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File Nos. 811-4092
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No.___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 [X]
FIRST VARIABLE ANNUITY FUND E
-----------------------------
(Exempt Name of Registrant)
FIRST VARIABLE LIFE INSURANCE COMPANY
-------------------------------------
(Name of Depositor)
10 Post Office Square 12th Floor
Boston, MA 02109
---------------------------------------------------- -----
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's telephone number including area code: (617) 457-6700
Name and Address of Agent for Service
-------------------------------------
Arnold R. Bergman
Vice President - Legal and Administration
First Variable Life Insurance Company
10 Post Office Square, 12th Floor
Boston, MA 02109
Copies to:
Lynn K. Stone
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Calculation of Registration Fee under the Securities Act of 1933:
$500 - Registrant is registering an indefinite number of securities under
the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
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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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FIRST VARIABLE ANNUITY FUND E
CROSS REFERENCE SHEET
(Pursuant to Rule 495(a))
<TABLE>
<CAPTION>
ITEM NO. IN
FORM N-4
PART A LOCATION
<C> <S> <C>
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions
Item 3. Synopsis or Highlights Highlights
Item 4. Condensed Financial Information Accumulation Unit Data; Financial
Statements
Item 5. General Description of Registrant, The Company; The Separate Account;
Depositor and Portfolio Companies Variable Investors Series Trust; Federated
Insurance Series
Item 6. Deductions Charges and Deductions
Item 7. General Description of Variable The Contracts
Annuity Contracts
Item 8. Annuity Period Annuity Provisions
Item 9. Death Benefit The Contracts; Annuity Provisions
Item 10. Purchases and Contract Value Purchase Payments; Contract Value
Item 11. Redemptions Withdrawals
Item 12. Taxes Tax Considerations
Item 13. Legal Proceedings Legal Proceedings
Item 14. Table of Contents of Statement of Table of Contents of Statement of
Additional Information Additional Information
</TABLE>
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<TABLE>
<CAPTION>
ITEM NO. IN
FORM N-4
PART B LOCATION
<C> <S> <C>
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Service Provider
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Performance
Information
Item 22. Annuity Payment Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PART A
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[LOGO]
Marketing and Executive Office: Variable Service Center
10 Post Office Square P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
(800) 845 - 0689
CAPITAL SIX VA
A VARIABLE ANNUITY CONTRACT
FUNDED IN
FIRST VARIABLE ANNUITY FUND E
Prospectus
Dated:
This Prospectus describes the Capital 6 contract (the "Contract"), an
individual flexible payment deferred variable annuity contract issued by
First Variable Life Insurance Company (the "Company"). The Contract provides
for accumulation of Contract Values and payment of monthly annuity payments
on a fixed and variable basis. The Contract is designed for use by
individuals in tax-qualified retirement plans (a "Qualified Contract") or for
other long term savings and retirement purposes (a "Non-Qualified Contract").
Purchase Payments for a Contract may be allocated to the Company's segregated
investment account called First Variable Annuity Fund E (the "Separate
Account") or to the Company's Fixed Account. The Separate Account invests in
selected Portfolios of two mutual funds: Variable Investors Series Trust
("VIST") and Federated Insurance Series ("Federated"). The Portfolios
currently available under a Contract are: VIST High Income Bond, VIST
Multiple Strategies, VIST Common Stock, VIST U.S. Government Bond, VIST Tilt
Utility, VIST World Equity, VIST Growth & Income, VIST Small Cap and
Federated Prime Money Fund II. (See "Investment Options".) The Company
reserves the right, under certain circumstances, to delay the investment of
initial Purchase Payments in VIST Portfolios, but does not currently do so.
(See "Application and Issuance of a Contract".)
AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY FINANCIAL INSTITUTION, NOR IS A CONTRACT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN THE CONTRACT IS SUBJECT TO RISK
THAT MAY CAUSE THE VALUE OF THE OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE
CONTRACT IS SURRENDERED, THE VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE
PAYMENT.
This Prospectus contains information that an investor should know before
investing. A Statement of Additional Information about the Contract and the
Separate Account, which has the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information
i
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can be found on page __ of this Prospectus. For a copy of the Statement of
Additional Information, which is available at no cost, write the Company at
its Variable Service Center or call the number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
ii
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TABLE OF CONTENTS
PAGE
----
DEFINITIONS........................................................
HIGHLIGHTS.........................................................
FEE TABLES AND EXAMPLES............................................
ACCUMULATION UNIT DATA.............................................
THE COMPANY........................................................
THE SEPARATE ACCOUNT...............................................
INVESTMENT OPTIONS.................................................
Variable Investors Series Trust..................................
Federated Insurance Series.......................................
Fixed Account Option.............................................
Transfers Among Investment Options...............................
General Requirements..........................................
Systematic Transfers - Dollar Cost Averaging..................
Asset Rebalancing Program.....................................
Telephone Requests............................................
Restrictions on Transfers.....................................
Automatic Transfer of Small Accounts..........................
Changes to Investment Options....................................
CHARGES AND DEDUCTIONS.............................................
Administrative Charge............................................
Annual Contract Maintenance Charge...............................
Mortality and Expense Risk Charge................................
Optional Enhanced Death Benefit Charge...........................
Premium Taxes....................................................
Withdrawal Charge................................................
Withdrawal Charge Percentages.................................
Partial Withdrawals...........................................
Free Withdrawal Amount........................................
Waiver of Withdrawal Charge...................................
Other Charges and Deductions.....................................
Fund Expenses.................................................
Income Taxes..................................................
Special Service Fees..........................................
Elimination or Reduction of Charges and Expenses..............
THE CONTRACT.......................................................
Application and Issuance of a Contract...........................
Free Look Right...............................................
Delayed Investment Start Date.................................
Purchase Payments................................................
General Requirements..........................................
Conversion to Accumulation Units..............................
Automatic Investment Plan.....................................
Contract Value...................................................
Accumulation Unit Value.......................................
Fixed Account Value...........................................
Reports.......................................................
Ownership........................................................
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Assignment....................................................
Change of Designations...........................................
Owner.........................................................
Annuitant.....................................................
Beneficiary...................................................
Restriction on Qualified Contracts............................
Minimum Value Requirements.......................................
Termination of Small Accounts.................................
Transfer of Small Contract Value..............................
DEATH BENEFIT PROVISIONS...........................................
Death of the Annuitant...........................................
Death of the Owner...............................................
Basic Death Benefit...........................................
Bonus Death Benefit...........................................
Optional Enhanced Death Benefit...............................
Payment of Death Benefit.........................................
Owners Other than a Single Person................................
Beneficiaries Other than a Single Person.........................
ANNUITY PROVISIONS.................................................
Annuity Date.....................................................
Annuity Payments.................................................
Allocation....................................................
Amount........................................................
Annuitization Bonus...........................................
Variable Annuity Payments.....................................
Annuity Options..................................................
Option A. Life Annuity........................................
Option B. Life Annuity with Periods Certain of 60,
120, 180 or 240 Months.......................................
Option C. Joint and Survivor Annuity..........................
Option D. Joint and Contingent Annuity........................
Option E. Fixed Payments for a Period Certain.................
Misstatement of Age or Sex.......................................
WITHDRAWALS........................................................
Partial Withdrawals..............................................
Systematic Withdrawals...........................................
Tax Penalties and Restrictions...................................
Texas Optional Retirement Program................................
Suspension of Payments or Transfers..............................
PERFORMANCE INFORMATION............................................
TAX CONSIDERATIONS.................................................
General..........................................................
Death Benefits...................................................
Diversification..................................................
Multiple Contracts...............................................
Income Tax Withholding...........................................
Withdrawals from Non-Qualified Contracts.........................
Qualified Plans..................................................
H.R. 10 Plans.................................................
403(b) Annuities..............................................
Individual Retirement Annuities...............................
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Corporate Pension and Profit-Sharing Plans....................
Section 457 Plans.............................................
Withdrawals from Qualified Contracts.............................
Withdrawal Limitations on 403(b) Annuities.......................
Contracts Owned by Other than Natural Persons....................
OTHER MATTERS......................................................
Financial Statements.............................................
Distribution.....................................................
Legal Proceedings................................................
Transfers by Company.............................................
Voting Rights....................................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.......
iii
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DEFINITIONS
ACCOUNT - Fixed Account and/or one or more of the Sub-Accounts of the
Separate Account.
ACCUMULATION PERIOD - The period during which Purchase Payments may be made
prior to the Annuity Date.
ACCUMULATION UNIT - A unit of measure used to calculate the Contract Value of
a Sub-Account of the Separate Account prior to the Annuity Date.
ACCUMULATION UNIT VALUE or AUV - The value of an Accumulation Unit on a
Business Day.
ANNUITANT -The natural person on whose life Annuity Payments are based.
ANNUITY DATE -The date on which Annuity Payments begin.
ANNUITY PAYMENTS -The series of payments made to the Annuitant, or other
payee selected by the Owner, after the Annuity Date under the Annuity Option
elected.
ANNUITY PERIOD -The period after the Annuity Date during which Annuity
Payments are made.
ANNUITY UNIT - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.
BENEFICIARY -The person(s) or entity who will receive the death benefit.
BUSINESS DAY - Each day that the New York Stock Exchange is open for trading,
which is Monday through Friday, except for normal business holidays.
COMPANY - First Variable Life Insurance Company.
CONTRACT ANNIVERSARY - An anniversary of the Issue Date.
CONTRACT QUARTER - One quarter of a Contract Year. The first Contract
Quarter begins on the Issue Date and ends on the last Business Day of the
third contract month.
CONTRACT VALUE - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and in the Fixed Account.
CONTRACT YEAR - One year from the Issue Date and from each Contract
Anniversary.
DISTRIBUTOR - First Variable Capital Services, Inc., 10 Post Office Square,
Boston, MA 02109.
FIXED ACCOUNT - The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and
other segregated asset accounts.
FIXED ACCOUNT VALUE - The Owner's interest in the Fixed Account during the
Accumulation Period.
FIXED ANNUITY PAYMENTS- A series of payments made during the Annuity Period
which are guaranteed as to dollar amount by the Company.
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FUNDS - Variable Investors Series Trust and Federated Insurance Series, each
of which is an open-end management investment company in which the Separate
Account invests.
INVESTMENT OPTION - The Fixed Account or any of the Sub-Accounts of the
Separate Account which can be selected by the Owner of a Contract.
ISSUE DATE - The date on which the first Contract Year begins.
NON-QUALIFIED CONTRACTS - Contracts issued under retirement plans, or for
other purposes, which do not receive favorable tax treatment under Sections
401, 403(b) 408, or 457 of the Internal Revenue Code.
OWNER - The person, persons or entity entitled to all the ownership rights
under a Contract and in whose name a Contract has been issued.
PORTFOLIO - A Fund's separate and distinct class of shares that is available
as an underlying investment under a Contract.
PURCHASE PAYMENT - An amount paid to the Company to provide benefits under
the Contracts.
QUALIFIED CONTRACTS - Contracts issued under retirement plans which receive
favorable tax treatment under Sections 401, 403(b) 408, or 457 of the
Internal Revenue Code.
SEPARATE ACCOUNT - A separate investment account of the Company, designated
as First Variable Annuity Fund E, into which Purchase Payments or Contract
Values may be allocated.
SUB-ACCOUNT - A segment of the Separate Account which invests in a specified
Portfolio of one of the Funds.
VALUATION PERIOD - The period of time between the close of one Business Day
and the close of business for the next succeeding Business Day.
VARIABLE ACCOUNT VALUE - The Owner's interest in the Sub-Accounts of the
Separate Account during the Accumulation Period, which vary in amount with
the investment experience of each applicable Sub-Account.
VARIABLE ANNUITY PAYMENTS - A series of payments made during the Annuity
Period which vary in amount with the investment experience of each applicable
Sub-Account.
VARIABLE SERVICE CENTER - The Company's administrative service center for a
Contract is P.O. Box 1317, 1206 Mulberry Street, Des Moines, IA 50305-1317.
WITHDRAWAL VALUE - The value of a Contract that is available during the
Accumulation Period upon withdrawal or surrender. The Withdrawal Value is
also used to determine Annuity Payments that begin during the first 2
Contract Years. Withdrawal Value equals the Contract Value as of the date the
Company prices the transaction, less:
- - any applicable taxes not previously deducted; less
- - the Withdrawal Charge, if any; less
- - the Annual Contract Maintenance Charge, if any; less
- - the Optional Enhanced Death Benefit Charge, if any.
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HIGHLIGHTS
The Capital Six VA is an individual flexible payment variable annuity
contract (the "Contract.") The Owner may allocate Purchase Payments among
ten Investment Options under a Contract issued by First Variable Life
Insurance Company (the "Company.") Nine of these options are Sub-Accounts of
First Variable Annuity Fund E (the "Separate Account"), a segregated
investment account of the Company. Purchase Payments may also be allocated to
the Fixed Account of the Company.
Each Sub-Account invests exclusively in shares of a corresponding Portfolio
of a selected mutual fund (a "Fund.") The selected Funds are Variable
Investors Series Trust ("VIST") and Federated Insurance Series ("Federated.")
The Portfolios currently available are: VIST Common Stock, VIST Growth &
Income, VIST High Income Bond, VIST Multiple Strategies, VIST Small Cap, VIST
Tilt Utility, VIST U.S. Government Bond, VIST World Equity, and Federated
Prime Money Fund II (see "Investment Options.") Owners bear the investment
risk for any amounts allocated to a Sub-Account.
Owners have the right to return a Contract according to the terms of its
"free-look" right. The Company reserves the right to delay initial
investments of Purchase Payments in the VIST Portfolios in certain instances,
but it does not currently do so. (See "Application and Issuance of a
Contract.")
Purchase Payments and other Contract Value allocated to the Fixed Account are
guaranteed by the Company as to safety of principal and are credited a
minimum 3% rate of interest on an annual basis. The Company, in its
discretion, may credit a higher "current" interest rate. (See "Fixed Account
Option.")
There is a daily Administrative Charge which is equal to a percentage of the
daily net assets in each Sub-Account of the Separate Account for this class
of Contract. The annual rate for this charge is .25%. This charge
compensates the Company for costs associated with the administration of a
Contract and the Separate Account. (See "Charges and
Deductions--Administrative Charge.")
There is an Annual Contract Maintenance Charge of $30 each Contract Year
during the Accumulation Period. However, if the Contract Value on a Contract
Anniversary is at least $100,000, then no charge is taken. (See "Charges and
Deductions--Annual Contract Maintenance Charge.")
There is a daily Mortality and Expense Risk Charge which is equal to a
percentage of the daily net assets in each Sub-Account of the Separate
Account for this class of Contract. The annual rate for this charge is
1.25%. This charge compensates the Company for assuming the mortality and
expense risks under the Contracts. (See "Charges and Deductions--Mortality
and Expense Risk Charge.")
The Contract provides different forms of Death Benefits if the Owner dies
before the Annuity Date. (See "Death Benefit Provisions.") If an Optional
Enhanced Death Benefit is elected, there is a charge which is taken on each
Contract Anniversary during the Accumulation Period up to the earlier of the
Annuity Date or the Owner's 80th birthday. The charge is .35% of the
Contract Value on the Contract Anniversary. The charge is also taken on the
Annuity Date if the Annuity Date is other than a Contract Anniversary or at
the time of surrender if a Contract is surrendered during a Contract Year,
based on the Contract Value at that time. (See "Charges and Deductions --
Optional Enhanced Death Benefit Charge.")
3
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Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Purchase Payments or Contract Values. (See
"Charges and Deductions-- Premium Taxes.")
A Withdrawal Charge of up to 7% of Purchase Payments may be deducted during
the first 6 Contract Years for a withdrawal or surrender of all or a portion
of the Contract Value. The Withdrawal Charge will also apply if Contract
Value is applied to an Annuity Option within the first 2 Contract Years (See
"Annuity Provisions.") No Withdrawal Charge will be taken in any Contract
Year on a partial withdrawal unless the amount withdrawn exceeds the annual
Free Withdrawal Amount. The annual Free Withdrawal Amount is equal to 15% of
Purchase Payments. The Withdrawal Charge will vary in amount, depending upon
the Contract Year in which the Purchase Payment being surrendered was made.
(See "Charges and Deductions--Withdrawal Charge.")
A ten percent (10%) federal income tax penalty may be applied to the income
portion of any distribution from a Non-Qualified Contract before the Owner
reaches age 59 1/2, with certain exceptions. Separate tax withdrawal
penalties and restrictions apply to a Qualified Contract. Special
restrictions apply to distributions from a 403(b) annuity. (See "Tax
Considerations--Withdrawals from Non-Qualified Contracts," and "Withdrawals
from Qualified Contracts," and "Withdrawal Limitations on 403(b) Annuities.")
For a further discussion on the taxation of a Contract, see "Tax
Considerations" and "Tax Considerations--Diversification" for a discussion of
owner control of the underlying investments in a variable annuity contract.
VARIOUS CONTRACT RIGHTS, BENEFITS, AND INVESTMENT OPTIONS DESCRIBED IN THIS
PROSPECTUS MAY NOT BE AVAILABLE IN ALL JURISDICTIONS, OR MAY DIFFER BETWEEN
JURISDICTIONS TO MEET APPLICABLE LOCAL LAWS AND/OR REGULATIONS.
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FEE TABLE AND EXAMPLES
The charges and deductions under a Contract are summarized in the following
table. This table is designed to help an Owner understand direct and
indirect costs for a Contract, but should be read only in conjunction with
the detailed descriptions in the "Charges and Deductions" section of this
prospectus. The table assumes that the entire Contract Value is invested in
the Separate Account, and reflects expenses of the Separate Account as well
as the Portfolios. Owners should read the accompanying prospectuses of the
Funds carefully for further information of the expenses shown for each
Portfolio. In addition to the expenses listed below, a charge for premium
taxes may be applicable.
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (see Note 1 below) 7%, reducing by 1% each Contract
(as a percentage of Purchase Payment) Year after the Issue Date until
the beginning of the seventh
Contract Year, when the charge
is 0%.
ANNUAL CONTRACT MAINTENANCE CHARGE $30 per Contract Year if Contract
Value on a Contract Anniversary
is less than $100,000.
OPTIONAL ENHANCED DEATH BENEFIT CHARGE .35% (as a percentage of Contract
(see Note 2 below) Value at the time the charge is
taken each Contract Year until
earlier of surrender, Annuity Date
or the Owner's 80th birthday)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average Variable Account Value)
MORTALITY AND EXPENSE RISK CHARGE 1.25%
ADMINISTRATIVE CHARGE .25%
-----
Total Separate Account Annual Expenses 1.50%
FUNDS' ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
Federated
VIST VIST VIST VIST VIST VIST VIST VIST Prime
Common Growth Hi. Inc. Multiple Small Tilt US World Money
Stock & Bond Strat. Cap Utility Gov. Equity Fund II
Income Bond
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mgmt. Fees...... .70% .75% .70% .70% .85% .65% .60% .70% .55%
Other Operating
Expenses -
After Expense
Reimbursement .47% .50% .50% .50% .50% .50% .25% .50% .25%
(see Note 3) ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Annual
Expenses 1.17% 1.25% 1.20% 1.20% 1.35% 1.15% .85% 1.20% .80%
</TABLE>
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EXAMPLES
An Owner would pay the following expenses on a $1,000 investment in a
Contract, assuming a 5% annual return on assets and allocation of 100% of
Purchase Payments to the Portfolio shown:
a) upon surrender at the end of each time period (or if the Contract is
annuitized during the first 2 Contract Years);
b) if the Contract is not surrendered: (or if the Contract is annuitized
after the first 2 Contract Years).
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 YEAR 3 YEARS
------ -------
VIST Common Stock a) $122 $222
b) $ 57 $174
VIST Growth & Income a) $123 $224
b) $ 58 $176
VIST High Income Bond a) $122 $223
b) $ 58 $175
VIST Multiple Strategies a) $122 $223
b) $ 58 $175
VIST Small Cap a) $124 $227
b) $ 59 $179
VIST Tilt Utility a) $122 $222
b) $ 57 $173
VIST U.S. Government Bond a) $119 $213
b) $ 54 $164
VIST World Equity a) $122 $223
b) $ 58 $175
Federated Prime a) $118 $211
Money Fund II b) $ 54 $163
NOTES ON FEE TABLES AND EXAMPLES
1. After the second Contract Year, the entire Contract Value may be applied
to an Annuity Option and no Withdrawal Charge will be taken. In each
Contract Year during the Accumulation Period, an Owner may request a "partial
withdrawal" of an amount of up to 15% of Purchase Payments without a
Withdrawal Charge. Amounts so withdrawn do not reduce the Purchase Payments
subject to a withdrawal charge. The 15% free withdrawal has not been
factored into the Examples above, and is not available on a full surrender.
2. If an Optional Enhanced Death Benefit is elected by the Owner at time of
application for a Contract, the Company deducts an annual charge on each
Contract Anniversary during the Accumulation Period until the earlier of the
Annuity Date or the Owner's 80th birthday. Also, the charge is taken if the
Annuity Date is other than a Contract Anniversary or if a Contract is
surrendered during a Contract Year, based on the Contract Value at that time.
(See "Charges and Deductions - Optional Enhanced Death Benefit Charge.")
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3. First Variable Advisory Services Corp. ( "Investment Adviser" ) has
agreed through April 1, 1997 to reimburse Variable Investors Series Trust for
all operating expenses (exclusive of management fees) in excess of .50% of a
Portfolio's average net assets (.25% in the case of the U.S. Government Bond
Portfolio). Had the Investment Adviser not reimbursed expenses of the
Portfolios, for the year ended December 31, 1995, the VIST Annual Expenses
were 1.19% for the Common Stock Portfolio; 2.04% for the High Income Bond
Portfolio; 1.33% for the Multiple Strategies Portfolio; 1.51% for the Tilt
Utility Portfolio; 1.59% for the U.S. Government Bond Portfolio; and 1.67%
for the World Equity Portfolio. ACCUMULATION UNIT DATA
The following condensed financial information reflects the value of
Accumulation Units in a Sub-Account based on the 1.50% asset-based charge
under the Contracts described in this prospectus and under other contracts
offered by the Company with similar asset-based charges (Policy Form 20230).
PERIOD
ENDED
12/31/95
--------
COMMON STOCK SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.14
Number of Accumulation Units Outstanding 6,026
GROWTH & INCOME SUB-ACCOUNT
Beginning of Period (12/31/95) $10.00
End of Period $10.63
Number of Accumulation Units Outstanding 2,754
HIGH INCOME BOND SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.15
Number of Accumulation Units Outstanding 5,995
MULTIPLE STRATEGIES SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.17
Number of Accumulation Units Outstanding 1,905
SMALL CAP SUB-ACCOUNT
Beginning of Period (5/4/95) $10.00
End of Period $10.36
Number of Accumulation Units Outstanding 2,212
TILT UTILITY SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.62
Number of Accumulation Units Outstanding 918
U.S. GOVERNMENT BOND SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.30
Number of Accumulation Units Outstanding 7,532
WORLD EQUITY SUB-ACCOUNT
Beginning of Period (11/1/95) $10.00
End of Period $10.24
Number of Accumulation Units Outstanding 3,989
PRIME MONEY FUND II SUB-ACCOUNT*
*On the date of this Prospectus, the Sub-Account had not commenced
operations and no Accumulation Units were outstanding.
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THE COMPANY
First Variable Life Insurance Company (the "Company") is a stock life
insurance company which was organized under the laws of the State of Arkansas
in 1968. The Company is principally engaged in the annuity business. The
Company is licensed in 49 states, the District of Columbia and the U.S.
Virgin Islands. The Company is a wholly-owned subsidiary of Irish Life of
North America, Inc. ("ILoNA") which in turn is beneficially owned by Irish
Life plc ("Irish Life"). ILoNA also owns Interstate Assurance Company
("Interstate") of Des Moines, IA. Irish Life was formed in 1939 through a
consolidation of a number of Irish and British Life offices transacting
business in Ireland. In terms of assets, Irish Life controls over 50% of the
Irish domestic life insurance market. As Ireland's leading institutional
investor, it owns in excess of 10% of the leading Irish publicly traded
stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States and France. As of
the end of 1995, the Irish Life consolidated group had in excess of $11
billion in assets. ILoNA is a Delaware corporation, incorporated as Carrig
International, Inc. in 1986, which is the holding company for Interstate and
the Company.
The Company has an A- (Excellent) rating from A.M. Best, an independent firm
that analyzes insurance carries. This rating is assigned to companies that
have a strong ability to meet obligations to policyholders over a long period
of time. The Company also has an AA- rating from Standard and Poor's and an
AA rating from Duff & Phelps Credit Rating Co. on claims paying ability. The
financial strength of the Company may be relevant with respect of the
Company's ability to satisfy its Fixed Account obligations under the
Contracts.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Arkansas insurance law on December 4,
1979. This account has been designated First Variable Annuity Fund E (the
"Separate Account"). The Company has registered the Separate Account with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended.
The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with
the Contracts, credited to or charged against the Separate Account without
regard to other income, gains or losses of the Company. The Company's
obligations arising under a Contract are general obligations.
The Separate Account meets the definition of a "separate account" under the
federal securities laws.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of a selected Fund. Owners bear the
complete investment risk for Purchase Payments and Contract Value allocated
or transferred to a Sub-Account. Contract Values fluctuate in accordance
with the investment performance of the Sub-Account(s), and reflect the
imposition of fees and charges assessed under a Contract.
INVESTMENT OPTIONS
Owners of a Contract may allocate Purchase Payments and Contract Value to one
or more Sub-Accounts of the Separate Account and to the Fixed Account. Each
Sub-Account invests exclusively in
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a Portfolio of a selected Fund. A brief summary of the Funds and the
investment objectives of the currently available Portfolios is set forth
below. More comprehensive information, including a discussion of potential
risks, is found in the current prospectuses for the Portfolios which are
included with this prospectus. The prospectuses for the Funds may describe
other portfolios that are not available under a Contract. THERE IS NO
ASSURANCE THAT THE AVAILABLE PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
Investors should read this prospectus and the prospectuses for the Funds
carefully before investing. To obtain prospectuses for the Funds write the
Company at its Variable Service Center or call the number shown on the cover
page.
VARIABLE INVESTORS SERIES TRUST
Variable Investors Series Trust ("VIST") is an open-end management investment
company that was formed as a series trust to provide funding options for
variable life insurance and variable annuity contracts. Effective April 1,
1994, VIST retained First Variable Advisory Services Corp. ("FVAS") to manage
its assets. FVAS is a wholly-owned subsidiary of the Company and retains the
services of sub-advisers under agreements to manage the assets of the VIST
Portfolios. The sub-advisers for the VIST Portfolios currently available
under a Contract are: Value Line, Inc. with respect to VIST Common Stock and
Multiple Strategies; Warburg, Pincus Counsellors, Inc. with respect to VIST
Growth & Income; Federated Investment Counseling with respect to VIST High
Income Bond; Pilgrim Baxter & Associates, Ltd. with respect to VIST Small
Cap; State Street Bank and Trust Company with respect to VIST Tilt Utility;
Strong Capital Management, Inc. with respect to VIST U.S. Government Bond;
and Keystone Investment Management Co. with respect to VIST World Equity.
Prior to April 1, 1994, INVESCO Capital Management, Inc. was the investment
adviser of VIST and managed its assets.
Each Portfolio has a distinct investment objective and policy. The
investment objectives of the Portfolios available under a Contract are:
VIST COMMON STOCK. The investment objective of this Portfolio is capital
growth which it seeks to achieve through a policy of investing primarily in a
diversified portfolio of common stocks and securities convertible into or
exchangeable for common stock. The secondary objective is current income
when consistent with its primary objective.
VIST GROWTH & INCOME. The investment objectives of this Portfolio are to
provide current income and growth of capital. The Portfolio seeks to achieve
its objectives by investing in equity securities, fixed income securities and
money market instruments. The portion of the Portfolio invested at any given
time in each of these asset classes will vary depending on market conditions,
and there may be extended periods when the Portfolio is primarily invested
in one of them. In addition, the amount of income derived from the Portfolio
will fluctuate depending on the composition of the Portfolio's holdings and
will tend to be lower when a higher portion of the Portfolio is invested in
equity securities. The Portfolio may also purchase without limitation
dollar-denominated American Depository Receipts ("ADRs.") ADRs are issued by
domestic banks and evidence ownership of underlying foreign securities.
VIST HIGH INCOME BOND. The investment objective of this Portfolio is to
obtain as high a level of current income as is believed to be consistent with
prudent investment management. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The
Portfolio seeks to achieve its investment objectives by investing primarily
in fixed-income securities rated lower than A. Many of the high yield
securities in which the Portfolio may invest are commonly referred to as
"junk bonds." For special risks involved with investing in such securities
(including
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among others, risk of default and illiquidity) see "Investment Objectives and
Policies of the Portfolios - High Income Bond Portfolio" in the VIST
prospectus.
VIST MULTIPLE STRATEGIES. The investment objective of this Portfolio is to
seek as high a level of total return over an extended period of time as is
considered consistent with prudent investment risk by investing in equity
securities, bonds, and money market instruments in varying proportions.
VIST SMALL CAP. The investment objective of this Portfolio is to seek
capital appreciation. The Portfolio will invest, under normal conditions, at
least 65% of its total assets in securities of companies with market
capitalization or annual revenues under $1 billion at the time of purchase.
VIST TILT UTILITY. The investment objective of this Portfolio is to seek
capital appreciation and current income by investing in a diversified
portfolio of common stock and income securities issued by companies engaged
in the utilities industry ("Utility Securities.") Under normal market
conditions, at least 80% of the Portfolio's assets will be invested in
Utility Securities. The Portfolio is intended to achieve investment returns
that are higher than the Standard & Poor's Utilities Index with equivalent
risk, diversification and price volatility. Prior to April 1, 1994, the Tilt
Utility Portfolio was known as the Equity Income Portfolio and had different
investment objectives, policies and restrictions.
VIST U.S. GOVERNMENT BOND. The investment objective of this Portfolio is to
seek current income and preservation of capital through investment primarily
in securities issued or guaranteed as to principal and interest by the U.S.
Government or by its agencies, authorities, or instrumentalities.
VIST WORLD EQUITY. The investment objective of this Portfolio is to maximize
long-term total return by investing primarily in common stocks, and
securities convertible into common stocks, traded in securities markets
located in countries around the world, including the United States. See
"Foreign Investments" under "Policies and Techniques Applicable to all
Portfolios" in the VIST prospectus for a discussion of the risks involved in
investing in foreign securities.
FEDERATED INSURANCE SERIES
Federated Insurance Series ("Federated") is an open-end investment management
company that was formed as a series trust to provide funding options for
variable life insurance and variable annuity contracts. Pursuant to an
investment advisory contract with Federated, investment decisions for
Federated are made by Federated Advisers, an affiliate of Federated
Investment Counseling.
