<PAGE>
As filed with the Securities and Exchange Commission on December 1, 1998
FILE NO. 33-01781
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------
A. Exact name of trust:
JPF SEPARATE ACCOUNT C
B. Name of depositor:
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
One Granite Place
Concord, NH 03301
D. Name and complete address of agent for service:
Ronald R. Angarella, President
Jefferson Pilot Securities Corporation
One Granite Place
Concord, NH 03301
Copies to:
Charlene Grant, Esq. Joan E. Boros, Esq.
Jefferson Pilot Financial Insurance Company Jorden, Burt, Boros, Cicchetti,
Berenson & Johnson LLP
One Granite Place 1025 Thomas Jefferson Street, NW
Concord, NH 03301 Suite 400 East
Washington, DC 20007-0805
------------
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on May 1, 1998 pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title and amount of securities being registered:
Units of Interest in the Separate Account under Survivorship
Flexible Premium Variable Life Insurance Policies.
<PAGE>
F. Approximate date of proposed public offering:
as soon as practicable after the effective date.
Registrant hereby amends this Registration Statement under the Securities Act of
1933 on such date or dates as may be necessary to delay its effective date until
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
Registrant is registering an indefinite number of securities, by reason of
Section 24(f) of the Investment Company Act of 1940.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption of Prospectus
- ----------- -----------------------------------------------------
1......... Cover Page
2......... Cover Page
3......... Not Applicable
4......... Distribution of the Policy
5......... Jefferson Pilot Financial Insurance Company; The Funds
6......... JPF Separate Account C
7......... Not Required
8......... Not Required
9......... Legal Proceedings
10......... Summary, The Funds; The Policies; Policy Benefits and
Rights; Calculation of Accumulation Value; Cash Value
Benefits; Other Matters; Federal Tax Matters
11......... JPF Separate Account C, The Funds
12......... The Funds; Distribution of the Policy
The Funds; General; Charges and Deductions; Optional
13......... Insurance Benefits; Distribution of the Policy
14......... The Policies
15......... The Policies
16......... JPF Separate Account C, The Funds
17......... Transfers; Telephone Transfers and Reallocations;
Policy Lapse; Reinstatement; Policy "Free Look",
Optional Insurance Benefits; Cash Value Benefits
18......... Separate Account C
19......... Annual Report; Confirmation
20......... Not Applicable
21......... Policy Loans
22......... JPF Separate Account C, Telephone Transfers and
Reallocations
<PAGE>
23......... Management of JP Financial
24......... Not Applicable
25......... Jefferson Pilot Financial Insurance Company
26......... Not Applicable
27......... Jefferson Pilot Financial Insurance Company of America
28......... Jefferson Pilot Financial Insurance Company;
Management of JP Financial
29......... Jefferson Pilot Financial Insurance Company
30......... Not Applicable
31......... Not Applicable
32......... Not Applicable
33......... Not Applicable
34......... Not Applicable
35......... Jefferson Pilot Financial Insurance Company
36......... Not Applicable
37......... Not Applicable
38-41...... Distribution of the Policy
42......... Not Applicable
43......... Not Applicable
44......... The Funds; The Policies; Charges and Deductions;
Calculation of Accumulation Value; Cash Value
Benefits; Distribution of the Policy
45......... Not Applicable
46......... The Funds; The Policies; Charges and Deductions;
Calculation of Accumulation Value; Cash Value Benefits
47......... Not Applicable
48......... Not Applicable
49......... Not Applicable
50......... JPF Separate Account C
<PAGE>
51......... Cover Page; The Policies; Charges and Deductions;
Policy Benefits and Rights; Calculation of Accumulation
Value; Cash Value Benefits; Other Matters
52......... The Funds; Other Matters
53......... Federal Tax Matters
54......... Not Applicable
55......... Not Applicable
56......... Not Applicable
57......... Not Applicable
58......... Not Applicable
59......... Financial Statements
<PAGE>
ENSEMBLE SL
JPF SEPARATE ACCOUNT C
FLEXIBLE PREMIUM VARIABLE SURVIVORSHIP LIFE INSURANCE POLICY
ON THE LIVES OF TWO INSUREDS
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ONE GRANITE PLACE
CONCORD, NEW HAMPSHIRE 03301
800-258-3648
This Prospectus describes the Ensemble Survivorship Life Insurance Policy
("Ensemble SL" or "the Policy"), a flexible premium variable life insurance
policy on the lives of two Insureds, issued and underwritten by Jefferson
Pilot Financial Insurance Company ("We" or "JP Financial" or "the Company").
The Policy provides life insurance and pays a benefit, as described in this
Prospectus, upon surrender or Second Death. The Policy allows flexible premium
payments, Policy Loans, Withdrawals, and a choice of two Death Benefit
Options. Your account values may be invested on either a fixed or variable or
combination of fixed and variable basis. You may allocate Your Net Premiums to
JPF Separate Account C ("Separate Account C"), and/or the General Account, or
both Accounts. The Divisions of Separate Account C support the benefits
provided by the variable portion of the Policy. The Accumulation Value
allocated to each Division is not guaranteed and will vary with the investment
performance of the associated Fund. Net Premiums allocated to the General
Account will accumulate at rates of interest We determine; such rates will not
be less than 4% per year. Your Policy may lapse if the Cash Value is
insufficient to pay a Monthly Deduction. For the first five Policy Years,
however, if you pay the Minimum Annual Premium, Your Policy will not lapse,
regardless of changes in the Accumulation Value. We will send premium reminder
notices for Planned Premiums and for premiums required to continue the Policy
in force. If the Policy lapses, You may reinstate it.
The Policy has a free look period during which You may return the Policy. We
will refund Your Premium (See "Right of Policy Examination").
This Prospectus also describes the Divisions used to fund the Policy through
Separate Account C. Each Division invests exclusively in one of the following
Portfolios:
<TABLE>
<S> <C>
JPVF International Equity Portfolio Fidelity VIP Growth Portfolio
JPVF World Growth Stock Portfolio Fidelity VIP Equity Income Portfolio
JPVF Emerging Growth Portfolio Fidelity VIP II Contrafund Portfolio
JPVF Growth Portfolio Fidelity VIP II Index 500 Portfolio
JPVF Capital Growth Portfolio MFS Research Series
JPVF Small Company Portfolio MFS Utilities Series
JPVF Growth and Income Portfolio Oppenheimer Strategic Bond Fund
JPVF Global Hard Assets Portfolio Oppenheimer Bond Fund
JPVF Balanced Portfolio Templeton International Fund
JPVF High Yield Bond Portfolio
JPVF Money Market Portfolio
</TABLE>
Not all Divisions may be available under all Policies or in all
jurisdictions. You may obtain the current Prospectus and Statement of
Additional Information ("SAI") for any of the Portfolios by calling (800) 760-
3947.
Replacing existing insurance or supplementing an existing flexible premium
variable life insurance policy with the Policy may not be to your advantage.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES
FOR THE FUNDS. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Ensemble SL insurance policies and shares of the funds are not deposits or
obligations of or guaranteed by any bank. They are not federally insured by
the FDIC or any other government agency. Investing in the contracts involves
certain investment risks, including possible loss of principal invested.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT JPF SEPARATE ACCOUNT C REQUIRED
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND IN THE
SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
THE DATE OF THIS PROSPECTUS IS DECEMBER 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions.............................. 3
Policy Summary........................... 5
The Separate Account..................... 5
Charges & Fees........................... 6
Charges & Fees Assessed Against Premi-
um.................................... 6
Charges & Fees Assessed Against the
Accumulation Value.................... 6
Charges & Fees Assessed Against the
Separate Account...................... 7
Charges Assessed Against the Underlying
Funds................................. 8
Charges Deducted Upon Surrender........ 10
Allocation of Premiums................... 11
The Portfolios......................... 11
Investment Advisers for the Funds...... 12
Mixed and Shared Funding; Conflicts of
Interest.............................. 13
Fund Additions, Deletions or Substitu-
tions................................. 13
General Account........................ 13
Policy Choices........................... 14
General................................ 14
Premium Payments....................... 14
Death Benefit Options.................. 15
Transfers and Allocations to Funding
Options............................... 16
Telephone Transfers, Loans and
Reallocations......................... 16
Automated Transfers (Dollar Cost
Averaging and Portfolio Rebalancing).. 17
Policy Values............................ 17
Accumulation Value..................... 17
Unit Value............................. 18
Net Investment Factor.................. 18
Surrender Value........................ 18
Policy Rights............................ 19
Surrenders............................. 19
Withdrawals............................ 19
Grace Period........................... 19
Reinstatement of a Lapsed Policy....... 19
Coverage Beyond Younger Insured's
Attained Age 100...................... 20
Right to Defer Payment................. 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Policy Loans............................ 20
Policy Changes.......................... 21
Right of Policy Examination............. 22
Supplemental Benefits................... 22
Death Benefit........................... 22
Policy Settlement....................... 22
Settlement Options.................... 22
The Company............................. 23
Directors & Officers.................... 24
Additional Information.................. 25
Reports to Policyowners............... 25
Right to Instruct Voting of Fund
Shares............................... 25
Disregard of Voting Instructions...... 25
State Regulation...................... 26
Legal Matters......................... 26
The Registration Statement............ 26
Financial Statements.................. 26
Employee Benefit Plans................ 26
Distribution of the Policy............ 26
Independent Auditors.................. 26
Year 2000............................. 27
Group or Sponsored Arrangements....... 27
Tax Matters............................. 28
General............................... 28
Federal Tax Status of the Company..... 28
Life Insurance Qualification.......... 28
Charges for JP Financial Income Taxes. 30
Miscellaneous Policy Provisions......... 31
The Policy............................ 31
Payment of Benefits................... 31
Suicide and Incontestability.......... 31
Protection of Proceeds................ 31
Nonparticipation...................... 31
Changes in Owner and Beneficiary;
Assignment........................... 31
Misstatements......................... 31
Illustrations of Death Benefit, Total
Account Values and Surrender Values.... A-1
Financial Statements of the Company..... F-1
Financial Statements of the Separate Ac-
count.................................. F-18
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON. THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE
INSURANCE PROTECTION. LIFE INSURANCE IS A LONG-TERM INVESTMENT. POLICYOWNERS
SHOULD CONSIDER THEIR NEED FOR INSURANCE COVERAGE AND THE POLICY'S LONG-TERM
INVESTMENT POTENTIAL. NO CLAIM IS MADE THAT THE POLICY IS ANY WAY SIMILAR OR
COMPARABLE TO AN INVESTMENT IN A MUTUAL FUND.
2
<PAGE>
DEFINITIONS
Accumulation Value: The total amount that a Policy provides for investment
plus the amount held as collateral for Policy Debt.
Age: The Insureds' ages at their nearest birthdays.
Allocation Date: The date when the initial Net Premium is placed in the
Divisions and the General Account as instructed by the Policyowner in the
application. The Allocation Date is 25 days from the date the Company mails
the Policy to the agent for delivery to the Policyowner. However, if either
insured is in a substandard risk class, the Allocation Date will be the date
the Company receives from You all administrative items needed to activate the
Policy.
Attained Age: The respective ages of the Insureds at the last Policy
Anniversary.
Beneficiary: The person you designate in the application to receive the Death
Benefit proceeds. If changed, the Beneficiary is as shown in the latest change
filed with the Company. If no Beneficiary survives either Insured, You or Your
estate will be the Beneficiary. The Beneficiary's interest may be subject to
that of any assignee.
Cash Value: The Accumulation Value less any Surrender Charge. This amount
less any Policy Debt is payable to the Policyowner on surrender of the Policy.
Code: The Internal Revenue Code of 1986, as amended.
Company: Jefferson Pilot Financial Insurance Company.
Cost of Insurance: A charge related to the Company's expected mortality cost
for Your basic insurance coverage under the Policy, not including any
supplemental benefit provision that You may elect through a Policy rider.
Cumulative Minimum Premium: An amount equal to the Minimum Annual Premium
divided by 12 and multiplied by the number of completed policy months.
Date of Receipt: Any Company business day, prior to 4:00 p.m. Eastern time,
on which a notice or premium payment is received at the Company's home office.
Death Benefit: The amount which is payable on the Second Death, adjusted as
provided in the Policy.
Death Benefit Options: Either of the two methods for determining the Death
Benefit.
Division: A separate division of Separate Account C which invests only in the
shares of a specified Portfolio of a Fund.
Fund: An open-end management investment company (mutual fund) whose shares
are purchased by the Separate Account to fund the benefits provided by the
Policy.
General Account: A non-variable funding option available in the Policy that
guarantees a minimum interest rate of 4% per year.
Grace Period: The 61-day period beginning on the Monthly Anniversary Day on
which the Policy's Cash Value less any Policy Debt is insufficient to cover
the current Monthly Deduction, unless the cumulative minimum premium
requirement has been met. The Policy will lapse without value at the end of
the 61-day period unless a sufficient payment is received by the Company.
Home Office: The Company's principal executive offices at One Granite Place,
Concord, New Hampshire 03301.
Insureds: The two persons on whose lives the Policy is issued.
Issue Age(s): The Age of each Insured on the Policy's Issue Date.
Issue Date: The effective date on which coverage begins under the Policy.
Load Basis Amount: A rate per $1,000 of Specified Amount to which the
Acquisition Charge applies and which varies by sex, Issue Ages, rating class
of the Insureds and Specified Amount.
Loan Value: Generally, 90% of the Policy's Cash Value on the date of a loan.
Minimum Annual Premium: The amount of premium to assure that the Policy
remains in force for at least 5 Policy Years from the Issue Date even if the
Surrender Value is insufficient to satisfy the current Monthly Deduction.
Monthly Anniversary Date: The same day in each month as the Policy Date.
Net Premium: The gross premium less a 2.5% State Premium Tax Charge and a
1.25% Federal DAC Tax Charge.
Policy: The life insurance contract described in this Prospectus.
Policy Date: The date set forth in the Policy and from which policy years,
policy months and policy anniversaries will be determined. If the Policy Date
should fall on the 29th, 30th or 31st of a month, the Policy Date will be the
1st of the following month. You may request the Policy Date. If You do not
request a date, it is the date the Policy is issued.
Policy Debt: The sum of all unpaid policy loans and accrued interest thereon.
Portfolio: A separate investment series of one of the Funds.
Proof of Death: One or more of: a) a copy of a certified death certificate;
b) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death; c) a written statement by a medical doctor who attended the
Insured; or d) any other proof satisfactory to the Company.
Second Death: Death of the Surviving Insured.
SEC: Securities and Exchange Commission.
Separate Account C: JPF Separate Account C, a separate investment account
established by the Company for the purpose of funding the Policy.
Specified Amount: The amount chosen by the Policyowner at application, which
may subsequently be decreased, and used in determining the Death Benefit.
3
<PAGE>
DEFINITIONS, CONTINUED
State: Any State of the United States, the District of Columbia, Puerto Rico,
Guam, the Virgin Islands or any other possession of the United States.
Surrender Charge: An amount retained by the Company upon the Surrender of the
Policy, a Withdrawal or a decrease in Specified Amount.
Surrender Value: Cash Value less any Policy Debt.
Surviving Insured: The Insured living after one of the Insureds dies.
Target Premium: The premium from which first year commissions will be
determined and which varies by sex, Issue Ages, rating class of the Insureds
and Specified Amount.
Valuation Date: The date and time at which the Accumulation Value of a
variable investment option is calculated. Currently, this calculation occurs
after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange and the
Company are open. In addition to being closed on all federal holidays, the
Company will also be closed on Good Friday, the Friday following Thanksgiving
and the day before or following Christmas.
Valuation Period: The period of time from between two successive Valuation
Dates, beginning at the close of regular trading on the New York Stock
Exchange on each Valuation Date, and ending at the close of regular trading on
the New York Stock Exchange on the next succeeding Valuation Date.
We, Our, Us, Company: Jefferson Pilot Financial Insurance Company, its
successors or assigns.
You, Your: Policyowner.
Younger Insured's Attained Age 100: the Policy anniversary on which the
younger insured would be Attained Age 100, regardless of whether he or she is
still alive.
4
<PAGE>
POLICY SUMMARY
This Prospectus describes a flexible premium variable life insurance policy
issued on the lives of two Insureds. The Policy provides life insurance and
pays a benefit (subject to adjustment under the Policy's Age and/or Sex,
Suicide and Incontestability, and Grace Period provisions) upon surrender or
Second Death. The Policy allows flexible premium payments, Policy Loans,
Withdrawals and a choice of two Death Benefit Options. Account values may be
either fixed or variable or a combination of fixed and variable.
Charges and fees will be assessed against premium payments, Accumulation
Value, the Separate Account, the underlying Funds and upon surrender or
decrease in Specified Amount.
You must purchase Your variable life insurance policy from a registered
representative. The Policy, the initial application on the Insureds, any
subsequent applications and any riders constitute the entire contract.
At the time of application, You must choose a Death Benefit Option, decide on
the amount of premium and determine how to allocate Net Premiums. You may
elect to supplement the benefits afforded by the Policy through the addition
of riders We make available.
The proceeds payable upon the Second Death depend on the Death Benefit Option
chosen. Under Option 1 the Death Benefit equals the current Specified Amount.
Under Option 2, the Death Benefit equals the current Specified Amount plus the
Accumulation Value on the date of death. The Death Benefit proceeds will be
reduced by repayment of any outstanding Policy Debt.
Although the Policy is designed to allow flexible premiums, You must pay
sufficient premiums to continue the Policy in force. An initial premium, based
on Issue Age, underwriting class and Specified Amount must be paid at issue.
No premium payment may be less than $250 ($50 for electronic fund transfers).
Premium reminder notices will be sent for Planned Premiums and for premiums
required to continue the Policy in force. Should Your Policy lapse, You may
reinstate it.
You may allocate Your Net Premiums to the Separate Account, the General
Account or both Accounts. Net Premiums allocated to the Separate Account must
be allocated to one or more of the Divisions of the Separate Account and
allocations must be in whole percentages. The variable portion of the Policy
is supported by the Divisions You choose and will vary with the investment
performance of the associated Portfolios. Net Premiums allocated to the
General Account will accumulate at rates of interest We determine. The
effective rate of interest will not be less than 4% per year.
THE SEPARATE ACCOUNT
The Separate Account underlying the Policy is JPF Separate Account C. Amounts
allocated to the Separate Account are invested in the Portfolios. Each
Portfolio is a series of an open-end management investment company (mutual
fund) whose shares are purchased by the Separate Account to fund the benefits
provided by the Policy. The Portfolios, including their investment objectives
and their investment advisers, are described in this Prospectus. Complete
descriptions of the Portfolios' investment objectives and restrictions and
other material information relating to the Portfolios are contained in the
Portfolios' prospectuses, which are delivered with this Prospectus.
Separate Account C was established under New Hampshire law on August 4, 1993.
Under New Hampshire Insurance Law, the income, gains or losses of the Separate
Account are credited without regard to the other income, gains or losses of
the Company. These assets are held for the Company's variable life insurance
policies. Any and all distributions made by the Portfolios with respect to
shares held by the Separate Account will be reinvested in additional shares at
net asset value. The assets maintained in the Separate Account will not be
charged with any liabilities arising out of any other business conducted by
the Company. The Company is, however, responsible for meeting the obligations
of the Policy to the Policyowner.
No stock certificates are issued to the Separate Account for shares of the
Portfolios held in the Separate Account. Ownership of Portfolio shares is
documented on the books and records of the Portfolios and of the Company for
the Separate Account.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 and meets the definition of separate
account under the federal securities laws. Such registration does not involve
any approval or disapproval by the Commission of the Separate Account or the
Company's management or investment practices or policies. The Company does not
guarantee the Separate Account's investment performance.
Divisions. The Policies presently offer twenty Divisions but may add or
delete Divisions. You may invest in a total of 17 Divisions over the life of
the Policy. Each Division will invest exclusively in shares of a single
Portfolio.
5
<PAGE>
CHARGES & FEES
CHARGES & FEES ASSESSED AGAINST PREMIUM
- ---------------------------------------
PREMIUM CHARGES
Before a premium is allocated to any of the Divisions of Separate Account C
and the General Account, We will deduct a state premium tax charge of 2.5%
(which represents an average of actual premium taxes imposed) unless otherwise
required by state law (2.35% in California). We may impose the premium tax
charge in states which do not themselves impose a premium tax. The state
premium tax charge reimburses the Company for taxes it pays to states and
municipalities in which the Policy is sold. The amount of tax assessed by a
state or municipality may be more or less than the charge. We will also deduct
a federal income tax charge of 1.25% ("Federal DAC Tax Charge") which
reimburses the Company for its increased federal tax liability under the
federal tax laws. The Company has determined that these state and federal tax
charges are reasonable in relation to its tax liability, but subject to state
law, reserves the right to increase these tax charges due to changes in the
state or federal tax laws that increase the Company's tax liability.
CHARGES & FEES ASSESSED AGAINST ACCUMULATION VALUE
- --------------------------------------------------
Charges and fees assessed against the Policy's Accumulation Value can be
deducted from any one of the Divisions, the General Account, or pro rata from
each of the Divisions and the General Account. If You do not designate one
Division, the charges will be deducted pro rata from each of the Divisions and
the General Account.
MONTHLY DEDUCTION
On each Monthly Anniversary Date and on the Policy Date, We will deduct from
the Policy's Accumulation Value an amount to cover certain expenses associated
with start-up and maintenance of the Policy, administrative expenses, the cost
of insurance for the Policy and any optional benefits added by rider.
The Monthly Deduction equals:
i) the Cost of Insurance for the Policy (as described below), plus
ii) a Monthly Administrative Fee of $10, plus
iii) a monthly Unit Expense Charge of .05 per $1,000 of Specified Amount
in Policy Years 1 through 10 (not less than $15 per month), and .02 per
$1,000 of Specified Amount in Policy Years 11 and thereafter (not to exceed
$50 per month or go below $15 per month), plus
iv) a monthly Acquisition Charge during the first two Policy Years equal
to 2% of Load Basis Amount per month in Policy Year 1 and 1% of Load Basis
Amount per month in Policy Year 2, plus
v) the cost of optional benefits provided by rider.
Cost of Insurance. The Cost of Insurance charge is related to the Company's
expected mortality cost for Your basic insurance coverage under the Policy,
not including any supplemental benefit provisions that You may elect through a
Policy rider.
The Cost of Insurance charge equals (i) multiplied by the result of (ii)
minus (iii) where:
i) is the current Cost of Insurance Rate as described in the Policy;
ii) is the death benefit at the beginning of the policy month divided by
1.0032737 (to arrive at the proper values for the beginning of the month
assuming the guaranteed interest rate of 4%; and
iii) is the Accumulation Value at the beginning of the policy month.
The current Cost of Insurance Rate is variable and is based on both
Insureds' issue ages, sex (where permitted by law), Policy Year, rating class
of the Insureds and Specified Amount. Because the Accumulation Value and the
Death Benefit of the Policy may vary from month to month, the Cost of
Insurance charge may also vary on each day a Monthly Deduction is taken. In
addition, You should note that the Cost of Insurance charge is related to the
difference between the Death Benefit payable under the Policy and the
Accumulation Value of the Policy. An increase in the Accumulation Value or a
decrease in the Death Benefit may result in a smaller Cost of Insurance charge
while a decrease in the Accumulation Value or an increase in the Death Benefit
may result in a larger cost of insurance charge.
The Cost of Insurance rate for standard risks will not exceed those based on
the 1980 Commissioners Standard Ordinary Mortality Tables Male or Female (1980
Tables). Substandard risks will have monthly deductions based on Cost of
Insurance
6
<PAGE>
rates which may be higher than those set forth in the 1980 Tables. A table of
guaranteed maximum Cost of Insurance rates per $1,000 of the Amount at Risk
will be included in each Policy. We may adjust the Monthly Cost of Insurance
rates from time to time. Adjustments will be on a class basis and will be
based on Our estimates for future factors such as mortality, investment
income, expenses, reinsurance costs and the length of time Policies stay in
force. Any adjustments will be made on a nondiscriminatory basis. The current
Cost of Insurance rate will not exceed the applicable maximum Cost of
Insurance rate shown in Your Policy.
Monthly Administrative Expense Charge. The Monthly Deduction amount also
includes a monthly administration fee of $10.00. This fee may not be
increased.
Unit Expense Charge. The Monthly Deduction amount also includes a current
administrative expense charge of $0.05 per month per $1,000 of Specified
Amount for Policy Years 1 through 10 (not less than $15 per month) and $0.02 a
month per $1,000 of Specified Amount for Policy Years 11 and thereafter (not
less than $15 per month nor more than $50 per month). These charges are for
items such as underwriting and issuance, premium billing and collection,
policy value calculation, confirmations and periodic reports.
Acquisition Charge. We will deduct from the Accumulation Value a monthly
acquisition charge of 2% of the Load Basis Amount in the first Policy Year and
1% of the Load Basis Amount in the second Policy Year. This charge does not
vary with the amount of premium paid. We reserve the right to increase or
decrease this charge for policies not yet issued in order to correspond with
changes in distribution costs of the Policy. The charge compensates Us for the
cost of selling the Policy, including, among other things, agents'
commissions, advertising and printing of prospectuses and sales literature.
Normally this charge plus the Surrender Charge, discussed below, compensate Us
for total sales expenses for the year. To the extent sales expenses in any
policy year are not recovered by this Acquisition Charge and the Surrender
Charge, the sales expenses may be recovered from other sources which may
include profits from the Mortality Risk and Expense Risk Charges.
Charges for Optional Benefits. If You elect any optional benefits by adding
riders to the Policy, an optional benefits charge will be included in the
Monthly Deduction amount. The amount of the charge will vary depending upon
the actual optional benefits selected and is described on each applicable
Policy rider.
CHARGES & FEES ASSESSED AGAINST THE SEPARATE ACCOUNT
- ----------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
We will assess a charge on a daily basis against each Division at a current
annual rate of 1.00% in Policy Years 1 through 10 (1.25% guaranteed) and .60%
in Policy Years 11 and thereafter (.85% guaranteed) of the value of the
Divisions to compensate Us for mortality and expense risks We assume in
connection with the Policy. The mortality risk assumed by the Company is that
Insureds, as a group, may live for a shorter period of time than estimated and
that the Company will, therefore, pay a Death Benefit before collecting a
sufficient Cost of Insurance charge. The expense risk assumed is that expenses
incurred in issuing and administering the Policies and operating the Separate
Account will be greater than the administrative charges assessed for such
expenses.
The Separate Account is not subject to any taxes. However, if taxes are
assessed against the Separate Account, We reserve the right to assess taxes
against the Separate Account Value.
ADMINISTRATIVE CHARGE FOR TRANSFERS OR WITHDRAWAL
We will impose an Administrative Fee of $50 for each transfer among the
Divisions of the Separate Account or the General Account, after the first 12
transfers in a Policy Year (up to a maximum of 20). An Administrative Fee of
$50 will also be charged for withdrawals.
7
<PAGE>
CHARGES ASSESSED AGAINST THE UNDERLYING FUNDS
Following are the investment advisory and sub-investment management fees,
paid by each of the Funds as a percentage of average net assets.
