account values represent an accumulation of gross premium payments
plus credited interest less expense and mortality charges and withdrawals.
Income Taxes for the Guardian and its life insurance and non-life
insurance subsidiaries file a consolidated federal income tax return. Current
federal taxes are charged or credited to operations based on amounts estimated
to be payable or recoverable as a result of taxable operations for the current
year. Deferred income tax assets and liabilities are recognized based on the
difference between financial statement carrying amounts and income tax basis of
assets and liabilities using enacted income tax rates and laws.
Reclassifications of certain amounts in prior years have been adjusted to
conform to current year presentation.
NOTE 3 -- INVESTMENT SECURITIES
Market values of bonds and common stocks are based on quoted prices as
available. For certain private placement debt securities where quoted market
prices are not available, management estimates fair market value by using
adjusted market prices for like securities.
The cost and estimated market values of investments by major investment
category as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31, 1999
(In millions)
----------------------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of U.S.
government corporations and agencies ................ $ 24.5 $ 0.2 $ 0.7 $ 24.0
Obligations of states and political subdivisions ...... 30.7 0.1 0.5 30.3
Debt securities issued by foreign governments ......... 3.8 -- 0.1 3.7
Corporate debt securities ............................. 513.7 0.5 17.4 496.8
----------- ----------- ----------- -----------
Subtotal ............................................ 572.7 0.8 18.7 554.8
Affiliated mutual funds ............................... 61.0 17.2 0.2 78.0
----------- ----------- ----------- -----------
$ 633.7 $ 18.0 $ 18.9 $ 632.8
=========== =========== =========== ===========
<CAPTION>
(In millions)
-------------------------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of U.S.
government corporations and agencies ................ $ 28.4 $ 1.5 $ -- $ 29.9
Obligations of states and political subdivisions ...... 60.2 1.4 -- 61.6
Debt securities issued by foreign governments ......... 8.0 0.1 -- 8.1
Corporate debt securities ............................. 442.0 10.0 2.6 449.4
----------- ----------- ----------- -----------
Subtotal ............................................ 538.6 13.0 2.6 549.0
Affiliated mutual funds ............................... 36.9 6.6 0.6 42.9
----------- ----------- ----------- -----------
$ 575.5 $ 19.6 $ 3.2 $ 591.9
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated market value of bonds as of December 31,
1999 and 1998 by contractual maturity is shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 87
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
<TABLE>
<CAPTION>
As of December 31, 1999
(In millions)
------------------------------------
Estimated
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less ........................................................ $ 61.4 $ 61.2
Due after one year through five years .......................................... 296.4 290.0
Due after five years through ten years ......................................... 100.1 95.5
Due after ten years ............................................................ 51.7 46.7
Sinking fund bonds (including collateralized mortgage obligations) ............. 63.1 61.4
----------- -----------
$ 572.7 $ 554.8
=========== ===========
<CAPTION>
As of December 31, 1998
(In millions)
------------------------------------
Estimated
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less ........................................................ $ 47.5 $ 47.7
Due after one year through five years .......................................... 250.0 253.2
Due after five years through ten years ......................................... 102.5 107.8
Due after ten years ............................................................ 67.6 68.3
Sinking fund bonds (including collateralized mortgage obligations) ............. 71.0 72.0
----------- -----------
$ 538.6 $ 549.0
=========== ===========
</TABLE>
The major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturities ...................................................... $ 37.2 $ 33.9 $ 31.8
Affiliated mutual funds ............................................... 1.6 1.5 1.1
Policy loans .......................................................... 3.7 3.5 3.4
Short-term investment ................................................. 2.9 2.3 2.4
Joint venture dividend ................................................ 1.3 1.3 1.1
----------- ----------- -----------
46.7 42.5 39.8
Less: Investment expenses ............................................. 1.3 1.1 1.1
----------- ----------- -----------
Net investment income ................................................. $ 45.4 $ 41.4 $ 38.7
=========== =========== ===========
</TABLE>
Realized gains and losses are based upon specific identification of the
investments. The components of gross realized gains and losses for the year
ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Realized gains from dispositions:
Bonds ............................................................... $ 0.6 $ 2.2 $ 1.1
Separate account seed ............................................... 0.9 -- 0.9
Realized gains from dispositions:
Bonds ............................................................... (3.1) (0.1) (1.1)
Affiliated mutual funds ............................................. (0.1) -- --
----------- ----------- -----------
Realized gains ........................................................ $ (1.7) $ 2.1 $ 0.9
=========== =========== ===========
</TABLE>
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88 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The net unrealized holding gains and losses, included in the consolidated
balance sheets as a component of comprehensive income and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year .............................................. $ 19.4 $ 16.2 $ 3.6
Changes in unrealized investment gains (losses),
net of deferred taxes, attributable to:
Bonds ............................................................... (20.4) 2.6 4.6
Affiliated mutual funds ............................................. 9.1 (1.8) 7.3
Separate account seed ............................................... 5.1 2.4 1.7
Other ............................................................... -- -- (1.0)
----------- ----------- -----------
Balance, end of year .................................................... $ 13.2 $ 19.4 $ 16.2
=========== =========== ===========
</TABLE>
Currently, comprehensive income for the Company consists of net income and
the change in unrealized gains and losses on securities. As of December 31,
1999, 1998 and 1997, the change in unrealized gains and losses before tax was
$(12.9), $7.4 and $15.6 and after tax was $(6.2), $3.2 and $12.6, respectively.
Reclassification adjustments for the period, which include gains on
investment securities that were realized and included in net income of the
current period that also had been included in other comprehensive income as
unrealized holding gains in the period in which they arose, are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Unrealized holding (losses) gains ....................................... $ (14.5) $ 5.7 $ 15.6
Less: Reclassification adjustments ...................................... 1.6 1.7 --
----------- ----------- -----------
Change in unrealized holding (losses) gains ............................. $ (12.9) $ 7.4 $ 15.6
=========== =========== ===========
</TABLE>
Special Deposit assets of $3.7 million and $4.1 million at December 31,
1999 and 1998, respectively, were on deposit with governmental authorities or
trustees as required by certain insurance laws.
NOTE 4 -- DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs as of and
for the years ended December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
As of December 31,
(In millions)
------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Balance, beginning of year .................................................... $ 313.6 $ 267.4
Capitalization of deferrable expenses ......................................... 93.8 77.0
Amortization of recoverable DAC balances ...................................... (67.1) (55.3)
Interest on DAC ............................................................... 21.7 24.2
Retrospectively applied adjustments ........................................... (4.5) 0.3
----------- -----------
Balance, end of year .......................................................... $ 357.5 $ 313.6
=========== ===========
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 89
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 5 -- POLICYHOLDERS' ACCOUNT BALANCES
The balances of policyholders' account balances as of and for the years
ended December 31, 1999 and 1998 are summarized as follows:
As of December 31,
(In millions)
------------------------------------
1999 1998
----------- -----------
Individual annuities .................... $ 7,617.9 $ 6,492.8
Group annuities ......................... 3,105.7 2,104.3
Variable life ........................... 713.7 569.6
Interest-sensitive life contracts ....... 4.2 4.5
----------- -----------
Policyholders' account balances ......... $ 11,441.5 $ 9,171.2
=========== ===========
Policyholders' account balances for investment-type contracts represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses and mortality charges.
NOTE 6 -- FEDERAL INCOME TAXES
The federal income tax expense in the consolidated statements of earnings
is summarized as follows:
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
Federal income tax expense:
Current ..................... $ 12.1 $ 24.4 $ 17.2
Deferred .................... 12.3 12.0 16.2
----------- ----------- -----------
Total ......................... $ 24.4 $ 36.4 $ 33.4
=========== =========== ===========
The federal income taxes attributable to consolidated operations in
certain circumstances can be different from the amounts determined by
multiplying the earnings from operations before federal income taxes by the
expected federal income tax rate of 35%. The sources of the difference and the
tax effects of each source are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Expected taxes on pre-tax income ....................................... $ 35.6 $ 37.5 $ 33.3
Permanent adjustments:
Dividends received deduction on separate accounts .................... (13.1) -- --
Reserve on overpayment of 1998 taxes in 1999 ........................... 1.3 -- --
True-up of tax basis reserves .......................................... 1.3 -- --
State and local taxes .................................................. -- (0.5) 0.1
Foreign tax credit ..................................................... (0.3) (0.3) --
Other .................................................................. (0.4) (0.3) --
----------- ----------- -----------
Total tax expense ...................................................... $ 24.4 $ 36.4 $ 33.4
=========== =========== ===========
</TABLE>
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90 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The tax effect of temporary differences which give rise to deferred
federal income tax assets and liabilities as of December 31, 1999 and 1998, are
as follows:
As of December 31, 1999
(In millions)
------------------------------------
1999 1998
----------- -----------
Deferred tax assets:
Other liabilities ........................ $ 19.5 $ 15.7
DAC Proxy ................................ 13.7 11.1
Amounts receivable from reinsurer ........ 0.3 0.9
Other .................................... 3.9 1.4
----------- -----------
Total deferred tax assets ................ 37.4 29.1
Deferred tax liabilities:
Deferred acquisition costs ............... $ 125.1 $ 109.8
Capitalized software costs ............... 4.1 --
Reserves ................................. 7.7 6.0
Investments .............................. 3.3 10.3
Other .................................... -- 1.8
----------- -----------
Total deferred tax liabilities ........... 140.2 127.9
----------- -----------
Net deferred tax liability ............... $ 102.8 $ 98.8
=========== ===========
Management has concluded that the deferred income tax assets are more
likely than not to be realized. Therefore, Management has concluded that the
deferred income tax assets are more likely than not to be realized. Therefore,
no valuation allowance has been provided.
NOTE 7 -- REINSURANCE
The Company has entered into cession and assumption agreements on a
coinsurance, modified coinsurance and yearly renewable term basis with
affiliated and non-affiliated companies. Ceding reinsurance is used by the
Company to limit its risk from large exposures and to permit recovery of a
portion of direct losses, although ceded reinsurance does not relieve the
originating insurer of liability.
The Company has assumed and ceded coinsurance and modified coinsurance
agreements with affiliated companies. Under these agreements, included in the
consolidated statements of income are $0.9 million, $0.9 million and $1.0
million of assumed premiums at December 31, 1999, 1998 and 1997, and $83.1
million, $65.2 million and $43.6 million of ceded premiums at December 31, 1999,
1998 and 1997, respectively.
The Company terminated, during 1997, an assumption agreement with an
unaffiliated company. Under this agreement, included in the consolidated
statements of income are $(2.3) million of premiums at December 31, 1997.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values for fixed maturities and equity securities, other
than private placement securities, are based on quoted market prices or
estimates from independent pricing services. Fair values for private placement
securities are estimated using a discounted cash flow model which considers the
current market spreads between the U.S. Treasury yield curve and corporate bond
yield curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The fair value of certain non-performing private
placement securities is based on amounts estimated by management.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 91
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 9 -- RELATED PARTY TRANSACTIONS
The Company is billed by The Guardian for all compensation and related
employee benefits for those employees of The Guardian who are engaged in the
Company's business and for the Company's use of The Guardian's centralized
services and agency force. The amounts charged for these services amounted to
$141.0 million in 1999, $100.8 million in 1998 and $72.2 million in 1997, and,
in the opinion of management, were considered appropriate for the services
rendered.
The Company had an investment in the Guardian Real Estate Account (GREA),
which was established in 1987 under Delaware Insurance law as an insurance
company separate account. GIAC had contributed capital to GREA to provide for
funds and to preserve liquidity. Effective December 19, 1997 GREA was liquidated
and, as a result, $6.7 million was returned to GIAC in the form of capital and
there was a realized gain recorded of $1.0 million.
A significant portion of the Company's separate account assets is invested
in affiliated mutual funds. Each of these funds has an investment advisory
agreement with the Company, except for The Baillie Gifford International Fund,
The Baillie Gifford Emerging Markets Fund, The Guardian Baillie Gifford
International Fund and The Guardian Baillie Gifford Emerging Markets Fund.
The separate account assets invested in affiliated mutual funds as of
December 31, 1999 and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
The Guardian Stock Fund ................................... $ 4,153.9 $ 3,664.9
The Guardian VC 500 Index Fund ............................ 1.8 --
The Guardian VC Allocation Fund ........................... 0.8 --
The Guardian High Yield Bond Fund ......................... 0.2 --
The Guardian Bond Fund .................................... 320.0 381.5
The Guardian Cash Fund .................................... 484.1 419.5
The Baillie Gifford International Fund .................... 662.3 526.4
The Baillie Gifford Emerging Markets Fund ................. 64.6 34.6
The Guardian Small Cap Stock Fund ......................... 130.6 109.2
The Guardian Park Avenue Fund ............................. 621.3 511.6
The Guardian Park Avenue Small Cap Fund ................... 22.8 13.2
The Guardian Asset Allocation Fund ........................ 46.0 39.8
The Guardian Baillie Gifford International Fund ........... 15.5 9.1
The Guardian Baillie Gifford Emerging Markets Fund ........ 6.8 0.8
The Guardian Investment Quality Bond Fund ................. 12.7 9.3
The Guardian High Yield Bond Fund ......................... 0.8 --
The Guardian Cash Management Fund ......................... 126.4 57.9
----------- -----------
$ 6,670.5 $ 5,777.8
=========== ===========
</TABLE>
The Company, in agreement with Baillie Gifford Overseas Ltd., has a joint
venture company -- Guardian Baillie Gifford Ltd. (GBG) -- that is organized as a
corporation in Scotland. GBG is registered in both the United Kingdom and the
United States to act as an investment advisor for the Baillie Gifford
International Fund (BGIF), the Baillie Gifford Emerging Markets Fund (BGEMF),
The Guardian Baillie Gifford International Fund (GBGIF) and The Guardian Baillie
Gifford Emerging Markets Fund (GBGEMF). The Funds are offered in the U.S. as
investment options under certain variable annuity contracts and variable life
policies.
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92 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The Company maintains investments in affiliated mutual funds. These
investments as of December 31, 1999 and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
The Guardian Park Avenue Fund ................................. $ 0.1 $ 0.1
The Guardian Park Avenue Small Cap Fund ....................... 2.5 1.8
The Guardian Small Cap Stock Fund ............................. 35.2 26.1
The Guardian Asset Allocation Fund ............................ 2.8 2.5
The Guardian Baillie Gifford International Fund ............... 2.9 2.1
The Guardian Baillie Gifford Emerging Markets Fund ............ 1.5 0.9
The Guardian Investment Quality Bond Fund ..................... 1.6 1.6
The Guardian High Yield Bond Fund ............................. 1.6 1.6
The Guardian Cash Management Fund ............................. 29.8 6.2
----------- -----------
$ 78.0 $ 42.9
=========== ===========
</TABLE>
NOTE 10 -- STATUTORY EQUITY AND INCOME
Applicable insurance department regulations require that the Company
prepare statutory financial statements in accordance with statutory accounting
practices prescribed or permitted by the New York Department of Insurance.
Statutory accounting practices primarily differ from GAAP by charging policy
acquisition costs to expense as incurred, establishing future policy benefits
reserves using different actuarial and interest assumptions, not providing for
deferred taxes, and valuing securities on a different basis.
The following reconciles the consolidated GAAP net income of the Company
to statutory net income as reported to the regulatory authorities:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Consolidated GAAP net income ............................................. $ 77.3 $ 69.4 $ 61.6
Adjustments to restate to statutory basis:
Statutory net income of subsidiaries ................................... 3.3 (4.5) (4.3)
Change in deferred policy acquisition costs ............................ (45.2) (43.2) (41.9)
Change in deferred software costs ...................................... (8.8) -- --
Deferred premiums ...................................................... 0.3 1.5 5.6
Re-estimation of future policy benefits ................................ 13.1 9.7 3.3
Reinsurance ............................................................ (3.8) (4.1) (12.4)
Deferred federal income tax expense .................................... 11.2 11.9 16.2
Amortization of interest maintenance reserve ........................... 0.4 0.3 0.1
Transfer to interest maintenance reserve ............................... 2.4 (1.4) --
Other, net ............................................................. 2.8 0.9 (0.2)
----------- ----------- -----------
Statutory net income ..................................................... $ 53.0 $ 40.5 $ 28.0
=========== =========== ===========
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 93
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The following reconciles the consolidated GAAP stockholder's equity of the
Company to statutory capital and surplus as reported to the regulatory
authorities:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Consolidated GAAP stockholder's equity ................................... $ 500.5 $ 469.4 $ 396.8
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs ...................................... (357.5) (313.6) (267.4)
Deferred software costs ................................................ (11.6) -- --
Elimination of asset valuation reserve ................................. (42.7) (29.6) (26.3)
Re-estimation of future policy benefits ................................ (53.4) (46.9) (41.3)
Establishment of deferred income tax liability ......................... 102.8 98.8 84.7
Unrealized gains on investments ........................................ 19.8 (11.7) (7.9)
Other liabilities ...................................................... 66.7 48.1 33.5
Deferred premiums ...................................................... 8.2 7.8 7.0
Other, net ............................................................. 5.4 5.1 3.6
----------- ----------- -----------
Statutory capital and surplus ............................................ $ 238.2 $ 227.4 $ 182.7
=========== =========== ===========
</TABLE>
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94 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, of changes in equity
and of cash flows present fairly, in all material respects, the financial
position of The Guardian Insurance & Annuity Company, Inc. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for costs of computer software developed or
obtained for internal use in 1999.
/s/ PricewaterhouseCoopers LLP
February 14, 2000
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 95
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES,
NET CASH SURRENDER VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically,
they show how the death benefit, net cash surrender value and policy account
value can vary over an extended period of time assuming hypothetical gross rates
of return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$500,000 for a male insured Age 40, preferred plus underwriting class, and a
female insured Age 40, preferred plus underwriting class, utilizing the
guideline premium test. Values are first given based on current charges and then
based on the policy's higher guaranteed charges. Each illustration is given
first for a policy with an Option 1 death benefit, then for a policy with an
Option 2 death benefit, and, finally, for a policy with an Option 3 death
benefit. These illustrations may assist in the comparison of death benefits, net
cash surrender values and policy account values for Park Avenue SVUL policies
with those under other survivorship variable life insurance policies that may be
issued by GIAC or other companies. Prospective policyowners are advised,
however, that it may not be advantageous to replace existing life insurance
coverage by purchasing a Park Avenue SVUL policy, particularly if the decision
to replace existing coverage is based primarily on a comparison of policy
illustrations.
Death benefits, net cash surrender values and policy account values will
be different from the amounts shown if: (1) the actual gross rates of return
average 0%, 6% or 12%, but vary above and below the average over the period; and
(2) premiums are paid at other than annual intervals. Benefits and values will
also be affected by the policyowner's allocation of the unloaned policy account
value among the variable investment options and the fixed-rate option. If the
actual gross rate of return for all options averages 0%, 6% or 12%, but varies
above or below that average for individual options, allocation and transfer
decisions can have a significant impact on a policy's performance. Policy loans
and other policy transactions, such as partial withdrawals, will also affect
results, as will the insured's sex, smoker status and underwriting class.
Death benefits, net cash surrender values and policy account values shown
in the tables reflect the fact that: (1) deductions have been made from premiums
for premium charges; and (2) the monthly deduction is deducted from the policy
account value on each monthly processing date. The net cash surrender values
shown in the tables reflect the fact that a surrender charge is deducted upon
surrender or lapse during a period of time that will not exceed 9 policy years.
See Deductions and charges. The amounts shown in the illustrations also reflect
an average of the investment advisory fees and operating expenses incurred by
the mutual funds, at an annual rate of 0.84% of the average daily net assets of
such funds. The average is based upon actual expenses, after applicable expense
reimbursements and fee waivers, incurred during 1999 for all funds except
Guardian VC 500 Index and Janus Aspen Series, which have been restated to
reflect a reduction in the management fees, and the Fidelity portfolios which
utilize estimates for the first year.
In the absence of expense reimbursements and fee waivers, operating
expenses of the affected funds, and the average investment advisory fees and
expenses used in the following illustrations would have been higher. For an
explanation of the expenses see the accompanying fund prospectuses.
Taking account of the charges, the average investment advisory fee and the
operating expenses of the mutual funds, the gross annual rates of return of 0%,
6% and 12% correspond to net investment experience at -0.84%, 5.16% and 11.16%,
respectively. See Net investment factor.
The hypothetical rates of return shown in the tables do not reflect any
tax charges attributable to the Separate Account since no charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash surrender values
and policy account values illustrated. See GIAC's taxes.
- -----------------------
96 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
The fourth column of each table shows the amount which would accumulate if
an amount equal to the target premium was invested to earn interest, after
taxes, of 5% per year, compounded annually. There can be no assurance that a
prospective policyowner would be able to earn this return.
GIAC will furnish upon request an illustration reflecting the proposed
insureds' ages, sexes, underwriting classes, face amount requested, and life
insurance test selected, but a premium-based illustration must reflect GIAC's
current minimum face amount requirement for Park Avenue SVUL -- which is
$250,000.
These illustrations will refer to "net outlay" as the cash flow into or
out of the policy. It is equal to the sum of all premiums and accrued loan
interest paid in cash and reduced by the proceeds of any policy loan or partial
withdrawal received in cash. For purposes of these illustrations "net outlay"
will be equal to target premium.
From time to time, advertisements or sales literature for Park Avenue SVUL
may quote historical performance data of one or more of the underlying funds,
and may include cash surrender values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with
historical average annual total returns of the underlying funds for which
performance data is shown in the advertisement or sales literature replacing the
hypothetical rates of return shown in the following tables. This information may
be shown in the form of graphs, charts, tables, and examples. Any such
information is intended to show the policy's investment experience based on the
historical experience of the underlying funds and is not intended to represent
what may happen in the future.
GIAC began to offer Park Avenue SVUL on May 1, 2000. As such the policies
may not have been available when the funds commenced their operations. However,
illustrations may be based on the actual investment experience of the funds
since their respective inception dates (See Investment performance of the
Funds). The results for any period prior to the policies' being offered would be
calculated as if the policies had been offered during that period of time, with
all charges assumed to be those applicable to the policies. Thus the
illustrations will reflect deductions for each fund's expenses, and the charges
deducted from premiums, monthly deductions and any transaction deductions
associated with the policy in question.
-----------------------
A P P E N D I C E S P R O S P E C T U S 97
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 1
Target Premium = $3,429.00
These values reflect CURRENT cost of insurance and other charges
Using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Current Assuming Current Assuming Current
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,246 0 500,000 2,406 0 500,000 2,566 0 500,000
2 41 41 3,429 7,381 4,458 1,715 500,000 4,919 2,176 500,000 5,401 2,658 500,000
3 42 42 3,429 11,350 6,637 4,237 500,000 7,545 5,145 500,000 8,531 6,131 500,000
4 43 43 3,429 15,518 8,782 6,724 500,000 10,287 8,230 500,000 11,987 9,930 500,000
5 44 44 3,429 19,895 10,893 9,179 500,000 13,150 11,436 500,000 15,802 14,088 500,000
6 45 45 3,429 24,490 12,970 11,599 500,000 16,139 14,768 500,000 20,015 18,643 500,000
7 46 46 3,429 29,315 15,014 13,985 500,000 19,260 18,231 500,000 24,665 23,636 500,000
8 47 47 3,429 34,381 17,023 16,509 500,000 22,516 22,002 500,000 29,797 29,283 500,000
9 48 48 3,429 39,701 18,998 18,827 500,000 25,915 25,744 500,000 35,464 35,292 500,000
10 49 49 3,429 45,286 20,939 20,939 500,000 29,462 29,462 500,000 41,719 41,719 500,000
15 54 54 3,429 77,693 32,984 32,984 500,000 52,888 52,888 500,000 87,955 87,955 500,000
20 59 59 3,429 119,052 45,859 45,859 500,000 84,513 84,513 500,000 168,013 168,013 500,000
25 64 64 3,429 171,839 57,458 57,458 500,000 123,994 123,994 500,000 302,296 302,296 500,000
30 69 69 3,429 239,210 67,021 67,021 500,000 173,103 173,103 500,000 527,972 527,972 607,212
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
98 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 1
Target Premium = $3,429.00
These values reflect GUARANTEED cost of insurance and other charges
Using the Guideline Premium Test as defined under
Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,239 0 500,000 2,399 0 500,000 2,559 0 500,000
2 41 41 3,429 7,381 4,432 1,689 500,000 4,892 2,148 500,000 5,371 2,628 500,000
3 42 42 3,429 11,350 6,583 4,182 500,000 7,485 5,084 500,000 8,463 6,063 500,000
4 43 43 3,429 15,518 8,689 6,632 500,000 10,180 8,123 500,000 11,864 9,806 500,000
5 44 44 3,429 19,895 10,750 9,036 500,000 12,981 11,266 500,000 15,602 13,887 500,000
6 45 45 3,429 24,490 12,766 11,395 500,000 15,890 14,519 500,000 19,710 18,338 500,000
7 46 46 3,429 29,315 14,735 13,706 500,000 18,910 17,881 500,000 24,225 23,196 500,000
8 47 47 3,429 34,381 16,655 16,141 500,000 22,043 21,529 500,000 29,185 28,671 500,000
9 48 48 3,429 39,701 18,525 18,354 500,000 25,292 25,121 500,000 34,634 34,463 500,000
10 49 49 3,429 45,286 20,342 20,342 500,000 28,658 28,658 500,000 40,619 40,619 500,000
15 54 54 3,429 77,693 31,343 31,343 500,000 50,486 50,486 500,000 84,256 84,256 500,000
20 59 59 3,429 119,052 41,817 41,817 500,000 78,393 78,393 500,000 157,726 157,726 500,000
25 64 64 3,429 171,839 48,054 48,054 500,000 109,768 109,768 500,000 277,452 277,452 500,000
30 69 69 3,429 239,210 45,232 45,232 500,000 141,486 141,486 500,000 475,501 475,501 547,037
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 99
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 2
Target Premium = $3,429.00
These values reflect CURRENT cost of insurance and other charges
Using the Guideline Premium Test as defined under
Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Current Assuming Current Assuming Current
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,246 0 502,321 2,406 0 502,469 2,566 0 502,618
2 41 41 3,429 7,381 4,458 1,715 504,536 4,919 2,176 504,974 5,401 2,658 505,429
3 42 42 3,429 11,350 6,637 4,237 506,718 7,545 5,145 507,590 8,531 6,131 508,533
4 43 43 3,429 15,518 8,782 6,724 508,865 10,287 8,230 510,322 11,987 9,930 511,961
5 44 44 3,429 19,895 10,893 9,178 510,979 13,150 11,435 513,175 15,802 14,088 515,744
6 45 45 3,429 24,490 12,970 11,598 513,059 16,138 14,767 516,153 20,014 18,642 519,921
7 46 46 3,429 29,315 15,013 13,984 515,105 19,258 18,229 519,261 24,663 23,634 524,532
8 47 47 3,429 34,381 17,021 16,507 517,116 22,514 21,999 522,505 29,794 29,279 529,621
9 48 48 3,429 39,701 18,995 18,824 519,093 25,911 25,740 525,891 35,458 35,286 535,239
10 49 49 3,429 45,286 20,934 20,934 521,035 29,455 29,455 529,422 41,709 41,709 541,439
15 54 54 3,429 77,693 32,963 32,963 533,011 52,851 52,851 552,662 87,890 87,890 587,162
20 59 59 3,429 119,052 45,788 45,788 545,856 84,368 84,368 584,063 167,699 167,699 666,292
25 64 64 3,429 171,839 57,262 57,262 557,356 123,519 123,519 623,074 301,045 301,045 798,503
30 69 69 3,429 239,210 66,480 66,480 566,620 171,543 171,543 670,942 523,077 523,077 1,018,660
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- ------------------------
100 P R O S P E C T U S A P P E N D I C E S
- ------------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 2
Target Premium = $3,429.00
These values reflect GUARANTEED cost of insurance and other charges
Using the Guideline Premium Test as defined under
Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,239 0 502,315 2,399 0 502,463 2,559 0 502,611
2 41 41 3,429 7,381 4,432 1,689 504,512 4,892 2,148 504,948 5,371 2,628 505,401
3 42 42 3,429 11,350 6,582 4,182 506,665 7,484 5,084 507,532 8,463 6,063 508,468
4 43 43 3,429 15,518 8,688 6,631 508,775 10,179 8,122 510,218 11,863 9,805 511,841
5 44 44 3,429 19,895 10,749 9,035 510,839 12,979 11,265 513,009 15,600 13,885 515,549
6 45 45 3,429 24,490 12,764 11,392 512,858 15,887 14,515 515,908 19,706 18,334 519,623
7 46 46 3,429 29,315 14,731 13,702 514,829 18,905 17,876 518,916 24,218 23,189 524,099
8 47 47 3,429 34,381 16,649 16,134 516,751 22,034 21,520 522,036 29,173 28,658 529,016
9 48 48 3,429 39,701 18,515 18,344 518,622 25,278 25,106 525,270 34,614 34,442 534,415
10 49 49 3,429 45,286 20,327 20,327 520,438 28,636 28,636 528,619 40,587 40,587 540,341
15 54 54 3,429 77,693 31,268 31,268 531,341 50,356 50,356 550,207 84,027 84,027 583,368
20 59 59 3,429 119,052 41,528 41,528 541,653 77,803 77,803 577,593 156,460 156,460 655,235
25 64 64 3,429 171,839 47,147 47,147 547,374 107,544 107,544 607,319 271,562 271,562 769,463
30 69 69 3,429 239,210 42,787 42,787 543,228 133,884 133,884 633,778 450,079 450,079 946,699
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
------------------------
A P P E N D I C E S P R O S P E C T U S 101
------------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 3
Target Premium = $3,429.00
These values reflect CURRENT cost of insurance and other charges
Using the Guideline Premium Test as defined under
Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Current Assuming Current Assuming Current
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,246 0 503,429 2,406 0 503,429 2,566 0 503,429
2 41 41 3,429 7,381 4,458 1,715 506,858 4,919 2,176 506,858 5,401 2,658 506,858
3 42 42 3,429 11,350 6,637 4,236 510,287 7,545 5,145 510,287 8,531 6,131 510,287
4 43 43 3,429 15,518 8,782 6,724 513,716 10,287 8,229 513,716 11,987 9,929 513,716
5 44 44 3,429 19,895 10,892 9,178 517,145 13,150 11,435 517,145 15,802 14,087 517,145
6 45 45 3,429 24,490 12,969 11,598 520,574 16,138 14,766 520,574 20,013 18,642 520,574
7 46 46 3,429 29,315 15,012 13,983 524,003 19,258 18,229 524,003 24,662 23,634 524,003
8 47 47 3,429 34,381 17,020 16,506 527,432 22,513 21,999 527,432 29,794 29,279 527,432
9 48 48 3,429 39,701 18,994 18,822 530,861 25,910 25,739 530,861 35,458 35,286 530,861
10 49 49 3,429 45,286 20,932 20,932 534,290 29,454 29,454 534,290 41,709 41,709 534,290
15 54 54 3,429 77,693 32,950 32,950 551,435 52,848 52,848 551,435 87,906 87,906 551,435
20 59 59 3,429 119,052 45,751 45,751 568,580 84,375 84,375 568,580 167,829 167,829 568,580
25 64 64 3,429 171,839 57,166 57,166 585,725 123,601 123,601 585,725 301,740 301,740 585,725
30 69 69 3,429 239,210 66,207 66,207 602,870 171,987 171,987 602,870 526,500 526,500 605,521
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- ------------------------
102 P R O S P E C T U S A P P E N D I C E S
- ------------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
Female Issue Age 40, Preferred Plus Underwriting Risk
$500,000 Face Amount
Death Benefit Option 3
Target Premium = $3,429.00
These values reflect GUARANTEED cost of insurance and other charges
Using the Guideline Premium Test as defined under
Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
Age Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Beginning Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
of Premiums ----------------------------- ----------------------------- ----------------------------
End Year Accumulated Net Net Net
of --------- at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy Ins Ins Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year 1 2 Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --- --- ------ ----------- -------- --------- -------- ------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 40 3,429 3,600 2,239 0 503,429 2,399 0 503,429 2,559 0 503,429
2 41 41 3,429 7,381 4,432 1,689 506,858 4,892 2,148 506,858 5,371 2,628 506,858
3 42 42 3,429 11,350 6,582 4,182 510,287 7,484 5,084 510,287 8,463 6,063 510,287
4 43 43 3,429 15,518 8,688 6,630 513,716 10,179 8,121 513,716 11,862 9,805 513,716
5 44 44 3,429 19,895 10,748 9,034 517,145 12,979 11,264 517,145 15,599 13,885 517,145
6 45 45 3,429 24,490 12,762 11,391 520,574 15,886 14,514 520,574 19,705 18,334 520,574
7 46 46 3,429 29,315 14,729 13,700 524,003 18,903 17,874 524,003 24,217 23,188 524,003
8 47 47 3,429 34,381 16,645 16,131 527,432 22,032 21,517 527,432 29,172 28,658 527,432
9 48 48 3,429 39,701 18,509 18,338 530,861 25,274 25,102 530,861 34,614 34,442 530,861
10 49 49 3,429 45,286 20,318 20,318 534,290 28,631 28,631 534,290 40,588 40,588 534,290
15 54 54 3,429 77,693 31,221 31,221 551,435 50,339 50,339 551,435 84,078 84,078 551,435
20 59 59 3,429 119,052 41,349 41,349 568,580 77,808 77,808 568,580 156,974 156,974 568,580
25 64 64 3,429 171,839 46,532 46,532 585,725 107,797 107,797 585,725 274,789 274,789 585,725
30 69 69 3,429 239,210 40,554 40,554 602,870 135,249 135,249 602,870 466,975 466,975 602,870
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
------------------------
A P P E N D I C E S P R O S P E C T U S 103
------------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
USES OF LIFE INSURANCE
- --------------------------------------------------------------------------------
The following are examples of ways in which the policy can be used to address
certain financial objectives, bearing in mind that variable life insurance is
not a short-term investment and that its primary purpose is to provide benefits
upon the death of the insured.