FEDERATED PRIME MONEY FUND II. The investment objective of the Portfolio is
to provide current income consistent with stability of principal and
liquidity. The Fund pursues its investment objective by investing exclusively
in a portfolio of money market instruments maturing in 397 days or less. An
investment in the Federated Prime Money Fund II Portfolio is neither insured
nor guaranteed by the U.S Government.
FIXED ACCOUNT OPTION
This Prospectus is generally intended to describe the Contract and Separate
Account. Because of certain exemptive and exclusionary provisions, interests
in the Fixed Account are not registered under the Securities Act of 1933 and
the Fixed Account is not registered as an investment company under the
Investment Company Act of 1940, as amended. Accordingly, neither the Fixed
Account nor any interests therein are subject to the provisions of these
Acts, and the Company has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in the Prospectus
relating to the Fixed Account.
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The Company guarantees that it will credit interest to Contract Value in the
Fixed Account at minimum rate of 3% per year. Additional amounts of
"current" interest may be credited by the Company in its sole discretion.
The initial current interest rate will be guaranteed for at least one year.
New Purchase Payments and transfers from the Separate Account allocated to
the Fixed Account may each receive different current interest rate(s) than
the current interest rate(s) credited to Contract Value existing in the Fixed
Account. The Company determines current interest rates in advance, and
credits interest daily to Fixed Account Value.
TRANSFERS AMONG INVESTMENT OPTIONS
An Owner may transfer Contract Value among Investment Options each Contract
Year without a Transfer Fee.
PRIOR TO THE ANNUITY DATE. Contract Value to be transferred from the Fixed
Account to other Investment Options in any Contract Year may not exceed:
- - 25% of the Fixed Account Value on the Issue Date for transfers during the
first Contract Year; or
- - for transfers after the first Contract Year, the greater of 25% of Fixed
Account Value on the immediately preceding Contract Anniversary or 100% of
the Fixed Account Value transferred to other Investment Options during the
immediately preceding Contract Year.
DURING THE ANNUITY PERIOD. The Owner may make a transfer once each Contract
Year: (i) from one or more Sub-Accounts to other Sub-Accounts; or (ii) to the
Fixed Account. No transfers will be permitted from the Fixed Account to the
Separate Account. Amounts transferred from a Sub-Account to the Fixed
Account are subject to certain procedures set out in the Contract.
GENERAL REQUIREMENTS. All transfers are subject to the following:
- - The minimum amount which may be transferred is the lesser of (a) $1,000;
or (ii) the Owner's entire interest in the applicable Sub-Account or
Fixed Account.
- - Any transfer instruction must clearly specify the amount which is to be
transferred and the Accounts which are to be affected.
- - The Company reserves the right at any time and without prior notice to
any party to modify, suspend or terminate the transfer privileges,
including, but not limited to, the description in "Suspension of Payments
or Transfers".
SYSTEMATIC TRANSFERS -DOLLAR COST AVERAGING. The Company permits systematic
transfers, such as a dollar cost averaging program, that an Owner may elect
by written request. Through systematic transfers, amounts are systematically
transferred each month or quarter from a selected Investment Option to other
per-selected Investment Options. The dollar cost averaging program permits
transfers from the Federated Prime Money Fund II Sub-Account or the Fixed
Account to other Sub-Account(s) on a regularly scheduled basis. Through use
of systematic transfers, instead of transfers of the total Contract Value at
one particular time, an Owner may be less susceptible to the impact of market
fluctuations. The minimum amount which may be transferred is $250. The
Company may require a minimum amount of Contract Value before permitting
systematic transfers. The Company requires $6,000 of Contract Value to be in
the Prime Money Fund II Sub-Account or the Fixed Account, as applicable,
before a "dollar cost averaging" program may begin.
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All systematic transfers are made on the same day of each month or quarter
(or the next Business Day if the same day of the month or quarter is not a
Business Day). Under certain circumstances, the Company may impose
restrictions on an Owner's ability to participate in the dollar cost
averaging program and limitations on the amounts that can be transferred from
the Fixed Account to any Sub-Accounts under a systematic transfer program.
An Owner participating in the dollar cost averaging program may not
participate in the systematic withdrawal program. (See "Withdrawals--
Systematic Withdrawals.")
ASSET REBALANCING PROGRAM. The Company administers an asset rebalancing
program that an Owner may elect by written request to the Company at its
Variable Service Center. The asset rebalancing program enables the Owner to
indicate to the Company the percentage levels of Contract Value he or she
would like to maintain in particular Sub-Accounts. On the last Business Day
of each Contract Quarter, the Contract Value will be automatically rebalanced
to maintain the indicated percentages by transfers among the Separate Account
Investment Options. All Contract Value allocated to the Separate Account
Investment Options must be included in the asset rebalancing program. Other
investment programs, such as systematic transfers and systematic withdrawals,
or other transfers or withdrawals may not work in concert with the asset
rebalancing program. Therefore, Owners should monitor their use of these
programs and other transfers or withdrawals while the asset rebalancing
program is being used.
TELEPHONE REQUESTS. Prior to the Annuity Date, an Owner may elect to make
transfers by telephone. If there are Joint Owners, unless the Company is
informed to the contrary, instructions will be accepted from either one of
the Joint Owners. The Company will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. If it does not, the
Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company tape records all telephone instructions.
RESTRICTIONS ON TRANSFERS. Programmed or other frequent requests to transfer
Investment Options by, or on behalf of, an Owner may have a detrimental
effect on the Fund share values held in the Separate Account. The Company
may therefore limit the number of permitted transfers in any Contract Year,
or refuse to honor any transfer request on behalf of an Owner or a group of
Owners if it is informed that the purchase or redemption of shares of one or
more of the Portfolios is to be restricted because of excessive trading, or
if a specific transfer or group of transfers is deemed to have a detrimental
effect on AUV or Portfolio share prices.
The Company may also at any time suspend or cancel its acceptance of third
party authorizations on behalf of an Owner or restrict the Investment Options
that will be available for transfers. Notice will be provided to the third
party in advance of the restrictions. The restrictions will not be imposed,
however, if the Company is given satisfactory evidence that: (a) the third
party has been appointed by the Owner to act on the Owner's behalf for all
financial affairs; or (b) the third party has been appointed by a court of
competent jurisdiction to act on the Owner's behalf.
AUTOMATIC TRANSFER OF SMALL ACCOUNTS. The Company reserves the right, to the
extent permitted by law, on any Business Day to transfer Contract Value held
in any Investment Option if less than $250, to the Investment Option with the
then highest Contract Value. (See "The Contract--Minimum Value Requirements.")
CHANGES TO INVESTMENT OPTIONS
New Sub-Accounts may be established and additional Portfolios or mutual funds
may be made available by the Company when, in its sole discretion, it
determines that conditions so warrant. Any
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new Sub-Accounts may be made available to existing Owners on a basis to be
determined by the Company. Each additional Sub-Account will purchase shares
in a Portfolio of a Fund, or in another mutual fund or investment vehicle.
The Company does not guarantee that continued purchase of Portfolio shares
will remain appropriate in view of the purposes of the Separate Account. If
shares of a Portfolio are no longer available for investment by the Separate
Account or, if in the judgment of the Company, further investment in the
shares should become inappropriate in view of the purpose of the Contracts,
the Company may limit further purchase of these shares or may substitute
shares of another Portfolio, or mutual fund or other investment option for
shares already purchased or to be purchased in the future. No substitution
of securities may take place without prior approval of the Securities and
Exchange Commission and under the requirements it may impose.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Contract Value and the Separate
Account. These are:
ADMINISTRATIVE CHARGE
The Company deducts on each Business Day, both prior to and during the
Annuity Period, an Administrative Charge which is equal to a percentage of
the daily net assets in each Sub-Account for this class of Contract. The
annual rate for this charge is .25%. This charge, together with the Annual
Contract Maintenance Charge (see below), compensates the Company for costs
associated with the administration of a Contract and the Separate Account.
The Company does not intend to profit from this charge.
ANNUAL CONTRACT MAINTENANCE CHARGE
During the Accumulation Period, the Company deducts an Annual Contract
Maintenance Charge of $30 from the Contract Value on each Contract
Anniversary. However, if the Contract Value on a Contract Anniversary is at
least $100,000, then no Annual Contract Maintenance Charge will be deducted.
If a total withdrawal is made on other than a Contract Anniversary, and the
Contract Value at the time is less than $100,00, the Annual Contract
Maintenance Charge will be deducted.
This charge is to reimburse the Company for its administrative expenses.
This charge is deducted by subtracting values from the Fixed Account and/or
canceling Accumulation Units from each applicable Sub-Account in the ratio
that the value of each Account bears to the total Contract Value. If the
Annuity Date is not a Contract Anniversary, the Annual Contract Maintenance
Charge will be deducted on the Annuity Date. After the Annuity Date, no
Annual Contract Maintenance Charge is taken. The Company does not intend to
profit from this charge.
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Business Day, both prior to and during the
Annuity Period, a Mortality and Expense Risk Charge which is equal to a
percentage of the daily net assets in each Sub-Account of the Separate
Account for this class of Contract. The annual rate for this charge is
1.25%. The mortality risks assumed by the Company arise from its contractual
obligation to make annuity payments after the Annuity Date for the life of
the Annuitant and to waive the Withdrawal Charge in the event of the death of
the Owner. The Company also bears a mortality risk with respect to the death
benefit. The expense risk assumed by the Company is that all actual expenses
involved in administering the
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Contracts, including Contract maintenance costs, administrative costs,
mailing costs, data processing costs, legal fees, accounting fees, filing
fees and the costs of other services may exceed the amount recovered from the
Annual Contract Maintenance Charge and the Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge. If the actual costs
for distribution of the Contract exceed the amount realized by the Company
from the Withdrawal Charge, the deficiency will be met from the Company's
general assets which may include amounts, if any, derived from the Mortality
and Expense Risk Charge. The Mortality and Expense Risk Charge is guaranteed
by the Company and cannot be increased.
OPTIONAL ENHANCED DEATH BENEFIT CHARGE
An Owner may elect an enhanced death benefit at the time of application for a
Contract. This benefit guarantees that upon death of the Owner while the
enhanced death benefit is in effect, the death benefit payable under the
Contract will be at least equal to the sum of Purchase Payments less amounts
attributable to Withdrawals (including applicable charges), accumulated at an
annual rate of 4.5% up to a maximum amount equal to twice the sum of Purchase
Payments. The enhanced death benefit ends on the earliest of: (a) the date
of the Owner's death; (b) the Owner's 80th birthday; or (c) the Annuity Date.
The enhanced death benefit may also end if a new owner is designated. If
this option is elected, the Company deducts an Enhanced Death Benefit Charge
on each Contract Anniversary prior to earlier of the Annuity Date or the
Owner's 80th birthday based on the Contract Value on the Contract
Anniversary. The charge is also deducted on the Annuity Date if the Annuity
Date is on a date other than a Contract Anniversary, at the time of
surrender, or if the Contract is surrendered based on the Contract Value at
that time. The Enhanced Death Benefit Charge is equal to .35% of the
Contract Value at the time the charge is taken. The charge is assessed
pro-rata among the Investment Options under a Contract, and will result in a
cancellation of Accumulation Units credited to a Contract and reduction in
Fixed Account Value. (See "Death of the Owner.")
PREMIUM TAXES
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. The Company currently intends
to deduct premium taxes when incurred. Some states assess premium taxes at
the time Purchase Payments are made; others assess premium taxes at the time
annuity payments begin. Premium taxes generally range from 0% to 4%.
WITHDRAWAL CHARGE
The Company incurs expenses in connection with the promotion, sale and
distribution of the Contract. To recover these expenses, the Company imposes
a Withdrawal Charge on the withdrawal or surrender of Contract Value during
the first 6 Contract Years (see "Withdrawals.") The Withdrawal Charge is also
imposed on the Annuity Date if the Annuity Date is within the first 2
Contract Years. (See "Annuity Provisions--Annuity Date.") To the extent
that the Withdrawal Charge is insufficient to cover the actual cost of
distribution, the Company may use any of its corporate assets, including
potential profit which may arise from the Mortality and Expense Risk Charge,
to provide for any difference.
The Withdrawal Charge is determined by applying the Withdrawal Charge
percentages shown below to the Purchase Payments deemed withdrawn,
surrendered, or applied to an Annuity Option. The charge will vary depending
on the Contract Year. Purchase Payments are deemed withdrawn in the order in
which they are made. The amount deducted from the Contract Value will be
determined by subtracting
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values from the Fixed Account and/or canceling Accumulation Units from each
applicable Sub-Account in the ratio that the value of each Account bears to
the total Contract Value, unless another method is requested and the Company
approves the request.
WITHDRAWAL CHARGE PERCENTAGES. The Withdrawal Charge percentages are:
- ----------------------------------------------------------------------------
Contract Year 1 2 3 4 5 6 7+
Withdrawal Charge Percentage 7% 6% 5% 4% 3% 2% 0%
- ----------------------------------------------------------------------------
PARTIAL WITHDRAWALS. Prior to the Annuity Date, an Owner may make partial
withdrawals of the Free Withdrawal Amount each Contract Year provided that
the minimum Contract Value after each partial withdrawal is $1,000. A
partial withdrawal must be for at least $1,000 or, if less, the Owner's
entire interest in the Investment Option from which the partial withdrawal is
requested to be taken. (See "Withdrawals--Systematic Withdrawals.") The
Withdrawal Charge on a partial withdrawal is deducted from the remaining
Contract Value, if sufficient; otherwise it is deducted from the amount
withdrawn. Unless the Owner requests otherwise, partial withdrawals will
ordinarily result in the cancellation of Accumulation Units from each
Sub-Account and a reduction in Fixed Account Value in the ratio that each
Sub-Account and the Fixed Account bears to the total Contract Value (See
"Withdrawals.")
Withdrawal requests that would result in remaining Withdrawal Value of less
than $1,000 may be deemed a surrender and termination of the Contract (See
"Minimum Value Requirements - Termination of Small Accounts.")
FREE WITHDRAWAL AMOUNT. No Withdrawal Charge will be taken on a partial
withdrawal unless the amount withdrawn exceeds the Free Withdrawal Amount.
In any Contract Year, the annual Free Withdrawal Amount for partial
withdrawals is equal to 15% of Purchase Payments. These 15% withdrawals do
not reduce Purchase Payments for purposes of computing the Withdrawal Charge.
The Withdrawal Charge will apply to the amount withdrawn or surrendered
during any of the first 6 Contract Years that exceeds 15% of Purchase
Payments. The unused portion of the Free Withdrawal Amount for one Contract
Year will not carry-over to the next Contract Year. The Free Withdrawal
Amount is not available on a total surrender or on withdrawal requests that
fail to meet the minimum remaining Contract Value requirement for a partial
withdrawal. (See "Minimum Value Requirements -Termination of Small
Accounts.")
WAIVER OF WITHDRAWAL CHARGE. The Company will waive the Withdrawal Charge:
- - If any death benefits are paid; or
- - If the Contract Value is applied after the first 2 Contract Years to an
Annuity Option. (See "Annuity Provisions.")
Subject to state availability, the Company will also waive the Withdrawal
Charge:
- - If the Owner or Owner's spouse is diagnosed with a terminal illness. The
Company may require evidence of such illness, including an examination by
a licensed physician of the Company's choice. Or,
- - After the first Contract Year if the Owner or the Owner's spouse is
confined for the immediately preceding 90 consecutive days in a qualifying
nursing home.
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To qualify for a waiver of charges based on confinement in a qualifying
nursing home, the Owner or the Owner's spouse, as the case may be, must never
have been confined in a qualifying nursing home on or before the date of
application for the Contract.
Owners should review their Contracts carefully for a complete description of
the terminal illness and nursing home waiver of charges requirements.
OTHER CHARGES AND EXPENSES
FUND EXPENSES. There are other deductions from, and expenses paid out of,
the assets of the Portfolios of a Fund which are described in the
accompanying prospectuses for the Funds.
INCOME TAXES. While the Company is not currently reducing Contract Value for
federal income taxes of the Separate Account, the Company reserves the right
to do so if it determines, in its sole discretion, that it will incur a tax
as a result of the operation of the Separate Account. The Company will
deduct for any income taxes incurred by it as a result of the operation of
the Separate Account whether or not there was a Company reserve for taxes and
whether or not it was sufficient.
The Company will deduct any withholding taxes required by applicable law when
amounts are distributed from a Contract. (See "Tax Status--Income Tax
Withholding.")
SPECIAL SERVICE FEES. The Company may charge Owners for special services,
such as additional reports, systematic withdrawals, dollar cost averaging,
the asset rebalancing program, and minimum distributions. As of the date of
this Prospectus, it does not charge for these special services.
ELIMINATION OR REDUCTION OF CHARGES AND EXPENSES. The charges and expenses
on a Contract may be reduced or eliminated, in whole or in part, when sales
of a Contracts are made to individuals or to a group of individuals in a
manner that results in savings of sales or administration expenses. Any
reduction will be determined by the Company after examination of relevant
factors such as:
- - the size and type of group to which sales are to be made because the
expenses for a larger group are generally less than for a smaller group
since large numbers of Contracts may be implemented with fewer contacts;
- - the total amount of Purchase Payments to be received because expenses are
likely to be less on larger Purchase Payments than on smaller ones;
- - any prior or existing relationship with the Company because of the
likelihood of implementing the Contract with fewer contacts; and
- - other circumstances, of which the Company is not presently aware, which
could result in reduced expenses.
Charges may also be eliminated when a Contract is issued to an officer,
director or employee of the Company or any of its affiliates. In no event
will reductions or elimination of the charges be permitted where reductions
or elimination will be unfairly discriminatory to any person.
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THE CONTRACT
APPLICATION AND ISSUANCE OF A CONTRACT
An application, or other request form acceptable to the Company, must be
completed and submitted to the Company to purchase a Contract, together with
the minimum required initial Purchase Payment. (See "Purchase Payments -
General Requirements.") A Contract ordinarily will be issued in respect of
Owners and Annuitants up to Age 85. Investors in Qualified Contracts for
Owners and Annuitants beyond Age 70 1/2 should consult with qualified tax
advisers on the impact of minimum distribution requirements under their
retirement plans. Any required annual minimum distribution amount should be
withdrawn from an existing retirement plan before amounts are transferred to
purchase a Qualified Contract. (See "Tax Considerations - Withdrawals from
Qualified Contracts.")
The Owner, Annuitant, and Beneficiary on a Contract are initially designated
by the applicant and subject to the Company's underwriting rules. If the
application for a Contract is in good order, the Company will apply the
Purchase Payment within 2 business days of receipt: (a) to the Separate
Account and credit the Contract with Accumulation Units; and/or (b) to the
Fixed Account and credit the Contract with dollars. If the application for a
Contract is not in good order, the Company will attempt to get it in good
order or the Company will return the application and the Purchase Payment
within 5 business days. The Company will not retain a Purchase Payment for
more than 5 business days while processing an incomplete application unless
it has been authorized by the purchaser. The Company may decline any
application.
FREE LOOK RIGHT. An Owner has the right to review a Contract during an
initial inspection period specified in the Contract and, if dissatisfied, to
return it to the Company or to the agent through whom it was purchased. When
the Contract is returned to the Company during the permitted period, it will
be voided as if it had never been in force. The Company will ordinarily
refund the Contract Value (which may be greater or less than the Purchase
Payments received) on a Contract returned during the permitted period, unless
a different amount is required. The "free look" period is typically 10 days,
and may be greater depending on state requirements.
DELAYED INVESTMENT START DATE. Initial Purchase Payments are allocated to
the Sub-Accounts or to the Fixed Account as selected by the Owner. On the
date of this Prospectus, the Company does not delay investment start dates
and will allocate Purchase Payments to the selected Investment Options upon
issuance of a Contract. The Company reserves the right, however, to allocate
initial Purchase Payments to the Prime Money Fund II Sub-Account for an
investment delay period before they will be invested (together with any
investment gain) in any other Sub-Account(s) designated by the Owner. If the
Company elects to delay such initial investments in Sub-Accounts, the delay
would apply where a Contract is issued subject to a requirement that Purchase
Payments be refunded upon the exercise of the Free Look Right. Allocation to
the Sub-Account(s) designated by the Owner would be made at the end of the
'free look' inspection period. The investment delay period would be measured
from the date a Contract is issued from the Variable Service Center. It
would include up to 5 days to provide time for mail or other delivery of the
Contract to the Owner in addition to the applicable "free look" inspection
period.
Should the Company elect to delay investment start dates, it will so advise
prospective investors in a Contract.
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PURCHASE PAYMENTS
GENERAL REQUIREMENTS. The initial Purchase Payment is due on the Issue Date.
Unless the Owner participates in the automatic investment plan described
below, the minimum initial Purchase Payment is $5,000 for Non-Qualified
Contracts and $2,000 for Qualified Contracts. The minimum amount for each
subsequent Purchase Payment is $200, unless an automatic investment plan is
in effect. The Company reserves the right to decline any Purchase Payment.
Unless the Company consents otherwise, the maximum amount of cumulative
Purchase Payments is $1,000,000. CONVERSION TO ACCUMULATION UNITS. Purchase
Payments allocated to the Sub-Account(s) of the Separate Account are
converted into Accumulation Units and credited to a Contract on the basis of
Accumulation Unit Value next determined after receipt of a Purchase Payment.
Calculations of Accumulation Unit Value for each Sub-Account are made as of
the end of each Business Day. This is done by dividing each Purchase Payment
allocated to a Sub-Account by the dollar value of an Accumulation Unit of
that Sub-Account as of the end of the Business Day. Initial Purchase Payments
are converted into Accumulation Units when a Contract is issued.
AUTOMATIC INVESTMENT PLAN. An Owner may elect to make Purchase Payments to a
Contract by pre-authorized transfers from a checking account. The checking
account must be with a bank that is a member of the Automated Clearing House
(ACH). Purchase Payments under this method may be allocated to a
Sub-Account, but not to the Fixed Account (see "Investment Options.") If an
automatic investment plan is elected, the Company will lower its Purchase
Payment requirements as follows:
- - For a Non-Qualified Contract, the initial Purchase Payment may be as low
as $1,000 if the applicant furnishes bank draft instructions for
subsequent Purchase Payments of at least $100 each.
- - For a Qualified Contract, the initial Purchase Payment may be as low as
$500 if the applicant furnishes bank draft instructions for subsequent
Purchase Payments of at least $100 each.
The Company may further reduce the minimum Purchase Payment requirement on
automatic investment plans for a Contract issued under certain group
sponsored arrangements. Participation in the automatic investment plan may
be suspended or terminated if there are insufficient funds in the checking
account to cover any transfer.
CONTRACT VALUE
The Contract Value on any Business Day is the sum of the Owner's interest in
the Sub-Accounts of the Separate Account and in the Fixed Account. The
Owner's interest in a Sub-Account is determined by multiplying the number of
that Sub-Account's Accumulation Units credited to a Contract by the
Accumulation Unit Value, or "AUV," for the Sub-Account.
ACCUMULATION UNIT VALUE. AUVs for each Valuation Period fluctuate to reflect
the performance of the Sub-Accounts. The AUV for a Sub-Account on any
Business Day is priced by the Company as follows:
- - The Accumulation Unit Value of the Sub-Account is based on the net asset
value per share of the underlying Portfolio.
- - Any applicable charge (or credit) for federal and state taxes attributable
to the Sub-Account is subtracted (or added).
- - The cumulative unpaid Mortality and Expense Risk Charge, and the
cumulative unpaid Administrative Charge is subtracted.
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- - The result is divided by the total number of Accumulation Units held in
the Sub-Account, before the purchase or redemption of any Accumulation
Units at the end of the current Business Day.
The AUV for one Sub-Account may differ from the AUV of a different
Sub-Account and may increase or decrease from Business Day to Business Day.
REPORTS. The Company will provide the Owner with reports on Contract Value
at least annually. Additional reports may be requested by the Owner. The
Company reserves the right to impose a charge for the cost of providing any
additional reports, but does not currently do so.
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OWNERSHIP
The Owner has all rights and may receive all benefits under the Contract. The
Owner is the person designated by the applicant, unless changed. Upon the
death of the Owner, the Beneficiary is the Owner.
ASSIGNMENT. The Owner may, at any time during his or her lifetime, assign his
or her rights under the Contract. The Company will not be bound by any
assignment until written notice is received by the Company at its Variable
Service Center. The Company is not responsible for the validity or tax
consequences of any assignment. The Company will not be liable as to any
payment or other settlement made by the Company before receipt of the
assignment. Assignment of a Non-Qualified Contract may be considered a
distribution subject to federal income taxes including, with certain
exceptions, a 10% penalty tax before age 59 1/2. Owners of Qualified
Contracts should consult a competent tax adviser as to any mandatory
restrictions on assignment in their retirement plans and the impact of income
taxes on permitted assignments. (See "Tax Considerations.")
CHANGE OF DESIGNATIONS
A request to change the designated Owner, Annuitant, or Beneficiary must be
made in writing and received by the Company at the Variable Service Center.
The change will become effective as of the date the written request is
signed. A new designation will not apply to any payment made or action
taken by the Company prior to the time it records the change.
A permitted change of a designation will automatically revoke any prior
designation of the same type (e.g., a change of Owner revokes a prior change
of Owner; a change of Annuitant revokes a prior change of Annuitant; a change
of Beneficiary revokes a prior change of Beneficiary).
OWNER. The Owner may change the Owner at any time prior to the Annuity Date.
ANNUITANT. A new Annuitant may be designated by the Owner prior to the
Annuity Date, but not if the Contract is owned by a non-natural person. The
Owner may automatically become the Annuitant if a new Annuitant is not
designated within 30 days of the death of the Annuitant prior to the Annuity
Date. (See "Death of Annuitant.")
BENEFICIARY. Subject to the rights of any irrevocable Beneficiary(ies), the
Owner may change the primary Beneficiary(ies) or contingent Beneficiary(ies).
RESTRICTIONS ON QUALIFIED CONTRACTS. Any Qualified Contract may have
restrictions on changes of Owner, Annuitant or Beneficiary. An Owner should
consult a competent tax adviser as to the tax consequences which may result.
MINIMUM VALUE REQUIREMENTS
TERMINATION OF SMALL ACCOUNTS. A withdrawal request that would cause the
remaining Withdrawal Value to be less than $1,000 may be deemed a surrender
of the Contract by the Company. The Company reserves the right to terminate
the Contract. In such event, the Company will pay the Withdrawal Value to
the Owner.
The Company also reserves the right to terminate a Contract if the Withdrawal
Value on any Business Day falls below $1,000 and no Purchase Payments were
received by the Company during the current Contract Year and the preceding 2
Contract Years. Prior to terminating small accounts for failure to
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pay Purchase Payments, the Company will provide Owners with 30 day notice,
and an opportunity to make an additional Purchase Payment to increase the
Contract Value above the minimum amount during this period.
Payments resulting from the termination of a Contract may be considered a
taxable distribution and may be subject, with certain exceptions, to a 10%
penalty tax for distributions before age 59 1/2. (See "Tax Considerations.")
TRANSFER OF SMALL CONTRACT VALUE. The Company reserves the right, to the
extent permitted by law, to transfer the amount of Contract Value held in a
particular Investment Option if, on any Business Day, the Contract Value is
less than $250, to the Investment Option under a Contract that has the
highest Contract Value.
DEATH BENEFIT PROVISIONS
DEATH OF THE ANNUITANT
Upon the death of the Annuitant prior to the Annuity Date, the Owner may
designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. However, if the
Owner is a non-natural person, then the death of the Annuitant will be
treated as the death of the Owner and a new Annuitant may not be designated.
(See "Death of the Owner.")
Upon the death of the Annuitant after the Annuity Date, the Death Benefit, if
any, will be as specified in the Annuity Option elected and will be paid at
least as rapidly as under the method in effect prior to the Owner's death.
(See "Annuity Provisions --Annuity Options.")
DEATH OF THE OWNER
The Contract provides for a Death Benefit to be paid to the Beneficiary upon
the death of an Owner prior to the Annuity Date. Subject to state
availability, the Death Benefit is:
- - the Basic Death Benefit; or
- - if greater and if no withdrawals of Contract Value have been taken during
the Owner's lifetime, the Bonus Death Benefit; or
- - if greater and if elected, the Enhanced Death Benefit.
Upon the death of an Owner on or after the Annuity Date, any remaining
payments under the Contract will be distributed at least as rapidly as under
the method of distribution being used as of the date of the Owner's death.
BASIC DEATH BENEFIT. The Basic Death Benefit is the greater of:
- - Purchase Payments less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime (including
applicable charges); or
- - the Contract Value.
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BONUS DEATH BENEFIT. The Bonus Death Benefit is the greater of:
- - the Basic Death Benefit on the date of the Owner's death; or
- - the Step Up Amount in effect on the date of the Owner's death.
A Step Up Amount is determined at the start of each Bonus Period while a
Contract is in force. The first Bonus Period begins on the Issue Date and
ends on the earlier of the seventh Contract Anniversary or the day on which
the Owner attains Age 80. Each succeeding Bonus Period is for the next 7
Contract Years or, if earlier, until the Owner attains Age 80.
The Step Up Amount at the start of the first Bonus Period is the initial
Purchase Payment. The Step Up Amount at the start of each succeeding Bonus
Period is the greater of:
- The Step Up Amount at the end of the preceding Bonus Period; or
- The Contract Value at the end of the preceding Bonus Period.
The Step Up Amount during any Bonus Period is increased by the amount of
Purchase Payments received by the Company during that Bonus Period.
The Step Up Amount on and after the day the Owner attains Age is 80 is zero.
Unless the Company consents otherwise, the Bonus Death Benefit will end if
the Owner is changed.
OPTIONAL ENHANCED DEATH BENEFIT. The Owner may elect an Enhanced Death
Benefit at the time a Contract is purchased. The Enhanced Death Benefit, up
to the Owner's 80th birthday, is an amount equal to:
- Purchase Payments, less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime
(including applicable charges); and
- interest accumulated at an annual rate of 4.5%
up to a maximum amount equal to two (2) times the sum of Purchase Payments.
The Enhanced Death Benefit on and after the day the Owner attains Age 80 is
zero. Unless the Company consents otherwise, the Enhanced Death Benefit will
end if the Owner is changed.
If the Enhanced Death Benefit is elected by the Owner, the Company deducts an
Enhanced Death Benefit Charge on each Contract Anniversary prior to the
Annuity Date or the Owner's 80th birthday, if earlier. The charge is also
deducted if the Annuity Date is on a date other than a Contract Anniversary
or if the Contract is surrendered, based on the Contract Value at that time.