Jefferson Pilot Variable Fund
<TABLE>
<CAPTION>
WORLD GROWTH STOCK,
GLOBAL HARD ASSETS,
SMALL COMPANY, HIGH YIELD
GROWTH AND INCOME, CAPITAL EMERGING BOND AND INTERNATIONAL
AVERAGE DAILY NET ASSETS MONEY MARKET AND BALANCED GROWTH GROWTH GROWTH EQUITY
- ------------------------ ------------ ------------------- ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
First $200 Million...... .50% .75% 1.00% .80% .75% 1.00%
Next $1.1 Billion....... .45% .70% .95% .75% .75% 1.00%
Over $1.3 Billion....... .40% .65% .90% .70% .75% 1.00%
</TABLE>
The compensation of the Sub-Investment Managers is paid directly from the
investment management fees of JP Investment Advisory and is set forth in the
table below as an annual percentage of the average daily net assets of the
Portfolio managed:
<TABLE>
<CAPTION>
SUB-INVESTMENT MANAGER FEES
--------------------------------------------------------------------
JANUS TEMPLETON VAN ECK PIONEER
AVERAGE DAILY NET ASSETS CAPITAL GROWTH WORLD GROWTH STOCK GLOBAL HARD ASSETS SMALL COMPANY
- ------------------------ -------------- -------------------- ------------------ -------------
<S> <C> <C> <C> <C>
First $200 Million...... .75% .50% .50% .50%
Next $1.1 Billion....... .70% .45% .45% .45%
Over $1.3 Billion....... .65% .40% .40% .40%
<CAPTION>
WARBURG GROWTH MFS MFS MFS MORGAN
NET ASSETS & INCOME EMERGING GROWTH MONEY MARKET HIGH YIELD BALANCED
---------- -------------- -------------------- ------------------ ------------- --------
<S> <C> <C> <C> <C> <C>
First $100 Million...... .50% .40% .30% .40% .45%
Next $100 Million....... .50% .40% .30% .40% .40%
Next $200 Million....... .50% .40% .25% .40% .35%
Over $400 Million....... .50% .40% .25% .40% .30%
<CAPTION>
LOMBARD ODIER
NET ASSETS STRONG GROWTH INTERNATIONAL EQUITY
---------- -------------- --------------------
<S> <C> <C>
First $25 Million....... .60% .50%
Next $75 Million........ .50% .50%
Next $50 Million........ .40% .50%
Over $150 Million....... .30% .50%
</TABLE>
Templeton International Fund: Class 2.
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
- ------------------------
<S> <C>
First $200 million....................................................... .75%
Next $1.1 billion........................................................ .675%
Over $1.3 billion........................................................ .60%
</TABLE>
8
<PAGE>
FIDELITY VIP AND VIP II
The monthly management fee for all Portfolios (except Index 500) is
calculated by adding a group fee rate to an individual fund fee rate,
multiplying the result by the fund's monthly net assets, and dividing by
twelve.
<TABLE>
<S> <C> <C>
Individual Fund Fee Rates: Equity-Income Portfolio.............................. 0.20%
Growth Portfolio..................................... 0.30%
Contrafund Portfolio................................. 0.30%
</TABLE>
Group Fee Rates--Equity-Income, Growth and Contrafund Portfolios: The
current group fee rate is 0.52% of monthly net assets. Additional information
concerning the group fee rates, including the lower group fee rates applicable
to average group assets in excess of $6 billion, is contained in the Statement
of Additional Information for those Portfolios.
<TABLE>
<S> <C>
GROUP FEE RATE SCHEDULE
-----------------------
<CAPTION>
AVERAGE GROUP ANNUALIZED
ASSETS RATE
------------- ----------
<S> <C>
0 - $3 billion .5200%
3 - 6 .4900
</TABLE>
The Index 500 Portfolio pays a monthly management fee to FMR at an annual
rate of 0.28% of its monthly average net assets.
MFS Research Series and MFS Utilities Series: 0.75% of average daily net
assets.
Oppenheimer Strategic Bond Fund: 0.10% of average daily net assets.
Oppenheimer Bond Fund: 0.15% of average daily net assets.
9
<PAGE>
Certain of the unaffiliated Portfolio advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Policy (Templeton--0.25%, MFS--0.15%,
Oppenheimer--0.10% for the Bond Fund and 0.15% for the Strategic Bond Fund;
all reimbursements are expressed as a percentage of average daily net assets
under management). These reimbursements are paid by the advisers and are not
charged to the Portfolios.
For further details on each Portfolio's expenses please refer to that
Portfolio's prospectus. Additional copies of each Portfolio's prospectus and
the Statement of Additional Information for each Portfolio may be obtained
free of charge by calling (800)-452-4822.
CHARGES DEDUCTED UPON SURRENDER
- -------------------------------
If You surrender the Policy, reduce the Specified Amount, or the Policy
lapses during the first nine Policy Years, We will assess a contingent
deferred sales charge, which will be deducted from the Policy's Accumulation
Value. This charge is imposed in part to recover distribution expenses and in
part to recover certain first year administrative costs. The initial Surrender
Charges will be specified in Your Policy and will be in compliance with each
state's nonforfeiture law.
When We issue Your Policy, We determine the initial Surrender Charge. To
determine the initial Surrender Charge, We multiply the initial Specified
Amount of Your Policy by a rate per thousand dollars of Specified Amount. The
applicable rate depends on the sex, Issue Ages, and rating class of the
Insureds. For the following examples of Insureds, the applicable rates per
1000 are:
Male Standard Non-Smoker Age 35, Female Standard Non-Smoker Age 30 $2.72
Male Standard Non-Smoker Age 45, Female Standard Non-Smoker Age 40 $4.87
Male Standard Non-Smoker Age 55, Female Standard Non-Smoker Age 50 $9.36
Male Standard Smoker Age 55, Female Standard Non-Smoker Age 50 $10.60
Male Non-Smoker Age 55 Rated Table H, Female Standard Non-Smoker Age 50 $11.29
Male Standard Non-Smoker Age 65, Female Standard Non-Smoker Age 60 $17.80
Male Standard Non-Smoker Age 75, Female Standard Non-Smoker Age 70 $33.19
Accordingly, if the Insureds were a male standard non-smoker age 55, and a
female standard non-smoker age 50, and the Policy's Specified Amount was
$500,000, the initial Surrender Charge would be $4,680 (9.36 x 500).
The maximum rate per 1000 of Specified Amount, considering all possible
combinations of sex, Issue Ages, and rating class of the Insureds, is $43.32.
The Surrender Charge in any given Policy Year will equal a percentage of the
initial Surrender Charge as follows:
<TABLE>
<CAPTION>
SURRENDER CHARGE AS
POLICY YEAR PERCENTAGE OF INITIAL SURRENDER CHARGE*
----------- ---------------------------------------
<S> <C>
0 - 5........................... 100%
6............................... 80%
7............................... 60%
8............................... 40%
9............................... 20%
10+............................. 0%
</TABLE>
- -------
* May be lower at some ages
We will not assess a Surrender Charge after the ninth Policy Year. A pro rata
portion of any Surrender Charge will be assessed upon withdrawal or reduction
in the Specified Amount. The Policy's Accumulation Value will be reduced by
the amount of any withdrawal or reduction in Specified Amount plus any
applicable pro rata Surrender Charge.
SURRENDER CHARGES ON SURRENDERS AND WITHDRAWALS
All applicable Surrender Charges are imposed on Surrenders.
We will impose a pro rata Surrender Charge on Withdrawals. The pro rata
Surrender Charge is the amount of the Withdrawal divided by the Cash Value. We
will reduce any applicable remaining Surrender Charges by the same proportion.
A transaction charge of $50 will be deducted from the amount of each
Withdrawal. (See "Withdrawals") The Surrender Charge dose not apply to Policy
loans.
10
<PAGE>
We will also impose a pro rata Surrender Charge on Decreases in Specified
Amount. The pro rata portion will equal the amount of the Specified Amount
reduction divided by the Specified Amount before the reduction.
OTHER CHARGES
- -------------
We reserve the right to charge the assets of each Division to provide for any
income taxes or other taxes payable by Us on the assets attributable to that
Division. Although We currently make no charge, we reserve the right to charge
You an administrative fee, not to exceed $50, to cover the cost of preparing
any additional illustrations of current Cash Values and current mortality
assumptions which you may request after the Policy Date.
ALLOCATION OF PREMIUMS
You may allocate all or a part of Your Net Premiums to the Divisions
currently available under Your Policy or You may allocate all or a part of
Your Net Premiums to the General Account.
THE PORTFOLIOS
The Separate Account currently invests in shares of the Portfolios listed
below. Net Premiums applied to the Separate Account will be invested in the
Portfolios in accordance with Your selection. Portfolios may be added or
withdrawn as permitted by applicable law. We reserve the right to limit the
total number of Portfolios You may elect to 17 over the lifetime of the Policy
or to increase the total number of Portfolios You may elect. Shares of the
Portfolios are not sold directly to the general public. Each of the Portfolios
is available only through the purchase of variable annuities or variable life
insurance policies. (See Mixed and Shared Funding)
The investment results of the Portfolios, whose investment objectives are
described below, are likely to differ significantly. There is no assurance
that any of the Portfolios will achieve their respective investment
objectives. Investment in some of the Portfolios involves special risks, which
are described in their respective prospectuses. You should read the
prospectuses for the Portfolios and consider carefully, and on a continuing
basis, which Portfolio or combination of Portfolios is best suited to Your
long-term investment objectives. Except where otherwise noted, all of the
Portfolios are diversified, as defined in the Investment Company Act of 1940.
. JPVF International Equity Portfolio seeks long-term capital appreciation
through investments in securities whose primary trading markets are
outside the United States.
. JPVF World Growth Stock Portfolio seeks to achieve long-term capital
growth through a policy of investing primarily in stocks of companies
organized in the United States or in any foreign nation. A portion of
the Portfolio may also be invested in debt obligations of companies and
governments of any nation. Any income realized will be incidental.
. JPVF Emerging Growth Portfolio seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if any,
is incidental to the Portfolio's investment objective of long-term
growth.
. JPVF Growth Portfolio seeks capital growth by investing primarily in
equity securities that the Sub-Investment Manager believes have above-
average growth prospects.
. JPVF Capital Growth Portfolio seeks capital growth. Realization of
income is not a significant investment consideration and any income
realized will be incidental.
. JPVF Small Company Portfolio seeks to achieve growth of capital. The
Portfolio pursues its objective by investing primarily in a diversified
portfolio of equity securities issued by small companies, which are
defined as companies with market capitalizations equal to or less than
the largest company in the Russell 2000(R) Index.
. JPVF Growth and Income Portfolio seeks long-term growth of capital by
investing primarily in a wide range of equity issues that may offer
capital appreciation and, secondarily, seeks a reasonable level of
current income.
. JPVF Global Hard Assets Portfolio seeks long-term capital appreciation
by investing globally, primarily in "Hard Asset Securities". Hard Asset
Securities include equity and debt securities of "Hard Asset Companies",
that are directly or indirectly engaged in the exploration, development,
production or distribution of one or more of the following: precious
metals; ferrous and non-ferrous metals; oil and gas, petroleum,
petrochemicals or other hydrocarbons; forest productions; real estate;
and other basic non-agricultural commodities. Income is a secondary
consideration.
. JPVF Balanced Portfolio seeks reasonable current income and long-term
capital growth, consistent with conservation of capital, by investing
primarily in common stocks and fixed income securities.
. JPVF High Yield Bond Portfolio seeks a high level of current income by
investing primarily in corporate obligations with emphasis on higher
yielding, higher risk, lower-rated or unrated securities. These
securities may be considered speculative and involve greater risks,
including risk of default, than higher rated securities.
11
<PAGE>
. JPVF Money Market Portfolio seeks to achieve as high a level of current
income as is consistent with preservation of capital and liquidity. An
investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government.
. Fidelity Variable Insurance Products Fund--Growth Portfolio seeks
capital appreciation by investing primarily in common stocks.
. Fidelity Variable Insurance Products Fund--Equity-Income Portfolio seeks
reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Fund will also consider
the potential for capital appreciation.
. Fidelity Investments' Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing its
assets mainly in equity securities of companies that are undervalued or
out-of-favor.
. Fidelity Variable Insurance Products Fund II--Index 500 Portfolio seeks
investment results that correspond to the total return of common stocks
publicly traded in the United States, as represented by the S&P 500.
. MFS Variable Insurance Trust--Research Series seeks to provide long-term
growth of capital and future income by investing a substantial
proportion of its assets in equity securities of companies believed to
possess better-than-average prospects for long-term growth.
. MFS Variable Insurance Trust--Utilities Series seeks capital growth and
current income (incomes above that available from a portfolio invested
entirely in equity securities) by investing, under normal circumstances,
at least 65% (but up to 100% at the discretion of the Adviser) of its
assets in equity and debt securities of both domestic and foreign
companies in the utilities industry.
. Oppenheimer Variable Account Funds--Strategic Bond Fund seeks a high
level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call
options on debt securities. The Portfolio intends to invest principally
in: (i) foreign government and corporate debt securities, (ii) U.S.
Government securities, and (iii) lower-rated high yield domestic debt
securities, commonly known as "junk bonds", which are subject to a
greater risk of loss of principal and nonpayment of interest than
higher-rated securities. These securities may be considered to be
speculative.
. Oppenheimer Variable Account Funds--Bond Fund primarily seeks a high
level of current income from investment in high yield, fixed-income
securities rated "Baa" or better by Moody's or "BBB" or better by
Standard & Poor's. Secondarily, this Portfolio seeks capital growth when
consistent with its primary objective.
. Templeton Variable Product Series Fund--Templeton International Fund
seeks long-term capital growth through a flexible policy of investing in
stocks and debt obligations of companies and governments outside the
United States. Any income realized will be incidental. Although the
Templeton International Fund generally invests in common stock, it may
also invest in preferred stocks and certain debt securities such as
convertible bonds which are rated in any category by Standard & Poor's
Corporation or Moody's Investors Service, Inc. or which are unrated by
any rating agency.
Some of the above Portfolios may use instruments known as derivatives as part
of their investment strategies, as described in their respective prospectuses.
The use of certain derivatives such as inverse floaters and principal on debt
instruments may involve higher risk of volatility to a Portfolio. The use of
leverage in connection with derivatives can also increase risk of losses. See
the prospectus for the Portfolio for a discussion of the risks associated with
an investment in those Portfolios. You should refer to the accompanying
prospectuses of the Portfolios for more complete information about their
investment policies and restrictions.
INVESTMENT ADVISERS FOR EACH OF THE FUNDS:
Jefferson Pilot Variable Fund, Inc. ("JPVF") The investment manager to JPVF
is Jefferson Pilot Investment Advisory Corporation ("JP Investment Advisory"),
an affiliate of the Company. JP Investment Advisory and JPVF have contracted
with nine unaffiliated companies to act as sub-investment managers to the
Funds. They are: Lombard Odier International Portfolio Management Limited
("Lombard Odier") for the International Equity Portfolio; Templeton Global
Advisors, Limited ("Templeton") for the World Growth Stock Portfolio;
Massachusetts Financial Services Company ("MFS") for the Emerging Growth
Portfolio, the High Yield Bond Portfolio and the Money Market Portfolio; Janus
Capital Corporation ("Janus") for the Capital Growth Portfolio; Strong Capital
Management, Inc. ("Strong") for the Growth Portfolio; Pioneering Management
Corporation ("Pioneer") for the Small Company Portfolio; Warburg Pincus Asset
Management, Inc. ("Warburg") for the Growth and Income Portfolio; Van Eck
Associates Corporation ("Van Eck") for the Global Hard Assets Portfolio; and
J.P. Morgan Investment Management, Inc. ("Morgan") for the Balanced Portfolio.
12
<PAGE>
Fidelity Variable Insurance Products Fund--Fidelity Management & Research
Company ("FMR")
Fidelity Variable Insurance Products Fund II--FMR
MFS Variable Insurance Trust--Massachusetts Financial Services Company
("MFS")
Oppenheimer Variable Account Funds--OppenheimerFunds, Inc. ("Oppenheimer")
Templeton Variable Products Series Fund--Templeton Investment Counsel, Inc.
("TICI")
MIXED AND SHARED FUNDING; CONFLICTS OF INTEREST
Shares of the Funds are available to insurance company separate accounts
which fund variable annuity contracts and variable life insurance policies,
including the Policy described in this Prospectus. Because Fund shares are
offered to separate accounts of both affiliated and unaffiliated insurance
companies, it is conceivable that, in the future, it may not be advantageous
for variable life insurance separate accounts and variable annuity separate
accounts to invest in these Funds simultaneously, since the interests of such
Policyowners or contractholders may differ. Although neither the Company nor
the Funds currently foresees any such disadvantages either to variable life
insurance or to variable annuity Policyowners, each Fund's Board of
Trustees/Directors has agreed to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise and to determine
what action, if any, should be taken in response thereto. If such a conflict
were to occur, one of the separate accounts might withdraw its investment in a
Fund. This might force that Fund to sell portfolio securities at
disadvantageous prices.
FUND ADDITIONS, DELETIONS OR SUBSTITUTIONS
The Company reserves the right, subject to compliance with appropriate state
and federal laws, to add, delete or substitute shares of another Portfolio or
Fund for Portfolio shares already purchased or to be purchased in the future
for the Division in connection with the Policy. The Company may substitute
shares of one Portfolio for shares of another Portfolio if, among other
things, (a) it is determined that a Portfolio no longer suits the purpose of
the Policy due to a change in its investment objectives or restrictions; (b)
the shares of a Portfolio are no longer available for investment; or (c) in
the Company's view, it has become inappropriate to continue investing in the
shares of the Portfolio. Substitution may be made with respect to both
existing investments and the investment of any future premium payments.
However, no substitution of securities will be made without prior notice to
Policyowners, and without prior approval of the SEC or such other regulatory
authorities as may be necessary, all to the extent required and permitted by
the Investment Company Act of 1940 or other applicable law.
We also reserve the right to make the following changes in the operation of
the Separate Account and the Divisions;
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain
and continue any exemption from applicable laws;
(c) to transfer assets from one Division to another, or from any Division
to our general account;
(d) to add, combine, or remove Divisions in the Separate Account;
(e) to assess a charge for taxes attributable to the operation of the
Separate Account or for other taxes, described in "Charges and Fees--Other
Charges" on page 10 above; and
(f) to change the way We assess other charges, as long as the total other
charges do not exceed the amount currently charged the Separate Account and
the Portfolios in connection with the Policies.
Portfolio shares are subject to certain investment restrictions which may not
be changed without the approval of the majority of the Portfolios'
shareholders. See accompanying Prospectus for the Portfolios.
GENERAL ACCOUNT
Interests in the General Account have not been registered with the SEC in
reliance upon exemptions under the Securities Act of 1933, as amended and the
General Account has not been registered as an investment company under the
1940 Act. However, disclosure in this Prospectus regarding the General Account
may be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of the statements.
Disclosure in this Prospectus relating to the Fixed Account has not been
reviewed by the SEC.
13
<PAGE>
The General Account is a fixed funding option available under the Policy. The
Company guarantees a minimum interest rate of 4.0% on amounts in the General
Account and assumes the risk of investment gain or loss. The investment gain
or loss of the Separate Account or any of the Portfolios does not affect the
General Account Value.
The General Account is secured by the general assets of the Company. The
general assets of the Company include all assets of the Company other than
those held in separate accounts sponsored by the Company or its affiliates.
The Company will invest the assets of the General Account in those assets
chosen by the Company, as allowed by applicable law. Investment income of such
General Account assets will be allocated by the Company between itself and
those policies participating in the General Account.
The Company guarantees that, at any time, the General Account Value of Your
Policy will not be less than the amount of the Net Premiums allocated to the
General Account, plus any monthly accumulation value adjustment, plus interest
at an annual rate of not less than 4.0%, less the amount of any Withdrawals,
Policy Loans or Monthly Deductions, plus interest at an annual rate of not
less than 4%.
If You do not accept the Policy issued as applied for or you exercise Your
"free look" option, no interest will be credited and We will retain any
interest earned on the Initial Net Premium.
POLICY CHOICES
GENERAL
The Policy is designed to provide the Insureds with lifetime insurance
protection and to provide the Policyowner with flexibility in amount and
frequency of premium payments and level of life insurance proceeds payable
under the Policy. It provides life insurance coverage on two Insureds with a
Death Benefit payable only on Second Death. You are not required to pay
scheduled premiums to keep the Policy in force and You may, subject to certain
limitations, vary the frequency and amount of premium payments.
To purchase a Policy, You must complete an application and submit it to Us
through the agent selling the Policy. You must furnish satisfactory evidence
of insurability. The Insureds under the Policy must generally be under age 85,
although one Insured may be over age 85. For ages 15 and over, each Insured's
smoking status is reflected in the current cost of insurance rates. Policies
issued in certain States will not directly reflect the Insured's sex in either
the premium rates or the charges or values under the Policy. We may reject an
application for any good reason.
The minimum Specified Amount at issue is $100,000. We reserve the right to
revise Our rules to specify different minimum Specified Amounts at issue. We
may reinsure all or a portion of the Policy.
PREMIUM PAYMENTS
The Policy is a flexible premium life insurance policy. This means that You
may decide when to make premium payments and in what amounts. You must pay
your premiums to Us at our home office or through one of Our authorized agents
for forwarding to Us. There is no fixed schedule of premium payment on the
Policy either as to amount or frequency. You may determine, within certain
limits, Your own premium payment schedule. No payment may be less than $250
($50 for electronic fund transfers). The Policy has a minimum premium period
of 5 years. If You pay the Minimum Annual Premium, We guarantee that the
Policy will stay in force throughout the minimum premium period, even if the
Surrender Value is insufficient to pay a Monthly Deduction. The minimum
initial premium will equal the Minimum Annual Premium, divided by 4. In order
to help You get the insurance benefits You desire, We will state a Planned
Periodic Premium and Premium Frequency in the Policy. This premium will
generally be based on Your insurance needs and financial abilities, the
current financial climate, the Specified Amount of the Policy and the
Insureds' ages, sex and risk classes. You are not required to pay such
premiums and failure to make any premium payment will not necessarily result
in lapse of the Policy, so long as the Policy's Surrender Value is sufficient
to pay the Monthly Deduction. Payment of the Planned Periodic Premiums will
not guarantee that Your Policy will remain in force. (See "Grace Period")
MODIFIED ENDOWMENT
The Policy will be allowed to become a Modified Endowment contract under the
Internal Revenue Code only with Your consent. Otherwise, if at any time the
premiums paid under the Policy exceed the limit for avoiding modified contract
status, We will notify You in writing within 60 days and You may request a
refund of the excess premium. If We do not receive Your request to refund the
excess premium, such amount will be held in a separate deposit fund and will
be credited with the current interest rate.
14
<PAGE>
COMPLIANCE WITH THE INTERNAL REVENUE CODE
The Policy is intended to qualify as life insurance under the Internal
Revenue Code. The Death Benefit provided by the Policy is intended to qualify
for the federal income tax exclusion. If at any time the premium paid under
the Policy exceeds the amount allowable for such qualification, We will notify
You in writing within 60 days and You may request a refund of the excess
premium. If we do not receive your request to refund the excess premium, such
amount will be held in a separate deposit fund and will be credited with the
current interest rate.
Under limited circumstances, We may backdate a Policy, upon request, by
assigning an Issue Date earlier than the date the application is signed but no
earlier than six months prior to state approval of the Policy. Backdating may
be desirable, for example, so that You can purchase a particular Policy
Specified Amount for lower Cost of Insurance Rate based on a younger insurance
age. For a backdated Policy, You must pay the premium for the period between
the Issue Date and the date the application is received at the Home Office.
Backdating of Your Policy will not affect the date on which Your premium
payments are credited to the Separate Account.
We will allocate premium payments, net of the premium tax charge and Federal
DAC tax, plus interest earned prior to the Allocation Date, among the General
Account and the divisions of the Separate Account in accordance with Your
directions to Us. The minimum percentage of any net premium payment allocated
to any division or the General Account is 5% and allocation percentages must
be in whole numbers only. Your initial premium (including any interest) will
be allocated, as You instructed, on the Allocation Date. Your subsequent
premiums will be allocated as of the date they are received in Our Home
Office. Prior to the Allocation Date, the initial net premium, and any other
premiums received, will be allocated to the General Account. (See "Right of
Policy Examination")
You may change Your premium allocation instructions at any time. Your request
may be written or by telephone, so long as the proper telephone authorization
is on file with Us. Allocations must be changed in whole percentages. The
change will be effective as of the date of the next premium payment after You
notify Us. We will send You confirmation of the change. (See "Transfers and
Allocations to Funding Options")
DEATH BENEFIT OPTIONS
At the time of purchase, You must choose between the two available Death
Benefit Options. The amount payable upon the Second Death depends upon which
Death Benefit Option You choose.
Under Option 1 the Death Benefit will be the greater of the current Specified
Amount or the Accumulation Value on the Second Death multiplied by the
corridor percentage, as described below.
Under Option 2 the Death Benefit will be the greater of the current Specified
Amount plus the Accumulation Value on the Second Death or the Accumulation
Value on the Second Death multiplied by the corridor percentage, as described
below.
The corridor percentage is used to determine a minimum ratio of Death Benefit
to Accumulation Value. This is required to qualify the Policy as life
insurance under the federal tax laws. Following is a complete list of corridor
percentages.
Corridor Percentages (Attained as of the Younger Insured at the Beginning of
the Contract Year)
<TABLE>
<CAPTION>
AGE % AGE % AGE % AGE %
--- --- --- --- --- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94+ 101
</TABLE>
Under both Option 1 and Option 2, the Death Benefit will be reduced by a
Withdrawal. (See "Withdrawals") The Death Benefit payable under either Option
will also be reduced by the amount necessary to repay the Policy Debt in full
and, if the Policy is within the Grace Period, any payment required to keep
the Policy in force.
15
<PAGE>
The Death Benefit will be set at 101% of the cash value on the Policy
Anniversary Date nearest the Younger Insured's Attained Age 100.
After We issue the Policy, You may, subject to certain restrictions, change
the Death Benefit selection from Option 1 to Option 2, or vice versa, by
sending Us a request in writing. If you change the Death Benefit option from
Option 2 to Option 1, the Specified Amount will be increased by the Policy's
Accumulation Value on the effective date of the change. If you change the
Death Benefit option from Option 1 to Option 2, the Specified Amount will be
decreased by the Policy's Accumulation Value on the effective date of the
change. We will require evidence of insurability on a request for a change
from Option 1 to Option 2.
TRANSFERS AND ALLOCATIONS TO FUNDING OPTIONS
You may transfer all or part of the Accumulation Value to any other Portfolio
or to the General Account at any time. Funds may be transferred between the
Portfolios or from the Portfolios to the General Account. We currently permit
12 transfers per year without imposing any transfer charge. For transfers over
12 in any Policy Year, We will impose a transfer charge of $50, which We will
deduct on a pro rata basis from the Division or Divisions or the General
Account into which the amount is transferred, unless You specify otherwise. We
will not impose a Transfer Charge on the transfer of the initial Net Premium
payments, plus interest earned, from the General Account to the Divisions on
the Allocation Date, or on loan repayments. We will not impose a Transfer
Charge for transfers under the Dollar Cost Averaging or Portfolio Rebalancing
features. You may currently make up to 20 transfers per Policy Year. We
reserve the right to modify transfer privileges and charges.
You may at any time transfer 100% of the Policy's Accumulation Value to the
General Account and choose to have all future premium payments allocated to
the General Account. While You are doing this, the minimum period the Policy
will be in force will be fixed and guaranteed. The minimum period will depend
on the amount of Accumulation Value, the Specified Amount, the sex, Attained
Age and rating classes of the Insureds at the time of transfer. The minimum
period will decrease if You choose to surrender the Policy or make a
withdrawal. The minimum period will increase if You choose to decrease the
Specified Amount, make additional premium payments, or We credit a higher
interest rate or charge a lower cost of insurance rate than those guaranteed
for the General Account.
Except for transfers in connection with Dollar Cost Averaging, Automatic
Portfolio Rebalancing and loan repayments, We allow transfers out of the
General Account to the Divisions only once in every 180 days and limit their
amount to the lesser of (a) 25% of the Accumulation Value in the General
Account not being held as loan collateral, or (b) $100,000. Any other transfer
rules, including minimum transfer amounts, also apply. We reserve the right to
modify these restrictions.
We will not impose a transfer charge for a transfer of all Accumulation Value
in the Separate Account to the General Account. A transfer from the General
Account to the Divisions of the Separate Account will be subject to the
transfer charge unless it is one of the first 12 transfers in a Policy Year
and except for the transfer of initial net premium payments, plus interest
earned, from the General Account and loan repayments.
We reserve the right to refuse or restrict transfers made by third-party
agents on behalf of Policyowners or pursuant to market timing services when We
determine that such transfers will be detrimental to the Portfolios,
Policyowners or You.