Family Income Protection
Life insurance may be purchased on the lives of a family's income earners to
provide a death benefit to cover final expenses, and continue the current income
to the family. The amount of insurance purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the insured's income.
Estate Protection
Life insurance may be purchased by a trust on the life of a person whose estate
will incur federal estate taxes upon his or her death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. Upon
the insured's death, the trustee could make the death proceeds available to the
estate for the payment of estate taxes.
Education Funding
Life insurance may be purchased on the life of the parent(s) or primary person
funding an education. The amount of insurance purchased should equal the total
education cost projected at a reasonable inflation rate.
In the event of the insured's death, the guaranteed death benefit is available
to help pay the education costs. If the insured lives through the education
years, the cash value accumulations may be accessed to help offset the remaining
education costs. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Mortgage Protection
Life insurance may be purchased on the life of the person(s) responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed late
in the mortgage term to help make the remaining mortgage payments. Any policy
loans or partial withdrawals will reduce the policy's death benefit and may have
tax consequences.
Key Person Protection
Life insurance may be purchased by a business on the life of a key person in an
amount equal to a key person's value, considering salary, benefits, and
contribution to business profits. Upon the key person's death, the business can
use the death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
Business Continuation Protection
Life insurance may be purchased on the life of each business owner in an amount
equal to the value of each owner's business interest. In the event of death, the
guaranteed death benefit may provide the funds needed to carry out the purchase
of the deceased's business interest by the business, or surviving owners, from
the deceased owner's heirs.
Retirement Income
Life insurance may be purchased on the life of a family income earner during his
or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Deferred Compensation Plans
Life insurance may be purchased to fund a Deferred Compensation Plan, or
Selective Incentive Plan, for key employees. A Deferred Compensation Plan, or
Selective Incentive Plan, is a written agreement between an employer and an
executive. The employer makes an unsecured promise to make future benefit
payments to a key executive if the executive meets certain stated requirements.
- ------------------------
104 P R O S P E C T U S A P P E N D I C E S
- ------------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX B
USES OF LIFE INSURANCE
Under this type of plan, a company purchases a cash value life insurance policy
insuring an executive's life to (1) informally fund the promised benefits and
(2) recover its plan costs at the death of the executive. The policy cash values
may be used to help pay the promised benefits to the executive. In the event
that the executive dies prior to retirement, the policy death benefits can be
used to fund survivor benefits.
Split Dollar Plans
Life insurance may be purchased by an employer on the life of an employee under
a Split Dollar Plan. In a Split Dollar Plan, the employer advances the executive
the premium on a life insurance policy. Both the employer and the executive
share the cash value and death benefit under the policy. Generally, the employer
has rights to the cash value and death benefit equal to its advances. The
balance of the cash value and death benefit belong to the executive.
The executive receives an economic benefit for which he or she must contribute
into the plan or pay income tax. The economic benefit is equal to the term value
of the death benefit assuming taxation under IRS Revenue Rulings and IRC Section
72. Different results are possible if these or other code sections are applied
or amended.
Executive Bonus Plans
Life Insurance may be purchased by an employee with funds provided by his or her
employer for that purpose. An Executive Bonus plan involves an employer
providing an executive with additional compensation to enable the executive to
pay premiums on a life insurance policy. The bonus is tax deductible by the
employer and received as taxable income by the executive.
Because the policy provides a death benefit and cash surrender value, the policy
can be used for various individual and business planning purposes. Purchasing
the policy in part for such purposes entails certain risks, particularly if the
policy's cash surrender value, as opposed to its death benefit, will be the
principal policy feature used for such planning purposes. If Policy Premiums are
not paid, the investment performance of the Variable Investment Options to which
Policy Account Value is allocated is poorer than anticipated, or insufficient
cash surrender value is maintained, then the policy may lapse or may not
accumulate sufficient values to fund the purpose for which the policy was
purchased. Because the policy is designed to provide benefits on a long-term
basis, before purchasing a policy for a specialized purpose, a purchaser should
consider whether the long-term nature of the policy is consistent with the
purpose for which it is being considered.
Policyowners are urged to consult competent tax advisors about the possible tax
consequences of pre-death distributions from any life insurance policy,
including Park Avenue Life.
------------------------
A P P E N D I C E S P R O S P E C T U S 105
------------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
ADDITIONAL BENEFITS BY RIDER
- --------------------------------------------------------------------------------
Additional benefits are available by riders to the
policy. Riders are issued subject to GIAC's standards
for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are
deducted monthly from policy account value. The benefits
provided by the riders are fully described in the riders
and summarized here. These riders may not be available
in all states.
Survivorship Adjustable Annual Renewable Term (SAART)
rider -- this rider, available only at issue, provides
term insurance coverage to the insured's age 80.
Coverage under this rider has no cash value associated
with it. If you have purchased an additional sum insured
you cannot have an AART rider. If AART overage is
greater than basic sum insured coverage, you cannot
purchase a guaranteed coverage rider.
Guaranteed Coverage rider ("GCR") -- this rider,
available with death benefit option 1 and at issue only,
guarantees that the policy will remain in force even if
the net cash surrender value is less than the current
monthly deduction, provided the GCR requirement, as
described in the rider, is met. It is not available if
coverage under the additional sum insured or SAART rider
is greater than the basic sum insured at issue.
Select Security rider -- this rider, used in split
dollar cases, is an endorsement that prevents the policy
owner from making certain policy changes without the
consent of the policy owner's employer. There is no
charge for this rider.
Exchange of Insureds rider -- this rider gives the
policy owner the right to exchange the policy for a new
one on the life of a substitute insured. The exercise of
this rider will be treated as a taxable exchange for
federal income tax purposes.
Policy Split Option -- this rider, which is only
available if the insureds are spouses, and if neither
insured is in the uninsurable risk class, allows the
policyowner to split the policy into two single
traditional whole life policies, each having the same
policy date as the original policy. Certain conditions
must be satisfied before the policy split option can be
exercised. These conditions include the following:
o The basic policy and this rider must be in force,
with all due monthly deductions paid to the
exchange date.
o Both of the insureds under this policy must be
living on the exchange date.
o The owner of each new policy must have an
insurable interest in the insured's life.
o The owner of each new policy and the insured must
sign the application for the new policy.
o Any assignee must agree in writing to the
exchange.
o GIAC must receive evidence of insurability
satisfactory to GIAC, if the exchange percentage
of a policy exceeds 50%.
GIAC may from time to time discontinue the availability
of one or more of these riders, or make other riders
available. GIAC agents can provide information about the
current availability of particular riders.
- ------------------------
106 P R O S P E C T U S A P P E N D I C E S
- ------------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX D
- --------------------------------------------------------------------------------
REPRESENTATIVE MONTHLY ADMINISTRATIVE EXPENSE CHARGES PER $1,000 OF
BASIC SUM INSURED
Males Females Unisex
------------------- -------------------- -----------------------
Preferred Preferred Preferred
Plus Plus Plus
and and and
Age Preferred Standard Preferred Standard Preferred Standard
---- --------- -------- --------- -------- --------- --------
25 0.07 0.09 0.06 0.07 0.07 0.09
30 0.08 0.10 0.07 0.09 0.08 0.10
35 0.10 0.12 0.08 0.10 0.09 0.12
40 0.12 0.15 0.09 0.12 0.11 0.14
45 0.13 0.18 0.10 0.14 0.13 0.17
50 0.19 0.24 0.15 0.19 0.18 0.23
55 0.24 0.31 0.19 0.25 0.23 0.30
60 0.30 0.38 0.24 0.30 0.29 0.36
65 0.35 0.44 0.28 0.35 0.34 0.43
------------------------
A P P E N D I C E S P R O S P E C T U S 107
------------------------
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484
Under Article VIII of GIAC's By-Laws, as supplemented by Section 3.2 of
GIAC's Certificate of Incorporation, any past or present director or officer of
GIAC (including persons who serve at GIAC's request or for its benefit as
directors or officers of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise [hereinafter referred to
as a "Covered Person"]) is indemnified to the fullest extent permitted by law
against liability and all expenses reasonably incurred by such Covered Person in
connection with any action, suit or proceeding to which such Covered Person may
be a party or otherwise involved by reason of being or having been a Covered
Person. However, this provision does not protect a Covered Person against any
liability to either GIAC or its stockholder to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office. This provision does protect a director of GIAC against
any liability to GIAC or its stockholder for monetary damages or for breach of
fiduciary duty as a director of GIAC, except for liability (i) for any breach of
the director's duty of loyalty to GIAC or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
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 Securities Act
of 1933 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26
GIAC hereby presents that the fees and charges deducted under the contract, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by GIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26 of The Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Richard T. Potter, Jr., Esq.*
Charles G. Fisher*
PricewaterhouseCoopers LLP*
- ----------
* To be filed by amendment.
II-1
<PAGE>
The following exhibits:
1.A (1) Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account N.
(2) Not Applicable.
(3)(a),
(b), (c),
(d) and
(e) Distribution Agreements.
(4) Not Applicable.
(5) Specimen of the Flexible Premium Adjustable Variable Whole
Life Insurance Policy.
(6)(a) Certificate of Incorporation of The Guardian Insurance &
Annuity Company, Inc.
(6)(b) By-laws of The Guardian Insurance & Annuity Company, Inc.
(7) Not Applicable.
(8) Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life Insurance
Company of America and The Guardian Insurance & Annuity
Company, Inc.
(9) Not Applicable.
(10) Form of Application for the Flexible Premium Survivorship
Adjustable Variable Whole Life Policy.
(11) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy.
2. See Exhibit 1.A(5).
3. (a)Opinion of Richard T. Potter, Jr., Esq.*
3. (b)Consent of Richard T. Potter, Jr., Esq.*
4. None.
5. Not Applicable.
6. Opinion and Consent of Charles G. Fisher, F.S.A.*
7. Consent of PricewaterhouseCoopers LLP*
8. Powers of Attorney executed by a majority of the Board of Directors
and certain principal officers of The Guardian Insurance & Annuity
Company, Inc.
- ----------
* To be filed by amendment.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Guardian Separate Account N, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 21st day of April, 2000.
THE GUARDIAN SEPARATE ACCOUNT N
(Name of Registrant)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
By: /s/ Richard T. Potter, Jr
-------------------------------------
Richard T. Potter, Jr
Vice President and Counsel
Attest: /s/ Sheri L. Kocen
---------------------------------
SHERI L. KOCEN
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following directors and
principal officers of The Guardian Insurance & Annuity Company, Inc. in the
capacities and on the date indicated.
/s/ Joseph D. Sargent* President, Chief Executive Officer
- ----------------------------------- and Director
Joseph D. Sargent
(Principal Executive Officer)
/s/ Frank J. Jones* Executive Vice President, Chief Investment
- ----------------------------------- Officer and Director
Frank J. Jones
(Principal Financial Officer)
/s/ Edward K. Kane* Executive Vice President
- ----------------------------------- and Director
Edward K. Kane
/s/ Frank L. Pepe Vice President and Controller
- -----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
/s/ Bruce C. Long Director
- -----------------------------------
Bruce C. Long
/s/ Philip H. Dutter* Director
- -----------------------------------
Philip H. Dutter
/s/ Arthur V. Ferrara* Director
- -----------------------------------
Arthur V. Ferrara
/s/ Leo R. Futia* Director
- -----------------------------------
Leo R. Futia
/s/ Peter L. Hutchings* Director
- -----------------------------------
Peter L. Hutchings
/s/ William C. Warren* Director
- -----------------------------------
William C. Warren
*By: /s/ Richard T. Potter, Jr. Date: April 21, 2000
---------------------------------
Richard T. Potter, Jr.
Vice President and Counsel
Pursuant to Power of Attorney
II-4
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT N
EXHIBIT INDEX
Exhibit
Number Description Page*
1. A(1) Resolutions of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account N.
1. A(3)(a)(b) Forms of Distribution Agreements.
and (c)(d)
and (e)
1. A(5) Specimen of the Flexible Premium Adjustable Variable Whole Life
Insurance Policy.
1. A(6)(a) Certificate of Incorporation of The Guardian Insurance
& Annuity Company, Inc.
(b) By-Laws of The Guardian Insurance & Annuity Company,
Inc.
1. A(8) Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life
Insurance Company of America and The Guardian Insurance
& Annuity Company, Inc.
1. A(10) Form of Application for the Flexible Premium Survivorship
Adjustable Variable Whole Life Insurance Policy.
1. A(11) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing
Cash Adjustments upon Exchange of the Policy.
8. Powers of Attorney executed by the Board of Directors
and certain principal officers of The Guardian
Insurance & Annuity Company, Inc.
GIAC Board Resolutions Relating to New
Variable Life Product
RESOLVED, that the Board of Directors of The Guardian Insurance &
Annuity Company, Inc. (the "Company") establishes, pursuant to Section 2932 of
the Delaware Insurance Code, a separate account to be designated THE GUARDIAN
SEPARATE ACCOUNT N (hereinafter in these resolutions referred to as the
"Account") to serve as a segregated asset account to receive, hold and invest
amounts arising from (a) premiums paid for the variable life insurance policies
issued by the Company through the Account (the "Policies"); and (b) such assets
of the Company as the proper officers of the Company may deem prudent and
appropriate to have invested in the same manner as the assets applicable to its
reserve liability under the Policies and lodged in the Account, and such
amounts, together with the dividends, interest and gains produced thereby shall
be invested and reinvested, subject to the rights of the holders of such
Policies, in units of the Account at the value of such units at the time of
acquisition; and it is further
RESOLVED, that the Board of Directors hereby approves the offering through
the Account, as investment options for Policyowner allocations, of such
open-end management investment companies registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940
Act") and such other investment options as the officers of the Company deem
appropriate; and it is further
RESOLVED, the Account shall be registered as a unit investment trust under
the 1940 Act and the Securities Act of 1933 ("the 1933 Act"), and that the
officers of the Company be and they hereby are authorized to sign and file with
the SEC, or cause to be signed and filed with the SEC, a registration statement
on behalf of the Account, as registrant, under the 1933 Act ("1933 Act
Registration") together with any exemptive applications, no-action requests or
other documents as they may deem necessary to effectuate registration of the
units of the Account; and it is further
<PAGE>
RESOLVED, that the officers of the Company are authorized and directed to
sign and file with the SEC, or cause to be signed and filed with the SEC,
amendments of such 1933 Act Registration or other documents as they may deem
necessary or advisable from time to time respecting the Account; and it is
further
RESOLVED, that the signature of any director or officer of the Company
required by law to affix his signature to such 1933 Act Registration, or to any
amendment thereof, may be affixed by said director or officer personally, or by
an attorney-in-fact duly constituted in writing by said director or officer by a
power of attorney to sign his name thereto; and it is further
RESOLVED, that the officers of the Company are authorized and directed to
employ Guardian Investor Services Corporation to serve as distributor of the
Policies and to prepare any and all agreements as they may deem necessary or
desirable for the provision of such services to the Account with the advice of
counsel, subject to final approval by the Board of Directors of the Company or
by the Executive Committee of the Board; and it is further
RESOLVED, that the officers of the Company are authorized and directed to
sign and file with the SEC, or cause to be signed and filed with the SEC, such
periodic reports under the 1940 Act respecting the Account as they may deem
necessary or advisable from time to time; and it is further
RESOLVED, that the Board of Directors of the Company authorizes $100,000
in the aggregate be deposited into the Account as "seed capital" to commence its
operations and that the officers of GIAC are given discretion as to the timing
of such deposit of seed capital; and it is further
RESOLVED, that the Company shall abide by the conditions imposed by the
SEC and set forth in Investment Company Act Release Number 14685 (August 20,
1985) regarding the offer of shares of registered open-end management investment
companies to multiple Company separate accounts in connection with the operation
of the Account; and it is further
RESOLVED, that the officers of the Company be and they hereby are
authorized to take whatever steps that may be necessary or desirable, with the
advice of counsel, to comply with such laws and regulations of the several
states as may be applicable to the establishment of the Account and the sale of
the Policies; and it is further
RESOLVED, that the officers of GIAC be and they hereby are authorized, in
the name and on behalf of the Company, to execute and deliver such corporate
documents and certificates and to take such further action as may be necessary
or desirable, with the advice of counsel, in order to effectuate the purposes of
the foregoing resolutions.
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
AGREEMENT OF GENERAL AGENCY
Agreement made this _________ day of ____________, 19___ by and between The
Guardian Insurance & Annuity Company, Inc. ("GIAC"), a Delaware corporation and
a wholly-owned subsidiary of The Guardian Life Insurance Company of America
("Guardian Life"), having its Principal office located at 7 Hanover Square, New
York, New York, 10004 and ________________ ("Principal").
1. The undersigned Principal is presently a General Agent of Guardian Life in
accordance with an Agreement of General Agency bearing an effective date
of _______________ ("Guardian Life GA Agreement").
2. GIAC hereby appoints the Principal a General Agent of GIAC for the limited
purpose of conducting and overseeing the business relating to GIAC's
Variable Whole Life Insurance Policies with Modified Scheduled Premiums
marketed under the name Park Avenue Life ("PAL") and GIAC's Flexible
Premium Variable Universal Life policy marketed under the name Park Avenue
VUL ("VUL"). There may be one or more policies marketed under the PAL name
and, where necessary or appropriate, this Agreement will distinguish
between them by appending the year of introduction. Currently, there are
two policies marketed under this name - "PAL '95 and PAL '97."
3. The Principal shall at all times be associated with Park Avenue Securities
LLC ("PAS"), a Broker-Dealer registered with the Securities and Exchange
Commission ("SEC") and a member of the National Association of Securities
Dealers, Inc. ("NASD") as an NASD Registered Representative or NASD
Registered Principal and, if the particular jurisdiction requires, shall
be licensed or registered as a securities agent of PAS. The Principal must
at all times be validly licensed, registered or appointed by GIAC as a
variable contracts agent in accordance with the requirements of the
jurisdiction where solicitations for PAL and VUL contracts occur. The
Principal, his agents, brokers and Field Representatives may solicit for
and sell PAL and VUL contracts in any jurisdiction where such contracts
are filed and approved for sale by the governmental authorities having
jurisdiction, provided the Principal, his agents, brokers and Field
Representatives are all validly licensed, registered or otherwise
qualified as required for the solicitation and sale of the PAL and VUL
contracts in such jurisdictions.
4. To the extent applicable, the Principal shall comply strictly with: (a)
the laws, rules and regulations of all jurisdictions (state and local) in
which the Principal, his agents, brokers and Field Representatives solicit
applications for and sell PAL and VUL contracts; (b) federal laws and the
1
<PAGE>
rules and regulations of the SEC; (c) the rules of the NASD; (d) the rules
and procedures of PAS, and (e) the rules and procedures of GIAC. The
Principal understands that failure to comply with such laws, rules,
regulations and procedures may result in disciplinary action against the
Principal by the SEC, a state or other local regulatory agency that has
jurisdiction, the NASD, PAS or GIAC. Before any solicitations or sales of
PAL and VUL are made, the Principal shall become familiar with and abide
by the laws, rules, regulations and procedures of all the above mentioned
agencies or parties as are currently in effect and as they may be changed
from time to time.
5. The Principal shall have all applications for PAL and VUL accurately
completed or reviewed and signed by the applicant and shall submit the
applications to GIAC through PAS together with all payments received from
applicants without any reductions. The Principal, his agents, brokers and
Field Representatives shall cause all checks or orders for PAL and VUL to
be made payable to GIAC. GIAC shall reject any application that is
submitted by or on behalf of a Principal, his agents, brokers and Field
Representatives not appropriately licensed as required by paragraph 3 of
this Agreement.
6. The Principal, his agents, brokers and Field Representatives shall not
make any statements concerning PAL and VUL except those that are contained
in the current prospectuses for PAL and VUL and the prospectuses for their
underlying variable investment options and they shall not solicit for
applications or make sales through the use of mailings, advertisements or
sales literature or any other method of contact unless the material or a
complete description of the method has been filed with the NASD and
received written approval of PAS from a Registered Principal whose office
is located in a PAS Office of Supervisory Jurisdiction as that term is
defined by NASD rules.
7. In connection with the Principal's appointment as a GIAC General Agent for
the purpose set forth in paragraph 2 above, the entire Guardian Life GA
Agreement referred to above and attached hereto as the Exhibit, including
all compensation adjustment provisions, is incorporated herein by
reference. Guardian Life GA Agreement compensation provisions that do not
apply to PAL and VUL are as noted below. All references to "Company"
within the Guardian Life GA Agreement shall apply with full force and
effect to GIAC. Additionally, the Registered Representative's Agreement
between the Principal and PAS and the Agent's Agreement between the
Principal and GIAC are incorporated herein by reference and attached
hereto as Exhibits.
8. The Principal shall be paid overriding commissions for sales of PAL and
VUL policies as outlined in Appendix A of this Agreement.
2
<PAGE>
9. Expense Allowance Payment ("EAP") provisions contained in Section 4 and
Appendix G of the Guardian Life GA Agreement shall not apply to PAL and
VUL (except for the use of PAL and VUL first year commissions on policy
premiums in determining the rate that will apply to non-PAL business in
accordance with the provisions contained in Appendix G, Schedule G-II, (B)
2). The Principal shall instead receive EAP on PAL and VUL as outlined in
Appendix B of this Agreement.
10. The Principal shall be paid commissions on personally produced PAL and VUL
business as outlined in of this Agreement .
11. Allocation of VUL premiums and the effect thereof on compensation is
described in Appendix D of this Agreement.
12. The Principal shall be responsible to the Company for any indebtedness
resulting from PAL chargebacks applied to PAL business personally produced
by the Principal and to PAL business produced by the agents, brokers and
Field Representatives of the Principal.
13. This Agreement may be terminated as outlined in Section 5 of the Guardian
Life GA Agreement. In addition, it shall be automatically terminated if
the Guardian Life GA Agreement, PAS Registered Representative Agreement or
GIAC Agent's Agreement is terminated.
IT SHALL BE EXPRESSLY UNDERSTOOD BY THE PRINCIPAL THAT THIS AGREEMENT SHALL NOT
BE EFFECTIVE UNLESS THE PRINCIPAL IS VALIDLY LICENSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE JURISDICTIONS WHERE SOLICITATIONS BY THE PRINCIPAL AND THE
AGENTS, BROKERS AND FIELD REPRESENTATIVES OF THE PRINCIPAL FOR PAL AND VUL
POLICIES OCCUR.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
as of the day and year first written above.
- ------------------- -------------------------
WITNESS Authorized Company Officer
- ------------------- -------------------------
WITNESS General Agent
3
<PAGE>
APPENDIX A
A. Overriding Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
PAL Unscheduled
Payments & VUL
Policy Years PAL Policy Premiums VUL Target Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 5% 5% 0.5%
- --------------------------------------------------------------------------------
2 through 5 4% 3% 0.5%
- --------------------------------------------------------------------------------
6 through 10 2% 3% 0.5%
- --------------------------------------------------------------------------------
No overrides on PAL policies shall be payable on PAL policy premiums skipped
under the Premium Skip Option of the PAL policy. If unscheduled payments are
received when policies should be on the Premium Skip Option, renewal overrides
on such payments shall be based on renewal rates of PAL policy premiums applied
up to amounts of premium that correspond to renewal PAL policy premiums that
would otherwise have been paid if not for the Premium Skip Option being in
effect with standard renewal rates on unscheduled payments applied to any
premiums received above such PAL policy premium levels.
B. First Policy Year Overriding Commission Chargebacks on PAL '95 Policies
First policy year overriding commissions on policy premiums shall be charged
back to the Principal on PAL '95 policies that are surrendered or lapsed prior
to the policies having been in force for at least 18 months in accordance with
the following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
4
<PAGE>
APPENDIX B
A. Expense Allowance Payments (Percentages of First Year Commissions)
------------------
Product Rate
------------------
PAL 62%
------------------
VUL 69%
------------------
The term "first year commissions" shall be understood to include first policy
year Field Representative compensation at $13.75 per 1,000 of life production
credits.
B. First Policy Year EAP Chargebacks on PAL '95 Policies
EAP on policy premiums shall be charged back to the Principal on PAL '95
policies that are surrendered or lapsed prior to the policies having been in
force for at least 18 months in accordance with the following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
5
<PAGE>
APPENDIX C
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
PAL Unscheduled
Payments & VUL
Policy Years PAL Policy Premiums VUL Target Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 50% 45% 3%
- --------------------------------------------------------------------------------
2 through 10 5% 3% 3%
- --------------------------------------------------------------------------------
The first policy year commission rates of 50% on PAL and 45% on VUL shall be
reduced where policies are issued at ages over 70 with actual rates payable
determined by deducting from the figure 120 ages of applicable insureds as of
policy issue dates on PAL polices and by deducting from the figure 115 ages of
applicable insureds as of policy issue dates on VUL policies.
No compensation shall be payable on PAL policy premiums skipped under the
Premium Skip Option of PAL policies. If unscheduled payments are received when
policies should be on the Premium Skip Option, renewal commissions on such
payments shall be based on renewal rates of PAL policy premiums applied up to
amounts of premium that correspond to renewal PAL policy premiums that would
otherwise have been paid if not for the Premium Skip Option being in effect with
standard renewal rates on unscheduled payments applied to any premiums received
above such PAL policy premium levels.
B. First Policy Year Commission Chargebacks on PAL '95 Policies
First policy year commissions on policy premiums shall be charged back to the
Agent on PAL '95 policies that are surrendered or lapsed prior to the policies
having been in force for at least 18 months in accordance with the following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
6
<PAGE>
APPENDIX D
ALLOCATION OF PREMIUMS AND THEIR EFFECT ON COMPENSATION
A. General
In a first policy year, premiums will first be applied to policy target
premium. These will be compensated at first year rates. Any premiums
received in the first year of a policy exceeding policy target premium
will be considered excess premium to be compensated at excess rates.
In policy years 2 through 10, any premium received up to nine times policy
target premium will be applied as policy target premium and receive
compensation at target premium renewal rates. Any premium exceeding nine
times policy target premium in policy years two through ten will be
considered excess premium to be compensated at excess rates.
In policy years 11 and greater, the compensation on premium received will
be at service fee rates.
B. Increases In Coverage
Coverage increases will be reflected in self-contained segments of
policies that have their own policy effective dates, policy year durations
and policy premiums. Premiums for policies with increases in coverage will
be applied to each coverage and associated target premiums in the order
the coverages were issued (earliest first). When the sum of the premiums
during a given policy year exceeds the sum of all applicable target
premiums, any additional amount will be allocated prorata based on target
premiums for each coverage. The amount thus allocated will be processed as
outlined in the above general description (i.e. it will be processed with
reference to policy years of the coverages and amounts of applicable
target premiums paid).
C. Decreases In Coverage
A coverage decrease will be applied to a last previous coverage increase,
if any, or to the initial coverage should no coverage increase have taken
place. Such decrease will serve to reduce target premium for the full
period so that any regular compensation on subsequent premium received
will be based on lower target premium (i.e. The total of renewal
compensation payable will be based on nine times the lower target
premium). Any premium amount applied over such lower target premium will
be compensated at excess rates for policy years 2 through 10 and at
service fee rates for policy years 11 and greater.
7
<PAGE>
APPENDIX D (CONTINUED)
First year compensation will be paid on coverage increases only to the
extent such increases should exceed previous coverage decreases.
8
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
MEMORANDUM OF AGREEMENT
Agreement made this _________ day of ____________, 19___ by and between The
Guardian Insurance & Annuity Company, Inc. ("GIAC"), a Delaware corporation and
a wholly-owned subsidiary of The Guardian Life Insurance Company of America
("Guardian Life"), having its Principal office located at 7 Hanover Square, New
York, New York, 10004 and ________________ ("AGENT").
1. The undersigned Agent is presently a Career Development Manager ("CDM") of
Guardian Life in accordance with a Memorandum of Agreement bearing an
effective date of _______________ ("Guardian Life CDM Agreement").
2. GIAC hereby appoints the Agent CDM of GIAC for the limited purpose of
conducting and overseeing the business relating to GIAC's Variable Whole
Life Insurance Policies with Modified Scheduled Premiums marketed under
the name Park Avenue Life ("PAL") and GIAC's Flexible Premium Variable
Universal Life policy marketed under the name Park Avenue VUL ("VUL").
There may be one or more policies marketed under the PAL name and, where
necessary or appropriate, this Agreement will distinguish between them by
appending the year of introduction. Currently, there are two policies
marketed under this name -- "PAL '95 and PAL '97."
3. The CDM shall at all times be associated with Park Avenue Securities LLC
("PAS"), a Broker-Dealer registered with the Securities and Exchange
Commission ("SEC") and a member of the National Association of Securities
Dealers, Inc. ("NASD") as an NASD Registered Representative or NASD
Registered Principal and, if the particular jurisdiction requires, shall
be licensed or registered as a securities agent of PAS. The CDM must at
all times be validly licensed, registered or appointed by GIAC as a
variable contracts agent in accordance with the requirements of the
jurisdiction where solicitations for PAL and VUL contracts occur. The CDM,
his agents, brokers and Field Representatives may solicit for and sell PAL
and VUL contracts in any jurisdiction where such contracts are filed and
approved for sale by the governmental authorities having jurisdiction,
provided the CDM, his agents, brokers and Field Representatives are all
validly licensed, registered or otherwise qualified as required for the
solicitation and sale of the PAL and VUL contracts in such jurisdictions.
1
<PAGE>
4. To the extent applicable, the CDM shall comply strictly with: (a) the
laws, rules and regulations of all jurisdictions (state and local) in
which the CDM, his agents, brokers and Field Representatives solicit
applications for and sell PAL and VUL contracts; (b) federal laws and the
rules and regulations of the SEC; (c) the rules of the NASD; (d) the rules
and procedures of PAS, and (e) the rules and procedures of GIAC. The CDM
understands that failure to comply with such laws, rules, regulations and
procedures may result in disciplinary action against the CDM by the SEC, a
state or other local regulatory agency that has jurisdiction, the NASD,
PAS or GIAC. Before any solicitations or sales of PAL and VUL are made,
the CDM shall become familiar with and abide by the laws, rules,
regulations and procedures of all the above mentioned agencies or parties
as are currently in effect and as they may be changed from time to time.
5. The CDM shall have all applications for PAL and VUL accurately completed
or reviewed and signed by the applicant and shall submit the applications
to GIAC through PAS together with all payments received from applicants
without any reductions. The CDM, his agents, brokers and Field
Representatives shall cause all checks or orders for PAL and VUL to be
made payable to GIAC. GIAC shall reject any application that is submitted
by or on behalf of a CDM, his agents, brokers and Field Representatives
not appropriately licensed as required by paragraph 3 of this Agreement.
6. The CDM, his agents, brokers and Field Representatives shall not make any
statements concerning PAL and VUL except those that are contained in the
current prospectuses for PAL and VUL and the prospectuses for their
underlying variable investment options and they shall not solicit for
applications or make sales through the use of mailings, advertisements or
sales literature or any other method of contact unless the material or a
complete description of the method has been filed wit the NASD and
received written approval of PAS from a Registered Principal whose office
is located in a PAS Office of Supervisory Jurisdiction as that term is
defined by NASD rules.
7. In connection with the agent's appointment as a GIAC CDM for the purpose
set forth in paragraph 2 above, the entire Guardian Life CDM Agreement
referred to above and attached hereto as the Exhibit, including all
compensation adjustment provisions, is incorporated herein by reference.
Guardian Life CDM Agreement compensation provisions that do not apply to
PAL and VUL are as noted below. All references to ' "Company" within the
Guardian Life CDM Agreement shall apply with full force and effect to
GIAC. Additionally, the Registered Representative's Agreement between the
CDM and PAS and the Agent's Agreement between the CDM and GIAC are
incorporated herein by reference and attached hereto as Exhibits.
8. The CDM shall be paid additional compensation as outlined in Appendix A of
this Agreement and shall be paid commissions on personally produced
2
<PAGE>
PAL and VUL business as outlined in Appendix B of this Agreement.