The Enhanced Death Benefit Charge is equal to .35% of the Contract Value at
the time the charge is taken. (See "Charges and Deductions - Optional
Enhanced Death Benefit Charge.")
In the case of Joint Owners, the BONUS DEATH BENEFIT and the ENHANCED DEATH
BENEFIT are not available.
If the Owner is a non-natural person, the Annuitant will be considered the
Owner for purposes of determining the BASIC DEATH BENEFIT, the BONUS DEATH
BENEFIT and the ENHANCED DEATH BENEFIT.
Owners should refer to their Contract for the applicable Death Benefit
provisions.
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PAYMENT OF DEATH BENEFIT
In the event of an Owner's death prior to the Annuity Date, the Death Benefit
will be determined by the Company as of the date of an Owner's death. The
Death Benefit will be paid as of the Valuation Period next following the date
of receipt by the Company of both due proof of death and, if no election of
payment method was previously made by the Owner, an election by the
Beneficiary for the payment method.
If a single sum payment is requested, the proceeds will be paid within seven
(7) days of receipt of proof of death and the election. Payment under an
Annuity Option may only be elected by a Beneficiary during the sixty-day
period beginning with the date of receipt of proof of death or a single sum
payment will be made to the Beneficiary at the end of the sixty-day period.
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The entire Death Benefit must be paid within five (5) years of the date of
death unless:
1. the Beneficiary elects to have the Death Benefit payable under an Annuity
Option over the life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary with distribution beginning
within one year of the date of death; or
2. if the Beneficiary is the spouse of the Owner, the Beneficiary may elect
to become the Owner of the Contract. If this election is made, the
Contract will continue in effect and no determination of Death Benefit
will then be made.
The dollar amount of each Death Benefit payment made under an Annuity Option
will depend on a number of factors, such as the Annuity Option elected, the
type of Contract (i.e., Qualified Contract or Non-Qualified Contract), the
frequency of payments elected and, for certain Annuity Options, the Age of
the Beneficiary. The Contract contains Annuity Option Tables. These tables
show the dollar amount of periodic Annuity Payments for each $1,000 applied
to an Annuity Option. For example, if a Beneficiary is Age 55 when $100,000
of Death Benefits becomes payable, and elects Annuity Option A (lifetime with
a minimum of 10 years guaranteed), the monthly Fixed Annuity Payment would be
calculated as follows:
Annuity Option A Rate X No. of $1,000's of = Minimum Monthly
Death Proceeds Payment
4.44 X 100 = $444
If, however a Beneficiary is Age 75 when $100,000 of Death Benefits first
becomes payable, and elects the same Annuity Option, the monthly payment
would be calculated as follows:
Annuity Option A Rate X No. of $1,000's of = Minimum Monthly
Death Proceeds Payment
7.20 X 100 = $720
See "Annuity Options" for a description of other payment options available
under a Contract, including Variable Annuity Payments. Available Annuity
Options may be limited to the extent required by law. Because individual
circumstances vary, Owners and Beneficiaries under the Contracts should seek
competent tax advice about the tax consequences of any distribution of Death
Benefits. (See "Tax Considerations.")
OWNERS OTHER THAN A SINGLE PERSON
If there are Joint Owners, any reference to the death of the Owner shall mean
the death of the Owner who dies first. Any Joint Owner must be the spouse of
the other Owner. Upon the death of either Owner, the surviving spouse will
be the primary Beneficiary. Any other Beneficiary designated by the
applicant or as subsequently changed will be treated as a contingent
Beneficiary unless otherwise indicated in writing to the Company.
If the Owner is a non-natural person, then for purposes of the Death Benefit
the Annuitant shall be treated as the Owner and the death of the Annuitant
shall be treated as the death of the Owner.
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BENEFICIARY
Unless the Owner provides otherwise, the Death Benefit will be paid in equal
shares to the survivor(s) as follows: (a) to the primary Beneficiaries who
survive the Owner or Annuitant's death, as applicable; or if there are none,
(b) to the contingent Beneficiaries who survive the Owner or Annuitant's
death as applicable; or if there are none, (c) to the estate of the Owner.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects an Annuity Date at the time of application, and may later
change it by written request at least 30 days prior to the existing Annuity
Date. If the Annuity Date selected is less than 2 Contract Years from the
Issue Date, a Withdrawal Charge will be deducted from Contract Value before
the first annuity payment is made. (See "Charges and Deductions --Withdrawal
Charge.") If the selected Annuity Date occurs when the Annuitant is at an
advanced age, such as over Age 85, it is possible that the Contract will not
be considered an annuity for federal tax purposes. Investors in a Qualified
Contract should select an Annuity Date that is consistent with the
requirements of their retirement plans (See "Tax Considerations - Withdrawals
from Qualified Contracts.") A qualified tax advisor should be consulted for
further information.
ANNUITY PAYMENTS
ALLOCATION. The Owner may elect by written request to the Company at its
Variable Service Center no later than seven (7) calendar days prior to the
Annuity Date, to receive Fixed Annuity Payments, Variable Annuity Payments or
a combination of Fixed Annuity Payments and Variable Annuity Payments. The
Annuitant is the payee, unless a different payee is selected by the Owner by
written request to the Company at its Variable Service Center at least 30
days prior to the Annuity Date. If all of the Contract Value on the seventh
calendar day before the Annuity Date is allocated to the Fixed Account, Fixed
Annuity Payments will be made. If all of the Contract Value on that date is
allocated to the Separate Account, Variable Annuity Payments will be made.
If the Contract Value on that date is allocated to both the Fixed Account and
the Separate Account, a combination of Fixed Annuity Payments and Variable
Annuity Payments will be made to reflect the allocation between the Accounts.
AMOUNT. The total dollar amount of each payment is the sum of the Variable
Annuity Payment and the Fixed Annuity Payment. The Company reserves the
right to pay Annuity Payments in one sum when the remaining payments are less
than $2,000 or other minimum amount established by the Company from time to
time, or when the Annuity Option elected would result in periodic payments of
less than $100.
ANNUITIZATION BONUS. Subject to state availability, the Company intends to
increase the Contract Value on the Annuity Date by an "Annuitization Bonus"
if Contract Value is applied to an Annuity Option. The increase in Contract
Value will be calculated by the Company with respect to Contract Value as of
the immediately preceding Business Day. The increase in Contract Value will
be allocated pro-rata to the Investment Options to which Contract Value is
then allocated, and will be deemed "income" on a Contract for federal income
tax purposes. (See "Tax Considerations.")
The Annuitization Bonus for a Contract will be determined by the Company at
the time of issuance of a Contract, but may be modified, reduced or
eliminated for Contracts subsequently issued. On the date of this
prospectus, the Annuitization Bonus is 3% of Contract Value.
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VARIABLE ANNUITY PAYMENTS. The actual dollar amount of Variable Annuity
Payments is dependent upon (a) the Contract Value (plus any Annuitization
Bonus) on the Annuity Date, (b) the annuity table specified in the Contract
for the Annuity Option selected, and (c) the investment performance of the
Sub-Account selected.
The annuity tables contained in the Contract for Variable Annuity Payments
are based on a 3% assumed investment rate. If the actual net investment rate
exceeds 3%, Variable Annuity Payments will increase. Conversely, if the
actual rate is less than 3%, Variable Annuity Payments will decrease.
Variable Annuity Payments will initially reflect the investment performance
of the Separate Account in accordance with the allocation of the Contract
Value to the Sub-Account(s) on the Annuity Date. After the Annuity Date,
allocations may be changed among Sub-Account Investment Options once each
Contract Year. (See "Changes Among Investment Options.")
ANNUITY OPTIONS
The Annuity Option is elected by the Owner and may be changed by written
request at least 30 days prior to the Annuity Date. If no Annuity Option
election is in effect at least 30 days before the Annuity Date, Annuity
Payments will be made under OPTION B. LIFE ANNUITY with a Period Certain of
120 Months, as described below.
The Annuity Payments payable under the Contract may be made under one of the
following options or any other option acceptable to the Company:
OPTION A. LIFE ANNUITY. An annuity payable monthly during the lifetime of
the Annuitant. Annuity Payments cease at the death of the Annuitant.
OPTION B. LIFE ANNUITY WITH PERIODS CERTAIN OF 60, 120, 180 OR 240 MONTHS.
An annuity payable monthly during the lifetime of the Annuitant and in any
event for 60, 120,180 or 240 months certain as selected.
OPTION C. JOINT AND SURVIVOR ANNUITY. An annuity payable monthly during the
joint lifetime of the Annuitant and a designated second person. At the death
of either Payee, Annuity Payments will continue to be made to the survivor
Payee. The survivor's Annuity Payments will be equal to 100%, 75%, 66 2/3% or
50% of the amount payable during the joint lifetime, as chosen.
OPTION D. JOINT AND CONTINGENT ANNUITY. An annuity payable monthly during
the lifetime of the Annuitant and continuing during the lifetime of a
designated second person after the Annuitant's death. The second person's
Annuity Payments will be equal to 100%, 75%, 66 2/3% or 50% of the amount
payable, as chosen.
OPTION E. FIXED PAYMENTS FOR A PERIOD CERTAIN. An annuity payable monthly
for a fixed amount for any specified period (at least 5 years but not
exceeding 30 years), as chosen.
Annuity Options A, B, C & D are available for Fixed Annuity Payments,
Variable Annuity Payments or a combination of both. Annuity Option E is
available for Fixed Annuity Payments only.
If the Annuitant dies during a period certain (Annuity Options B or E), the
remaining Annuity Payments will be made to the Beneficiary. The Beneficiary
may elect to receive the commuted value of the remaining Annuity Payments in
a single sum instead. The Company will determine the commuted value by
discounting the remaining Annuity Payments at its then current interest rate
used for commutation.
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MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, the Company may change
the annuity benefits to those which the Contract Value would have provided
had the correct age and sex been stated. If the misstatement is discovered
after the Annuity Date: (a) the Company will add interest to any
overpayments at the rate of 6% per year, compounded annually and deduct the
amount against remaining annuity payments; and (b) the Company will add
interest to any underpayments at the rate of 6% per year, compounded
annually, and pay the amount in a single sum with the next Annuity Payment.
WITHDRAWALS
The Owner may make a written request to the Company at its Variable Service
Center to surrender the Contract or to make a partial withdrawal of
Withdrawal Value before the Annuity Date. Contract Value available upon
surrender or withdrawal may be reduced by any applicable: (a) Withdrawal
Charge; (b) taxes not previously deducted; (c) Annual Contract Maintenance
Charge; and (d) Optional Enhanced Death Benefit Charge. (See "Charges and
Deductions"). Partial withdrawals and surrenders will ordinarily result in
the cancellation of Accumulation Units from each applicable Sub-Account of
the Separate Account or a reduction in the Fixed Account Value in the ratio
that the Sub-Account Value and/or the Fixed Account Value bears to the total
Contract Value. The Owner may request in writing in advance if a different
method of cancellation of units and reduction of Fixed Account Value is
desired. The Company will pay the amount of any withdrawal from the Separate
Account within 7 days of receipt of a request in good order, unless the
"Suspension of Payments or Transfers" provision is in effect. (See
"Suspension of Payments or Transfers.")
PARTIAL WITHDRAWALS
Each partial withdrawal must be for an amount which is not less than $1,000.
If a partial withdrawal request is made which would reduce the remaining
Withdrawal Value below $1,000, the Company may deem the Contract surrendered.
In such event, the Contract will terminate and the Company will pay an Owner
the Withdrawal Value of a Contract. (See "The Contract --Minimum Value
Requirements.")
SYSTEMATIC WITHDRAWALS
Subject to any conditions and fees the Company may impose, an Owner may elect
to take partial withdrawals under a systematic withdrawal program. The
Company does not currently impose a fee for systematic withdrawals. Amounts
withdrawn under the program will be subject to a Withdrawal Charge, however,
to the extent that total amounts withdrawn during a Contract Year exceed the
Free Withdrawal Amount. (See "Withdrawal Charge --Free Withdrawal Amount.")
Under the program, systematic withdrawals are made on the same day (or next
Business Day) of each month or quarter. Owners must be 59 1/2 or older to
participate. Systematic withdrawals are taken pro-rata from the Investment
Options of a Contract and are transferred automatically to an Owner's bank
account, provided the account is maintained at a bank that is a member of the
Automated Clearing House (ACH). Systematic withdrawals are not allowed
simultaneously with the dollar cost averaging program. (See "Systematic
Transfers --Dollar Cost Averaging.")
The Company reserves the right to modify, suspend or eliminate the program at
any time.
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TAX PENALTIES AND RESTRICTIONS
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from a Contract. The withdrawal penalties and restrictions differ between a
Non-Qualified Contract and a Qualified Contract. (See "Tax Considerations.")
Special restrictions apply to a Qualified Contract issued as a 403(b)
annuity. (See "Tax Considerations - Withdrawal Limitations on 403(b)
Annuities.")
Owners should consult their own tax counsel or other tax adviser before
requesting any withdrawals.
TEXAS OPTIONAL RETIREMENT PROGRAM
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract to
provide: (a) if for any reason a second year of ORP participation is not
begun, the total amount of the State of Texas' first-year contribution will
be returned to the appropriate institute of higher education upon its
request; and (b) no benefits will be payable, through surrender of the
Contract or otherwise, until the participant dies, accepts retirement,
terminates employment in all Texas institutions of higher education or
attains the age of 70 1/2. The value of the Contract may, however, be
transferred to other contracts or carriers during the period of ORP
participation. A participant in the ORP is required to obtain a certificate
of termination from the participant's employer before the value of a Contract
can be withdrawn.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right to suspend or postpone payments for
withdrawals or transfers from the Sub-Accounts for any period when:
- - the New York Stock Exchange is closed;
- - trading on the New York Stock Exchange is restricted;
- - an emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets; or
- - during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners.
The Company reserves the right to defer payment for a withdrawal or transfer
from the Fixed Account for the period permitted by law but not for more than
six months after written election is received by the Company.
PERFORMANCE INFORMATION
Performance information for the Sub-Accounts of the Separate Account, except
the Federated Prime Money Fund II Sub-Account, may appear in advertisements,
reports, and promotional literature to current or prospective Owners.
Quotations of standardized total return for any Sub-Account will be expressed
in terms of the average annual compounded rate of return on a hypothetical
investment in a Contract over a period of one, five and ten years (or, if
less, up to the life of the Sub-Account), and will reflect the deduction of
the applicable Withdrawal Charge, the Administrative Charge, the Annual
Contract Maintenance Charge, the Mortality and Expense Risk Charge and
deductions for the fees and expenses of the underlying Portfolio. Quotations
of non-standardized total return may simultaneously be shown for the time
periods indicated in the advertisement that may not reflect some or all of
these deductions.
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Total return performance information for Sub-Accounts may also be advertised
based on the historical performance of the Portfolio underlying a Sub-Account
for periods beginning prior to the date Accumulation Unit Values were first
calculated for Contracts funded in that Sub-Account. Any such performance
calculation will be based on the assumption that the Sub-Account
corresponding to the applicable Portfolio was in existence throughout the
stated period and that contractual charges and expenses of the Sub-Account
during the period were equal to those currently assessed under the Contract.
The Company may distribute sales literature which compares the percentage
change in share values for any of the Sub-Accounts against established market
indices such as the Standard & Poor's 500 Composite Stock Price Index, the
Dow Jones Industrial Average or other management investment companies which
have investment objectives similar to the Portfolio being compared. The
Standard & Poor's 500 Composite Stock Price Index is an unmanaged, unweighted
average of 500 stocks, the majority of which are listed on the New York Stock
Exchange. The Dow Jones Industrial Average is an unmanaged, weighted average
of thirty blue chip industrial corporations listed on the New York Stock
Exchange. Both the Standard & Poor's 500 Composite Stock Price Index and
the Dow Jones Industrial Average assume quarterly reinvestment of dividends.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions for administrative and management costs and expenses.
Performance information for any Sub-Account reflects only the performance of
a hypothetical Contract under which Contract Value is allocated to a
Sub-Account during a particular time period on which the calculations are
based. Performance information should be considered in light of the
investment objectives and policies, characteristics, and quality of the
Portfolio in which the Sub-Account invests, and the market conditions during
the given time period and should not be considered as a representation of
what may be achieved in the future. For a description of the method used to
determine total return for the Sub-Accounts, see the Statement of Additional
Information.
The Company may also distribute sales literature which compares the
performance of the AUVs of a Contract issued through the Separate Account
with the unit values of variable annuities issued through the separate
accounts of other insurance companies. Such information will be derived from
the Lipper Variable Insurance Products Performance Analysis Service,
Morningstar or from the VARDS Report.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical
data which currently tracks the performance of almost 4,000 investment
companies. The rankings compiled by Lipper may or may not reflect the
deduction of asset-based insurance charges. The Company's sales literature
utilizing these rankings will indicate whether or not such charges have been
deducted. Where the charges have not been deducted, the sales literature
will indicate that if the charges had been deducted, the ranking might have
been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect
the deduction of asset-based insurance charges.
Morningstar rates a variable annuity sub-account against its peers with
similar investment objectives. Morningstar does not rate any Sub-Account that
has less than three years of performance data.
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TAX CONSIDERATIONS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE
COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE
MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS
OF THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY
NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT
SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE
AND THAT SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN
CERTAIN SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY
APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For Non-Qualified
Contracts, this cost basis is generally the Purchase Payments, while for
Qualified Contracts there may be no cost basis. The taxable portion of the
lump sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period
certain or refund feature) bears to the expected return under the Contract.
The exclusion amount for payments based on a variable annuity option is
determined by dividing the cost basis of the Contract (adjusted for any
period certain or refund guarantee) by the number of years over which the
annuity is expected to be paid. Payments received after the investment in the
Contract has been recovered (i.e. when the total of the excludable amounts
equals the investment in the Contract) are fully taxable. The taxable
portion is taxed at ordinary income tax rates. For certain types of Qualified
Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under a Contract
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DEATH BENEFITS
For Death Benefits under the Contract, the Beneficiary will be taxed on the
portion of the Death Benefit which exceeds the cost basis of the Contract.
However, if the Beneficiary elects to receive the Death Benefit under an
Annuity Option, the payments made to the Beneficiary will be taxed as annuity
payments as discussed above.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"),
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adequately diversified. Disqualification of the Contract as an annuity
contract would result in imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to the receipt of
payments under the Contract.
The Company intends that all Portfolios of a Fund underlying a Contract will
be managed by the Fund or its investment adviser to comply with the
diversification requirements set forth in Section 817(h) of the Code and
Treas. Reg. 1.817-5 promulgated thereunder.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of
the investments of the Separate Account will cause the Owner to be treated as
the owner of the assets of the Separate Account, thereby resulting in the
loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards
may be contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the
Owner with respect to earnings allocable to the Contract prior to receipt of
payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the owner is a non-natural
person, e.g., a corporation, or certain other entities. Such Contracts
generally will not be treated as annuities for federal income tax purposes.
However, this treatment is not applied to Contracts held by a trust or other
entity as an agent for a natural person or to Contracts held by a
tax-qualified retirement plan described in sections 401, 403(a), 403(b), 408,
or 457 of the Code. Purchasers should consult their own tax counsel or other
tax adviser before purchasing a Contract to be owned by a non-natural person.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or
its affiliates are treated as one annuity contract for purposes of
determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences including more rapid taxation of the
distributed amounts from such combination of contracts. Owners should
consult a tax adviser prior to purchasing more than one non-qualified annuity
contract in any calendar year.
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INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as
wages and at the rate of 10% from non- periodic payments. However, the
Owner, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: (a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or distributions for a specified period of 10 years
or more; or (b) distributions which are required minimum distributions; or
(c) the portion of the distributions not includible in gross income (i.e.
return of after-tax contributions). Participants should consult their own
tax counsel or other tax adviser regarding withholding requirements.
WITHDRAWALS FROM NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of
the Owner; (c) if the taxpayer is totally disabled (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or for the joint lives (or
joint life expectancies) of the taxpayer and his or her Beneficiary; (e)
under an immediate annuity; or (f) which are allocable to purchase payments
made prior to August 14, 1982.
QUALIFIED PLANS
A Contract offered by this Prospectus is designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that
contributions and benefits under a Qualified Plan may be subject to the terms
and conditions of the plan regardless of the terms and conditions of a
Contract issued pursuant to the plan. Some retirement plans are subject to
distribution and other requirements that are not incorporated into the
Company's administrative procedures. Contract Owners, participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contract comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding Qualified Plans are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued
under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in
violation of applicable limitations.
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Furthermore, certain withdrawal penalties and restrictions may apply to
surrenders from Qualified Contracts. (See "Tax Treatment of
Withdrawals--Qualified Contracts," below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection
with Qualified Plans will utilize annuity tables which do not differentiate
on the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
H.R. 10 PLANS. Section 401 of the Code permits self-employed individuals to
establish Qualified Plans for themselves and their employees, commonly
referred to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan
for the benefit of the employees will not be included in the gross income of
the employees until distributed from the Plan. The tax consequences to
participants may vary depending upon the particular plan design. However, the
Code places limitations and restrictions on all Plans including on such items
as: amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders. (See "Tax Treatment
of Withdrawals--Qualified Contracts," below.) Purchasers of Contracts for
use with an H.R. 10 Plan should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
403(B) ANNUITIES. Section 403(b) of the Code permits the purchase of
"403(b)" or "tax-sheltered annuities" by public schools and certain
charitable, educational and scientific organizations described in Section
501(c)(3) of the Code. These qualifying employers may make contributions to
a Contract for the benefit of their employees. Such contributions are not
includible in the gross income of the employees until the employees receive
distributions from the Contracts. The amount of contributions to the
tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items
as transferability, distributions, nondiscrimination and withdrawals. (See
"Tax Treatment of Withdrawals--Qualified Contracts" and "Tax Sheltered
Annuities--Withdrawal Limitations," below.) Any employee should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408(b) of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" ("IRA"). Under applicable limitations,
certain amounts may be contributed to an IRA which will be deductible from
the individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by
the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
CORPORATE PENSION AND PROFIT-SHARING PLANS. Sections 401(a) and 401(k) of
the Code permit corporate employers to establish various types of retirement
plans for employees. These retirement plans may permit the purchase of a
Contract to provide benefits under the Plan. Contributions to the Plan for
the benefit of employees will not be includible in the gross income of the
employees until distributed from the Plan. The tax consequences to
participants may vary depending upon the particular plan design. However,
the Code places limitations and restrictions on all plans including on such
items
33
<PAGE>
as: amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders. Purchasers of
Contracts for use with Corporate Pension or Profit-Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such
an investment. Unless the Company otherwise permits, participant loans are
not allowed in connection with Contracts purchased in connection with these
plans.
SECTION 457 PLANS. Under Section 457 of the Code, governmental and certain
other tax-exempt employers may establish deferred compensation plans for the
benefit of their employees which may invest in annuity contracts. The Code,
as in the case of Qualified Plans, establishes limitations and restrictions
on eligibility, contributions and distributions. Under these Plans,
contributions made for the benefit of the employees will not be includible
in the employee's gross income until distributed from the Plan. However,
under a Section 457 Plan, all the assets remain solely the property of the
employer subject only to the claims of the employer's general creditors until
such time as made available to the participant or beneficiary.
WITHDRAWALS FROM QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty
tax on the taxable portion of any distribution from qualified retirement
plans, including Contracts issued and qualified under Code Sections 401 (H.R.
10 and Corporate Pension and Profit-Sharing Plans), 403(b) and 408(b)
(Individual Retirement Annuities). To the extent amounts are not includible
in gross income because they have been rolled over to an IRA or to another
eligible Qualified Plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on
or after the date on which the Owner or Annuitant (as applicable) reaches age
59 1/2; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) after separation from service,
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Owner
or Annuitant (as applicable) or the joint lives (or joint life expectancies)
of such Owner or Annuitant (as applicable) and his or her designated
Beneficiary; (d) distributions to an Owner or Annuitant (as applicable) who
has separated from service after he has attained age 55; (e) distributions
made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; and (f) distributions made to an alternate
payee pursuant to a qualified domestic relations order. The exceptions
stated in (d), (e) and (f) above do not apply in the case of an Individual
Retirement Annuity. The exception stated in (c) above applies to an
Individual Retirement Annuity without the requirement that there be a
separation from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year, following the year in which the employee
attains age 70 1/2. Required distributions must be over a period not
exceeding the life expectancy of the individual or the joint lives or life
expectancies of the individual and his or her designated beneficiary. If the
required minimum distributions are not made, a 50% penalty tax is imposed as
to the amount not distributed. In addition, distributions in excess of
$150,000 per year may be subject to an additional 15% excise tax unless an
exemption applies.
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TAX-SHELTERED ANNUITIES--WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (a) attains age 59 1/2; (b)
separates from service; (c) dies; (d) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (e) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became
effective on January 1, 1989 and apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions
and to income attributable to amounts held as of December 31, 1988. The
limitations on withdrawals do not affect rollovers or transfer between
certain Qualified Plans. Owners should consult their own tax counsel or other
tax adviser regarding any distributions.
OTHER MATTERS
FINANCIAL STATEMENTS
The full financial statements for the Separate Account and the Company are in
the Statement of Additional Information. As of the date of this Prospectus,
the Separate Account had not commenced sales of the Capital Six VA.
Accordingly, the Accumulation Unit Data presented for such Contracts is
derived from the Separate Account's financial statements. The Separate
Account funds other contracts offered by the Company (Policy Form 20230) with
similar asset based charges.
DISTRIBUTION
First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square,
Boston, MA 02109, acts as the distributor of the Contracts. FVCS is a
wholly-owned subsidiary of the Company. The Contracts are offered on a
continuous basis through FVCS and approved broker-dealers who are members of
the National Association of Securities Dealers, Inc.
The Company and FVCS have agreements with various broker-dealers under which
the Contracts will be sold by registered representatives of the
broker-dealers. The registered representatives are required to be authorized
under applicable state regulations to sell variable annuity contracts. The
commissions payable to a broker-dealer for sales of the Contract may vary
with the sales agreement, but is not expected to exceed 3.00% of first year
Purchase Payments and annual renewal compensation of up to 1.00% of Contract
Value in later Contract Years. Broker-dealers may also receive expense
allowances, wholesaler fees, bonuses and training fees.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate
Account, the Distributor or the Company is a party.
TRANSFERS BY THE COMPANY
The Company may, subject to applicable regulatory approvals, transfer its
obligations under a Contract to another qualified life insurance company
under an assumption reinsurance arrangement without the prior consent of the
Owner.
35
<PAGE>
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of a Fund held in the Separate Account at regular or special
meetings of the shareholders in accordance with instructions received from
Owners having the voting interest in the affected Portfolio(s) held in the
Separate Account. The number of votes that an Owner has the right to
instruct for a particular Sub-Account is determined by dividing the
Accumulation Unit Value in the Sub-Account by the net asset value per share
of the corresponding Portfolio in which the Sub-Account invests. The Company
will vote shares for which it has not received instructions, as well as
shares attributable to it, in the same proportion as it votes shares for
which it has received instructions. A Fund may not hold routine annual
meetings of its shareholders.
The Funds' shares are used solely as the investment vehicle for separate
accounts of insurance companies offering variable annuity contracts and
variable life insurance policies. The use of Funds' shares as investments
for both variable annuity contracts and variable life insurance policies is
referred to as "mixed funding." The use of Funds' shares as investments by
separate accounts of unaffiliated life insurance companies is referred to as
"shared funding."
The Funds intend to engage in mixed funding and shared funding in the future.
Although the Funds do not currently foresee any disadvantage to Contract
owners due to differences in redemption rates, tax treatment, or other
considerations resulting from mixed funding or shared funding, the Trustees
of the Funds will closely monitor the operation of mixed funding and shared
funding and will consider appropriate action to avoid material conflict and
take appropriate action in response to any material conflicts which occur.
The number of shares which an Owner has a right to vote will be determined as
of a date to be chosen by the Company not more than sixty (60) days prior to
a shareholder meeting of a Fund. Each Owner having a voting interest will
receive proxy material, reports, and other materials relating to the
appropriate Portfolio.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
ITEM PAGE
- ---- ----
Company..................................................... 2
Independent Auditors........................................ 2
Legal Opinions.............................................. 2
Distributor................................................. 2
Service Provider............................................ 2
Performance Information..................................... 2
Annuity Provisions.......................................... 4
Variable Annuity......................................... 4
Fixed Annuity............................................ 4
Annuity Unit............................................. 4
Mortality and Expense Guarantee.......................... 5
Financial Statements........................................ 5
36
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE CONTRACTS
issued by
FIRST VARIABLE ANNUITY FUND E
AND
FIRST VARIABLE LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED __________ FOR THE INDIVIDUAL
FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS WHICH ARE
REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT 10 Post Office Square, Boston, Massachusetts 02109, (800) 845-0689.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED ________
TABLE OF CONTENTS
Page
Company...................................................................2
Independent Auditors......................................................2
Legal Opinions............................................................2
Distributor...............................................................2
Service Provider..........................................................2
Performance Information...................................................2
Annuity Provisions........................................................4
Variable Annuity.....................................................4
Fixed Annuity........................................................4
Annuity Unit.........................................................4
Mortality and Expense Guarantee......................................5
Financial Statements......................................................5
<PAGE>
COMPANY
Information regarding the Company and its ownership is contained in the
Prospectus.
INDEPENDENT AUDITORS
The Company's independent auditor is Ernst & Young LLP, 200 Clarendon Street,
Boston, Massachusetts 02116. The financial statements for the Company as of
December 31, 1995 and 1994 for the years then ended and the financial
statements for First Variable Annuity Fund E as of December 31, 1995 and for
the periods indicated included in this Statement of Additional Information,
which is incorporated by reference into the Prospectus, have been so included
in reliance on the report of Ernst & Young, LLP, independent auditors given
on the authority of said firm as experts in auditing and accounting.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
First Variable Capital Services, Inc. ("FVCS") acts as the distributor. FVCS
is a wholly-owned subsidiary of the Company. The offering is on a continuous
basis.
SERVICE PROVIDER
The Company has retained Alliance-One Services, L.P. ("Alliance"), successor
corporation to Vantage Computer Systems, Inc., 310 West 11th St., Kansas
City, Missouri to provide administrative services on certain previously
issued variable annuity contracts funded through First Variable Annuity Fund
E. Such administrative services include maintenance of Owner's records. The
Company will pay all fees and charges of Alliance. Alliance serves as the
administrator to various insurance companies offering variable and fixed
annuity and variable life insurance contracts. The Company administers other
contracts it issues, including the Contracts described in the Prospectus,
through the Variable Service Center described therein.