TELEPHONE TRANSFERS, LOANS AND REALLOCATIONS
You or your authorized representative may request a transfer of Accumulation
Value or reallocation of premiums (including allocation changes relating to
existing Dollar Cost Averaging and Automatic Portfolio Rebalancing programs)
either in writing or by telephone. In order to make telephone transfers, You
must complete a written telephone transfer authorization form and return it to
Us at our Home Office. All transfers must be in accordance with the terms of
the Policy. If the transfer instructions are not in good order, the Company
will not execute the transfer and You will be notified.
We may also permit loans to be made by telephone, provided that Your
authorization form is one file with Us. Only You may request loans by
telephone.
We will use reasonable procedures, such as requiring identifying information
from callers, recording telephone instructions, and providing written
confirmation of transactions, in order to confirm that telephone instructions
are genuine. Any telephone instructions which We reasonably believe to be
genuine will be Your responsibility, including losses arising from any errors
in the communication of instructions. As a result of this procedure, You will
bear the risk of loss. If the Company does not use reasonable procedures, as
described above, it may be liable for losses due to unauthorized instructions.
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AUTOMATED TRANSFERS (DOLLAR COST AVERAGING AND PORTFOLIO REBALANCING)
Dollar Cost Averaging describes a system of investing a uniform sum of money
at regular intervals over an extended period of time. Dollar Cost Averaging is
based on the economic fact that buying a security with a constant sum of money
at fixed intervals results in acquiring more of the item when prices are low
and less of it when prices are high.
You may establish automated transfers of a specific dollar amount (the
"Periodic Transfer Amount") on a monthly, quarterly or semi-annual basis from
the Money Market Division or the General Account to any other Portfolio or to
the General Account. You must have a minimum of $3,000 allocated to either the
Money Market Division or the General Account in order to enroll in the Dollar
Cost Averaging program. The minimum Periodic Transfer Amount is $250. A
minimum of 5% of the Periodic Transfer Amount must be transferred to any
specified Division. There is no additional charge for the program. You may
start or stop participation in the Dollar Cost Averaging program at any time,
but You must give the Company at least 30 days' notice to change any automated
transfer instructions that are currently in place. The Company reserves the
right to suspend or modify automated transfer privileges at any time.
You may elect an Automatic Portfolio Rebalancing feature which provides a
method for reestablishing fixed proportions between various types of
investments on a systematic basis. Under this feature, We will automatically
readjust the allocation between the Divisions and the General Account to the
desired allocation, subject to a minimum of 5% per Division or General
Account, on a quarterly, semi-annual or annual basis. There is no additional
charge for the program.
You may not elect Dollar Cost Averaging and Automatic Portfolio Rebalancing
at the same time. We will make transfers and adjustments pursuant to these
features on the Policy's Monthly Anniversary Date in the month when the
transaction is to take place, or the next succeeding business day if the
Monthly Anniversary Date falls on a holiday or weekend. We must have an
authorization form on file before either feature may begin. Transfers under
these features are not subject to the transfer fee and do not count toward the
12 free transfers or the 20 transfer maximum currently allowed per year.
Before participating in the Dollar Cost Averaging or Automatic Portfolio
Rebalancing programs, You should consider the risks involved in switching
between investments available under the Policy. Dollar Cost Averaging requires
regular investments regardless of fluctuating price levels, and does not
guarantee profits or prevent losses. Automatic Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Accumulation Value
allocated to the better performing segments. Therefore, You should carefully
consider market conditions and each Fund's investment policies and related
risks before electing to participate in the Dollar Cost Averaging or Automatic
Portfolio Rebalancing programs.
POLICY VALUES
ACCUMULATION VALUE
The Accumulation Value of Your Policy is determined on a daily basis.
Accumulation Value is the sum of the values in the Divisions plus the value in
the General Account. We calculate Your Policy's Accumulation Value in the
Divisions by units and unit values under the Policies. Your Policy's
Accumulation Value will reflect the investment experience of the Divisions
investing in the Portfolios, any additional net premiums paid, any
withdrawals, any policy loans, and any charges assessed in connection with the
Policy. We do not guarantee Accumulation Values in the Separate Account as to
dollar amount.
On the Allocation Date, the Accumulation Value in the Separate Account (the
"Separate Account Value") equals the initial premium payments, less the State
Premium Tax and Federal DAC Tax Charges, plus interest earned prior to the
Allocation Date, and less the Monthly Deduction for the first policy month. We
will establish the initial number of units credited to the Separate Account
for Your Policy on the Allocation Date. At the end of each Valuation Period
thereafter, the Accumulation Value in a Division is (i) plus (ii) plus (iii)
minus (iv) minus (v) where:
(i) is the Accumulation Value in the Division on the preceding Valuation
Date multiplied by the net investment factor, described below, for the
current Valuation Period,
(ii) is any Net Premium We receive during the current Valuation Period
which is allocated to the Division,
(iii) is all Accumulation Value transferred to the Division from another
Division or the General Account during the current Valuation Period,
(iv) is the Accumulation Value transferred from the Division to another
Division or the General Account and Accumulation Value transferred to
secure a Policy Debt during the current Valuation Period, and
(v) is all withdrawals from the Division during the current Valuation
Period.
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Whenever a Valuation Period includes the Monthly Anniversary Date, the
Separate Account Value at the end of such period is reduced by the portion of
the monthly deduction and increased by any Accumulation Value Adjustment
allocated to the Divisions.
We will calculate a guaranteed monthly Accumulation Value Adjustment at the
beginning of the second Policy Year and every Policy Year thereafter. The
adjustment will be allocated among the General Account and the Divisions in
the same proportion as premium payments. The adjustment is calculated as (i)
multiplied by the total of (ii) plus (iii) minus (iv), but not less than zero,
where:
(i) is .0003333 in Policy Years 2 through 10 and .00025 in Policy Years 11
and thereafter;
(ii) is the amount allocated to the Divisions at the beginning of the
Policy Year;
(iii) is the Type B loan balance at the beginning of the Policy Year; and
(iv) is the Guideline Single Premium at issue under Section 7702 of the
Code.
See "Policy Loans" for a description of Type B loans.
Unit Values. We credit Units to You upon allocation of Net Premiums to a
Division. Each Net Premium payment you allocate to a Division will increase
the number of units in that Division. We credit both full and fractional
units. We determine the number of units and fractional units by dividing the
Net Premium payment by the unit value of the Division to which You have
allocated the payment. We determine each Division's unit value on each
Valuation Date. The number of units credited to Your Policy will not change
because of subsequent changes in unit value. The number is increased by
subsequent contributions or transfers allocated to a Division, and decreased
by charges and withdrawals from that Division. The dollar value of each
Division's units will vary depending on the investment performance of the
corresponding Portfolio, as well as any expenses charged directly to the
Separate Account.
The initial Unit Value of each Division's units was $10.00. Thereafter, the
Unit Value of a Division on any Valuation Date is calculated by multiplying
the Division's Unit Value on the previous Valuation Date by the Net Investment
Factor for the Valuation Period then ended.
Net Investment Factor. The Net Investment Factor measures each Division's
investment experience and is used to determine changes in Unit Value from one
Valuation Period to the next. We calculate the Net Investment Factor by
dividing (1) by (2) and subtracting (3) from the result, where:
(1) is the sum of:
(a) the Net Asset Value of a Fund share held in the Separate Account
for that Division determined at the end of the current Valuation Period;
plus
(b) the per share amount of any dividend or capital gain distributions
made for shares held in the Separate Account for that Division if the
ex-dividend date occurs during the Valuation Period;
(2) is the Net Asset Value of a Fund share held in the Separate Account
for that Division determined as of the end of the preceding Valuation
Period; and
(3) is the daily charge representing the Mortality & Expense Risk Charge.
This charge is equal, on an annual basis, to a percentage of the daily Net
Asset Value of Fund shares held in the Separate Account for that Division.
Because the Net Investment Factor may be greater than, less than or equal to
1, values in a Division may increase or decrease from Valuation Period to
Valuation Period.
The General Account Value reflects amounts allocated to the General Account
through payment of premiums or transfers from the Separate Account, plus
interest credited to those amounts. Amounts allocated to the General Account,
and interest thereon, are guaranteed; however there is no assurance that the
Separate Account Value of the Policy will equal or exceed the Net Premiums
paid and allocated to the Separate Account.
You will be advised at least annually as to the number of Units which remain
credited to the Policy, the current Unit Values, the Separate Account Value,
the General Account Value, and the Accumulation Value.
SURRENDER VALUE
The Surrender Value of the Policy is the amount You can receive in cash by
surrendering the Policy. The Surrender Value will equal (a) the Accumulation
Value on the date of surrender; less (b) the Surrender Charge; less (c) the
Loan Value plus any accrued interest. (See Charges Deducted Upon Surrender)
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POLICY RIGHTS
SURRENDERS
By Written Request, You may surrender the Policy for its Surrender Value at
any time while one or both Insureds is alive. All insurance coverage under the
Policy will end on the date of the Surrender. All or part of the Surrender
Value may be applied to one or more of the Settlement Options described in
this Prospectus or in any manner to which We agree and that We make available.
(See Right to Defer Payment, Policy Settlement and Payment of Benefits)
WITHDRAWALS
By Written Request, You may, at any time after the expiration of the Free
Look Period, make withdrawals from the Policy. A $50 Charge will be deducted
from the amount of the Cash Value which You withdraw. We will also deduct a
pro rata Surrender Charge. The minimum amount of any withdrawal after the $50
charge is applied is $500. The amount You withdraw cannot exceed the Surrender
Value.
Withdrawals will generally affect the Policy's Accumulation Value, Cash Value
and the life insurance proceeds payable under the Policy as follows.
. The Policy's Cash Value will be reduced by the amount of the withdrawal;
. The Policy's Accumulation Value will be reduced by the amount of the
withdrawal plus any applicable pro rata Surrender Charge;
. Life insurance proceeds payable under the Policy will generally be
reduced by the amount of the withdrawal plus any applicable pro rata
Surrender Charge, unless the withdrawal is combined with a request to
maintain the Specified Amount.
The withdrawal will reduce the Policy's values as described in the "Charges
Deducted Upon Surrender" section.
If the Death Benefit Option for the Policy is Option 1, a withdrawal will
reduce the Specified Amount. However, We will not allow a withdrawal if the
Specified Amount will be reduced below the $100,000.
If the Death Benefit Option for the Policy is Option 2, a withdrawal will
reduce the Accumulation Value, usually resulting in a dollar-per-dollar
reduction in the life insurance proceeds payable under the Policy.
You may allocate a withdrawal among the Divisions and the General Account. If
you do not make such an allocation, We will allocate the withdrawal among the
Divisions and the General Account in the same proportion that the Accumulation
Value in each Division and the General Account Value, less any Policy Debt,
bears to the total Accumulation Value of the Policy, less any Policy Debt.
(See Right to Defer Payment, Policy Changes and Payment of Benefits)
GRACE PERIOD
If Your Policy's Surrender Value is insufficient to satisfy the Monthly
Deduction and You have not met Cumulative Minimum Premium requirements during
the minimum premium period, we will allow you 61 days of grace for payment of
an amount sufficient to continue coverage. Your Policy will go into "lapse
pending status".
Written notice will be mailed to Your last known address, according to Our
records, not less than 61 days before termination of the Policy. This notice
will also be mailed to the last known address of any assignee of record.
The Policy will stay in force during the Grace Period. If the last surviving
Insured dies during the Grace Period, we will reduce the Death Benefit by the
amount of any Monthly Deduction due and the amount of any outstanding Policy
Debt.
If payment is not made within 61 days after the Monthly Anniversary Day, the
Policy will terminate without value at the end of the Grace Period.
REINSTATEMENT OF A LAPSED OR TERMINATED POLICY
If the Policy terminates as provided in its Grace Period benefit, it may be
reinstated. To reinstate the Policy, the following conditions must be met:
--The Policy has not been fully surrendered.
--You must apply for reinstatement within 5 years after the date of
termination and before the Younger Insured's Attained Age 100.
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--We must receive evidence of insurability, satisfactory to Us, that each
Insured, or the survivor of the Insureds, is insurable at the original
rating class or classes.
--We must receive a premium payment sufficient to keep the Policy in force
for the current month plus two additional months.
--If a loan was outstanding at the time of lapse, We will require that
either You repay or reinstate the loan before We reinstate the Policy.
Supplemental Benefits will be reinstated only with Our consent. (See Grace
Period and Premium Payments)
COVERAGE BEYOND YOUNGER INSURED'S ATTAINED AGE 100
At the younger Insured's Attained Age 100, We will make several changes to
Your Policy. At that point and thereafter, the Specified Amount will equal the
current Accumulation Value. The Death Benefit will be set to Option 1 and will
equal 101% of the Specified Amount less Policy Debt. We will no longer deduct
any Cost of Insurance charges or Unit Expense Charge, the Monthly Accumulation
Value Adjustment will cease and no new premiums will be accepted.
RIGHT TO DEFER PAYMENT
Payments of any Separate Account Value will be made within 7 days after Our
receipt of Your Written Request. However, the Company reserves the right to
suspend or postpone the date of any payment of any benefit or values for any
Valuation Period (1) when the New York Stock Exchange is closed (except
holidays or weekends); (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the SEC so that disposal of the
securities held in the Funds is not reasonably practicable or it is not
reasonably practicable to determine the value of the Funds' net assets; or (4)
during any other period when the SEC, by order, so permits for the protection
of security holders. For payment from the Separate Account in such instances,
We may defer payment of Full Surrender and Withdrawal Values, any Death
Benefit in excess of the current Specified Amount, transfers and any portion
of the Loan Value.
Payment of any General Account Value may be deferred for up to six months,
except when used to pay amounts due Us.
POLICY LOANS
We will grant loans at any time after the expiration of the Right of Policy
Examination. The amount of the loan will not be more than the Loan Value.
Unless otherwise required by state law, the Loan Value for this Policy is 90%
of Cash Value at the end of the Valuation Period during which the loan request
is received. The maximum amount You can borrow at any time is the Loan Value
reduced by any outstanding Policy Debt.
We will usually disburse loan proceeds within seven days from the Date of
Receipt of a loan request, although we reserve the right to postpone payments
under certain circumstances. See "OTHER MATTERS--Postponement of Payments". We
may, in our sole discretion, allow You to make loans by telephone if You have
filed a proper telephone authorization form with Us. So long as your Policy is
in force and an Insured is living, You may repay your loan in whole or in part
at any time without penalty.
Accumulation Value equal to the loan amount will be maintained in the General
Account to secure the loan. You may allocate a policy loan among the Divisions
of the Separate Account and the existing General Account value that is not
already allocated to secure a Policy Loan, and We will transfer Separate
Account Value as You have indicated. If you do not make this allocation, the
loan will be allocated among the Divisions and the General Account in the same
proportion that the Accumulation Value in each Division and the Accumulation
Value in the General Account less Policy Debt bears to the total Accumulation
Value of the Policy, less Policy Debt, on the date of the loan. We will make a
similar allocation for unpaid loan interest due. A policy loan removes
Accumulation Value from the investment experience of the Separate Account,
which will have a permanent effect on the Accumulation Value and Death Benefit
even if the loan is repaid. General Account Value equal to Policy Debt will
accrue interest daily at an annual rate of 4%.
We will charge interest on any outstanding Policy Debt with the interest
compounded annually. There are two types of loans available. A Type A loan is
charged the same interest rate as the interest credited to the amount of the
Accumulation Value held in the General Account to secure loans, which is an
effective annual rate of 4%. The amount available at any time for a Type A
loan is the maximum loan amount, less the Guideline Single Premium at issue,
as set forth in the Code, less any outstanding Type A loans. Any other loans
are Type B loans. A Type B loan is charged an effective annual interest rate
of 6%. One loan request can result in both a Type A and a Type B loan. A loan
request will first be granted as a Type A loan, to the extent available, and
then as a Type B loan. Once a loan is granted, it remains a Type A or Type B
loan until it is repaid. Interest is due and payable at the end of each Policy
Year and any unpaid interest due becomes loan principal.
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If Policy Debt exceeds Cash Value, We will notify You and any assignee of
record. You must make a payment within 61 days from the date Policy Debt
exceeds Cash Value or the Policy will lapse and terminate without value (See
"Grace Period"). If this happens, You may be taxed on the total appreciation
under the Policy. However, You may reinstate the Policy, subject to proof of
insurability and payment of a reinstatement premium. See "Reinstatement of a
Lapsed Policy".
You may repay the Policy Debt, in whole or in part, at any time during either
Insured's life, so long as the Policy is in force. The amount necessary to
repay all Policy Debt in full will include any accrued interest. If there is
any Policy Debt, We will apply payments received from you as follows: We will
apply payments as premium in the amount of the Planned Periodic Premium,
received at the Premium Frequency, unless You specifically designate the
payment as a loan repayment. We will apply payments in excess of the Planned
Periodic Premium or payments received other than at the Premium Frequency,
first as policy loan repayments, then as premium when you have repaid the
Policy Debt. If You have both a Type A and a Type B loan, we will apply
repayments first to the Type B loan and then to the Type A loan. Upon
repayment of all or part of the Policy Debt, We will transfer the Policy's
Accumulation Value securing the repaid portion of the debt in the General
Account to the Divisions and the General Account in the same proportion in
which the loan was taken.
An outstanding loan amount will decrease the Surrender Value available under
the Policy. For example, if a Policy has a Surrender Value of $10,000, You may
take a loan of 90% or $9,000, leaving a new Surrender Value of $1,000. If a
loan is not repaid, the decrease in the Surrender Value could cause the Policy
to lapse. In addition, the Death Benefit will be decreased because of an
outstanding Policy Loan. Furthermore, even if You repay the loan, the amount
of the Death Benefit and the Policy's Surrender Value may be permanently
affected since the Loan Value is not credited with the investment experience
of the Funds.
POLICY CHANGES
You may make changes to Your Policy, as described below, by submitting a
Written Request to Our Home Office. Supplemental Policy Specification pages
and/or a notice confirming the change will be sent to You once the change is
completed.
DECREASE IN SPECIFIED AMOUNT
You may decrease the Specified Amount of this Policy after the 1st Policy
Year by sending a written request and the Policy to Our home office. However:
. Any decrease must be at least $25,000
. Any decrease will affect Your cost of insurance charge
. Any decrease may affect the monthly Accumulation Value Adjustment but
will not affect the amount available for a Type A loan
. Any decrease will be effective on the Monthly Anniversary Date after the
Date of Receipt of the request
. A pro rata Surrender Charge will be assessed
. Any decrease may result in federal tax implications (See "Federal Tax
Matters")
. No decrease may decrease the Specified Amount below $100,000.
CHANGE IN DEATH BENEFIT OPTION
Any change in the Death Benefit Option is subject to the following
conditions:
. The change will take effect on the Monthly Deduction Day on or next
following the date on which Your Written Request is received.
. There will be no change in the Surrender Charge.
. Evidence of insurability may be required.
. Changes from Option 1 to 2 will be allowed at any time while this Policy
is in force, subject to evidence of insurability satisfactory to Us. The
Specified Amount will be reduced to equal the Specified Amount less the
Accumulation Value at the time of the change.
. If the change decreases the Specified Amount below the minimum of
$100,000, We will increase the Specified Amount to $100,000.
. Changes from Option 2 to 1 will be allowed at any time while this Policy
is in force. The new Specified Amount will be increased to equal the
Specified Amount plus the Accumulation Value as of the date of the
change. (See Surrender Charge and Right of Policy Examination)
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RIGHT OF POLICY EXAMINATION ("FREE LOOK PERIOD")
The Policy has a free look period during which You may examine the Policy. If
for any reason You are dissatisfied, You may return the Policy to Us at Our
Home Office or to Our representative within 10 days of delivery of the Policy
to You (or within a different period if required by State law). Return the
Policy to Jefferson Pilot Financial Insurance Company at One Granite Place,
Concord, New Hampshire 03301. Upon its return, the Policy will be deemed void
from its beginning. We will return to You within seven days all payments We
received on the Policy. Prior to the Allocation Date, We will hold the initial
Net Premium, and any other premiums we receive, in Our General Account. We
will retain any interest earned if the Free Look right is exercised, unless
otherwise required by State law.
SUPPLEMENTAL BENEFITS
The supplemental benefits currently available as riders to the Policy include
the following:
. Guaranteed Death Benefit Rider--guarantees that the Policy will stay in
force during the guarantee period specified in the rider with a Death
Benefit equal to the Specified Amount, subject to the terms of the
rider.
. Automatic Increase Rider--allows for scheduled annual increases in
Specified Amount, subject to the terms of the rider.
. Policy Split Option Rider--allows You, upon election, to exchange the
Policy for two individual policies one on each Insured named in the
Policy, subject to the terms of the rider.
. Estate Protection Rider--provides for an increase in Specified Amount in
Policy Years 1 through 4, subject to the terms of the rider.
These riders may not be available in all states.
Other riders for supplemental benefits may become available under the Policy
from time to time. The charges for each of these riders are described in Your
Policy.
DEATH BENEFIT
The Death Benefit under the Policy will be paid in a lump sum unless You or
the beneficiary have elected that they be paid under one or more of the
available Settlement Options.
Payment of the Death Benefit may be delayed if the Policy is being contested.
You may elect a Settlement Option for the beneficiary and deem it irrevocable.
You may revoke or change a prior election. The beneficiary may make or change
an election within 90 days of the Second Death, unless You have made an
irrevocable election.
All or part of the Death Benefit may be applied under one of the Settlement
Options, or such options as We may choose to make available in the future.
If the Policy is assigned as collateral security, We will pay any amount due
the assignee in a lump sum. Any excess Death Benefit due will be paid as
elected.
(See "Right to Defer Payment" and "Policy Settlement")
POLICY SETTLEMENT
We will pay proceeds in whole or in part in the form of a lump sum or the
Settlement Options available under the Policy upon the death of the Surviving
Insured or upon Surrender or upon maturity.
A Written Request may be made to elect, change or revoke a Settlement Option
before payments begin under any Settlement Option. This request will take
effect upon its filing at our Home Office. If no Settlement Option has been
elected by You when the Death Benefit becomes payable to the beneficiary, that
beneficiary may make the election.
SETTLEMENT OPTIONS
The following Settlement Options are available under the Policy:
Option A--Installments of a specified amount. Payments of an agreed amount to
be made monthly until the proceeds and interest are exhausted.
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Option B--Installments for a specified period. Payments to be made monthly
for an agreed number of years.
Option C--Life Income. Payments to be made each month for the lifetime of the
payee. We guarantee that payments will be made for a minimum of 10, 15 or 20
years, as agreed upon.
Option D--Interest. We will pay interest on the proceeds We hold, calculated
at the compound rate of 3% per year. We will make interest payments at 12, 6,
3 or 1 month intervals.
Option E--Interest: Performance Plus Account. We will pay interest on the
proceeds We hold, based on current money market interest rates. The payee can
write checks against such account at any time and in any amount up to the
total in the account. The checks must be for a minimum of $250.
The interest rate for Options A, B, D and E will not be less than 3% per
year. The interest rate for Option C will not be less than 2.5% per year.
Unless otherwise stated in the election of any option, the payee of the
policy benefits shall have the right to receive the withdrawal value under
that option. For Options A, D and E, the withdrawal value shall be any unpaid
balance of proceeds plus accrued interest. For Option B, the withdrawal value
shall be the commuted value of the remaining payments. We will calculate this
withdrawal value on the same basis as the original payments. For Option C, the
withdrawal value will be the commuted value of any remaining guaranteed
payments. If the payee is alive at the end of the guarantee period, We will
resume the payment on that date. The payment will then continue for the
lifetime of the payee.
If the payee of policy benefits dies before the proceeds are exhausted or the
prescribed payments made, a final payment will be made in one sum to the
estate of the last surviving payee. The amount to be paid will be calculated
as described for the applicable option in the Withdrawal Value provision of
the Policy.
At least $25,000 of Policy proceeds must be applied to each settlement option
chosen. We reserve the right to change payment intervals to increase payments
to $250 each.
CALCULATION OF SETTLEMENT OPTION VALUES
The value of the Settlement Options will be calculated as set forth in the
Policy.
THE COMPANY
Jefferson Pilot Financial Insurance Company ("JP Financial" or "the Company")
is a stock life insurance company chartered in 1903 in Tennessee. Prior to May
1, 1998, JP Financial was known as Chubb Life Insurance Company of America. In
1991 Chubb Life redomesticated from the State of Tennessee to the State of New
Hampshire and is now a New Hampshire life insurance company. Effective April
30, 1997, Chubb Life, formerly a wholly-owned subsidiary of The Chubb
Corporation, became a wholly-owned subsidiary of Jefferson-Pilot Corporation,
a North Carolina corporation. The principal offices of Jefferson-Pilot
Corporation are located at 100 North Greene Street, Greensboro, North Carolina
27401; its telephone number is 336-691-3000. Chubb Life changed its name to
Jefferson Pilot Financial Insurance Company effective May 1, 1998. JP
Financial's home office and service center are located at One Granite Place,
Concord, New Hampshire 03301; its telephone number is 800-258-3648.
The Company is licensed to do life insurance business in forty-nine states of
the United States, Puerto Rico, the U.S. Virgin Islands, Guam and in the
District of Columbia.
At December 31, 1997 the Company and its subsidiaries had total assets of
$4,919,934,000 and had over $64 billion of insurance in force, while total
assets of Jefferson-Pilot Corporation and its subsidiaries (including the
Company) were approximately $23 billion.
The Company writes individual life insurance and annuities. It is subject to
New Hampshire law governing insurance.
The Company is currently rated AAA (Superior) by Duff & Phelps, AAA
(Superior) by Standard & Poor's Corporation and A+ (Superior) by A.M. Best and
Company. These ratings do not apply to JPF Separate Account C, but reflect the
opinion of the rating companies as to the Company's relative financial
strength and ability to meet its contractual obligations to its policyowners.
23
<PAGE>
DIRECTORS AND OFFICERS
MANAGEMENT OF JP FINANCIAL
Executive Officers and Directors of JP Financial
DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS ADDRESS
- ---- ------------------------
<S> <C>
Dennis R. Glass......... Senior Vice President, Chief Financial Officer and Treasurer
Jefferson-Pilot Corporation
(also serves as Executive Vice President, Chief Financial Officer
and Treasurer of Jefferson-Pilot Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
Kenneth C. Mlekush...... Senior Vice President
(also serves as President of Jefferson-Pilot
Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
David A. Stonecipher.... President, Chairman and Chief Executive Officer
(also serves as Chief Executive Officer of
Jefferson-Pilot Life Insurance Company)
100 North Greene Street
Greensboro, North Carolina 27401
E. Jay Yelton........... Executive Vice President
Jefferson-Pilot Life Insurance Company
100 North Greene Street
Greensboro, North Carolina 27401
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Charles C. Cornelio..... Executive Vice President
Reggie D. Adamson....... Senior Vice President
Ronald R. Angarella..... Senior Vice President
John C. Ingram.......... Senior Vice President
Hal B. Phillips, Jr. ... Senior Vice President
Paul J. Strong.......... Senior Vice President
John W. Wells........... Senior Vice President
James R. Abernathy...... Vice President
Thomas M. Bodrogi....... Vice President
Margaret O. Cain........ Vice President
Rebecca M. Clark........ Vice President
Kenneth S. Dwyer........ Vice President
Ronald H. Emery......... Vice President
Donald M. Kane.......... Vice President
Patrick A. Lang......... Vice President
Shari J. Lease.......... Vice President
Donna L. Metcalf........ Vice President
Thomas E. Murphy, Jr.
M.D. .................. Vice President and Medical Director
Robert A. Reed.......... Vice President
Kenneth L. Robinson,
Jr. ................... Vice President
James M. Sandelli....... Vice President
Russell C. Simpson...... Vice President and Treasurer
William A. Spencer...... Vice President
John A. Thomas.......... Vice President
</TABLE>
The officers and employees of JP Financial who have access to the assets of
Separate Account C are covered by a fidelity bond issued by Aetna Casualty and
Surety Company in the amount of $35,000,000.