Allocation of VUL premiums and the effect thereof on compensation is
described in Appendix C of this Agreement.
9. The CDM shall be responsible to the Company for any indebtedness that may
have resulted from PAL chargebacks applied to PAL business personally
produced the CDM.
10. This Agreement may be terminated as outlined in Section IV of the Guardian
Life CDM Agreement. In addition, it shall be automatically terminated if
the Guardian Life CDM Agreement, PAS Registered Representative Agreement
or GIAC Agent's Agreement is terminated.
IT SHALL BE EXPRESSLY UNDERSTOOD BY THE AGENT THAT THIS AGREEMENT SHALL NOT BE
EFFECTIVE UNLESS THE AGENT IS VALIDLY LICENSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE JURISDICTIONS WHERE SOLICITATIONS BY THE CDM AND THE AGENTS,
BROKERS AND FIELD REPRESENTATIVES OF THE CDM FOR PAL AND VUL POLICIES OCCUR.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
as of the day and year first written above.
- ------------------- --------------------------
WITNESS Authorized Company Officer
- ------------------- --------------------------
WITNESS Career Development Manager
3
<PAGE>
APPENDIX A
A. CDM Additional Compensation (Percentages of First Year Premium)
- --------------------------------------------------------------------------------
Type Rate
- --------------------------------------------------------------------------------
PAL Policy Premiums 20%
- --------------------------------------------------------------------------------
VUL Target Premiums 19%
- --------------------------------------------------------------------------------
PAL Unscheduled Payments & VUL Excess Premiums 1%
- --------------------------------------------------------------------------------
Section IIIB, Paragraph (K) Additional
Compensation 30%
- --------------------------------------------------------------------------------
B. CDM Additional Compensation Chargebacks on PAL '95 Policies
Additional compensation on policy premiums shall be charged back to the CDM on
PAL '95 policies that are surrendered or lapsed prior to the policies having
been in force for at least 18 months in accordance with the following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
4
<PAGE>
APPENDIX B
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
PAL Unscheduled
Payments & VUL
Policy Years PAL Policy Premiums VUL Target Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 50% 45% 3%
- --------------------------------------------------------------------------------
2 through 10 5% 3% 3%
- --------------------------------------------------------------------------------
The first policy year commission rates of 50% on PAL and 45% on VUL shall be
reduced where policies are issued at ages over 70 with actual rates payable
determined by deducting from the figure 120 ages of applicable insureds as of
policy issue dates on PAL polices and by deducting from the figure 115 ages of
applicable insureds as of policy issue dates on VUL policies.
No compensation shall be payable on PAL policy premiums skipped under the
Premium Skip Option of PAL policies. If unscheduled payments are received when
policies should be on the Premium Skip Option, renewal commissions on such
payments shall be based on renewal rates of PAL policy premiums applied up to
amounts of premium that correspond to renewal PAL policy premiums that would
otherwise have been paid if not for the Premium Skip Option being in effect with
standard renewal rates on unscheduled payments applied to any premiums received
above such PAL policy premium levels.
B. First Policy Year Commission Chargebacks on PAL '95 Policies
First policy year commissions on policy premiums shall be charged back to the
Agent on PAL '95 policies that are surrendered or lapsed prior to the policies
having been in force for at least 18 months in accordance with the following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
5
<PAGE>
APPENDIX C
ALLOCATION OF PREMIUMS AND THEIR EFFECT ON COMPENSATION
A. General
In a first policy year, premiums will first be applied to policy target
premium. These will be compensated at first year rates. Any premiums
received in the first year of a policy exceeding policy target premium
will be considered excess premium to be compensated at excess rates.
In policy years 2 through 10, any premium received up to nine times policy
target premium will be applied as policy target premium and receive
compensation at target premium renewal rates. Any premium exceeding nine
times policy target premium in policy years two through ten will be
considered excess premium to be compensated at excess rates.
In policy years 11 and greater, the compensation on premium received will
be at service fee rates.
B. Increases In Coverage
Coverage increases will be reflected in self-contained segments of
policies that have their own policy effective dates, policy year durations
and policy premiums. Premiums for policies with increases in coverage will
be applied to each coverage and associated target premiums in the order
the coverages were issued (earliest first). When the sum of the premiums
during a given policy year exceeds the sum of all applicable target
premiums, any additional amount will be allocated prorata based on target
premiums for each coverage. The amount thus allocated will be processed as
outlined in the above general description (i.e. it will be processed with
reference to policy years of the coverages and amounts of applicable
target premiums paid).
C. Decreases In Coverage
A coverage decrease will be applied to a last previous coverage increase,
if any, or to the initial coverage should no coverage increase have taken
place. Such decrease will serve to reduce target premium for the full
period so that any regular compensation on subsequent premium received
will be based on lower target premium (i.e. The total of renewal
compensation payable will be based on nine times the lower target
premium). Any premium amount applied over such lower target premium will
be compensated at excess rates for policy years 2 through 10 and at
service fee rates for policy years 11 and greater.
6
<PAGE>
APPENDIX C (CONTINUED)
First year compensation will be paid on coverage increases only to the
extent such increases should exceed previous coverage decreases.
7
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
BROKERAGE AGREEMENT
Agreement made this _________ day of ________by and between ___________________
("Principal") and __________________ ("Broker").
1. The undersigned is presently a Broker in accordance with a Brokerage
Agreement ("Guardian Life Broker Agreement") with the Principal
named above, endorsed by The Guardian Life Insurance Company of
America ("Guardian Life") and bearing an effective date of
_________________.
2. The Principal hereby appoints the Broker with the endorsement of The
Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware
Corporation and a wholly-owned subsidiary of Guardian Life, for the
limited purpose of soliciting applications for GIAC's Variable Whole
Life Insurance Policies with Modified Scheduled Premiums marketed
under the name Park Avenue Life ("PAL") and GIAC's Flexible Premium
Variable Universal Life Policies marketed under the name Park Avenue
VUL ("VUL"). There may be one or more policies marketed under the
PAL name. Where necessary or appropriate, this Agreement will
distinguish between them by appending the year of introduction.
Currently, there are two policies marketed under this name - "PAL
'95 and PAL '97."
3. The Broker shall at all times be associated with Park Avenue
Securities LLC ("PAS"), a Broker-Dealer registered with the
Securities and Exchange Commission ("SEC") and a member of the
National Association of Securities Dealers, Inc. ("NASD") as an NASD
Registered Representative or NASD Registered Principal and, if the
particular jurisdiction requires, shall be licensed or registered as
a securities agent of PAS. The Broker must at all times be validly
licensed, registered or appointed by GIAC as a variable contracts
agent in accordance with the requirements of the jurisdiction where
solicitations for PAL and VUL contracts occur. The Broker may
solicit for and sell PAL and VUL contracts in any jurisdiction where
such contracts are filed and approved for sale by the governmental
authorities having jurisdiction, provided the Broker is validly
licensed, registered or otherwise qualified as required for the
solicitation and sale of the PAL and VUL contracts in such
jurisdictions.
4. To the extent applicable, the Broker shall comply strictly with :
(a) the laws, rules and regulations of all jurisdictions (state and
local) in which the Broker solicits applications for and sells PAL
and VUL
1
<PAGE>
contracts; (b) federal laws and the rules, regulations of the SEC;
(c) the rules of the NASD; (d) the rules and procedures of PAS, and
(e) the rules and procedures of GIAC. The Broker understands that
failure to comply with such laws, rules, regulations and procedures
may result in disciplinary action against the Broker by the SEC, a
state or other local regulatory agency that has jurisdiction, the
NASD, PAS and GIAC. Before any solicitations or sales of PAL and VUL
are made, the Broker shall become familiar with and abide by the
laws, rules, regulations and procedures of all of the above
mentioned agencies or parties as are currently in effect and as they
may be changed from time to time.
5. The Broker shall have all applications for PAL and VUL accurately
completed or reviewed and signed by the applicant and shall submit
the applications to GIAC through PAS together with all payments
received from applicants without any reductions. The Broker shall
cause all checks or orders for PAL and VUL to be made payable to
GIAC. GIAC shall reject any application that is submitted by or on
behalf of a Broker not appropriately licensed as required by
paragraph 3 of this Agreement.
6. The Broker shall not make any statements concerning PAL and VUL
except those that are contained in the current prospectuses for PAL
and VUL and the prospectuses for their underlying variable
investment options and shall not solicit for applications or make
sales through the use of mailings, advertisements or sales
literature or any other method of contact unless the material or a
complete description of the method has been filed with the NASD and
received written Approval of PAS from a Registered Principal whose
office is located in a PAS Office of Supervisory Jurisdiction as
that term is defined by NASD rules.
7. In connection with the Broker's appointment for the purpose set
forth in paragraph 2 above, the entire Guardian Life Broker
Agreement referred to above and attached hereto as the Exhibit,
including all compensation adjustment and service fee provisions, is
incorporated herein by reference. All references to "Company"
within the Guardian Life Broker Agreement shall apply with full
force and effect to GIAC. Additionally, the Registered
Representative's Agreement between the Broker and PAS and the
2
<PAGE>
Agent's Agreement between the Broker and GIAC are incorporated
herein by reference and attached hereto as Exhibits.
8. The Broker shall be paid commissions on PAL as outlined in Appendix
A of this Agreement.
9. The Broker shall be paid commissions on VUL as outlined in Appendix
B of this Agreement.
10. Allocation of VUL premiums and the effect thereof on compensation is
described in Appendix C of this Agreement.
11. It shall be understood that this Agreement is automatically
terminated if the Guardian Life Broker Agreement, PAS Registered
Representative Agreement or GIAC Agent's Agreement is terminated.
IT SHALL BE EXPRESSLY UNDERSTOOD BY THE BROKER THAT THIS AGREEMENT SHALL NOT BE
EFFECTIVE UNLESS THE BROKER IS VALIDLY LICENSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE JURISDICTIONS WHERE SOLICITATIONS FOR PAL AND VUL POLICIES
OCCUR.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
- ----------------------- --------------------------
WITNESS PRINCIPAL
- ----------------------- --------------------------
WITNESS BROKER
3
<PAGE>
APPENDIX A
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
Policy Years Policy Premiums Unscheduled Payments
- --------------------------------------------------------------------------------
1 50% 3%
- --------------------------------------------------------------------------------
2 through 10 5% 3%
- --------------------------------------------------------------------------------
The first policy year commission rate of 50% on policy premiums shall be reduced
where policies are issued at ages over 70 with actual rates payable determined
by deducting from the figure 120 ages of applicable insureds as of policy issue
dates.
No compensation shall be payable on PAL policy premiums skipped under the
Premium Skip Option of PAL policies. If unscheduled payments are received when
policies should be on the Premium Skip Option, renewal commissions on such
payments shall be based on renewal rates of PAL policy premiums applied up to
amounts of premium that correspond to renewal PAL policy premiums that would
otherwise have been paid if not for the Premium Skip Option being in effect with
standard renewal rates on unscheduled payments applied to any premiums received
above such PAL policy premium levels.
B. First Policy Year Commission Chargebacks on PAL '95 Policies
First policy year commissions on policy premiums shall be charged back to the
Broker on PAL '95 policies that are surrendered or lapsed prior to the policies
having been in force for at least eighteen months in accordance with the
following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
4
<PAGE>
APPENDIX A (CONTINUED)
PAL chargebacks not immediately repaid on demand by the Broker to the Principal
(or to the Company if the Company should be the Principal) shall constitute an
indebtedness under the terms of the Guardian Life Broker Agreement.
5
<PAGE>
APPENDIX B
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
Policy Years Target Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 45% 3%
- --------------------------------------------------------------------------------
2 through 10 3% 3%
- --------------------------------------------------------------------------------
6
<PAGE>
APPENDIX C
ALLOCATION OF PREMIUMS AND THEIR EFFECT ON COMPENSATION
A. General
In a first policy year, premiums will first be applied to policy target
premium. These will be compensated at first year rates. Any premiums
received in the first year of a policy exceeding policy target premium
will be considered excess premium to be compensated at excess rates.
In policy years 2 through 10, any premium received up to nine times policy
target premium will be applied as policy target premium and receive
compensation at target premium renewal rates. Any premium exceeding nine
times policy target premium in policy years two through ten will be
considered excess premium to be compensated at excess rates.
In policy years 11 and greater, the compensation on premium received will
be at service fee rates.
B. Increases In Coverage
Coverage increases will be reflected in self-contained segments of
policies that have their own policy effective dates, policy year durations
and policy premiums. Premiums for policies with increases in coverage will
be applied to each coverage and associated target premiums in the order
the coverages were issued (earliest first). When the sum of the premiums
during a given policy year exceeds the sum of all applicable target
premiums, any additional amount will be allocated prorata based on target
premiums for each coverage. The amount thus allocated will be processed as
outlined in the above general description (i.e. it will be processed with
reference to policy years of the coverages and amounts of applicable
target premiums paid).
C. Decreases In Coverage
A coverage decrease will be applied to a last previous coverage increase,
if any, or to the initial coverage should no coverage increase have taken
place. Such decrease will serve to reduce target premium for the full
period so that any regular compensation on subsequent premium received
will be based on lower target premium (i.e. The total of renewal
compensation payable will be based on nine
7
<PAGE>
APPENDIX C (CONTINUED)
times the lower target premium). Any premium amount applied over such
lower target premium will be compensated at excess rates for policy years
2 through 10 and at service fee rates for policy years 11 and greater.
First year compensation will be paid on coverage increases only to the
extent such increases should exceed previous coverage decreases.
8
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
AGREEMENT OF AGENCY
Agreement made this _________ day of ________by and between ___________________
("Principal") and __________________ ("Agent ").
1. The undersigned is presently an Agent in accordance with an
Agreement of Agency ("Guardian Life Agency Agreement") with the
Principal named above, endorsed by The Guardian Life Insurance
Company of America ("Guardian Life") and bearing an effective date
of _________________.
2. The Principal hereby appoints the Agent with the endorsement of The
Guardian Insurance & Annuity Company, Inc. ("GIAC"), a Delaware
Corporation and a wholly-owned subsidiary of Guardian Life, for the
limited purpose of soliciting applications for GIAC's Variable Whole
Life Insurance Policies with Modified Scheduled Premiums marketed
under the name Park Avenue Life ("PAL") and GIAC's Flexible Premium
Variable Universal Life Policies marketed under the name Park Avenue
VUL ("VUL"). There may be one or more policies marketed under the
PAL name. Where necessary or appropriate, this Agreement will
distinguish between them by appending the year of introduction.
Currently, there are two policies marketed under this name - "PAL
'95 and PAL '97."
3. The Agent shall at all times be associated with Park Avenue
Securities LLC ("PAS"), a Broker-Dealer registered with the
Securities and Exchange Commission ("SEC") and a member of the
National Association of Securities Dealers, Inc. ("NASD") as an NASD
Registered Representative or NASD Registered Principal and, if the
particular jurisdiction requires, shall be licensed or registered as
a securities agent of PAS. The Agent must at all times be validly
licensed, registered or appointed by GIAC as a variable contracts
agent in accordance with the requirements of the jurisdiction where
solicitations for PAL and VUL contracts occur. The Agent may solicit
for and sell PAL and VUL contracts in any jurisdiction where such
contracts are filed and approved for sale by the governmental
authorities having jurisdiction, provided the Agent is validly
licensed, registered or otherwise qualified as required for the
solicitation and sale of the PAL and VUL contracts in such
jurisdictions.
4. To the extent applicable, the Agent shall comply strictly with: (a)
the laws, rules and regulations of all jurisdictions (state and
local) in which the Agent solicits applications for and sells PAL
and VUL
1
<PAGE>
contracts; (b) federal laws and the rules, regulations of the SEC;
(c) the rules of the NASD; (d) the rules and procedures of PAS, and
(e) the rules and procedures of GIAC. The Agent understands that
failure to comply with such laws, rules, regulations and procedures
may result in disciplinary action against the Agent by the SEC, a
state or other local regulatory agency that has jurisdiction, the
NASD, PAS and GIAC. Before any solicitations or sales of PAL and VUL
are made, the Agent shall become familiar with and abide by the
laws, rules, regulations and procedures of all of the above
mentioned agencies or parties as are currently in effect and as they
may be changed from time to time.
5. The Agent shall have all applications for PAL and VUL accurately
completed or reviewed and signed by the applicant and shall submit
the applications to GIAC through PAS together with all payments
received from applicants without any reductions. The Agent shall
cause all checks or orders for PAL and VUL to be made payable to
GIAC. GIAC shall reject any application that is submitted by or on
behalf of an Agent not appropriately licensed as required by
paragraph 3 of this Agreement.
6. The Agent shall not make any statements concerning PAL and VUL
except those that are contained in the current prospectuses for PAL
and VUL and the prospectuses for their underlying variable
investment options and shall not solicit for applications or make
sales through the use of mailings, advertisements or sales
literature or any other method of contact unless the material or a
complete description of the method has been filed with the NASD and
received written Approval of PAS from a Registered Principal whose
office is located in a PAS Office of Supervisory Jurisdiction as
that term is defined by NASD rules.
7. In connection with the Agent's appointment for the purpose set forth
in paragraph 2 above, the entire Guardian Life Agency Agreement
referred to above and attached hereto as the Exhibit, including all
compensation adjustment and service fee provisions, is incorporated
herein by reference. All references to "Company"
within the Guardian Life Agency Agreement shall apply with full
force and effect to GIAC. Additionally, the Registered
Representative's Agreement between the Agent and PAS and the
2
<PAGE>
Agent's Agreement between the Agent and GIAC are incorporated herein
by reference and attached hereto as Exhibits.
8. The Agent shall be paid commissions on PAL as outlined in Appendix A
of this Agreement.
9. The Agent shall be paid commissions on VUL as outlined in Appendix B
of this Agreement.
10. Allocation of VUL premiums and the effect thereof on compensation is
described in Appendix C of this Agreement.
11. It shall be understood that this Agreement is automatically
terminated if the Guardian Life Agency Agreement, PAS Registered
Representative Agreement or GIAC Agent's Agreement is terminated.
IT SHALL BE EXPRESSLY UNDERSTOOD BY THE AGENT THAT THIS AGREEMENT SHALL NOT BE
EFFECTIVE UNLESS THE AGENT IS VALIDLY LICENSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE JURISDICTIONS WHERE SOLICITATIONS FOR PAL AND VUL POLICIES
OCCUR.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
- ----------------------- --------------------------
WITNESS PRINCIPAL
- ----------------------- --------------------------
WITNESS AGENT
3
<PAGE>
APPENDIX A
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
Policy Years Policy Premiums Unscheduled Payments
- --------------------------------------------------------------------------------
1 50% 3%
- --------------------------------------------------------------------------------
2 through 10 5% 3%
- --------------------------------------------------------------------------------
The first policy year commission rate of 50% on policy premiums shall be reduced
where policies are issued at ages over 70 with actual rates payable determined
by deducting from the figure 120 ages of applicable insureds as of policy issue
dates.
No compensation shall be payable on PAL policy premiums skipped under the
Premium Skip Option of PAL policies. If unscheduled payments are received when
policies should be on the Premium Skip Option, renewal commissions on such
payments shall be based on renewal rates of PAL policy premiums applied up to
amounts of premium that correspond to renewal PAL policy premiums that would
otherwise have been paid if not for the Premium Skip Option being in effect with
standard renewal rates on unscheduled payments applied to any premiums received
above such PAL policy premium levels.
B. First Policy Year Commission Chargebacks on PAL '95 Policies
First policy year commissions on policy premiums shall be charged back to the
Agent on PAL '95 policies that are surrendered or lapsed prior to the policies
having been in force for at least eighteen months in accordance with the
following:
- --------------------------------------------------------------------------------
Policy Months of PAL '95 Surrenders or Lapses Chargeback Percentages
- --------------------------------------------------------------------------------
1-3 75%
- --------------------------------------------------------------------------------
4-6 70%
- --------------------------------------------------------------------------------
7-10 65%
- --------------------------------------------------------------------------------
11-13 55%
- --------------------------------------------------------------------------------
14 50%
- --------------------------------------------------------------------------------
15 40%
- --------------------------------------------------------------------------------
16 30%
- --------------------------------------------------------------------------------
17 20%
- --------------------------------------------------------------------------------
18 10%
- --------------------------------------------------------------------------------
4
<PAGE>
APPENDIX A (CONTINUED)
PAL chargebacks not immediately repaid on demand by the Agent to the Principal
(or to the Company if the Company should be the Principal) shall constitute an
indebtedness under the terms of the Guardian Life Agency Agreement.
5
<PAGE>
APPENDIX B
A. Commission Schedule (Percentages of Premium)
- --------------------------------------------------------------------------------
Policy Years Target Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 45% 3%
- --------------------------------------------------------------------------------
2 through 10 3% 3%
- --------------------------------------------------------------------------------
6
<PAGE>
APPENDIX C
ALLOCATION OF PREMIUMS AND THEIR EFFECT ON COMPENSATION
A. General
In a first policy year, premiums will first be applied to policy target
premium. These will be compensated at first year rates. Any premiums
received in the first year of a policy exceeding policy target premium
will be considered excess premium to be compensated at excess rates.
In policy years 2 through 10, any premium received up to nine times policy
target premium will be applied as policy target premium and receive
compensation at target premium renewal rates. Any premium exceeding nine
times policy target premium in policy years two through ten will be
considered excess premium to be compensated at excess rates.
In policy years 11 and greater, the compensation on premium received will
be at service fee rates.
B. Increases In Coverage
Coverage increases will be reflected in self-contained segments of
policies that have their own policy effective dates, policy year durations
and policy premiums. Premiums for policies with increases in coverage will
be applied to each coverage and associated target premiums in the order
the coverages were issued (earliest first). When the sum of the premiums
during a given policy year exceeds the sum of all applicable target
premiums, any additional amount will be allocated prorata based on target
premiums for each coverage. The amount thus allocated will be processed as
outlined in the above general description (i.e. it will be processed with
reference to policy years of the coverages and amounts of applicable
target premiums paid).
C. Decreases In Coverage
A coverage decrease will be applied to a last previous coverage increase,
if any, or to the initial coverage should no coverage increase have taken
place. Such decrease will serve to reduce target premium for the full
period so that any regular compensation on subsequent premium received
will be based on lower target premium (i.e. The total of renewal
compensation payable will be based on nine
7
<PAGE>
APPENDIX C (CONTINUED)
times the lower target premium). Any premium amount applied over such
lower target premium will be compensated at excess rates for policy years
2 through 10 and at service fee rates for policy years 11 and greater.
First year compensation will be paid on coverage increases only to the
extent such increases should exceed previous coverage decreases.
8
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
FIELD REPRESENTATIVE AGREEMENT
Agreement made this _________ day of ________by and between The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), a Delaware corporation and a
wholly-owned subsidiary of The Guardian Life Insurance Company of America
("Guardian Life"), having its principal office located at 7 Hanover Square, New
York, New York, 10004 and ___________________ ("Field Representative"). .
1. The undersigned is presently a Field Representative of Guardian Life
in accordance with a Field Representative Agreement bearing an
effective date of ___________________("Guardian Life FR Agreement").
2. GIAC hereby appoints the Field Representative for the limited
purpose of soliciting applications for GIAC's Variable Whole Life
Insurance Policies with Modified Scheduled Premiums marketed under
the name Park Avenue Life ("PAL") and GIAC's Flexible Premium
Variable Universal Life Policies marketed under the name Park Avenue
VUL ("VUL"). There may be one or more policies marketed under the
PAL name. Where necessary or appropriate, this Agreement will
distinguish between them by appending the year of introduction.
Currently, there are two policies marketed under this name -- "PAL
'95 and PAL '97."
3. The Field Representative shall at all times be associated with Park
Avenue Securities LLC ("PAS"), a Broker-Dealer registered with the
Securities and Exchange Commission ("SEC") and a member of the
National Association of Securities Dealers, Inc. ("NASD") as an NASD
Registered Representative or NASD Registered Principal and, if the
particular jurisdiction requires, shall be licensed or registered as
a securities agent of PAS. The Field Representative must at all
times be validly licensed, registered or appointed by GIAC as a
variable contracts agent in accordance with the requirements of the
jurisdiction where solicitations for PAL and VUL contracts occur.
The Field Representative may solicit for and sell PAL and VUL
contracts in any jurisdiction where such contracts are filed and
approved for sale by the governmental authorities having
jurisdiction, provided the Field Representative is validly licensed,
registered or otherwise qualified as required for the solicitation
and sale of the PAL and VUL contracts in such jurisdictions.
4. To the extent applicable, the Field Representative shall comply
strictly with: (a) the laws, rules and regulations of all
jurisdictions
1
<PAGE>
(state and local) in which the Field Representative solicits
applications for and sells PAL and VUL contracts; (b) federal laws
and the rules, regulations of the SEC; (c) the rules of the NASD;
(d) the rules and procedures of PAS, and (e) the rules and
procedures of GIAC. The Field Representative understands that
failure to comply with such laws, rules, regulations and procedures
may result in disciplinary action against the Field Representative
by the SEC, a state or other local regulatory agency that has
jurisdiction, the NASD, PAS and GIAC. Before any solicitations or
sales of PAL and VUL are made, the Field Representative shall become
familiar with and abide by the laws, rules, regulations and
procedures of all of the above mentioned agencies or parties as are
currently in effect and as they may be changed from time to time.
5. The Field Representative shall have all applications for PAL and VUL
accurately completed or reviewed and signed by the applicant and
shall submit the applications to GIAC through PAS together with all
payments received from applicants without any reductions. The Field
Representative shall cause all checks or orders for PAL and VUL to
be made payable to GIAC. GIAC shall reject any application that is
submitted by or on behalf of a Field Representative not
appropriately licensed as required by paragraph 3 of this Agreement.
6. The Field Representative shall not make any statements concerning
PAL and VUL except those that are contained in the current
prospectuses for PAL and VUL and the prospectuses for their
underlying variable investment options and shall not solicit for
applications or make sales through the use of mailings,
advertisements or sales literature or any other method of contact
unless the material or a complete description of the method has been
filed with the NASD and received written Approval of PAS from a
Registered Principal whose office is located in a PAS Office of
Supervisory Jurisdiction as that term is defined by NASD rules.
7. In connection with the appointment of the undersigned as a GIAC
Field Representative for the purpose set forth in paragraph 2 above,
the entire Guardian Life FR Agreement referred to above and attached
hereto as the Exhibit, including all compensation adjustment and
service fee provisions, is incorporated herein by reference.
Guardian Life FR Agreement compensation provisions that do not apply
to PAL and VUL are as noted below. All references to
2
<PAGE>
"Company" within the Guardian Life Agency Agreement shall apply with
full force and effect to GIAC. Additionally, the Registered
Representative's Agreement between the Field Representative and PAS
and the Agent's Agreement between the Field Representative and GIAC
are incorporated herein by reference and attached hereto as
Exhibits.
8. Field Representative compensation on PAL is described in Appendix A
of the Agreement.
9. Field Representative compensation on VUL is described in Appendix B
of this Agreement.
10. Allocation of VUL premiums and the effect thereof on compensation is
described in Appendix C of this Agreement.
11. This Agreement may be terminated as outlined in Paragraph 14 of the
Guardian Life FR Agreement. In addition, it shall be automatically
terminated if the Guardian Life FR Agreement, PAS Registered
Representative Agreement or GIAC Agent's Agreement is terminated.
IT SHALL BE EXPRESSLY UNDERSTOOD BY THE FIELD REPRESENTATIVE THAT THIS AGREEMENT
SHALL NOT BE EFFECTIVE UNLESS THE FIELD REPRESENTATIVE IS VALIDLY LICENSED IN
ACCORDANCE WITH THE REQUIREMENTS OF THE JURISDICTIONS WHERE SOLICITATIONS FOR
PAL AND VUL POLICIES OCCUR.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
- ----------------------- --------------------------
WITNESS AUTHORIZED COMPANY OFFICER
- ----------------------- --------------------------
WITNESS FIELD REPRESENTATIVE
3
<PAGE>
APPENDIX A
A. FR Compensation Schedule
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LPC Factor on Policy Unscheduled Payments Unscheduled Payments 1956/1967
Policy Years Premiums 1985 Version FRs Version FRs
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 36 3.5% 3%
- ------------------------------------------------------------------------------------------------------------
2 through 10 * 3.5% 3%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*Renewal compensation for preceding employment years on PAL policy premiums
shall be the same as set forth in the Field Representatives Plan manuals for
existing Plan versions (except that the rates applicable under Part A shall be
50% of standard rates, and in the case of the PAL '95 product only, Part C shall
be entirely replaced by Part D as outlined below for those Field Representatives
belonging to the 1985 FR Plan version). FR Plan compensation factors shall
operate in accordance with the effective date of the Guardian Life FR Agreement.
The first policy year LPC factor of 36 on policy premiums shall be reduced where
policies are issued at ages over 70 with actual rates payable determined by
deducting from the figure 106 ages of applicable insureds as of policy issue
dates.
No compensation shall be payable on PAL policy premiums skipped under the
Premium Skip Option of PAL policies. If unscheduled payments are received when
policies should be on the Premium Skip Option, renewal compensation on such
payments shall be calculated at 5% and applied up to amounts of premium that
correspond to renewal PAL policy premiums that would otherwise have been paid if
not for the Premium Skip Option being in effect with standard renewal rates on
unscheduled payments applied to any premiums received above such PAL policy
premium levels.
B. First Policy Year Compensation Chargebacks on PAL '95 Policies
Basic first policy year compensation on policy premiums at $13.75 per thousand
of life production credits shall be charged back to Field Representatives on PAL
'95 policies that are surrendered or lapsed prior to the policies having been in
force for at least eighteen months in accordance with the following:
4
<PAGE>
APPENDIX A (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Policy Months of PAL '95 Chargeback Percentages 1956/1967
Surrenders or Lapses Version FRs Chargeback Percentages 1985 Version FRs
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1-3 75% 82%
- -----------------------------------------------------------------------------------------------------------
4-6 70% 77%
- -----------------------------------------------------------------------------------------------------------
7-10 65% 71%
- -----------------------------------------------------------------------------------------------------------
11-13 55% 60%
- -----------------------------------------------------------------------------------------------------------
14 50% 55%
- -----------------------------------------------------------------------------------------------------------
15 40% 44%
- -----------------------------------------------------------------------------------------------------------
16 30% 33%
- -----------------------------------------------------------------------------------------------------------
17 20% 22%
- -----------------------------------------------------------------------------------------------------------
18 10% 11%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
APPENDIX B
A. FR Compensation Schedule
- --------------------------------------------------------------------------------
LPC Factor on Target
Policy Years Premiums Excess Premiums
- --------------------------------------------------------------------------------
1 33 3.5%
- --------------------------------------------------------------------------------
2 through 10 * 3.5%
- --------------------------------------------------------------------------------
*3.5% policy years two through ten and 2.0% policy years eleven and over
credited as Commission Equivalent Compensation (PGF)
VUL compensation shall cease at termination except in the event of retirement in
accordance with Section II, Subsection K, Paragraph 1 of the Field
Representatives' Plan or possibly in the event of death in accordance with
Section II, Subsection L, Paragraph 1 of the Field Representatives' Plan.
6
<PAGE>
APPENDIX C
ALLOCATION OF PREMIUMS AND THEIR EFFECT ON COMPENSATION
A. General
In a first policy year, premiums will first be applied to policy target
premium. These will be compensated at first year rates. Any premiums
received in the first year of a policy exceeding policy target premium
will be considered excess premium to be compensated at excess rates.
In policy years 2 through 10, any premium received up to nine times policy
target premium will be applied as policy target premium and receive
compensation at target premium renewal rates. Any premium exceeding nine
times policy target premium in policy years two through ten will be
considered excess premium to be compensated at excess rates.
In policy years 11 and greater, the compensation on premium received will
be at service fee rates.
B. Increases In Coverage
Coverage increases will be reflected in self-contained segments of
policies that have their own policy effective dates, policy year durations
and policy premiums. Premiums for policies with increases in coverage will
be applied to each coverage and associated target premiums in the order
the coverages were issued (earliest first). When the sum of the premiums
during a given policy year exceeds the sum of all applicable target
premiums, any additional amount will be allocated prorata based on target
premiums for each coverage. The amount thus allocated will be processed as
outlined in the above general description (i.e. it will be processed with
reference to policy years of the coverages and amounts of applicable
target premiums paid).
C. Decreases In Coverage
A coverage decrease will be applied to a last previous coverage increase,
if any, or to the initial coverage should no coverage increase have taken
place. Such decrease will serve to reduce target premium for the full
period so that any regular compensation on subsequent premium received
will be based on lower target premium (i.e. The total of renewal
compensation payable will be based on nine
7
<PAGE>
APPENDIX C (CONTINUED)
times the lower target premium). Any premium amount applied over such
lower target premium will be compensated at excess rates for policy years
2 through 10 and at service fee rates for policy years 11 and greater.