PERFORMANCE INFORMATION
From time to time, the Company may advertise standardized performance data of
Sub-Accounts other than the Federated Prime Money Fund II Sub-Account. Any
such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deductions of a 1.25% Mortality and Expense Risk Charge, a .25%
Administrative Charge, the investment advisory fee and expenses for the
underlying Portfolio being advertised and any applicable Withdrawal Charges
and Annual Contract Maintenance Charges.
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the Accumulation Unit Values
for an initial $1,000 purchase payment, and deducting any applicable Annual
Contract Maintenance Charges and Withdrawal Charges to arrive at the ending
hypothetical value. For periods before the date that actual Accumulation
Unit Values were first computed for the Contracts, the Accumulation Unit
Values are derived from the financial statements of the Separate Account
(Policy Form 20230). The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase
<PAGE>
payment would have to earn annually, compounded annually, to grow to the
hypothetical value at the end of time periods described. The formula used in
these calculations is:
[P x (1+T)n] = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5 or 10 years periods (or fractional portion thereof).
The standardized average annualized total returns as of December 31, 1995 and
for 5 years and for the life of the Sub-Account are listed below:
LIFE OF SUB-
1 YEAR 5 YEARS ACCOUNT
------- ------- ------------
Common Stock (inception 5/1/87) 28.085% 11.009% 10.408%
Growth & Income (inception 5/31/95) N/A N/A 5.066%
High Income Bond (inception 6/1/87) 10.211% 11.313% 9.429%
Multiple Strategies (inception 5/5/87) 23.272% 10.441% 10.729%
Small Cap (inception 5/4/95) N/A N/A 22.180%
Tilt Utility (inception 6/16/88) 24.467% 13.370% 13.018%
US Govt Bond (inception 5/27/87) 11.394% 7.263% 8.230%
World Equity (inception 6/10/88) 15.471% 9.315% 7.367%
The Company may also advertise non-standardized performance data of
Sub-Accounts other than the Federated Prime Money Fund II Sub-Account. Any
such advertisement will include total return figures computed under the
formula shown above for the time periods indicated in the advertisement.
Such total return figures may not reflect the deductions of a 1.25% Mortality
and Expense Risk Charge, a .25% Administrative Charge, the investment
advisory fee for the underlying Portfolio being advertised and any applicable
Withdrawal Charges and Annual Contract Maintenance Charges. Non-standardized
performance data may be shown for periods of one, three, five and ten years
(or, if less up to the life of the Sub-Account).
The non-standardized annualized total returns as of December 31, 1995 and for
5 years and for the life of the Sub-Account are listed below:
LIFE OF SUB-
1 YEAR 5 YEARS ACCOUNT
------- ------- ------------
Common Stock (inception 5/1/87) 35.085% 11.311% 10.408%
Growth & Income (inception 5/31/95) N/A N/A 12.066%
High Income Bond (inception 6/1/87) 17.211% 11.611% 9.429%
Multiple Strategies (inception 5/5/87) 30.272% 10.751% 10.729%
Small Cap (inception 5/4/95) N/A N/A 29.180%
Tilt Utility (inception 6/16/88) 31.467% 13.638% 13.018%
US Govt Bond (inception 5/27/87) 18.394% 7.625% 8.230%
World Equity (inception 6/10/88) 22.471% 9.643% 7.367%
The above returns include all applicable charges for the periods shown except
for the applicable Withdrawal Charges and Annual Contract Maintenance Charges.
<PAGE>
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return
for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return may be in any future
period.
<PAGE>
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount: and (2) will vary in amount with the net
investment results of the applicable Sub-Account(s) of the Separate Account.
At the Annuity Date, the Contract Value in each Sub-Account will be applied
to the applicable Annuity Tables. The Annuity Table used will depend upon
the Annuity Option chosen. If, as of the Annuity Date, the then current
Annuity Option rates applicable to this class of Contracts provide a first
Annuity Payment greater than guaranteed under the same Annuity Option under
this Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value
of an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month proceeding the month for
which the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which
are guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The Fixed Account Value on
the day immediately preceding the Annuity Date will be used to determine the
Fixed Annuity monthly payment. The first monthly Annuity Payment will be
based upon the Annuity Option elected and the appropriate Annuity Option
Table.
ANNUITY UNIT
The value of an Annuity Unit for each Sub-Account was arbitrarily set
initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation
Period is determined by subtracting (2) from (1) and dividing the result by
(3) and multiplying the result by a factor which neutralizes the assumed
investment rate of 3% contained in the Annuity Tables where:
1. is the net result of:
a. the assets of the Sub-Account attributable to the Annuity Units;
plus or minus
b. the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation or
maintenance of the Sub-Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge.
3. is the number of Annuity Units outstanding at the end of the Valuation
Period.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
<PAGE>
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after
the first Annuity Payment will not be affected by variations in mortality or
expense experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
First Variable Life Insurance Company
First Variable Annuity Fund E
Financial Statements
[to be filed by amendment]
<PAGE>
PART C
<PAGE>
FIRST VARIABLE ANNUITY FUND E
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements
The financial statements of the Separate Account (to be filed by
pre-effective ammendment)
The financial statements of the Company (to be filed by pre-effective
ammendment)
(b) EXHIBITS
1. Resolution of Board of Directors for the Company authorizing the
establishment of the Separate Account*
2. Not Applicable
3(a). Form of Principal Underwriter's Agreement**
(b). Form of Broker-Dealer Agreement**
(c). Specimen Broker-Dealer Supervisory and Selling Agreement
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract
5. Application for Variable Annuity#
6(a). Articles of Incorporation*
(b) By-laws of First Variable Life Insurance Company (to be filed by
pre-effective amendment)
7. Not Applicable
8. Form of Fund Participation Agreements
9. Opinion and Consent of Counsel (to be filed by pre-effective
amendment)
10. Consent of Independent Auditors (to be filed by pre-effective
amendment)
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information (to be filed by
pre-effective amendment)
14. Not Applicable
27. Financial Data Schedule (to be filed by pre-effective amendment)
________________________________
<PAGE>
* Incorporated by reference to the Registrant's Original Registration
Statement (File Nos. 2-92856 and 811-4092).
** Incorporated by reference to the Registrant's Post-Effective Amendment
No.4 to Form N-4 (File Nos. 33-35749 and 811-4092) as filed on April 30,
1993.
# Incorporated by reference to the Registrant's Post-Effective Amendment
No. 5 to Form N-4 (File Nos. 33-35749, 811-4092) as filed on or about
December 30, 1993.
ITEM 25. OFFICERS AND DIRECTORS OF DEPOSITOR
The following are the Officers and Directors of the Company.
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH THE
BUSINESS ADDRESS DEPOSITOR
Ronald M. Butkiewicz Chairman and Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Stephan M. Largent President and Director
10 Post Office Square
Boston, MA 02109
Michael J. Corey Director
401 East Host Drive
Lake Geneva, WI 53147
Michael R. Ferrari Director
25th & University Avenue
Des Moines, IA 50311
Peter D. Fullam Director
Lower Abbey Street
Dublin 1, Ireland
T. David Kingston Director
Lower Abbey Street
Dublin 1, Ireland
Jeff S. Liebmann Director
1301 Avenue of the Americas
New York, NY 10019
Kenneth R. Meyer Director
200 South Wacker Drive, Suite 2100
Chicago, IL 60606
Phillip R. O'Connor Director
111 West Washington, Suite 1247
Chicago, IL 60602
Norman A. Fair Director
2211 York Road, Suite 202
Oakbrook, IL 60521
<PAGE>
ITEM 25 (continued)
Thomas K. Neavins Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Arnold R. Bergman Vice President - Legal &
10 Post Office Square Administration and Secretary
Boston, MA 02109
Martin Sheerin Vice President and Chief Actuary
10 Post Office Square
Boston, MA 02109
Anthony J. Koenig, Jr. Vice President and Treasurer
10 Post Office Square
Boston, MA 02109
Constance Graves Assistant Vice President and
10 Post Office Square Assistant Controller
Boston, MA 02109
Mark Kelly Assistant Vice President and
10 Post Office Square Assistant Treasurer
Boston, MA 02109
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
Incorporated by reference to Registrant's Post Effective Amendment No.
20 filed electronically on April 29, 1996. (File Nos. 33-35749 and 811-4092).
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities
Act of 1933 ("Act") may be permitted to directors and officers and
controlling persons of the Registrant, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) First Variable Capital Services, Inc. ("FVCS") is the principal
underwriter for the Contracts and for the following investment companies:
First Variable Annuity Fund A
<PAGE>
(b) The following persons are directors and officers of FVCS:
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH
UNDERWRITER
Norman A. Fair Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Stephan M. Largent President and Director
10 Post Office Square
Boston, MA 02109
Arnold R. Bergman Secretary and Director
10 Post Office Square
Boston, MA 02109
Tom Simpson Vice President and Director
10 Post Office Square
Boston, MA 02109
Anthony J. Koenig, Jr. Assistant Treasurer
10 Post Office Square
Boston, MA 02109
Constance Graves Assistant Treasurer
10 Post Office Square
Boston, MA 02109
Mark Kelly Assistant Treasurer
10 Post Office Square
Boston, MA 02109
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Arnold R. Bergman, Secretary of the Company and Anthony Koenig,
Treasurer of the Company, who are located at 10 Post Office Square, 12th
Floor, Boston, MA 02109, maintain physical possession of the accounts, books
or documents of the Separate Account required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more
than sixteen (16) months old for so long as payment under the variable
annuity contracts may be accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2)
a postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of
Additional Information.
<PAGE>
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been
complied with:
1. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b) (11) in any sales literature used in
connection with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restriction on redemption imposed by Section 403(b)(11), and (2) other
investment alternatives available under the employer's Section 403(b)
arrangement to which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, as amended, the Registrant has caused this Registration Statement to
be signed on its behalf, in the City of Boston, and the Commonwealth of
Massachusetts, on this 16th day of September, 1996.
FIRST VARIABLE ANNUITY FUND E
(Registrant)
By: FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: s/Stephan Largent
-----------------------
Stephan M. Largent, President
FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: s/Stephan Largent
-----------------------
Stephan M. Largent, President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ Ronald M. Butkiewicz* Chairman & Director 9/16/96
- -------------------------- -------
Ronald M. Butkiewicz
/S/ Michael J. Corey* Director 9/16/96
- -------------------------- -------
Michael J. Corey
/S/ Michael R. Ferrari* Director 9/16/96
- -------------------------- -------
Michael R. Ferrari
/S/ Peter D. Fullam* Director 9/16/96
- -------------------------- -------
Peter D. Fullam
Stephan M. Largent President and Director 9/16/96
- -------------------------- -------
Stephan M. Largent
/S/ T. David Kingston* Director 9/16/96
- -------------------------- -------
T. David Kingston
/S/ Jeff S. Liebmann* Director 9/16/96
- -------------------------- -------
Jeff S. Liebmann
_______________________ Director 9/16/96
- -------------------------- -------
Kenneth R. Meyer
/S/ Philip R. O'Connor* Director 9/16/96
- -------------------------- -------
Phillip R. O'Connor
/S/ Norman A. Fair* Director 9/16/96
- -------------------------- -------
Norman A. Fair
/S/ Thomas K. Neavins* Director 9/16/96
- -------------------------- -------
Thomas K. Neavins
Anthony J. Koenig, Jr. Vice President and Treasurer 9/16/96
- -------------------------- -------
Anthony J. Koenig, Jr.
*By Power of Attorney
s/Arnold R. Bergman
--------------------
Arnold R. Bergman
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, RONALD M. BUTKIEWICZ, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD
R. BERGMAN, or any one of the foregoing individually, as my attorney and
agent, for me, and in my name as a Director of this company on behalf of the
Company or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MARTIN SHEERIN /S/ RONALD M. BUTKIEWICZ
------------------------
Ronald M. Butkiewicz
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Michael J. Corey, a Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD R.
BERGMAN, or any one of the foregoing individually, as my attorney and agent,
for me, and in my name as a Director of this company on behalf of the Company
or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MARTIN SHEERIN /S/ MICHAEL J. COREY
--------------------
Michael J. Corey
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, NORMAN A. FAIR, Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD R.
BERGMAN, or any one of the foregoing individually, as my attorney and agent,
for me, and in my name as a Director of this company on behalf of the Company
or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 24th day of April, 1996
WITNESS:
/S/ THOMAS K. NEAVINS /S/ NORMAN A. FAIR
------------------
Norman A. Fair
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, MICHAEL R. FERRARI, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD
R. BERGMAN, or any one of the foregoing individually, as my attorney and
agent, for me, and in my name as a Director of this company on behalf of the
Company or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 18th day of November, 1996
WITNESS:
/S/ MICHAEL R. FRIEDBERG /S/ MICHAEL R. FERRARI
----------------------
Michael R. Ferrari
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, T. DAVID KINGSTON, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD
R. BERGMAN, or any one of the foregoing individually, as my attorney and
agent, for me, and in my name as a Director of this company on behalf of the
Company or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MARTIN SHEERIN /S/ T. DAVID KINGSTON
---------------------
T. David Kingston
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, PETER D. FULLAM, a Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD R.
BERGMAN, or any one of the foregoing individually, as my attorney and agent,
for me, and in my name as a Director of this company on behalf of the Company
or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MARTIN SHEERIN /S/ PETER D. FULLAM
-------------------
Peter D. Fullam
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JEFF S. LIEBMANN, Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD R.
BERGMAN, or any one of the foregoing individually, as my attorney and agent,
for me, and in my name as a Director of this company on behalf of the Company
or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MICHAEL R. FRIEDBERG /S/ JEFF S. LIEBMANN
--------------------
Jeff S. Liebmann
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, THOMAS K. NEAVINS, Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD R.
BERGMAN, or any one of the foregoing individually, as my attorney and agent,
for me, and in my name as a Director of this company on behalf of the Company
or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MARTIN SHEERIN /S/ THOMAS K. NEAVINS
---------------------
Thomas K. Neavins
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, PHILLIP R. O' CONNOR, Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, STEPHAN LARGENT and ARNOLD
R. BERGMAN, or any one of the foregoing individually, as my attorney and
agent, for me, and in my name as a Director of this company on behalf of the
Company or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of May, 1996
WITNESS:
/S/ MICHAEL R. FRIEDBERG /S/ PHILIP R. O'CONNOR
----------------------
Phillip R. O'Connor
<PAGE>
FIRST VARIABLE ANNUITY FUND E
INDEX TO EXHIBITS
NO. TITLE OF EXHIBIT PAGE
- --- ---------------- -----
3.(c) Specimen Broker-Dealer Supervisory and Selling Agreement
4. Individual Flexible Purchase Payment Deferred Variable
Annuity Contract
6.(b) By-laws of First Variable Life Insurance Company
(to be filed by amendment)
8. Form of Fund Participation Agreements
9. Opinion and Consent of Counsel (to be filed by amendment)
10. Consent of Independent Auditors (to be filed by amendment)
13. Calculation of Performance Information
(to be filed by amendment)
27. Financial Data Schedule (to be filed by amendment)
<PAGE>
EXHIBIT 3(c)
SPECIMEN BROKER-DEALER SUPERVISORY AND SELLING AGREEMENT
<PAGE>
[LOGO]
FIRST VARIABLE CAPITAL SERVICES, INC.
10 Post Office Square, Suite 1200
Boston, MA 02109-9309
(617) 457-6700
BROKER-DEALER SUPERVISORY AND SELLING AGREEMENT
Broker-Dealer Supervisory and Selling Agreement (the "Agreement") dated
________________ between and among FINANCIAL WEST GROUP, INC. ("Selling
Broker-Dealer") with principal offices located at 600 HAMPSHIRE ROAD,
WESTLAKE VILLAGE, CA each of Selling Broker-Dealer's insurance agency
subsidiaries or affiliates (the "Agency" or "Agencies") listed on the
signature pages of this Agreement, First Variable Life Insurance Company,
and First Variable Capital Services, Inc.
RECITALS
1. First Variable Life Insurance Company (the "Insurer") issues certain
variable life insurance policies and variable annuity contracts
(collectively, the "Contracts") and offers the Contracts for sale in
accordance with federal securities laws. The Insurer also issues certain
fixed life insurance policies and fixed annuity contracts (collectively, the
"Fixed Contracts") that have not been registered as securities.
2. First Variable Capital Services, Inc. ("FVCS"), a broker-dealer
registered with the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934 ("'34 Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"), has been authorized by the
Insurer to serve as principal underwriter and distributor of the Contracts.
In particular, FVCS is authorized to enter into agreements, subject to the
consent of the Insurer, with NASD members and their affiliated insurance
agencies for the distribution of the Contracts.
3. Selling Broker-Dealer is a broker-dealer registered with the SEC under
the '34 Act and a member of the NASD.
4. Selling Broker-Dealer and the Agencies (collectively, the "Selling
Group") wish to participate in the distribution of the Contracts, which are
deemed to be securities under the Securities Act of 1933 (the "'33 Act").
5. Selling Group has registered representatives ("Representatives") who
desire to serve as authorized life insurance agents or brokers to solicit
and sell the Contracts and Fixed Contracts.
6. Selling Group proposes to undertake certain supervisory and
administrative obligations described below in connection with the
distribution of the Contracts and Fixed Contracts.
<PAGE>
AGREEMENT
IN CONSIDERATION of the mutual covenants contained herein, the Insurer, FVCS
and Selling Group agree as follows:
1. RELATIONSHIP OF PARTIES. The Insurer is the issuer of Contracts covered
by this Agreement. FVCS is the principal underwriter and distributor of the
Contracts. Selling Broker-Dealer represents that it is a registered
broker-dealer under the '34 Act and a member of the NASD and that it (or its
Agencies) are authorized to transact the insurance business contemplated in
this Agreement.
1.1 APPOINTMENT. Insurer hereby appoints the Selling Broker-Dealer
and/or its Agencies under the insurance laws as a distributor of the
Contracts and Fixed Contracts listed on the Schedule of Commissions to this
Agreement, and Insurer and FVCS authorize the Selling Broker-Dealer under
the securities laws to distribute the Contracts listed on the Schedule of
Commissions to this Agreement. Selling Broker-Dealer agrees to supervise
the Representatives in connection with the distribution, solicitation and
sale of such Contracts and Fixed Contracts and to perform other services
as described below.
1.2 NON-EMPLOYEE, PARTNER OR FRANCHISEE. For the purpose of compliance
with any applicable federal or state securities laws or regulations,
Selling Broker-Dealer acknowledges and agrees that in performing the
services covered by this Agreement, it is acting in the capacity of an
independent "broker" or "dealer" as defined in the By-Laws of the NASD and
not as an agent, employee, partner or franchisee of Insurer, FVCS, or any
registered investment company. Each Agency and its subagents shall be free
to exercise independent judgment as to the time, place and means of
performing all acts under this Agreement, and the relationship of the
Agency and its subagents to Insurer shall be that of an independent
contractor. Nothing in this Agreement shall be construed to create the
relationship of employer and employee, partnership or franchise between the
Agency (or any of its subagents) and Insurer.
1.3 NON-EXCLUSIVITY. The Selling Group agrees that no territory or
product is assigned exclusively hereunder. The Insurer and FVCS reserve
the right in their discretion to enter into selling agreements with other
broker-dealers, and to contract with or establish one or more insurance
agencies in any jurisdiction in which the Selling Group transacts business
hereunder.
2. AUTHORITY AND DUTIES OF SELLING BROKER-DEALER. Selling Broker-Dealer
shall distribute the Contracts and agrees that it shall have all the
attendant duties, responsibilities and liabilities associated with that
function, for compliance, supervision and servicing purposes. Selling
Broker-Dealer acknowledges that it is responsible for statutory and
regulatory compliance in securities transactions involving any business
produced by its Representative concerning the Contracts. Without
limitation, Selling Broker-Dealer also agrees to the following duties and
obligations.
2.1 BEST EFFORTS. Selling Broker-Dealer agrees to use its best efforts
to find suitable purchasers for the Contracts.
2.2 REGISTRATION. Selling Broker-Dealer agrees that it shall, at all
times when performing its functions under this Agreement, be registered as
a securities broker-dealer with the SEC and will maintain its membership
with the NASD, and shall be licensed or registered as a securities broker-
dealer in the states that require such licensing or registration in
connection with supervision and other services pertaining to Contract sales
activities.
2.3 SELECTION AND SUPERVISION OF REPRESENTATIVES. Selling Broker-Dealer
shall select and employ Representatives and shall have full responsibility
for the training, supervision and
<PAGE>
control of such Representatives as contemplated by Section 15(b)(4)(E) of
the 1934 Act and applicable NASD Rules. Such Representatives shall be
subject to the control of Selling Broker-Dealer with respect to such
persons' securities-regulated activities in connection with the Contracts.
Selling Broker-Dealer shall cause such Representatives to be NASD
registered representatives and appropriately licensed with Selling Broker-
Dealer before such Representatives engage in the solicitation of
applications for the Contracts and shall cause such Representatives to
limit solicitations of applications for the Contracts to jurisdictions
where such Representatives are licensed and where the Insurer
has authorized solicitations of its Contracts. Selling Broker-Dealer
agrees that it will permit only its Representatives who are appointed with
the Insurer to solicit and sell the Contracts.
SELLING BROKER-DEALER agrees that the Insurer and shall not have any
responsibility for the supervision of any Representative or any other
associated person or affiliate of Selling Broker-Dealer. If the act or
omission of a Representative or any other associated person or affiliate of
Selling Broker-Dealer is the proximate cause of any claim, damage or
liability (including reasonable attorneys' fees) to the Insurer or FVCS,
Selling Broker-Dealer shall be entirely responsible and liable therefor.
2.4 NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of Selling Broker-
Dealer, ceases to be a Representative of Selling Broker-Dealer, or fails to
meet the rules and standards imposed by Selling Broker-Dealer on its
Representatives, Selling Broker-Dealer shall certify such fact to the
Insurer and FVCS in writing immediately, and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Contracts.
2.5 COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Selling Broker-Dealer shall fully comply with the
requirements of the '34 Act and all other applicable federal or state laws
and with the rules of the NASD and shall establish such rules and
procedures as may be necessary to cause diligent supervision of the
securities activities of Representatives. Selling Broker-Dealer agrees to
maintain appropriate books, records and supervisory procedures as are
required by the SEC, NASD and other regulatory agencies having
jurisdiction.
2.6 PURCHASER SUITABILITY. Selling Broker-Dealer shall be responsible for
suitability and shall take reasonable steps to ensure that its
Representatives shall not make recommendations to applicants to purchase
Contracts inn the absence of reasonable grounds to believe the purchase of
each Contract is suitable for the applicant. The procedure shall include
review of al proposals and applications for Contracts for suitability and
completeness and correctness as to form as well as review and endorsement
on an internal record of Selling Broker-Dealer of the transactions.
Selling Broker-Dealer shall promptly forward to the Insurer's Variable
Service Center, or such other locations as Insurer may from time to time
designate, all applications, without deduction or reduction.
2.7 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION. FVCS shall
provide Selling Broker-Dealer with prospectuses and any supplements or
amendments thereto, and any Statement of Additional Information ("SAI")
describing the Contracts subject to this Agreement. The Insurer is
responsible for maintaining in effect, in accordance with the requirements
of the SEC, each Registration Statement for the Contracts of which the
prospectus is a part. The Insurer shall immediately notify Selling Broker-
Dealer of the issuance of any stop order or any federal or state regulatory
proceeding which would prevent the sale of the Contracts in any state or
jurisdiction. Selling Broker-Dealer shall ensure compliance with the
<PAGE>
prospectus delivery requirements of the '33 Act. Selling Broker-Dealer
agrees to deliver a copy of the SAI concurrently with a copy of the
prospectus to Contract applicants in any jurisdiction where such delivery
may be required.
2.8 APPLICATION FOR CONTRACTS. Each application for a Contract shall be
made on an application form provided by the Insurer and all payments
collected by Selling Broker-Dealer or any of its Representatives shall
be remitted promptly in full, together with such application form and
any other required documentation directly to the Insurer at the address
indicated on such application or to such other address as may be
designated by the Insurer from time to time. All such payments and
documents shall be the property of the Insurer. Selling Broker-Dealer
shall review all such applications for completeness and for compliance
with the conditions herein including the suitability and prospectus
delivery requirements set forth above under sections 2.6. and 2.7. Checks
or money orders in payment of such Contracts should be made payable to the
Insurer. All applications are subject to acceptance or rejection by the
Insurer in its sole discretion.
2.9 DELIVERY OF CONTRACTS. Unless otherwise agreed, Contracts issued on
applications accepted by the Insurer shall be forwarded to the
Representative of Selling Broker-Dealer for delivery to the Contract owner.
3. AUTHORITY AND DUTIES OF AGENCIES. Each Agency agrees to procure
applications for the Contracts and Fixed Contracts in compliance with applicable
insurance law. Such laws and regulations include, but are not limited to, those
pertaining to client funds, privacy and confidentiality, licensing, rebating,
replacements, solicitation and advertising. Each Agency also agrees to the
following duties.
3.1 APPOINTMENT OF SUBAGENTS. Production must be through the Selling
Broker-Dealer and subagents of the Agency who are duly appointed by the
Insurer. The Agency warrants that it and all of its subagents appointed
pursuant to this Agreement shall not solicit nor aid, directly or
indirectly, in the solicitation of any application for any Contract or
Fixed Contract until they are fully licensed by the proper authorities
under the applicable insurance laws within the applicable jurisdictions
where the Agency and subagents propose to offer the Contracts or Fixed
Contracts, where the Insurer is authorized to conduct business and where
the Contracts (or Fixed Contracts) may be lawfully sold. The Insurer may
refuse for any reason, by written notice to the Agency, to permit any
subagent the right to solicit applications for the sale of any of the
Contracts or Fixed Contracts. Upon receipt of such notice, Agency
immediately shall cause such subagent to cease such solicitations of sales
and cancel the appointment of any subagent under this Agreement.
3.2 SUBAGENT LISTS. The Agency shall periodically provide the Insurer
with a list of all subagents appointed by the Agency and the jurisdictions
where such subagents are licensed to solicit sales of the Contracts and/or
Fixed Contracts.
3.3 APPOINTMENT FORMS AND FEES. The Agency shall prepare and transmit the
appropriate appointment forms to the Insurer. The Agency shall pay all
fees to state insurance regulatory authorities, all initial appointment and
renewal fees in connection with obtaining necessary licenses and
authorizations for Agency and subagents to solicit and sell the Contracts
and/or Fixed Contracts. The Insurer reserves the right to accept or reject
any request for such appointment in its sole discretion and may cancel any
existing appointment at any time.
<PAGE>
3.4 SUPERVISION AND TRAINING. Each Agency shall supervise all of its
subagents appointed pursuant to this Agreement to solicit sales of the
Contracts and Fixed Contracts and shall bear responsibility for all acts
and omissions of each subagent. The Agency shall train and supervise its
subagents to ensure that purchase of a Contract is not recommended to an
applicant in the absence of reasonable grounds to believe the purchase of
the Contract is suitable for that applicant. While not limited to the
following, a determination of suitability shall be based on information
furnished to a subagent after reasonable inquiry of such applicant
concerning the applicant's insurance and investment objectives, financial
situation and needs, and the likelihood that the applicant will continue to
make any premium payments contemplated by the Contracts and will keep the
Contract in force. Each Agency also agrees to provide general training and
exercise general supervision over its subagents for Contracts and Fixed
Contracts.
3.5 COLLECTION OF MONEY. Each Agency agrees to treat money received or
collected for the Insurer as property held in trust, and to remit such
money promptly in full, together with the application form and any other
required documentation, to the Insurer's Variable Service Center, or such
other address as may from time to time be designated by the Insurer for the
Contracts and Fixed Contracts. All such payments and documents shall be
the property of the Insurer. The Agency agrees to adhere to the "cash with
application" requirements and further agrees, when applicable, to provide
the proper form of interim coverage and inform the applicant of the
specific conditions of the coverage.
3.6 UNDERWRITING AND ISSUE. Each Agency agrees to comply with the
underwriting and issue requirements of the Insurer and the applicable
insurance laws and regulations of the state or states in which the Agency
operates. Without limitation, each Agency agrees to inform the Insurer of
all material facts of which the Agency is aware relating to insurance of
insureds or proposed insureds.
3.7 CONTRACT DELIVERY. Each Agency agrees to the Contract and Fixed
Contract delivery requirements described in section 2.9., above. The
Agency shall have no authority and agrees not to deliver any Contract (or
Fixed Contract) or allow any Contract (or Fixed Contract) to be delivered
until the first premium has been paid in full. No delivery shall take
place if, after an inquiry, the Agency or subagent is aware that any person
proposed for insurance is not in the same condition of health, habits,
occupation and other facts as are represented in the application.
4. LIMITATION OF AUTHORITY. Selling Broker-Dealer and each Agency, jointly
and severally, agree to the following limitations on their authority under this
Agreement.
4.1 NO AGREEMENT OR DEBT. The Selling Group shall have no authority and
each member thereof agrees not to bind the Insurer or FVCS by any promise
or agreement; incur any debt, expense, or liability whatever in their name
or account; receive any money due or to become due to the Insurer except
first premiums on applications for Contracts and Fixed Contracts, and
except where the Insurer otherwise agrees in writing.
4.2 NO MODIFICATION OF CONTRACT. The Selling Group shall have no
authority and each member thereof agrees not to make, modify or discharge
any Contract (or Fixed Contract), or bind the Insurer by making any
promises respecting any Contract (or Fixed Contract), except when
authorized in writing to do so by an authorized officer of the Insurer.
<PAGE>
4.3 REPRESENTATIVES AND SUBAGENTS. The Selling Group shall have no
authority and each member thereof agrees not to authorize or allow a
Representative or a subagent, as the case may be, to do any act prohibited
under this Agreement.
5. OBLIGATIONS OF THE SELLING GROUP. The Selling Group agrees to the following
obligations:
5.1 ADVERTISING AND SALES PROMOTION MATERIALS. The Selling Group shall
perform the selling functions required by this Agreement only in accordance
with the terms and conditions of the then current prospectus applicable to
the Contracts and shall make no representations not included in the
prospectus or in any authorized supplemental material, including
illustrations. The Selling Group warrants that only advertising and sales
materials, including illustrations, approved by the Insurer and FVCS will
be used by its Representatives in the solicitation and sale of the
Contracts. The Selling Group warrants that only advertising and sales
materials, including illustrations, approved by the Insurer will be used by
it and its subagents in the sale of Fixed Contracts.
5.2 AGREEMENT WITH SUB-AGENTS. Each Agency and the Selling Broker-Dealer
hereby warrant and represent that before a subagent is permitted to sell
the Contracts or Fixed Contracts, the Agency, Selling Broker-Dealer and
subagent shall have entered into a written agreement pursuant to which: (a)
subagent is appointed a subagent of the Agency and a Representative of
Selling Broker-Dealer, (b) subagent agrees that his or her selling
activities relating to the Contracts shall be under the supervision and
control of Selling Broker-Dealer, and his or her selling activities
relating to the Fixed Contracts shall be under the supervision and control
of the appropriate member of the Selling Group; and (c) that subagent's
right to continue to sell such Contracts and Fixed Contracts is subject to
his or her continued compliance with such agreement and any procedures,
rules or regulations implemented by Selling Broker-Dealer and the Agency.