24
<PAGE>
ADDITIONAL INFORMATION
REPORTS TO POLICYOWNERS
We will maintain all records relating to the Separate Account. At least once
in each Policy Year, We will send You an Annual Summary containing the
following information:
1. A statement of the current Accumulation Value and Cash Value since the
prior report or since the Issue Date, if there has been no prior report;
2. A statement of all premiums paid and all charges incurred;
3. The balance of outstanding Policy Loans for the previous calendar
year;
4. Any reports required by the 1940 Act.
We will promptly mail confirmation notices at the time of the following
transactions:
1. policy issue;
2. receipt of premium payments;
3. initial allocation among Divisions on the Allocation Date;
4. transfers among Divisions;
5. change of premium allocation;
6. change between Death Benefit Option 1 and Option 2;
7. decreases in Specified Amount;
8. withdrawals, surrenders or loans;
9. receipt of loan repayments;
10. reinstatements; and
11. redemptions due to insufficient funds.
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with our view of present applicable law, We will vote the
shares of the Funds held in the Separate Account in accordance with
instructions received from Policyowners having a voting interest in the Funds.
Policyowners having such an interest will receive periodic reports relating to
the Fund, proxy material and a form for giving voting instructions. The number
of shares You have a right to vote will be determined as of a record date
established by the Fund. The number of votes that You are entitled to direct
with respect to a Fund will be determined by dividing Your Policy's
Accumulation Value in a Division by the net asset value per share of the
corresponding Portfolio in which the Division invests. We will solicit Your
voting instructions by mail at least 14 days before any shareholders meeting.
We will cast the votes at meetings of the shareholders of the Fund and will
be based on instructions received from Policyowners. However, if the
Investment Company Act of 1940 or any regulations thereunder should be amended
or if the present interpretation should change, and as a result We determine
that We are permitted to vote the shares of the Fund in our right, We may
elect to do so.
We will vote Fund shares for which We do not receive timely instructions and
Fund shares which are not otherwise attributable to Policyowners in the same
proportion as the voting instruction which We receive for all Policies
participating in each Fund through the Separate Account.
DISREGARD OF VOTING INSTRUCTIONS
When required by state insurance regulatory authorities, We may disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the sub-classification or investment objectives of a Fund
or to approve or disapprove an investment advisory contract for a Fund. We may
also disregard voting instructions initiated by a Policyowner in favor of
changes in the investment policy or the investment adviser of the Fund if We
reasonably disapprove of such changes.
We only disapprove a change if the proposed change is contrary to state law
or prohibited by state regulatory authorities or if We determine that the
change would have an adverse effect on the Separate Account if the proposed
investment policy for a fund would result in overly speculative or unsound
investments. In the event that We do disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
annual report to Policyowners.
25
<PAGE>
STATE REGULATION
The Policy will be offered for sale in all jurisdictions where the Company is
authorized to do business and where the Policy has been approved by the
appropriate Insurance Department or regulatory authorities.
LEGAL MATTERS
We know of no pending material legal proceedings pending to which either the
Separate Account or the Company is a party or which would materially affect
the Separate Account. The legal validity of the securities described in the
prospectus has been passed on by Our Counsel. The law firm of Jorden Burt
Boros Cicchetti Berenson & Johnson, 1025 Thomas Jefferson Street, Suite 400,
East Lobby, Washington, DC 20007-5201, serve as Our Special Counsel with
regard to the federal securities laws.
THE REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of 1933
relating to the offering described in this Prospectus. This Prospectus does
not include all of the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to SEC rules and
regulations. You should refer to the instrument as filed to obtain any omitted
information.
FINANCIAL STATEMENTS
Our financial statements which are included in the Prospectus should be
considered only as bearing on Our ability to meet Our obligations under the
Policy. They should not be considered as bearing on the investment experience
of the assets held in the Separate Account. Our most current audited financial
statements are those as of the end of the most recent fiscal year. There has
been no material adverse change in Our financial position since the dates of
the audited financial statements.
EMPLOYMENT BENEFIT PLANS
Employers and employee organizations should consider, in connection with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of policy in connection with an employment-related insurance or
benefit plan. The U.S. Supreme Court held, in a 1983 decision, that, under
Title VII, optional annuity benefits under a deferred compensation plan could
not vary on the basis of sex.
DISTRIBUTION OF THE POLICY
Jefferson Pilot Variable Corporation (JPVC), a North Carolina Corporation
incorporated on January 13, 1970, will serve as principal underwriter of the
securities offered under the Policy as defined by the federal securities laws.
The Policy will be sold by individuals who, in addition to being licensed as
life insurance agents for Us, are also registered representatives of broker-
dealers who have entered into written sales agreements with JPVC. Any such
broker-dealers will be registered with the SEC and will be members of the
National Association of Securities Dealers, Inc. We may also offer and sell
policies directly.
We will pay commissions under various schedules and accordingly commissions
will vary with the form of schedule selected. In any event, commissions to
registered representatives are not expected to exceed 85% of first year target
premium and 5% of first year excess premium, and 5% of target premium for the
second through fifteenth policy years for both renewals and excess premium.
Compensation arrangements vary among broker-dealers. Override payments,
expense allowances and bonuses based on specific production levels may be
paid. Alternative Commission Schedules will reflect differences in up-front
commissions versus ongoing compensation. Except as previously described in
this prospectus, no separate deductions from premiums are made to pay sales
commissions or sales expenses.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts, are the
independent auditors for the Separate Account and Ernst & Young LLP, 100 North
Greene Street, Greensboro, North Carolina, are the independent auditors for
the Company. The services provided to the Separate Account include primarily
the audits of the Separate Account's financial statements.
26
<PAGE>
YEAR 2000
Certain computer programs have been written using two digits rather than four
to define the applicable year. As a result, any computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000 (the "Year 2000 Matter"). This could result in a
system failure which may disrupt operations, including an inability to
accurately process or calculate new or in-force business.
Our parent company, Jefferson-Pilot Corporation ("JP Corporation"), has
completed an assessment and has determined that it will have to modify or
replace portions of the software and hardware utilized by JP Corporation's
affiliates, including Us, so that the computer systems will function properly
with respect to dates in the year 2000 and thereafter.
JP Corporation will utilize both internal and external resources to
reprogram, replace, convert and test software and hardware for any necessary
Year 2000 modifications. The project is estimated to be completed no later
than the third quarter of 1999. JP Corporation believes that with
modifications to its existing software and hardware and conversions to new
software, the Year 2000 matter will not post significant operational problems
for its computer systems. However, if such modifications and conversions are
not made, or are not completed on a timely basis, the Year 2000 Matter could
have a material impact on Our operations.
JP Corporation has initiated formal communications with all of its
significant suppliers to determine the extent to which Our systems, policies,
procedures and contracts are vulnerable to those third parties' failure to
remedy their own Year 2000 issues. There is no guarantee that the systems of
other companies on which We rely will be in compliance on a timely basis, nor
is there any guarantee that non-compliance would not have an adverse effect on
Our systems and business.
The costs of the project and the date on which JP Corporation believes it
will be compliant are based on management's best estimates which were derived
using various assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved.
JP Corporation has not yet allocated the costs of compliance among its
subsidiaries, including Us. To the best of JP Corporation's and Our knowledge,
it is currently anticipated that any future allocation is unlikely to have a
material financial impact on Us.
GROUP OR SPONSORED ARRANGEMENTS
Policies may be purchased under group or sponsored arrangements. A group
arrangement includes a program under which a trustee, employer or similar
entity purchases individual Policies covering a group of individuals on a
group basis. A sponsored arrangement includes a program under which an
employer permits group solicitation of its employees or an association permits
group solicitation of its members for the purchase of Policies on an
individual basis.
We may reduce the following types of charges for Policies issued in
connection with group or sponsored arrangement: the cost of insurance charge,
surrender or withdrawal charges, administrative charges, charges for
withdrawal or transfer and charges for optional rider benefits. We may also
issue Policies in connection with group or sponsored arrangements on a "non-
medical" or guaranteed issue basis; actual monthly cost of insurance charges
may be higher than the current cost of insurance charges under otherwise
identical Policies that are medically underwritten. We may also specify
different minimum Specified Amounts at issue for Policies issued in connection
with group or sponsored arrangements.
We may also reduce or eliminate certain charges or underwriting requirements
for Policies issued in connection with an exchange of another JP Financial
policy or a policy of any JP Financial affiliate.
The amounts of any reduction, the charges to be reduced, the elimination or
modification of underwriting requirements and the criteria for applying a
reduction or modification will generally reflect the reduced sales and
administrative effort, costs and differing mortality experience appropriate to
the circumstances giving rise to the reduction or modification. Reductions and
modifications will not be made where prohibited by law and will not be
unfairly discriminatory.
27
<PAGE>
TAX MATTERS
GENERAL
Following is a discussion of the federal income tax considerations relating
to the Policy. This discussion is based on Our understanding of federal income
tax laws as they now exist and are currently interpreted by the Internal
Revenue Service. These laws are complex and tax results may vary among
individuals. Anyone contemplating the purchase of or the exercise of elections
under the Policy should seek competent tax advice.
FEDERAL TAX STATUS OF THE COMPANY
We are taxed as a life insurance company in accordance with the Internal
Revenue Code of 1986 as amended ("Code"). For federal income tax purposes, the
operations of each Separate Account form a part of the Company's total
operations and are not taxed separately, although operations of each Separate
Account are treated separately for accounting and financial statement
purposes.
Both investment income and realized capital gains of the Separate Account are
reinvested without tax since the Code does not impose a tax on the Separate
Account for these amounts. However, we reserve the right to make a deduction
for such tax should it be imposed in the future.
LIFE INSURANCE QUALIFICATION
The Policy contains provisions not found in traditional life insurance
policies. Moreover, the Code does not directly address how it applies to
survivorship policies. In the absence of final regulations or other guidance
under the Code regarding this form of Contract, there is necessarily some
uncertainty as to whether a survivorship policy will meet the code's
definition of life insurance contract. However, we believe that it should
qualify under the Code as a life insurance contract for federal income tax
purposes, with the result that all Death Benefits paid under the Policy will
generally be excludable from the gross income of the Policy's Beneficiary.
Section 7702 of the Code includes a definition of life insurance for tax
purposes. The definition provides limitations on the relationship between the
death benefit and the account value. If necessary, we will increase your death
benefit to maintain compliance with Section 7702.
The Policy is intended to qualify as life insurance under the Code. The Death
Benefit provided by the Policy is intended to qualify for the federal income
tax exclusion. If at any time the premium paid under the Policy exceeds the
amount allowable for such qualification, We will notify You in writing within
60 days and you may request a refund of the excess premium. If We do not
receive Your request to refund the excess premium, such amount will be held in
a separate deposit fund and will be credited with the current interest rate.
You may also choose to have the Policy become a modified endowment contract.
A modified endowment contract is a life insurance policy which fails to meet
a "seven-pay" test. In general, a policy will fail the seven-pay test if the
cumulative amount of premiums paid under the policy at any time during the
first seven policy years exceeds a calculated premium level. The calculated
seven-pay premium level is based on a hypothetical policy issued on the same
insured persons and for the same initial death benefit which, under specified
conditions (which include the absence of expense and administrative charges),
would be fully paid for after seven years. Your policy will be treated as a
modified endowment unless the cumulative premiums paid under Your policy, at
all times during the first seven policy years, are less than or equal to the
cumulative seven-pay premiums which would have been paid under the
hypothetical policy on or before such times.
Whenever there is a "material change" under a Policy, it will generally be
treated as a new contract for purposes of determining whether the Policy is a
modified endowment contract, and subject to a new seven-pay premium period and
a new seven-pay limit. The new seven-pay limit would be determined taking into
account, under a prospective adjustment formula, the Policy Account Value of
the policy at the time of such change. A materially changed Policy would be
considered a modified endowment if it failed to satisfy the new seven-pay
limit. A material change could occur as a result of a change in death benefit
option, the selection of additional benefits, the restoration of a terminated
policy and certain other changes.
If the benefits under your Policy are reduced, for example, by requesting a
decrease in Face Amount, or in some cases by making partial withdrawals,
terminating additional benefits under a rider, changing the death benefit
option, or as a result of
28
<PAGE>
policy termination, the calculated seven-pay premium level will be
redetermined based on the reduced level of benefits and applied retroactively
for purposes of the seven-pay test. If the premiums previously paid are
greater than the recalculated seven-pay premium level limit, the policy will
become a modified endowment unless You request a refund of the excess premium,
as outlined above. Generally, a life insurance policy which is received in
exchange for a modified endowment or a modified endowment which terminates and
is restored, will also be considered a modified endowment.
If a Policy is deemed to be a modified endowment contract, any distribution
from the Policy will be taxed in a manner comparable to distributions from
annuities (i.e., on an "income first") basis; distributions for this purpose
include a loan, pledge, assignment or partial withdrawal. Any such
distributions will be considered taxable income to the extent Accumulation
Value under the Policy exceeds investment in the Policy.
A 10% penalty tax will apply to the taxable portion of such a distribution.
No penalty will apply to distributions (i) to taxpayers 59 1/2 years of age or
older, (ii) in the case of a disability which can be expected to result in
death or to be of indefinite duration or (iii) received as part of a series of
substantially equal periodic annuity payment for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his beneficiary.
To the extent a Policy becomes a modified endowment contract, any
distribution, as defined above, which occurs in the policy year it becomes a
modified endowment contract and in any year thereafter, will be taxable income
to You. Also, any distributions within two years before a Policy becomes a
modified endowment contract will also be income taxable to You to the extent
that accumulation value exceeds investment in the Policy, as described above.
The Secretary of the Treasury has been authorized to prescribe rules which
would similarly treat other distributions made in anticipation of a policy
becoming a modified endowment contract. For purposes of determining the amount
of any distribution includible in income, all modified endowment contract
policies that fail the above-described tests which are issued by the same
insurer, or its affiliates, to the same policyowner during any calendar year
are treated as one contract. The Secretary of the Treasury is also authorized
to issue regulations in this connection.
In addition to the distribution rules for modified endowment contracts, the
Code and proposed regulations thereunder require that reasonable mortality and
other charges be used in satisfying the definition of life insurance. The
death benefit under a policy which meets this definition will continue to be
excluded from the beneficiary's gross income. We believe that the Policies
meet this definition. As long as a policy does not violate the tests described
above, it will not fail to meet the tests of the Code and the general tax
provisions described herein still apply.
The foregoing summary does not purport to be complete or to cover all
situations, and, as always, there is some degree of uncertainty with respect
to the application of the current tax laws. In addition to the provisions
discussed above, the United States Congress may consider other legislation
which, if enacted, could adversely affect the tax treatment of life insurance
policies. Also, the Treasury Department may amend current regulations or adopt
new regulations with respect to this and other Code provisions. Therefore, You
are advised to consult a tax adviser or attorney for more complete tax
information, specifically regarding the applicability of the Code provisions
to Your situation.
Under normal circumstances, if the Policy is not a modified endowment
contract, loans received under the Policy will be construed as Your
indebtedness. You are advised to consult a tax adviser or attorney regarding
the deduction of interest paid on loans.
Even if the Policy is not a modified endowment contract, a partial withdrawal
together with a reduction in death benefits during the first 15 Policy Years
may create taxable income for You. The amount of that taxable income is
determined under a complex formula and it may be equal to part or all of, but
not greater than, the income on the contract. A partial withdrawal made after
the first 15 Policy Years will be taxed on a recovery of premium-first basis,
and will only be subject to federal income tax to the extent such proceeds
exceed the total amount of premiums You have paid that have not been
previously withdrawn.
If You make a partial withdrawal, surrender, loan or exchange of the Policy,
We may be required to withhold federal income tax from the portion of the
money You receive that is includible in Your federal gross income. A
Policyowner who is not a corporation may elect not to have such tax withheld;
however, such election must be made before We make the payment. In addition,
if You fail to provide us with a correct taxpayer identification number
(usually a social security number) or if the Treasury notifies Us that the
taxpayer identification number which has been provided is not correct, the
election not to have such taxes withheld will not be effective. In any case,
You are liable for payment of the federal income tax on the taxable portion of
money received, whether or not an election to have federal income tax withheld
is made. If You elect not to have federal income tax withheld, or if the
amount withheld is insufficient, then You may be responsible
29
<PAGE>
for payment of estimated tax. You may also incur penalties under the estimated
tax rules if the withholding and estimated tax payments are insufficient. We
suggest that You consult with a tax adviser or attorney as to the tax
implications of these matters.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, tax consequences
of ownership or receipt of proceeds under the Policy could differ from those
stated herein. However, if ownership of such a Policy is transferred from the
plan to a plan participant (upon termination of employment, for example), the
Policy will be subject to all of the federal tax rules described above. A
Policy owned by a trustee under such a plan may be subject to restrictions
under ERISA and a tax adviser should be consulted regarding any applicable
ERISA requirements.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans and others, where the tax consequences may vary
depending on the particular facts and circumstances of each individual
arrangement. A tax adviser should be consulted regarding the tax attributes of
any particular arrangement where the value of it depends in part on its tax
consequences.
Federal estate and local estate, inheritance and other tax consequences of
ownership or receipt of policy proceeds depend upon the circumstances of each
Policyowner and Beneficiary. If the Policyowner is the last surviving Insured,
the Death Benefit proceeds will generally be includible in the Policyowner's
estate on his or her death for purposes of the federal estate tax. If the
Policyowner dies and was not the last surviving Insured, the fair market value
of the Policy may be included in the Policyowner's estate. In general, Death
Benefit proceeds are not included in the last surviving Insured's estate if he
or she neither retained incidents of ownership at death nor had given up
ownership within three years before death.
Current Treasury regulations set standards for diversificaiton of the
investments underlying variable life insurance policies in order for such
policies to be treated as life insurance. We believe We presently are and
intend to remain in compliance with the diversification requirements as set
forth in the regulations. If the diversification requirements are not
satisfied, the Policy would not be treated as a life insurance contract. As a
consequence to You, income earned on a Policy would be taxable to You in the
calendar quarter in which the diversification requirements were not satisfied,
and for all subsequent calendar quarters.
The Secretary of the Treasury may issue a regulation or a ruling which will
prescribe the circumstances in which a Policyowner's control of the
investments of a segregated account may cause the Policyowner, rather than the
insurance company, to be treated as the owner of the assets of the account.
The regulation or ruling could impose requirements that are not reflected in
the Policy, relating, for example, to such elements of Policyowner control as
premium allocation, investment selection, transfer privileges and investment
in a division focusing on a particular investment sector. Failure to comply
with any such regulation or ruling presumably would cause earnings on a
Policyowner's interest in Separate Account C to be includible in the
Policyowner's gross income in the year earned. However, We have reserved
certain rights to alter the Policy and investment alternatives so as to comply
with such regulation or ruling. We believe that any such regulation or ruling
would apply prospectively. Since the regulation or ruling has not been issued,
there can be no assurance as to the content of such regulation or ruling or
even whether application of the regulation or ruling will be prospective. For
these reasons, Policyowners are urged to consult with their own tax advisers.
The foregoing summary does not purport to be complete or to cover all
situations, including the possible tax consequences of changes in ownership.
Counsel and other competent advisers should be consulted for more complete
information.
CHARGES FOR JP FINANCIAL INCOME TAXES
We are presently taxed as a life insurance company under the provisions of
the Code. The Code specifically provides for adjustments in reserves for
variable policies, and We will include flexible premium life insurance
operations in our tax return in accordance with these rules.
Currently no charge is made against the Separate Account for Our federal
income taxes, or provisions for such taxes, that may be attributable to the
Separate Account. We may charge each Division for its portion of any income
tax charged to Us on the Division or its assets. Under present laws, We may
incur state and local taxes (in addition to premium taxes) in several states.
At present these taxes are not significant. However, if they increase, We may
decide to make charges for such taxes or provisions for such taxes against the
Separate Account. We would retain any investment earnings on any tax charges
accumulated in a Division. Any such charges against the Separate Account or
its Divisions could have an adverse effect on the investment experience of
such Division.
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MISCELLANEOUS POLICY PROVISIONS
THE POLICY
The Policy which You receive, the application You make when You purchase the
Policy, any applications for any changes approved by Us and any riders
constitute the whole contract. Copies of all applications are attached to and
made a part of the Policy.
Application forms are completed by the applicants and forwarded to Us for
acceptance. Upon acceptance, the Policy is prepared, executed by duly
authorized officers of the Company and forwarded to You.
We reserve the right to make a change in the Policy; however, we will not
change any terms of the Policy beneficial to You.
PAYMENT OF BENEFITS
All benefits are payable at Our Home Office. We may require submission of the
Policy before We grant Policy Loans, make changes or pay benefits.
SUICIDE AND INCONTESTABILITY
Suicide Exclusion--In most states, if one or both Insureds die by suicide,
while sane or insane, within 2 years from the Issue Date of this Policy, this
Policy will end and We will refund premiums paid, without interest, less any
Policy Debt and less any withdrawal.
Incontestability--We will not contest or revoke the insurance coverage
provided under the Policy after the Policy has been in force during the
lifetime of each Insured for two years from the date of issue or
reinstatement.
PROTECTION OF PROCEEDS
To the extent provided by law, the proceeds of the Policy are not subject to
claims by a Beneficiary's creditors or to any legal process against any
Beneficiary.
NONPARTICIPATION
The Policy is not entitled to share in the divisible surplus of the Company.
No dividends are payable.
CHANGES IN OWNER AND BENEFICIARY; ASSIGNMENT
Unless otherwise stated in the Policy, You may change the Policyowner and the
Beneficiary, or both, at any time while the Policy is in force. A request for
such change must be made in writing and sent to Us at Our Home Office. After
We have agreed, in writing, to the change, it will take effect as of the date
on which Your Written Request was signed.
The Policy may also be assigned. No assignment of Policy will be binding on
Us unless made in writing and sent to Us at Our Home Office. We will use
reasonable procedures to confirm that the assignment is authentic. Otherwise,
we are not responsible for the validity of any assignment. Your rights and the
Beneficiary's interest will be subject to the rights of any assignee of
record.
MISSTATEMENTS
If the age or sex of either Insured has been misstated in an application,
including a reinstatement application, We will adjust the benefits payable to
reflect the correct age or sex.
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APPENDIX C
ILLUSTRATIONS OF ACCUMULATION VALUES CASH VALUES AND DEATH BENEFITS
Following are a series of tables that illustrate how the Accumulation
Values, Cash Values and Death Benefits of a Policy change with the investment
performance of the Portfolios. The tables show how the Accumulation Values,
Cash Values and Death Benefits of a Policy issued to Insureds of a given age
and given premium would vary over time if the return on the assets held in
each Portfolio of the Funds were a constant gross annual rate of 0%, 6%, and
12%. The tables on pages A-2 through A-7 illustrate a Survivorship Policy
issued to a male, age 55, under a standard rate non-smoker underwriting risk
classification and a female, age 50, under a standard rate non-smoker
underwriting risk classification. The Accumulation Values, Cash Values and
Death Benefits would be different from those shown if the returns averaged 0%,
6%, and 12% over a period of years, but fluctuated above and below those
averages for individual policy years.
The amount of the Accumulation Value exceeds the Cash Value during the first
nine policy years due to the Surrender Charge. For policy years ten and after,
the Accumulation Value and Cash Value are equal, since the Surrender Charge
has been reduced to zero.
The second column shows the Accumulation Value of the premiums paid at the
stated interest rate. The third and sixth columns illustrate the Accumulation
Values and the fourth and seventh columns illustrate the Cash Values of the
Policy over the designated period. The Accumulation Values shown in the third
column and the Cash Values shown in the fourth column assume the monthly
charge for cost of insurance is based upon the current cost of insurance rates
and assume a monthly accumulation value adjustment. The current cost of
insurance rates, which may be modified at any time, are based on the sex,
issue ages, policy year, and rating class of the Insured(s). The Accumulation
Values shown in the sixth column and the Cash Values shown in the seventh
column assume the monthly charge for cost of insurance is based upon the
maximum cost of insurance rates allowable, which are based on the
Commissioner's 1980 Standard Ordinary Mortality Table Male and Female. The
fifth and eighth columns illustrate the death benefit of a Policy over the
designated period. The illustrations of Death Benefits reflect the same
assumptions as the Accumulation Values and Cash Values. The Death Benefit
values also vary between tables, depending upon whether Option I or Option II
death benefits are illustrated.
The amounts shown for the Death Benefit, Accumulation Values, and Cash
Values reflect the fact that the net investment return of the Divisions of
Separate Account C is lower than the gross rates of return on the assets in
the Portfolios, as a result of expenses paid by the Portfolios and charges
levied against the Divisions of Separate Account C.
The policy values shown take into account a daily investment advisory fee
equivalent to the maximum annual rate of .70% of the aggregate average daily
net assets of the Portfolios plus an assumed charge of .14% of the aggregate
average daily net assets to cover expenses incurred by the Portfolios for the
twelve months ended December 31, 1997. The .70% investment advisory fee is an
average of the individual investment advisory fees of the twenty Portfolios.
The .14% expense figure is based on a weighted average utilizing average net
assets for the Jefferson Pilot Variable Fund Portfolios, the Templeton
International Fund, the Fidelity VIP and VIP II Portfolios, the Oppenheimer
Portfolios and the MFS Portfolios. Expenses for the Templeton International
Fund: Class 2, the Fidelity Equity Income, Growth, Contrafund and Index 500
Portfolios, the MFS Research and Utilities Series, and the Oppenheimer Bond
and Strategic Bond Portfolios were provided by the investment managers for
these portfolios and JP Financial has not independently verified such
information. The policy values also take into account a daily charge to each
Division of Separate Account C for the Mortality and Expense Risk Charge,
which is equivalent to a charge at a current annual rate of 1.00% of the
average net assets of the Divisions of Separate Account C in Policy Years 1
through 10 and .60% in Policy Years 11 and thereafter. After deduction of
these amounts, the illustrated gross investment rates of 0%, 6%, and 12%
correspond to approximate net annual rates of -2.09%, 3.91%, and 9.91%,
respectively.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes or other taxes other than the DAC tax and the
consideration of premium tax (at 2.5% of premium). However, if, in the future,
any additional charges are made, the gross annual investment rate of return
would have to exceed the stated investment rates by a sufficient amount to
cover the tax charges in order to produce the Accumulation Values, Cash Values
and Death Benefits illustrated.
The tables illustrate the policy values that would result based on
hypothetical investment rates of return if premiums are paid in full at the
beginning of each year, if all net premiums are allocated to Separate Account
C, and if no policy loans have been made. The values would vary from those
shown if the assumed annual premium payments were paid in installments during
a year. The values would also vary if the Policyowner varied the amount or
frequency of premium payments. The tables also assume that the Policyowner has
not requested an increase or decrease in Specified Amount, that no withdrawals
have been made and no Surrender Charges imposed, and that no transfers have
been made and no Transfer Charges imposed.
Upon request, JP Financial will provide, without charge, a comparable
illustration based upon the proposed Insured's age, sex and rating class, the
Specified Amount requested, the proposed frequency and amount of premium
payments and any available riders requested. Existing Policyowners may request
illustrations based on existing Cash Value at the time of request. JP
Financial has reserved the right to charge an administrative fee of up to $50
for such illustrations.