First year compensation will be paid on coverage increases only to the
extent such increases should exceed previous coverage decreases.
8
INSURED A JOHN DOE 50-MALE AGE AND SEX
INSURED B MARY DOE 45-FEMALE
SPECIMEN POLICY NUMBER
JAN 06, 2000 POLICY DATE
FACE AMOUNT BASIC SUM INSURED AT ISSUE $ 250,000
ADDITIONAL SUM INSURED $ 25,000
AT ISSUE
INITIAL FACE AMOUNT $ 275,000
ISSUE DATE JAN 06, 2000 PREFERRED PLUS INSURED A
PLAN OF SURVIVORSHIP FLEXIBLE PREMIUM PREFERRED PLUS INSURED B
INSURANCE ADJUSTABLE VARIABLE LIFE INSURANCE GUIDELINE PREMIUM SECTION
7702 TEST
[LOGO] The Guardian A Stock Company
GUARDIAN(SM) Insurance & Annuity Incorporated in the
Company, Inc. State of Delaware
Customer Service Office:
P.O. Box 26210
Lehigh Valley, PA 18002-6210
Read this policy carefully. This policy is a legal contract between the owner
and The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC will pay the
death proceeds to the beneficiary upon receipt at the Customer Service Office of
due proof that the insured died while this policy was in force. The entire
contract consists of the Basic Policy and any attached additional benefit
riders, endorsements and applications. This policy is issued and administered by
GIAC at its Customer Service Office. GIAC's home office is 1209 Orange Street,
Wilmington, Delaware 19801. GIAC receives all communications at its Customer
Service Office.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
Secretary President
ALL VALUES UNDER THIS POLICY WHICH ARE BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT ARE VARIABLE, MAY INCREASE OR DECREASE AND ARE NOT GUARANTEED.
THE DEATH PROCEEDS, POLICY ACCOUNT VALUE AND CASH SURRENDER VALUE UNDER THIS
POLICY MAY INCREASE OR DECREASE DAILY, DEPENDING UPON PAYMENTS MADE, THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE AMOUNT OF INTEREST CREDITED
TO THE FIXED-RATE OPTION, THE AMOUNT OF CHARGES DEDUCTED, CHANGES IN FACE AMOUNT
AND WHETHER PARTIAL WITHDRAWALS OR POLICY LOANS ARE TAKEN. SEE PAGES 7 AND 15
FOR A FULL DESCRIPTION OF DEATH PROCEEDS AND THE POLICY ACCOUNT VALUE.
THERE IS NO MINIMUM GUARANTEED CASH SURRENDER VALUE. THE LOAN VALUE OF THIS
POLICY IS LESS THAN 100% OF THE CASH SURRENDER VALUE. SEE PAGES 5, 18 AND 19 FOR
A FULL DESCRIPTION OF CASH SURRENDER VALUE AND LOAN VALUE.
RIGHT TO CANCEL:
The owner has the right to examine this policy and return it for cancellation to
the Customer Service Office or to the agent from whom it was purchased by the
later of: 1) 10 days after receiving it; or 2) 45 days from the date the
completed application was signed. The policy and a written cancellation notice
must be delivered or mailed to cancel this policy. Any notice given by mail is
effective on being postmarked, properly addressed, and postage prepaid. If the
policy is canceled during this period, GIAC will refund any amounts paid. The
policy will be void from the beginning.
Survivorship Flexible Premium Adjustable Variable Life Insurance Policy
o Flexible premiums payable while either insured is alive
o Adjustable death proceeds payable at the second death if policy is in
force- No death proceeds payable on the first death
o Investment experience reflected in benefits
o Non-participating--No dividends payable
00-SVUL
<PAGE>
POLICY SUMMARY
This summary outlines some of the major policy provisions; it does not alter any
of these provisions. The actual policy provisions set forth the full details and
conditions of this policy; only the actual policy provisions will control.
While this policy is in force, the owner may increase or decrease the Face
Amount in accordance with "Changing the Face Amount" on page 9. The Initial Face
Amount is shown on page 3. GIAC will pay the death proceeds to the beneficiary
if the Surviving Insured dies while this policy is in force. GIAC will determine
the actual death proceeds payable in accordance with "Death Proceeds" on page 7.
The premiums for this policy are flexible, which means that premium payments may
be made at any time and for varying amounts, subject to the limits described on
page 11. However, the Planned Premium is shown on page 3. The Planned Premium is
the premium the owner designates in the application; this premium is not
required, but may be paid as elected. The payment of Planned Premiums does not
guarantee that this policy will stay in force.
This policy will stay in force as long as the Net Cash Surrender Value is at
least equal to the Monthly Deduction when due, except that during the first 3
policy years this policy will remain in force if specific conditions are met
(see "No Lapse Guarantee Period" and "No Lapse Guarantee Conditions" on page
11.)
The owner may allocate all or part of any Net Premium to any of the Variable
Investment Options and to the Fixed-Rate Option, subject to any applicable
restrictions described in this policy. The owner may change the allocation of
future Net Premiums (see "Allocations and Transfers" on page 12.) Amounts
allocated to the Fixed-Rate Option will accrue interest at a guaranteed minimum
effective interest rate of 4% per year. GIAC may declare an interest rate
greater than 4% at its discretion (see "The Fixed-Rate Option" on page 15).
The Policy Account Value is the sum of the values which are allocated to the
Variable Investment Options, the Fixed-Rate Option, the Loan Account and the
Loan Interest Account. The Policy Account Value may vary daily with the
investment experience of Separate Account N, the amount of interest credited to
the Fixed-Rate Option and the Loan Interest Account, and charges deducted (see
"Policy Account Value" on page 15). The owner may transfer any portion of the
unloaned Policy Account Value among the Variable Investment Options and the
Fixed-Rate Option, subject to the provisions set forth in "Allocations and
Transfers".
This policy does not have a minimum guaranteed Cash Surrender Value (see
"Partial Withdrawals and Surrender" on page 17). If this policy has a Cash
Surrender Value, the owner may, subject to limitations:
o make partial withdrawals (see "Partial Withdrawals" on page 17);
o obtain a policy loan (see "Policy Loans" on page 18);
o surrender this policy for cash (see "Surrender" on page 18);
o use this policy to provide life income (see "Payment Options" on
page 21).
If the Net Cash Surrender Value is less than the current Monthly Deduction when
due, GIAC allows a 61 day grace period for the required premium (see "Grace
Period" on page 11). If the required premium is not paid by the end of the grace
period, this policy will lapse without value.
Any endorsements, additional benefit riders and applications which are attached
to this policy follow.
An Index appears on the inside of the back cover.
Guide to Policy Provisions
1. Definitions 8. The Fixed-Rate Option
2. Death Proceeds 9. Policy Account Value
3. Changing the Face Amount 10. Partial Withdrawals and Surrender
4. Owner and Beneficiary 11. Policy Loans
5. Premiums 12. Exchange of Policy
6. Allocations and Transfers 13. Payment Options
7. The Separate Account 14. General Provisions
00-SVUL Page 2 {POL NO}
<PAGE>
POLICY DATA
INSURED A JOHN DOE 50-MALE AGE AND SEX
INSURED B MARY DOE 45-FEMALE
SPECIMEN POLICY NUMBER
JAN 06, 2000 POLICY DATE
FACE AMOUNT BASIC SUM INSURED AT ISSUE $250,000
ADDITIONAL SUM INSURED $ 25,000
AT ISSUE
INITIAL FACE AMOUNT $275,000
ISSUE DATE JAN 06, 2000 PREFERRED PLUS INSURED A
PLAN OF INSURANCE SURVIVORSHIP FLEXIBLE PREMIUM PREFERRED PLUS INSURED B
ADJUSTABLE VARIABLE LIFE INSURANCE [1] DEATH
BENEFIT
OPTION
OWNER JOHN DOE GUIDELINE PREMIUM SECTION
BENEFICIARY MARY DOE, WIFE 7702 TEST
BENEFITS AND PREMIUMS
POLICY YEARS
BASIC POLICY AMOUNT PAYABLE
PLANNED [ANNUAL] PREMIUM $ 1,495
MINIMUM ANNUAL PREMIUM $ 1,172 1 through 3
GUIDELINE LEVEL PREMIUM $ 3,530
GUIDELINE SINGLE PREMIUM $ 38,754
MINIMUM FACE AMOUNT $250,000
EXCHANGE OF POLICY OPTION
EXPIRY DATE: 01/06/2002
ANNUAL RENEWABLE TERM
INSURANCE RIDER
INSURED: JOHN DOE
TERM FACE AMOUNT
EXPIRY DATE: 01/06/2035 $ 25,000
00-SVUL (CONTINUED ON PAGE 3.1) Page 3 {POL NO}
<PAGE>
POLICY DATA - CONT'D
BENEFITS AND PREMIUMS (cont'd)
POLICY YEARS
AMOUNT PAYABLE
------ -------
GUARANTEED COVERAGE RIDER
ANNUAL GUARANTEED COVERAGE PREMIUM $ 1,495 1 through 30
START DATE: 01/06/2000
EXPIRY DATE: 01/06/2030
EXCHANGE OF INSUREDS RIDER
AMENDMENT TO OWNER PROVISION
SURVIVORSHIP VARIABLE POLICY
SPLIT OPTION RIDER
To obtain information about your coverage you may call your agent or GIAC at:
[1-800-441-6455]
00-SVUL (CONTINUED ON PAGE 3.2) Page 3.1 {POL NO}
<PAGE>
POLICY DATA - CONT'D
PREMIUM ALLOCATION INFORMATION
This amount is allocated as follows:
[The Guardian Stock Fund 25% Gabelli Capital Asset Fund 25%
The Guardian Bond Fund 25% The Guardian VC 500 Index Fund 0%]
The Guardian Small Cap Stock Fund 0% The Fixed-Rate Option 25%
The Guardian VC Asset Allocation Fund 0%
The maximum number of Allocation Options in which the Policy Account Value may
be invested at any time is [20].
POLICY LOANS
The minimum loan amount is $500. The minimum loan repayment is the lesser of:
(a) $100; or (b) the total outstanding Policy Debt.
Policy Loans bear interest at a yearly rate of 5%, payable in arrears. The
yearly loan interest rate changes to 4.5%, payable in arrears, beginning on
01/06/2020.
See "Policy Loans" on page 18 for details on loan value.
PREMIUM CHARGE
GIAC deducts a charge from premium payments based on the following percentages.
See "Premiums" on page 11 for details on the determination of premium charge.
The Target Premium is $2,434.62.
-------------------------------------------------
Up to Target Excess over
Policy Years Premium Target Premium
-------------------------------------------------
1-12 8% 4%
-------------------------------------------------
13+ 4% 0%
-------------------------------------------------
00-SVUL (CONTINUED ON PAGE 3.3) Page 3.2 {POL NO}
<PAGE>
POLICY DATA - CONT'D
MONTHLY DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
1. COST OF INSURANCE CHARGES
BASIC POLICY
GIAC deducts the current cost of insurance charge for the Basic Policy on
each Monthly Processing Date. GIAC bases the monthly cost of insurance
charge on its current cost of insurance rates. The current cost of
insurance rate will never exceed the maximum monthly cost of insurance
rate for the applicable policy year. The Table of Maximum Monthly Cost of
Insurance Rates is shown on page 4. See "Monthly Cost of Insurance" on
page 16.
2. ADMINISTRATIVE CHARGES
GIAC deducts the administrative charges for the Policy on each Monthly
Processing Date.
o $7.50 per month for all Policy Years, plus
o $0.15 per $1,000 of Basic Sum Insured at Issue deducted
monthly for the first 12 policy years.
o [$0.01 per $1,000 Additional Sum Insured at Issue deducted
monthly for the first 12 policy years.]
o [$0.01 per $1,000 of Survivorship Adjustable Annual Renewable
Term Insurance Rider at issue deducted monthly for the first
12 policy years.]
3. MAXIMUM MORTALITY AND EXPENSE RISK CHARGE
GIAC deducts the Mortality and Expense Risk charge for the Policy on each
Monthly Processing Date. These deductions are based on amounts in the
Variable Investment Options.
o For Policy Years 1-12, the rate is 0.000708333.
o For Policy Years 13+, the rate is 0.00054167 for amounts up to
the Account Value Breakpoint and 0.00037500 for amounts in
excess of the Account Value Breakpoint.
00-SVUL (CONTINUED ON PAGE 3.4) Page 3.3 {POL NO}
<PAGE>
POLICY DATA - CONT'D
4. RIDER CHARGES
GIAC will also deduct the cost of these other riders. See "Monthly
Deductions" on page 16.
GUARANTEED COVERAGE RIDER $2.75 1 through 30
00-SVUL (CONTINUED ON PAGE 3.5) Page 3.4 {POL NO}
<PAGE>
POLICY DATA - CONT'D
TRANSACTION DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
TRANSFERS
The minimum amount which may be transferred from a Variable Investment
Option and the Fixed-Rate Option is the lesser of: a) $100; or b) the
entire value of that option. GIAC reserves the right to charge $25 for
each transfer after the 12th transfer in a policy year. Additional
restrictions regarding transfers are described in "Transfers from the
Fixed-Rate Option" on page 13.
PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE
The minimum partial withdrawal is $500. GIAC reserves the right to limit
the number of withdrawals in a policy year to 12. See "Partial Withdrawals
and Surrender" on page 17.
00-SVUL (CONTINUED ON PAGE 3.6) Page 3.5 {POL NO}
<PAGE>
POLICY DATA - CONT'D
SURRENDER CHARGES
The table below shows surrender charges for the Initial Face Amount. For a
detailed description of surrender charges, see "Partial Withdrawals and
Surrender" on page 17.
POLICY SURRENDER
YEAR CHARGE
----------------- -------------
1 $ 2,154.77
2 $ 1,915.35
3 $ 1,675.93
4 $ 1,436.51
5 $ 1,197.10
6 $ 957.68
7 $ 718.26
8 $ 323.22
9 $ 107.74
10 and thereafter $0
00-SVUL Page 3.6 {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
Monthly cost of insurance charges are based on current cost of insurance rates.
The current cost of insurance rate applicable to the Net Amount at Risk for the
Initial Face Amount will never exceed the applicable maximum monthly cost of
insurance rate shown below. See "Monthly Cost of Insurance" on Page16.
MAXIMUM MAXIMUM
------- -------
POLICY YEAR MONTHLY RATE POLICY YEAR MONTHLY RATE
----------- ------------ ----------- ------------
1 0.00013 36 5.83427
2 0.00404 37 6.64975
3 0.00751 38 7.56482
4 0.01178 39 8.59037
5 0.01701 40 9.71756
6 0.02344 41 10.95086
7 0.03126 42 12.27804
8 0.04072 43 13.71276
9 0.05222 44 15.25039
10 0.06600 45 16.94406
11 0.08251 46 18.83212
12 0.10204 47 20.99774
13 0.12508 48 23.54242
14 0.15197 49 26.26529
15 0.18370 50 28.61598
16 0.22137 51 33.45272
17 0.26584 52 40.04678
18 0.31935 53 55.15920
19 0.38400 54 83.33333
20 0.46171 55 83.33333
21 0.55361
22 0.66732
23 0.78767
24 0.93196
25 1.09824
26 1.28996
27 1.51257
28 1.77408
29 2.08050
30 2.43813
31 2.85173
32 3.32331
33 3.85437
34 4.44645
35 5.10327
00-SVUL (CONTINUED ON PAGE 4.1) Page 4 {POL NO}
<PAGE>
TABLE OF DEATH BENEFIT FACTORS
Death Benefit Factors are used to calculate the death benefit provided under the
Section 7702 Minimum Death Benefit (see the applicable provisions on page 7).
POLICY YEAR FACTOR POLICY YEAR FACTOR
----------- ------ ----------- ------
1 2.15 36 1.05
2 2.09 37 1.05
3 2.03 38 1.05
4 1.97 39 1.05
5 1.91 40 1.05
6 1.85 41 1.05
7 1.78 42 1.05
8 1.71 43 1.05
9 1.64 44 1.05
10 1.57 45 1.05
11 1.50 46 1.05
12 1.46 47 1.04
13 1.42 48 1.03
14 1.38 49 1.02
15 1.34 50 1.01
16 1.30 51 1.00
17 1.28 52 1.00
18 1.26 53 1.00
19 1.24 54 1.00
20 1.22 55 1.00
21 1.20
22 1.19
23 1.18
24 1.17
25 1.16
26 1.15
27 1.13
28 1.11
29 1.09
30 1.07
31 1.05
32 1.05
33 1.05
34 1.05
35 1.05
00-SVUL Page 4.1 {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF SURVIVORSHIP TERM COVERAGE
Monthly rider charges are based on current cost of insurance rates. The current
cost of insurance rate applicable to the survivorship adjustable annual
renewable term insurance benefits will never exceed the applicable maximum
monthly cost of insurance rate shown below. See Rider Cost in the attached
rider.
MAXIMUM MAXIMUM
------- -------
MONTHLY MONTHLY
------- -------
POLICY YEAR RATE POLICY YEAR RATE
----------- ---- ----------- ----
1 0.00013 36 5.83427
2 0.00404 37 6.64975
3 0.00751 38 7.56482
4 0.01178 39 8.59037
5 0.01701 40 9.71756
6 0.02344 41 10.95086
7 0.03126 42 12.27804
8 0.04072 43 13.71276
9 0.05222 44 15.25039
10 0.06600 45 16.94406
11 0.08251 46 18.83212
12 0.10204 47 20.99774
13 0.12508 48 23.54242
14 0.15197 49 26.26529
15 0.18370 50 28.61598
16 0.22137 51 33.45272
17 0.26584 52 40.04678
18 0.31935 53 55.15920
19 0.38400 54 83.33333
20 0.46171 55 83.33333
21 0.55361
22 0.66732
23 0.78767
24 0.93196
25 1.09824
26 1.28996
27 1.51257
28 1.77408
29 2.08050
30 2.43813
31 2.85173
32 3.32331
33 3.85437
34 4.44645
35 5.10327
00-SVUL Page 3-R215SVUL {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF INDIVIDUAL TERM COVERAGE
Monthly cost of insurance charges are based on current cost of insurance rates.
The current cost of insurance rate applicable to the adjustable annual renewable
individual term insurance benefit will never exceed the applicable maximum
monthly cost of insurance rate shown below. See Rider Cost in the attached
rider.
MAXIMUM
-------
POLICY YEAR MONTHLY RATE
----------- ------------
1 0.13476
2 0.44713
3 0.48989
4 0.53771
5 0.59311
6 0.65444
7 0.72255
8 0.79493
9 0.87327
10 0.96182
11 1.06061
12 1.17052
13 1.29585
14 1.43921
15 1.60155
16 1.78129
17 1.97513
18 2.18574
19 2.41241
20 2.66044
21 2.94130
22 3.13274
23 3.63093
24 4.05839
25 4.54126
26 5.06274
27 5.62182
28 6.21387
29 6.83324
30 7.49616
31 8.22966
32 9.05445
33 9.99708
34 11.07332
35 12.26712
00-SVUL Page 3-R218SVUL {POL NO}
<PAGE>
1. DEFINITIONS
Certain important terms used in this policy are defined below. Additional terms,
not explained here, are defined in other parts of this policy.
Account Value Breakpoint: The amount used to calculate the mortality and expense
risk charge on the 12th Policy Anniversary and thereafter. The Account Value
Breakpoint amount is the greater of zero or $100,000 less the amount of Policy
Account Value in the Fixed-Rate Option.
Additional Sum Insured: The Additional Sum Insured, if elected, is additional
insurance coverage which provides a level death benefit to the anniversary
nearest the younger insured's 100th birthday. The Additional Sum Insured is
shown on page 3.
Age: Each insured's Age on the birthday nearest the Policy Date. These Ages are
shown on page 3.
Allocation Options: The Allocation Options consist of the Variable Investment
Options and the Fixed-Rate Option.
Attained Age: Each insured's Age as shown on page 3, plus the number of policy
years completed since the Policy Date.
Basic Policy: This policy, including any attached endorsements and applications,
but excluding any additional benefit riders.
Basic Sum Insured: The Basic Sum Insured is shown on Page 3.
Business Day: Each day that GIAC processes transactions, currently including
each day that the New York Stock Exchange or its successor is open for trading
and GIAC is open for business. GIAC's close of business is 4:00 PM New York City
time. If any transaction or event occurs or is scheduled to occur on a day that
is not a Business Day, or if a transaction is received after GIAC's close of
business, such transaction or event will be deemed to occur as of the next
following Business Day unless otherwise specified.
Cash Surrender Value: The Policy Account Value less any surrender charges.
Face Amount: The sum of the Basic Insured Amount plus the Additional Sum Insured
and the amount of any Policy Segments then in force.
Good Order: Notice from the party authorized to initiate a policy transaction
under this policy in a format satisfactory to GIAC, including all information
required by GIAC to process the requested transaction under this policy.
Initial Face Amount: The Face Amount in force on this policy's Issue Date.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended, and its
related rules and regulations.
Investment Unit: A unit of measure used to determine the value attributable to a
Variable Investment Option.
Issue Date: The date this policy is issued at the Customer Service Office. The
Issue Date is shown on page 3.
Loan Account: An account to which values from the Variable Investment Options
and the Fixed-Rate Option are transferred when a policy loan is taken. The Loan
Account is equal to the loan.
Loan Amount: Loan Amount is the sum of any amounts borrowed plus any capitalized
loan interest less any loan repayment.
Loan Interest Account: An account which represents the interest earnings
credited by GIAC on the Loan Account.
Minimum Annual Premium: The premium amount required to maintain the No-Lapse
Guarantee. The Minimum Annual Premium is shown on page 3.
Monthly Deduction: The total of the charges due and payable on each Monthly
Processing Date.
Monthly Processing Date: The day of each policy month on which the Monthly
Deduction is deducted from the Policy Account Value and certain policy benefits
and values are calculated. The Monthly Processing Date is the same date of each
calendar month as the Policy Date, or the last day of a calendar month, if
earlier. If such calendar day is not a Business Day, the Monthly Processing Date
will be the next following Business Day.
Net Amount at Risk: The amount calculated as:
o the amount of death benefit provided under the Death Benefit Option in
force;
o divided by 1.0032737;
o less the Policy Account Value immediately prior to the Monthly Deduction.
A separate Net Amount at Risk is determined for the Basic Sum Insured,
Additional Sum Insured, and for each Policy Segment.
Net Cash Surrender Value: The Cash Surrender Value less any Policy Debt.
00-SVUL Page 5 {POL NO}
<PAGE>
DEFINITIONS-- cont'd
Net Accumulated Premiums: For Death Benefit Option 3, the sum of premiums paid
less the sum of adjusted partial withdrawals taken to date. An adjusted partial
withdrawal is the partial withdrawal reduced by the portion that exceeds the Net
Accumulated Premiums at the date of the partial withdrawal.
Net Premium: The portion of a premium payment which is allocated to the Variable
Investment Options or the Fixed-Rate Option. GIAC deducts the premium charge
based on the percentages shown on page 3 from each premium payment before
allocation.
Planned Premium: The premium the owner designates in the application. The amount
or mode of the Planned Premium may be changed if GIAC receives the owner's
written request for such change in Good Order at the Customer Service Office.
Policy Account Value: The sum of the values of the Variable Investment Options,
the Fixed-Rate Option, the Loan Account, and the Loan Interest Account. The
unloaned Policy Account Value is the Policy Account Value less the Loan Account
and the Loan Interest Account.
Policy Anniversary: The same date of each calendar year as the Policy Date.
Policy Date: The Policy Date is shown on page 3. Policy months, policy years and
Policy Anniversaries are measured from the Policy Date.
Policy Debt: The Loan Amount, plus accrued and unpaid loan interest.
Policy Segment: The additional coverage provided by an increase in the Face
Amount.
Section 7702: The section of the Internal Revenue Code which defines life
insurance.
Surviving Insured: The insured remaining alive after the first death that occurs
while this policy is in force.
Target Premium: An amount GIAC uses to determine premium charges. The Target
Premium is shown on page 3.
Unit Value: The value of an Investment unit.
Variable Investment Options: The investment divisions of The Guardian Separate
Account N (Account N).
Younger Insured: The youngest of the two insureds on the Policy Date. Certain
policy calculations are based on the Age of the Younger Insured even if the
Younger Insured is deceased.
00-SVUL Page 6 {POL NO}
<PAGE>
2. DEATH PROCEEDS
Death Proceeds
The death proceeds become payable to the beneficiary upon GIAC's receipt at the
Customer Service Office of due proof in Good Order that the Surviving Insured
died while this policy was in force. The death proceeds payable are the sum of
the following:
o the amount of death benefit as of the Monthly Processing Date immediately
preceding the Surviving Insured's death provided under the Death Benefit
Option then in force (see "Death Benefit Options" below); and
o any insurance on the insured's life provided by additional benefit riders;
less, as of the date of the Surviving Insured's death:
o any Policy Debt;
o the lesser of:
o any premium required under the no lapse guarantee; or
o the amount required to bring the Cash Surrender Value up to zero;
and
o any partial withdrawals between the Monthly Processing Date and the
date of the Surviving Insured's death.
If the Death Benefit Option is Option 3, the death benefit increases by the
amount of any premiums paid between the Monthly Processing Date and the date of
the Surviving Insured's death.
Death Benefit Options
The owner elects the Death Benefit Option in the application.
Option 1 (Level): The amount of death benefit provided under this option on any
Monthly Processing Date prior to the Policy Anniversary nearest the Younger
Insured's 100th birthday is the greater of:
o the Face Amount; or
o the minimum death benefit required under Section 7702.
Option 2 (Increasing): The amount of death benefit provided under this option on
any Monthly Processing Date prior to the Policy Anniversary nearest the Younger
Insured's 100th birthday is the greater of:
o the Face Amount plus the Policy Account Value, if positive; or
o the minimum death benefit required under Section 7702.
Option 3 (Return of Premium): The amount of death benefit provided under this
option on any Monthly Processing Date prior to the Policy Anniversary nearest
the Younger Insured's 100th birthday is the greater of:
o the Face Amount plus the Net Accumulated Premiums; or
o the minimum death benefit required under Section 7702.
On the Policy Anniversary nearest the Younger Insured's 100th birthday and
thereafter, the death benefit under Death Benefit Options 1, 2 and 3 will equal
the Policy Account Value on the date of the Surviving Insured's death.
Section 7702 Minimum Death Benefit
The amount of death benefit will always equal or exceed the minimum death
benefit required by the Guideline Premium Test under Section 7702.
The minimum death benefit required under Section 7702 on any Monthly Processing
Date is the Policy Account Value on the Monthly Processing Date multiplied by
the factor shown in the Table of Death Benefit Factors on page 4.
Changing the Death Benefit Option
Subject to the rules stated below and while either insured is living, the owner
may change the Death Benefit Option on any Policy Anniversary. GIAC must receive
the owner's written request for the change in Good Order at the Customer Service
Office. Any such change will become effective on the Policy Anniversary on or
after receipt of the request.
00-SVUL Page 7 {POL NO}
<PAGE>
DEATH PROCEEDS--cont'd
Changing from Option 1 to Option 2: GIAC requires satisfactory evidence of
insurability for this change. GIAC will decrease the Face Amount by the lesser
of:
o the amount of the Policy Account Value on the effective date of change; or
o the Face Amount divided by the factor shown in the Table of Death Benefit
Factors on page 4.
The Face Amount is decreased so that the amount of death benefit remains the
same on the effective date of change. GIAC will not permit any change from
Option 1 to Option 2 if it results in the reduction of the Face Amount below the
Minimum Face Amount shown on page 3.
Changing from Option 2 to Option 1: GIAC will increase the Face Amount by the
lesser of:
o the amount of the Policy Account Value on the effective date of change; or
o the Face Amount divided by the factor shown in the Table of Death Benefit
Factors on page 4 minus 1.
The Face Amount is increased so that the amount of the death benefit remains the
same on the effective date of change; such increase will not result in a new
Policy Segment.
Changing from Option 3 to Option 1: GIAC will increase the Face Amount by the
amount of the Net Accumulated Premiums on the effective date of change.
The Face Amount is increased so that the amount of the death benefit remains the
same on the effective date of change; such increase will not result in a new
Policy Segment.
Changing from Option 3 to Option 2: GIAC will change the Face Amount by an
amount equal to (a) minus (b) on the effective date of change, where:
o (a) is the Net Accumulated Premiums, and
o (b) is the lesser of:
o the Policy Account Value on the effective
date of change; or
o the Face Amount divided by the factor shown in the Table of Death
Benefit Factors on page 4.
The net effect is that the Face Amount is increased or decreased so that the
amount of the death benefit remains the same on the effective date of change.
Any resulting increase will not result in a new Policy Segment.
GIAC will not permit any change from Option 3 to Option 2 if it results in the
reduction of the Face Amount below the Minimum Face Amount shown on page 3.
No Changes to Option 3: Changes from Option 1 to Option 3, or from Option 2 to
Option 3 are not allowed.
00-SVUL Page 8 {POL NO}
<PAGE>
3. CHANGING THE FACE AMOUNT
Increases in Face Amount
The owner may request an increase in Face Amount on the first Policy
Anniversary:
o provided both insureds are alive;
o on any subsequent Policy Anniversary up to and including the Policy
Anniversary when the Younger Insured is at most age 70; and
o the older insured is at most 90.
GIAC must receive the owner's written request for the increase in Good Order at
the Customer Service Office at least 30 days before a Policy Anniversary. To
process an increase in the Face Amount, GIAC requires that:
o the increase is for at least $10,000; and
o each insured provides evidence of insurability satisfactory to GIAC.
If GIAC approves the change, the increase will take effect on the Policy
Anniversary, provided that both insureds are living on that date. The increase
will be issued as a separate Policy Segment. Each Policy Segment will have its
own:
o underwriting classes;
o cost of insurance rates;
o surrender charges;
o administrative charges;
o Target Premiums; and
o Minimum Annual Premium.
Premium charges will be affected by Policy Segments (see "Determination of
Premium Charges" on page 11).
GIAC will send the owner revised policy pages reflecting any changes caused by
an increase in Face Amount.
Decreases in Face Amount
The owner may request a decrease in the Face Amount at any time on or after the
first Policy Anniversary. GIAC must receive the owner's written request for the
decrease in Good Order at the Customer Service Office. To process a decrease in
the Face Amount, GIAC requires that:
o at least one insured is living on the date GIAC receives the owner's
written request;
o the amount of the decrease is at least $5,000; and
o the reduced Face Amount may not be less than the Minimum Face Amount shown
on page 3.
The decrease will take effect on the Monthly Processing Date coinciding with or
next following the date GIAC approves the change. A decrease is applied:
o first, to reduce the amount provided by the most recent in force Policy
Segment;
o next, to reduce the next most recent in force Policy Segments,
successively;
o next, to reduce the Additional Sum Insured portion of the Initial Face
Amount;
o finally, to reduce the Basic Sum Insured portion of the Initial Face
Amount.
GIAC will send the owner revised policy pages reflecting any changes caused by a
decrease in Face Amount.
4. OWNER AND BENEFICIARY
Owner
The owner is named in the application or in any later change shown in GIAC's
records. While either insured is living and subject to any assignment on file
with GIAC, the owner alone has the right to receive all benefits and exercise
all rights this policy grants or GIAC allows.
Successor Owner
A numbered sequence may be used to name successor owners. If the owner dies,
ownership passes to the next designated successor owner then living. If none is
then living, ownership passes to the owner's estate.
00-SVUL Page 9 {POL NO}
<PAGE>
OWNER AND BENEFICIARY--cont'd
Joint Owner
If more than one person is named as owner with no number or the same number,
they are joint owners. Except for transfers, any request for a policy
transaction or change must be signed by all of the joint owners named in GIAC's
records. Unless otherwise provided, if a joint owner dies, ownership passes to
the surviving joint owner(s) equally. When the last joint owner dies, ownership
passes to that person's estate, unless otherwise provided.
Beneficiary
The beneficiary is named in the application or in any later change shown in
GIAC's records. GIAC will pay the death proceeds to the beneficiary, subject to
the terms of "Death Proceeds" on page 7. Unless otherwise provided, in order to
receive proceeds at the Surviving Insured's death, a beneficiary must be living
on the earlier of:
o the date GIAC receives due proof of the Surviving Insured's death in Good
Order at the Customer Service Office; or
o the 15th day after the Surviving Insured's death.
Unless otherwise provided, if no designated beneficiary is living on such
earlier date, the owner or the owner's estate is the beneficiary.
Contingent Beneficiary
A numbered sequence may be used to name contingent beneficiaries. The
beneficiary is the living person(s) designated by the lowest number in the
sequence.
Concurrent Beneficiary
If more than one person is named as beneficiary with no number or the same
number, those persons are concurrent beneficiaries. Shares are equal, unless
otherwise specified. If shares are equal, the share of a concurrent beneficiary
who predeceases the Surviving Insured will be shared equally by the surviving
concurrent beneficiaries. If unequal shares are specified and a concurrent
beneficiary predeceases the Surviving Insured, the beneficiary of that share
will be the owner or the owner's estate.