5.3 EXPENSES. Except as may be expressly agreed in advance in writing by
the Insurer or FVCS, the Selling Group shall be solely responsible for
hiring any staff it may desire and for maintaining office space and meeting
necessary expenses without reimbursement from the Insurer or FVCS.
5.4 CO-OPERATION IN INVESTIGATION. Selling Group, Insurer and FVCS
jointly agree to cooperate fully in any insurance, securities or other
regulatory investigation or proceeding or judicial proceeding arising in
connection with any Contract or Fixed Contract. Selling Group shall
promptly notify the Insurer and FVCS of any customer complaint or notice
from any regulatory authority of any investigation or proceeding or
judicial proceeding which it might receive with respect to any Contract or
Fixed Contract.
6. COMPENSATION. Neither FVCS nor the Insurer shall be responsible for payment
of compensation to any Representative or subagent. Compensation to a
Representative for Contracts and Fixed Contracts solicited and sold by the
Representative shall be governed by an agreement between Selling Broker-Dealer
and its Representative and/or between the Agency and the subagent, and to the
extent deemed necessary by the Selling Broker-Dealer, by an agreement between
the Selling Broker-Dealer and the Agency.
6.1 COMPENSATION ON CONTRACTS. While this Agreement is in force, FVCS
shall arrange for payment to Selling Broker-Dealer of compensation payable
on sales of the Contracts solicited in accordance with, and to the extent
described in the Schedule of Commissions in effect at the time of sale.
<PAGE>
6.2 COMPENSATION ON FIXED CONTRACTS. While this Agreement is in force, the
Insurer shall arrange for payment to the Selling Broker-Dealer or its
designated Agency(s) of compensation on sales of the Fixed Contracts
solicited in accordance with, and to the extent described in the applicable
Schedule of Commissions in effect at the time of sale. FVCS shall not be
responsible for payment of any compensation on sales of Fixed Contracts.
6.3. AMENDMENT TO SCHEDULE OF COMMISSIONS. FVCS may change at any time any
Schedule of Commissions on Contracts for business written after the
effective date of the new Schedule. The Insurer may change at any time any
Schedule of Commissions on Fixed Contracts for business written after the
effective date of the new Schedule. Payment of any commission by the
Insurer is subject to its rules, as may be published from time to time as
part of, or separate from the applicable Schedule. In the event of
termination of this Agreement, this subsection shall remain in effect so
long as Selling Group, or any member thereof, is receiving compensation
hereunder. Notwithstanding any other provisions, FVCS and the Insurer
retain the right to amend any Schedule of Commissions, pursuant to this
subsection, even after termination of this Agreement.
6.4 ACCRUAL OF COMMISSIONS. Commissions shall accrue to the Selling
Broker-Dealer upon acceptance by the Insurer of a completed application for
a Contract (or Fixed Contract) and receipt by the Insurer of collected
funds sufficient to cover the premium required. Renewal commissions or
commission trails, if any, will accrue and be vested to the Selling Broker-
Dealer, if at all, only to the extent stated in the Schedule of
Commissions.
6.5 REJECTION OF APPLICATION; WITHDRAWAL OF CONTRACT. The Insurer
reserves the right to reject any application or premium for the purchase of
any Contract or Fixed Contract. In the event any such application or
premium is rejected by the Insurer and the Selling Broker-Dealer (or any of
its Agencies) has received any compensation thereon, such compensation
shall be promptly returned by the Selling Broker-Dealer. The Insurer and
FVCS reserve the right to discontinue distributing any or all Contracts or
Fixed Contracts in any jurisdiction at any time.
6.6 COMMISSION CHARGEBACKS AND RECAPTURE. In the event any Contract or
Fixed Contract sold by or through the Selling Group terminates, lapses,
matures or is surrendered, the Selling Broker-Dealer shall return to FVCS
and/or the Insurer all or a portion of the compensation received therefore
in accordance with the applicable Schedule of Commissions.
6.7 OFFSET. In the event the Selling Group, or any member thereof, owes
FVCS or the Insurer any monies, FVCS or the Insurer may offset any such
amounts against amounts owed to the Selling Group. In the absence of any
offset, the Selling Broker-Dealer shall repay such amounts to FVCS or the
Insurer, as the case may be, within thirty (30) days of written request
therefore. In the event FVCS or the Insurer initiates legal action to
collect any indebtedness owed it by the Selling Broker-Dealer, the Selling
Broker-Dealer shall reimburse FVCS or the Insurer, as the case may be, for
reasonable attorney's fees and expenses in connection therewith.
6.8 PAYMENT UPON TERMINATION. Upon termination of this Agreement, all
compensation to Selling Broker-Dealer (and the Agencies) shall cease.
However, Selling Broker-Dealer (or the Agencies, as the case may be) shall
be entitled to receive compensation for all new and additional premium
payments which have been received by Insurer and are in process at the time
of termination, and shall continue to be liable for any charge-backs and
for any other amount advanced by or otherwise due FVCS or the Insurer.
<PAGE>
6.9 NO THIRD PARTY PAYMENT. Selling Broker-Dealer represents that no
commissions or other compensation based upon a percentage of premiums or
based upon a percentage of assets or other valuable consideration will be
paid for services rendered in soliciting the purchase of the Contracts or
Fixed Contracts by any person or entity which is not duly licensed and
registered by the required authority and appointed by the Insurer to sell
the Contracts (or Fixed Contracts) in the state of such solicitation or
sale; provided, however, that this representation shall not prohibit the
payment of compensation to the surviving spouse or other beneficiary of a
person entitled to receive such compensation pursuant to a bona fide
written contract that calls for such payment. Selling Broker-Dealer and
each Agency agrees that no compensation of any kind other than described in
this Section 6 of this Agreement is payable by FVCS or the Insurer.
7. TERM, TERMINATION. This Agreement shall be effective on the date first
written above when signed by all parties, and shall continue for an indefinite
term, subject to the termination by any party upon thirty (30) days' advance
written notice to the other parties. In the event FVCS or Selling Broker-Dealer
ceases to be a registered broker-dealer or a member of the NASD, this Agreement
shall immediately terminate.
8. INDEMNIFICATION. The Selling Group jointly and severally agree to
indemnify and hold
harmless the Insurer, FVCS, and their affiliates and such associated person as
their officers, directors, agents and employees, against any losses, claims,
damages or liabilities to which the Insurer, FVCS and any such associated person
may become subject under the '33 Act, the '34 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following:
8.1 UNAUTHORIZED SALES PRACTICES. Any unauthorized use of sales materials
or any oral or written misrepresentations or any unlawful sales practices
concerning a Contract or Fixed Contract by the Selling Group, its officers,
directors, employees, agents, Representatives or associated persons.
8.2 COMPENSATION CLAIMS. Claims by agents or Representatives or employees
of the Selling Group for commissions or other compensation or remuneration
of any type.
8.3 NON-COMPLIANCE WITH INSURANCE LAWS. Failure by agents,
Representatives or employees of the Selling Group to comply with all
applicable state insurance laws and regulations including but not limited
to state licensing requirements, rebate statutes and replacement
regulations, and the provisions of this Agreement.
8.4 TELEPHONE INSTRUCTIONS. Telephone instructions by a Representative or
subagent to the Insurer or FVCS in connection with any Contracts or Fixed
Contracts.
8.5 EXPENSES. Legal or other expenses reasonably incurred in connection
with investigating or defending any loss, claim, damage, liability or
action described in this section 8.
9. GENERAL PROVISIONS:
9.1 ENTIRE AGREEMENT. This Agreement supersedes all previous contracts
and agreements between and among the Selling Group, the Insurer and FVCS
made for the procurement of the Contracts and Fixed Contracts, except for
the economic obligations of either party on existing policies which exist
under any such previous or continuing contracts or agreements.
<PAGE>
9.2 ASSIGNMENT. Neither this Agreement nor any commissions hereunder
payable may be assigned, pledged or transferred by the Selling Group
without the prior written consent of the Insurer and FVCS.
9.3 AMENDMENT TO AGREEMENT. No oral promises or representations shall be
binding nor shall this Agreement be modified except by agreement in
writing, executed on behalf of the Insurer and FVCS by a duly authorized
officer of each of them. Each Agency hereby grants a limited Power of
Attorney to the Selling Broker-Dealer, to execute any amendments,
modifications or waivers with respect to this Agreement.
9.4 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be given as follows:
a. If given by the Insurer or FVCS: Either delivered personally to
the Selling Broker-Dealer and any Agency directly affected thereby or
to an officer or partner thereof, or mailed by certified or registered
mail, return receipt requested, to the Selling Broker-Dealer at the
address(s) as shown herein, or to such other address as the Selling
Broker-Dealer may have previously specified to FVCS in writing; or
b. If given by the Selling Broker-Dealer or the Agencies: Either
delivered personally to the president or a vice president of FVCS and
the Insurer at the Insurer and FVCS's office, or mailed by certified
or registered mail, return receipt requested, to FVCS and the
Insurer's office to the attention of the president or vice president,
or to such other address as may be specified from time to time by FVCS
and/or the Insurer.
9.5 NO WAIVER. Failure of any party to insist upon strict compliance
with any of the conditions of this Agreement shall not be construed as a
waiver of any such conditions.
9.6 SURVIVAL. The provisions under sections 5., 6.3., 6.8., 6.9, and 8.
shall survive any termination of this Agreement.
9.7 GOVERNING LAW AND VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Massachusetts.
9.8 BINDING EFFECT. This Agreement shall be binding on and shall inure to
the benefit of the parties to it and their respective successors in
interest. If any provision of the Agreement conflicts with any other
provision, or if any provision shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together
will constitute one and the same instrument.
<PAGE>
[LOGO]
FIRST VARIABLE CAPITAL SERVICES, INC.
10 Post Office Square, Suite 1200
Boston, MA 02109-9309
(617) 457-6700
BROKER-DEALER SUPERVISORY AND SELLING AGREEMENT (CONTINUED)
SIGNATURE PAGES
IN RELIANCE ON the representations set forth above and in consideration of
the undertakings described, the parties represented below do hereby contract
and agree.
For Selling Broker-Dealer*:
FINANCIAL WEST GROUP, INC.
[Name of Broker-Dealer]
By: __________________________________
Name: _________________________________
[Print]
Date: ____________________
For FVCS: For Insurer:
FIRST VARIABLE CAPITAL SERVICES, INC. FIRST VARIABLE LIFE INSURANCE INC.
INSURANCE COMPANY
By: _____________________________ By: __________________________
Title: _____________________________ Title: __________________________
Date: _____________________________ Date: __________________________
This Agreement is not effective unless and until signed by FVCS and the
Insurer.
*Selling Broker-Dealer shall also be deemed an Agency for purposes of the
Agreement, except to the extent provided otherwise on the attached Signature
Pages for Selling Broker-Dealer's Insurance Agency Affiliates and
Subsidiaries.
<PAGE>
[LOGO]
FIRST VARIABLE CAPITAL SERVICES, INC.
10 Post Office Square, Suite 1200
Boston, MA 02109-9309
(617) 457-6700
BROKER-DEALER SUPERVISORY AND SELLING AGREEMENT (CONTINUED)
SIGNATURE PAGES FOR
INSURANCE AGENCY AFFILIATES AND SUBSIDIARIES
By execution hereof, the following Agencies of the Selling Broker-Dealer
agree to become parties to the Agreement and to be to bound by the terms and
conditions contained therein.
<TABLE>
Agency: Agency:
<S> <C>
_____________________________ ____________________________
[Name of Insurance Agency] [Name of Insurance Agency]
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
Date: _____________________________ Date: _____________________________
Territory: _____________________________ Territory: _____________________________
Agency: Agency:
_____________________________ ____________________________
[Name of Insurance Agency] [Name of Insurance Agency]
By: _____________________________ By: _____________________________
Name: _____________________________ Name: _____________________________
Title: _____________________________ Title: _____________________________
Date: _____________________________ Date: _____________________________
Territory: _____________________________ Territory: _____________________________
</TABLE>
<PAGE>
EXHIBIT 4
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
<PAGE>
[LOGO]
LITTLE ROCK, ARKANSAS
A STOCK LIFE INSURANCE COMPANY
FIRST VARIABLE LIFE INSURANCE COMPANY (the "Company") will make Annuity
Payments to the Annuitant, unless directed otherwise by the Owner, starting
on the Annuity Date, subject to the terms of this Contract.
This Contract is issued in return for the payment of the initial Purchase
Payment.
TEN DAY FREE LOOK--Within 10 days of the date of receipt of this Contract by
the Owner, it may be returned by delivering or mailing it to the Company at
its Variable Service Center or to the agent through whom it was purchased.
When this Contract is received by the Company, it will be voided as if it had
never been in force. The Company will refund the Contract Value computed at
the end of the Valuation Period during which this Contract is received by the
Company at its Variable Service Center.
STEVE LARGENT ARNOLD R. BERGMAN
President Secretary
First Variable Life Insurance Company
Little Rock, Arkansas
ANNUITY PAYMENTS, WITHDRAWAL VALUES AND THE DEATH BENEFITS PROVIDED BY THIS
CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE VARIABLE PROVISIONS OF THIS CONTRACT CAN BE FOUND ON PAGES 10 AND 14.
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT WITH
FLEXIBLE PURCHASE PAYMENTS - NON-PARTICIPATING
<PAGE>
TABLE OF CONTENTS
PAGE
----
CONTRACT DATA PAGE......................................................CD-1
DEFINITIONS................................................................1
INVESTMENT OPTIONS.........................................................2
The Separate Account and the Sub-Accounts..................................2
Sub-Account Investment Options.............................................2
Fixed Account Option.......................................................2
TRANSFERS..................................................................2
Transfers Among Investment Options.........................................2
General Requirements for Transfers.........................................3
Automatic Transfer of Small Accounts.......................................3
CHARGES AND DEDUCTIONS.....................................................3
Administrative Charge......................................................3
Annual Contract Maintenance Charge.........................................3
Mortality and Expense Risk Charge..........................................4
Separate Account Management Fee............................................4
Taxes......................................................................4
Transfer Fee...............................................................4
Withdrawal Charge..........................................................4
GENERAL PROVISIONS.........................................................4
The Contract...............................................................4
Incontestability...........................................................4
Modification...............................................................4
Ownership..................................................................5
Change of Designations.....................................................5
Non-Participating..........................................................5
Protection of Proceeds.....................................................5
Transfer by the Company....................................................5
PURCHASE PAYMENTS..........................................................5
General....................................................................5
Conversion to Accumulation Units...........................................6
Delayed Investment Start Date..............................................6
CONTRACT VALUE.............................................................6
General....................................................................6
Accumulation Unit Value....................................................6
Fixed Account Value........................................................7
Minimum Value Required After Partial Withdrawal............................7
Minimum Value Required If Subsequent Purchase Payments Not Made............7
Minimum Value Required In Any Investment Option............................7
Reports....................................................................7
i
<PAGE>
TABLE OF CONTENTS (CONTINUED)
Death of Annuitant.........................................................7
Death of Owner.............................................................8
Payment of Owner's Death Benefit...........................................8
Owners Other than a Single Person..........................................8
Beneficiary Other than a Single Person.....................................8
WITHDRAWALS................................................................9
General....................................................................9
Withdrawal Charge..........................................................9
Partial Withdrawals........................................................9
Free Withdrawal Amount.....................................................10
Suspension or Deferral of Payments.........................................10
ANNUITY PROVISIONS.........................................................10
Annuity Date...............................................................10
Annuity Payments...........................................................11
Variable Annuity Payments..................................................11
Fixed Annuity Payments.....................................................11
Annuity Options............................................................11
Mortality Tables...........................................................12
Misstatement of Age or Sex.................................................12
Supplementary Agreement....................................................12
Evidence of Survival.......................................................12
Proof of Age...............................................................13
ANNUITY OPTION TABLES......................................................13
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
CONTRACT DATA PAGE CAPITAL SIX VA
ANNUITANT: [JOHN DOE] AGE AT ISSUE: [50]
OWNER: [JOHN DOE] AGE AT ISSUE: [50]
BENEFICIARY: [as shown in
application]
CONTRACT NUMBER: [8700-96] ISSUE DATE: [1/1/96]
ANNUITY DATE: [1/1/2015] ANNUITIZATION BONUS: [3% of Contract
Value on Annuity
Date]
SEPARATE ACCOUNT: [First Variable FIXED ACCOUNT:
Annuity Fund E] MINIMUM GUARANTEED INTEREST RATE: [3.0%]
CURRENT INTEREST RATE ON ISSUE DATE: [5.5%]
DURATION OF CURRENT INTEREST RATE: [First Contract
Year]
INVESTMENT OPTIONS:
[VIST Common Stock Portfolio] [VIST Tilt Utility Portfolio]
[VIST Growth & Income Portfolio] [VIST U.S. Government Bond Portfolio]
[VIST High Income Bond Portfolio] [VIST World Equity Portfolio]
[VIST Multiple Strategies Portfolio] [Federated Prime Money Fund II Portfolio]
[VIST Small Cap Portfolio] [Fixed Account]
DELAYED INVESTMENT START DATE: [Not Applicable]
DELAYED INVESTMENT START SUB-ACCOUNT: [Not Applicable]
PURCHASE PAYMENTS:
INITIAL PURCHASE PAYMENT: [$ 5,000]
MINIMUM SUBSEQUENT PURCHASE PAYMENT: [$200]
MAXIMUM CUMULATIVE PURCHASE
PAYMENTS: [$1 Million]
ADMINISTRATIVE CHARGE:
[Daily charge on net assets in each Sub-Account equal to an annual rate of .25%]
ANNUAL CONTRACT MAINTENANCE CHARGE:
[$30.00 each Contract Year during the Accumulation Period, if Contract Value is less than $100,000]
[No Annual Contract Maintenance Charge during the Annuity Period]
MORTALITY AND EXPENSE RISK CHARGE:
[Daily charge on net assets in each Sub-Account equal to an annual rate of 1.25%]
CHARGE FOR RIDERS:
[OPTIONAL ENHANCED DEATH BENEFIT Annual charge of..35% of Contract Value on
each Contract Anniversary prior to the earlier of the
Annuity Date or the Owner's 80th birthday]
</TABLE>
CD-1
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CONTRACT DATA PAGE
(CONTINUED)
CAPITAL SIX VA
SEPARATE ACCOUNT MANAGEMENT FEE: [None]
TRANSFERS:
FREE TRANSFERS:
[Unlimited for purposes of determining Transfer Fee]
TRANSFER FEE: [$0]
MINIMUM CONTRACT VALUE TO BE TRANSFERRED: [$1,000 or the Contract Value in the
selected Investment Option, if less]
RESTRICTIONS ON TRANSFERS FROM THE FIXED ACCOUNT: [Prior to the Annuity Date,
Contract Value to be transferred from the Fixed Account in any Contract Year
may not exceed:
(1) for transfers during the first Contract Year, 25% of Fixed Account Value
on the Issue Date; and
(2) for transfers after the first Contract Year, the greater of: (a) 25% of
Fixed Account Value on the immediately preceding Contract Anniversary; or
(b) 100% of the Fixed Account Value transferred to other Investment Options
during the immediately preceding Contract Year.
No transfers of Contract Value are permitted from the Fixed Account to other
Investment Options during the Annuity Period.]
MINIMUM CONTRACT VALUE TO REMAIN IN INVESTMENT OPTION AFTER TRANSFER:
[None]
VARIABLE SERVICE CENTER: [The Variable Service Center on the Issue Date is
located at P.O. Box 1317, Des Moines, IA 50305-13179]
WITHDRAWALS:
WITHDRAWAL CHARGE EVENT: [The Company may impose a Withdrawal Charge:
(1) Upon withdrawal or surrender of Contract Value during the Accumulation
Period; and
(2) On the Annuity Date, if the Annuity Date is within the first two (2)
Contract Years.
No Withdrawal Charge is imposed on Death Benefits payable if an Owner dies
before the Annuity Date.]
DURATION OF WITHDRAWAL CHARGE: [The Withdrawal Charge Duration begins on the
Issue Date and ends at the end of the sixth Contract Year]
WITHDRAWAL CHARGE PERCENTAGES:
[(as Percentage of Purchase Payment)]
[CONTRACT YEAR 1 2 3 4 5 6 7+]
[WITHDRAWAL CHARGE PERCENTAGE 7% 6% 5% 4% 3% 2% 0%]
MINIMUM PARTIAL WITHDRAWAL: [$1,000, if less, the Owner's entireInterest]
FREE WITHDRAWAL AMOUNT ON PARTIAL WITHDRAWALS: [15% of Purchase Payments]
WITHDRAWAL VALUE REQUIRED TO REMAIN IN CONTRACT AFTER PARTIAL
WITHDRAWAL: [$1,000]
WAIVER OF WITHDRAWAL CHARGE: [As specified in Nursing Home and Terminal
Illness Waiver Endorsement]
ANNUITY UNIT VALUE: Assumed Interest Rate: [3% per anum]
CD-2
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD: The period during which Purchase Payments may be made
prior to the Annuity Date.
ACCUMULATION UNIT: A unit of measure used to calculate the Contract Value in
a Sub-Account of the Separate Account prior to the Annuity Date.
ACCUMULATION UNIT VALUE: The value of an Accumulation Unit on a Business Day.
AGE: The attained age on the date for which age is being determined for the
Annuitant or Owner, as applicable.
ANNUITANT: The natural person on whose life Annuity Payments are based.
ANNUITY DATE: The date on which Annuity Payments begin. The Annuity Date is
shown on the Contract Data Page.
ANNUITY PAYMENTS: The series of payments made to the Annuitant or other
payee selected by the Owner after the Annuity Date under the Annuity Option
selected.
ANNUITY PERIOD: The period after the Annuity Date during which Annuity
Payments are made.
ANNUITY UNIT: A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.
ANNUITY UNIT VALUE: The value of an Annuity Unit on a Business Day.
BENEFICIARY: The person, persons or entity who will receive the death
benefit. The Beneficiary is stated on the Contract Data Page for this
Contract, unless changed in accordance with the Contract provisions.
BUSINESS DAY: Each day that the New York Stock Exchange is open for trading,
which is Monday through Friday, except for normal business holidays.
COMPANY: First Variable Life Insurance Company.
CONTRACT ANNIVERSARY: An anniversary of the Issue Date.
CONTRACT VALUE: The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and in the Fixed Account.
CONTRACT YEAR: One year from the Issue Date and from each Contract
Anniversary.
FIXED ACCOUNT: The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and
other segregated asset accounts.
FIXED ACCOUNT VALUE: The Owner's interest in the Fixed Account during the
Accumulation Period.
FIXED ANNUITY PAYMENTS: A series of payments made during the Annuity Period
which are guaranteed as to dollar amount by the Company.
INVESTMENT OPTION: The Fixed Account or any of the Sub-Accounts of the
Separate Account which can be selected under this Contract.
ISSUE DATE: The date on which this Contract became effective. The Issue
Date is shown on the Contract Data Page.
OWNER: The person, persons or entity entitled to all the ownership rights
under this Contract. The Owner is stated on the Contract Data Page for this
Contract, unless changed in accordance with the Contract provisions.
PORTFOLIO: A separate and distinct class of shares that is available as an
underlying investment of a Sub-Account. As of the Issue Date, each
Sub-Account invests exclusively in a Portfolio stated on the Contract Data
Pages.
PURCHASE PAYMENT: An amount paid to the Company to provide benefits under
this Contract.
SEPARATE ACCOUNT: A separate investment account of the Company designated on
the Contract Data Page.
SUB-ACCOUNT: A segment of the Separate Account.
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VALUATION PERIOD: The period of time between the close of one Business Day
and the close of business for the next succeeding Business Day.
VARIABLE ACCOUNT VALUE: The Owner's interest in the Sub-Accounts of the
Separate Account during the Accumulation Period.
VARIABLE ANNUITY PAYMENTS: A series of payments made during the Annuity
Period which vary in amount with the investment experience of each applicable
Sub-Account.
VARIABLE SERVICE CENTER: The Company's administrative service center for this
Contract. The mailing address for the Variable Service Center on the Issue
Date is shown on the Contract Data Pages. Other terms are defined in the
Contract.
INVESTMENT OPTIONS
THE SEPARATE ACCOUNT AND THE SUB-ACCOUNTS
The Separate Account is a separate investment account of the Company. It is
shown on the Contract Data Page. The Company has allocated a part of its
assets for this and certain other contracts to the Separate Account. The
assets of the Separate Account are the property of the Company. The Company
guarantees that the portion of the Separate Account assets equal to the
Company's reserves and other contract liabilities shall not be chargeable
with the liabilities arising out of any other business the Company may
conduct.
Assets of the Separate Account are valued at their fair market value in
accordance with procedures of the Company. The Separate Account is segmented
into Sub-Accounts. Each Sub-Account available under this Contract on the
Issue Date invests its assets exclusively in shares of one of the Portfolios
shown on the Contract Data Page.
SUB-ACCOUNT INVESTMENT OPTIONS
The Owner may allocate Purchase Payments to one or more of the Sub-Accounts
that correspond to the Portfolios shown on the Contract Data Page. The
Company may, from time to time, invest Separate Account assets in additional
mutual funds, portfolios of mutual funds, or other investment vehicles. The
Owner may be permitted to transfer Contract Value or allocate Purchase
Payments to these additional Separate Account investments. However, the
right to make any transfer will be limited by the terms and conditions
imposed by the Company. If the shares of any Portfolio, or of any other
Separate Account investment, become unavailable for investment by the
Separate Account, or if the Company's Board of Directors deems further
investment in these shares inappropriate, the Company may limit further
purchase of these shares or may substitute shares of another Portfolio or
other investment vehicle for shares already purchased under this Contract.
FIXED ACCOUNT OPTION
The Owner may allocate Purchase Payments to the Fixed Account. Interest will
be credited to amounts allocated to the Fixed Account as described in the
"Contract Value - Fixed Account Value" provision of this Contract.
TRANSFERS
TRANSFERS AMONG INVESTMENT OPTIONS
During the Accumulation Period, the Owner may transfer Contract Value among
Investment Options without the imposition of any fee or charge if there have
been no more than the number of free transfers shown on the Contract Data
Page for the Contract Year. No transfers are permitted, however, until the
end of a Delayed Investment Start Date, if
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<PAGE>
any, shown on the Contract Data Page. The amount of Contract Value which may
be transferred from the Fixed Account to other Investment Options will be
subject, without limitation, to the specific restrictions, if any, shown on
the Contract Data Page.
During the Annuity Period, the Owner may make a transfer from one or more
Sub-Accounts to other Investment Options only once each Contract Year, and no
transfers of Contract Value are permitted from the Fixed Account to the
Separate Account. The amount transferred to the Fixed Account from a
Sub-Account of the Separate Account will be equal to the annuity reserves for
the Owner's interest in that Sub-Account. The annuity reserve is the product
of (a) multiplied by (b) multiplied by (c), where (a) is the number of
Annuity Units representing the Owner's interest in the Sub-Account per
Annuity Payment; (b) is the Annuity Unit value for the Sub-Account; and (c)
is the present value of $1.00 per payment period as of the Age of the
Annuitant at time of transfer for the Annuity Option, determined using the
Mortality Tables used to construct the Annuity Tables contained in this
Contract and the assumed interest rate shown on the Contract Data Page.
Amounts transferred to the Fixed Account will be applied to the existing
Annuity Option, using the Age of the Annuitant at the time of the transfer.
All amounts, Accumulation Unit Values and Annuity Unit Values will be
determined as of the end of the Valuation Period during which a transfer
request was received by the Company of its Variable Service Center.
GENERAL REQUIREMENTS FOR TRANSFERS
If more than the permitted number of free transfers have been made in the
Contract Year, the Company will deduct the Transfer Fee shown on the Contract
Data Page for each subsequent transfer. The Transfer Fee will be deducted
from the Owner's interest in the Investment Option from which the transfer is
made. However, if the Owner's entire interest in an Investment Option is
being transferred, the Transfer Fee will be deducted from the amount which is
transferred.
The minimum amount of Contract Value which can be transferred is shown on the
Contract Data Page. The minimum amount of Contract Value, if any, which must
remain in an Investment Option after a transfer from it is shown on the
Contract Data Page.
Any transfer instruction must be in form satisfactory to the Company, and
received by the Company at its Variable Service Center. Without limitation,
any such instruction must clearly specify the amount which is to be
transferred and the Investment Options which are to be affected. The Company
will not be liable for transfers made in accordance with instructions by, or
on behalf of, the Owner.
The Company reserves the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privileges described
above.
AUTOMATIC TRANSFER OF SMALL ACCOUNTS
The Company reserves the right to the extent permitted by law, on any
Business Day to transfer Contract Value then held in any particular
Investment Option in the event that Contract Value in that Investment Option
is less than $250, to the Investment Option with the then highest Contract
Value.
CHARGES AND DEDUCTIONS
ADMINISTRATIVE CHARGE
The Company deducts on each Business Day, both prior to and during the
Annuity Period, an Administrative Charge from the Separate Account which is
equal, on an annual basis, to the amount shown on the Contract Data Page.
The Administrative Charge compensates the Company for the costs associated
with the administration of this Contract and the Separate Account.
ANNUAL CONTRACT MAINTENANCE CHARGE
The Company deducts an Annual Contract Maintenance Charge to reimburse it for
its administrative expenses from the Contract Value for the amount, and
during the period, shown on the Contract Data Page. The charge is deducted by
the
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<PAGE>
Company reducing Fixed Account Value and/or Accumulation Unit Value from each
applicable Investment Option in the ratio that the value that Contract Value
in each applicable Investment Option bears to the total Contract Value.
Accumulation Unit Value is reduced by the Company canceling Accumulation
Units credited to this Contract.
The Annual Contract Maintenance Charge will be deducted from the Contract
Value on each Contract Anniversary while this Contract is in force. If a
total withdrawal (surrender) is made on other than a Contract Anniversary,
the Annual Contract Maintenance Charge will be deducted at the time of
withdrawal. If the Annuity Date is not a Contract Anniversary, the Annual
Contract Maintenance Charge will be deducted on the Annuity Date. After the
Annuity Date, the Annual Contract Maintenance Charge, if any, will be
collected on a monthly basis and will result in a reduction of each Annuity
Payment.