A-1
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION I;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 ANNUAL RATE OF RETURN: 12% (9.91% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ ---------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 7,424 0 1,000,000 7,404 0 1,000,000
2 21,525 16,662 7,312 1,000,000 16,600 7,250 1,000,000
3 33,101 27,875 18,525 1,000,000 27,742 18,392 1,000,000
4 45,256 40,051 30,701 1,000,000 39,813 30,463 1,000,000
5 58,019 53,261 43,911 1,000,000 52,877 43,527 1,000,000
6 71,420 67,577 60,097 1,000,000 66,999 59,519 1,000,000
7 85,491 83,078 77,468 1,000,000 82,251 76,641 1,000,000
8 100,266 99,849 96,109 1,000,000 98,710 94,970 1,000,000
9 115,779 117,985 116,115 1,000,000 116,460 114,590 1,000,000
10 132,068 137,804 137,804 1,000,000 135,589 135,589 1,000,000
11 149,171 160,681 160,681 1,000,000 157,145 157,145 1,000,000
12 167,130 186,029 186,029 1,000,000 180,450 180,450 1,000,000
13 185,986 214,087 214,087 1,000,000 205,626 205,626 1,000,000
14 205,786 245,200 245,200 1,000,000 232,848 232,848 1,000,000
15 226,575 279,703 279,703 1,000,000 262,297 262,297 1,000,000
16 248,404 317,944 317,944 1,000,000 294,157 294,157 1,000,000
17 271,324 360,317 360,317 1,000,000 328,647 328,647 1,000,000
18 295,390 407,268 407,268 1,000,000 366,040 366,040 1,000,000
19 320,660 459,296 459,296 1,000,000 406,672 406,672 1,000,000
20 347,193 516,956 516,956 1,000,000 450,941 450,941 1,000,000
25 501,135 915,817 915,817 1,000,000 747,978 747,978 1,000,000
30 697,608 1,589,585 1,589,585 1,669,064 (3) 1,270,536 1,270,536 1,334,062 (3)
35 948,363 2,704,358 2,704,358 2,839,576 (3) 2,121,061 2,121,061 2,227,114 (3)
40 1,268,398 4,528,648 4,528,648 4,755,081 (3) 3,450,754 3,450,754 3,623,291 (3)
45 1,676,852 7,556,318 7,556 ,318 7,631,881 (3) 5,606,101 5,606,101 5,662,162 (3)
50 2,198,154 12,663,225 12,663,225 12,789,857 (3) 9,178,145 9,178,145 9,269,927 (3)
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-2
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION I;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 ANNUAL RATE OF RETURN: 6% (3.91% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 6,943 0 1,000,000 6,923 0 1,000,000
2 21,525 15,202 5,852 1,000,000 15,142 5,792 1,000,000
3 33,101 24,808 15,458 1,000,000 24,685 15,335 1,000,000
4 45,256 34,643 25,293 1,000,000 34,431 25,081 1,000,000
5 58,019 44,687 35,337 1,000,000 44,357 35,007 1,000,000
6 71,420 54,914 47,434 1,000,000 54,438 46,958 1,000,000
7 85,491 65,296 59,686 1,000,000 64,642 59,032 1,000,000
8 100,266 75,800 72,060 1,000,000 74,935 71,195 1,000,000
9 115,779 86,391 84,521 1,000,000 85,279 83,409 1,000,000
10 132,068 97,242 97,242 1,000,000 95,627 95,627 1,000,000
11 149,171 109,393 109,393 1,000,000 106,703 106,703 1,000,000
12 167,130 122,125 122,125 1,000,000 117,728 117,728 1,000,000
13 185,986 135,437 135,437 1,000,000 128,612 128,612 1,000,000
14 205,786 149,328 149,328 1,000,000 139,236 139,236 1,000,000
15 226,575 163,806 163,806 1,000,000 149,469 149,469 1,000,000
16 248,404 178,858 178,858 1,000,000 159,161 159,161 1,000,000
17 271,324 194,477 194,477 1,000,000 168,147 168,147 1,000,000
18 295,390 210,670 210,670 1,000,000 176,247 176,247 1,000,000
19 320,660 227,456 227,456 1,000,000 183,267 183,267 1,000,000
20 347,193 244,805 244,805 1,000,000 188,968 188,968 1,000,000
25 501,135 338,531 338,531 1,000,000 184,350 184,350 1,000,000
30 697,608 433,751 433,751 1,000,000 55,687 55,687 1,000,000
35 948,363 511,913 511,913 1,000,000 0 0 0
40 1,268,398 546,894 546,894 1,000,000 0 0 0
45 1,676,852 490,448 490,448 1,000,000 0 0 0
50 2,198,154 188,399 188,399 1,000,000 0 0 0
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-3
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION I;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 NNUAL RATE OF RETURN: 0% (-2.09% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 6,463 0 1,000,000 6,443 0 1,000,000
2 21,525 13,801 4,451 1,000,000 13,744 4,394 1,000,000
3 33,101 21,977 12,627 1,000,000 21,864 12,514 1,000,000
4 45,256 29,835 20,485 1,000,000 29,647 20,297 1,000,000
5 58,019 37,352 28,002 1,000,000 37,071 27,721 1,000,000
44,109
6 71,420 44,499 37,019 1,000,000 36,629 1,000,000
7 85,491 51,247 45,637 1,000,000 50,731 45,121 1,000,000
8 100,266 57,560 53,820 1,000,000 56,905 53,165 1,000,000
9 115,779 63,403 61,533 1,000,000 62,595 60,725 1,000,000
10 132,068 68,948 68,948 1,000,000 67,757 67,757 1,000,000
11 149,171 75,101 75,101 1,000,000 72,996 72,996 1,000,000
12 167,130 81,179 81,179 1,000,000 77,595 77,595 1,000,000
13 185,986 87,152 87,152 1,000,000 81,462 81,462 1,000,000
14 205,786 92,992 92,992 1,000,000 84,484 84,484 1,000,000
15 226,575 98,677 98,677 1,000,000 86,531 86,531 1,000,000
16 248,404 104,167 104,167 1,000,000 87,459 87,459 1,000,000
17 271,324 109,421 109,421 1,000,000 87,109 87,109 1,000,000
18 295,390 114,400 114,400 1,000,000 85,310 85,310 1,000,000
19 320,660 119,053 119,053 1,000,000 81,880 81,880 1,000,000
20 347,193 123,307 123,307 1,000,000 76,590 76,590 1,000,000
25 501,135 135,263 135,263 1,000,000 9,063 9,063 1,000,000
30 697,608 112,708 112,708 1,000,000 0 0 0
35 948,363 10,500 10,500 1,000,000 0 0 0
40 1,268,398 0 0 0 0 0 0
45 1,676,852 0 0 0 0 0 0
50 2,198,154 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-4
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION II;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 ANNUAL RATE OF RETURN: 12% (9.91% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ --------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 7,424 0 1,007,424 7,404 0 1,007,404
2 21,525 16,659 7,309 1,016,659 16,597 7,247 1,016,597
3 33,101 27,862 18,512 1,027,862 27,729 18,379 1,027,729
4 45,256 40,017 30,667 1,040,017 39,779 30,429 1,039,779
5 58,019 53,186 43,836 1,053,186 52,802 43,452 1,052,802
6 71,420 67,429 59,949 1,067,429 66,852 59,372 1,066,852
7 85,491 82,809 77,199 1,082,809 81,986 76,376 1,081,986
8 100,266 99,393 95,653 1,099,393 98,260 94,520 1,098,260
9 115,779 117,246 115,376 1,117,246 115,732 113,862 1,115,732
10 132,068 136,684 136,684 1,136,684 134,454 134,454 1,134,454
11 149,171 159,092 159,092 1,159,092 155,421 155,421 1,155,421
12 167,130 183,866 183,866 1,183,866 177,894 177,894 1,177,894
13 185,986 211,222 211,222 1,211,222 201,907 201,907 1,201,907
14 205,786 241,465 241,465 1,241,465 227,507 227,507 1,227,507
15 226,575 274,900 274,900 1,274,900 254,731 254,731 1,254,731
16 248,404 311,820 311,820 1,311,820 283,567 283,567 1,283,567
17 271,324 352,553 352,553 1,352,553 313,986 313,986 1,313,986
18 295,390 397,460 397,460 1,397,460 345,945 345,945 1,345,945
19 320,660 446,927 446,927 1,446,927 379,391 379,391 1,379,391
20 347,193 501,353 501,353 1,501,353 414,225 414,225 1,414,225
25 501,135 864,046 864,046 1,864,046 600,317 600,317 1,600,317
30 697,608 1,421,629 1,421,629 2,421,629 754,905 754,905 1,754,905
35 948,363 3,247,467 2,247,467 3,247,467 750,772 750,772 1,750,772
40 1,268,398 3,447,639 3,447,639 4,447,639 339,060 339,060 1,339,060
45 1,676,852 5,216,861 5,216,861 6,216,861 0 0 0
50 2,198,154 7,919,144 7,919,144 8,919,144 0 0 0
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-5
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION II;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 ANNUAL RATE OF RETURN: 6% (3.91% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 6,942 0 1,006,942 6,922 0 1,006,922
2 21,525 15,198 5,848 1,015,198 15,139 5,789 1,015,139
3 33,101 24,797 15,447 1,024,797 24,674 15,324 1,024,674
4 45,256 34,614 25,264 1,034,614 34,402 25,052 1,034,402
5 58,019 44,624 35,274 1,044,624 44,296 34,946 1,044,296
6 71,420 54,796 47,316 1,054,796 54,321 46,841 1,054,321
7 85,491 65,090 59,480 1,065,090 64,438 58,828 1,064,438
8 100,266 75,464 71,724 1,075,464 74,603 70,863 1,074,603
9 115,779 85,867 83,997 1,085,867 84,763 82,893 1,084,763
10 132,068 96,479 96,479 1,096,479 94,853 94,853 1,094,853
11 149,171 108,355 108,355 1,108,355 105,574 105,574 1,105,574
12 167,130 120,772 120,772 1,120,772 116,120 116,120 1,116,120
13 185,986 133,723 133,723 1,133,723 126,368 126,368 1,126,368
14 205,786 147,195 147,195 1,147,195 136,156 136,156 1,136,156
15 226,575 161,185 161,185 1,161,185 145,303 145,303 1,145,303
16 248,404 175,667 175,667 1,175,667 153,600 153,600 1,153,600
17 271,324 190,612 190,612 1,190,612 160,816 160,816 1,160,816
18 295,390 205,994 205,994 1,205,994 166,700 166,700 1,166,700
19 320,660 221,808 221,808 1,221,808 170,986 170,986 1,170,986
20 347,193 237,984 237,984 1,237,984 173,351 173,351 1,173,351
25 501,135 320,407 320,407 1,320,407 139,939 139,939 1,139,939
30 697,608 380,725 380,725 1,380,725 0 0 0
35 948,363 361,777 361,777 1,361,777 0 0 0
40 1,268,398 176,433 176,433 1,176,433 0 0 0
45 1,676,852 0 0 0 0 0 0
50 2,198,154 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-6
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
ENSEMBLE SURVIVORSHIP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C>
DEATH BENEFIT OPTION II;
MALE NON-SMOKER ISSUE AGE 55 ASSUMED HYPOTHETICAL GROSS
FEMALE NON-SMOKER ISSUE AGE 50 ANNUAL RATE OF RETURN: 0% (-2.09% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $10,000
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED -------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 6,426 0 1,006,462 6,442 0 1,006,442
2 21,525 13,798 4,448 1,013,798 13,741 4,391 1,013,741
3 33,101 21,967 12,617 1,021,967 21,854 12,504 1,021,854
4 45,256 29,810 20,460 1,029,810 29,622 20,272 1,029,622
5 58,019 37,301 27,951 1,037,301 37,020 27,670 1,037,020
6 71,420 44,406 36,926 1,044,406 44,016 36,536 1,044,016
7 85,491 51,090 45,480 1,051,090 50,576 44,966 1,050,576
8 100,266 57,313 53,573 1,057,313 56,661 52,921 1,056,661
9 115,779 63,032 61,162 1,063,032 62,230 60,360 1,062,230
10 132,068 68,429 68,429 1,068,429 67,230 67,230 1,067,230
11 149,171 74,424 74,424 1,074,424 72,257 72,257 1,072,257
12 167,130 80,333 80,333 1,080,333 76,582 76,582 1,076,582
13 185,986 86,124 86,124 1,086,124 80,104 80,104 1,080,104
14 205,786 91,765 91,765 1,091,765 82,694 82,694 1,082,694
15 226,575 97,232 97,232 1,097,232 84,210 84,210 1,084,210
16 248,404 102,479 102,479 1,102,479 84,495 84,495 1,084,495
17 271,324 107,458 107,458 1,107,458 83,383 83,383 1,083,383
18 295,390 112,124 112,124 1,112,124 80,697 80,697 1,080,697
19 320,660 116,418 116,418 1,116,418 76,262 76,262 1,076,262
20 347,193 120,253 120,253 1,120,253 69,864 69,864 1,069,864
25 501,135 128,658 128,658 1,128,658 0 0 0
30 697,608 97,847 97,847 1,097,847 0 0 0
35 948,363 0 0 0 0 0 0
40 1,268,398 0 0 0 0 0 0
45 1,676,852 0 0 0 0 0 0
50 2,198,154 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $10,000 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR THE FUNDS. THE ACCUMULATION VALUE, CASH VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY JP FINANCIAL SEPARATE ACCOUNT C, OR THE FUNDS THAT THIS ASSUMED
INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Chubb Life Insurance Company of America
We have audited the accompanying consolidated balance sheet of Chubb Life
Insurance Company of America (a wholly-owned subsidiary of Jefferson Pilot
Corporation as of April 30, 1997--see Note 1) and subsidiaries as of December
31, 1997 on a purchase accounting basis (Successor), and the related
consolidated statement of income, stockholder's equity, and cash flows for the
eight month period ended December 31, 1997 on a purchase accounting basis
(Successor) and for the four month period ended April 30, 1997 on a historical
cost basis (Predecessor). These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Chubb Life
Insurance Company of America and subsidiaries at December 31, 1997 on a
purchase accounting basis (Successor), and the consolidated results of their
operations and their cash flows for the eight month period ended December 31,
1997 on a purchase accounting basis (Successor), and for the four month period
ended April 30, 1997 on a historical cost basis (Predecessor), in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Greensboro, North Carolina
February 9, 1998
F-1
<PAGE>
CONSOLIDATED BALANCE SHEET
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Invested assets
Debt securities, available-for-sale, at fair value (amortized
cost--$2,878,984)................................................ $2,993,384
Equity securities, available-for-sale, at fair value (cost--
$15,087)......................................................... 18,984
Policy loans...................................................... 236,729
Mortgage loans on real estate..................................... 125,067
----------
Total investments................................................... 3,374,164
----------
Cash and cash equivalents........................................... 28,288
Accrued investment income........................................... 50,724
Uncollected premiums................................................ 4,475
Due from reinsurers................................................. 219,131
Deferred policy acquisition costs................................... 38,200
Value of business acquired.......................................... 418,665
Cost in excess of net assets acquired, net of accumulated
amortization of $2,852............................................. 146,893
Property and equipment, net of accumulated depreciation of $1,111... 17,845
Federal income taxes receivable..................................... 7,952
Deferred federal income taxes....................................... 39,184
Assets held in separate accounts.................................... 598,039
Other assets........................................................ 39,312
----------
1,608,708
----------
$4,982,872
==========
LIABILITIES
Policy liabilities
Policyholder contract deposits.................................... $2,634,029
Future policy benefits............................................ 615,976
Policy and contract claims........................................ 64,716
Premiums paid in advance.......................................... 1,436
Other policyholders' funds........................................ 107,578
----------
Total policy liabilities............................................ 3,423,735
Liabilities related to separate accounts............................ 598,039
Accrued expenses and other liabilities.............................. 87,949
----------
4,109,723
Commitments and contingent liabilities
STOCKHOLDER'S EQUITY:
Common stock, par value $5 per share, 600,000 shares authorized,
issued and outstanding........................................... 3,000
Paid in capital................................................... 782,500
Retained earnings................................................. 53,717
Net unrealized gains on securities, net of deferred income taxes
of $18,271....................................................... 33,932
----------
873,149
----------
$4,982,872
==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
REVENUES
Premiums and policy charges......................... $235,247 $117,385
Net investment income............................... 158,181 82,056
Realized investment gains........................... 4,788 3,473
Other income........................................ 3,303 1,087
-------- --------
Total revenues........................................ 401,519 204,001
BENEFITS AND EXPENSES
Policy benefits and claims.......................... 217,622 108,274
Commissions and operating expenses, net of
deferrals.......................................... 65,344 10,098
Amortization of intangibles......................... 35,842 38,206
-------- --------
Total benefits and expenses........................... 318,808 156,578
Income from continuing operations before federal
income tax........................................... 82,711 47,423
Federal income tax (benefit):
Current............................................. 14,422 20,596
Deferred............................................ 14,572 (7,926)
-------- --------
28,994 12,670
-------- --------
Income from continuing operations..................... 53,717 34,753
Discontinued operations:
Adjustment to reduce estimated losses during phase-
out period, net of taxes of $3,206................. -- 6,006
-------- --------
Net income............................................ $ 53,717 $ 40,759
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED TOTAL
COMMON PAID IN RETAINED GAINS ON STOCKHOLDER'S
STOCK CAPITAL EARNINGS SECURITIES EQUITY
------ -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Predecessor balances,
December 31, 1996.......... $3,000 $249,872 $595,536 $17,622 $866,030
Net income.................. -- -- 40,759 -- 40,759
Dividends declared.......... -- -- (103,008) -- (103,008)
Net change in unrealized
gains on available-for-sale
securities................. -- -- -- (10,708) (10,708)
------ -------- -------- ------- --------
Predecessor balances, April
30, 1997................... 3,000 249,872 533,287 6,914 793,073
Purchase accounting
adjustments................ -- 532,628 (533,287) (6,914) (7,573)
------ -------- -------- ------- --------
Successor balances, May 1,
1997....................... 3,000 782,500 -- -- 785,500
Net income.................. -- -- 53,717 -- 53,717
Net change in unrealized
gains on available-for-sale
securities................. -- -- -- 33,932 33,932
------ -------- -------- ------- --------
Successor balances, December
31, 1997................... $3,000 $782,500 $ 53,717 $33,932 $873,149
====== ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 53,717 $ 40,759
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Decrease in future policy benefits, policy and
contract claims and premiums paid in advance, net.. (11,066) 6,070
Credits to policyholders accounts................... (65,949) (36,595)
Decrease (increase) in uncollected premiums......... 4,297 (2,990)
Increase in policy acquisition costs deferred, net
of amortization.................................... (38,200) (7,907)
Net (capitalization) amortization of value of
business acquired.................................. (3,159) 1,284
Decrease in accrued investment income............... 704 1,045
Realized investment gains........................... (4,788) (3,473)
Amortization (accretion) of investment premiums
(discounts)........................................ 5,719 (277)
Provision for depreciation.......................... 1,210 2,485
Provision for deferred income tax................... 14,572 (7,926)
Increase (decrease) in federal income tax payable... (10,332) (10,988)
Change in receivables and asset accruals............ 48,461 (6,880)
Change in payables and expense accruals............. 9,313 (46,398)
Other operating activities, net..................... 570 (6,865)
--------- ---------
Net cash provided by (used in) operating activities... 5,069 (78,656)
INVESTING ACTIVITIES
Proceeds from sales of debt securities................ 205,590 199,970
Proceeds from maturities of debt securities........... 98,301 40,743
Proceeds from sales of equity securities.............. 10,386 18,343
Purchases of debt securities.......................... (379,041) (203,214)
Purchases of equity securities........................ (322) (6,284)
Policy loans issued, net of repayments................ (14,652) (4,219)
Mortgage loans, net of repayments..................... (117,136) 1,016
Other investing activities, net....................... 4,185 28,254
--------- ---------
Net cash (used in) provided by investing activities... (192,689) 74,609
FINANCING ACTIVITIES
Deposits credited to policyholders' funds............. 343,754 139,658
Withdrawals from policyholders' funds................. (108,331) (49,006)
Dividends paid........................................ (101,004) (2,004)
Decrease in loans payable............................. (51,142) (303)
--------- ---------
Net cash provided by financing activities............. 83,277 88,345
--------- ---------
Net (decrease) increase in cash and cash equivalents.. (104,343) 84,298
Cash and cash equivalents, beginning of period........ 132,631 48,333
--------- ---------
Cash and cash equivalents, end of period.............. $ 28,288 $ 132,631
========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION
NATURE OF OPERATIONS
Chubb Life Insurance Company of America (the Company) is a wholly-owned
subsidiary of Jefferson-Pilot Corporation (Jefferson-Pilot) and is principally
engaged in the sale of individual life insurance and investment products.
These products are marketed primarily through personal producing general
agents throughout the United States.
ACQUISITION
Jefferson-Pilot acquired the Company from Chubb Corporation on May 13, 1997,
with an effective date of April 30, 1997. The acquisition was accounted for as
a purchase, utilizing "pushdown" accounting, and the assets and liabilities
were recorded at fair value as of April 30, 1997. For purposes of these
financial statements, the consolidated statements of income, stockholder's
equity, and cash flows for the four months ended April 30, 1997 represent the
results of operations of the "Predecessor", and are presented on the
historical basis of accounting. The consolidated statements of income,
stockholder's equity, and cash flows for the eight months ended December 31,
1997 represent the results of operations of the "Successor" and are presented
on a purchase accounting basis. As a result, the consolidated financial
statements subsequent to the acquisition date (Successor) are not comparable
to the consolidated financial statements prior to the acquisition date
(Predecessor).
The cost of the acquisition by Jefferson-Pilot was $785,500,000, including
all acquisition costs. The final purchase price is subject to post-closing
adjustments, none of which is expected to be material. In addition,
immediately prior to the acquisition, the Company declared a $103,000,000
dividend to the Chubb Corporation.
The preliminary adjustments as a result of allocation of the pushed down
purchase price and the determination of the cost in excess of net assets
acquired is as follows:
<TABLE>
<CAPTION>
<S> <C>
Stockholder's equity as reported by Predecessor................ $ 793,073
Fair value adjustments:
Debt securities--available-for-sale.......................... (899)
Property and equipment....................................... (14,285)
Deferred policy acquisition costs............................ (667,865)
Value of business acquired................................... 447,344
Deferred federal income tax.................................. 108,669
Cost in excess of net assets acquired........................ 87,274
Other assets................................................. (329)
Policy liabilities........................................... 49,577
Accrued expenses and other liabilities....................... (17,059)
---------
Total.......................................................... $ 785,500
=========
</TABLE>
The following proforma results of operations for the year ended December 31,
1997, assume that the acquisition occurred as of January 1, 1997. The proforma
results have been prepared for comparative purposes only and do not purport to
indicate the results of operations which would have actually been reported had
the acquisition occurred on January 1, 1997, or which may occur in the future
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net revenues.................................................... $496,530
Net income before realized investment gains (net of taxes)...... 70,658
Net income...................................................... 26,713
</TABLE>
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
1. BASIS OF PRESENTATION (CONTINUED)
DISCONTINUED OPERATIONS
In 1996, the Predecessor adopted a plan to exit the group insurance
business. Accordingly, the group health insurance business was accounted for
as a discontinued operation in the consolidated income statement for the four
months ended April 30, 1997. As a result of the decision by the Predecessor in
1996 to discontinue the group health insurance business, a liability was
established to cover any future losses from operations and costs to exit the
business including severance for employees. The amount reflected in the
statement of income for the Predecessor reflects an adjustment to the future
estimated losses, net of taxes during the phase-out period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) and include
the accounts of Chubb Life Insurance Company of America (the Company) and its
subsidiaries. Principal subsidiaries include Chubb Colonial Life Insurance
Company (Colonial), Chubb Sovereign Life Insurance Company (Sovereign), and
Chubb America Service Corporation. Significant intercompany transactions have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions affecting the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenues and
expenses for the reporting period. Those estimates are inherently subject to
change and actual results could differ from those estimates. Included among
the material (or potentially material) reported amounts and disclosures that
require extensive use of estimates are asset valuation allowances, policy
liabilities, deferred policy acquisition costs, value of business acquired and
the potential effects of resolving litigated matters.
CASH AND CASH EQUIVALENTS
The Company includes with cash and cash equivalents its holdings of short
term investments which are highly liquid investments that mature within three
months of the date of acquisition.
INVESTED ASSETS
Debt securities, which include bonds and redeemable preferred stocks, are
purchased to support the investment strategies of the Company. These
strategies are developed based on many factors including rate of return,
maturity, credit risk, tax considerations and regulatory requirements. Debt
securities which may be sold prior to maturity to support the investment
strategies of the Company are considered available-for-sale and carried at
market value as of the balance sheet date.
Equity securities, which include common stocks and non-redeemable preferred
stocks, are considered available-for-sale and are carried at market values as
of the balance sheet date.
Policy loans are carried at the unpaid balances.
Mortgage loans on real estate are stated at the unpaid balances, net of
allowances for unrecoverable amounts. The Company's mortgage loan portfolio is
comprised primarily of conventional real estate mortgages collateralized by
retail (13%), apartment (41%), industrial (9%), hotel (29%) and office (8%)
properties.
Mortgage loan underwriting standards emphasize the credit status of a
prospective borrower, quality of the underlying collateral and conservative
loan-to-value relationships. Of stated mortgage loan balances as of December
31, 1997, 30% are due from borrowers in West South Central states, 22% are due
from borrowers in South Atlantic states, 18% are due from borrowers in Pacific
states, 12% are due from borrowers in East North Central states and 12% are
due from borrowers in Mountain states. No other geographic region represents
as much as 10% of December 31, 1997 mortgage loans.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Realized gains and losses on dispositions of securities are determined by
the specific identification method. Unrealized appreciation or depreciation of
investments classified as available-for-sale, net of the deferred policy
acquisition costs and value of business acquired adjustments and the
applicable deferred income tax, is excluded from income and credited or
charged directly to a separate component of stockholder's equity.
RECOGNITION OF REVENUES, BENEFITS, CLAIMS AND EXPENSES:
UNIVERSAL LIFE PRODUCTS
Universal life products include universal life insurance, variable universal
life insurance, and other interest-sensitive life insurance policies. Revenues
for universal life products consist of policy charges for the cost of
insurance, policy administration and surrenders that have been assessed
against policy account balances during the period.
Policy fund liabilities for universal life and other interest-sensitive life
insurance policies are computed in accordance with the retrospective deposit
method and represent policy account balances before surrender charges. Policy
fund assets and liabilities for variable universal life insurance are
segregated and recorded as separate account assets and liabilities. Separate
account assets are carried at market values as of the balance sheet date and
are invested by the Company at the direction of the policyholder. Investments
are made in different portfolios in a series fund. Each of the portfolios has
specific investment objectives and the investment income and investment gains
and losses accrue directly to, and investment risk is borne by, the
policyholders. Accordingly, operating results of the separate account are not
included in the consolidated statements of income.
Policy claims that are charged to expense include claims incurred in the
period in excess of related policy account balances. Other policy benefits
include interest credited to universal life and other interest-sensitive life
insurance policies. Interest crediting rates ranged from 4% to 6.875%.
INVESTMENT PRODUCTS
Investment products include flexible premium annuities, structured
settlement annuities and other supplementary contracts without life
contingencies. Revenues for investment products consist of policy charges for
the cost of insurance, policy administration and surrenders that have been
assessed against policy account balances during the period. Deposits for these
products are recorded as policy fund liabilities, which are increased by
interest credited to the liabilities and decreased by withdrawals and policy
charges assessed against the contract holders. Interest crediting rates ranged
from 3.5% to 6.75%.
TRADITIONAL LIFE INSURANCE PRODUCTS
Traditional life insurance products include those products with fixed and
guaranteed premiums and benefits. Premium revenues for traditional life
insurance are recognized as revenues when due. The liabilities for future
policy benefits are computed by the net level premium method based on
estimated future investment yield, mortality and withdrawal experience.
Interest rate assumptions ranged from 3% to 9%. Mortality is calculated
principally on an experience multiple applied to select and ultimate tables in
common usage in the industry. Estimated withdrawals are determined principally
based on industry tables. Policy benefits and claims are charged to expense as
incurred.
ACCIDENT AND HEALTH INSURANCE
Accident and health insurance premiums are earned on a monthly pro rata
basis over the terms of the policies. Benefits include paid claims plus an
estimate for known claims and claims incurred but not reported as of the
balance sheet date.