Change of Owner or Beneficiary
The owner may change the owner or beneficiary by written request in Good Order.
The change will take effect as of the date the request is signed, whether or not
the Surviving Insured is living when GIAC receives the request at the Customer
Service Office. However, the change will not apply to any payments made or
actions taken by GIAC on or before the date the request is received by GIAC.
Assignment
No assignment will bind GIAC unless the original, or a copy, is filed at the
Customer Service Office in Good Order. An assignment must be signed and dated by
both the assignor and the assignee and, as applicable, by the beneficiary. The
rights of any owner or beneficiary and the entire contract, as defined in "The
Contract" on page 25, will be subject to the assignment. GIAC will rely solely
on the assignee's statement as to the amount of the assignee's interest. GIAC
will not be responsible for the validity of any assignment. Unless otherwise
provided, the assignee may exercise all rights this policy grants except:
o the right to change the owner or beneficiary;
o the right to elect a Payment Option; and
o the right to allocate or transfer amounts among the Variable Investment
Options and the Fixed-Rate Option.
Assignments are subject to all payments made or actions taken by GIAC on or
before the date GIAC receives the assignment at the Customer Service Office.
00-SVUL Page 10 {POL NO}
<PAGE>
5. PREMIUMS
Premium Payment
The first premium is due on the Issue Date. This premium must be at least one
sixth of the Minimum Annual Premium shown on page 3. This policy is in force
when the first premium is paid, but not before the Issue Date. After the first
premium, all other premiums are payable only at the Customer Service Office.
Upon request, GIAC will give the owner a receipt signed by one of its officers.
Premiums may be paid at any time while this policy is in force, subject to
GIAC's premium limitations.
The owner selects a Planned Premium on the application. GIAC will send reminder
notices for the Planned Premium annually, semi-annually, or quarterly as
requested. However, no premium needs to be paid as long as the Net Cash
Surrender Value is sufficient to provide for payment in full of the Monthly
Deduction when due.
The minimum premium payment GIAC will accept is $100, unless GIAC is authorized
to accept payment under a pre-authorized check plan. The minimum premium payment
GIAC will accept under a pre-authorized check plan is $25.
Premium Limitations
The Guideline Premium Test under Section 7702 of the Internal Revenue Code
limits the relationship of premiums to death benefit in order to qualify this
policy as life insurance. GIAC will refund to the owner any portion of a premium
payment which violates Section 7702 limits with interest at an annual rate of 6%
within 60 days of receipt of such premium.
Crediting Payments
When a payment is received at the Customer Service Office without being
identified as a premium payment, such payment will be applied:
o first, to repay any Policy Debt;
o then, as a premium payment.
All premium payments will be credited as of the Business Day of receipt in Good
Order at the Customer Service Office.
Determination of Premium Charges
GIAC determines premium charges based on:
o premium payments allocated to the Initial Face Amount and any Policy
Segments; and
o the Target Premiums associated with the Initial Face Amount and any Policy
Segments, as described below:
In any policy year, GIAC will allocate premium payments to the Initial Face
Amount, until such payments equal the Target Premium associated with the Initial
Face Amount. GIAC will then allocate premium payments sequentially to each
Policy Segment, if any, until the total premium payments equal the sum of all
Target Premiums associated with such segments.
GIAC will allocate any additional premium payments to the Initial Face Amount
and any Policy Segments proportionately based on the Target Premiums. After
premium payments are allocated, the premium charge for the Initial Face Amount
and any Policy Segments will be assessed in accordance with "Premium Charge" on
page 3.
No Lapse Guarantee Period
This policy will not lapse as long as the Net Cash Surrender Value is at least
equal to the Monthly Deduction when due. However, provided that the "No Lapse
Guarantee Condition" (as described below) is met, GIAC guarantees that this
policy (including any riders) will not lapse during the No Lapse Guarantee
Period even if the Net Cash Surrender Value is less than the Monthly Deduction
when due. The No Lapse Guarantee Period starts on the Policy Date. The No Lapse
Guarantee Period ends on the third Policy Anniversary.
No Lapse Guarantee Condition
The No Lapse Guarantee Condition on any Monthly Processing Date is met if (a) is
equal to or greater than (b) where:
o (a) is the sum of all premium payments made under this policy:
o less the amount of any existing Policy Debt, and
o less any previous partial withdrawals; and
o (b) is the sum of the Minimum Annual Premium for all previous policy
years, plus the Minimum Annual Premium for the current policy year times a
ratio. This ratio equals one plus the number of complete policy months
since the last Policy Anniversary, divided by 12.
Grace Period
GIAC allows a grace period of 61 days after the Monthly Processing Date that:
o the Net Cash Surrender Value is less than the current Monthly Deduction
when due and the No Lapse Guarantee Condition is not met; or
o the Policy Debt exceeds the Cash Surrender Value, and GIAC requires a loan
repayment.
If either event occurs, GIAC will mail to the owner, at least 30 days before the
end of the grace period, at the owner's last known address, a notice of the
required premium or loan repayment to keep this policy in force (see "Repayment"
on page 19 for details on the amount required for such loan repayments).
00-SVUL Page 11 {POL NO}
<PAGE>
PREMIUMS--cont'd
During the first three policy years, if the Net Cash Surrender Value is less
than the current Monthly Deductions when due, the required premium will equal
the lesser of:
o the amount of the deficiency plus 3 times the current Monthly Deduction;
or
o the amount of the deficiency in the No Lapse Guarantee Condition, plus one
quarter of the Minimum Annual Premium shown on page 3.
After the third Policy Anniversary, if the Net Cash Surrender Value is less than
the current Monthly Deduction, the required premium will equal the amount of the
deficiency plus 3 times the current Monthly Deduction.
This policy remains in force during the grace period. If the required premium or
loan repayment is not paid by the end of the grace period, this policy will
lapse without value.
6. ALLOCATIONS AND TRANSFERS
Allocation of Net Premiums
On the Issue Date, GIAC will allocate any Net Premiums received prior to the
Issue Date to the Allocation Options in accordance with the allocation
percentages then in effect and the limitations specified on page 3. After the
Issue Date, the owner may allocate all or part of a Net Premium to the
Allocation Options. GIAC applies the Net Premium in accordance with the
allocation percentages in effect on that date (see "Crediting Payments" on page
11). GIAC reserves the right to limit the number of options in which the Policy
Account Value may be invested; the maximum number of Allocation Options in which
the Policy Account Value may be invested is shown on page 3. All allocation
percentages must be in whole numbers; no fractional percentages are permitted.
The sum of the percentages allocated among the options must equal 100.
The allocation percentages in effect on the Issue Date are those designated in
the application; they are shown on page 3. The owner may subsequently change
these allocation percentages. GIAC will change the allocation percentages
following receipt of the owner's written request at the Customer Service Office
in Good Order. Any allocation change will only apply to Net Premiums received on
or after the Business Day on which GIAC receives the request at the Customer
Service Office.
Transfers
The owner may transfer all or a portion of the unloaned Policy Account Value
among the Variable Investment Options and the Fixed-Rate Option, subject to the
conditions and restrictions described below.
o GIAC must receive the owner's proper request for transfer in Good Order at
the Customer Service Office.
o The minimum amount which may be transferred from a Variable Investment
Option or the Fixed-Rate Option is the lesser of the amount shown on page
3 or the entire value of that option.
00-SVUL Page 12 {POL NO}
<PAGE>
ALLOCATIONS AND TRANSFERS--cont'd
o GIAC reserves the right to charge for each transfer, after the twelfth
transfer in a policy year. The amount of the transfer charge is shown on
page 3. GIAC will deduct any transfer charge from the options from which
the amounts are transferred. However, a transfer charge will not be
assessed for certain transactions as described elsewhere in this policy.
o The Policy Account Value may be invested in no more than the maximum
number of Allocation Options specified on page 3.
Transfers Among the Variable Investment Options or into the Fixed-Rate Option
o Any transfer among the Variable Investment Options or into the Fixed-Rate
Option will be effective as of the close of the Business Day on which GIAC
receives the request in Good Order at the Customer Service Office.
o GIAC reserves the right to limit transfers among the Variable Investment
Options or into the Fixed-Rate Option to once every 30 days.
Transfers from the Fixed-Rate Option
GIAC permits transfers from the Fixed-Rate Option into one or more of the
Variable Investment Options only once each year on or within 30 days after a
Policy Anniversary. Amounts first allocated or transferred to the Fixed-Rate
Option will be the first amounts transferred from this option. The maximum
amount that may be transferred from the Fixed-Rate Option each policy year is
the greater of:
o 33 1/3% of the Policy Account Value attributable to the Fixed-Rate Option
on the Policy Anniversary; or
o $2,500.
Transfers from the Fixed-Rate Option will be effective:
o as of the Policy Anniversary, if GIAC receives the owner's transfer
request at the Customer Service Office on or within 30 days prior to that
Anniversary; or
o as of the close of the Business Day on which GIAC receives the owner's
transfer request at the Customer Service Office, if such request is
received within 30 days after a Policy Anniversary.
GIAC will not process any request for transfer from the Fixed-Rate Option which
is received on any other date.
Dollar Cost Averaging Transfer Option
The owner may make monthly transfers under the Dollar Cost Averaging Transfer
Option if a portion of the Policy
Account Value is attributable to The Guardian Cash Fund Variable Investment
Option.
Under this option, an amount specified by the owner automatically will be
transferred from The Guardian Cash Fund on a Monthly Processing Date and into
one or more of the other Variable Investment Options or into the Fixed-Rate
Option, as elected by the owner. The minimum amount which may be transferred
into each option is $100 per transfer.
GIAC must receive the owner's written election of this option in Good Order at
the Customer Service Office at least 3 Business Days before the Monthly
Processing Date on which such monthly transfers are to begin.
The Dollar Cost Averaging Transfer Option will terminate:
o when GIAC receives the owner's written request for cancellation in Good
Order at the Customer Service Office at least 3 Business Days before the
Monthly Processing Date on which a transfer would normally occur; or
o if the portion of the Policy Account Value attributable to The Guardian
Cash Fund is less than the amount designated for transfer on a Monthly
Processing Date. GIAC automatically will transfer the portion of the
Policy Account Value remaining in The Guardian Cash Fund on a pro rata
basis into the other Variable Investment Options or into the Fixed-Rate
Option, in accordance with the owner's then current Dollar Cost Averaging
transfer instructions.
The owner may change the transfer instructions under this option or reinstate
this option if it has terminated. GIAC must receive the owner's written request
in Good Order at the Customer Service Office at least 3 Business Days before the
Monthly Processing Date on which the change or such reinstatement would take
effect.
00-SVUL Page 13 {POL NO}
<PAGE>
7. THE SEPARATE ACCOUNT
The Guardian Separate Account N
The Variable Investment Options under this policy are funded by The Guardian
Separate Account N (Account N). Account N is a separate investment account
established by GIAC under the laws of the state of Delaware. Account N is
registered as a unit investment trust with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940 (the 1940 Act).
Account N is treated as a division of GIAC and is used to provide values and
benefits for variable life insurance policies only. GIAC owns the assets in
Account N. The assets in Account N are kept separate from:
o GIAC's general account; and
o GIAC's other separate accounts.
Assets equal to the reserves and contract liabilities of Account N will not be
charged with liabilities that arise from any other business GIAC may conduct.
GIAC may transfer assets in excess of the reserves and contract liabilities of
Account N to its general account. Income and realized and unrealized gains and
losses from assets in each Variable Investment Option in Account N are credited
to or charged against such Variable Investment Option without regard to income
and realized and unrealized gains or losses in Account N's other Variable
Investment Options or in GIAC's general account, or other separate accounts. The
valuation of all assets in Account N will be determined in accordance with all
applicable laws and regulations.
Investment Divisions
Account N consists of several investment divisions or Variable Investment
Options. Each investment division of Account N invests in shares of a mutual
fund. Each mutual fund is managed by an investment adviser registered under the
Investment Advisers Act of 1940. The investment divisions available on the Issue
Date are listed in the then current prospectus for Account N as it relates to
this policy. Each mutual fund is more fully described in a separate prospectus.
Any investment adviser's fee, if applicable, is described in the appropriate
prospectus.
Rights Reserved
GIAC reserves the right to take certain actions which it deems:
o necessary to serve the best interests of the owner and beneficiary; and
o appropriate to carry out the purposes of this policy.
GIAC will exercise its reserved rights only when permitted by applicable law.
When required by law, GIAC will obtain approval by the owner, the SEC, and any
appropriate regulatory authority. Examples of the actions GIAC may take include:
o deregistering Account N under the 1940 Act;
o operating Account N in any form permitted under the 1940 Act, or in any
other form permitted by law;
o taking any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act;
o transferring any assets in an investment division:
o into another investment division; or
o into one or more separate accounts; or
o into GIAC's general account;
o adding, combining or removing investment divisions in Account N;
o substituting, for the mutual fund shares held in any investment division,
the shares of another class issued by such mutual fund or the shares of
another investment company or any other investment permitted by law;
o changing the way GIAC deducts or collects charges under a policy, but
without increasing the charges unless and to the extent permitted by other
provisions of this policy;
o modifying this policy as necessary to ensure that it continues to qualify
as life insurance under Section 7702;
o making any other necessary technical changes in this policy in order to
conform with any action this provision permits GIAC to take;
o adding to, eliminating, or suspending the owner's ability to allocate Net
Premiums or transfer unloaned Policy Account Value amounts into any
Variable Investment Option or into the Fixed-Rate Option.
GIAC will notify the owner if any of these changes result in a material change
in the underlying investments of an investment division of Account N to which
any part of the Policy Account Value is allocated. Details of any such change
will be filed with any regulatory authority where required and will be subject
to any required approval.
If the owner objects to the material change and a portion of the Policy Account
Value is attributable to the affected investment division, then GIAC will
transfer that value into:
o another investment division; or
o the Fixed-Rate Option.
To effect such transfer, GIAC must receive the owner's written request in Good
Order at the Customer Service Office within 60 days of the postmarked notice of
material change. GIAC will not deduct a transfer charge for this transaction.
00-SVUL Page 14 {POL NO}
<PAGE>
8. THE FIXED-RATE OPTION
The Fixed-Rate Option is funded by GIAC's general account. The owner may:
o allocate all or part of any Net Premium to the Fixed-Rate Option; or
o transfer all or part of the Policy Account Value attributable to the
Variable Investment Options into the Fixed-Rate Option (for restrictions
on transfers from the Fixed-Rate Option, see "Transfers from the
Fixed-Rate Option" on page 13).
GIAC will credit interest on all amounts allocated or transferred to the
Fixed-Rate Option. Interest will accrue daily at a minimum guaranteed effective
annual rate of 4% and will be credited to the Fixed-Rate Option each Monthly
Processing Date. GIAC may declare interest rates greater than 4% at its
discretion.
On each Policy Anniversary, GIAC will begin accruing interest on all amounts
held in the Fixed-Rate Option at the interest rate in effect on that date. The
annual statement to the owner shows the interest rate in effect on a Policy
Anniversary if a portion of the Policy Account Value is then attributable to the
Fixed-Rate Option. GIAC will provide the interest rate in effect on any other
date upon request.
9. POLICY ACCOUNT VALUE
The Policy Account Value is the sum of the values of the Variable Investment
Options, the Fixed-Rate Option, the Loan Account and the Loan Interest Account
attributable to this policy.
Each Variable Investment Option has Investment Units and a related Unit Value.
The portion of the Policy Account Value attributable to a Variable Investment
Option equals:
o the number of Investment Units attributable to this policy which are in
that Variable Investment Option;
multiplied by:
o the applicable Unit Value for that Variable Investment Option.
The portion of the Policy Account Value attributable to the Fixed-Rate Option,
the Loan Account and the Loan Interest Account, if any, is expressed as a dollar
amount.
Investment Units
Amounts allocated, transferred or added to a Variable Investment Option are used
to purchase Investment Units. Investment Units are redeemed and canceled when
amounts are deducted, withdrawn or transferred from a Variable Investment
Option. GIAC determines the number of Investment Units purchased or redeemed in
a Variable Investment Option by dividing the dollar amount of the transaction by
the Unit Value for that Variable Investment Option at the close of the Business
Day the transaction occurs.
Investment Unit Value
GIAC determines the Unit Value for each Variable Investment Option at the close
of every Business Day. The Unit Value for any Business Day is (a) multiplied by
(b), where:
o (a) is the Unit Value for the Investment Unit at the close of business on
the preceding Business Day; and
o (b) is the net investment factor, as described below, for the current
Business Day.
Net Investment Factor
On any Business Day, the net investment factor for a Variable Investment Option
is determined by dividing the sum of (a) and (b) by (c) where:
o (a) is the net asset value per share of the Variable Investment Option's
corresponding mutual fund at the close of the current Business Day;
o (b) is the per share amount of any dividends or capital gains distributed
by the mutual fund on the current Business Day reduced by the sum of any
federal, state, or local taxes payable by GIAC and allocated by GIAC to
the Variable Investment Option; and
o (c) is the net asset value per share of such mutual fund at the close of
the Business Day immediately preceding the current Business Day.
00-SVUL Page 15 {POL NO}
<PAGE>
POLICY ACCOUNT VALUE--cont'd
Monthly Deductions
On each Monthly Processing Date, GIAC will deduct a Monthly Deduction from the
Variable Investment Options and the Fixed-Rate Option in proportion to the
portion of the Policy Account Value attributable to each option. The Monthly
Deduction for a policy month is the sum of:
o the monthly cost of insurance charge;
o the administrative charges;
o the mortality and expense risk charge; and
o the monthly costs for any riders.
GIAC will not make Monthly Deductions on or after the Policy Anniversary nearest
the Younger Insured's 100th birthday.
Monthly Cost of Insurance
The monthly cost of insurance charge on each Monthly Processing Date equals the
sum of the products of (a) and (b), where:
o (a) is the applicable cost of insurance rate in effect on that Monthly
Processing Date; and
o (b) is the applicable Net Amount at Risk on the Monthly Processing Date,
divided by 1,000.
The monthly cost of insurance charge is calculated before the calculation of the
administrative charges, the Mortality and Expense Risk Charge, and the cost for
any additional benefit riders.
When the Net Amount at Risk is determined, the Policy Account Value will be
allocated first to the Basic Sum Insured; any excess will be allocated to any in
force Policy Segments in the order they took effect. If the death benefit is
increased due to the operation of Death Benefit Option 2 or 3, the increase will
be allocated to the Basic Sum Insured. If the death benefit is further increased
due to Section 7702, such increase will be allocated to the most recent Policy
Segment.
Monthly cost of insurance rates applicable to the Net Amount at Risk for the
Basic Sum Insured, the Additional Sum Insured and any Policy Segments are based
on each insured's underwriting class, Age on the Issue Date, and sex as well as
the Policy or Policy Segment duration.
GIAC has the right to change the monthly cost of insurance rates; however, these
rates will never exceed the maximum monthly cost of insurance rates shown in the
table on page 4. Any such change will be on a uniform basis for combinations of
insured's which have the same:
o underwriting classes;
o Ages on the Policy Date or the date of any Policy Segment;
o duration; and
o sexes.
Any change in the monthly cost of insurance rates will be based on changes in
future expectations for:
o mortality;
o expenses;
o persistency;
o federal income taxes;
o state or local premium taxes; and
o GIAC's investment earnings.
Changes in the monthly cost of insurance rates:
o will be determined only prospectively;
o will not occur because of the deterioration of health or death of an
insured;
o will not be made so GIAC may recoup any prior losses;
o will apply to all policies that are issued on this form; and
o will comply with the procedures and standards on file with the insurance
department for the jurisdiction where this policy is delivered.
Administrative Charges
The Monthly Deduction on each Monthly Processing Date includes the
administrative charges shown on page 3.
The administrative charges are not affected by subsequent decreases in Face
Amount nor by Death Benefit Option changes.
Mortality and Expense Risk Charge
The mortality and expense risk charge is based on the Policy Account Value
allocated to the Variable Investment Options on the Monthly Processing Date. The
amount of this charge varies by duration, and the rates are guaranteed never to
exceed a maximum monthly rate as specified on page 3.
Transaction Deductions
GIAC will deduct any applicable transfer charge (see "Transfers" on page 3) from
the Allocation Options from which amounts were transferred.
00-SVUL Page 16 {POL NO}
<PAGE>
POLICY ACCOUNT VALUE--cont'd
Continuation of Insurance
This policy will stay in force, even if the owner stops paying premiums, as long
as the Net Cash Surrender Value is at least equal to the current Monthly
Deduction when due.
If the Net Cash Surrender Value is less than the Monthly Deduction when due, the
Grace Period provision on page 11 will apply.
10. PARTIAL WITHDRAWALS AND SURRENDER
Partial Withdrawals
After the first policy year and while either insured is living, the owner may
request a partial withdrawal from the Net Cash Surrender Value, subject to the
conditions described below. All partial withdrawals will reduce the Policy
Account Value by the amount of the partial withdrawal. The portion of a partial
withdrawal which exceeds the reduction-free partial withdrawal, as described
below, will also reduce the Face Amount.
GIAC will calculate the reduction-free partial withdrawal as of the close of the
Business Day of receipt of the owner's written request for a partial withdrawal
as follows:
For Death Benefit Option 1, the reduction-free partial withdrawal will equal the
lesser of the full amount of the partial withdrawal or the excess, if any, of
(a) over (b) where:
o (a) equals the Policy Account Value; and
o (b) equals the Face Amount, divided by the applicable Death Benefit Factor
shown on page 4.
For Death Benefit Option 2, the full partial withdrawal is reduction-free.
For Death Benefit Option 3, the reduction-free partial withdrawal is the lesser
of the full amount of the partial withdrawal or the greater of:
o the Net Accumulated Premiums; or
o the lesser of the full amount of the partial withdrawal or the excess, if
any, of (a) or (b), where;
o (a) equals the Policy Account Value; and
o (b) equals the Face Amount divided by the applicable Death Benefit
Factor shown on page 4.
A partial withdrawal will take effect as of the Business Day on which GIAC
receives the owner's request for the partial withdrawal.
GIAC will send the owner revised policy pages reflecting any reduction in
benefits and values due to a partial withdrawal. The conditions for taking a
partial withdrawal are as follows:
o GIAC must receive the owner's written request in Good Order at the
Customer Service Office;
o the partial withdrawal must be at least the amount of the minimum partial
withdrawal shown on page 3;
o if Death Benefit Option 1 or Option 3 is in effect, the Face Amount
remaining after any reduction, as specified above, may not be less than
the Minimum Face Amount shown on page 3; and
o the Net Cash Surrender Value after a partial withdrawal must be sufficient
to cover 3 times the most recent Monthly Deduction.
GIAC reserves the right to limit the number of partial withdrawals to 12 a
policy year.
GIAC will first deduct the amount of any partial withdrawal from the Policy
Account Value attributable to the Variable Investment Options specified in the
owner's request for the partial withdrawal. GIAC will only deduct from the Fixed
Rate Option if the partial withdrawal exceeds the Policy Account Value
attributable to all Variable Investment Options.
GIAC will not process any request for a partial withdrawal that:
o does not specify the Variable Investment Options from which the partial
withdrawal should be taken; or
o exceeds the amount available.
00-SVUL Page 17 {POL NO}
<PAGE>
PARTIAL WITHDRAWALS AND SURRENDER--cont'd
Surrender
The owner may surrender this policy for its Net Cash Surrender Value if GIAC
receives this policy and written request in Good Order at the Customer Service
Office. The surrender will take effect as of the close of the Business Day on
which GIAC receives the written request. Upon surrender, this policy will
terminate and all insurance under this policy will end. The surrender charge is
shown on page 3.
GIAC will deduct surrender charges if this policy is surrendered for its Net
Cash Surrender Value during a surrender charge period.
Total surrender charges under this policy will equal the sum of the surrender
charges for the Initial Face Amount and any in force Policy Segments.
The Surrender Charge Table applicable to the Initial Face Amount is shown on
page 3.
An increase in Face Amount that creates a new Policy Segment will result in
additional surrender charges. The owner will be notified of the new surrender
charges. The new surrender charges will take effect on the effective date of the
new Policy Segment.
Surrender charges are not affected by a change in Death Benefit Option or by
decreases in Face Amount.
11. POLICY LOANS
The owner may obtain a policy loan at any time if:
o either insured is living; and
o GIAC receives the owner's written request in Good Order at the Customer
Service Office.
This policy must be assigned to GIAC; this is the only security needed. The
policy loan will take effect as of the Business Day on which GIAC receives the
written request.
Loan Value
The loan value is the maximum amount the owner may borrow on this policy. The
loan value on any Business Day is:
o 90% of the Cash Surrender Value on that Business Day; less:
o the amount of any Policy Debt on that Business Day; less:
o the amount of any interest which will accrue on this Policy Debt and the
amount borrowed up to the next Policy Anniversary.
The minimum loan amount is shown on page 3.
Policy Debt
Any Policy Debt not repaid upon the Surviving Insured's death will be deducted
from the death proceeds.
Loan Interest
Loan interest accrues daily at a yearly rate of 5% until the date shown on page
3, and 4.5% thereafter. This interest is payable in arrears on each Policy
Anniversary. Any accrued and unpaid interest as of the Policy Anniversary will
be capitalized and added to the outstanding loan amounts and will be charged
interest at the same rate.
See "Repayment" below for interest on the due date of the loan repayments.
00-SVUL Page 18 {POL NO}
<PAGE>
POLICY LOANS--cont'd
Loan Account
When the owner takes a policy loan, GIAC transfers an amount equal to the loan
amount from the Variable Investment Options and the Fixed-Rate Option into a
Loan Account. An amount equal to the loan amount remains in the Loan Account
until the loan is repaid. Amounts transferred from the Variable Investment
Options into the Loan Account no longer share in the investment experience of
the options from which they were transferred. Amounts transferred from the
Fixed-Rate Option no longer earn the rate of interest which applied to the
Fixed-Rate Option.
GIAC will first transfer the loan amount from the Policy Account Value
attributable to the Variable Investment Options specified in the owner's request
for the loan. GIAC will only transfer the excess from the Fixed Rate Option if
the loan exceeds the Policy Account Value attributable to all Variable
Investment Options.
GIAC will not process any request for loan amount that:
o does not specify the Variable Investment Options from which the loan
amount should be taken; or
o exceeds the amount available.
On each Policy Anniversary, GIAC will transfer an amount needed to increase the
Loan Account to equal the Policy Debt. This amount will first be transferred
from the Loan Interest Account (see "Loan Interest Account," below) to the
extent available and thereafter proportionately from the amounts in the Variable
Investment Options and the Fixed-Rate Option.
Loan Interest Account
Amounts in the Loan Account earn interest from the Business Day of the transfer
at a minimum effective yearly rate of 4%.
Interest earned on the Loan Account is credited to the Loan Interest Account.
Amounts in the Loan Interest Account earn interest at a minimum effective yearly
rate of 4%.
On each Policy Anniversary, the amount remaining in the Loan Interest Account
after the transfer required to cover the Policy Debt, if any, is transferred to
the Variable Investment Options and the Fixed-Rate Option in accordance with the
premium allocation instructions in effect on that date.
Repayment
Except for required loan repayments, any outstanding Policy Debt may be repaid
at any time before the Surviving Insured's death while this policy is in force.
Loan repayments are applied:
o first to policy loan interest due but not yet capitalized;
o then to loan amounts outstanding; and
o then to policy interest accrued since the last Policy Anniversary but not
yet due.
The minimum amount loan repayment is shown on page 3.
GIAC will require a loan repayment when the Policy Debt exceeds the Cash
Surrender Value. GIAC will notify the owner if a loan repayment is required. The
notice will specify the amount and due date of any required loan repayment (see
"Grace Period" on page 11 for the due date of a required loan repayment). The
amount of the required loan repayment will be the amount by which the Policy
Debt exceeds the Cash Surrender Value on the Monthly Processing Date that GIAC
identified the shortfall.
The required loan repayment will be credited as of the close of the Business Day
on which GIAC receives the repayment in Good Order at the Customer Service
Office. If a required loan repayment is not paid by its due date, this policy
will lapse without value.
Any outstanding Policy Debt may also be repaid within 60 days after the
Surviving Insured's death if:
o the death proceeds of this policy have not been paid in one sum or applied
under a payment option; and
o the policy was in force on the date of the Surviving Insured's death.
00-SVUL Page 19 {POL NO}
<PAGE>
12. EXCHANGE OF POLICY
The owner may exchange this policy for a new fixed-benefit policy on the lives
of the insureds at any time until the applicable date shown on page 3; evidence
of insurability will not be required. The values under the new policy will not
be available for allocation to the Variable Investment Options or the Fixed-Rate
Option. This exchange is subject to the following conditions:
o GIAC must receive written request at the Customer Service Office in Good
Order;
o both insureds must be alive on the exchange date;
o this policy must be in force with all due Monthly Deductions paid to the
exchange date;
o this policy must be surrendered to GIAC;
o the exchange cost, if any, must be paid to the issuing company (see
"Exchange Cost or Credit") below;
o any outstanding Policy Debt must be paid to GIAC;
o the new policy will be an annual premium survivorship whole life plan then
being issued by GIAC or its affiliate. GIAC's affiliate is The Guardian
Life Insurance Company of America;
o the new policy will have the same Policy Date as this policy;
o the face amount of the new policy will be for the same Face Amount as this
policy; however, the owner may exchange a portion of this policy's Face
Amount, subject to the following conditions:
o the new policy's face amount may not be less than the minimum face
amount under GIAC's or its affiliate's rules;
o the remaining policy's face amount shall not be less than the
minimum face amount under GIAC's rules. If the remaining policy's
face amount does not meet GIAC's requirements, then it will
terminate on the date the new policy takes effect;
o if a partial exchange is made, a pro rata portion of this policy's
Net Cash Surrender Value will be withdrawn and applied to the new
policy;
o if a partial exchange is made, no further policy exchanges may be
made.
o the new policy's underwriting classes will be based on the underwriting
classes made available by the issuing company and will be comparable to
the underwriting classes of the most recent in force Policy Segment of
this policy; however, it will be subject to any face amount limitations
then in effect;
o premiums for the new policy will be based on the published rates of the
issuing company on the exchange date. The premiums will depend on the new
policy's plan, face amount and underwriting classes, and the insureds'
Ages and sexes;
o the contestable and suicide periods for the new policy will be measured
from the Issue Date of this policy; and
o the new policy will be subject to any existing assignment of this policy.
Riders
Additional benefit riders will be available on the new policy only with the
issuing company's receipt of satisfactory evidence of insurability. All riders
on the new policy will be subject to the issuing company's rules on the exchange
date.
Exchange Cost or Credit
In some cases, there may be an exchange cost or credit, depending on the amount
applied to the new policy.
The exchange cost or credit is the greater of (a) or (b) where:
o (a) is the cumulative premiums for the new policy with an annual interest
rate of 6%, less the pro rata portion of the cumulative Premiums for this
policy applicable to the Face Amount exchanged with an annual interest
rate of 6%; and
o (b) is the cash value of the new policy, less the pro rata portion of this
policy's Net Cash Surrender Value on the exchange date applicable to the
Face Amount exchanged.
If this amount is greater than zero, the owner must pay the exchange cost to the
issuing company. If this amount is less than zero, the issuing company will pay
an exchange credit to the owner.
Exchange Date
The exchange date is the Issue Date of the new policy. This date is the later
of:
o the Business Day GIAC receives the owner's written request for exchange in
Good Order and this policy at the Customer Service Office; or
o the Business Day the issuing company receives any exchange cost payable by
the owner.
00-SVUL Page 20 {POL NO}
<PAGE>
13. PAYMENT OPTIONS
Payment of Proceeds
The proceeds of this policy will be paid in one sum, unless otherwise provided.
All or part of this sum may be applied under any payment option described below
or in any other manner GIAC approves. The payee under any payment option must be
a natural person.
Election of Payment Options
Prior to the death of the Surviving Insured, the owner may choose any option for
payment of the death proceeds. If no election is in force when the proceeds
become payable, the payee may make an election subject to the following
conditions:
o for death proceeds, election must be made within one year after the
Surviving Insured's death;
o for other proceeds, election must be made within 60 days after the
proceeds become payable.
The owner may appoint a secondary payee to receive any payments remaining after
the death of the payee. Upon the death of any payee receiving payments under an
option, the remaining payments will be continued to the secondary payee or paid
in one sum as described in "Termination" on page 22, whichever is elected.
Any election must be in a written form satisfactory to GIAC. Payment options are
fixed and do not vary with the performance of the variable investment options.
Options Available
o Option 1 - Proceeds Left at Interest: GIAC will hold the proceeds, making
monthly interest payments. The yearly guaranteed interest rate is 3%.
o Option 2 - Payments of a Specified Amount: GIAC will make monthly payments
of a specified amount until the proceeds and interest are fully paid. The
total amount paid each year must be at least 10% of the original proceeds.