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Business Day, both prior to and during the
Annuity Period, a Mortality and Expense Risk Charge from the Separate Account
which is equal, on an annual basis, to the amount shown on the Contract Data
Page. The Mortality and Expense Risk Charge compensates the Company for
assuming the mortality and expense risks under this Contract. The Company
guarantees that the dollar amount of each Annuity Payment after the first
Annuity Payment will not be affected by variations in mortality or expense
experience.
SEPARATE ACCOUNT MANAGEMENT FEE
Any fee deducted by the Company from the Separate Account for investment
management is shown on the Contract Data Page.
TAXES
Any taxes paid to any governmental entity relating to this Contract will be
deducted from the Purchase Payment or Contract Value when incurred. The
Company will, in its sole discretion, determine when taxes have resulted
from: the investment experience of the Separate Account; receipt by the
Company of the Purchase Payments; or commencement of Annuity Payments. The
Company may, at its sole discretion, pay taxes when due and deduct that
amount from the Contract Value at a later date, or may establish reserves or
other appropriate provision for payment of taxes at a later date. Payment at
an earlier date does not waive any right the Company may have to deduct
amounts at a later date. The Company will deduct any withholding taxes
required by applicable law.
TRANSFER FEE
The Transfer Fee applicable to a permitted transfer of Contract Value among
Investment Options is shown on the Contract Data Page.
WITHDRAWAL CHARGE
The Withdrawal Charge, if any, shown on the Contract Data Page may be
deducted in the event of a withdrawal of all or a portion of the Contract
Value. It is described in the Withdrawals provisions of this Contract.
GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of this Contract and any riders or endorsements
attached to this Contract.
This Contract may be changed or altered only by the President or Vice
President and the Secretary of the Company. A change or alteration must be
made in writing.
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<PAGE>
INCONTESTABILITY
The Contract will not be contestable after it has been in force for a period
of two years from the Issue Date.
MODIFICATION
This Contract may be modified in order to maintain compliance with applicable
state and federal law.
OWNERSHIP
The Owner has all rights and may receive all benefits under this Contract.
The Owner is the person shown on the Contract Data Page, unless changed prior
to the Annuity Date. Upon the death of the Owner, the Beneficiary will have
all the rights and may receive all benefits under this Contract.
ASSIGNMENT: The Owner may, at any time during his or her lifetime, assign
his or her rights under this Contract. The Company will not be bound by any
assignment until written notice is received by the Company at its Variable
Service Center. The Company is not responsible for the validity or tax
consequences of any assignment. The Company will not be liable as to any
payment or other settlement made by the Company before receipt of the
assignment.
CHANGE OF DESIGNATIONS
A request to change the designated Owner, Annuitant or Beneficiary must be
made in writing and received by the Company at its Variable Service Center.
The change will become effective as of the date the written request is
signed. A new designation will not apply to any payment made or action taken
by the Company prior to the time it records the change, and the Company shall
be released from any further liability with respect to any such payment made
or action taken.
OWNER. The Owner may change the Owner at any time prior to the Annuity Date.
A change of Owner will automatically revoke any prior designation of Owner.
ANNUITANT. The Owner may change the Annuitant at any time prior to the
Annuity Date, but not if the Contract is owned by a non-natural person. Any
change of Annuitant is subject to the Company's underwriting rules then in
effect. The Owner may automatically become the Annuitant if a new Annuitant
is not designated within thirty (30) days of the death of the Annuitant prior
to the Annuity Date, as stated in the Death Benefit provisions of this
Contract. A permitted change of Annuitant will automatically revoke any
prior designation of Annuitant.
BENEFICIARY: Subject to the rights of any irrevocable Beneficiary(ies), the
Owner may change the primary Beneficiary(ies) or contingent Beneficiary(ies).
A permitted change of Beneficiary will automatically revoke any prior
designation of Beneficiary.
NON-PARTICIPATING
This Contract will not share in any distribution of dividends.
PROTECTION OF PROCEEDS
To the extent permitted by law, Death Benefits and Annuity Payments shall be
free from legal process and the claim of any creditor if the person is
entitled to them under this Contract. No payment and no amount under this
Contract can be taken or assigned in advance of its payment date unless the
Company receives the Owner's written consent.
TRANSFER BY THE COMPANY
The Company reserves the right to transfer its obligations hereunder to
another qualified life insurance company under an assumption reinsurance
arrangement without the prior consent of the Owner.
5
<PAGE>
PURCHASE PAYMENTS
GENERAL
The initial Purchase Payment as shown on the Contract Data Page is due on the
Issue Date. The Owner may make subsequent Purchase Payments prior to the
Annuity Date and may increase or decrease or change the frequency of such
payments. Purchase Payments are, however, subject to the Minimum Subsequent
Purchase Payment amount and the Maximum Cumulative Purchase Payment amount
shown on the Contract Data Page (unless otherwise approved by the Company).
The Company reserves the right to reject any Purchase Payment.
CONVERSION TO ACCUMULATION UNITS
Each Purchase Payment is allocated to the Fixed Account and/or one or more
Sub-Accounts of the Separate Account. A Purchase Payment allocated to a
Sub-Account of the Separate Account is converted into Accumulation Units.
The number of Accumulation Units in a Sub-Account credited to this Contract
is determined by dividing the Purchase Payment allocated to that Sub-Account
by the dollar value of the Accumulation Unit Value for that Sub-Account as of
the end of the Valuation Period during which that Purchase Payment is
received by the Company at its Variable Service Center. Except as described
in the Delayed Investment Start Date provision below, the allocation of the
initial Purchase Payment is made in accordance with the selection made by the
Owner. Unless otherwise changed by the Owner, subsequent Purchase Payments
are allocated in the same manner as the initial Purchase Payment. Allocation
of the Purchase Payments is subject to the terms and conditions imposed by
the Company.
DELAYED INVESTMENT START DATE
If a Delayed Investment Start Date is shown on the Contract Data Page, the
initial Purchase Payments for this Contract will be allocated to the Delayed
Investment Start Sub-Account shown on the Contract Data Page in lieu of
allocation to any other Sub-Account Investment Option. Contract Value will
be transferred from the Delayed Investment Start Sub-Account on the Business
Day immediately following the Delayed Investment Start Date to any other
Sub-Account Investment Option in accordance with the initial instructions of
the Owner.
The allocation of Purchase Payments to the Fixed Account is not affected by a
Delayed Investment Start Date. Purchase Payments received after a Delayed
Investment Start Date will be allocated to any Investment Option then
available under this Contract in accordance with the Owner's direction.
CONTRACT VALUE
GENERAL
The Contract Value on any Business Day is the sum of the Owner's interest in
the Sub-Accounts of the Separate Account and in the Fixed Account. The value
of the Owner's interest in a Sub-Account is determined by multiplying the
number of Accumulation Units attributable to that Sub-Account by the
Accumulation Unit Value for that Sub-Account.
ACCUMULATION UNIT VALUE
The number of Accumulation Units in a Sub-Account credited to this Contract
is determined by dividing the amount to be allocated to or deducted from that
Sub-Account by the Accumulation Unit Value for that Sub-Account as of the end
of the Valuation Period during which the request for the transaction was
received by the Company at its Variable Service. The Accumulation Unit Value
for each Sub-Account was arbitrarily set initially at $10. Subsequent
Accumulation Unit Values are determined by subtracting (2) from (1) and
dividing the result by (3) where:
(1) is the net result of:
a. the assets of the Sub-Account attributable to Accumulation
Units; plus or minus
b. the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation
or maintenance of that Sub-Account.
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<PAGE>
(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge, which are shown on the
Contract Data Page; and
(3) is the number of Accumulation Units outstanding at the end of the
Valuation Period.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
FIXED ACCOUNT VALUE
The Company guarantees that it will credit interest to Contract Value in the
Fixed Account at a rate not less than the Minimum Guaranteed Interest Rate
shown on the Contract Data Page. Additional amounts of interest may be
credited by the Company from time to time in its sole discretion. The Current
Interest Rate credited on the Issue Date, which includes the minimum
guaranteed interest rate, is shown on the Contract Data Page. It is
guaranteed for the first Contract Year by the Company, unless a greater
period is shown on the Contract Data Page.
New Purchase Payments allocated to the Fixed Account may be credited with
interest at a different rate than the interest rate credited to Contract
Value transferred from the Separate Account to the Fixed Account. Contract
Value existing in the Fixed Account may be credited with interest at a
different rate than the interest rate(s) applied to new Purchase Payment
allocations and Separate Account transfers. The Company determines interest
rates in advance, and credits interest daily to Fixed Account Value in
dollars.
MINIMUM VALUE REQUIRED AFTER PARTIAL WITHDRAWAL
The Company may deem a Contract surrendered if it receives a request to
withdraw Contract Value that would cause the remaining Withdrawal Value to
be less than the amount required to remain in the Contract after a partial
withdrawal. The Withdrawal Value required to remain in the Contract after a
partial withdrawal is shown on the Contract Data Page. The Company reserves
the right to terminate the Contract in such event and pay all Withdrawal
Value to the Owner. The Company will send a notice to the Owner at his or her
last known address at least thirty (30) days in advance of any such
termination. This Contract will remain in force during such thirty (30) day
period. The Owner may make additional Purchase Payments during the thirty
(30) day period to increase Contract Value above such minimum.
MINIMUM VALUE REQUIRED IF SUBSEQUENT PURCHASE PAYMENTS NOT MADE
The Company reserves the right to terminate a Contract if the Contract Value
on any Business Day falls below $1,000 and no Purchase Payments were received
by the Company during the then current Contract Year and the two (2)
immediately preceding Contract Years. The Company will send a notice to the
Owner at his or her last known address at least thirty (30) days in advance
of any such termination. This Contract will remain in force during such
thirty (30) day period. The Owner may make additional Purchase Payments
during the thirty (30) day period to increase Contract Value above such
minimum. If such additional Purchase Payments are received by the Company
in good order during the thirty (30) day period, the Contract will not be in
default for failure to make subsequent Purchase Payments during the then
current Contract Year and the two (2) immediately preceding Contract Years.
This Minimum Value requirement, however, will continue to apply during the
next and each subsequent Contract Year.
MINIMUM VALUE REQUIRED IN ANY INVESTMENT OPTION
The Company reserves the right to the extent permitted by law to transfer
Contract Value from any Investment Option if on any Business Day the Contract
Value in the Investment Option is less than $250. In such event, the
Contract Value will be transferred to the Investment Option with the highest
Contract Value.
REPORTS
At least once each calendar year, the Company will furnish the Owner with a
report showing the Contract Value and any other information as may be
required by law. Reports will be sent to the last known address of the Owner.
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DEATH BENEFITS
DEATH OF ANNUITANT
Upon the death of the Annuitant prior to the Annuity Date, the Owner may
designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. If the Owner is
a non-natural person, the death of the Annuitant will be treated as the death
of the Owner and a new Annuitant may not be designated.
Upon the death of the Annuitant after the Annuity Date, the Death Benefit, if
any, will be as specified in the Annuity Option elected.
DEATH OF OWNER
Upon the death of an Owner prior to the Annuity Date, the Death Benefit will
be paid to the Beneficiary designated by the Owner. The Death Benefit will
be the greater of:
1. the Purchase Payments, less the sum of any Withdrawal Value
previously taken; or
2. the Contract Value.
For purposes of determining the Death Benefit, "Withdrawal Value previously
taken" is the sum of the reductions in Contract Value attributable to partial
withdrawals during the Owner's lifetime, including applicable charges.
If the Beneficiary is the spouse of the Owner and elects to continue the
Contract, the Contract Value remains unchanged and no determination of the
Death Benefit is made at that time.
Upon the death of an Owner on or after the Annuity Date, any remaining
amounts payable under the Contract will be distributed at least as rapidly as
under the method of distribution being used as of the date of the Owner's
death.
PAYMENT OF OWNER'S DEATH BENEFIT
The Death Benefit will be determined by the Company as of the date of the
Owner's death. The Death Benefit will be paid as of the Valuation Period
next following the date of receipt by the Company of both due proof of death
and, if no election of payment method was previously made by the Owner, an
election for the payment method. In the event of the death of an Owner prior
to the Annuity Date, a Beneficiary may elect to have the Death Benefit paid
under one of the following options: (a) as a single lump sum payment; (b)
payment of the entire Death Benefit within five years of the date of the
Owner's death or (c) payment of the Death Benefit under an Annuity Option
over the lifetime of the Beneficiary or over a period not extending beyond
the life expectancy of the Beneficiary with payments commencing within one
year of the date of the Owner's death. Any portion of the Death Benefit not
applied under option (c) within one year of the date of the Owner's death,
must be distributed within five years of the date of such death.
A spousal Beneficiary may elect one of the above options or elect to continue
the Contract in his or her name at the then current Contract Value in lieu of
receiving any Death Benefit. Payment to the Beneficiary other than in a lump
sum, may only be elected during the sixty (60) day period beginning with the
date of receipt of proof of death.
If a single sum payment is requested, the amount will be paid within seven
(7) days of receipt of proof of death and the election, unless the Suspension
or Deferral of Payments provision is in effect.
Payment to the Beneficiary, other than in a single sum, may only be elected
during the sixty-day period beginning with the date of receipt of proof of
death.
The Company will require due proof of death before payment of a Death
Benefit. For these purposes, "due proof of death" means:
1. a certified death certificate;
2. a certified decree of a court of competent jurisdiction as to
the finding of death; or
3. any other proof satisfactory to the Company.
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All Death Benefits will be paid in accordance with applicable law or
regulations governing death benefit payments.
OWNERS OTHER THAN A SINGLE PERSON
If there are Joint Owners, any references to the death of an Owner shall mean
the first death of an Owner. Any Joint Owner must be the spouse of the other
Owner. Upon the death of either Owner, the surviving spouse will be the
primary Beneficiary.
BENEFICIARY OTHER THAN A SINGLE PERSON
Unless the Owner provides otherwise, the Death Benefit will be paid in equal
shares to the survivor(s) as follows:
1. to the primary Beneficiary(ies) who survive the death of the Owner
and/or Annuitant, as applicable; or if there are none,
2. to the contingent Beneficiary(ies) who survive the death of the
Owner and/or Annuitant, as applicable; or if there are none,
3. to the estate of the Owner.
WITHDRAWALS
GENERAL
Prior to the Annuity Date, the Owner may, upon written request received by
the Company at its Variable Service Center, make a total withdrawal
(surrender) or partial withdrawal of the Withdrawal Value. The Withdrawal
Value is:
1. The Contract Value at the end of the Valuation Period during which
a written request for a withdrawal is received at the Company; less
2. any applicable taxes not previously deducted; less
3. the Withdrawal Charge, if any; less
4. the Annual Contract Maintenance Charge, if any; less
5. the Optional Enhanced Death Benefit Charge, if any.
A withdrawal will result in the cancellation of Accumulation Units from each
applicable Sub-Account or a reduction in Fixed Account Value in the ratio
that the Contract Value in each Investment Option bears to the total Contract
Value. The Owner may request in writing in advance if a different method for
canceling Accumulation Units or reducing Fixed Account Value is desired. The
Company reserves the right to approve or disapprove any such request.
The Company will pay the amount of any withdrawal within seven (7) days of
receipt of a request in good order unless the Suspension or Deferral of
Payments provision is in effect.
WITHDRAWAL CHARGE
A Withdrawal Charge may be imposed by the Company if a Withdrawal Charge
Event shown on the Contract Data Page occurs during the Withdrawal Charge
Duration shown on the Contract Data Page.
The Withdrawal Charge is determined by the Company applying the Withdrawal
Charge Percentages shown on the Contract Data Page to the Contract Value
deemed by the Company to represent Purchase Payments withdrawn, surrendered
or applied to an Annuity Option. The charge will vary depending on the
elapsed period shown on the Contract Data Page for which a Withdrawal Charge
applies. Purchase Payments are deemed withdrawn in the order in which they
are received by the Company. The amount deducted will result in the
cancellation of Accumulation Units from each applicable Sub-Account or a
reduction in Fixed Account Value in the ratio that the Contract Value in each
Investment Option bears to the total Contract Value. The Owner may request
in writing in advance if a different
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method for assessing the Withdrawal Charge is desired. The Company reserves
the right to approve or disapprove any such request.
PARTIAL WITHDRAWALS
Each partial withdrawal must be for an amount which is not less than the
amount shown on the Contract Data Page. The remaining Withdrawal Value which
must remain in the Contract after a partial withdrawal, if any, is shown on
the Contract Data Page. If a partial withdrawal is requested that would
reduce the remaining Withdrawal Value for the Contract below that shown on
the Contract Data Page, the Company may deem the request to be a total
withdrawal (surrender) from the Contract. In such event, the Company may pay
the then current Withdrawal Value and terminate the Contract in accordance
with the "Minimum Value Required After Partial Withdrawal" provision of this
Contract.
FREE WITHDRAWAL AMOUNT
The Free Withdrawal Amount on Partial Withdrawals applicable to this
Contract, if any, is shown on the Contract Data Page. No Withdrawal Charge
will be imposed on a partial withdrawal unless the amount withdrawn during a
Contract Year exceeds the Free Withdrawal Amount on Partial Withdrawals.
Amounts taken as a Free Withdrawal Amount do not reduce Purchase Payments for
purposes of computing the Withdrawal Charge on Contract Value subject to a
Withdrawal Charge. The Withdrawal Charge will apply to any amount withdrawn
during a Contract Year in excess of the Free Withdrawal Amount on Partial
Withdrawals. The unused portion of the Free Withdrawal Amount for one
Contract Year will not carry-over to the next Contract Year. The Free
Withdrawal Amount is not available if a withdrawal request would result in
remaining Withdrawal Value that is less than the Withdrawal Value required to
remain in Contract After Partial Withdrawal shown on the Contract Data Page.
SUSPENSION OR DEFERRAL OF PAYMENTS
The Company reserves the right to suspend or postpone payments for a
withdrawal or transfer for any period when:
1. the New York Stock Exchange is closed;
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it
is not reasonably practicable to determine the value of the Separate
Account's net assets; or
4. during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners;
5. provided that applicable rules and regulations of the Securities
and Exchange Commission will govern as to whether the conditions
described in 2. and 3. exist.
The Company reserves the right to defer payment for a withdrawal or transfer
from the Fixed Account for the period permitted by law, but not for more than
six months after written election is received by the Company.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects the Annuity Date at the time of the application, and may
later change it by written request to the Company's Variable Service Center
at least thirty (30) days prior to the existing Annuity Date. If an Annuity
Date is selected that would cause a Withdrawal Charge Event to occur, a
Withdrawal Charge will be deducted from Contract Value before the first
Annuity Payment is made. The Annuity Date on the Issue Date is shown on the
Contract Data Page.
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ANNUITY PAYMENTS
Annuity Payments are paid in monthly installments in the form of Fixed
Annuity Payments, Variable Annuity Payments or a combination of Fixed Annuity
Payments and Variable Annuity Payments.
The Owner may select the form of Annuity Payments by written request to the
Company at its Variable Service Center at least seven (7) days prior to the
Annuity Date. If all of the Contract Value on the seventh calendar day
before the Annuity Date is allocated to the Fixed Account, Fixed Annuity
Payments will be made. If all of the Contract Value on that date is allocated
to the Separate Account, Variable Annuity Payments will be made. If the
Contract Value on that date is allocated to both the Fixed Account and the
Separate Account, a combination of Fixed Annuity Payments and Variable
Annuity Payments will be made to reflect the allocation between the Fixed
Account Value and the Variable Account Value.
The payments will be made to the Annuitant, unless a different payee is
selected by the Owner by written request to the Company at its Variable
Service Center at least 30 days prior to the Annuity Date.
The Contract Value on the Annuity Date, as adjusted for any applicable taxes
and charges ("Adjusted Contract Value"), will be applied to the applicable
Annuity Table contained in the Contract based upon the Annuity Option
selected by the Owner. The amount of the first payment for each $1,000 of
Adjusted Contract Value is shown in the Annuity Tables. If, as of the
Annuity Date, the current Annuity Option rates applicable to this class of
contracts provide an initial Annuity Payment greater than that guaranteed
under the same Annuity Option under this Contract, the greater payment will
be made.
The total dollar amount of each Annuity Payment is the sum of the Variable
Annuity Payment and the Fixed Annuity Payment. The Company reserves the
right to pay Annuity Payments in one sum when the remaining payments are less
than $2,000, or other minimum amount established by the Company from time to
time, or when the Annuity Option elected would result in periodic payments of
less than $100.
VARIABLE ANNUITY PAYMENTS
The amount of a Variable Annuity Payment is dependent upon (a) the Contract
Value, adjusted for any applicable charges, that is applied to an Annuity
Option; (b) the rates for the Annuity Option selected, as stated in the
Annuity Option Tables; and (c) the investment performance of the selected
Sub-Accounts during the Annuity Period. Variable Annuity Payments are not
guaranteed as to dollar amount.
CALCULATION. The dollar amount of Variable Annuity Payments for each
applicable Sub-Account after the first Variable Annuity Payment is determined
as follows:
1. the dollar amount of the first Variable Annuity Payment is divided
by the value of an Annuity Unit for each applicable Sub-Account as
of the Annuity Date. This sets the number of Annuity Units for each
monthly payment for the applicable Sub-Account. The number of Annuity
Units for each applicable Sub-Account remains fixed during the Annuity
Period;
2. the fixed number of Annuity Units per payment in each Sub-Account
is multiplied by the Annuity Unit Value for that Sub-Account for the
last Valuation Period of the month preceding the month for which the
payment is due. This result is the dollar amount of the payment for
each applicable Sub-Account.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments.
ANNUITY UNIT: The value of any Annuity Unit for each Sub-Account of the
Separate Account was arbitrarily set initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation
Period is determined by subtracting 2. from 1. and dividing the result by 3.
and multiplying the result by a factor which neutralizes the assumed interest
rate shown on the Contract Data Page, where:
1. is the net result of: (a) the assets of the Sub-Account
attributable to the Annuity Units; plus or minus (b) the cumulative
charge or credit for taxes reserved which is determined by the Company
to have resulted from the operation or maintenance of the Sub-Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge, which are shown on the
Contract Data Page; and
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3. is the number of Annuity Units outstanding at the end of the
Valuation Period.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
FIXED ANNUITY PAYMENTS
The dollar amount of each Fixed Annuity Payment shall be determined in
accordance with Annuity Tables contained in this Contract which are based on
the minimum guaranteed interest rate of 3.0% per year. After the initial
Fixed Annuity Payment, the payments will not change regardless of investment,
mortality or expense experience.
ANNUITY OPTIONS
An Annuity Option is selected by the Owner at the time of the application and
may be changed by the Owner by written request at least thirty (30) days
prior to the Annuity Date. If no Annuity Option election is in effect at
least thirty (30) days before the Annuity Date, OPTION B. LIFE ANNUITY with a
period certain of 120 months will automatically be applied
The following Annuity Options or any other Annuity Option acceptable to the
Company may be selected:
OPTION A. LIFE ANNUITY: Monthly Annuity Payments during the life of the
Annuitant.
OPTION B. LIFE ANNUITY WITH PERIODS CERTAIN OF 60,120, 180 OR 240 MONTHS:
Monthly Annuity Payments during the lifetime of the Annuitant and in any
event for sixty (60), one hundred twenty (120), one hundred eighty (180) or
two hundred forty (240) months certain as selected.
OPTION C. JOINT AND SURVIVOR ANNUITY: Monthly Annuity Payments payable
during the joint lifetime of the Annuitant and a designated second person and
then during the lifetime of the survivor at the percentage (100%, 75%,
66 2/3% or 50%) selected.
OPTION D. JOINT AND CONTINGENT ANNUITY: Monthly Annuity Payments during the
Annuitant's lifetime and continuing during the lifetime of a designated
second person after the Annuitant's death at the percentage (100%, 75%,
66 2/3% or 50%) selected.
OPTION E. FIXED PAYMENTS FOR A PERIOD CERTAIN: Fixed monthly Annuity
Payments for any specified period (at least five years but not exceeding
thirty years), as selected.
Annuity Options A, B, C and D are available for Fixed Annuity Payments,
Variable Annuity Payments or a combination of both. Annuity Option E is
available for Fixed Annuity Payments only. If the Annuitant dies during a
period certain (Annuity Options B or E), the remaining Annuity Payments will
be made to the Beneficiary. The Beneficiary may elect to receive the
commuted value of the remaining Annuity Payments in a single sum instead.
The Company will determine the commuted value by discounting the remaining
Annuity Payments at its then current interest rate used for commutation.
MORTALITY TABLES
The mortality tables used in determining the Annuity Purchase Rates for
Options A, B, C, and D is the 1983a Annuity Mortality Table (40% Male,
pivotal age 65) and interest at a rate of 3.0% per year, compounded annually.
A detailed statement of the method of calculation has been filed with the
insurance department of the state in which the Contract was issued. The
Company will compute reserves on this Contract on the Commissioners Annuity
Reserve Valuation Method (CARVM). The reserves and guaranteed values
including any paid-up annuity, Withdrawal Value or Death Benefits will at no
time be less than the minimum required by the laws of the state in which the
application was signed.
The dollar amount of an Annuity Payment for any Age or combination of Ages
not shown in the Tables or for any other form of Annuity Option agreed to by
the Company will be provided by the Company upon request.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of the Annuitant, or the Age or sex of any designated
second person, has been misstated, any Annuity Payments will be the Annuity
Payments provided by the correct Age or sex. If the misstatement is
discovered after the Annuity Date: (a) the Company will add interest to any
overpayments at the rate of 6% per year, compounded annually, and deduct the
amount from remaining Annuity Payments until the total is repaid; and (b) the
Company will add interest to any underpayments at the rate of 6% per year,
compounded annually, and pay the amount in a single sum with next Annuity
Payment.
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SUPPLEMENTARY AGREEMENT
A Supplementary Agreement setting forth the terms of the Annuity Option
selected will be issued at the Annuity Date, at which time this contract will
be exchanged for the Supplementary Agreement.
EVIDENCE OF SURVIVAL
The Company may require satisfactory evidence of the continued survival of
any person(s) on whose life Annuity Payments are based.
PROOF OF AGE
The Company may require evidence of age of any payee under Annuity Options A,
B, C, and D and of the designated second person under Annuity Options C and
D.
ANNUITY OPTION TABLES
MINIMUM MONTHLY PAYMENT RATES FOR EACH $1,000 APPLIED
OPTIONS A AND B - LIFETIME PAYMENT OPTION
AGE OF 10 YEAR & AGE OF 10 YEAR &
PAYEE LIFE PAYEE LIFE
50 4.07 70 6.30
51 4.13 71 6.47
52 4.20 72 6.65
53 4.28 73 6.83
54 4.35 74 7.01
55 4.44 75 7.20
56 4.52 76 7.39
57 4.61 77 7.58
58 4.71 78 7.76
59 4.81 79 7.95
60 4.91 80 8.12
61 5.02 81 8.29
62 5.14 82 8.45
63 5.26 83 8.60
64 5.39 84 8.74
65 5.53 80 8.87
66 5.67
67 5.82
68 5.97
69 6.13
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OPTIONS C AND D - JOINT LIFETIME PAYMENT - PAYMENTS FOR TWO LIVES ONLY
ANNUITANTS' AGES PERCENTAGE OF PAYMENT PAYABLE TO SURVIVING
ANNUITANT IS:
PRIMARY JOINT 50% 66 2/3% 75% 100%
(A) Payments reduce upon the death of either the Annuitant or
the Joint Annuitant:
50 50 4.10 3.93 3.85 3.63
50 55 4.29 4.09 4.00 3.74
55 55 4.49 4.28 4.18 3.90
55 60 4.74 4.48 4.37 4.05
60 60 5.01 4.74 4.61 4.27
60 65 5.35 5.02 4.87 4.47
65 65 5.73 5.37 5.20 4.76
65 70 6.20 5.75 5.56 5.04
(B) Payments reduce only upon the death of the Annuitant (ERISA Joint and
Survivor Annuity Option):
50 50 3.85 3.78 3.73 3.63
50 55 3.91 3.86 3.83 3.74
55 50 4.08 3.97 3.90 3.74
55 55 4.18 4.08 4.03 3.90
55 60 4.26 4.19 4.15 4.05
60 55 4.48 4.33 4.26 4.05
60 60 4.61 4.49 4.43 4.27
60 65 4.72 4.64 4.59 4.47
65 60 5.02 4.83 4.73 4.47
65 65 5.20 5.05 4.97 4.76
65 70 5.36 5.25 5.19 5.04
70 65 5.76 5.51 5.38 5.04
Monthly payment rates for other age combinations will be furnished on
request. For quarterly payments, multiply the monthly payment rate by 2.99.
For semi-annual payments, multiply by 5.96. For annual payment, multiply
by 11.84.
OPTION E - FIXED TIME PAYMENT
YEARS MONTHLY PAYMENT YEARS MONTHLY PAYMENT YEARS MONTHLY PAYMENT
1 Not available 11 8.86 21 5.32
2 Not available 12 8.24 22 5.15
3 Not available 13 7.71 23 4.99
4 Not available 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.47
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
For quarterly payments, multiply the monthly payment rate by 2.99. For
semi-annual payments, multiply by 5.96. For annual payment, multiply by
11.84.
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FIRST VARIABLE LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS
BONUS DEATH BENEFIT RIDER
This Rider is made part of the Contract to which it is attached, and is
effective upon the Issue Date.
The DEATH BENEFITS provision of the Contract is amended to include the
following:
BONUS DEATH BENEFIT: If no partial withdrawals have previously been taken,
the Death Benefit payable upon the death of the Owner prior to the Annuity
Date may be increased. This Bonus Death Benefit is the excess, if any, of:
1. The Step Up Amount in effect on the date of the Owner's death; over
2. The Death Benefit on the date of the Owner's death.
A Step Up Amount is determined for each Bonus Period while this Contract is
in force. The first Bonus Period begins on the Issue Date and ends on the
earlier of the sixth Contract Anniversary or the day on which the Owner
attains Age 80. Each succeeding Bonus Period is for the six (6) Contract
Years immediately following the preceding Bonus Period or, if earlier, until
the day on which the Owner attains Age 80.
The Step Up Amount at the start of the first Bonus Period is the initial
Purchase Payment. The Step Up Amount at the start of each succeeding Bonus
Period is the greater of:
1. The Step Up Amount at the end of the preceding Bonus Period; or
2. The Contract Value at the end of the preceding Bonus Period.
The Step Up Amount during any Bonus Period is increased by the amount of
Purchase Payments received by the Company during that Bonus Period. No Bonus
Death Benefit is payable: (a) if any withdrawals of Contract Value were taken
during the Owner's lifetime; (b) if death occurs after the Annuity Date; or
(c) if death occurs beyond the Owner's eightieth birthday.
If the Owner is a non-natural person, the Annuitant will be considered the
Owner for purposes of determining the Bonus Death Benefit. If the initial
Owner is changed, however, this Rider will terminate unless the Company
consents otherwise.