POLICY AND CONTRACT CLAIMS
The liability for policy and contract claims consists of the estimated
amount payable for claims reported but not yet settled, and an estimate of
claims incurred but not reported, which is based on historical experience,
adjusted for trends and circumstances. Management believes that the recorded
liability is sufficient to provide for the associated claims adjustment
expenses.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
Reinsurance receivables include amounts recoverable from reinsurers related
to paid benefits and estimated amounts related to unpaid policy and contract
claims, future policy benefits and policyholder contract deposits. The cost of
reinsurance is accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account for the
policies.
DEFERRED POLICY ACQUISITION COSTS
Costs related to obtaining new business, including commissions, certain
costs of underwriting and issuing policies and certain agency office expenses,
all of which vary with and are primarily related to the production of new
business, have been deferred.
Deferred policy acquisition costs for traditional life insurance policies
are amortized over the premium paying periods of the related contracts using
the same assumptions for anticipated premium revenue that are used to compute
liabilities for future policy benefits. For universal life and investment
products, these costs are amortized at a constant rate based on the present
value of the estimated future gross profits to be realized over the terms of
the contracts, not to exceed 25 years.
The carrying amount of deferred policy acquisition costs is adjusted for the
effect of realized gains and losses and the effects of unrealized gains or
losses on debt securities classified as available-for-sale. Deferred policy
acquisition costs are reviewed periodically to determine that the unamortized
portion does not exceed expected recoverable amounts. No impairment
adjustments have been reflected in earnings for any period presented.
VALUE OF BUSINESS ACQUIRED
Value of business acquired represents the actuarially determined present
value of anticipated profits to be realized from life insurance and annuity
business purchased, using the same assumptions used to value the related
liabilities. Amortization of the value of business acquired occurs over the
related contract periods, using current crediting rates to accrete and a
constant amortization rate based on the present value of expected future
profits.
Value of business acquired related to universal life and investment
contracts also is adjusted to reflect the effects that the unrealized gains or
losses on investments classified as available-for-sale would have had on the
present value of estimated gross profits had such gains or losses actually
been realized. This adjustment is excluded from income and charged or credited
directly to the net unrealized gains on securities component of stockholder's
equity, net of applicable deferred income tax.
COST IN EXCESS OF ASSETS ACQUIRED
The preliminary excess of Jefferson-Pilot's purchase price over the fair
value of assets acquired, which has been "pushed down" to the Chubb Life level
for financial reporting purposes, is being amortized on a straight-line basis
over 35 years.
PROPERTY AND EQUIPMENT
Property and equipment used in operations are carried at cost, less
accumulated depreciation. Depreciation is calculated using the straight-line
method over the estimated remaining useful lives of the assets.
FEDERAL INCOME TAXES
The Predecessor will file a consolidated federal income tax return with its
parent for the four months ended April 30, 1997. Federal income tax for the
Predecessor is allocated as if the Company and its subsidiaries filed a
separate consolidated income tax return. The Successor will file a separate
consolidated income tax return for the eight months ended December 31, 1997
and include only the Company and its subsidiaries.
Deferred income tax assets are recorded on the differences between the tax
bases of assets and liabilities and the amounts at which they are reported in
the financial statements. Recorded amounts are adjusted to reflect changes in
income tax rates and other tax law provisions as they become enacted.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
130, "Reporting Comprehensive Income", which is effective for fiscal years
beginning after December 15, 1997. SFAS 130 sets standards for the reporting
and display of comprehensive income and its components in financial
statements. Application of the new rule will not impact the Company's
financial position or net income. The Company expects to adopt this
pronouncement in the first quarter of 1998, which will include the
presentation of comprehensive income for prior periods presented for
comparative purposes, as required by SFAS 130. The primary element of
comprehensive income applicable to the Company is changes in unrealized gains
and losses on securities classified as available-for-sale.
3. DERIVATIVES
USE OF DERIVATIVES
The Company's investment policy permits the use of derivative financial
instruments such as interest rate swaps in certain circumstances. At December
31, 1997, ten such interest rate swaps are held to modify specific floating-
rate direct investments. The notional amount is $50 million, with the Company
receiving an average fixed rate of 7.36% and paying a floating rate based on
the 3 month or 6 month LIBOR rates (5.81% and 5.84%, respectively, on December
31, 1997).
The interest rate swaps are used to reduce the impact of interest rate
fluctuations on specific floating-rate direct investments. Interest is
exchanged periodically on the notional value, with the Company receiving a
fixed rate and paying a short-term LIBOR rate on a net exchange basis. The net
amount received or paid under this swap is reflected as an adjustment to
investment income. All of the hedges are of investments classified as
available-for-sale, and net unrealized gains and losses, net of the effects of
income taxes and the impact on deferred policy acquisition costs and the value
of business acquired, are not significant and are included in net unrealized
gains on securities in stockholder's equity as of December 31, 1997.
CREDIT AND MARKET RISK
The Company is exposed to credit risk in the event of non-performance by
counterparties to swap agreements. The Company limits this exposure by
entering into swap agreements with counterparties having high credit ratings
and by regularly monitoring the ratings.
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, non-performance would
not have a material adverse effect on the Company's financial position or
results of operations.
The Company's exposure to market risk is mitigated by the offsetting effects
of changes in the value of swap agreements and the related direct investments.
The Company routinely monitors correlation between hedged items and hedging
instruments. In the event a hedge relationship was terminated, any related
hedging instrument that remained would be marked-to-market.
4. INVESTED ASSETS
Aggregate amortized cost, aggregate fair value and gross unrealized gains
and losses of debt securities available-for-sale at December 31, 1997 were as
follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury obligations and
direct obligations of U.S.
government agencies......... $ 190,938 $ 5,146 $ -- $ 196,084
Corporate bonds.............. 1,955,816 94,941 (7,030) 2,043,727
Foreign bonds................ 637 -- (29) 608
Mortgage-backed securities... 729,671 21,831 (419) 751,083
Redeemable preferred stocks.. 1,922 50 (90) 1,882
---------- -------- ------- ----------
Total debt securities........ $2,878,984 $121,968 $(7,568) $2,993,384
========== ======== ======= ==========
</TABLE>
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
4. INVESTED ASSETS (CONTINUED)
Aggregate amortized cost and aggregate fair value of debt securities at
December 31, 1997 by contractual maturity were as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in one year or less............................ $ 85,421 $ 85,637
Due after one year through five years.............. 236,911 241,483
Due after five years through ten years............. 547,657 570,656
Due after ten years................................ 595,626 639,796
Amounts not due at a single maturity date.......... 1,413,369 1,455,812
---------- ----------
$2,878,984 $2,993,384
========== ==========
</TABLE>
Actual future maturities will differ from the contractual maturities shown
because the issuers of certain debt securities have the right to call or
prepay the amounts due to the Company, with or without penalty.
The sources of net investment income for the Successor and Predecessor for
1997 were as follows: (in thousands):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT
MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
Debt securities.................................. $144,632 $75,964
Equity securities................................ 778 379
Policy loans..................................... 11,115 5,281
Mortgage loans................................... 1,818 267
Other............................................ 2,242 1,095
-------- -------
Gross investment income.......................... 160,585 82,986
Investment expenses.............................. 2,404 930
-------- -------
Net investment income............................ $158,181 $82,056
======== =======
</TABLE>
Realized investment gains and losses on available-for-sale securities were
as follows (in thousands):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT
MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
Gross Realized Investment Gains:
Debt securities................................ $4,788 $3,658
Equity securities.............................. -- (185)
------ ------
$4,788 $3,473
====== ======
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
4. INVESTED ASSETS (CONTINUED)
The changes in unrealized gains on securities classified as available-for-
sale for the Successor and Predecessor for 1997 were as follows (in
thousands):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT
MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
Change in unrealized appreciation of equity se-
curities...................................... $ 3,897 $ (3,488)
Change in unrealized appreciation of debt secu-
rities........................................ 114,400 (29,369)
Change in deferred policy acquisition costs ad-
justment...................................... -- 15,305
Change in value of business acquired adjust-
ment.......................................... (66,094) 1,080
-------- --------
52,203 (16,472)
Deferred income taxes.......................... (18,271) 5,764
-------- --------
$ 33,932 $(10,708)
======== ========
</TABLE>
5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED
Policy acquisition costs deferred and the related amortization charged to
income for both the Successor and Predecessor were as follows (in thousands):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT
MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
Beginning balance............................... $ -- $644,653
Deferral:
Commissions................................... 26,240 37,512
Other......................................... 13,179 6,589
------- --------
39,419 44,101
Amortization.................................... (1,219) (36,194)
Change in adjustment to reflect the effects of
unrealized gains on securities................. -- 15,305
------- --------
Ending balance.................................. $38,200 $667,865
======= ========
</TABLE>
Changes in the value of business acquired for both the Successor and
Predecessor were as follows (in thousands):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ -----------
EIGHT
MONTHS FOUR MONTHS
ENDED ENDED
DECEMBER 31, APRIL 30,
1997 1997
------------ -----------
<S> <C> <C>
Beginning balance............................... $481,600 $34,460
Capitalized cost................................ 34,929 --
Amortization.................................... (31,770) (1,284)
Change in adjustment to reflect the effects of
unrealized gains on securities................. (66,094) 1,080
-------- -------
Ending balance.................................. $418,665 $34,256
======== =======
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED
(CONTINUED)
Expected approximate amortization percentages of the value of business
acquired as of December 31, 1997 over the next five years are as follows (in
thousands):
<TABLE>
<CAPTION>
AMORTIZATION
PERCENTAGE
------------
<S> <C>
Year Ending December 31:
1998....................................................... 11.6%
1999....................................................... 11.3
2000....................................................... 10.2
2001....................................................... 9.1
2002....................................................... 8.4
</TABLE>
6. FEDERAL INCOME TAXES
Federal income tax provisions for both the Successor and the Predecessor
have been computed using the tax rates and regulations in effect during the
year. The provision for federal income tax gives effect to permanent
differences between financial and taxable income. The statutory federal
corporate tax rate was equal to the effective tax rate for the Successor, as
there were minimal permanent differences. The statutory federal corporate tax
rate differed from the effective tax rate for the Predecessor due to a change
in estimate of the tax liability.
The tax effects of temporary differences that gave rise to deferred income
tax liabilities and assets at December 31, 1997 were as follows (in
thousands):
<TABLE>
<S> <C>
Deferred income tax liabilities:
Value of business acquired.................................... $157,695
Net unrealized gains on securities............................ 18,271
Other......................................................... 2,406
--------
Total........................................................... 178,372
Deferred income tax assets:
Future policy benefits and policy fund balances............... 133,839
Deferred policy acquisition costs............................. 61,466
Other assets.................................................. 12,578
Group contingency reserve..................................... 3,080
Due and deferred premiums..................................... 2,232
Severance and relocation...................................... 2,089
Other......................................................... 2,272
Total........................................................... 217,556
--------
Net deferred income tax asset................................... $ 39,184
========
</TABLE>
Under prior federal income tax law, one-half of the excess of a life
insurance company's income from operations over its taxable investment income
was not taxed, but was set aside in a special tax account designated as
"Policyholders' Surplus". The Company has approximately $13.5 million of
untaxed "Policyholders' Surplus" on which no payment of federal income taxes
will be required unless it is distributed as a dividend, or under other
specified conditions. The Company does not believe that any significant
portion of the account will be taxed in the foreseeable future and no related
deferred tax liability has been recognized. If the entire balance of the
account became taxable under the current federal rate, the tax would
approximate $4.7 million.
Federal income taxes paid in 1997, including amounts remitted to the
Predecessor's parent for its share of income taxes were $30,694,000 for the
Successor and $24,081,000 for the Predecessor.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
7. PENSIONS
The Company's defined benefit pension plan for both the Successor and the
Predecessor have been included with the respective pension plans of their
Parents. The respective plans cover substantially all employees. Pension costs
allocated to the Company for the eight months ended December 31, 1997, for the
Successor were $1,739,000. Terms of the acquisition agreement between
Jefferson-Pilot and the Chubb Corporation specified that the Chubb Corporation
would assume all responsibilities for pension costs through the acquisition.
As such, the Company paid the Chubb Corporation approximately $3,500,000
representing the present value of all future pension costs as of April 30,
1997. The difference between the amount remitted to the Chubb Corporation and
the liability recorded at April 30, 1997, was recorded as a settlement gain
for the Predecessor of approximately $300,000.
8. OTHER POSTRETIREMENT BENEFITS
The Company provides certain other postretirement benefits, principally
health care and life insurance, to retired employees and their beneficiaries
and covered dependents. Prior to the acquisition, the Company had recorded a
postretirement benefit obligation of approximately $24,185,000, representing
all of the expected costs of retirees, vested active plan participants, and
other non-vested plan participants. As part of the acquisition, the Chubb
Corporation assumed all liabilities relating to these postretirement benefits
without any cash transferring to the Chubb Corporation. The result of this
assumption of the liabilities was a settlement gain of approximately
$23,916,000 for the Predecessor. This gain is included in the statement of
income as a reduction to commissions and operating expenses, net of deferrals.
Postretirement costs of the Successor that were allocated from Jefferson-Pilot
amounted to approximately $455,000 for the eight month period ended December
31, 1997.
9. RENT EXPENSE AND COMMITMENTS
The Company occupies office facilities under lease agreements which expire
at various dates through 2009; such leases generally are renewed or replaced
by other leases. In addition, the Company leases office and transportation
equipment.
Total rent expense charged to operations amounted to approximately
$1,937,000 for the Successor and $979,000 for the Predecessor, respectively.
All leases are operating leases and generally contain renewal options. At
December 31, 1997, future minimum rental payments required under
noncancellable operating leases were as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1998............................................................ $ 2,560
1999............................................................ 1,916
2000............................................................ 1,449
2001............................................................ 1,334
2002............................................................ 1,124
Subsequent to 2002.............................................. 4,591
-------
$12,974
=======
</TABLE>
The Company routinely enters into commitments to extend credit in the form
of mortgage loans and to purchase certain debt securities for its investment
portfolio in private placement transactions. The fair value of outstanding
commitments to fund mortgage loans and to acquire debt securities in private
placement transactions, which are not reflected in the consolidated balance
sheet, approximates $78,000,000 as of December 31, 1997.
10. REINSURANCE
The Company attempts to reduce its exposure to significant individual claims
by reinsuring portions of certain life insurance contracts written. The
maximum amount of individual life insurance retained on any one life,
including accidental death benefits, is $1,400,000.
Sovereign had a reinsurance recoverable resulting from a reinsurance
agreement with a single reinsurer of $96,740,000 at December 31, 1997.
Sovereign coinsured fifty percent of a block of single premium whole life
policies under this agreement. Sovereign and the reinsurer are joint and equal
owners in securities and short term investments of $194,659,000 at December
31, 1997. The remaining reinsurance recoverables were associated with numerous
other reinsurers.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
10. REINSURANCE (CONTINUED)
The effect of reinsurance on the premiums and policy charges in the
consolidated statement of income for both the Successor and Predecessor was as
follows (in thousands):
<TABLE>
<CAPTION>
CEDED TO ASSUMED
SUCCESSOR, EIGHT MONTHS ENDED DIRECT OTHER FROM OTHER NET
DECEMBER 31, 1997 AMOUNT COMPANIES COMPANIES AMOUNT
----------------------------- -------- --------- ---------- --------
<S> <C> <C> <C> <C>
Total premiums and policy
charges......................... $248,903 $14,976 $1,320 $235,247
======== ======= ====== ========
<CAPTION>
CEDED TO ASSUMED
PREDECESSOR, FOUR MONTHS ENDED DIRECT OTHER FROM OTHER NET
APRIL 30, 1997 AMOUNT COMPANIES COMPANIES AMOUNT
------------------------------ -------- --------- ---------- --------
<S> <C> <C> <C> <C>
Total premiums and policy
charges......................... $124,039 $ 7,063 $ 409 $117,385
======== ======= ====== ========
</TABLE>
Reinsurance recoveries which have been deducted from benefits, claims and
expenses in the consolidated statements of income for the Successor and
Predecessor were $26,329,000 and $11,929,000, respectively.
Reinsurance contracts do not relieve the Company from its primary obligation
to policyholders. Therefore, the failure of a reinsurer to discharge its
reinsurance obligations could result in a loss to the Company. The Company
regularly evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk related to reinsurance activities. No
significant credit losses resulted from the Company's reinsurance activities
during the year ended December 31, 1997.
11. STATUTORY FINANCIAL INFORMATION
The Company prepares financial statements on the basis of statutory
accounting practices (SAP) prescribed or permitted by the New Hampshire
Department of Insurance. Prescribed SAP include a variety of publications of
the National Association of Insurance Commissioners (NAIC) as well as state
laws, regulations and administrative rules. Permitted SAP encompass all
accounting practices not so prescribed. The impact of permitted accounting
practices on statutory capital and surplus is not significant for the Company.
The principal differences between SAP and generally accepted accounting
principles (GAAP) as they relate to the financial statements of the Company
are (1) policy acquisition costs are expensed as incurred under SAP, whereas
they are deferred and amortized under GAAP, (2) amounts collected from holders
of universal life-type and investment products are recognized as premiums when
collected under SAP, but are initially recorded as contract deposits under
GAAP, with cost of insurance recognized as revenue when assessed and other
contract charges recognized over the periods for which services are provided,
(3) the classification and carrying amounts of investments in certain
securities are different under SAP than under GAAP, (4) the criteria for
providing asset valuation allowances, and the methodologies used to determine
the amounts thereof, are different under SAP than under GAAP, (5) the timing
of establishing certain reserves, and the methodologies used to determine the
amounts thereof, are different under SAP than under GAAP, (6) no provision is
made for deferred income taxes under SAP, and (7) certain assets are not
admitted for purposes of determining surplus under SAP.
Reported capital and surplus on a statutory basis at December 31, 1997 was
$364,707,000. Reported statutory net income for the year ended December 31,
1997 was $151,357,000. Purchase accounting adjustments are not made for
statutory accounting purposes.
The amount of GAAP equity in excess of statutory surplus is unavailable for
distribution. In addition, various state insurance laws restrict the Company
and its insurance subsidiaries as to the amount of dividends from statutory
surplus they may pay without the prior approval of regulatory authorities. The
restrictions generally are based on net gains from operations and on certain
levels of surplus as determined in accordance with statutory accounting
practices. Dividends in excess of such thresholds are considered
"extraordinary" and require prior regulatory approval. Because of the special
dividends paid in connection with the acquisition, all dividends paid in 1998
will require prior regulatory approval.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
11. STATUTORY FINANCIAL INFORMATION (CONTINUED)
Risk-Based Capital ("RBC") requirements promulgated by the NAIC require life
insurers to maintain minimum capitalization levels that are determined based
on formulas incorporating credit risk pertaining to its investments, insurance
risk, interest rate risk and general business risk. As of December 31, 1997,
the Company's adjusted capital and surplus exceeded its authorized control
level RBC.
12. TRANSACTIONS WITH AFFILIATED COMPANIES
During 1997, the Successor and Predecessor entered into agreements with
their respective parent companies for general management services, investment
management services and transportation services. The Successor accrued $2.8
million for general management and investment services payable to its parent,
Jefferson-Pilot Corporation, for the eight months ended December 31, 1997, and
this amount remained payable at December 31, 1997. The Predecessor paid its
parent, The Chubb Corporation, $2.0 million for general management services
and investment services for the four months ended April 30, 1997.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments are based on quoted market prices where
available. Fair values of financial instruments for which quoted market prices
are not available are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rates and the estimates of future
cash flows. Certain financial instruments, particularly insurance contracts,
are excluded from fair value disclosure requirements.
The methods and assumptions used to estimate the fair value of financial
instruments are as follows:
. Fair values of debt securities with active markets are based on quoted
market prices. For debt securities that trade in less active markets,
fair values are obtained from independent pricing services. Fair values
of debt securities are principally a function of current interest rates.
. Fair values of equity securities are based on quoted market prices.
. The carrying value of cash and cash equivalents approximates fair value
due to the short maturities of these assets.
. Fair values of policy loans and mortgage loans are estimated using
discounted cash flow analyses and approximate carrying values.
The carrying value and fair value of financial instruments at December 31,
1997 were as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
---------- ----------
<S> <C> <C>
ASSETS
Debt securities available-for-sale............... $2,993,384 $2,993,384
Equity securities available-for-sale............. 18,984 18,984
Cash and cash equivalents........................ 28,288 28,288
Policy loans..................................... 236,729 236,729
Mortgage loans on real estate.................... 125,067 123,637
</TABLE>
14. LITIGATION
In the normal course of business, the Company is involved in various
lawsuits. Management is of the opinion that these suits are substantially
without merit, that valid defenses exist, and that such litigation will not
have a material effect on the consolidated financial statements.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
15. YEAR 2000 CONVERSION COSTS (UNAUDITED)
The Company's parent has been analyzing the Year 2000 computer systems
problem since 1995. During the course of this analysis, the Company's parent
has ascertained that failure to alleviate Year 2000 systems problems could
result in a material disruption to the Company's operations in the year 2000.
A centralized oversight and project management process has been put into place
to facilitate compliance of all information systems prior to the end of 1999.
The oversight process includes communications with significant suppliers to
the extent systems are vulnerable to those third parties failure to remedy
year 2000 issues. The assessment phase of the Year 2000 effort (including
mainframe and alternative systems) is complete for the majority of systems and
several have been brought into Year 2000 compliance. To date, the Company's
parent has incurred external costs of approximately $3 million. The remainder
of this effort is expected to be completed by the third quarter of 1999
utilizing internal and external resources, with remaining external costs
estimated at approximately $9 million. However, there can be no guarantee that
these results will be achieved and actual results could differ materially. All
costs associated with this effort are being expensed as incurred.
F-17
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Contractholders
Separate Account C
We have audited the accompanying statements of assets and liabilities of the
Separate Account C (the "Separate Account", comprising respectively, the JPM
Treasury Money Market Division, JPM Bond Division, JPM Equity Division, JPM
Small Company Division, and JPM International Equity Division) as of December
31, 1997, and the related statements of operations and changes in net assets
for the years ended December 31, 1997 and 1996. These financial statements are
the responsibility of the Separate Account's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of December 31, 1997,
by correspondence with JPM Series Trust II. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
divisions constituting the Separate Account C at December 31, 1997, the
results of their operations and the changes in their net assets for each of
the periods indicated above, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Boston, Massachusetts
March 13, 1998
F-18
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
CHUBB SEPARATE ACCOUNT C
DECEMBER 31, 1997
<TABLE>
<CAPTION>
JPM JPM
TREASURY JPM JPM JPM INTERNATIONAL
MONEY MARKET BOND EQUITY SMALL COMPANY EQUITY
DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in JPM
Series Trust II
at cost................ $ 456,739 $ 5,706,281 $ 8,314,692 $ 4,246,324 $ 6,674,886
========= =========== =========== =========== ===========
Investments in JPM
Series Trust II at
market value ........... $ 466,536 $ 6,028,073 $ 8,889,907 $ 4,553,534 $ 6,341,666
Expenses payable........ (17) (215) (317) (162) (226)
--------- ----------- ----------- ----------- -----------
TOTAL NET ASSETS..... $ 466,519 $ 6,027,858 $ 8,889,590 $ 4,553,372 $ 6,341,440
========= =========== =========== =========== ===========
UNITS OUTSTANDING....... 41,245 470,677 438,055 234,144 482,055
NET ASSET VALUE PER
UNIT.................... $ 11.311 $ 12.807 $ 20.293 $ 19.447 $ 13.155
</TABLE>
See notes to financial statements
F-19
<PAGE>
STATEMENTS OF OPERATIONS
CHUBB SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
JPM
TREASURY JPM JPM
MONEY MARKET BOND EQUITY
DIVISION DIVISION DIVISION
------------------------------ ------------------------------ --------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3,
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO
---------------- DECEMBER 31, ---------------- DECEMBER 31, ------------------- DECEMBER 31,
1997 1996 1995 1997 1996 1995 1997 1996 1995
------- ------- ------------ -------- ------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend income........ $ 135 $14,528 $11,800 $140,731 $72,416 $17,294 $ 56,988 $ 55,925 $ 28,445
Distributions of
realized gains......... 1 16 16 41,158 531 6,011 1,467,366 392,202 144,358
------- ------- ------- -------- ------- ------- ---------- -------- --------
136 14,544 11,816 181,889 72,947 23,305 1,524,354 448,127 172,803
Expenses:
Mortality and expense
risk charge............ 2,578 1,603 746 34,460 6,172 1,070 53,370 24,143 9,552
------- ------- ------- -------- ------- ------- ---------- -------- --------
Net Investment
Income............... (2,442) 12,941 11,070 147,429 66,775 22,235 1,470,984 423,984 163,251
Gain (loss) on
investments
Net realized gain
(loss) on investments.. (1,080) (1,817) 1,747 4,420 (870) 1,371 20,069 67,265 1,177
Net unrealized gain
(loss) on investments.. 18,936 (1,756) (7,383) 322,800 (4,624) 3,616 204,260 176,276 194,679
------- ------- ------- -------- ------- ------- ---------- -------- --------
Net gain (loss) on
investments............ 17,856 (3,573) (5,636) 327,220 (5,494) 4,987 224,329 243,541 195,856
------- ------- ------- -------- ------- ------- ---------- -------- --------
Increase in Net
Assets from
Operations........... $15,414 $ 9,368 $ 5,434 $474,649 $61,281 $27,222 $1,695,313 $667,525 $359,107
======= ======= ======= ======== ======= ======= ========== ======== ========
</TABLE>
F-20
<PAGE>
STATEMENTS OF OPERATIONS--(CONTINUED)
CHUBB SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
JPM
JPM INTERNATIONAL
SMALL COMPANY EQUITY
DIVISION DIVISION
------------------------------ --------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3,
DECEMBER 31, TO DECEMBER 31, TO
----------------- DECEMBER 31, ------------------- DECEMBER 31,
1997 1996 1995 1997 1996 1995
-------- -------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend income........ $ 11,006 $ 9,360 $ 1,591 $ 217,676 $ 29,908 $ 32,329
Distributions of
realized gains......... 579,516 211,193 19,285 685,191 152,279 30,752
-------- -------- ------- --------- -------- --------
590,522 220,553 20,876 902,867 182,187 63,081
Expenses:
Mortality and expense
risk charge............ 26,511 6,703 566 42,648 18,798 6,145
-------- -------- ------- --------- -------- --------
Net Investment
Income............... 564,011 213,850 20,310 860,219 163,389 56,936
Gain (loss) on
investments
Net realized gain
(loss) on investments.. 4,007 3,521 1,039 42,615 15,389 (448)
Net unrealized gain on
investments............ 221,164 82,854 3,191 (613,175) 206,175 73,767
-------- -------- ------- --------- -------- --------
Net gain on
investments............ 225,171 86,375 4,230 (570,560) 221,564 73,319
-------- -------- ------- --------- -------- --------
Increase in Net
Assets from
Operations........... $789,182 $300,225 $24,540 $ 289,659 $384,953 $130,255
======== ======== ======= ========= ======== ========
</TABLE>
See notes to financial statements.