Interest will be added to the proceeds each year; the yearly guaranteed
interest rate is 3%.
o Option 3 - Payments for a Specified Period: GIAC will make monthly
payments for the number of years elected. The guaranteed monthly payments
shown in the Option 3 table on page 22 include interest at 3% per year.
o Option 4 - Life Income with 10 Years Guaranteed: GIAC will make monthly
payments for 10 years and for the remaining lifetime of the person on
whose life the option is based. The guaranteed monthly payments shown in
the Option 4 table on page 23 include interest at 3% per year.
o Option 5 - Refund Life Income: GIAC will make monthly payments until the
total amount paid equals the proceeds settled, and for the remaining
lifetime of the person on whose life the option is based. The guaranteed
monthly payments shown in the Option 5 table on page 23 include interest
at 3% per year.
o Option 6 - Joint and Survivor Income with 10 Years Guaranteed: GIAC will
make monthly payments for 10 years and for the remaining lifetime of
either of the two persons on whose lives the option is based. The
guaranteed monthly payments shown in the Option 6 table on page 24 include
interest at 3% per year.
The Payment Option Tables for options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female), projected 20 years to the year 2020 by:
o 100% of male Scale G factors for males;
o 50% of female Scale G factors for females.
Payment Provisions
o At least $5,000 must be applied under each option selected.
o Each periodic payment must be at least $50.
o The effective date of any option is the date the proceeds become payable.
This date is the option date. Death proceeds are payable as of the date of
the Surviving Insured's death.
o After an option becomes effective, it cannot be terminated for payment in
one sum, unless otherwise provided.
o The first payment under Option 1 is due one month after the option date.
The first payment under Option 2, 3, 4, 5, or 6 is due on the option date.
o GIAC requires satisfactory proof of age of any person on whose life the
option is based before any payment is made.
o Under Option 4, 5, or 6, the present value of future benefits may not be
withdrawn.
00-SVUL Page 21 {POL NO}
<PAGE>
PAYMENT OPTIONS -- cont'd
Termination
Upon termination of an option, any amount payable is:
o Under Option 1 or 2, any unpaid proceeds with any accrued interest.
o Under Option 3, the present value on the basis of 3% yearly compound
interest of any unpaid payments for the specified period.
o Under Option 4, 5, or 6, the present value of any unpaid payments for the
guaranteed period. This present value is derived using the interest rate
which was used in computing the actual monthly payment.
PAYMENT OPTION TABLES
OPTION 3 - PAYMENTS FOR A SPECIFIED PERIOD
GUARANTEED MONTHLY PAYMENT
FOR EACH $1,000 OF PROCEEDS
---------------------------------------------------------
Years 1 2 3 4 5 6
Amount $ 84.47 42.86 28.99 22.06 17.91 15.14
Years 7 8 9 10 11 12
Amount $ 13.16 11.68 10.53 9.61 8.86 8.24
Years 13 14 15 16 17 18
Amount $ 7.71 7.26 6.87 6.53 6.23 5.96
Years 19 20 21 22 23 24
Amount $ 5.73 5.51 5.32 5.15 4.99 4.84
Years 25 26 27 28 29 30
Amount $ 4.71 4.59 4.47 4.37 4.27 4.18
---------------------------------------------------------
00-SVUL Page 22 {POL NO}
<PAGE>
PAYMENT OPTION TABLES--cont'd
OPTIONS 4 AND 5 - GUARANTEED MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS+
Option 4* Option 5*
Age Male Female Male Female
20 2.93 2.89 2.92 2.88
21 2.95 2.90 2.94 2.89
22 2.97 2.92 2.95 2.91
23 2.98 2.93 2.97 2.92
24 3.00 2.95 2.99 2.94
25 3.02 2.96 3.00 2.95
26 3.04 2.98 3.02 2.97
27 3.06 3.00 3.04 2.99
28 3.08 3.02 3.06 3.01
29 3.10 3.04 3.08 3.03
30 3.12 3.06 3.10 3.05
31 3.15 3.08 3.13 3.07
32 3.17 3.10 3.15 3.09
33 3.20 3.12 3.17 3.11
34 3.22 3.15 3.20 3.13
35 3.25 3.17 3.23 3.16
36 3.28 3.20 3.25 3.18
37 3.31 3.23 3.28 3.21
38 3.35 3.26 3.31 3.24
39 3.38 3.29 3.34 3.26
40 3.42 3.32 3.38 3.29
41 3.45 3.35 3.41 3.32
42 3.49 3.39 3.44 3.36
43 3.53 3.42 3.48 3.39
44 3.58 3.46 3.52 3.43
45 3.62 3.50 3.56 3.46
46 3.67 3.54 3.60 3.50
47 3.72 3.59 3.64 3.54
48 3.77 3.63 3.69 3.58
49 3.82 3.68 3.74 3.63
50 3.87 3.73 3.79 3.67
51 3.93 3.79 3.84 3.72
52 3.99 3.84 3.89 3.77
53 4.06 3.90 3.95 3.82
54 4.13 3.96 4.01 3.88
55 4.20 4.03 4.07 3.94
56 4.27 4.10 4.13 4.00
57 4.35 4.17 4.20 4.06
58 4.43 4.24 4.27 4.13
59 4.52 4.32 4.34 4.20
60 4.61 4.41 4.42 4.27
61 4.71 4.50 4.50 4.35
62 4.81 4.59 4.59 4.43
63 4.92 4.69 4.68 4.52
64 5.03 4.80 4.77 4.61
65 5.15 4.91 4.87 4.70
66 5.28 5.03 4.97 4.81
67 5.41 5.16 5.08 4.91
68 5.54 5.29 5.20 5.03
69 5.68 5.43 5.32 5.15
70 5.83 5.57 5.44 5.27
71 5.98 5.73 5.58 5.41
72 6.14 5.89 5.72 5.55
73 6.30 6.06 5.86 5.70
74 6.46 6.24 6.02 5.86
75 6.63 6.42 6.18 6.03
76 6.80 6.61 6.35 6.20
77 6.97 6.81 6.53 6.39
78 7.15 7.00 6.72 6.59
79 7.33 7.20 6.92 6.80
80 7.51 7.40 7.13 7.03
81 7.68 7.60 7.35 7.26
82 7.86 7.80 7.59 7.52
83 8.03 7.99 7.83 7.78
84 8.19 8.17 8.09 8.06
85 8.35 8.34 8.37 8.35
* Amount payable unless owner irrevocably elects, prior to the Surviving
Insured's death, to have this option apply for death proceeds. If this option is
irrevocably elected prior to the Surviving Insured's death, add 2 years to
annuitant's age at all ages.
+ Guaranteed monthly payments for any ages not shown will be furnished upon
request.
00-SVUL Page 23 {POL NO}
<PAGE>
PAYMENT OPTION TABLES -- cont'd
OPTION 6-GUARANTEED MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS+
Female Male Age
Age 50 51 52 53 54 55 56 57 58 59
50 3.44 3.46 3.48 3.50 3.51 3.53 3.54 3.55 3.57 3.58
51 3.47 3.49 3.50 3.52 3.54 3.56 3.57 3.59 3.60 3.62
52 3.49 3.51 3.53 3.55 3.57 3.58 3.60 3.62 3.63 3.65
53 3.51 3.53 3.55 3.57 3.59 3.61 3.63 3.65 3.67 3.69
54 3.53 3.55 3.58 3.60 3.62 3.64 3.66 3.68 3.70 3.72
55 3.55 3.58 3.60 3.62 3.65 3.67 3.69 3.72 3.74 3.76
56 3.57 3.60 3.62 3.65 3.67 3.70 3.72 3.75 3.77 3.79
57 3.59 3.62 3.65 3.67 3.70 3.73 3.75 3.78 3.80 3.83
58 3.61 3.64 3.67 3.70 3.73 3.75 3.78 3.81 3.84 3.86
59 3.63 3.66 3.69 3.72 3.75 3.78 3.81 3.84 3.87 3.90
60 3.64 3.68 3.71 3.74 3.78 3.81 3.84 3.87 3.90 3.94
61 3.66 3.70 3.73 3.76 3.80 3.83 3.87 3.90 3.94 3.97
62 3.68 3.71 3.75 3.79 3.82 3.86 3.90 3.93 3.97 4.00
63 3.69 3.73 3.77 3.81 3.84 3.88 3.92 3.96 4.00 4.04
64 3.71 3.75 3.79 3.83 3.87 3.91 3.95 3.99 4.03 4.07
65 3.72 3.76 3.80 3.84 3.89 3.93 3.97 4.02 4.06 4.10
66 3.73 3.78 3.82 3.86 3.91 3.95 4.00 4.04 4.09 4.13
67 3.75 3.79 3.83 3.88 3.92 3.97 4.02 4.07 4.12 4.16
68 3.76 3.80 3.85 3.89 3.94 3.99 4.04 4.09 4.14 4.19
69 3.77 3.81 3.86 3.91 3.96 4.01 4.06 4.11 4.17 4.22
70 3.78 3.83 3.87 3.92 3.97 4.03 4.08 4.14 4.19 4.25
Female Male Age
Age 60 61 62 63 64 65 66 67 68 69 70
50 3.59 3.60 3.61 3.62 3.63 3.64 3.65 3.66 3.67 3.67 3.68
51 3.63 3.64 3.65 3.66 3.67 3.68 3.69 3.70 3.71 3.72 3.72
52 3.66 3.68 3.69 3.70 3.72 3.73 3.74 3.75 3.76 3.76 3.77
53 3.70 3.72 3.73 3.75 3.76 3.77 3.78 3.79 3.80 3.81 3.82
54 3.74 3.76 3.77 3.79 3.80 3.82 3.83 3.84 3.85 3.86 3.87
55 3.78 3.80 3.81 3.83 3.85 3.86 3.88 3.89 3.90 3.92 3.93
56 3.81 3.84 3.86 3.87 3.89 3.91 3.93 3.94 3.96 3.97 3.98
57 3.85 3.88 3.90 3.92 3.94 3.96 3.98 3.99 4.01 4.02 4.04
58 3.89 3.92 3.94 3.96 3.99 4.01 4.03 4.05 4.06 4.08 4.10
59 3.93 3.96 3.98 4.01 4.03 4.06 4.08 4.10 4.12 4.14 4.16
60 3.97 4.00 4.02 4.05 4.08 4.11 4.13 4.15 4.18 4.20 4.22
61 4.00 4.04 4.07 4.10 4.13 4.16 4.18 4.21 4.24 4.26 4.28
62 4.04 4.08 4.11 4.14 4.18 4.21 4.24 4.27 4.29 4.32 4.35
63 4.08 4.11 4.15 4.19 4.22 4.26 4.29 4.32 4.35 4.38 4.41
64 4.11 4.15 4.19 4.23 4.27 4.31 4.35 4.38 4.41 4.45 4.48
65 4.15 4.19 4.23 4.28 4.32 4.36 4.40 4.44 4.48 4.51 4.55
66 4.18 4.23 4.27 4.32 4.36 4.41 4.45 4.50 4.54 4.58 4.61
67 4.21 4.26 4.31 4.36 4.41 4.46 4.51 4.55 4.60 4.64 4.68
68 4.25 4.30 4.35 4.40 4.46 4.51 4.56 4.61 4.66 4.71 4.75
69 4.28 4.33 4.39 4.44 4.50 4.56 4.61 4.67 4.72 4.77 4.82
70 4.31 4.36 4.42 4.48 4.54 4.60 4.66 4.72 4.78 4.84 4.89
+ Guaranteed monthly payments for any ages not shown will be furnished upon
request.
00-SVUL Page 24 {POL NO}
<PAGE>
14. GENERAL PROVISIONS
The Contract
The entire contract consists of the Basic Policy and any attached additional
benefit riders, endorsements, the original application and any subsequent
applications for changes that are attached to this policy. GIAC relied upon the
application(s) in issuing this policy. All statements in the application(s) are
assumed to be true to the best knowledge and belief of the person(s) making
them. These statements are representations and not warranties. No statement will
be used to contest this policy unless contained in the application(s).
Only the President, a Vice President, or the Secretary of GIAC may make or
modify this policy. No agent has the authority to:
o change this policy;
o waive any provision of this policy or any of GIAC's requirements; or
o waive an answer to any question in the application(s).
GIAC will not be bound by any promise or statement made by any agent or other
person except as stated above.
Basis of Values
The maximum cost of insurance rates under this policy are based on:
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
aggregate, for Attained Ages 0 through 14; or
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
non-smoker, for Attained Ages 15 through 19; or
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
smoker or non-smoker, for Attained Ages 20 and over.
All policy values equal or exceed those required by any state statute. A
detailed statement of the method of computing these values has been filed with
each state insurance department.
Age and Sex
If the Age or sex of an insured has been misstated, the amount of death benefit
for the Basic Policy will be that which would be purchased by the most recent
deduction for the cost of insurance charge based on the correct Age and sex; the
amount of death benefit for any riders will be that which would be purchased by
the most recent deduction for rider charges based on the correct Age and sex.
Incontestability
This policy will be incontestable after it has been in force during a given
insured's lifetime for 2 years from its Issue Date. This policy will terminate
upon successful contest with respect to either insured.
If the Death Benefit Option is changed from Option 1 or Option 3 to Option 2,
the amount of any increase in the death benefit will be incontestable after such
increase has been in force during a given insured's lifetime for 2 years from
the date the change takes effect. If the Face Amount has been increased, such
increase will be incontestable after it has been in force during a given
insured's lifetime for 2 years from the date the increase takes effect. If GIAC
successfully contests a change from Death Benefit Option 1 or Option 3 to Option
2 or an increase in Face Amount, the death benefit will be the amount that would
have been payable had such change or increase not taken effect.
The contestable period of any additional benefit rider attached to this policy
is stated in the rider.
Suicide Exclusion
If either insured commits suicide, while sane or insane, within 2 years from the
Issue Date no death benefit proceeds will be paid. GIAC's liability will be
limited to the greater of (a) or (b) as of the date of the insured's death,
where:
o (a) is the sum of all premium payments made under this policy; less:
o any Policy Debt; and
o any partial withdrawals;
o (b) is the Net Cash Surrender Value.
If either insured commits suicide, while sane or insane within 2 years from the
effective date of any increase in the Face Amount, GIAC's liability with respect
to such increase will be limited to the cost of insurance for such increase. If
either insured commits suicide, while sane or insane, within 2 years from the
effective date of any change from Death Benefit Option 1 or Option 3 to Option
2, GIAC's liability will be limited to the death benefit that would have been
payable had such change not taken effect; GIAC will also refund to the owner any
cost of insurance associated with any increase in death benefit due to such
change.
00-SVUL Page 25 {POL NO}
<PAGE>
GENERAL PROVISIONS--cont'd
Deferment
GIAC reserves the right to defer calculation and payment of this policy's
benefits which are attributable to the Variable Investment Options when:
o the New York Stock Exchange is closed for trading (except for customary
weekend and holiday closings);
o the Securities and Exchange Commission restricts trading or determines
that an emergency exists; or
o a Variable Investment Option's corresponding mutual fund lawfully suspends
payment or redemption of its shares.
In such situations, GIAC may defer:
o determination or payment of a partial withdrawal, surrender or death
proceeds (GIAC may defer payment of death proceeds for up to 2 months
only);
o determination or payment of policy loans;
o transfers among the Variable Investment Options; or
o allocation of Net Premiums to the Variable Investment Options.
GIAC may defer the following transactions from the Fixed-Rate Option for up to 6
months from the Business Day GIAC receives the owner's written request in Good
Order at the Customer Service Office:
o determination or payment of a partial withdrawal, surrender or death
proceeds. GIAC will pay interest on deferred partial withdrawals and
surrenders at a rate not less than 3% a year if any such payment is
deferred 30 days or more; or
o determination or payment of policy loans; or
o transfers from the Fixed-Rate Option.
Communications with GIAC
GIAC receives all communications only at the Customer Service Office. Please
include the policy number, the full names of the owner and insured, and the
owner's current address in all correspondence with GIAC.
Payments by GIAC
All amounts payable by GIAC are payable at the Customer Service Office.
Statement to the Owner
GIAC will provide a written statement to the owner once each year. GIAC will
send the statement soon after each Policy Anniversary.
The statement will show the following information as of the most recent Policy
Anniversary:
o the amount of the current death benefit;
o the Policy Account Value and the portion of the Policy Account Value
attributable to the Variable Investment Options and the Fixed-Rate Option;
o the Net Cash Surrender Value and Cash Surrender Value;
o the premiums paid, and charges deducted since the last statement;
o any transfers or partial withdrawals since the last statement; and
o any outstanding Policy Debt.
The statement will also include any other information required by the
jurisdiction where this policy is delivered.
00-SVUL Page 26 {POL NO}
<PAGE>
INDEX
Subject Page
Age and Sex................................................25
Allocation of Net Premiums.................................12
Assignment.................................................10
Basis of Values............................................25
Beneficiary..............................................3,10
Changing the Face Amount....................................9
Communications with GIAC...................................26
Continuation of Insurance..................................17
Crediting Payments.........................................11
Death Proceeds..............................................7
Deferment................................................. 26
Definitions.................................................5
Dollar Cost Averaging Option.............................. 13
Exchange of Policy.........................................20
The Fixed-Rate Option......................................15
Grace Period...............................................11
The Guardian Separate Account N............................14
Incontestability...........................................25
Investment Units....................................... 5, 15
Loan Account..............................................19
Monthly Cost of Insurance..................................16
Monthly Deductions......................................3, 16
No Lapse Guarantee Condition...............................11
No Lapse Guarantee Period..................................11
Owner....................................................3, 9
Partial Withdrawals........................................17
Payment Options........................................21, 22
Payment Option Tables..............................22, 23, 24
Policy Account Value............................6, 15, 16, 17
Policy Data.................................................3
Policy Loans...............................................18
Premium Payment.........................................11,12
Rights Reserved........................................... 14
Statement to the Owner.....................................26
Suicide Exclusion..........................................25
Surrender...............................................17,18
Table of Maximum Monthly Cost of Insurance Rates............4
Table of Death Benefit Factors..............................4
Transaction Deductions...................................3,16
Transfers..................................................12
00-SVUL Page 27 {POL NO}
<PAGE>
Survivorship Flexible Premium Adjustable Variable Life Insurance Policy
o Flexible premiums payable while either insured is alive
o Adjustable death proceeds payable at the second death if policy is in
force- No death proceeds payable on the first death
o Investment experience reflected in benefits
o Non-participating--No dividends payable
[LOGO] The Guardian A Stock Company
GUARDIAN(SM) Insurance & Annuity Incorporated in the
Company, Inc. State of Delaware
Customer Service Office:
P.O. Box 26210
Lehigh Valley, PA 18002-6210
00-SVUL
CERTIFICATE OF INCORPORATION
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
---oo0oo---
ARTICLE I
Section 1.1 Name. The name of the corporation (hereinafter called the
Corporation) is: THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
ARTICLE II
Section 2.1 Registered Office and Registered Agent. The address of the
Corporation's registered office in the State of Delaware is 100 West 10th
Street, City of Wilmington. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE III
Section 3.1 Corporate Purposes. A primary purpose of the Corporation is to
engage in and carry on the business of insurance as permitted under the laws of
Delaware. In addition, and without limitation by the foregoing, the purpose of
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
<PAGE>
Section 3.2 Management and Other Contracts. The Corporation may enter into
a management, supervisory or investment advisory contract and other contracts
with, and may otherwise do business with, any firm or organization
notwithstanding that the directors or officers of the Corporation may be
employees, directors or officers of such firms or organizations, and in the
absence of fraud the Corporation and such firms or organizations may deal freely
with each other, and such other contracts or any other contract or transaction
between the Corporation and such firms or organizations shall not be invalidated
or in any wise affected thereby, nor shall any director or officer of the
Corporation be liable to the Corporation or to any stockholder or creditor
thereof or to any other person for any loss incurred by it or him under or by
reason of any such contracts or transactions; provided that nothing herein shall
protect any director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office; and provided always that
such contracts or transactions shall have been fair to the Corporation as of the
time it was authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
ARTICLE IV
Section 4.1 Capital Stock. The total number of shares of stock which the
Corporation shall have authority to issue is twenty thousand (20,000) shares,
all of which shall be one class of common stock of the par value of One Hundred
Dollars ($100.00) each.
<PAGE>
ARTICLE V
Section 5.1 Power of Board to Make By-Laws. The Board may make, alter or
repeal from time to time any of the By-Laws of the Corporation, except any
particular By-Law which is specified as not subject to alteration or repeal by
the Board. Any such particular By-Law may be altered or repealed only by the
affirmative vote at a meeting of the holders of a majority of the shares of
capital stock outstanding or by the written consent of the holders of a majority
of such shares.
Section 5.2 Elections of Directors Need Not be By Written Ballot. The
elections of directors need not be by written ballot unless the By-Laws of the
Corporation shall so provide.
ARTICLE VI
Section 6.1 Incorporators. The names and mailing addresses of the
incorporators of the Corporation are:
NAME MAIL ADDRESS
---- ------------
B. J. CONSONO 100 West Tenth Street
Wilmington, Delaware 19899
F. J. OBARA, JR. 100 West Tenth Street
Wilmington, Delaware 19899
J. L. RIVERA 100 West Tenth Street
Wilmington, Delaware 19899
ARTICLE VII
Section 7.1 Reservation of Right to Amend Certificate. The Corporation
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate in the manner now or hereafter prescribed by law, and all
rights and powers
<PAGE>
conferred in this Certificate on stockholders, directors and officers are
subject to this reserved power.
Section 7.2 Right to Amend By-Laws. The Board of Directors is expressly
authorized to make, alter or repeal the By-Laws of the Corporation, except as
otherwise provided in any By-Laws adopted by the stockholders.
WITNESS the signatures of the undersigned this 2nd day of March, 1970.
B. J. CONSONO
F. J. OBARA, Jr.
J. L. RIVERA
<PAGE>
STATE OF DELAWARE )
) ss:
COUNTY OF NEW CASTLE )
BE IT REMEMBERED that on this 2nd day of March, 1970, personally came
before me, a Notary Public for the State of Delaware, F. J. CONSONO, F. J.
OBARA, Jr., and J. L. RIVERA all of the parties to the foregoing certificate of
incorporation, known to me personally to be such, and severally acknowledged the
said certificate to be the act and deed of the signers respectively and that the
facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
A. DANA ATWELL
---------------------------------
NOTARY PUBLIC
A. Dana Atwell
Notary Public
Appointed October 27, 1969
State of Delaware
Term Two Years
<PAGE>
STATE OF DELAWARE
OFFICE OF SECRETARY OF STATE
I, EUGENE BUNTING, Secretary of State of the State Delaware, DO HEREBY
CERTIFY that the above and foregoing is a true and correct copy of Certificate
of Incorporation of "THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.", as
received and filed in this office the second day of March, A.D. 1970, at 10
o'clock A.M.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Dover this second day of March in the year of our Lord
one thousand nine hundred and seventy.
EUGENE BUNTING
Secretary of State
R. H. CALDWELL
Ass't Secretary of State
Secretary's Office
1855 Delaware 1793
<PAGE>
Received for Record
March 2nd, A. D. 1970.
Leo J. Dugan, Jr., Recorder.
STATE OF DELAWARE :
: SS.:
NEW CASTLE COUNTY :
Recorded in the Recorder's Office at
Wilmington, in Incorporation Record ,
Vol. Page &c., the 2nd day
of March, A. D. 1970.
Witness my hand and official seal.
Leo J. Dugan, Jr.
Recorder
Recorder's Office
New Castle Co. Del.
Mercy Justice
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * *
The Guardian Insurance & Annuity Company, Inc. a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. (the "Corporation") resolutions were duly
adopted setting forth a proposed amendment of the Certificate of Incorporation
of the Corporation, declaring said amendment to be advisable and calling a
meeting of the stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by changing the Article thereof numbered "III" and Section thereof
numbered "3.2" so that, as amended, said Article and Section shall be and
read as follows: "Management and Other Contracts. The Corporation may
enter into a management, supervisory or investment advisory contract and
other contracts with, and may otherwise do business with, any firm or
organization notwithstanding that the directors or officers of the
Corporation may be employees, directors or officers of such firms or
organizations, and in the absence of fraud the Corporation and such firms
or organizations may deal freely with each
<PAGE>
other, and such contracts or any other contracts or transaction between
the Corporation and such firms or organizations shall not be invalidated
or in any way affected thereby, nor shall any director or officer of the
Corporation be liable to the Corporation or to any stockholder or creditor
thereof or to any other person for any loss incurred by it or him under or
by reason of any such contracts or transactions; provided that nothing
herein shall protect any director or officer of the Corporation against
any liability to the Corporation or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office; and provided always that such contracts or
transactions shall have been fair as to the Corporation as of the time it
was authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders. No director of the Corporation
shall be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of
<PAGE>
Delaware at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, The Guardian Insurance & Annuity Company, Inc. has
caused its corporate seal to be hereunto affixed and this certificate to be
signed by Arthur V. Ferrara, its President, and Herbert N. Grolnick, its
Secretary, this 29th day of August, 1986.
By
--------------------------------------
Arthur V. Ferrara, President
Attest:
By
--------------------------------------
(CORPORATE SEAL) Herbert N. Grolnick, Secretary
BY-LAWS
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
---oo0oo---
ARTICLE I
OFFICES
Section 1. The registered office shall be in Wilmington, Delaware.
Section 2. The corporation may have offices also at such other
places within and without the State of Delaware as the board of directors may
from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the stockholders for the election of
directors shall be held in New York, New York at such place as may be fixed from
time to time by the board of directors. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting.
<PAGE>
Section 2. Annual meetings of stockholders shall, unless otherwise
provided by the board of directors, be held on the third Thursday in February
each year if not a legal holiday, and if a legal holiday, then on the next full
business day following, at 2:00 P.M., at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. In order that the corporation may determine the
stockholders entitled to notice of or to, vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than fifty nor less than ten days before the date of
such meeting, nor more than fifty days prior to any other action. A
determination of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Written notice of the annual meeting, and any special
meeting stating the place, date and hour thereof, shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 5. The officer who has charge of the stock ledger of the
corporation shall prepare, and produce a complete list of the stockholders
entitled to vote at said meeting in accordance with Section 219(a) Title 8 of
the Delaware Code.
<PAGE>
Section 6. Special meetings of the stockholders may be called by the
president and shall be called by the president or secretary by resolution of the
board of directors or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such resolution or request shall state the
purpose or purposes of the proposed meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, so long as the adjournment is not for more than thirty days and a
new record date is not fixed for the adjourned meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation a
<PAGE>
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. No proxy or power of attorney to vote shall be used to vote at a
meeting of the stockholders unless it shall have been filed with the secretary
of the meeting when required by the inspectors of election. All questions
regarding the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by two inspectors of election
who shall be appointed by the board of directors, or if not so appointed, then
by the presiding officer of the meeting.
Section 11. Whenever stockholders are required or permitted to take
any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding stock entitled to vote thereon, all in accordance with Section 228,
Title 8 of the Delaware Code.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be five.*(1) By amendment of this by-law the number may be increased
or
- ----------
1 *Amended by board of directors on 11/20/86 to delete the number "five" and
insert in its place "at least seven."
<PAGE>
decreased from time to time by the board of directors within the limits
permitted by law, but no decrease in the number of directors shall change the
term of any director in office at the time thereof. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this article, and each director shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held immediately following the adjournment of the meeting of
stockholders and at the place thereof. No notice of such meeting shall be
necessary to the directors in order legally to constitute the meeting, provided
a quorum be present. In the event such meeting is not so held, the meeting may
be held at such time and place as shall be
<PAGE>
specified in a notice given as hereinafter provided for special meetings of the
board of directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board of directors.
Section 7. Special meetings of the board of directors may be called
by the president and shall be called by the secretary on the written request of
two directors. Notice of special meetings of the board of directors shall be
given to each director at least three days before the meeting if by mail or at
least 24 hours before the meeting if given in person or by telephone or by
telegraph. The notice need not specify the business to be transacted.
Section 8. At meetings of the board of directors, one-third of the
directors at the time in office but in no event less than two*(2) directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. The board of directors may, by resolution adopted by a
majority of the whole board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the
- ----------
2 *Amended by board of directors on 11/20/86 to delete the phrase "one-third of
the directors at the time in office but in no event less than two" and insert in
its place the word "five."
<PAGE>
management of the business and affairs of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting or in any written consent of the committee. The member or members of
any such committee present at any meeting and not disqualified from voting may,
whether or not he or they constitute a quorum, unanimously appoint another
member of the board of directors to act at the meeting in the place of any
absent or disqualified member.
Section 10. The committees shall keep regular minutes of their
proceedings and report the same to the board of directors.
Section 11. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or committee.
Section 12. The directors may be paid their expenses of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
<PAGE>
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders mailed to them at
their addresses appearing on the books of the corporation shall be deemed to be
given at the time when deposited in the United States mail.
Section 2. Whenever any notice is required to be given a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent of
notice. Attendance of a person at a meeting of a stockholders or of directors
shall constitute a waiver of notice of such meeting except when the stockholder
or director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors at its first meeting after each annual meeting of
stockholders and shall be a president, who shall be a director, and a vice
president, a secretary, a treasurer and such other officers and agents as the
board desires who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the board or as set forth in these by-laws. Any number of offices may be held by
the same person.
<PAGE>
Section 2. The salaries of all officers of the corporation shall be
fixed by the board of directors.
Section 3. Any officer may be removed at any time by the board of
directors with or without cause. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors if the office is not discontinued.
*(3)Section 4. The president shall be the chief executive officer of
the corporation, shall preside at all meetings of the stockholders and shall
have general and active management of the business of the corporation and shall
see that all orders and resolutions of the board of directors are carried into
effect. He shall execute on behalf of the corporation and may affix or cause the
seal to be affixed to all instruments requiring such execution except to the
extent the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation or as
provided herein.
Section 5. The vice presidents shall act under the direction
of the president and in the absence or disability of the president, in the order
of seniority specified by the board, they shall perform the duties and exercise
the powers of the president. They shall perform such other duties and have such
other powers as the president or the board of directors may from time to time
prescribe.
Section 6. The secretary shall act under the direction of the
president. Subject to the direction of the president he shall attend all
meetings of the board of
- ----------
3 *Amended by board of directors 6/3/82 to read: "Unless the board of directors
shall elect a chairman as chief executive officer, the president shall be the
chief executive officer of the corporation . . . ."
<PAGE>
directors and all meetings of the stockholders and record the proceedings. He
shall perform like duties for the standing committees when required. He shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors, and shall perform such other duties
as may be prescribed by the president or the board of directors. He shall keep
in safe custody the seal of the corporation and cause it to be affixed to any
instrument requiring it.
Section 7. The treasurer shall act under the direction of the
president. Subject to the direction of the president he shall have custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the president or the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation. He may affix or cause to be affixed the seal of the corporation to
any instrument requiring it.
Section 8. On behalf of the corporation any officer may execute and
affix the corporate seal to documents necessary in the management of the affairs
of the corporation. Where two signatures are required, any two officers may
execute such documents.
<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the president or a vice president and the treasurer or the secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Section 2. The board of directors may direct a new certificate of
stock to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed
Section 3. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation, if it is satisfied that all provisions of the
certificate of the incorporation and these by-laws regarding transfer of shares
and restrictions on such transfers have been complied with, to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
<PAGE>
Section 4. The corporation shall be entitled to recognize the person
registered on its books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
MISCELLANEOUS
Section 1. Dividends upon the shares of the capital stock of the
corporation may be declared and paid by the board of directors from the funds
legally available. Dividends may be paid in cash, in property, or in shares of
the capital stock of the corporation.
Section 2. Before the payment of any dividends there may be set
aside, out of any funds of the corporation available for dividends, such sum or
sums as the board of directors from time to time in its absolute discretion may
think proper, as a reserve or reserves to meet contingencies or for any other
purpose the directors shall think conducive to the interest of the corporation.
The board of directors may modify or abolish any such reserve.
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officers or offices or such other person or
persons as the board of directors may from time to time designate.
<PAGE>
Section 4. The fiscal year of the corporation shall be the calendar
year unless changed by the board of directors.
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE VIII
INDEMNIFICATION
Every person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer of
the corporation or is or was serving at the request of the corporation or for
its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissable under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith. Such
right of indemnification shall not be exclusive of any other right which such
directors, officers or representatives may have or hereafter acquire and,
without limiting the generality of such statement, they shall be entitled to
their respective
<PAGE>
rights of indemnification under any by-law, agreement, vote of stockholders,
provision of law or otherwise, as well as their rights under this Article.
The board of directors may cause the corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The board of directors may from time to time adopt further by-laws
with respect to indemnification and may amend these and such by-laws to provide
all time the fullest indemnification permitted by the General Corporation law of
the State of Delaware.