If the Beneficiary is the spouse of the Owner and elects to continue the
Contract, the Contract Value remains unchanged and no determination of the
Death Benefit or Bonus Death Benefit is made at that time.
/s/ Steve Largent /s/ Arnold R. Bergman
--------------------------- --------------------------
Steve Largent Arnold R. Bergman
President Secretary
First Variable Life Insurance Company
Little Rock, Arkansas
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FIRST VARIABLE LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS
ENHANCED DEATH BENEFIT RIDER
In consideration of the Optional Enhanced Death Benefit Charge stated on the
Contract Data Page, this Rider is made part of the Contract to which it is
attached, and is effective upon the Issue Date.
The Contract is amended as follows:
1. The CHARGES AND DEDUCTIONS provisions are amended to include the following:
The Company will deduct the Optional Enhanced Death Benefit Charge stated on
the Contract Data Page on each Contract Anniversary prior to the Annuity
Date or the Owner's 80th birthday, if earlier. The Optional Enhanced Death
Benefit Charge will also be deducted on the Annuity Date, and upon surrender
of the Contract, based on the Contract Value at that time. The charge is
deducted by the Company reducing Contract Value from each Investment Option
in the ratio that the value of each Investment Option bears to the total
Contract Value. Variable Account Value is reduced by the Company canceling
Accumulation Units credited to the Contract in each applicable Sub-Account.
2. The DEATH OF OWNER provision and BONUS DEATH BENEFIT Rider, if any,
provisions are deleted and the following inserted in its place:
DEATH OF OWNER: The Contract provides for a Death Benefit to be paid to the
Beneficiary upon the death of an Owner prior to the Annuity Date. The Death
Benefit is:
- the Basic Death Benefit; or
- if greater and if no withdrawals of Contract Value have been taken
during the Owner's lifetime,
the Bonus Death Benefit; or
- if greater, the Enhanced Death Benefit.
Upon the death of an Owner on or after the Annuity Date, any remaining
payments under the Contract will be distributed at least as rapidly as under
the method of distribution being used as of the date of the Owner's death.
BASIC DEATH BENEFIT. The Basic Death Benefit is the greater of:
- Purchase Payments less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime
(including applicable charges); or
- the Contract Value.
BONUS DEATH BENEFIT. The Bonus Death Benefit is the greater of:
- the Basic Death Benefit on the date of the Owner's death; or
- the Step Up Amount in effect on the date of the Owner's death
A Step Up Amount is determined at the start of each Bonus Period while a
Contract is in force. The first Bonus Period begins on the Issue Date and
ends on the earlier of the seventh Contract Anniversary or the day on which
the Owner attains Age 80. Each succeeding Bonus Period is for the next 6
Contract Years or, if earlier, until the Owner attains Age 80.
The Step Up Amount at the start of the first Bonus Period is the initial
Purchase Payment. The Step Up Amount at the start of each succeeding Bonus
Period is the greater of:
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- The Step Up Amount at the end of the preceding Bonus Period; or
- The Contract Value at the end of the preceding Bonus Period.
The Step Up Amount during any Bonus Period is increased by the amount of
Purchase Payments received by the Company during that Bonus Period.
The Step Up Amount on and after the day the Owner attains Age is 80 is zero.
Unless the Company consents otherwise, the Bonus Death Benefit will terminate
if the Owner is changed.
OPTIONAL ENHANCED DEATH BENEFIT. The Owner may elect an Enhanced Death
Benefit at the time a Contract is purchased. The Enhanced Death Benefit, up
to the Owner's 80th birthday, is an amount equal to:
- Purchase Payments, less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime
(including applicable charges); and
- interest accumulated at an annual rate of 4.5%
up to a maximum amount equal to two (2) times the sum of Purchase Payments.
The Enhanced Death Benefit on and after the day the Owner attains Age 80 is
zero. Unless the Company consents otherwise, the Enhanced Death Benefit will
end if the Owner is changed.
If the Owner is a non-natural person, the Annuitant will be considered the
Owner for purposes of determining the BASIC DEATH BENEFIT, the BONUS DEATH
BENEFIT and the ENHANCED DEATH BENEFIT.
If the Beneficiary is the spouse of the Owner and elects to continue the
Contract, the Contract Value remains unchanged and no determination of the
Death Benefit is made at that time.
TERMINATION OF RIDER: This Rider will terminate on the earliest of:
1. The death of the Owner before the Annuity Date;
2. A change of designation of Owner, unless the Company consents
otherwise;
3. The Annuity Date;
4. The Contract Anniversary following the Owner's request to terminate
the Rider; and
5. The termination of the Contract.
6. The Owner's 80th birthday.
A request to terminate this Rider by the Owner must be received by the
Company at its Variable Service Center no later than thirty (30) days before
a Contract Anniversary. If a request is received during this thirty (30)
period, the Rider will remain in force (unless terminated for other reasons)
during the immediately following Contract Year.
The Optional Enhanced Death Benefit Charge stated on the Contract Data Page
will be deducted upon termination of this Rider, unless termination is due to
death of the Owner before the Annuity Date.
/s/ Steve Largent /s/ Arnold R. Bergman
--------------------------- --------------------------
Steve Largent Arnold R. Bergman
President Secretary
First Variable Life Insurance Company
Little Rock, Arkansas
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[LOGO]
FIRST VARIABLE LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS
ANNUITIZATION BONUS RIDER
This Rider is made part of the Contract to which it is attached, and is
effective upon the Issue Date:
The ANNUITY PROVISIONS of the Contract is amended to include the following:
ANNUITIZATION BONUS: The Company will increase the Contract Value on the
Annuity Date if Contract Value is applied to an Annuity Option. The increase
in Contract Value will be calculated by the Company with respect to Contract
Value as of the immediately preceding Business Day, using the percentage
shown on the Contract Data Page. The increase in Contract Value will be
allocated pro-rata to the Investment Options to which Contract Value is then
allocated.
/s/ Steve Largent /s/ Arnold R. Bergman
--------------------------- --------------------------
Steve Largent Arnold R. Bergman
President Secretary
First Variable Life Insurance Company
Little Rock, Arkansas
<PAGE>
[LOGO]
FIRST VARIABLE LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS
ENDORSEMENT - NURSING HOME AND TERMINAL ILLNESS WAIVER
This Endorsement is made part of the Contract to which it is attached, and is
effective upon the Issue Date.
The WITHDRAWALS provisions of the Contract are amended to include the
following:
WAIVER OF WITHDRAWAL CHARGE: The Withdrawal Charge may be waived:
1. After the first Contract Year, due to Confinement in a Qualifying Nursing
Home; or
2. Due to diagnosis of a Terminal Illness.
A request to waive any Withdrawal Charges is subject to the following
conditions:
QUALIFYING NURSING HOME CONDITIONS. If request is made for waiver due to
confinement in a Qualifying Nursing Home:
1. The Owner or the Owner's spouse must be and have been confined in a
Qualifying Nursing Home for the immediately preceding period of ninety
(90) consecutive days.
2. The Owner or the Owner's spouse must never have been confined in a
Qualifying Nursing Home on or before the date of application for this
Contract.
3. The Owner must not have changed.
4. Confinement must be for reasons that are medically necessary, prescribed
by a licensed physician; and be based on physical limitations which
prohibit daily living in a non-institutional environment.
5. The Company must be presented with written and signed documentation from
the confining facility that it qualifies as Qualifying Nursing Home and
that the confinement satisfies the criteria stated in 4., above.
To be eligible as a Qualifying Nursing Home, a facility must be either:
- - A Skilled Nursing Facility or an Intermediate Care Facility which
maintains a daily medical record of each patient.
- - A Custodial Care Facility that is licensed and operated as such in the
state in which it is located and accommodates three or more persons for a
charge.
A Qualified Nursing Home must provide nursing service 24 hours a day, and
service must be under the supervision of a licensed physician, registered
graduate professional nurse or licensed practical nurse.
TERMINAL ILLNESS CONDITIONS. If request is made for waiver due to a Terminal
Illness:
1. The Owner or the Owner's spouse must never have been diagnosed with a
Terminal Illness on or before the date of application for this Contract.
2. The Owner or the Owner's spouse must be diagnosed as having a Terminal
Illness by a duly licensed physician. Such duly licensed physician shall
not be:
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- - The Owner or the Owner's spouse;
- - A person who lives with the Owner or the Owners spouse; or
- - A person who is related to the Annuitant or Owner by blood or marriage.
3. The Company must be presented with written and signed evidence of a
Terminal Illness:
- - During the lifetime of the Owner or Owner's Spouse, as applicable; and
- - From a duly licensed physician as stated above.
4. The Company may request additional medical information and may require an
independent examination of the Owner or Owner's spouse by a duly licensed
physician selected by the Company to confirm the diagnosis of a Terminal
Illness.
A "Terminal Illness" means a non-correctable medical condition which is
expected to result in a drastically limited life span of six (6) months or
less.
The Company will not accept any additional Purchase Payments under a Contract
if a waiver of Withdrawal Charges under this Endorsement is in effect.
/s/ Steve Largent /s/ Arnold R. Bergman
--------------------------- --------------------------
Steve Largent Arnold R. Bergman
President Secretary
2
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INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT WITH
FLEXIBLE PURCHASE PAYMENTS
NON-PARTICIPATING
[LOGO]
LITTLE ROCK, ARKANSAS
A STOCK LIFE INSURANCE COMPANY
Form 8860
3
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EXHIBIT 8
FORM OF FUND PARTICIPATION AGREEMENTS
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FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 22nd day of September , 1994, by and between
Linda Ruthardt, as the Commissioner of Insurance of the Commonwealth of
Massachusetts, the duly appointed Temporary Receiver of Monarch Life
Insurance Company ("Monarch Life"), a life insurance company domiciled in
Massachusetts, on its behalf and on behalf of its segregated asset accounts
listed on Exhibit A to this Agreement; First Variable Life Insurance Company
("First Variable Life"), a life insurance company domiciled in Arkansas, on
its behalf and on behalf of its segregated asset accounts listed on Exhibit B
to this Agreement; and Variable Investors Series Trust (the "Fund"), a
Massachusetts business trust. References herein to the "Insurer" refer to
Monarch Life and First Variable Life, collectively, or to either of them as
the case may be, and references herein to the "Separate Accounts" refer to
the segregated asset accounts of Monarch Life and First Variable Life,
collectively, or to the segregated asset accounts of either of them as the
case may be.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to
issue separate classes of shares of beneficial interest ("shares"), each
representing an interest in a separate portfolio of assets known as a
"portfolio", and each portfolio has its own investment objectives, policies,
and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment
medium for Variable Contracts offered by insurance companies that have
entered into participation agreements substantially similar to this agreement
("Participating Insurance Companies"), and the Fund may be made available in
the future to offer shares of one or more of its portfolios to separate
accounts of insurance companies that fund variable life insurance policies
(at which time such policies would also be "Variable Contracts" hereunder);
and
WHEREAS, the Fund is currently comprised of seven separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the
Fund's portfolios on behalf of its Separate Accounts to serve as an
investment medium for Variable Contracts funded by the Separate Accounts;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
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ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to make available on each day on which it calculates
its net asset value pursuant to rules of the SEC ("business day") shares of
the portfolios identified on Exhibit C ("Portfolios") for purchase by the
Insurer on behalf of its Separate Accounts at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order
for its shares; provided, however, that the Board of Trustees of the Fund may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio, if such action is required by law or
by regulatory authorities having jurisdiction or is, in the sole discretion
of the Trustees, acting in good faith and in light of the Trustees' fiduciary
duties under applicable law, in the best interests of the shareholders of any
Portfolio.
1.2. The Fund agrees that shares of the Portfolios of the Fund will be
sold only to Participating Insurance Companies, their separate accounts, and
other persons consistent with each Portfolio being adequately diversified
pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and the regulations thereunder. No shares of any Portfolio will be
sold directly to the general public.
1.3. The Fund will not sell shares of the Portfolios to any insurance
company or separate account unless an agreement containing provisions
substantially the same as the provisions contained in this Agreement is in
effect to govern such sales.
1.4. Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption, except
that the Fund reserves the right to suspend the right of redemption,
consistent with Section 22(e) of the 1940 Act and any rules thereunder. Such
redemption shall be paid consistent with applicable rules of the SEC and
procedures and policies of the Fund as described in the current prospectus
for the Fund. Redemption payments shall be in federal funds transmitted by
wire.
1.5. At the end of each business day, the Insurer will use the information
described in Sections 1.10 and 1.11 to calculate the Separate Account unit
values for the day. Using these unit values, the Insurer will process the
day's Separate Account transactions based on requests and premiums received
by it by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) to determine the net dollar amount of
Portfolio shares which will be purchased or redeemed at that day's closing
net asset value per share for such Portfolio. The net purchase or redemption
orders so determined will be transmitted to the Fund by the Insurer by 10:00
a.m. Eastern time on the business day next following the Insurer's receipt of
such requests and premiums.
1.6. For purposes of Sections 1.1, 1.4 and 1.5, the Insurer shall be the
agent of the Fund for the limited purpose of receiving and accepting purchase
and redemption orders from each Separate Account and receipt by such agent
shall constitute receipt by the Fund; provided that the Fund receives notice
of such orders on the next following business day by 10:00 a.m. Eastern time.
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<PAGE>
1.7. The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
1.8. The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
1.9. Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not
be issued to the Insurer or the Separate Accounts unless otherwise agreed by
the Fund. Shares ordered from the Fund will be recorded in an appropriate
title for the Separate Accounts or the appropriate subaccounts of the
Separate Accounts.
1.10. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation, or by facsimile transmission) to the
Insurer of any income dividends or capital gain distributions payable on the
shares of the Portfolios. The Insurer hereby elects to reinvest in the
Portfolio all such dividends and distributions as are payable on a
Portfolio's shares and to receive such dividends and distributions in
additional shares of that Portfolio. The Insurer reserves the right to revoke
this election in writing and to receive all such dividends and distributions
in cash. The Fund shall notify the Insurer of the number of shares so issued
as payment of such dividends and distributions.
1.11. The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each
Portfolio as soon as reasonably practical after the net asset value per share
is calculated and shall use its best efforts to make such net asset value per
share available by 6:15 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. Monarch Life represents and warrants that it is an insurance company
duly organized and in good standing under the laws of The Commonwealth of
Massachusetts and that it is taxed as an insurance company under Subchapter L
of the Code. First Variable Life represents and warrants that it is an
insurance company duly organized and in good standing under the laws of the
State of Arkansas and that it is taxed as an insurance company under
Subchapter L of the Code.
2.2. Monarch Life represents and warrants that it has legally and validly
established each of its Separate Accounts as a segregated asset account under
the Massachusetts insurance laws, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law. First Variable Life represents and warrants that it has legally and
validly established each of its Separate Accounts as a segregated asset
account under the Arkansas insurance laws, and that each of the Separate
Accounts is a validly existing segregated asset account under applicable
federal and state law.
2.3. The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to
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issuance, will be registered as securities under the Securities Act of 1933
("1933 Act") or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under
the 1933 Act.
2.4. The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance
with the provisions of the 1940 Act or, alternatively (2) has not been
registered in proper reliance upon an exclusion from registration under the
1940 Act.
2.5. The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the
Code.
2.6. The Fund represents and warrants that it is duly organized as a
business trust under the laws of The Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7. The Fund represents and warrants that the shares of the Portfolios
are duly authorized for issuance in accordance with applicable law and that
the Fund is registered as an open-end management investment company under the
1940 Act.
2.8. The Fund represents that it believes, in good faith, that the assets
of the Portfolios currently comply with the diversification provisions of
Section 817(h) of the Code and the regulations issued thereunder relating to
the diversification requirements for assets supporting variable life
insurance policies and variable annuity contracts.
ARTICLE III. GENERAL DUTIES
3.1. The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under
the 1933 Act for so long as required by applicable law. Subject to Section
1.1, the Fund shall (i) amend its Registration Statements filed with the SEC
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of the shares of the Portfolios and (ii)
register and qualify the shares for sale in accordance with the laws of the
various states to the extent deemed necessary by the Fund.
3.2. The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code
(or any successor or similar provision) and shall notify the Insurer
immediately upon having a reasonable basis for believing that a Portfolio has
ceased to so qualify or that it might not so qualify in the future.
3.3. The Fund shall make every effort to enable the assets of each Portfolio
to comply with the diversification provisions of Section 817(h) of the Code and
the regulations issued thereunder relating to the diversification requirements
for assets supporting variable life
7
<PAGE>
insurance policies and variable annuity contracts and any prospective
amendments or other modifications to Section 817 or regulations thereunder,
and shall notify the Insurer immediately upon having a reasonable basis for
believing that the assets of any Portfolio have ceased to comply.
3.4. The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the
Variable Contracts to the extent required under the 1933 Act, and obtaining
all necessary approvals to offer the Variable Contracts from state insurance
commissioners.
3.5. The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of
the Code, and shall notify the Fund immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated
or that they might not be so treated in the future.
3.6. The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the
Securities Exchange Act of 1934 ("1934 Act"), the 1940 Act, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD"),
and state law respecting the offering of variable life insurance policies and
variable annuity contracts.
3.7. Before shares of the Fund are offered (1) to variable annuity
separate accounts and variable life insurance separate accounts of the same
life insurance company or of affiliated life insurance companies ("Mixed
Funding") or (2) to variable life insurance separate accounts of one life
insurance company and separate accounts funding variable life insurance
policies or variable annuity contracts of other unaffiliated life insurance
companies ("Shared Funding"), the Fund shall use its best efforts to obtain
an order from the SEC, granting Participating Insurance Companies, separate
accounts funding Variable Contracts of Participating Insurance Companies, and
the Fund exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940
Act, to the extent necessary to permit such persons to rely on the exemptive
relief provided under paragraph (b)(15) of Rule 6e-2 and/or paragraph (b)(15)
of Rule 6e-3(T) (the "Mixed and Shared Funding Exemptive Order").
3.8. During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested
Trustees"), as defined by Section 2(a)(19) of the 1940 Act and the rules
thereunder, and as modified by any applicable orders of the SEC, except that
if this provision of this Section 3.8 is not met by reason of the death,
disqualification, or bona fide resignation of any Trustee or Trustees, then
the operation of this provision shall be suspended (a) for a period of 45
days if the vacancy or vacancies may be filled by the Fund's Board; (b) for a
period of 60 days if a vote of shareholders is required to fill the vacancy
or vacancies; or (c) for such longer period as the SEC may prescribe by order
upon application.
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<PAGE>
3.9. The Insurer and its agents will not in any way recommend any
proposal, or oppose or interfere with any proposal, submitted by the Fund at
a meeting of owners of Variable Contracts or shareholders of the Fund, and
will in no way recommend, oppose, or interfere with the solicitation of
proxies for Fund shares held by Contract Owners, without the prior written
consent of the Fund, which consent may be withheld in the Fund's sole
discretion.
3.10. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall
permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
ARTICLE IV. POTENTIAL CONFLICTS
4.1. During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereby shall comply with the conditions in this Article
IV; provided, however, that the terms of the Mixed and Shared Funding
Exemptive Order, to the extent that such terms differ from the terms of this
Article IV, shall be controlling and shall override any conflicting provision
of this Article IV.
4.2. The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners
of variable annuity contracts and variable life insurance policies, and (2)
between the interests of owners of Variable Contracts ("Variable Contract
Owners") issued by different Participating Life Insurance Companies that
invest in the Fund. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretive letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments
of any Portfolio of the Fund are being managed; (e) a difference in voting
instructions given by variable annuity and variable life insurance contract
owners; or (f) a decision by a Participating Insurance Company to disregard
the voting instructions of Variable Contract Owners.
4.3. The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer
will be responsible for assisting the Board of Trustees of the Fund in
carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, or, if the Fund is engaged in Mixed Funding or Shared
Funding in reliance on Rule 6e-2, 6e-3(T), or any other regulation under the
1940 Act, the Insurer will be responsible for assisting the Board of Trustees
of the Fund in carrying out its responsibilities under such regulation, by
providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Insurer to inform the Board whenever Variable Contract
Owner voting instructions are disregarded. The Insurer shall carry out its
responsibility under this Section 4.3 with a view only to the interests of
the Variable Contract Owners.
4.4. The Insurer agrees that in the event that it is determined by the
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material
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<PAGE>
irreconcilable conflict exists, the Insurer shall, at its expense and to the
extent reasonably practicable (as determined by a majority of the
disinterested Trustees of the Board of the Fund), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
Separate Accounts from the Fund or any Portfolio and reinvesting such assets
in a different investment medium, including another portfolio of the Fund, or
submitting the question as to whether such segregation should be implemented
to a vote of all affected Variable Contract Owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners or life insurance contract owners of contracts issued by one or more
Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract Owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. The notice provision of Section 9.2
applies to any withdrawal made pursuant to this Section 4.4. If a material
irreconcilable conflict arises because of the Insurer's decision to disregard
Variable Contract Owners' voting instructions and that decision represents a
minority position or would preclude a majority vote, the Insurer shall be
required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees, and no charge or penalty will be imposed as a result of such
withdrawal. These responsibilities shall be carried out with a view only to
the interests of the Variable Contract Owners. A majority of the
disinterested Trustees of the Fund shall determine whether or not any
proposed action adequately remedies any material irreconcilable conflict, but
in no event will the Fund or its investment adviser be required to establish
a new funding medium for any Variable Contract. The Insurer shall not be
required by this Section 4.4 to establish a new funding medium for any
Variable Contract if any offer to do so has been declined by vote of a
majority of Variable Contract Owners materially adversely affected by the
material irreconcilable conflict.
4.5. The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request
so that the Trustees of the Fund may fully carry out the obligations imposed
upon the Board by the conditions contained in the application for the Mixed
and Shared Funding Exemptive Order and said reports, materials, and data
shall be submitted more frequently if deemed appropriate by the Board.
4.6. All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees
of the Fund or other appropriate records, and such minutes or other records
shall be made available to the SEC upon request.
4.7. The Board of Trustees of the Fund shall promptly notify the Insurer
in writing of its determination of the existence of an irreconcilable
material conflict and its implications.
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ARTICLE V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1. The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by
the Insurer as are required to be distributed to such Variable Contract
Owners under applicable federal or state law.
5.2. The Fund shall provide the Insurer with as many copies of the current
prospectus of the Fund as the Insurer may reasonably request. If requested
by the Insurer in lieu thereof, the Fund shall provide such documentation
(including a final copy of the Fund's prospectus as set in type or in
camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to print together in one document the current prospectus or
prospectuses for the Variable Contracts issued by the Insurer and the current
prospectus for the Fund. The Fund shall bear the expense of printing copies
of its current prospectus that will be distributed to existing Variable
Contract Owners, and the Insurer shall bear the expense of printing copies of
the Fund's prospectus that are used in connection with the offering of the
Variable Contracts to prospective Variable Contract Owners.
5.3. The Fund shall provide, at its expense, such copies of the Fund's
current Statement of Additional Information ("SAI") as may reasonably be
requested, to the Insurer and to any owner of a Variable Contract issued by
the Insurer who requests such SAI.
5.4. The Fund, at its expense, shall provide the Insurer with copies of
its proxy materials, periodic reports to shareholders and other
communications to shareholders in such quantity as the Insurer shall
reasonably require for purposes of distribution of such materials to owners
of Variable Contracts issued by the Insurer. The Fund, at the Insurer's
expense, shall provide the Insurer with copies of its periodic reports to
shareholders and other communications to shareholders in such quantity as the
Insurer shall reasonably request for use in connection with the offering of
the Variable Contracts by the Insurer to prospective Variable Contract
Owners. If requested by the Insurer in lieu thereof, the Fund shall provide
such documentation (including a final copy of the Fund's proxy materials,
periodic reports to shareholders and other communications to shareholders, as
set in type or in camera-ready copy) and other assistance as reasonably
necessary in order for the Insurer to print such shareholder communications
for distribution to owners of Variable Contracts issued by the Insurer.
5.5. For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate
Accounts are registered as investment companies under the 1940 Act, the
Insurer shall vote shares of each Portfolio of the Fund held in a Separate
Account or a subaccount thereof, whether or not registered under the 1940
Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Insurer (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Portfolio. The Insurer shall vote
shares of a Portfolio of the Fund held in a Separate Account or a subaccount
thereof that are attributable to the Variable Contracts as to which no timely
instructions are received, as well as shares held in such Separate Account or
subaccount thereof that are not attributable to the Variable Contracts and
are owned beneficially by the Insurer (resulting from charges against the
Variable Contracts or otherwise), in the same proportion as the votes cast by
owners of the Variable Contracts funded by that Separate Account or
subaccount thereof having a voting interest in the Portfolio from whom
instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in
all Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
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<PAGE>
5.6. During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is
intended to be a funding vehicle for variable annuity and variable life
insurance contracts offered by various insurance companies, (2) material
irreconcilable conflicts possibly may arise, and (3) the Board of Trustees of
the Fund will monitor events in order to identify the existence of any
material irreconcilable conflicts and to determine what action, if any,
should be taken in response to any such conflict. The Fund hereby notifies
the Insurer that Separate Account prospectus disclosure may be appropriate
regarding potential risks of offering shares of the Fund to separate accounts
funding both variable annuity contracts and variable life insurance policies
and to separate accounts funding Variable Contracts of unaffiliated life
insurance companies.
ARTICLE VI. SALES MATERIAL AND INFORMATION
6.1. The Insurer shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Portfolio thereof) is named at least 15
days prior to the anticipated use of such material, and no such sales
literature or other promotional material shall be used unless the Fund or its
designee approves the material or does not respond with comments on the
material within 10 days from receipt of the material. The Insurer shall
furnish, or shall cause to be furnished, to the investment adviser(s) of the
Fund (or any Portfolio thereof) each piece of sales literature or other
promotional material in which the adviser(s) or any sub-adviser is named at
least 15 days prior to the anticipated use of such material, and no such
sales literature or other promotional material shall be used unless the
investment adviser(s) or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.2. The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements
on behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the
Fund or its designee, except with the permission of the Fund or its designee.
6.3. The Fund or its designee shall furnish to the Insurer or its
designee, each piece of sales literature or other promotional material in
which the Insurer or its Separate Accounts are named at least 15 days prior
to the anticipated use of such material, and no such material shall be used
unless the Insurer or its designee approves the material or does not respond
with comments on the material within 10 days from receipt of the material.
6.4. The Fund agrees that its affiliates and agents shall not give any
information or make any representations on behalf of the Insurer or
concerning the Insurer, the Separate Accounts, or the Variable Contracts
issued by the Insurer, other than the information or representations
contained in a registration statement or prospectus for such Variable
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
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<PAGE>
6.5. The Fund will provide to the Insurer at least one complete copy of
any Mixed and Shared Funding Exemptive Application and any amendments
thereto, all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements and other voting solicitation
materials, and all amendments and supplements to any of the above, that
relate to the Fund or its shares, promptly after the filing of such documents
with the SEC or other regulatory authorities.
6.6. The Insurer will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum if the Variable Contracts issued by the Insurer or interests
therein are not registered under the 1933 Act), Statements of Additional
Information, reports, solicitations for voting instructions, and all
amendments or supplements to any of the above, that relate to the Variable
Contracts issued by the Insurer or the Separate Accounts promptly after the
filing of such document with the SEC or other regulatory authority.
6.7. For purposes of this Article VI, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, computerized media,
or other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, illustrations, circulares, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
(including recruiting materials) or other communications distributed or made
generally available to some or all agents or employees.
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ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE INSURER
7.1(a). The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers and any affiliated person of the Fund within
the meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Insurer) or litigation expenses (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Insurer by or
on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to the sale or distribution of the Variable Contracts
issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material failure by the
Insurer to provide the services or furnish the materials required
under the terms of this Agreement; or
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<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Insurer; except to the extent provided in Sections 7.1(b) and 7.1(c)
hereof.
7.1(b). The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be entitled by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1(c). The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Insurer of any such claim shall not relieve the Insurer
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against any Indemnified Party, the Insurer
shall be entitled to participate, at its own expense, in the defense of such
action. The Insurer also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1(d). Any Indemnified Party shall promptly notify the Insurer of the
commencement of any litigation or proceedings against it in connection with the
issuance or sale of the Fund shares or the Variable Contracts issued by the
Insurer or the operation of the Fund.
7.2. INDEMNIFICATION BY THE FUND
7.2(a). The Fund agrees to indemnify and hold harmless the Insurer, any
affiliated principal underwriter of the Variable Contracts, and each of their
directors and officers and each person, if any, who is an affiliated person of
the Insurer within the meaning of Section 2(a)(3) of the 1940 Act (collectively,
the "Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation expenses (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
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<PAGE>
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Fund or the designee of the Fund either by or on behalf of the Insurer
or any other Indemnified Party for use in the registration statement
or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or representation
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts) or wrongful conduct of the Fund, or the
affiliates, employees, or agents of the Fund (other than an
Indemnified Party acting as an agent of the Fund); or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature covering the Variable Contracts issued by the
Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund (unless such information was furnished by an Indemnified
Party acting as an agent of the Fund); or
(iv) arise out of or result from any material failure by the Fund to
provide the services or furnish the material required under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund; except to the extent provided in Sections
7.2(b) and 7.2(c) hereof.
7.2(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities, or
litigation expenses to which an Indemnified Party would otherwise be entitled by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurer or the Separate Accounts.
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7.2(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
party shall have received notice of such services on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this Indemnification Provision. In case
any such action is brought against any Indemnified Party, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.2(d). The Insurer shall promptly notify the Fund of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Variable Contracts issued by the
Insurer or the sale of the Fund's shares.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
9.2. The applicable notice period for any termination by the Fund under this
Agreement is 180 days, unless indicated to the contrary.