F-21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
CHUBB SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
TREASURY JPM JPM
MONEY MARKET BOND EQUITY
DIVISION DIVISION DIVISION
--------------------------------- ------------------------------------ ------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3,
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO
------------------- DECEMBER 31, ---------------------- DECEMBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 1997 1996 1995 1997 1996 1995
-------- --------- ------------ ---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE IN NET
ASSETS
Operations:
Net investment
income (loss)... $ (2,442) $ 12,941 $ 11,070 $ 147,429 $ 66,775 $ 22,235 $1,470,984 $ 423,984 $ 163,251
Net realized
gain (loss) on
investments..... (1,080) (1,817) 1,747 4,420 (870) 1,371 20,069 67,265 1,177
Net unrealized
gain (loss) on
investments..... 18,936 (1,756) (7,383) 322,800 (4,624) 3,616 204,260 176,276 194,679
-------- --------- -------- ---------- ---------- -------- ---------- ---------- ----------
Increase in net
assets from
operations...... 15,414 9,368 5,434 474,649 61,281 27,222 1,695,313 667,525 359,107
Contractholder
transactions--
Note D:
Transfers of net
premiums........ 171,335 277,045 (37,059) 354,690 251,428 19,429 765,854 387,274 99,189
Transfers
from/to General
Account and
within Separate
Account, net.... (64,645) (208,924) 310,772 3,566,167 1,057,013 305,525 2,227,022 172,368 2,596,988
Transfers of
cost of
insurance....... (2,632) (1,590) (661) (78,877) (9,537) (2,770) (57,566) (13,001) (5,338)
Transfers on
account of other
terminations.... 26 (7,323) (41) (745) 2,425 (42) (4,631) (834) 320
-------- --------- -------- ---------- ---------- -------- ---------- ---------- ----------
Net increase in
net assets
derived from
contractholder
transactions..... 104,084 59,208 273,011 3,841,235 1,301,329 322,142 2,930,679 545,807 2,691,159
-------- --------- -------- ---------- ---------- -------- ---------- ---------- ----------
Net increase in
net assets....... 119,498 68,576 278,445 4,315,884 1,362,610 349,364 4,625,992 1,213,332 3,050,266
Balance at
beginning of
period........... 347,021 278,445 -- 1,711,974 349,364 -- 4,263,598 3,050,266 --
-------- --------- -------- ---------- ---------- -------- ---------- ---------- ----------
Balance at end of
period........... $466,519 $ 347,021 $278,445 $6,027,858 $1,711,974 $349,364 $8,889,590 $4,263,598 $3,050,266
======== ========= ======== ========== ========== ======== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-22
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
CHUBB SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
JPM
JPM INTERNATIONAL
SMALL COMPANY EQUITY
DIVISION DIVISION
------------------------------------ ------------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 3, YEAR ENDED JANUARY 3,
DECEMBER 31, TO DECEMBER 31, TO
---------------------- DECEMBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 1997 1996 1995
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income.. $ 564,011 $ 213,850 $ 20,310 $ 860,219 $ 163,389 $ 56,936
Net realized gain
(loss) on
investments........... 4,007 3,521 1,039 42,615 15,389 (448)
Net unrealized gain
(loss) on
investments........... 221,164 82,854 3,191 (613,175) 206,175 73,767
---------- ---------- -------- ---------- ---------- ----------
Increase in net assets
from operations........ 789,182 300,225 24,540 289,659 384,953 130,255
Contractholder
transactions--Note D:
Transfers of net
premiums.............. 463,334 193,946 16,998 509,514 365,133 12,554
Transfers from/to
General Account and
within Separate
Account, net.......... 1,237,752 1,403,000 150,812 1,597,555 1,380,915 1,744,480
Transfers of cost of
insurance............. (27,349) (5,933) (1,986) (54,916) (11,500) (4,478)
Transfers on account of
other terminations.... 2,389 6,464 (2) (5,439) 2,685 70
---------- ---------- -------- ---------- ---------- ----------
Net increase in net
assets derived from
contractholder
transactions........... 1,676,126 1,597,477 165,822 2,046,714 1,737,233 1,752,626
---------- ---------- -------- ---------- ---------- ----------
Net increase in net
assets................. 2,465,308 1,897,702 190,362 2,336,373 2,122,186 1,882,881
Balance at beginning of
period................. 2,088,064 190,362 -- 4,005,067 1,882,881 --
---------- ---------- -------- ---------- ---------- ----------
Balance at end of
period................. $4,553,372 $2,088,064 $190,362 $6,341,440 $4,005,067 $1,882,881
========== ========== ======== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
CHUBB SEPARATE ACCOUNT C
DECEMBER 31, 1997
NOTE A--ORGANIZATION OF ACCOUNT
Chubb Separate Account C (the "Separate Account") is a separate account of
Chubb Life Insurance Company of America ("Chubb Life"). Effective April 30,
1997, Chubb Life and its subsidiaries were acquired by Jefferson-Pilot
Corporation. The Separate Account is organized as a unit investment trust
registered under the Investment Company Act of 1940 as amended. It was
established for the purpose of funding flexible premium variable life
insurance policies issued by Chubb Life and is presently comprised of five
investment divisions, each of which invests exclusively in the corresponding
portfolio of the JPM Series Trust II (the "Trust") an open-end diversified
Series Management Investment Company.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments: Investments in shares of the Trust are valued at
the net asset value per share which is calculated each day the New York Stock
Exchange is open for trading.
Investment Income: Dividend income and distributions of realized gains are
recorded on the ex-dividend date.
Investment Transactions: Purchases and sales of shares of the Trust are
recorded as of the trade date, the date the transaction is executed.
Federal Income Taxes: The operations of the Separate Account are included in
the federal income tax return of Chubb Life which is taxed as a life insurance
company under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the Separate Account.
Expenses: A mortality and expense risk charge is accrued daily which will
not exceed 65% of the average net asset value of each division of the Separate
Account on an annual basis.
NOTE C--AFFILIATED COMPANY TRANSACTIONS
Administrative services necessary for the operation of the Separate Account
are provided by Chubb America Service Corporation, an affiliate of Chubb Life.
Chubb Life is the principal underwriter of the variable insurance contracts
that utilize the Separate Account. Jefferson Pilot Securities Corporation, an
affiliate of the Company, is the distributor.
NOTE D--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable life insurance contract will be subject to federal income taxes on
the income earned on the contract for any period for which the investments of
the segregated assets account, on which the contract is based, are not
adequately diversified. The code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a
statutory safe harbor test or diversification requirements set forth in
regulations issued by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that the segregated asset account satisfies the
current requirements of the regulations, and it intends that the segregated
asset account will continue to meet such requirements.
NOTE E--INVESTMENTS
In determining the net realized gain or loss on sales of shares of the
Trust, the cost of shares sold has been determined on an average cost basis.
For federal income tax purposes, the cost of shares owned at December 31, 1997
is the same as for financial reporting purposes.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
CHUBB SEPARATE ACCOUNT C
NOTE E--INVESTMENTS (CONTINUED)
Following is a summary of shares of each portfolio of the Trust owned by the
respective divisions of the Separate Account and the related net asset values
at December 31, 1997.
<TABLE>
<CAPTION>
NET ASSET
VALUE
SHARES PER SHARE
------- ----------
<S> <C> <C>
JPM Treasury Money Market Portfolio................... 44,180 $10.560000
JPM Bond Portfolio.................................... 533,930 11.290000
JPM Equity Portfolio.................................. 620,370 14.330000
JPM Small Company Portfolio........................... 347,864 13.090000
JPM International Equity Portfolio.................... 598,270 10.600000
</TABLE>
NOTE F--CONTRACTHOLDER TRANSACTIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1995
(COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
DECEMBER 31, 1997 DECEMBER 31, 1996 TO DECEMBER 31, 1995
------------------ ------------------ --------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
------- ---------- ------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
JPM Treasury Money
Market Division
Issuance of units...... 16,293 $ 180,290 231,052 $2,480,672 56,145 $ 578,342
Redemptions of units... 6,950 76,206 225,769 2,421,464 29,526 305,331
------- ---------- ------- ---------- -------- -----------
Net Increase........... 9,343 $ 104,084 5,283 $ 59,208 26,619 $ 273,011
======= ========== ======= ========== ======== ===========
JPM Bond Division
Issuance of units...... 333,164 $3,936,415 170,414 $1,931,269 35,064 $ 376,748
Redemptions of units... 7,769 95,180 55,202 629,940 4,994 54,606
------- ---------- ------- ---------- -------- -----------
Net Increase........... 325,395 $3,841,235 115,212 $1,301,329 30,070 $ 322,142
======= ========== ======= ========== ======== ===========
JPM Equity Division
Issuance of units...... 248,888 $4,443,329 182,200 $2,590,095 237,990 $ 2,797,257
Redemptions of units... 76,883 1,512,650 145,517 2,044,287 8,623 106,098
------- ---------- ------- ---------- -------- -----------
Net Increase........... 172,005 $2,930,679 36,683 $ 545,808 229,367 $ 2,691,159
======= ========== ======= ========== ======== ===========
JPM Small Company
Division Issuance of
units................. 169,487 $2,966,326 158,843 $2,217,721 17,337 $ 201,457
Redemptions of units... 65,988 1,290,200 42,603 620,244 2,932 35,635
------- ---------- ------- ---------- -------- -----------
Net Increase........... 103,499 $1,676,126 116,240 $1,597,477 14,405 $ 165,822
======= ========== ======= ========== ======== ===========
JPM International Equity
Division
Issuance of units...... 233,614 $2,947,905 251,694 $2,918,223 175,045 $ 1,819,776
Redemptions of units... 70,489 901,191 101,276 1,180,990 6,533 67,150
------- ---------- ------- ---------- -------- -----------
Net Increase........... 163,125 $2,046,714 150,418 $1,737,233 168,512 $ 1,752,626
======= ========== ======= ========== ======== ===========
</TABLE>
NOTE G--YEAR 2000 CONVERSION (UNAUDITED)
Jefferson-Pilot Corporation, the Company's parent has developed a
centralized oversight and project management process to facilitate the
conversion of all information systems to be ready for the year 2000 and has
been converting critical data processing systems. The parent Company currently
expects the project to be substantially completed be early 1999. Although some
projects may be delayed due to resource constraints, the Company does not
expect this project to have a significant effect on operations.
F-25
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the SEC such supplementary and periodic information, documents, and reports as
may be prescribed by any rule or regulation of the Securities and Exchange
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Rule 484(b)(1) of the Securities Act of 1933, insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, 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 of 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.
REPRESENTATIONS REGARDING THE REASONABLENESS OF FEES AND CHARGES
Jefferson Pilot Financial Insurance Company hereby represents that the fees
and charges deducted under the Flexible Premium Variable Life Insurance Policies
hereby registered by this Registration Statement in the aggregate are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Jefferson Pilot Financial Insurance Company.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company Act of
1940, as amended (the "1940 Act").
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following pages and documents:
The facing sheet
The prospectus consisting of 63 pages
The undertaking to file reports
The undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933
regarding indemnification
The representation as to fees and charges.
The representation pursuant to Rule 6e-3(T)
The signatures
Written consents of the following persons:
(a) Richard Dielensnyder, FSA, MAAA, contained in Exhibit 6 below.
(b) Ernst & Young LLP.
The following exhibits:
<PAGE>
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
(a) (i) Certified Copy of Resolution of the Executive Committee of the Board
of Directors of JP Financial Insurance Company of America establishing Chubb
Separate Account C. (Incorporated by reference to Registrant's Registration
Statement on Form S-6, filed on December 10, 1993, File No. 33-72830.)
(ii) Certified Copy of Resolution of the Board of Directors of JP Financial
Insurance Company of America authorizing the registration of a new policy
offered through the Chubb Separate Account C (Incorporated by reference to
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form
S-6, filed on March 13, 1996, File No. 33-01781).
(b) Not Applicable
(c) (i) Form of Distribution Agreement among JP Financial Insurance Company of
America, Chubb Separate Account C, and Chubb Securities Corporation.
(Incorporated by reference to Registrant's Registration Statement on Form S-6,
filed on December 10, 1993, File No. 33-72830.)
(ii) Specimen Variable Contracts Selling Agreement between Jefferson Pilot
Variable Corporation and Selling Broker-Dealers.
(iii) Schedule of Sales Commissions
(d) Not Applicable
(e)
(i) Specimen last survivor flexible premium variable life insurance
policy
(ii) Forms of Riders
(f) (i) Amended and Restated Charter, with all amendments, of JP Financial
Insurance Company. Incorporated by reference to Exhibit 1(f)(i) of Registrant's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6, filed
March 13, 1996, File No. 33-01781.
(ii) By-Laws of JP Financial Insurance Company. (Incorporated by reference to
Exhibit 1(f)(i) of Registrant's Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, filed March 13, 1996, File No. 33-01781.
(g) Not Applicable
(h) (i) Participation Agreement by and among Oppenheimer Variable Account
Funds, Chubb Life Insurance Company of America and Oppenheimer Funds Inc., dated
January 8, 1998.
(ii) Participation Agreement among MFS Variable Trust, Chubb Life Insurance
Company of America and Massachusetts Financial Services Company dated December
9, 1997.
(iii) Participation Agreement among Templeton Variable Products Series Fund,
Franklin Templeton Distributors Inc., and Chubb Life Insurance Company of
America, The Colonial Life Insurance Company of America dated May 1, 1995.
(iv) Participation Agreement among Variable Insurance Products Fund, Fidelity
Distributors Corporation and Chubb Life Insurance Company of America dated May
1, 1996.
(v) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Chubb Life Insurance Company of America
dated May 1, 1996.
<PAGE>
(i) Not applicable
(j) Specimen Application
2. Opinion of counsel as to securities being registered.
3. Not applicable.
4. Not applicable.
5. Actuarial opinions and consents of Richard Dielensnyder, FSA, MAAA.
6. Consent of Ernst & Young LLP, independent auditors.
7. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) under the 1940
Act.
8. Form of Reinsurance Agreement. (Incorporated by reference to Registrant's
Pre-effective Amendment No. 1 to the Registration Statement on Form S-6, filed
May 24, 1994, File No. 33-72830.
9. Memorandum regarding reliance on Order of the Commission to deduct the DAC
Tax Charge (Incorporated by reference to Pre-Effective Amendment No.1 to the
Registration Statement on Form S-6 filed on March 13, 1996, File No. 33-01781).
27. Financial Data Schedule. Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
JPF Separate Account C, has caused this Post-Effective Amendment No. 3 to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in Concord, New Hampshire, on the
25/th/ day of November, 1998.
(Seal)
JPF Separate Account C
(Registrant)
Jefferson Pilot Financial Insurance Company
(Depositor)
By: /s/ Charles C. Cornelio
------------------------------
Charles C. Cornelio
Title: Executive Vice President
Attest: /s/ Ronald Angarella
------------------------------------
Ronald Angarella
Senior Vice President
II-58t
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, JP Financial
Insurance Company of America has caused this Post-Effective Amendment No.3 to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in Concord, New Hampshire on the 25/th/
day of November, 1998.
(Seal)
Jefferson Pilot Financial Insurance Company
By: /s/ Charles C. Cornelio
----------------------------
Charles C. Cornelio
Title: Executive Vice President
Attest:
/s/ Ronald Angarella
--------------------------------
Ronald Angarella
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Signatures Title
/s/ Dennis R. Glass
- ---------------------------
Dennis R. Glass Director
/s/ Kenneth C. Mlekosh
- --------------------------
Kenneth C. Mlekosh Director
/s/ David A. Stonecipher
- ---------------------------
David A. Stonecipher Director
/s/ E. Jay Yelton
- ---------------------------
E. Jay Yelton Director
II-59t
<PAGE>
EXHIBIT INDEX
1.(c)(ii) Specimen Variable Contracts Selling Agreement between Jefferson
Pilot Variable Corporation and selling Broker-Dealers.
1.(c)(iii) Schedule of Sales Commissions
1.(e)(i) Specimen Last Survivor Flexible Premium Variable Life Insurance
Policy
1.(e)(ii) Forms of Riders
1.(h)(i) Participation Agreement by and among Oppenheimer Variable Account
Funds, Chubb Life Insurance Company of America and OppenheimerFunds, Inc., dated
January 8, 1998
1.(h)(ii) Participation Agreement among MFS Variable Trust, Chubb Life
Insurance Company of America and Massachusetts Financial Services Company dated
December 9, 1997
1.(h)(iii) Participation Agreement among Templeton Variable Products Series
Fund, Franklin Templeton Distributors, Inc., and Chubb Life Insurance Company of
America, The Colonial Life Insurance Company of America, dated May 1, 1995
1.(h)(iv) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Chubb Life Insurance Company of America
dated May 1, 1996
1.(h)(v) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and Chubb Life Insurance Company of
America dated May 1, 1996
1.(j) Specimen Application
2. Opinion of Counsel as to securities being registered
5. Actuarial opinion and consent of Richard Dielendnyder, FSA, MAAA
6. Consent of Ernst & Young LLP, independent auditors
7. Procedures Memorandum
<PAGE>
JEFFERSON PILOT VARIABLE CORPORATION
One Granite Place, PO Box 2005, Concord, NH 03302-2005
(603)-226-5000
ENSEMBLE SL BROKER-DEALER SELLING AGREEMENT
This agreement is made by and between Jefferson Pilot Variable Corporation, a
corporation organized and existing under the laws of the state of North Carolina
with its principal place of business in Concord, New Hampshire (hereafter called
"JPVC") and ______________________________________________, a corporation
organized and existing under the laws of the State of
____________________________ (the State) with its principal place of business in
__________________________________ (hereinafter called "Broker").
In consideration of the premises and the mutual agreements herein made, it is
agreed as follows:
EFFECTIVE DATE
(TO BE COMPLETED BY JPVC)
This agreement shall be effective as of ___________________________, 19__.
BACKGROUND
JPVC pursuant to the provisions of a Distribution Agreement between JPVC and
Jefferson Pilot Financial Insurance Company ("JP Financial") , acts as a
distributor of certain flexible premium variable life insurance policies issued
by JP Financial and listed on the attached commission schedule. JPVC desires
that Broker distribute such policies in those states in which Broker, JPVC, JP
Financial and the policies are appropriately licensed or approved, and broker
desires to sell such policies, through its registered representatives
("representatives") in such states, on the terms and conditions set forth
hereinafter.
CONDITIONS
Broker represents, warrants and convenants that:
a) It is and will remain at all times during the term of this agreement a
member in good standing of the National Association of Securities Dealers,
Inc. ("NASD") and a broker-dealer duly registered with the Securities and
Exchange Commission ("SEC") and licensed as a broker-dealer under
applicable state securities laws;
b) It is a corporation organized and existing in good standing under the
laws of the State and the execution and performance of this agreement has
been duly authorized and will not violate any document or instrument to
which it is a party or by which it is bound;
c) It is, and during the term of this agreement will remain, in compliance
with the broker-dealer capital and/or net capital and financial reporting
requirements of the SEC, the NASD, and any applicable securities exchanges
of which it is a member, and of every state in which it is required to be
licensed as a broker-dealer, and shall immediately inform JPVC of any
noncompliance with such requirements and provide to JPVC, upon request,
such financial reports filed with any applicable regulatory agency
(including but not limited to the FOCUS reports filed with the SEC);
d) It will notify JPVC immediately in the event a determination is made to
cancel, terminate, or substantially modify its blanket bond insurance
coverage;
1
<PAGE>
e) It will keep confidential any confidential information it may acquire
as a result of this agreement regarding JPVC, its affiliates' and
subsidiaries' affairs, which requirement shall survive the termination of
this agreement;
f) Only representatives of Broker who are agents of JP Financial, and duly
registered as such with states having jurisdiction over such
representatives, may sell such policies;
g) Broker and/or its representatives selling Ensemble SL policies shall
maintain for the duration of the agreement an errors and omissions policy
that covers the activities and subject matter of this agreement and is
deemed satisfactory to JPVC;
h) Broker will select persons associated with it who are trained and
qualified to solicit applications for the purchase of Ensemble SL policies
in conformance with all applicable local, state, and federal laws. Any such
person shall be a representative of the Broker in accordance with the rules
of the NASD and be licensed to offer Ensemble SL policies in accordance
with the insurance laws of any jurisdiction in which such person solicits
applications. Broker will train and supervise its representatives to insure
that solicitation for sales of Ensemble SL are made in accordance with the
terms and conditions of the current prospectus for Ensemble SL. In addition
Broker will ensure that its representatives are soliciting applications
using only the current prospectus, Statement of Additional Information, and
authorized sales material supplied by JPVC.
2. JPVC represents, warrants, and covenants that:
a.) It is and will remain at all times during the term of this
agreement a member in good standing of the NASD and a broker-
dealer duly registered with the SEC;
b.) It is a corporation organized and existing in good standing under
the laws of North Carolina, and that the execution and
performance of this agreement has been duly authorized;
c.) It is, and during the term of this agreement will remain, in
compliance with the capital and financial reporting requirements
of the NASD; and
d.) It shall keep confidential any confidential information it may
require as a result of this agreement regarding Broker's business
and affairs, which requirement shall survive termination of this
agreement.
3. Subject to the terms and conditions contained herein, JPVC hereby
authorizes Broker as an independent contractor to make sales of such policies
for which JPVC acts as a distributor. Broker agrees to direct the sales
activities of its representatives and to enforce written supervisory procedures
to assure strict compliance with applicable rules and regulations of the NASD,
and any applicable state securities laws and regulations.
4. JPVC shall not have any responsibility for the supervision of any
representative or any other associated person or affiliate of Broker. Broker
agrees that it shall have sole responsibility for maintaining an organized
program of supervision and compliance, consistent with the rules and regulations
of the SEC, the NASD, any applicable national securities exchanges and any state
securities regulatory agency having jurisdiction, with respect to the sale of
such policies. Such program shall include, but not be limited to, the following
types of procedures:
(a) Review, verification and approval of all new accounts and
applications for the purpose of establishing the identity,
capacity to contract, reputability, financial condition,
creditworthiness, investment objectives and needs of each
customer (and if applicable, essential information concerning
such customer's agent); and obtaining and providing all documents
and agreements required in opening, operating and maintaining
such a policy,
2
<PAGE>
including, but not limited to, delivery of the current
prospectus;
(b) Review of all statements relating to each customer's policy;
(c) Investigation and analysis of all bona fide customer complaints
and regulatory or customer inquires relating to policies sold
through Broker, with prompt notification thereof to JPVC;
(d) Registration of the firm as a broker-dealer and of representative
in all states in which business is conducted and such
registration is required.
5. Broker agrees to use its best efforts on behalf of JPVC while performing the
functions set forth herein. Broker agrees to promptly report and remit to JPVC
all checks, drafts or funds of any kind received from clients and in the event
of failure to do so, all rights hereunder, including all accrued and accruing
commissions, shall immediately terminate.
6. Broker shall be free to exercise its own judgment as to whom to solicit and
the time, place, and manner of solicitation. Broker shall pay all expenses
incurred by it hereunder and shall comply with all federal and state laws,
ordinances and regulations relating thereto.
7. Broker hereby assigns to JPVC any and all commissions or other monies now or
hereafter owed to it, arising from the sale of such policies by its
representatives or from other business which Broker may do with JP Financial, or
any subsidiary or affiliate thereof, or their lawful successors, as security for
repayment for any advance or other extension of credit by JPVC to Broker.
Broker hereby authorizes JP Financial or any of its subsidiaries or
affiliates, upon receipt of written demand by JPVC, to pay such monies to JPVC
to the extent of JPVC's interest therein or, in the alternative, Broker hereby
grants to JPVC and its affiliates a right of offset against such commissions or
other monies due Broker, which right shall survive the termination of this
agreement.
8. Except as otherwise stated herein, Broker shall be entitled to commissions
with respect to all sales of such policies it shall make in accordance with the
Commission Schedule(s) attached hereto, which schedule(s) may be modified at any
time by JPVC. All commissions are payable only upon receipt of full payment of
premiums due on such policies and are not paid until such premiums are earned.
Payments, if any, made to Broker's account in excess of commissions earned by it
in accordance with said Commission Schedule, as amended or supplemented, shall
be deemed an advance against future commissions and the amount of any such
excess shall be refunded to JPVC in the event of termination of this agreement,
to the extent that such commissions have not been earned prior to such
termination.
If JP Financial is required to refund premiums on any policy sold under this
agreement for any reason, including, but not limited to, the exercise of any
"free look" right by a policyholder, then no commission will be payable to
Broker in connection with such policy and any commissions previously paid will
be refunded by Broker. Any such refund of commissions by Broker will be netted
against commissions next due the Broker, with Broker liable for any commission
refunded in excess of commissions payable to Broker.
In the event that it is determined by either party for any reason (other
than a termination of the agreement by JPVC for "cause") that Broker will no
longer sell new Ensemble SL Policies ("Determination Date"), the agreement will
remain in effect solely to allow Broker to receive commissions on premium
payments received in connection with Ensemble SL policies which were either in
effect or for which applications had been received prior to the Determination
Date. The Determination Date will be thirty days after the date of written
notification of the cessation of the sale of new policies. Broker shall maintain
all SEC, NASD, and all applicable state securities and insurance registrations
and licenses, to the extent required in order to continue to receive such
commissions, and both JPVC and Broker shall continue to comply with all
applicable terms and conditions of the agreement after the Determination Date.
If Broker
3
<PAGE>
does not maintain such required registrations and licenses, is dissolved or
liquidated, or does not comply with the applicable terms and conditions of the
agreement, the agreement will immediately terminate and no further commissions
will be due to Broker.
In the event that the Broker, or any partner or employee of the Broker, at
any time after the termination of this agreement shall improperly induce, or
attempt to induce any policyholder of JPVC to cancel or fail to renew any
Ensemble SL policy with JPVC, then JPVC shall have the right to terminate all
future payments of any sort hereunder. This provision shall survive the
termination of the other terms and provisions of the agreement.
9. JPVC will, each month, furnish to broker a statement of Broker's account
showing all earnings and payments made to its account allocated by
representative registered with Broker and the balance due from JPVC. Broker
agrees to notify JPVC, in writing, within 30 days, of any discrepancy or
disagreement with such statement in any respect, and in the absence of such
notice, such statement shall be conclusively presumed to be correct unless the
parties mutually agree to an adjustment in writing.
Notwithstanding anything to the contrary herein, JPVC shall have no
obligation hereunder to any registered representative of Broker.
10. Broker shall indemnify and hold harmless JPVC and its affiliates from any
losses, claims, damages or liabilities, including reasonable attorney's fees to
which JPVC and its affiliates may be subject arising out of or resulting from
unauthorized use of Ensemble SL sales materials and for negligent, improper,
fraudulent, unsuitable, or unauthorized acts or omissions by Broker, its
principals, employees or representatives relating to solicitation of
applications for Ensemble SL.
Notwithstanding the forgoing, JPVC will indemnify and hold harmless Broker
from any losses, claims, damages or liabilities, including reasonable attorney's
fees which result from any untrue statement of any material fact contained in
the prospectus of Ensemble SL or any JPVC prepared sales material or advertising
material or omission to state a material fact in the Ensemble SL Prospectus,
statement of additional information or supplements thereto.
If any action or proceeding shall be brought against JPVC or Broker relating
to a policy sold pursuant to this agreement, the party against whom such action
or proceeding is brought shall give prompt written notice to the other party to
this agreement if a claim is intended to be asserted against such other party
with respect to indemnity against any loss or expense and such other party shall
be entitled to participate in the defense thereof at its own expense.
In the event of any dispute with a policyholder, JPVC shall have the right
to take such action as JPVC may in its sole discretion deem necessary to
promptly effect mitigation of damages or limitation of losses without obtaining
the prior consent of Broker.
JPVC shall the right to settle with any policyholder engaged in a dispute
with JPVC or Broker without the prior consent of Broker and without waiving or
electing to relinquish any rights or remedies JPVC may have against Broker.
Additionally, without limiting the forgoing indemnities, JPVC and Broker
each agree to indemnify and hold harmless the other against any breach of
representation, warranty or covenant herein by the indemnifying party.
The indemnification provisions of this agreement shall remain operative and
in full force and effect, regardless of the termination of this agreement and
shall survive any such termination.
11. Broker shall submit to JPVC, for written approval in advance of use, all
advertising, signs and sales promotion material involving the use of JPVC's name
and/or the sale of such policies.
4
<PAGE>
12. No relationship of principal and agent or partnership or joint venture
between the parties hereto is intended to be established and neither party shall
hold itself out as the agent, partner or joint venture of or with the other
party in any respect whatsoever. Except for this agreement, no other legal
relationship is intended between the parties.
13. This agreement may be terminated at any time by either party upon thirty
(30) days written notice to the other, and may be terminated immediately by JPVC
for cause. For purposes of this section 13, "cause" shall mean failure to
return money to clients where appropriate, failure to account for any money
received from or on behalf of JPVC, any fraud, misrepresentation or dishonesty
in any relationship with JPVC, its affiliates, or any past, present, or proposed
client, violation of any federal or state law or regulation, or violation of any
of the terms of this contract.