ARTICLE IX
AMENDMENTS
Section 1. The by-laws may be amended by a majority vote of all the
stock issued and outstanding and entitled to vote at any annual or special
meeting of the stockholders, provided notice of intention to amend shall have
been contained in the notice of the meeting.
Section 2. The board of directors by a majority vote of the whole
board at any meeting may amend these by-laws, including by-laws adopted by the
stockholders, but the stockholders may from time to time specify particular
provisions of the by-laws which shall not be amended by the board of directors.
AMENDED AND RESTATED
AGREEMENT FOR SERVICES AND REIMBURSEMENT THEREFOR
This Agreement, dated the 18th of November, 1994, amends and restates the
Agreement for Services and Reimbursement Therefor, dated June 22, 1970, between
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York Corporation having
its principal place of business at 201 Park Avenue South, New York, New York
10003 (hereinafter called "GUARDIAN") and THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC., a Delaware Corporation having its principal place of business at
201 Park Avenue South, New York, New York 10003 (hereinafter called "THE
SUBSIDIARY").
WHEREAS, THE SUBSIDIARY is an insurance company wholly owned by GUARDIAN,
and
WHEREAS, THE SUBSIDIARY was organized for the purpose among others of
distributing variable insurance and annuity products which are subject to the
regulation of the Securities and Exchange Commission and whose benefits are
dependent upon the performance of a portfolio of common stocks and other
investments, and
WHEREAS, the net profit or net loss of THE SUBSIDIARY will ultimately
belong to GUARDIAN as the sole owner of the stock;
NOW, THEREFORE, in consideration of the mutual advantages which will
accrue to each of the parties, it is hereby convenanted and agreed as follows:
1. THE SUBSIDIARY will develop and qualify its various products for sale
to the public through those members of the Guardian Field Force and others as
may become eligible to do so.
2. THE SUBSIDIARY will account for and administer its own activities as an
Insurance Company in accordance with the laws of the several states and the
federal laws and regulations of the Securities and Exchange Commission where
applicable.
3. THE SUBSIDIARY undertakes to follow standards set by GUARDIAN in its
operations.
4. As consideration for this Agreement and in connection with carrying out
the provisions hereof, GUARDIAN agrees to provide office space, furniture,
equipment, heat and light and clerical staff. It is further agreed that GUARDIAN
will pay salaries and provide pension benefits and other employee services
including health care
<PAGE>
benefits on the same basis for THE SUBSIDIARY'S officers and staff as for
regular full-time GUARDIAN employees. In the case of those individuals not fully
occupied in work for THE SUBSIDIARY, the proportion of salaries and other costs
attributable to the individual which should be charged to THE SUBSIDIARY will be
determined by time analysis methods. The total of such costs incurred and paid
by GUARDIAN on behalf of THE SUBSIDIARY will be repaid by THE SUBSIDIARY to
GUARDIAN at quarterly intervals upon demand accompanied by a detailed statement
substantiating the amount claimed. Such costs will be allocated by GUARDIAN to
THE SUBSIDIARY using GUARDIAN's cost accounting system. Costs will be allocated
to THE SUBSIDIARY based upon services provided by various Departments of
GUARDIAN as determined by either the Department's supervising officer or manager
or through an allocation developed by GUARDIAN's Cost Accounting Department
utilizing asset information, head count or overhead information.
THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe By /s/ John M. Smith
- ---------------------------- --------------------------------------
Witness
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
/s/ Frank L. Pepe By /s/ Peter L. Hutchings
- ---------------------------- --------------------------------------
Witness
[LOGO]
GUARDIAN(SM)
The Guardian Insurance & Annuity Company, Inc. (GIAC)
Customer Service Office
P. O. Box 26240
Lehigh Valley, Pennsylvania 18003-6240
APPLICATION TO THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
SUPPLEMENT FOR VARIABLE LIFE INSURANCE
================================================================================
Please print the following information:
Section 1: Proposed Insured
This Supplement is part of the application for variable life insurance on the
life of the Proposed Insured.
(please print full name)
Name____________________________________________________________________________
First Middle Last
Application Number______________________________________________________________
- --------------------------------------------------------------------------------
Section 2: Smoking Status (Both questions apply to the Proposed Insured)
Have you smoked cigarettes in the past 24 months? |_| Yes |_| No
(A "Yes" answer designates the Proposed Insured as a smoker.)
Have you used tobacco in any form in the past 24 months? |_| Yes |_| No
- --------------------------------------------------------------------------------
Section 3: Death Benefit Options
|_| Option 1 (Level Death Benefit equal to the policy's Face Amount)
|_| Option 2 (Death Benefit may increase by the amount of the Policy Account
Value, but will never be less than the policy's Face Amount)
|_| Option 3 (Death Benefit equal to the greater of the policy's Face Amount
plus Net Cumulative Payments or the minimum death benefit required
under Section 7702 on the Monthly Processing Date preceding the
date of death.)
(Option 3 may be used only if it is available with the product
applied for)
- --------------------------------------------------------------------------------
Section 4: Life Insurance Tests Under Section 7702 of the Federal Income Tax
Code
Complete this Section only if applying for Variable Flexible Premium Adjustable
Life Insurance
Section 7702 specifies the rules under which life insurance death proceeds are
excludible from gross income. Please check one of the tests shown below. Once
elected, such test cannot be changed. If no test is elected, the automatic Life
Insurance Test will be the Guideline Premium Test.
|_| Cash Value Accumulation Test |_| Guideline Premium Test
================================================================================
P1-24 GIAC 2000 {(11/99)}
<PAGE>
================================================================================
Section 5: Planned Premium and Initial Premium Payments
Complete this Section only if applying for Variable Flexible Premium Adjustable
Life Insurance
Initial Premium Payment Amount $ _______________________
Planned Premium Payment Amount $ _______________________
Planned premiums may be payable (please check one):
|_| Annually |_| Semi-Annually
|_| Quarterly |_| Guard-O-Matic (monthly check plan).
Submit GOM form R223 and a void check
The planned premium is an amount the Owner elects to pay. However, this is a
flexible premium policy. After the initial premium, no other premium is required
to be paid as long as the Net Cash Surrender Value is sufficient to cover
monthly deductions when due; if this condition is not met, the policy may lapse
without value.
- --------------------------------------------------------------------------------
Section 6: Net Premium Allocation
[% ______ The Guardian Stock Fund
% ______ The Guardian Cash Fund
% ______ The Guardian VC High Yield Bond Fund
% ______ The Guardian VC 500 Index Fund
% ______ Baillie Gifford Emerging Markets Fund
% ______ Value Line Strategic Asset Management Trust
% ______ AIM V.I. Value Fund
% ______ Fidelity VIP III Growth Opportunities Portfolio
% ______ Fidelity VIP III MidCap Portfolio
% ______ Fidelity VIP II Contrafund(R)Portfolio
% ______ Fidelity VIP Equity-Income Portfolio
% ______ Davis Value Portfolio
% ______ MFS Research Series
% ______ MFS Total Return Series
% ______ Janus Aggressive Growth Portfolio
% ______ Janus Worldwide Growth Portfolio
% ______ Other ____________________________________
% ______ Fixed-Rate Option
% ______ The Guardian Bond Fund
% ______ The Guardian Small Cap Stock Fund
% ______ The Guardian VC Asset Allocation Fund
% ______ Baillie Gifford International Fund
% ______ Gabelli Capital Asset Fund
% ______ Value Line Centurion Fund
% ______ AIM V.I. Capital Appreciation Fund
% ______ AIM V.I. Global Utilities Fund
% ______ Davis Financial Portfolio
% ______ Davis Real Estate Portfolio
% ______ MFS Emerging Growth Series
% ______ MFS New Discovery Series
% ______ MFS Growth with Income Series
% ______ Janus Capital Appreciation Portfolio
% ______ Janus Growth Portfolio
% ______ Other __________________________________
% ______ Other __________________________________]
================================================================================
P1-24 GIAC 2000 {(11/99)}
<PAGE>
================================================================================
Section 7: Suitability
Complete this Section only if applying for Variable Flexible Premium Adjustable
Life Insurance
1. Have you, the Proposed Insured or the Owner, if other than the Proposed
Insured, received the current Prospectus?
|_| Yes |_| No
2. Do you understand that:
(a) the death benefit may increase or decrease based on the policy's
investment return, but will never be less than the guaranteed
amount?
|_| Yes |_| No
(b) the cash value may increase or decrease, even to the extent of being
reduced to zero, based on the investment return and is not
guaranteed?
|_| Yes |_| No
3. Do you believe that the policy applied for will meet your insurance needs
and financial objectives?
|_| Yes |_| No
Note: Upon request, we will furnish illustrations of benefits, including death
benefits and cash values, for:
(a) the variable life insurance policy applied for; and (b) a fixed benefit life
insurance policy for the same premium.
It is understood that under a variable life insurance policy, the amount of the
death benefit above the Guaranteed Insurance Amount, the Policy Account Value
and the Cash Surrender Value may increase or decrease, based on the investment
experience of the Separate Account and are not guaranteed.
- --------------------------------------------------------------------------------
Section 8: Riders and Optional Provisions
The following riders and optional provisions are available only with Flexible
Premium Adjustable Variable Life Insurance Policies:
|_| Accidental Death Benefit Rider $ _________
|_| Guaranteed Insurability Option Rider
|_| Annual Adjustable Renewable Term Rider $ _________
|_| Guaranteed Coverage Rider
|_| Select Security Plan - amendment to "Owner" Endorsement
|_| Other _________________________________
|_| Other _________________________________
|_| Exchange of Insured's Rider
|_| Waiver of Monthly Deduction Rider
|_| Disability Benefit Rider $ _________
|_| Additional Sum Insured Provision $ _________
|_| Other _________________________________
|_| Other _________________________________
|_| Other _________________________________
================================================================================
P1-24 GIAC 2000 {(11/99)}
<PAGE>
================================================================================
9. Dollar Cost Averaging Transfer Option
The portion of the Policy Account Value attributable to The Guardian Cash Fund
on the date this option is elected must be at least 12 times the amount
designated for transfer each month. The minimum transfer amount per fund, per
month is $100. Each month, GIAC will dollar cost average from The Guardian Cash
Fund the following amounts into:
================================================================================
$ ______ The Guardian Stock Fund
$ ______ The Guardian Cash Fund
$ ______ The Guardian VC High Yield Bond Fund
$ ______ The Guardian VC 500 Index Fund
$ ______ Baillie Gifford Emerging Markets Fund
$ ______ Value Line Strategic Asset Management Trust
$ ______ AIM V.I. Value Fund
$ ______ Fidelity VIP III Growth Opportunities Portfolio
$ ______ Fidelity VIP III MidCap Portfolio
$ ______ Fidelity VIP II Contrafund(R)Portfolio
$ ______ Fidelity VIP Equity-Income Portfolio
$ ______ Davis Value Portfolio
$ ______ MFS Research Series
$ ______ MFS Total Return Series
$ ______ Janus Aggressive Growth Portfolio
$ ______ Janus Worldwide Growth Portfolio
$ ______ Other ____________________________________
$ ______ Fixed-Rate Option
$ ______ The Guardian Bond Fund
$ ______ The Guardian Small Cap Stock Fund
$ ______ The Guardian VC Asset Allocation Fund
$ ______ Baillie Gifford International Fund
$ ______ Gabelli Capital Asset Fund
$ ______ Value Line Centurion Fund
$ ______ AIM V.I. Capital Appreciation Fund
$ ______ AIM V.I. Global Utilities Fund
$ ______ Davis Financial Portfolio
$ ______ Davis Real Estate Portfolio
$ ______ MFS Emerging Growth Series
$ ______ MFS New Discovery Series
$ ______ MFS Growth with Income Series
$ ______ Janus Capital Appreciation Portfolio
$ ______ Janus Growth Portfolio
$ ______ Other __________________________________
$ ______ Other __________________________________]
ANY APPLICATION MADE FOR VARIABLE LIFE INSURANCE IS MADE TO
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INC.
All values under this policy which are based on the investment experience of the
separate account are variable, may increase or decrease daily and are not
guaranteed. The death proceeds, Policy Account Value and Cash Surrender Value
under this policy may increase or decrease daily, depending upon payments made,
the investment experience of the Separate Account, the amount of interest
credited to the Fixed-Rate Option, the amount of charges deducted and whether
partial withdrawals or policy loans are taken. There is no minimum guaranteed
Cash Surrender Value.
I (We) have read the above information. I (We) agree that the answers to the
questions in Section 2 are true to the best of my (our) knowledge and belief.
Dated at _______________________________________ on ____________________________
City and State Month Day Year
___________________________________ ______________________________________
Signature of Proposed Insured Signature of Applicant/Owner
if Other than proposed Insured
______________________________________ ____________________________________
Soliciting Agent/Dealer - Please Print Signature of Soliciting Agent/Dealer
(witness)
================================================================================
P1-24 GIAC 2000 {(11/99)}
<PAGE>
[LOGO]
GUARDIAN(SM)
APPLICATION USAGE AND INSTRUCTIONS
This application should be used for: Qualified Pension Plans and Non-Qualified
Payroll Deduction Plans and Individual and Corporate VUL Sales, including COLI
Plans.
The basic underwriting guidelines have not been changed. The application has
been streamlined to accommodate a variety of sales situations.
QUALIFIED PENSION PLANS, NON-QUALIFIED PAYROLL DEDUCTION PLANS and
INDIVIDUAL AND CORPORATE VUL SALES
Simplified Underwriting
Please complete: Signatures are required on:
o Page 1, questions 1-8 Page 5, Agent's Report on Page 6 and Page 12
o Page 2, question 13
o Page 4, questions 19, 20
o Page 5, questions 21-24
- --------------------------------------------------------------------------------
Regular Underwriting
Please complete: Signatures are required on:
o Page 1, questions 1-8 Page 5, Agent's Report on Page 6,
o Page 2, question 13 Page 9 and Page 12
o Page 3, questions 16, 17
o Page 8, questions 25-31
o Page 9, questions 32, 33
o Page 11, questions 1-9
- --------------------------------------------------------------------------------
COLI PLANS
Guaranteed Issue
Please complete: Signatures are required on:
o Page 1, questions 1-8 Page 5 and Agent's Report on Page 6
o Page 2, question 13
o Page 3, questions 16, 17
- --------------------------------------------------------------------------------
Simplified Underwriting
Please complete: Signatures are required on:
o Page 1, questions 1-8 Page 5, Agent's Report on Page 6 and Page 12
o Page 2, question 13
o Page 4, questions 19, 20
o Page 5, questions 21-24
- --------------------------------------------------------------------------------
Regular Underwriting
Please complete: Signatures are required on:
o Page 1, questions 1-8 Page 5, Agent's Report on Page 6,
o Page 2, question 13 Page 9 and Page 12
o Page 3, questions 16, 17
o Page 8, questions 25-31
o Page 9, questions 32, 33
o Page 11, questions 1-9
PT-AP-2000
<PAGE>
The notification below must be completed and given to the Proposed Insured
before the application is completed.
GUARDIAN(SM)
|_| The Guardian Life Insurance Company of
America (the Company)
7 Hanover Square
Mail Area 25C
New York, New York 10004-2616
|_| The Guardian Insurance & Annuity Company, Inc. (GIAC)
Customer Service Office
P. O. Box 26240
Lehigh Valley, Pennsylvania 18003-6240
Insurance Information Practices
Notice to ______________________________________________________________________
Proposed Insured (parent or guardian of minor)
Thank you for choosing insurance from Guardian. This notice is given to you at
the time you apply for life or health insurance to tell you about the kinds of
information we may obtain in connection with your application. We will treat all
personal information about you as confidential. You have a right of access and
correction with respect to this information. If you would like a more detailed
explanation of our information practices, please send your written request to
the Corporate Secretary of the Company or GIAC at the applicable address shown
above.
Fair Credit Reporting Act Pre-Notice
When we begin to process your application, we may ask for a consumer report from
a consumer reporting agency. All or part of that report may be an investigative
consumer report. Such a report will include information about your character,
general reputation, personal characteristics or mode of living, except as may be
related directly or indirectly to your sexual orientation. It will be obtained
through personal interviews with people who know you. You may ask to be
interviewed in connection with this report. We may request later consumer
reports, other than an investigative consumer report, at a future update,
renewal or extension of the insurance for which you have applied.
At your request, we will tell you if we have asked for a consumer report or an
investigative consumer report in the initial processing of your application. If
we have, we will tell you the name and address of the consumer reporting agency
to which we have made our request for a report. You can obtain a copy of this
report by contacting this consumer reporting agency. At your written request, we
will give you more detailed information about the nature and scope of this kind
of investigation.
Medical Information Bureau Pre-Notice
The Medical Information Bureau is a nonprofit membership organization of life
insurance companies. The Bureau provides an information exchange for its
members. On the request of any of its member companies to which you apply for
life or health insurance, or to which you make a claim for benefits, the Bureau
will supply Guardian with the information in its files.
Guardian or its reinsurers may make a brief report of objective findings about
you to the Bureau. We will not report what action we have taken on your
application.
If you so request of the Bureau, it will arrange to disclose the information it
may have in your file; however, medical information will be disclosed only to
your doctor. If you question the accuracy of the information in the Bureau's
file, you may contact the Bureau and seek to correct the information according
to procedures set forth in the Federal Fair Credit Reporting Act. The Bureau's
address is Post Office Box 105, Essex Station, Boston, MA 02112, telephone
617-426-3660.
Medical Records
We may request information from health care providers or others who have records
of your medical history, mental or physical condition, or treatment. Only
qualified members of Guardian's staff will have access to your medical file to
evaluate your eligibility for insurance or to service your claim for benefits
under a policy. Your authorization will govern our request for information and
any later disclosure of that information.
PT-AP-FCRA-2000
<PAGE>
GUARDIAN(SM)
|_| The Guardian Life Insurance Company of
America (the Company) Home Office:
7 Hanover Square
Mail Area 25C
New York, New York 10004-2616
|_| The Guardian Insurance & Annuity Company, Inc. (GIAC)
Customer Service Office
P. O. Box 26240
Lehigh Valley, Pennsylvania 18003-6240
APPLICATION FOR LIFE INSURANCE
================================================================================
1. Print full name of Proposed Insured __________ Height _____ Weight ______
Social Security No. |_||_||_| - |_||_| - |_||_||_||_|
|_| Single |_| Married |_| Widowed |_| Divorced
Date of Birth _____________ Place of Birth ______________ Age _________________
Mo. Day Year (nearest birthday)
Home Address _______________________________________ Policy Date _______________
Zipcode
- --------------------------------------------------------------------------------
2. Insurance Amount $ ____________ Plan Type ________________________________
- --------------------------------------------------------------------------------
3. Beneficiary (Full name, relationship to Proposed Insured , age if a minor)
If no designated beneficiary is living at the Insured's death, death benefits to
be paid to Insured's estate |_| Owner |_|
- --------------------------------------------------------------------------------
4. Owner ____________________________________________________________________
________________________________________________________________________________
Address __________________________________________ Taxpayer ID Number _________
- --------------------------------------------------------------------------------
5. Name of Employer____________________________ Date of Employment __________
- --------------------------------------------------------------------------------
6. A. Has the Proposed Insured been continuously actively at work as a
full-time employee during the last 3 months (disregarding vacations,
normal non-working days and other absences totalling not more than 7
days)? Actively at work as a full-time employee means performing all the
employee's regular duties for the above employer, at the employer's
customary place of employment, on a work schedule which is in no way
curtailed or altered because of the employee's health. |_| Yes |_| No
B. Is the Proposed Insured now actively at work full time? If "No" give full
details in "Remarks." |_| Yes |_| No
- --------------------------------------------------------------------------------
7. Is Proposed Insured an eligible employee as defined in the Plan under
which this application is made? |_| Yes |_| No
If "No," give full details in "Remarks."
- --------------------------------------------------------------------------------
8. Is the amount of insurance applied for based on the Proposed Insured's
actual compensation as defined in the Plan under which this application is
made? If "No," give full details in "Remarks." |_| Yes |_| No
================================================================================
PT-AP-2000
1
<PAGE>
================================================================================
9. Premiums payable |_| Annually |_| Semi-Annually |_| Quarterly
|_| Monthly (for PT series only)
|_| Guard-O-Matic (monthly check plan).
Submit GOM form R223 and a void check
- --------------------------------------------------------------------------------
10. Dividend Option (Applicable only to plans written by the Company)
A. Paid in cash |_| B. To reduce premium |_| C. Left at interest |_|
D. Paid-up additional insurance* |_|
*not applicable to term insurance
- --------------------------------------------------------------------------------
11. Death Benefit Option Please check one of the options shown.
Complete this Section only if applying for Variable Flexible Premium
Adjustable Life Insurance
|_| Option 1 (Level Death Benefit equal to the policy's Face Amount)
|_| Option 2 (Death Benefit may increase by the amount of the Policy
Account Value, but will never be less than the policy's Face Amount)
|_| Option 3 (Death Benefit equal to the greater of the policy's Face
Amount plus Net Cumulative Payments or the minimum death benefit
required under Section 7702 on the Monthly Processing Date preceding
the date of death.)
- --------------------------------------------------------------------------------
12. Life Insurance Tests Under Section 7702 of the Federal Tax Code
Complete this Section only if applying for Variable Flexible Premium
Adjustable Life Insurance
Section 7702 specifies the rules under which life insurance death proceeds are
excludible from gross income. Please check one of the tests shown below. Once
elected, such test cannot be changed. If no test is elected, the automatic Life
Insurance Test will be the Guideline Premium Test.
|_| Cash Value Accumulation Test |_| Guideline Premium Test
- --------------------------------------------------------------------------------
13. Planned Premium Payment
Complete this Section only if applying for Variable Flexible Premium
Adjustable Life Insurance
Planned Premium Payment Amount $ __________________
Planned premiums may be payable (please check one):
|_| Annually |_| Semi-Annually |_| Quarterly
|_| Guard-O-Matic (monthly check plan). Submit GOM form R223 and a void check
- --------------------------------------------------------------------------------
14. Suitability
Complete this Section only if applying for Variable Flexible Premium
Adjustable Life Insurance
1. Have you, the Proposed Insured or the Owner, if other than the Proposed
Insured, received the current Prospectus?
|_| Yes |_| No
2. Do you understand that:
(a) the death benefit may increase or decrease based on the policy's
investment return, but will never be less than the guaranteed
amount?
|_| Yes |_| No
(b) The cash value may increase or decrease, even ito the extent of
being reduced to zero, based on the investment return And is not
guaranteed?
|_| Yes |_| No
3. Do you believe that the policy applied for will meet your insurance needs
and financial objectives? |_| Yes |_| No
Note: Upon request we will furnish illustrations of benefits, including death
benefits and cash values, for:
(a) the variable life insurance policy applied for; and (b) a fixed benefit life
insurance policy for the same premium.
It is understood that under a variable life insurance policy, the amount of the
death benefit above the Guaranteed Insurance Amount, the Policy Account Value
and the Cash Surrender Value may increase or decrease, based on the investment
experience of the Separate Account and are not guaranteed.
================================================================================
PT-AP-2000
2
<PAGE>
================================================================================
15. Net Planned Premium
[% ______ The Guardian Stock Fund
% ______ The Guardian Cash Fund
% ______ The Guardian VC High Yield Bond Fund
% ______ The Guardian VC 500 Index Fund
% ______ Baillie Gifford Emerging Markets Fund
% ______ Value Line Strategic Asset Management Trust
% ______ AIM V.I. Value Fund
% ______ Fidelity VIP III Growth Opportunities Portfolio
% ______ Fidelity VIP III MidCap Portfolio
% ______ Fidelity VIP II Contrafund(R)Portfolio
% ______ Fidelity VIP Equity-Income Portfolio
% ______ Davis Value Portfolio
% ______ MFS Research Series
% ______ MFS Total Return Series
% ______ Janus Aggressive Growth Portfolio
% ______ Janus Worldwide Growth Portfolio
% ______ Other ____________________________________
% ______ Fixed-Rate Option
% ______ The Guardian Bond Fund
% ______ The Guardian Small Cap Stock Fund
% ______ The Guardian VC Asset Allocation Fund
% ______ Baillie Gifford International Fund
% ______ Gabelli Capital Asset Fund
% ______ Value Line Centurion Fund
% ______ AIM V.I. Capital Appreciation Fund
% ______ AIM V.I. Global Utilities Fund
% ______ Davis Financial Portfolio
% ______ Davis Real Estate Portfolio
% ______ MFS Emerging Growth Series
% ______ MFS New Discovery Series
% ______ MFS Growth with Income Series
% ______ Janus Capital Appreciation Portfolio
% ______ Janus Growth Portfolio
% ______ Other __________________________________
% ______ Other __________________________________]
- --------------------------------------------------------------------------------
16. Is the insurance applied for intended to replace, in whole or in part, any
insurance policy or annuity contract in force in this or any other
company? |_| Yes |_| No
If 'Yes," give details in dated and signed statement, including company, plan,
policy number, if known, and reason for replacement.
- --------------------------------------------------------------------------------
17. Riders and Optional Provisions
The following riders and optional provisions are available only with Flexible
Premium Adjustable Variable Life Insurance Policies
|_| Accidental Death Benefit Rider $ _________
|_| Guaranteed Insurability Option Rider
|_| Annual Adjustable Renewable Term Rider $ _________
|_| Guaranteed Coverage Rider
|_| Select Security Plan - amendment to "Owner" Endorsement
|_| Other _________________________________
|_| Other _________________________________
|_| Exchange of Insured's Rider
|_| Waiver of Monthly Deduction Rider
|_| Disability Benefit Rider $ _________
|_| Additional Sum Insured Provision $ _________
|_| Other _________________________________
|_| Other _________________________________
|_| Other _________________________________
================================================================================
PT-AP-2000
3
<PAGE>
================================================================================
18. Dollar Cost Averaging Transfer Option
The portion of the Policy Account Value attributable to The Guardian Cash Fund
on the date this option is elected must be at least 12 times the amount
designated for transfer each month. The minimum transfer amount per fund, per
month is $100. Each month, GIAC will dollar cost average from The Guardian Cash
Fund the following amounts into:
[% ______ The Guardian Stock Fund
% ______ The Guardian Cash Fund
% ______ The Guardian VC High Yield Bond Fund
% ______ The Guardian VC 500 Index Fund
% ______ Baillie Gifford Emerging Markets Fund
% ______ Value Line Strategic Asset Management Trust
% ______ AIM V.I. Value Fund
% ______ Fidelity VIP III Growth Opportunities Portfolio
% ______ Fidelity VIP III MidCap Portfolio
% ______ Fidelity VIP II Contrafund(R)Portfolio
% ______ Fidelity VIP Equity-Income Portfolio
% ______ Davis Value Portfolio
% ______ MFS Research Series
% ______ MFS Total Return Series
% ______ Janus Aggressive Growth Portfolio
% ______ Janus Worldwide Growth Portfolio
% ______ Other ____________________________________
% ______ Fixed-Rate Option
% ______ The Guardian Bond Fund
% ______ The Guardian Small Cap Stock Fund
% ______ The Guardian VC Asset Allocation Fund
% ______ Baillie Gifford International Fund
% ______ Gabelli Capital Asset Fund
% ______ Value Line Centurion Fund
% ______ AIM V.I. Capital Appreciation Fund
% ______ AIM V.I. Global Utilities Fund
% ______ Davis Financial Portfolio
% ______ Davis Real Estate Portfolio
% ______ MFS Emerging Growth Series
% ______ MFS New Discovery Series
% ______ MFS Growth with Income Series
% ______ Janus Capital Appreciation Portfolio
% ______ Janus Growth Portfolio
% ______ Other __________________________________
% ______ Other __________________________________]
All values under this policy which are based on the investment experience of the
separate account are variable, may increase or decrease daily and are not
guaranteed. The death proceeds, Policy Account Value and Cash Surrender Value
under this policy may increase or decrease daily, depending upon payments made,
the investment experience of the Separate Account, the amount of interest
credited to the Fixed-Rate Option, the amount of charges deducted and whether
partial withdrawals or policy loans are taken. There is no minimum guaranteed
Cash Surrender Value.
- --------------------------------------------------------------------------------
19. Has the Proposed Insured within the last 12 months:
(a) been treated for or had any known heart disease, stroke or cancer?
|_| Yes |_| No
(b) had an electrocardiogram because of chest pain or any other physical
problem or taken medication for elevated blood Pressure?
|_| Yes |_| No
If this question, (a) or (b), is answered "yes," the agent is not authorized to
take money or deliver a Temporary Insurance Agreement, and the Temporary
Insurance Agreement shall be ineffective
- --------------------------------------------------------------------------------
20. Has the Proposed Insured ever had or been treated for:
(a) heart disease, stroke, cancer, chest pain or elevated blood
pressure? |_| Yes |_| No
(b) respiratory disorder, kidney disorder, diabetes or mental condition?
|_| Yes |_| No
(c) any condition not covered in (a) or (b)? |_| Yes |_| No
================================================================================
PT-AP-2000
4
<PAGE>
================================================================================
21. (a) Is the Proposed Insured currently receiving medical care or taking
medication? |_| Yes |_| No
(b) Has the Proposed Insured been advised within the past 5 years to have
any diagnostic test, hospitalization, or surgery which has not been
completed? |_| Yes |_| No
- --------------------------------------------------------------------------------
22. (a) Has the Proposed Insured ever used drugs other than as prescribed by a
physician or had or been advised to have counseling or treatment for
alcohol or drug abuse? |_| Yes |_| No
(b) Has the Proposed Insured smoked cigarettes in the past 24 months?
|_| Yes |_| No
(c) Has the Proposed Insured used tobacco in any form in the past 24
months? |_| Yes |_| No
- --------------------------------------------------------------------------------
23. During the past 10 years, have you been diagnosed by or received treatment
from a member of the medical profession for Acquired Immune Deficiency
Syndrome (AIDS), AIDS Related Complex (ARC), or any disorder of the immune
system?
|_| Yes |_| No
- --------------------------------------------------------------------------------
24. Provide details of "No" answers to question 6B. Provide specific details
and dates of "Yes" answer to questions 19, 20, 21, 22 and 23.
- --------------------------------------------------------------------------------
AMENDMENTS OR CORRECTIONS (For Home Office use only)
________________________________________________________________________________
I (We) have read the above information. I (We) agree that the answers to the
questions are true to the best of my (our) knowledge and belief. I (We) agree a)
that this Application and any supplement to the Application, if required, shall
for a part of any Policy issued; b) that no information acquired by any
Representative of GIAC shall bind GIAC unless it shall have been set out in
writing in this Application; and c) that only the President, a Vice President or
a Secretary of GIAC has the authority to bind GIAC by any promise or statement
or to waive or modify any of GIAC's requirements. I (We) further agree that no
insurance shall take effect (except as provided in the Temporary Insurance
Agreement and such Agreement issued) unless and until the Policy has been
delivered to and accepted by me (us) and the premium paid during the lifetime
and prior to any change in the health of the Proposed Insured, as stated in this
Application.
Changes or corrections made by GIAC and noted in the Amendments section above
are ratified by the Owner upon acceptance of a contract containing this
Application with the noted changes or corrections. In those states where written
consent is required by statute or State Insurance Department regulation as to
amendments as to plan, amount, classification, age at issue, or benefits, such
changes will be made only with the Owner's written consent.
[I authorize my employer to deduct from my pay the amount of premiums payable by
me in accordance with the sponsored insurance plan under which this application
is being submitted.]
______________________________________________________________
Signature of Applicant or Owner if other than Proposed Insured
______________________________________________________________
Signature of Proposed Insured
Signed at _________________________ Witness ______________________________
City State Date Agent
================================================================================
PT-AP-2000
5
<PAGE>
AGENT'S REPORT
Do you have knowledge or reason to believe that replacement of an existing
insurance policy or annuity may be involved? |_| Yes |_| No
If "yes," complete replacement requirements. Give company name and policy
number.
The answers to all questions on this application are full, complete and true to
the best of my knowledge and belief. I know nothing unfavorable about this risk
which is not fully set forth in these papers. The writing agent or broker is
duly appointed and licensed in the state in which this application was signed.
________________________________ __________________________
Signature of Soliciting Agent(s) Type or print Agent's name
_________________________
General Agent's Signature
TO BE COMPLETED IN EVERY CASE. DO NOT DETACH
AUTHORIZATION TO OBTAIN INFORMATION
Investigative consumer report. I authorize The Guardian Life Insurance Company
of America or The Guardian Insurance & Annuity Company, Inc. to obtain or have
prepared an investigative consumer report as described in the notice given to
me.
Medical records and other information. I authorize any physician, medical
practitioner, hospital, clinic, other health facility, consumer reporting
agency, the Medical Information Bureau, insurance or reinsurance company, or
employer to release any and all medical and non-medical information in its
possession about me or my minor children to The Guardian Life Insurance Company
of America or The Guardian Insurance & Annuity Company, Inc. or its legal
representatives. Medical information means all information in the possession of
or derived from providers of health care regarding the medical history, mental
or physical condition, or treatment of me or my minor children. I agree that
this authorization shall be valid for two and one half years from the date shown
below and that a copy of the authorization shall be as valid as the original. I
know that I may request and receive a copy of this authorization.