9.3. This Agreement shall terminate without penalty at the option of the
terminating party in accordance with the following provisions:
(a) At the option of the Insurer, at any time, effective as
of the time stated in the notice of termination;
(b) At the option of the Fund upon a reasonable
determination by the Board in good faith that it is no longer
advisable and in the best interests of shareholders for the Fund to
continue to operate pursuant to this Agreement;
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(c) At the option of the Insurer, if Fund shares are not
reasonably available to meet the requirements of the variable
contracts as determined by the Insurer. Prompt notice of
election to terminate shall be furnished by the Insurer, said
termination to be effective ten days after receipt of notice
unless the Fund makes available a sufficient number of shares
to reasonably meet the requirements of the variable contracts
within said ten-day period;
(d) At the option of the Insurer, upon the insti tution of
formal proceedings against the Fund by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in the Insurer's reasonable
judgment, materially impair the Fund's ability to meet and
perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by the
Insurer with said termination to be effective upon receipt of
notice;
(e) Pursuant to Section 4.4 of this Agreement, at the
option of the Insurer, upon a good faith determination, or at
the option of the Fund upon a determination by a majority of
the Board, or a majority of disinterested Board members, that
an irreconcilable material conflict exists among the interests
of (i) owners of variable contracts issued by participating
life insurance companies; or (ii) participating life insurance
companies;
(f) At the option of the Fund, upon the institution of
formal proceedings against the Insurer by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome which would, in the Fund's reasonable judgment,
materially impair the Insurer's ability to meet and perform its
obligations and duties hereunder;
(g) At the option of the Fund, if the Fund shall
determine in its sole judgment reasonably exercised in good
faith, that the Insurer has suffered a material adverse change
in its business or financial condition or is the subject of
material adverse publicity and such material adverse change or
material adverse publicity is likely to have a material adverse
impact upon the business and operation of the Fund, the Fund
shall have notified the Insurer in writing of such
determination and its intent to terminate this Agreement, and,
if after consideration of the actions taken by the Insurer and
any other changes in circumstances since the giving of such
notice, the determination of the Fund shall continue to apply
on the one hundred eightieth (180th) day since giving of such
notice, then such one hundred eightieth (180th) day shall be
the effective date of termination;
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(h) At the option of the Insurer, in the event the Fund's
shares are not registered, issued or sold in accordance with
applicable federal law, or such law precludes the use of such
shares of the underlying investment medium of variable
contracts issued or to be issued by the Insurer. Prompt notice
of election to terminate shall be furnished by the Insurer with
said termination to be effective upon receipt of notice;
(i) At the option of the Fund if the variable contracts
cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code, or if the Fund
reasonably believes that the variable contracts may fail to so
qualify;
(j) At the option of the Insurer, upon the Fund's breach of
any material provision of this Agreement, which breach has not
been cured to the satisfaction of the Insurer within ten days
after written notice of such breach is delivered to the Fund;
(k) At the option of the Fund upon the Insurer's breach of
any material provision of this Agreement unless such breach has
been cured to the satisfaction of the Fund by the end of the
notice period;
(l) At the option of the Fund, if the variable contracts
are not registered, issued or sold in accordance with
applicable federal and/or state law; or
(m) At the option of the Insurer, if the Insurer shall
determine, in its sole judgment reasonably exercised in good
faith, that the Fund is the subject of material adverse
publicity and such material adverse publicity is likely to have
a material adverse impact on the sale of the variable contracts
and/or the operations or business reputation of the Insurer,
the Insurer shall have notified the Fund in writing of such
determination and its intent to terminate this Agreement, and,
if after consideration of the actions taken by the Fund and any
other changes in circumstances since the giving of such notice,
the determination of the Insurer shall continue to apply on the
sixtieth (60th) day since giving of such notice, then such
sixtieth day shall be the effective date of termination.
9.4. Notwithstanding any termination of this Agreement pursuant to
Section 9.3 hereof, the Fund at its option may elect to continue to make
available the Fund's existing shares and additional Fund shares, as provided
below, for so long as the Fund desires pursuant to the terms and conditions of
this Agreement, for all variable contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Fund so elects
to make additional Fund shares available, the owners
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<PAGE>
of the Existing Contracts or the Insurer, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the payment of
additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 9.3 hereof, the Fund, as
promptly as is practicable under the circumstances, shall notify the Insurer
whether the Fund shall elect to continue to make Fund shares available after
such termination. If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either the Fund or the Insurer may terminate the Agreement, as so
continued pursuant to this Section 9.4, upon prior written notice to the
other party in accordance with Section 9.2 hereof. In determining whether to
elect to continue to make available additional Fund shares, the Fund shall
act in good faith, giving due consideration to the interests of existing
shareholders, including holders of Existing Contracts.
9.5. This Agreement shall terminate automatically in the event of its
assignment unless made with the written consent of the Insurer and the Fund.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Variable Investors Series Trust
Federal Reserve Building
600 Atlantic Avenue, 28th Floor
Boston, MA 02210
Attn: Secretary
If to Monarch Life:
Monarch Life Insurance Company
One Monarch Place
Springfield, MA 01133
Attn: General Counsel
If to First Variable Life:
First Variable Life Insurance Company
Federal Reserve Building
600 Atlantic Avenue, 28th Floor
Boston, MA 02210
Attn: President
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ARTICLE XI. MISCELLANEOUS
11.1. The Fund and the Insurer agree that, if and to the extent Rule 6e-2
or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each take
such steps as may be necessary to comply with such Rules as amended or adopted
in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of The Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or
officer and not individually. The obligations of this Agreement shall only be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer or shareholder of the Fund individually.
11.3. Nothing in this Agreement shall impede the Fund's Trustees or
shareholders from exercising any of the rights provided to such Trustees or
shareholders in the Fund's Agreement and Declaration of Trust, as amended, a
copy of which will be provided to the Insurer upon request.
11.4. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.5. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.6. If any provisions of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.7. This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other party to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
VARIABLE INVESTORS SERIES TRUST
ATTEST: /s/ John S. Coulton BY: /s/ David J. Mehle
-------------------- -------------------
Name: John S. Coulton Name: David J. Mehle
Title: Clerk/Secretary Title: President
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<PAGE>
Linda Ruthardt, as the Commissioner
of Insurance of the Commonwealth of
Massachusetts, the duly appointed
Temporary Receiver of MONARCH LIFE
INSURANCE COMPANY
ATTEST: /s/ James A. Wachta BY: /s/ Linda L. Ruthardt
------------------- -----------------------
Name: James A. Wachta Name: Linda L. Ruthardt
Title: Receiver
FIRST VARIABLE LIFE INSURANCE COMPANY
ATTEST: /s/ Dorothy Mikaelian BY: /s/ John S. Coulton
--------------------- -------------------
Name: Dorothy Mikaelian Name: John S. Coulton
Title: Vice President
<PAGE>
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 11th day of April, 1996, by and between
First Variable Life Insurance Company (the "Insurer"), a life insurance
company domiciled in the State of Massachusetts, on its behalf and on behalf
of the segregated asset accounts of the Insurer listed on Exhibit A to this
Agreement (the "Separate Accounts"); Federated Insurance Series (the "Fund"),
a Massachusetts business trust; and Federated Securities Corp. (the
"Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended ("1940 Act") and the Fund is
authorized to issue separate classes of shares of beneficial interest
("shares"), each representing an interest in a separate portfolio of assets
known as a "portfolio" and each portfolio has its own investment objective,
policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment
medium for Variable Contracts offered by insurance companies that have
entered into participation agreements substantially similar to this agreement
("Participating Insurance Companies"), and the Fund will be made available in
the future to offer shares of one or more of its portfolios to separate
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accounts of insurance companies that fund variable life insurance policies
(at which time such policies would also be "Variable Contracts" hereunder),
and
WHEREAS, the Fund is currently comprised of seven separate portfolios,
and other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions
from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that
may or may not be affiliated with one another (hereinafter the "Mixed and
Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. ("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the
Fund's portfolios on behalf of its Separate Accounts to serve as an
investment medium for Variable Contracts funded by the Separate Accounts, and
the Distributor is authorized to sell shares of the Fund's portfolios;
2
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts,
and agrees to execute such orders on each day on which the Fund calculates
its net asset value pursuant to rules of the SEC ("business day") at the net
asset value next computed after receipt and acceptance by the Fund or its
agent of the order for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of
the Portfolios for purchase at the applicable net asset value per share by
the Insurer on behalf of its Separate Accounts; provided, however, that the
Board of Trustees of the Fund may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio,
if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees, acting in good
faith and in light of the Trustees' fiduciary duties under applicable law,
necessary in the best interests of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being
3
<PAGE>
adequately diversified pursuant to Section 817(h) of the Internal Revenue
Code of 1986, as amended ("Code"), and the regulations thereunder. No shares
of any Portfolio will be sold directly to the general public to the extent
not permitted by applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios
to any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption, except
that the Fund reserves the right to suspend the right of redemption,
consistent with Section 22(e) of the 1940 Act and any rules thereunder. Such
redemption shall be paid consistent with applicable rules of the SEC and
procedures and policies of the Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the
agent of the Fund for the limited purpose of receiving and accepting purchase
and redemption orders from each Separate Account and receipt of such orders
by 4:00 p.m. Eastern time by the Insurer shall be deemed to be receipt by the
Fund for purposes of Rule 22c-1 of the 1940 Act; provided that the Fund
receives notice of such orders on the next following business day prior to
4:00
4
<PAGE>
p.m. Eastern time on such day, although the Insurer will use its best efforts
to provide such notice by 12:00 noon Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not
be issued to the Insurer or the Separate Accounts unless otherwise agreed by
the Fund. Shares ordered from the Fund will be recorded in an appropriate
title for the Separate Accounts or the appropriate subaccounts of the
Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurer of any income dividends or
capital gain distributions payable on the shares of the Portfolios. The
Insurer hereby elects to reinvest in the Portfolio all such dividends and
distributions as are payable on a Portfolio's shares and to receive such
dividends and distributions in additional shares of that Portfolio. The
Insurer reserves the right to revoke this election in writing and to receive
all such dividends and distributions in cash. The Fund shall notify the
Insurer of the number of shares so issued as payment of such dividends and
distributions.
5
<PAGE>
1.11 The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each
Portfolio as soon as reasonably practical after the net asset value per share
is calculated and shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time. If the Fund provides materially
incorrect share net asset value information, the Fund shall make an
adjustment to the number of shares purchased or redeemed for the Separate
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share, dividend
or capital gains information shall be reported promptly upon discovery to the
Insurer.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed
as an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the laws of the State of Louisiana, and that each of the Separate Accounts is
a validly existing segregated asset account under applicable federal and
state law.
2.3 The Insurer represents and warrants that the Variable Contracts
issued by the Insurer or interests in the Separate Accounts under such
Variable Contracts (1) are or, prior to issuance, will be registered as
securities
6
<PAGE>
under the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933
Act or will be offered exclusively in transactions that are properly exempt
from registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance
with the provisions of the 1940 Act or, alternatively, (2) has not been
registered in proper reliance upon an exclusion from registration under the
1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios
are duly authorized for issuance in accordance with applicable law and that
the Fund is registered as an open-end management investment company under the
1940 Act.
2.8 The Fund represents and warrants that each Portfolio currently
complies with the diversification provisions of Section 817(h) of the Code
and the regulations issued thereunder relating to the diversification
requirements
7
<PAGE>
for variable life insurance policies and variable annuity contracts, and that
each Portfolio is currently qualified as a regulated investment company under
Subchapter M of the Code.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
2.10 The Fund represents and warrants that any of its trustees,
officers, employees, and investment advisers are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than that required by Rule 17g-1
under the Act. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
ARTICLE III. GENERAL DUTIES
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under
the 1933 Act for so long as required by applicable law. The Fund shall amend
its Registration Statement filed with the SEC under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering
of the shares of the Portfolios. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states to the
extent deemed necessary in the reasonable discretion of the Fund or the
Distributor.
8
<PAGE>
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code
(or any successor or similar provision) and shall notify the Insurer
immediately upon having a reasonable basis for believing that a Portfolio has
ceased to so qualify or that it might not so qualify in the future.
3.3 The Fund shall be managed and invested in such a manner as to
comply with the diversification provisions of Section 817(h) of the Code and
the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts and any prospective amendments or other modifications to Section
817 or regulations thereunder, and shall notify the Insurer immediately upon
having a reasonable basis for believing that any Portfolio has ceased to
comply, and in such event shall take all reasonable steps to adequately
diversify so as to achieve compliance.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the
Variable Contracts to the extent required under the 1933 Act, and obtaining
all necessary approvals to offer the Variable Contracts from state insurance
commissioners.
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<PAGE>
3.5 The Insurer shall make every effort to maintain the treatment of
the Variable Contracts issued by the Insurer as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of
the Code, and shall notify the Fund and the Distributor immediately upon
having a reasonable basis for believing that such Variable Contracts have
ceased to be so treated or that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by
the Insurer in accordance with applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law
respecting the offering of variable life insurance policies and variable
annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the
Portfolios of the Fund in accordance with the applicable provisions of the
1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and
state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested
Trustees"), as defined by Section 2(a)(19) of the 1940 Act and the rules
thereunder, and as modified by any applicable orders of the SEC, except that
if this provision of this Section 3.8 is not met by reason of the death,
disqualification, or bona fide resignation of any Trustee or Trustees, then
the operation of this provision shall be suspended (a) for a period of 45
days if the vacancy or vacancies may be filled by the Fund's Board; (b) for a
period of 60
10
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days if a vote of shareholders is required to fill the vacancy or vacancies;
or (c) for such longer period as the SEC may prescribe by order upon
application.
3.9 The Insurer and its agents will not in any way recommend any
proposal or oppose or interfere with any proposal submitted by the Fund at a
meeting of owners of Variable Contracts or shareholders of the Fund, and will
in no way recommend, oppose, or interfere with the solicitation of proxies
for Fund shares held by Contract Owners, without the prior written consent of
the Fund, which consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall
permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
ARTICLE IV. POTENTIAL CONFLICTS
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article
IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the
existence of any material irreconcilable conflict (1) between the interests
of owners of variable annuity contracts and variable life insurance policies,
and
11
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(2) between the interests of owners of Variable Contracts ("Variable Contract
Owners") issued by different Participating Life Insurance Companies that
invest in the Fund. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretive letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments
of any Portfolio of the Fund are being managed; (e) a difference in voting
instructions given by variable annuity and variable life insurance contract
owners; or (f) a decision by a Participating Insurance Company to disregard
the voting instructions of Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer
will be responsible for assisting the Board of Trustees of the Fund in
carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, or, if the Fund is engaged in Mixed Funding or Shared
Funding in reliance on Rule 6e-2, 6e-3(T), or any other regulation under the
1940 Act, the Insurer will be responsible for assisting the Board of Trustees
of the Fund in carrying out its responsibilities under such regulation, by
providing the Board, upon request, with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurer to inform the Board whenever
Variable Contract Owner voting instructions are disregarded. The Insurer
shall carry out its
12
<PAGE>
responsibility under this Section 4.3 with a view only to the interests of
the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (I.E., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a
new registered management investment company or managed separate account. If
a material irreconcilable conflict arises because of the Insurer's decision
to disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
13
<PAGE>
Trustees, and no charge or penalty will be imposed as a result of such
withdrawal. These responsibilities shall be carried out with a view only to
the interests of the Variable Contract Owners. A majority of the
disinterested Trustees of the Fund shall determine whether or not any
proposed action adequately remedies any material irreconcilable conflict, but
in no event will the Fund or its investment adviser or the Distributor be
required to establish a new funding medium for any Variable Contract. The
Insurer shall not be required by this Section 4.4 to establish a new funding
medium for any Variable Contract if any offer to do so has been declined by
vote of a majority of Variable Contract Owners materially adversely affected
by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request
so that the Trustees of the Fund may fully carry out the obligations imposed
upon the Board by the conditions contained in the application for the Mixed
and Shared Funding Exemptive Order and said reports, materials, and data
shall be submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the
Fund's Board of Trustees, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees
of the Fund or other appropriate records, and such minutes or other records
shall be made available to the SEC upon request.
14
<PAGE>
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer
in writing of its determination of the existence of an irreconcilable
material conflict and its implications.
ARTICLE V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1 The Insurer shall distribute such prospectuses, proxy statements
and periodic reports of the Fund to the owners of Variable Contracts issued
by the Insurer as required to be distributed to such Variable Contract Owners
under applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of
the current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type
or in camera-ready copy) and other assistance as is reasonably necessary in
order for the Insurer to either print a stand-alone document or print
together in one document the current prospectus for the Variable Contracts
issued by the Insurer and the current prospectus for the Fund, or a document
combining the Fund prospectus with prospectuses of other funds in which the
Variable Contracts may be invested. The Fund shall bear the expense of
printing copies of its current prospectus that will be distributed to
existing Variable Contract Owners, and the Insurer shall bear the expense of
printing copies of the Fund's prospectus that are used in connection with
offering the Variable Contracts issued by the Insurer. The expenses of
printing prospectuses combining the Fund prospectus with the Variable
Contract
15
<PAGE>
prospectus or with prospectuses of other funds in which the Variable
Contracts may be invested shall be apportioned between (a) the Insurer and
(b) the Fund, in proportion to the number of pages of the combined
prospectus, taking account of other relevant factors affecting the expense of
printing, such as covers, columns, graphs and charts. The Fund will bear the
cost of printing the Funds' prospectus portion of such document for
distribution to owners of existing Variable Contracts invested in the Fund,
and the Insurer will bear the expense of printing the portion of such
documents relating to the Separate Accounts; provided, however, that the
Insurer will bear all printing expenses of such combined prospectuses where
used for distribution to prospective purchasers or to owners of existing
Variable Contracts not invested in the Fund.
5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI")
as may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of
its proxy materials, periodic reports to shareholders, and other
communications to shareholders in such quantity as the Insurer shall
reasonably require for purposes of distributing to owners of Variable
Contracts issued by the Insurer. The Fund, at the Insurer's expense, shall
provide the Insurer with copies of its periodic reports to shareholders and
other communications to shareholders in such quantity as the Insurer shall
reasonably request for use in connection with offering the Variable Contracts
issued by the Insurer. If requested by the Insurer in lieu thereof, the Fund
16
<PAGE>
shall provide such documentation (including a final copy of the Fund's proxy
materials, periodic reports to shareholders, and other communications to
shareholders, as set in type or in camera-ready copy) and other assistance as
reasonably necessary in order for the Insurer to print such shareholder
communications for distribution to owners of Variable Contracts issued by the
Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate
Accounts are registered as investment companies under the 1940 Act, the
Insurer shall vote shares of each Portfolio of the Fund held in a Separate
Account or a subaccount thereof, whether or not registered under the 1940
Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Insurer (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Portfolio. The Insurer shall vote
shares of a Portfolio of the Fund held in a Separate Account or a subaccount
thereof that are attributable to the Variable Contracts as to which no timely
instructions are received, as well as shares held in such Separate Account or
subaccount thereof that are not attributable to the Variable Contracts and
owned beneficially by the Insurer (resulting from charges against the
Variable Contracts or otherwise), in the same proportion as the votes cast by
owners of the Variable Contracts funded by that Separate Account or
subaccount thereof having a voting interest in the Portfolio from whom
instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast
17
<PAGE>
with respect to shares of the Portfolio held in all Separate Accounts of the
Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is
intended to be a funding vehicle for variable annuity and variable life
insurance contracts offered by various insurance companies, (2) material
irreconcilable conflicts possibly may arise, and (3) the Board of Trustees of
the Fund will monitor events in order to identify the existence of any
material irreconcilable conflicts and to determine what action, if any,
should be taken in response to any such conflict. The Fund hereby notifies
the Insurer that prospectus disclosure may be appropriate regarding potential
risks of offering shares of the Fund to separate accounts funding both
variable annuity contracts and variable life insurance policies and to
separate accounts funding Variable Contracts of unaffiliated life insurance
companies.
ARTICLE VI. SALES MATERIAL AND INFORMATION
6.1 The Insurer shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Portfolio thereof) or its investment
adviser or the Distributor is named at least 15 days prior to the anticipated
use of such material, and no such sales literature or other promotional
material shall be used unless the Fund and the Distributor or the designee of
either approve the material or do not respond with comments on the material
within 10 days from receipt of the material.
18
<PAGE>
6.2 The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements
on behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the
Fund or its designee and by the Distributor or its designee, except with the
permission of the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish
to the Insurer or its designee, each piece of sales literature or other
promotional material in which the Insurer or its Separate Accounts are named
at least 15 days prior to the anticipated use of such material, and no such
material shall be used unless the Insurer or its designee approves the
material or does not respond with comments on the material within 10 days
from receipt of the material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or
the Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports for the Separate
Accounts or prepared for distribution to owners of such Variable Contracts,
or in sales literature or other promotional material
19
<PAGE>
approved by the Insurer or its designee, except with the permission of the
Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of
the Mixed and Shared Funding Exemptive Application and any amendments
thereto, all prospectuses, Statements of Additional Information, reports,
proxy statements and other voting solicitation materials, and all amendments
and supplements to any of the above, that relate to the Fund or its shares,
promptly after the filing of such document with the SEC or other regulatory
authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the
Insurer or interests therein are not registered under the 1933 Act),
Statements of Additional Information, reports, solicitations for voting
instructions relating to the Fund, and all amendments or supplements to any
of the above that relate to the Variable Contracts issued by the Insurer or
the Separate Accounts which utilize the Fund as an underlying investment
medium, promptly after the filing of such document with the SEC or other
regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, computerized media,
or other public media), sales literature (I.E., any written communication
distributed or
20
<PAGE>
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees.
ARTICLE VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY THE INSURER
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers, any affiliated person of the Fund within
the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor
(collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurer) or litigation
expenses (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or litigation
expenses are related to the sale or acquisition of the Fund's shares or the
Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such
21
<PAGE>
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Insurer by or
on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to the sale or distribution of the Variable Contracts
issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the
22
<PAGE>
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Party shall have received notice of such service on any designated
agent), but failure to notify the Insurer of any such claim shall not relieve
the Insurer from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Insurer shall be entitled to participate, at its own
expense, in the defense of such action. The Insurer also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Insurer to such party of the Insurer's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Insurer
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer
of the commencement of any litigation or proceedings against them in
23
<PAGE>
connection with the issuance or sale of the Fund shares or the Variable
Contracts issued by the Insurer or the operation of the Fund.
7.1(e) This indemnification provision is in addition to any
liability which the Insurer may otherwise have.
7.2 INDEMNIFICATION BY THE DISTRIBUTOR
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, the principal underwriter or underwriters of the Variable Contracts,
and each of their directors and officers and any affiliated person of the
Insurer within the meaning of Section 2(a)(3) of the 1940 Act (collectively,
the "Indemnified Parties" for purposes of this Section 7.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or litigation
expenses are related to the sale or acquisition of the Fund's shares or the
Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus
24
<PAGE>
for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund or Distributor, or the
affiliates, employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts issued
by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund;
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor; or
(v) arise out of a failure by the Fund to comply with the
diversification requirements of Section 817(h) of the Code or a
failure by the Fund to qualify as a regulated investment company under
Subchapter M of the Code;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
25
<PAGE>
negligence in the performance of the Indemnified Party's duties or by reason
of the Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Insurer or the Separate Accounts.
7.2(c) The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Party shall have notified the Distributor in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Party shall have received notice
of such service on any designated agent), but failure to notify the
Distributor of any such claim shall not relieve the Distributor from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Distributor will be entitled to participate, at is own expense, in the
defense thereof. The Distributor also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Distributor to such party of the Distributor's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Distributor will
not be liable to such party under this Agreement for any legal or other
expense subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers
26
<PAGE>
or directors in connection with the issuance or sale of the Variable
Contracts issued by the Insurer or the operation of the Separate Accounts.
7.2(e) This indemnification provision is in addition to any
liability which the Distributor may otherwise have.
7.3 INDEMNIFICATION BY THE FUND
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer,
its affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer within
the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued
by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus
27
<PAGE>
for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund, or the affiliates,
employees, or agents of the Fund, with respect to the sale or
distribution of the Variable Contracts issued by the Insurer or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund; or
(v) arise as a result of a failure by the Fund to substantially
provide the services and furnish the materials under the terms of this
Agreement.
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless
28
<PAGE>
disregard of obligations or duties under this Agreement or to the Insurer or
the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Party shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve
the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Variable
Contracts issued by the Insurer or the sale of the Fund's shares.
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7.3(e) This indemnification provision is in addition to any
liability which the Fund may otherwise have.
ARTICLE VIII. APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Mixed and Shared Funding
Exemptive Order), and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE IX. TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written
notice to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are
not reasonably available to meet the requirements of the Variable Contracts
30
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issued by the Insurer, as determined by the Insurer, and upon prompt notice
by the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution
of formal proceedings against the Insurer or its agent by the NASD, the SEC,
or any state securities or insurance department or any other regulatory body
regarding the Insurer's duties under this Agreement or related to the sale of
the Variable Contracts issued by the Insurer, the operation of the Separate
Accounts, or the purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to substitute
the shares of another investment company for the corresponding shares of the
Fund or a Portfolio in accordance with the terms of the Variable Contracts
for which those shares had been selected or serve as the underlying
investment media; or
(f) in the event any of the shares of a Portfolio are not
registered, issued or sold in accordance with applicable state and/or federal
law, or such law precludes the use of such shares as the underlying
investment media of the Variable Contracts issued or to be issued by the
Insurer; or
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(g) by any party to the Agreement upon a determination by a
majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, that an irreconcilable conflict, as described in Article IV hereof,
exists; or
(h) at the option of the Insurer if the Fund or a Portfolio fails
to meet the requirements under Subchapter M of the Code for qualification as
a Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof; or
(i) at the option of any party upon any other party's breach of
any material provision of this Agreement, which breach has not been cured to
the satisfaction of the non-breaching party within ten days after written
notice of such breach is delivered to the breaching party; or
(j) at the option of the Insurer, if the Insurer shall determine,
in its sole judgment reasonably exercised in good faith, that the Fund and/or
the Distributor is the subject of material adverse publicity and such
material adverse publicity is likely to have a material adverse impact on the
sale of the variable contracts and/or the operations or business reputation
of the Insurer, and the Insurer shall have notified the Fund and/or the
Distributor, as appropriate, in writing of such determination and its intent
to terminate this Agreement, and, after consideration of the actions taken by
the Fund and/or the Distributor and any other changes in circumstances since
the giving of such notice, the determination of the Insurer shall continue to
apply on the sixtieth day since giving of such notice, which sixtieth day
shall be the effective date of termination; or
32
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(k) at the option of the Fund and/or the Distributor, if the Fund
and/or the Distributor shall determine, in their sole judgment reasonably
exercised in good faith, that the Insurer is the subject of material adverse
publicity and such material adverse publicity is likely to have a material
adverse impact on the sale of the Portfolios, the variable contracts and/or
the operations or business reputation of the Fund and/or the Distributor, and
the Fund and/or the Distributor shall have notified the Insurer in writing of
such determination and the intent to terminate this Agreement, and, after
consideration of the actions taken by the Insurer and any other changes in
circumstances since the giving of such notice, the determination of the Fund
and/or the Distributor shall continue to apply on the sixtieth day since
giving of such notice, which sixtieth day shall be the effective date of
termination.
9.2 Each party to this Agreement shall promptly notify the other
parties to the Agreement of the institution against such party of any such
formal proceedings as described in Sections 9.1(c) and (d) hereof. The
Insurer shall give 60 days prior written notice to the Fund of the date of
any proposed vote of Variable Contract Owners to replace the Fund's shares as
described in Section 9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions or transfers, or as required by state insurance laws or
regulations, the Insurer shall not redeem Fund shares attributable to the
Variable Contracts issued by the Insurer (as opposed to Fund shares
attributable to the Insurer's assets held in the Separate Accounts), and the
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Insurer shall not prevent Variable Contract Owners from allocating payments
to a Portfolio, until 30 days after the Insurer shall have notified the Fund
or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, based upon instructions from
the owners of the Existing Contracts, the Separate Accounts shall be
permitted to reallocate investments in the Portfolios of the Fund and redeem
investments in the Portfolios, and shall be permitted to invest in the
Portfolios in the event that owners of the Existing Contracts make additional
purchase payments under the Existing Contracts. If this Agreement
terminates, the parties agree that Sections 3.10, 7.1, 7.2, 7.3, 8.1, and
8.2, and, to the extent that all or a portion of the assets of the Separate
Accounts continue to be invested in the Fund or any Portfolio of the Fund,
Articles I, II, III, and IV and Sections 5.5, 5.6 and 11.4 will remain in
effect after termination.
9.5 Unless stated otherwise in this Agreement, termination shall
be effective upon giving written notice as set forth in Article X.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or
34
<PAGE>
at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Federated Insurance Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
First Variable Life Insurance Company
10 Post Office Square
Boston, Massachusetts 02109
Attn.: Arnold R. Bergman
ARTICLE XI: MISCELLANEOUS
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2
or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each
take such steps as may be necessary to comply with the Rule as amended or
adopted in final form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any
Trustee or officer of the Fund are executed in his or her capacity as
35
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Trustee or officer and not individually. The obligations of this Agreement
shall only be binding upon the assets and property of the Fund and shall not
be binding upon any Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of
the rights provided to such Trustees or shareholders in the Fund's Agreement
and Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will
be the sole shareholder of record of Fund shares. Fund and Distributor
recognize that they will derive a substantial savings in administrative
expense by virtue of having a sole shareholder rather than multiple
shareholders. In consideration of the administrative savings resulting from
having a sole shareholder rather than multiple shareholders, Distributor
agrees to pay monthly to Insurer an amount computed at an annual rate of .25
of 1% of the average daily net asset value of shares held in subaccounts for
which Insurer provides administrative services. Distributor's payments to
Insurer are for administrative services only and do not constitute payment in
any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative
thereof or logo associated with that name is the valuable property of the
Distributor and its affiliates, and that the Insurer has the right to use
such name (or derivative or logo) only so long as this Agreement is in effect.
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<PAGE>
Upon termination of this Agreement the Insurer shall forthwith cease to use
such name (or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
FEDERATED INSURANCE
SERIES
ATTEST: BY:
------------------------------- -------------------------------
Name: Name:
--------------------------------- -----------------------------
Title: Title:
-------------------------------- -----------------------------
FEDERATED SECURITIES CORP.
ATTEST: BY:
------------------------------- -------------------------------
Name: Name:
--------------------------------- -----------------------------
Title: Title:
-------------------------------- -----------------------------
FIRST VARIABLE LIFE
INSURANCE COMPANY
ATTEST: /s/ ARNOLD R. BERGMAN BY: /s/ STEPHAN M. LARGENT
------------------------------- -------------------------------
Name: Arnold R. Bergman Name: Stephan M. Largent
--------------------------------- -----------------------------
Title: Secretary Title: President
-------------------------------- -----------------------------
38
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Exhibit A
First Variable Life Annuity Fund A
First Variable Life Annuity Fund E
First Variable Life Annuity Fund M
Separate Account VL
39
<PAGE>
Exhibit B
Federated Prime Money Fund II
40
<PAGE>
EXHIBIT A
Monarch Life Separate Account VA
Monarch Life Separate Account VA-3
22
<PAGE>
EXHIBIT B
---------
First Variable Life Annuity Fund A
First Variable Life Annuity Fund E
First Variable Life Annuity Fund M
8655 23
<PAGE>
EXHIBIT C
---------
Cash Management Portfolio
Common Stock Portfolio
High Income Bond Portfolio
World Equity Portfolio
Multiple Strategies Portfolio
Tilt Utility Portfolio
U.S. Government Bond Portfolio
8655 24