I understand The Guardian Life Insurance Company of America or The Guardian
Insurance & Annuity Company, Inc. will use the information obtained by this
authorization to determine eligibility for insurance or eligibility for benefits
under an existing policy. The Guardian Life Insurance Company of America or The
Guardian Insurance & Annuity Company, Inc. will not release any information
obtained to any person or organization except to reinsurance companies, the
Medical Information Bureau, or other persons or organizations performing
business or legal services in connection with my application, claim, or as may
be lawfully permitted or required, or as I may further authorize.
Signed this _____________________ day of _____________________ _________
Year
_____________________________________________
Signature of Proposed Insured
_____________________________________________
Signature of spouse if proposed for insurance
PT-AP-2000
6
<PAGE>
DO NOT DETACH unless Questions 21(a), 21(b)
and 21(c) are answered in the negative.
If the answers are positive or incomplete, the agent is not authorized to
deliver this agreement, and this agreement shall be ineffective.
Temporary Insurance Agreement (To be given to Applicant)
Used with 401(k) and worksite marketing only for Pension Trust product L-97
================================================================================
The death benefit under this Agreement is the face amount applied for in an
application with the same date as number as this Agreement on the life of
____________________________, herein called the `Proposed Insured." This death
benefit, together with any insurance pending issue with the Company or GIAC, may
not exceed $50,000. The maximum period of coverage is 60 days.
Temporary Insurance Coverage - Maximum of $50,000.
If the Proposed Insured dies during the period covered by this Agreement, the
Company or GIAC will pay a death benefit to the beneficiary designated in the
application. The amount of the death benefit will be the lesser of:
o the face amount of insurance applied for;
o $50,000
This death benefit, together with any insurance pending issue with the Company
or GIAC, may not exceed $50,000.
Date Coverage Begins
Temporary Insurance coverage under this Agreement will begin on the later of:
o the date of this Agreement;
o the date of this application.
Date Coverage Terminates - 60-Day Maximum
Temporary insurance coverage under this Agreement will terminate on the earliest
of:
o the 60th day after the temporary insurance coverage begins under this
Agreement;
o the issue date of the policy applied for;
o the date a policy, other than as applied for, is offered to the applicant;
o the date the Company or GIAC declines the application;
o the date any policy issued under the application is refused by the
applicant.
Conditions and Limitations
o No insurance will take effect under this Agreement if the Proposed
Insured's death results from suicide. The Company's or GIAC's liability
will be limited to the premiums paid.
o No person, except the President, a Vice President or Secretary of the
Company or GIAC has the authority to alter or modify the provisions of
this Agreement.
Signed at ______________________________________ on ___________________________
CITY AND STATE MONTH DAY YEAR
Signature of Agent __________________ Signature of Owner/Applicant ____________
PT-AP-2000
================================================================================
7
<PAGE>
COMPLETE PAGES 8 AND 9
IF INSURANCE APPLIED FOR IS NOT GUARANTEED ISSUE IN ITS ENTIRETY
================================================================================
25. Has any application for life, accident or health insurance or
reinstatement of any such insurance on the life of the Proposed Insured
ever been declined, postponed, rated-up, or in any way modified?
|_| Yes |_| No
If "Yes," explain and give date and company under "Remarks."
- --------------------------------------------------------------------------------
26. Is there now pending any application for life, accident or health
insurance, or reinstatement of a policy on the life of the Proposed
Insured? |_| Yes |_| No
If "Yes," explain and give amounts, date and company under "Remarks."
- --------------------------------------------------------------------------------
27. List below total insurance now on life of Proposed Insured.
- --------------------------------------------------------------------------------
Year Issued Company Amount Plan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28. Previous Residence
Remarks
- --------------------------------------------------------------------------------
29. Current Occupation:_______________________________________________________
Former occupation (if changed within two years):__________________________
Previous business address (if changed within two years) __________________
- --------------------------------------------------------------------------------
30. Does Proposed Insured contemplate:
A. Changing occupation? |_| Yes |_| No
B. Travel or residence outside the U.S.? |_| Yes |_| No
If either question is answered "Yes," give details under "Remarks."
- --------------------------------------------------------------------------------
31. Has the Proposed Insured:
A. Made any aerial flights except as a fare-paying passenger within the
past three years? |_| Yes |_| No
B. Any intention to make any such flights? |_| Yes |_| No
If either question is answered "Yes," complete Aviation Supplement
================================================================================
PT-AP-2000
8
<PAGE>
================================================================================
32. Does the Proposed Insured plan to participate in, or has he/she within the
past 3 years, participated in auto, boat, snowmobile or motorcycle racing,
skin or scuba diving, parachuting or skydiving, hang gliding or mountain
or rock climbing? |_| Yes |_| No
(If "Yes," complete Avocation Supplement)
- --------------------------------------------------------------------------------
33. A. Does the Proposed Insured ride a motor vehicle? |_| Yes |_| No
If "yes," give Driver's License Number ________________ State ___________
B. Within the past 3 years, has the Proposed Insured been convicted of any
motor vehicle moving violations or had his/her driver's license suspended
or revoked? (If "Yes," complete Driving Supplement) |_| Yes |_| No
AUTHORIZATION TO OBTAIN INFORMATION
Investigate Consumer Report. I authorize The Guardian Life Insurance Company of
America or The Guardian Insurance & Annuity Company, Inc. to obtain or have
prepared an investigative consumer report as described in the notice given to
me.
Medical record and other information. I authorize any physician, medical
practitioner, hospital, clinic, other health facility, consumer reporting
agency, the Medical Information Bureau, insurance or reinsurance company, or
employer to release any and all medical and non-medical information in its
possession about me to The Guardian Life Insurance Company of America or The
Guardian Insurance & Annuity Company, Inc. or its legal representatives. Medical
information means all information in the possession of or derived from providers
of health care regarding my medical history, mental or physical condition, or
treatment. I agree that this authorization shall be valid for two and one half
years from the date shown below and that a copy of the authorization shall be as
valid as the original. I know that I may request and receive a copy of this
authorization.
I understand The Guardian Life Insurance Company of America or The Guardian
Insurance & Annuity Company, Inc. will use the information obtained by this
authorization to determine eligibility for insurance or eligibility for benefits
under an existing policy. Guardian will not release any information obtained to
any person or organization except to reinsurance companies, the Medical
Information Bureau, or other persons or organizations performing business or
legal services in connection with my application, claim, or as may be lawfully
permitted or required, or as I may further authorize.
I acknowledge receipt of Guardian's notice regarding its Insurance Information
Practices, the Fair Credit Reporting Act, the Medical Information Bureau, and
Medical Records.
Signed this _______ day of __________, ____ _________________________________
Year Signature of Proposed Insured
PT-AP-2000.
9
<PAGE>
- --------------------------------------------------------------------------------
Telephone Interview Information
A telephone interview may be necessary to verify or supplement information given
to us on your application.
This interview may be made from our Home office or from a consumer reporting
agency by a trained interviewer acting on our behalf.
Please enter the information requested below so we can call you at a time and
place convenient to you.
Name ___________________________________________________________________________
First M.I. last
Telephone: Home: _________ _____ _________ Business: _________ _____ _________
Area Code Area Code
Preferred place to call: |_| Home |_| Business
Preferred Time to Call:
|_| Morning (Local Time) _____ AM
|_| Afternoon (Local Time) _____ PM
|_| Evening (Local Time) _____ PM
- --------------------------------------------------------------------------------
10
<PAGE>
Complete Pages 11 and 12 only if, in accordance with Company or GIAC rules,
entire amount of insurance applied for may not be considered on a guaranteed
issue basis, but may be considered without a medical examination.
APPLICATION TO |_| The Guardian Life Insurance Company of America (the Company)
|_| The Guardian Insurance & Annuity Company, Inc. (GIAC)
NON-MEDICAL SUPPLEMENT
- --------------------------------------------------------------------------------
1. a. Name and address of your personal physician ______________________________
(If none, so state) ______________________________________________________
b. Date and reason last consulted? __________________________________________
__________________________________________________________________________
c. What treatment or medication was given or recommended? ___________________
__________________________________________________________________________
Proposed Insured
Height _______ ft. __________ in.
Weight _______ lbs. By scale |_|
Estimated |_|
Weight change past year
|_| Gain |_| Loss ______ lbs.
Explain below
- --------------------------------------------------------------------------------
2. Have you ever had or been treated for: Yes No
a. dizziness, convulsions, paralysis or stroke, mental or
emotional problems; any disease or disorder of the
brain or nervous system? |_| |_|
b. shortness of breath, persistent hoarseness of cough;
asthma, emphysema, tuberculosis; any other disease or
disorder of lungs or respiratory system? |_| |_|
c. chest pain or discomfort, palpitation, elevated blood
pressure, rheumatic fever, heart murmur or any other
disease or disorder of the heart or blood vessels? |_| |_|
d. ulcer, indigestion, hernia, colitis or any other
disease or disorder of the stomach, intestines,
rectum, liver, gall bladder, pancreas or spleen? |_| |_|
e. sugar, pus, albumin or blood in the urine; venereal
disease; any disease or disorder of the kidneys,
bladder, prostate, genital organs, breasts? |_| |_|
f. diabetes; thyroid or other glandular disease or
disorder? |_| |_|
g. arthritis, gout or any disease or disorder of the
joints, muscles or bones? |_| |_|
h. cancer or tumor of any kind, growth, unexplained
bleeding? |_| |_|
i. anemia or other disease or disorder of the blood? |_| |_|
j. any disease or disorder of skin, ears, eyes, nose or
throat or any impairment of sight or hearing? |_| |_|
k. any injury, disease, deformity, abnormality or
disorder not listed above? |_| |_|
- --------------------------------------------------------------------------------
3. Have you ever used drugs other than as prescribed by a
physician, or been advised to have counseling or
treatment for alcohol or drug use? |_| |_|
- --------------------------------------------------------------------------------
4. Have you smoked cigarettes in the last twenty-four
months? |_| |_|
- --------------------------------------------------------------------------------
5. Are you now under observation, receiving treatment, or
taking medication? |_| |_|
- --------------------------------------------------------------------------------
6. Other than above, have you within the past five years:
a. had a checkup, consultation, illness, injury or
surgery? |_| |_|
b. been a patient in a hospital, clinic, sanatorium, or
other medical facility? |_| |_|
c. had electrocardiogram, x-ray, other diagnostic test? |_| |_|
d. been advised to have any diagnostic test,
hospitalization, or surgery which was not completed? |_| |_|
- --------------------------------------------------------------------------------
7. a. Have you ever had any tumor or disorder of female
organs or complications of pregnancy? |_| |_|
b. Are you now pregnant? If "Yes," give expected delivery date. _____________
- --------------------------------------------------------------------------------
8. Do you have a family history of: diabetes, cancer, high
blood pressure, heart disease, mental illness or suicide? |_| |_|
- --------------------------------------------------------------------------------
Age if Cause of Age at
9. Living Death Death
- --------------------------------------------------------------------------------
Father
- --------------------------------------------------------------------------------
Mother
- --------------------------------------------------------------------------------
Brothers and Sisters
No. Living _________
No. Dead _________
- --------------------------------------------------------------------------------
PT-AP-2000
11
<PAGE>
DETAILS of "yes" answers. IDENTIFY QUESTION NUMBER. CIRCLE APPLICABLE ITEMS:
Include diagnoses, dates, durations and names and addresses of all attending
physicians and medical facilities.
- --------------------------------------------------------------------------------
I represent that all the statements and answers above are complete and true to
the best of my knowledge and belief.
Dated at ___________________ on ________________________
Month Day Year
_____________________________
Signature of Proposed Insured
_____________________________
Soliciting Agent (witness)
AUTHORIZATION
Medical record and other information. I authorize any physician, medical
practitioner, hospital, clinic, other health facility, consumer reporting
agency, the Medical Information Bureau, insurance or reinsurance company, or
employer to release any and all medical and non-medical information in its
possession about me to The Guardian Life Insurance Company of America or The
Guardian Insurance & Annuity Company, Inc. or its legal representatives. Medical
information means all information in the possession of or derived from providers
of health care regarding my medical history, mental or physical condition, or
treatment. I agree that this authorization shall be valid for two and one half
years from the date shown below and that a copy of the authorization shall be as
valid as the original. I know that I may request and receive a copy of this
authorization.
I understand The Guardian Life Insurance Company of America or The Guardian
Insurance & Annuity Company, Inc. will use the information obtained by this
authorization to determine eligibility for insurance or eligibility for benefits
under an existing policy. The Guardian Life Insurance Company of America or The
Guardian Insurance & Annuity Company, Inc. will not release any information
obtained to any person or organization except to reinsurance companies, the
Medical Information Bureau, or other persons or organizations performing
business or legal services in connection with my application, claim, or as may
be lawfully permitted or required, or as I may further authorize.
I acknowledge receipt of The Guardian Life Insurance Company of America's or The
Guardian Insurance & Annuity Company, Inc.'s notice regarding its Insurance
Information Practices, the Fair Credit Reporting Act, the Medical Information
Bureau, and Medical Records.
___________ X__________________________ X______________________________
Date Witness Signature of Proposed Insured
PT-AP-2000
12
EXHIBIT - 99.1.A (11)(b)
ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Description of the
Issuance, Transfer and Redemption Procedures for FPVL Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
Under the Investment Company Act of 1940
and
Method of Computing Adjustments in
Payment and Cash Values
Upon Conversion to Fixed Benefit Life Policies
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)
Under the Investment Company Act of 1940
This document sets forth the administrative procedures that will be
followed by The Guardian Insurance & Annuity Company, Inc. ("GIAC") in
connection with the issuance of its Flexible Premium Adjustable Survivorship
Variable Life Insurance Policy with (the "Policy/Policies"), the transfer of
assets held under the Policies, and the redemption by Policyowners of their
interests in said Policies. This document also explains the method that GIAC
will follow in making cash adjustments when a Policy is exchanged for a
fixed-benefit life insurance policy. Defined terms indicated by initial upper
case letters have the same meaning herein as in the registration statement on
Form S-6 for the Policies and the Separate Account through which they are issued
(Reg. No. 333-92475).
<PAGE>
I. Procedures Relating to Issuance of the Policy*
A. Premiums and Underwriting Standards
Minimum Annual Premiums for GIAC's Policy will not be the same for all
owners. Insurance is based on the principle of pooling and distribution of
mortality risks, which assumes that each owner pays premiums commensurate with
the insured's mortality risk as actuarially determined, reflecting factors such
as age, sex, health and occupation. A uniform premium for all insureds would
discriminate unfairly in favor of those insureds representing greater risks.
Although there will be no uniform Minimum Annual Premium for all insureds, there
will be a single price for all insureds of the same age and sex who are within
the same risk classification. In addition to a Minimum Annual Premium, a Policy
will also have a Planned Premium which is the premium the policyowner plans to
pay on a regular basis. Neither the Minimum Annual Premium nor the Planned
Premium is required to be paid, but payment of the Minimum Annual Premium during
the first three policy years will keep the No Lapse Guarantee in effect during
that period.
The Policy will be offered and sold pursuant to established premium
schedules and underwriting standards and in accordance with state insurance
laws. The Minimum Annual Premium and any additional benefits acquired by rider
to the Policy that are to be paid by a Policyowner will be specified in the
Policy issued to such owner.
- ----------
* The term "Policy" refers to the Policy described in the Prospectus (contained
in the registration statement to which this document is an exhibit) exclusive of
any Additional Benefit Riders acquired by the Policyowner.
-2-
<PAGE>
B. Application and the Processing of Policy Premium Payments
When a completed application is received, GIAC will follow certain
insurance underwriting (i.e., evaluation of risk) procedures designed to
determine whether the proposed insureds are insurable. This process may involve
such verification procedures as medical examinations, and may require that
further information be provided about the proposed insureds before a
determination can be made. A Policy will not be issued until this underwriting
procedure has been completed. Permanent coverage under a Policy begins when all
underwriting requirements have been met, the Initial Premium has been paid, and
the Policy has been delivered while the insureds are living.
Owners of certain fixed-benefit life insurance policies issued by GIAC or
its parent, The Guardian Life Insurance Company of America, may be able to
purchase the Policy (i) without evidence of insurability, by exchanging their
present policies or (ii) without evidence of insurability, or with simplified
underwriting, by exercising applicable riders to their fixed-benefit life
insurance policies. Policyowners who elect to convert to a Park Avenue Life SVVL
policy may receive a credit upon conversion in an amount up to one Minimum
Annual Premium.
The Policy Date is the date as of which the insured's Age is determined.
It is the date when the Policy is issued. The Policy Date is used to measure
Policy months and Policy years.
GIAC will permit a policy to be backdated, upon request if it would allow
the policyowner to qualify for a lower premium because the insureds were younger
on an earlier policydate, but only to a Policy Date not earlier than six months
prior to the date the application is signed. To backdate a policy, GIAC will
require the payment of all Policy premiums that would have been due had the
application date coincided with the backdated Policy Date. Also, on the Issue
Date, all Monthly Deductions for the period from the backdated Policy Date to
the Issue Date will be deducted.
-3-
<PAGE>
GIAC credits and allocates any payment received on or before the Issue
Date to the investment divisions of the Separate Account (i.e., the Variable
Investment Options) chosen by the Policyowner and/or the Fixed-Rate Option as of
the Issue Date. Only the Net Premium amount will be allocated among the Variable
Investment Options and the Fixed-Rate Option. The Net Premium is the premium
minus the Premium Charge which is described in the prospectus. Once a Policy is
in force, GIAC credits and allocates that portion of any payment that is used to
pay a Policy premium as of the Business Day such payment is received if it
receives such a payment before the close of business at its Customer Service
Office. After payment of the Initial Premium, premiums may be paid at any time
and in any amount subject to certain limitations.
II. Procedures Relating to Transfers Among Investment Divisions
The Account is subdivided into investment divisions which correspond to
the mutual funds (collectively referred to as the "Funds") currently offered
under the Policies. Each of the Funds is registered under the Investment Company
Act of 1940 as an open-end management investment company.
Net Premiums under the Policy are allocated to the investment divisions
designated in the application, or as changed in writing by the Policyowner.
The Policyowner may transfer all or a portion of the unloaned Policy
Account Value among the Account's investment divisions as often as he/she
wishes. However, the number of options in which the Policy Account Value may be
invested or held at any one time, including the Fixed-Rate Option, cannot exceed
20, and GIAC reserves the right to limit such transfers to no more frequently
than once every 30 days. Transfers may be requested in writing or by telephone.
Transfers are effective as of the end of the Business Day on which the request
is received. The minimum transfer amount is the lesser of $500 or the entire
amount held in the investment division from which GIAC effects a transfer.
-4-
<PAGE>
The Policyowner may elect to have designated dollar amounts automatically
transferred on each Monthly Date from The Guardian Cash Fund Investment Division
to one or more of the other investment divisions or the Fixed-Rate Option for a
minimum of 12 months. The minimum automatic transfer amount is $100 per
receiving option.
III. Procedures Relating to Redemptions Under the Policy
A. Partial Withdrawals
After the first Policy year and while an insured is living, the
Policyowner may take withdrawals from the Net Cash Surrender Value. The minimum
net partial withdrawal amount is $500. All partial withdrawals will reduce the
Policy Account Value by the amount of the partial withdrawal. GIAC may limit the
number of partial withdrawals made in a policy year to 12.
Any portion of a partial withdrawal which exceeds the amount eligible for
a reduction-free partial withdrawal, as described below, will reduce the Face
Amount. When the Face Amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied against the Face Amount provided by the most recent
increase, then against the next most recent increases successively and finally
against the additional sum insured and the basic sum insured portions of the
Initial Face Amount. GIAC will calculate the amount eligible for a
reduction-free partial withdrawal as of date it receives the policyowner's
written request for a partial withdrawal as follows:
Under death benefit option 1, the amount of a reduction-free partial
withdrawal is any positive amount resulting from:
(a) the Policy Account Value, minus
-5-
<PAGE>
(b) the Face Amount divided by the applicable death benefit factor set forth
in the policy.
Under death benefit option 2, all partial withdrawals are reduction-free.
Under death benefit option 3, the free partial withdrawal amount is the
greater of:
(a) your Net Accumulated Premiums immediately prior to the partial withdrawal;
and
(b) an amount calculated as if death benefit option 1 were in effect.
The requested partial withdrawal amount will be deducted from the Variable
Investment Options specified in the Policyowner's request as of the Business Day
of the Policyowner's request, then proportionately from all other Variable
Investment Options and, finally, from the Fixed-Rate Option. Payment will
typically be made within seven days of the date that GIAC received the
Policyowner's partial withdrawal request. After effecting a partial withdrawal,
the remaining Cash Surrender Value must be sufficient to cover Monthly
Deductions for three months.
B. Face Amount Decreases and Increases
Provided at least one insured is alive, after the first Policy year, the
Policyowner may ask GIAC to decrease the Face Amount of his/her Policy. The
minimum reduction is $5,000. The reduction will take effect on the Monthly
Processing Date coinciding with or next following the date that GIAC approves
the change.
-6-
<PAGE>
GIAC will not deduct a surrender charge if the Face Amount is reduced. The
Minimum Annual Premium, Policy Account Value, Monthly Deductions, Target
Premiums, and any benefits provided under additional benefit riders will
generally decrease after a Face Amount reduction. The surrender charge will not
change and the policy account value must always be greater than the full
surrender charge. When the Face Amount of a Policy is based on one or more
increases subsequent to issuance of the Policy, a requested decrease in Face
Amount will be applied against the Face Amount provided by the most recent
increase, then against the next most recent increases successively, the
Additional Sum Insured portion of the Initial Face Amount and, finally, against
the remainder of the Initial Face Amount.
Provided both insureds are living, on any Policy Anniversary until the
Policy Anniversary nearest the younger insured's 70th birthday, a Policyowner
may ask GIAC to increase the Face Amount of his/her Policy. The minimum increase
is $10,000. The increase will take effect on the Policy Anniversary following
GIAC's receipt of the request, provided the insured is alive on that date.
The increase will be issued as a separate Policy Segment with separate and
distinct underwriting classes, cost of insurance rates, surrender charges,
administrative charges, premium charges, Target Premium and minimum annual
premium. Premiums will be allocated to the Initial Face Amount and each Policy
Segment in amounts not to exceed the Target Premium for each on an annual basis,
such that when the sum of premiums paid during the policy year exceeds the
Target Premium for the Initial Face Amount, the premium will then be allocated
to the first Policy Segment. When, in a policy year, the sum of premiums paid
exceeds the sum of all applicable Target Premiums, the excess premium will be
allocated pro-rata to the Target Premium for the Initial Face Amount and each
Policy Segment.
An increase in the Face Amount will usually result in the policy's being
subject to new surrender charges. The new surrender charges will be computed as
if a new policy were being purchased for the increase in Face Amount and a new
surrender charge will apply to the Policy Segment resulting from an increase.
-7-
<PAGE>
No additional premium is required for a Face Amount increase. However, a
premium payment may be necessary to prevent the Policy from going into default,
since new surrender charges would reduce the Net Cash Surrender Value of the
Policy.
C. Policy Loans
While either insured is alive, a Policyowner may borrow all or part of a
Policy's "loan value," by assigning the Policy to GIAC as security for the loan.
A Policy's loan value is 90% of the Cash Surrender Value on the date that GIAC
receives a proper, written loan request (which includes an assignment of the
Policy) at its Customer Service Office, minus any then outstanding Policy Debt
and minus the amount of interest due on the outstanding Policy Debt and the
amount to be borrowed at the next policy anniversary. The sum of any outstanding
loan amounts plus accrued loan interest is the Policy Debt. Policy loan proceeds
will ordinarily be paid within seven days of the date that GIAC received the
loan request. The minimum loan amount is $500.
When a Policyowner takes a loan, GIAC transfers the amount of the loan
from the Variable Investment Options and the Fixed-Rate Option into a Loan
Account within GIAC's general account. GIAC will transfer amounts held in the
Variable Investment Options in accordance with the policyowner's instructions as
of the date it received the loan request. Any excess amount will be transferred
from the fixed-rate option only after all variable options have been exhausted.
Amounts in the Loan Account earn interest from the date of transfer at a minimum
effective annual rate of 4%, which is credited to the Loan Interest Account.
GIAC charges the Policyowner interest on all outstanding loans at an
annual rate of 5% until the twentieth Policy Anniversary, at which time the
annual rate decreases to 4.5% for all existing and new loans. Interest accrues
daily and is payable in arrears on Policy Anniversaries. If interest is not paid
when due on each Policy Anniversary, GIAC transfers the required amount from the
Loan Interest Account to the Loan Account. Any amount remaining in the Loan
Interest Account after the transfer is transferred to the Variable Investment
Options and the Fixed-Rate Option in accordance with the current premium
allocation instructions. If the amount in the Loan Interest Account is not
sufficient to cover the interest due, any deficiency will be transferred
proportionately from the amounts in the Variable Investment Options and the
Fixed-Rate Option.
-8-
<PAGE>
The Policyowner may repay all or part of the Policy Debt. The minimum loan
repayment amount is the lesser of $100, unless the repayment accompanies the
then outstanding Policy Debt.
When GIAC receives a loan repayment, other than a required loan repayment,
it applies that repayment first to the payment of loan interest due but not yet
capitalized, then to reduce amounts in the Loan Account, and then to policy
interest accrued since the last policy anniversary but not yet due. GIAC credits
any repayment applied to reduce amounts in the Loan Account to the Variable
Investment Options and the Fixed-Rate Option according to the Policy owner's
current allocation instructions.
If the Policy Debt exceeds the Cash Surrender Value on a Monthly
Processing Date, the Policy could lapse. GIAC will notify the Policyowner that a
specified loan repayment is required to keep the Policy in force, unless the No
Lapse Guarantee is in effect.
D. Surrender
If either insured is alive, the Policyowner may surrender the Policy by
submitting to GIAC a written and signed request (in a form acceptable to GIAC)
together with the Policy or an acceptable affidavit of loss. GIAC will normally
pay the Net Cash Surrender Value as of the Business Day on which it received the
surrender request within seven days. All insurance coverage ends as of the
Business Day that GIAC computes the Net Cash Surrender Value for surrender.
-9-
<PAGE>
The Net Cash Surrender Value on any given date is the Policy Account Value
minus any surrender charge, minus any Policy Debt. GIAC assesses a surrender
charge if a Policy is surrendered when a surrender charge is in effect. This
charge is described in the prospectus for the Policy.
The Net Cash Surrender Value can be paid in a single sum or under one of
the payment options described in the prospectus for the Policy. At least $5,000
must be applied under each option selected, and periodic payments under a
payment option must be at least $50. Other restrictions and limitations are set
forth in the Policy and described in the prospectus.
If either Policy premium or required loan repayment (see above) remains
unpaid by the end of a 61-day grace period from its due date, the Policy lapses
as of the end of the grace period unless the No Lapse Guarantee is in effect. If
the No Lapse Guarantee is in effect, the Policy will not lapse during the first
three policy years even if the Policy's Net Cash Surrender Value is insufficient
to meet the Monthly Deductions due on a Monthly Processing Date. Once the Policy
lapses, the Policyowner may take steps to surrender the Policy for its Net Cash
Surrender Value. The No Lapse Guarantee cannot be reinstated once terminated.
-10-
<PAGE>
E. Death Claims
GIAC will normally pay the death proceeds under a Policy to the
beneficiary within seven (7) days after it has received due proof of the
insured's death and all other required information or documentation necessary to
make payment.**
The Policy provides three death benefit options. The Policyowner must
choose an option on the Policy application. Regardless which death benefit
option is chosen by the policyowner, after the Policy Anniversary nearest to the
younger insured's 100th birthday, the death benefit is equal to the Policy
Account Value.
The death benefit provided under Option 1 is the greater of:
* the Face Amount on the Monthly Processing Date preceding the
surviving insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
surviving insured's death.
The death benefit provided under Option 2 is the greater of:
* the Face Amount plus the Policy Account Value as of the Monthly
Processing Date preceding the surviving insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
surviving insured's date of death.
The death benefit provided under Option 3 is the greater of:
* the Face Amount plus Net Accumulated Premiums in effect on the date
of the surviving insured's death
- ----------
** State insurance laws impose various requirements, such as receipt of a tax
waiver, before an insurer may pay a death benefit. In addition, payment of the
death benefit is subject to the provisions of the Policy regarding suicide and
incontestability.
-11-
<PAGE>
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the monthly processing date preceding the
surviving insured's date of death.
Any partial withdrawals taken between the Monthly Processing Date and the date
of the surviving insured's death will reduce the death benefit under Option 1, 2
or 3 by the amount of the partial withdrawal and any applicable surrender
charge. Under death benefit Option 3, any premiums paid between the Monthly
Processing Date and the date of the surviving insured's death will increase
death benefit.
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any Monthly Processing Date is determined by the Guideline Premium and
Cash Value Corridor Test. The minimum death benefit required on any Monthly
Processing Date is the Policy Account Value on the Monthly Processing Date
multiplied by the factor shown in the Table of Death Benefit Factors in the
Policy.
On or after the first Policy Anniversary, the Policyowner may change the
death benefit option in effect for his/her Policy once each Policy year,
provided either insured is alive. Evidence of insurability is required to change
from Option 1 to Option 2. No changes from Option 1 or 2 to Option 3 will be
permitted.
The death proceeds payable to the beneficiary will include any proceeds
provided by additional benefit riders, but will be reduced by any outstanding
Policy Debt. If the insured dies during the grace period, GIAC will calculate
the death benefit as though any required premium had been paid and then deduct
the portion of such premium that relates to periods through the Policy month of
death from the payable death proceeds.
GIAC will pay the death benefit from its general account, and will
transfer assets from the Separate Account to its general account in an amount
equal to the reserve liability applicable to the Policy held in the Account. Any
excess of the insurance amount over the Face Amount will be paid out of the
general account reserve maintained for that purpose.
-12-
<PAGE>
The death proceeds can be paid in a single sum or under one of the payment
options described in the prospectus for the Policy. The Policyowner may elect
how death proceeds are to be paid while the insured is alive. If no election is
in effect when the insured dies, the beneficiary makes the election. An option
in effect at death may not be changed after death. At least $5,000 must be
applied under each option selected, and periodic payments under a payment option
must be at least $50. Other restrictions and limitations are set forth in the
Policy and described in the prospectus.
IV. Deferment of Benefits
GIAC can delay the payment of death proceeds if the Policy is being
contested and may postpone calculating or paying any benefit or effecting other
Policy transactions involving any Policy Account Value held in the Separate
Account's investment divisions if: (i) the New York Stock Exchange is closed for
other than weekends or holidays, or trading is restricted; (ii) the Securities
and Exchange Commission determines that a state of emergency exists which may
make Policy transactions impracticable; or (iii) at any other time when one or
more of the Variable Investment Options' corresponding Funds lawfully suspends
payment or redemption of their shares.
V. Cash Adjustment Upon Exchange of Policy
The Policyowner may exchange all or a portion of the Policy for a
permanent fixed-benefit policy on the lives of the insureds offered by GIAC or
its affiliate, without submission of new evidence of insurability. Once
exercised, this right terminates. The new policy will have a Face Amount not in
excess of the Face Amount of the Policy being exchanged and not less than the
minimum face amount under GIAC's or its affiliate's rules. If only a portion of
the Policy is exchanged, the remaining face amount of this Policy must meet
GIAC's minimum face amount requirements. The new policy will have the same
Policy Date, and the insureds' Ages will be retained for the new policy. The
underwriting classes of the new policy will be comparable to the underwriting
classes of the most recent policy segment. This exchange privilege is designed
to permit a Policyowner to opt out of this Policy which provides benefits that
vary with investment results in order to obtain a similar policy which provides
a fixed benefit.
-13-
<PAGE>
The exchange may result in a cost or credit to be paid. The cost or credit
will reflect any differences in cash values and premiums between the exchanged
portion of the policy and the new policy.
-14-
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter L. Hutchings, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Peter L. Hutchings
----------------------------
Peter L. Hutchings
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Leo R. Futia
----------------------------
Leo R. Futia
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Philip H. Dutter, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Philip H. Dutter
----------------------------
Philip H. Dutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward K. Kane, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Edward K. Kane
----------------------------
Edward K. Kane
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frank J. Jones, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Frank J. Jones
----------------------------
Frank J. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Arthur V. Ferrara
----------------------------
Arthur V. Ferrara
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Joseph D. Sargent
----------------------------
Joseph D. Sargent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that William C. Warren, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ William C. Warren
----------------------------
William C. Warren
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Bruce C. Long, whose
signature appears below, constitutes and appoints Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated April 7, 2000
/s/ Bruce C. Long
----------------------------
Bruce C. Long