Notice of such termination shall be deemed to be given on the day mailed or
delivered by hand to an officer of either party. If mailed to JPVC, such notice
shall be address to the principal office of JPVC, currently One Granite Place,
Concord, New Hampshire 03301, and if mailed to the Broker, shall be addressed to
the last known address as shown on the records of JPVC.
14. If any dispute, disagreement or controversy shall arise in connection with
any interpretation of this agreement, its performance or nonperformance, or the
figures and calculations used, the parties shall make every effort to meet and
settle their dispute(s) in good faith informally. If the parties to this
agreement cannot agree on a written settlement to the dispute within fourteen
(14) days after it arises, or within a longer period agreed upon by the parties,
then the matter in controversy shall be settled by arbitration, in accordance
with the rules of the Board of Arbitration of the National Association of
Securities Dealers, Inc. The determination of the arbitrator(s), or a majority
of them, shall be final and binding on all parties and judgment upon the award
rendered by the arbitrator(s) may be entered in any state or federal court
having jurisdiction.
15. Broker may not assign this agreement without prior written approval of
JPVC.
16. This agreement is exclusively for and shall inure to the benefit of the
parties hereto, their respective heirs, legal representatives, successors and
assigns and shall not be deemed to create any rights for the benefit of third
parties.
17. This agreement is made in the State of New Hampshire, and all questions
concerning its validity, construction or otherwise shall be determined under the
laws of New Hampshire.
IN WITNESS WHEREOF, the parties hereto have executed the agreement in duplicate.
JEFFERSON PILOT VARIABLE CORPORATION BROKER
_____________________________________ _________________________________
By___________________________________ By_______________________________
Print Name___________________________ Print Name_______________________
Title________________________________ Title____________________________
Date_________________________________ Date_____________________________
5
<PAGE>
COMMISSION SCHEDULE E
Non-Participating Flexible Premium Variable Life Insurance Policies Issued by
Jefferson Pilot Financial Insurance Company ("JP Financial").
This Supplemental Commission Schedule is part of the Broker/Dealer Agreement
entered into by the Broker/Dealer ("Broker") and Jefferson Pilot Variable
Corporation ("JPVC"). This Schedule supersedes all previous Commission
Schedules.
Gross commissions on policies issued on applications personally written by
Registered Representatives of Broker are payable to Broker on premiums received
and earned by JPVC as follows:
Schedule I Schedule II
First Year 65% First Year 65%
(up to Target Premium) (up to Target Premium)
First Year 4% First Year 3%
(in excess of Target) (in excess of Target)
Renewal Years 2 - 15 4% Renewal Years 2 -10 3%
Renewal Years 16 & Later 0% Renewal Years 11 & Later 0%
Asset Based Commission:
Percentage of Account Value
Years 1 -10 0%
Years 11 & Later 0.25%
The schedules of Target premium are published by JP Financial in the brochures
giving the Guideline Premium for Non-Participating Flexible Premium Variable
Life (Ensemble SL). Such schedules are subject to change upon 30 days notice by
JP Financial.
6
<PAGE>
COMMISSION SCHEDULE
Year 1 65% of target premium
and 3% of excess premium
Years 2-10 3% of premium
Years 11-25 .20% of non-loaned assets
to threshold
.10% of non-loaned
assets above threshold
Years 26+ .10% of all non-loaned assets
<PAGE>
[LOGO] JEFFERSON PILOT
FINANCIAL
Jefferson Pilot Financial Insurance Company, One Granite Place, P.O. Box 515,
Concord, New Hampshire 03302
Jefferson Pilot Financial Insurance Company, a Stock company, will pay the Death
Benefit described on Page 11 to the Beneficiary on the death of the survivor of
the Insureds on receipt of due proof of the death of both Insureds while the
policy was in force.
This is a legal contract between the Owner and Jefferson Pilot Financial
Insurance Company. All payments and benefits will be payable subject to its
terms.
This is a Flexible Premium Variable Life Insurance Policy. The Specified Amount
may be decreased by the Owner. Net Premiums will be allocated to the General
Account or to one or more divisions of the Separate Account as defined on Page
3B and determined by the Owner.
THE POLICY'S ACCUMULATION VALUE IN EACH DIVISION OF THE SEPARATE ACCOUNT IS
BASED ON THE INVESTMENT EXPERIENCE OF THAT DIVISION AND MAY INCREASE OR DECREASE
DAILY. THE ACCUMULATION VALUE IS NOT GUARANTEED AS TO DOLLAR AMOUNT.
The policy's Accumulation Value in the General Account will earn interest daily
at a minimum guaranteed effective annual rate as shown on Page 3. Interest in
excess of the guaranteed rate may be applied in the calculation of the
Accumulation Value at such increased rates as the Company may determine.
THE AMOUNT OF DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY INCREASE OR
DECREASE UNDER THE CONDITIONS DESCRIBED HEREIN.
This policy is a legal contract between the Owner and Jefferson Pilot Financial
Insurance Company.
READ YOUR POLICY CAREFULLY
RIGHT TO CANCEL - Please examine this policy carefully. You may cancel this
policy by returning it to Our Home Office or to the agent through whom it was
purchased within (1)10 days after You receive it, (2)10 days after We mail or
deliver a notice of the right of withdrawal, or (3) 45 days after You sign the
application, whichever is later. This policy will then be deemed void from the
beginning and We will refund the premiums paid.
/s/ [SIGNATURE ILLEGIBLE] /s/ Robert A. REED
- --------------------------------- -----------------------------
President Secretary
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Joint Insureds John Doe
Jane Doe
Policy Number: 12345678
Adjustable Death Benefit Payable On The Death Of The Survivor Of The
Insureds No Death Benefit Payable On The Death Of The First Insured
Unless Rider Attached Premium Payments May be Made At Any Time And,
Within Limits, In Any Amount
The Specified Amount May Be Decreased
And Death Benefit Option May Be Changed
Additional Benefits, If Any, As Indicated On Page 3
Some Benefits Reflect Investment Results
Non-participating - No Dividends
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
POLICY SPECIFICATIONS PAGES........................... 3-4 POLICY VALUE PROVISIONS
DEFINITIONS............................................. 5 General Account Accumulation Value................. 13
General Account Interest Rate...................... 13
GENERAL PROVISIONS Separate Account Accumulation Values............... 13
Net Investment Factor.............................. 14
The Contract.......................................... 7 Monthly Deduction.................................. 14
Policy Changes........................................ 7 Cost of Insurance.................................. 14
Incontestibility...................................... 7 Cost of Insurance Rates............................ 14
Suicide............................................... 7 Changes in Interest and Cost of Insurance Rates.... 14
Misstatement of Age or Sex............................ 7 Monthly Accumulation Value Adjustment.............. 14
Assignment............................................ 7 Continuation of Insurance.......................... 15
Simultaneous Death.................................... 7 Basis of Computation............................... 15
Change of Owner or Beneficiary........................ 7
Death of Owner or Beneficiary......................... 8 SURRENDER AND WITHDRAWAL PROVISIONS
Proceeds.............................................. 8
Payment of Proceeds................................... 8 Surrender.......................................... 15
Postponement of Payment............................... 8 Surrender Charge................................... 15
Notice of First Death................................. 8 Withdrawals........................................ 15
Compliance with Internal Revenue Code................. 8
Modified Endowment.................................... 9 SEPARATE ACCOUNT PROVISIONS
Non-participating..................................... 9
Annual Report......................................... 9 Separate Account................................... 16
Illustration of Benefits and Values................... 9 Divisions.......................................... 16
Termination........................................... 9 Transfers.......................................... 17
Optional Features.................................. 17
PREMIUM PROVISIONS Dollar Cost Averaging.............................. 17
Automatic Portfolio Rebalancing.................... 18
Premium Payments...................................... 9 Addition, Deletion or Substitution of Investments.. 18
Minimum Premium....................................... 9
Planned Periodic Premium and Premium Frequency........10 POLICY LOAN PROVISIONS
Allocation of Net Premiums............................10 Policy Loans....................................... 19
Unscheduled Premiums..................................10 Types of Policy Loans (Type A and Type B).......... 19
Grace Period..........................................10 Policy Loan Interest............................... 19
Reinstatement.........................................11 Policy Loan Repayment.............................. 19
DEATH BENEFIT PROVISIONS PAYMENT OPTIONS
Death Benefit.........................................11 Election of an Option.............................. 20
Changes in Insurance Coverage.........................11 Supplementary Contract............................. 20
Interest........................................... 20
Withdrawal Value................................... 20
Death of Payee..................................... 20
Limitation on Rights of Payee and Claims of
Creditors........................................ 20
SETTLEMENT OPTIONS TABLES........................... 21
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C>
Insured: A -[JOHN DOE] Policy Number: [12345678)
Insured: B -[JANE DOE] Premium Frequency: [ANNUAL]
Owner: (JOHN DOE) Death Benefit: [OPTION I]
Issue Date: [09/01/1998]
Policy Date: [09/01/19981
Age/Sex atIssue: A -[35 MALE]
Age/Sex atIssue: B -[35 FEMALE]
Rating Class: A -[STANDARD - NON-SMOKER]
Rating Class: B -[STANDARD - NON-SMOKER]
</TABLE>
Beneficiary: AS STATED IN APPLICATION OR ENDORSEMENT ATTACHED
Joint and Last Survivor Flexible Premium Variable Life Insurance
Initial Planned Minimum Load Type of Loan
Specified Periodic Annual Basis Threshold
Amount: Premium: Premium: Amount: Amount:
$[l00,000] $[850.00] $[419.52] $[323.00] $[12,322.00]
No premium payment may be less than: $(250.00) or ($50.00) if paid by electronic
funds transfer.
Minimum Premium Period: The Minimum Premium Period begins on the Policy Date and
terminates on the policy anniversary at the end of policy year [5].
The Policy may terminate if either no premiums are paid following payment of the
initial premium or subsequent premiums are insufficient to continue the policy.
Changes in current values will also affect coverage.
Interest Rates:
The policy's Accumulation Value in the General Account will earn interest daily
at a minimum guaranteed effective annual rate of: 4.00%
The policy Accumulation Value held in the General Account for policy loan
collateral will earn interest daily at an effective rate of 4.00%.
Interest Rate Charged to Type A Policy Loans: 4.00%
Interest Rate Charged to Type B Policy Loans: 6.00%
Page 3
<PAGE>
Policy Expense Charges:
(1) State Premium Tax Charge: [2.5]% of each premium paid.
(2) Federal Deferred Acquisition Cost (DAC Tax) Charge: [1.25]% of each premium
paid.
(3) Monthly Administrative Charge: $10.00 per month.
(4) Cost or Insurance Charges: See Page 14.
(5) Surrender Charge on Withdrawal, surrender or decrease in Specified
Amount:See Page 15.
(6) Monthly Unit Expense Charge:
(a) for policy years one through ten is a charge equal to the greater of:
(i) .05 per $1,000 of Specified Amount; or
(ii) $15.00 per month.
(b) for policy years 11 and thereafter is a charge equal to the greater of:
(i) .02 per $1,000 of Specified Amount; or
(ii) $15.00 per month.
If the amount in (b) (i) is applied, it will be subject to a maximum of
$50.00 month.
(7) Monthly Acquisition Charge:
(a) for policy year one: (2.0] % of the Load Basis Amount.
(b) for policy year two: [1.0] % of the Load Basis Amount.
(8) Mortality & Expense Risk Charge:
(a) for policy years one through ten, is a charge not to exceed [.0034246]
daily on the assets in each division; this equals an annual rate of
[1.25]%; and
(b) for policy years eleven and thereafter, is a charge not to exceed
[.0023287]% daily on the assets in each division; this equals an annual
rate of [.85]%.
Basis of Computation:
Minimum Cash Values and Reserves in the General Account are based on the 1980
CSO Male or Female Mortality Tables with interest at 4% per year.
The method used in computing Cash Values and Reserves in the Separate Account is
in accordance with actuarial procedures that recognize the variable nature of
the Separate Account. The method used is such that if the Net Investment Factor,
less one, for all divisions of the Separate Account, at all times from the
Policy Date, is equal to an effective annual interest rate of 4%, then the Cash
Values and Reserves in the Account will be at least equal to the minimum Cash
Values and Reserves, which Separate have been required by the law of the state
in which this policy is delivered, of an equivalent policy in which all Net
Premiums have been allocated to the General Account.
Table of Surrender Charges Per 1,000 of Initial Specified Amount
<TABLE>
<CAPTION>
Charge For
Policy Year Full Surrender
<S> <C>
1 3.23
2 3.23
3 3.23
4 3.23
5 3.23
6 2.58
7 1.94
8 1.29
9 0.65
10 and thereafter 0.00
</TABLE>
Page 3A
<PAGE>
Separate Account: [JPF Separate Account C].
Funds: [Jefferson Pilot Variable Fund, Inc.], (Fidelity Variable
Insurance Products Fund), [Fidelity Variable Insurance
Products Fund II] [MFS Variable Insurance Trust], [Oppenheimer
Variable Account Funds]' [Templeton Variable Products Series
Fund]
While the Right to Cancel provision (see cover page) is in effect, all Net
Premiums received will be allocated to the General Account. On the Valuation
Date next following the twenty-fifth day from the Issue Date, the Accumulation
Value in the General Account will be allocated to the divisions of the Separate
Account if You have so specified. This transaction will be free of charge and
will not be considered a transfer.
Allocation of Net Premium:
<TABLE>
<S> <C>
[Jefferson Pilot Variable Fund, Inc.] (Fidelity Variable Insurance Products Fund II)
20 % [JPVF INTERNATIONAL] 0.0% [FIDELITY CONTRAFUND]
0.0% [JPVF WORLD GROWTH] 0.0% [INDEX 500]
0.0% [JPVF EMERGING GROWTH]
0.0% [JPVF GROWTH] [MFS Variable Insurance Trust)
0.0% [JPVF CAPITAL GROWTH] 20% (MFS RESEARCH)
0.0% [JPVF SMALL COMPANY] 0.0% [MFS UTILITIES)
0.0% [JPVF GROWTH & INCOME]
0.0%. [JPVF GLOBAL HARD ASSETS] (Oppenheimer Variable Account Funds)
0.0% [JPVF BALANCED] 20% [OPPENHEIMER STRATGBD]
0.0% [JPVF HIGH YIELD] 0.0%[OPPENHEIMER BOND]
0.0% [JPVF MONEY MARKET]
(Templeton Variable Products Series Fund]
20% [TEMPLETON INTL.]
(Fidelity Variable Insurance Products
Fund)
20% [FIDELITY GROWTH) 0.0% GENERAL ACCOUNT
0.0% [FIDELITY EQUITY-INC.)
</TABLE>
Withdrawal and Transfer Minimums and Charges:
Minimum amount for a withdrawal: $(500)
Minimum amount for a transfer: $(250)
Charge for each transfer $(50.00) However charge does not apply to the first
(12)transfers in any policy year.
Charge for each withdrawal: $[50.00)
Minimum Specified Amount after a withdrawal: $(100,000]
Minimum Division value or General Account value after a transfer: $(250.00)
Limitations on transfers from the General Account: Permitted once every 180 days
and limited to the lesser of:
(1) 25% of the Accumulation Value in the General Account not being held as loan
collateral; or
(2) $100,000
Policy Change Minimums
Minimum decrease in the Specified Amount: $ (25,000)
Minimum Specified Amount after a Change in Insurance Coverage: $ (100,000)
Page 3B
<PAGE>
Corridor Percentage Table
<TABLE>
<CAPTION>
Attained Attained
Age of Age of
Younger Corridor Younger Corridor
Insured Percentage Insured Percentage
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 and over 101
65 120
66 119
67 118
68 117
69 116
</TABLE>
Monthly Accumulation Value Adjustment Calculation Factors - See Page 14
Monthly Accumulation Value Adjustment Factor:
[ .0003333] Policy Years 2 - 10
[.0002500] Policy Years 11 and thereafter
Monthly Accumulation Value Adjustment Threshold: Is the Guideline Single Premium
for this policy at issue and is the same as is shown on Page 3 in the "Type A
Loan Threshold Amount", as defined in Section 7702 of the Internal Revenue Code
of 1986 entitled "Insurance Contracts Defined". If the Specified Amount
decreases, the threshold will not change.
Page 3C
<PAGE>
Table of Monthly Guaranteed Cost of Insurance Rates Per $1,000
Policy Number [12345678]
If a Rating Class description shown on page 3 is shown as RATED then the
mortality rates have been adjusted to include an additional amount for the
rating.
<TABLE>
<CAPTION>
Policy Monthly Policy Monthly Policy Monthly
Year Rate Year Rate Year Rate
<S> <C> <C> <C> <C> <C>
01 0.00029 26 0.24037 51 9.46627
02 0.00094 27 0.27889 52 10.68069
03 0.00174 28 0.32525 53 11.96749
04 0.00270 29 0.38191 54 13.32057
05 0.00390 30 0.44942 55 14.74117
06 0.00537 31 0.52806 56 16.23914
07 0.00720 32 0.61762 57 17.83495
08 0.00937 33 0.71799 58 19.57221
09 0.01195 34 0.82874 59 21.53283
10 0.01498 35 0.95407 60 23.93733
11 0.01858 36 1.09992 61 27.24194
12 0.02272 37 1.27352 62 32.37254
13 0.02754 38 1.48411 63 41.23097
14 0.03315 39 1.74000 64 57.81478
15 0.03974 40 2.04438 65 83.32685
16 0.04741 41 2.39683 66 and over 00.00000
17 0.05649 42 2.79602
18 0.06725 43 3.23899
19 0.08016 44 3.72491
20 0.09528 45 4.26351
21 0.11273 46 4.87221
22 0.13270 47 5.56854
23 0.15495 48 6.37273
24 0.17975 49 7.29843
25 0.20787 50 8.33404
</TABLE>
Page 4
<PAGE>
DEFINITIONS
Terms or Definitions We identify or define here are some of the terms used
throughout the contract. There are other terms which are explained or defined in
other parts of the text.
Accumulation Value - The Accumulation Value of the policy is equal to the total
of the policy's Accumulation Value in the General Account and the policy's
Accumulation Value in the divisions of the Separate Account.
Attained Age - Refers to the age nearest birthday of each Insured on the Policy
Date, plus the number of completed Policy Years. For purposes of determining
dates and values under the policy, the attained age of the Insured who dies
first will continue to increase each year.
Beneficiary - The person or persons named by You to receive the Death Benefit
proceeds upon the death of the survivor of the Insureds The Beneficiary is as
shown in the application unless later changed.
Cash Value - The Accumulation Value less any applicable Surrender Charge.
Death Benefit - The amount payable on the death of the survivor of the Insureds
while the policy is in force. It is explained fully in the Death Benefit
section.
Debt - The principal of any loan outstanding against the policy, plus any
accrued loan interest which has not been paid.
General Account - All of the assets of Ours other than those held in separate
investment accounts.
Home Office - Our principal place of business.
Insureds - The persons named as the Insureds on Page 3. The Insureds may be
other than the Owner.
Irrevocable Beneficiary - A Beneficiary, named by You as irrevocable, whose
written consent is required for You to exercise any right specified in the
policy.
Issue Date - This is the date the policy is issued at Our Home Office and is
stated on Page 3.
Monthly Anniversary Day - The same day in each month as the Policy Date.
Net Premium - Equals premiums paid less the State Premium Tax Charge and the
Federal Deferred Acquisition Cost Charge as shown on Page 3A.
Notice, Election, Request - Writings satisfactory to Us that have been received
at Our Home Office. We will not be held responsible for any payment or other
action We have taken before Your writings are recorded at Our Home Office.
Policy Date - The date as shown on Page 3 which is the date requested by the
Owner. If no date is requested, it shall be the Issue Date. The Policy Date is
the date from which Policy Years, policy months, policy anniversaries and
Monthly Anniversary Days will be determined. If the Policy Date should fall on
the 29th, 30th or 31st of a month, the Policy Date will be the 1st of the
following month.
Policy Year - The first Policy Year is the twelve month period following the
Policy Date. Each twelve month period thereafter makes up the next Policy Year.
Specified Amount - The face amount of the policy as selected by You. This amount
may decrease subject to the terms of the policy. The Death Benefit is based on
the Specified Amount as described in the Death Benefit section.
Surrender Charge - A charge to the Accumulation Value in the event of surrender,
Withdrawal or a decrease in Specified Amount.
Surrender Value - The Cash Value less any Debt.
Valuation Date - A day on which the net asset value of the shares of any of the
portfolios and unit values of the divisions are determined. Valuation Dates
currently occur on each day on which the New York Stock Exchange is open for
trading and We and the investment advisor of the Funds are open for business.
<PAGE>
DEFINITIONS (CONTINUED)
Valuation Period - The interval between two consecutive Valuation Dates,
commencing after the close of regular trading on the New York Stock Exchange on
each Valuation Date and ending at the application. While either Insured is
alive, the Owner close of regular trading on the New York Stock Exchange on the
next succeeding Valuation Date.
We, Us, Our - Jefferson Pilot Financial Insurance Company.
Withdrawal - A payment to You of some portion of the Cash Value accompanied by a
reduction to the Accumulation Value, Specified Amount (if Death Benefit is
Option II), Surrender Charge and Death Benefit.
You, Your - The Owner of the policy as shown in the Application. While either
Insured is alive, the Owner may exercise every right and option and receive
every benefit provided by the policy. These right, however, are subject to the
written consent of any Irrevocable Beneficiary.
Younger Insured's Attained Age 100 - The policy anniversary nearest the younger
Insured's Attained Age 100, whether living or dead.
Page 6
<PAGE>
GENERAL PROVISIONS
The Contract - The Policy is issued in consideration of the applications and
payment of the initial premium. The policy, the attached copy of the application
and/or endorsements, and any attached supplemental applications and riders
form the entire contract. Statements contained in the application are, in the
absence of fraud, considered representations and not warranties. No statement
will be used to void the policy or to deny a claim unless it is contained in the
application.
Policy Changes - Only one of Our authorized Officers can change the terms of the
policy. A change must be in writing.
Incontestability - We will not contest the policy after it has been in force
during the lifetime of both Insureds for a period of two years from the Issue
Date or the effective date of Reinstatement.
If We cancel coverage for the Initial Specified Amount, We will refund to You
all premiums paid less any Debt and Withdrawals paid out.
If the policy is reinstated, the contestable period will start over again
beginning on the Reinstatement date, but only for statements made in the
application for Reinstatement.
Suicide - If either Insured commits suicide, while sane or insane, within two
years from the Issue Date, Our only liability will be a refund of premiums paid
without interest less any Debt and Withdrawals.
Misstatement of Age or Sex - If the age or sex of either lnsured has been
misstated in the application, We will adjust the proceeds to reflect the correct
age or sex. In such event, the Death Benefit We will pay will be equal to:
(1) The Accumulation Value on the date of death of the survivor of the Insureds
less any outstanding Debt; plus
(2) The Death Benefit, less the Accumulation Value on the date of death of the
survivor of the Insureds multiplied by the ratio of (a) the cost of
insurance actually deducted at the beginning of the policy month in which
death occurs, to (b) the cost of insurance that should have been deducted
based on the correct age and sex.
If either Insured's age or sex has been misstated in the application the amount
payable under any rider by reason of death of either Insured shall be the amount
of insurance which the rider cost, for the policy month purchased had the cost
of the benefits provided under the rider been calculated using the correct age
or sex.
If prior to the death of either Insured, it is found that either Insured's age
or sex has been misstated in the application for the policy or a rider, the
Accumulation Value and Cash Value will be recalculated from issue, using
mortality charges based on the correct age or sex.
Assignment - You may assign the policy. We are not bound by an assignment unless
We receive notice of it at Our Home Office prior to the payment of any benefits
by Us. Policy rights and benefits are subject to any assignment. We are not
obliged to see that an assignment is valid or sufficient.
Simultaneous Death - When the Insureds die within a period of 120 hours of each
other and the order of death is unknown the amount determined to be payable as a
result of their deaths will be divided equally between both Insureds
beneficiaries. When the survivor of the Insureds and a named Beneficiary die
within a period of 120 hours of each other and the order of death is unknown, We
shall assume that the Beneficiary died before the survivor of the Insureds.
Change of Owner or Beneficiary - While either Insured equal to: is alive, the
Owner or Beneficiary may be changed. Any change will take effect as of the date
the request is signed. Neither Insured needs to be alive when the requested
change is recorded at Our Home Office.
<PAGE>
GENERAL PROVISIONS (CONTINUED)
Death of Owner or Beneficiary - If the Insureds are joint owners of the policy,
after the death of the first Insured, the Survivor will be the sole owner unless
otherwise provided. If an Owner other than an Insured dies while an Insured is
living, unless otherwise provided all rights and options of the Owner belong to
the Owner's executors and administrators. Unless otherwise provided, the
interest of any Beneficiary, including any Irrevocable Beneficiary, who dies
before the survivor of the Insureds will belong to the Owner.
Proceeds - Is the amount payable on surrender or on the death of the survivor of
the Insureds Proceeds payable on the date of surrender will be the Surrender
Value. Proceeds payable on the death of the survivor of the Insureds will be in
accordance with the Death Benefit provisions. Proceeds are subject to the
adjustments provided in the Incontestability, Suicide and Misstatement of Age or
Sex provisions and the restrictions below.
Payment of Proceeds - Death Benefit proceeds or Surrender Value proceeds may be
paid in one sum or under Our payment options. Before proceeds are paid they will
be used to pay the interest of anyone to whom the policy has been assigned.
Loans and assignments will be paid in one sum.
If there is no Beneficiary designated or alive at the time of the death of the
survivor of the Insureds, We will pay the proceeds to You or to Your estate.
If the Death Benefit proceeds are not paid in one sum or applied under a payment
option within 30 days after We receive due proof of death of the survivor of the
Insureds, We will pay interest. Interest will be paid at a rate declared by Us
in effect on the date of payment, calculated from the date of death to the date
of payment. If state law requires payment of a greater amount, We will pay that
amount.
To the extent allowed by law, all payments under the policy will be free from
creditor claims or legal process.
Postponement of Payment - We will usually pay any amounts payable on surrender,
Withdrawal or policy loan allocated to the Separate Account within 7 days after
written notice is received. We will usually pay any Death Benefit proceeds
within seven days after We receive due proof of the death of the survivor of the
Insureds Payment of any amount payable on surrender, Withdrawal, policy loan or
death may be postponed whenever. (1) The New York Stock Exchange is closed other
than customary week-end and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission;
(2) The Securities and Exchange Commission, by order, permits postponement for
the protection of policyowners; or (3) An emergency exists as determined by the
Securities and Exchange Commission, as a result of which disposal of securities
is not reasonably practicable or it is not reasonably practicable to determine
the value of the net assets of the Separate Account.
Transfers may also be postponed under the above circumstances.
We will defer the portion of any transfer, amount payable on surrender,
Withdrawal or policy loan from the General Account for not more than 6 months.
However, no payment from the General Account to pay premiums on policies with Us
will be deferred.
Notice of First Death - Due proof of the death of the first Insured to die must
be given to Us as soon after the death occurs as is reasonably possible.
Compliance with the Internal Revenue Code - The policy is intended to qualify as
life insurance under the Internal Revenue Code. The Death Benefit provided by
the policy is intended to qualify for the Federal income tax exclusion. If at
any time the premium paid under the policy exceeds the amount allowable for such
qualification, You will be provided with written notification within 60 days and
You may request a refund of the excess premium. If We do not receive Your
request to refund the excess premium, such amount will be held in a separate
deposit fund and will be credited with the current interest rate.
We also reserve the right to refuse to make any change in the Specified Amount
or the Death Benefit Option or any other change if such change would cause the
policy to fail to qualify as life insurance under the Internal Revenue Code.
Page 8
<PAGE>
GENERAL PROVISIONS (CONTINUED)
Modified Endowment - The policy will be allowed to become a Modified Endowment
contract under the Internal Revenue Code only with Your consent. Otherwise, if
at any time the premiums paid under the policy exceed the limit for avoiding
modified contract status You will be provided with written notification within
60 days and You may request a refund of the excess premium. If We do not receive
Your request to refund the excess premium, such amount will be held in a
separate deposit fund and will be credited with the current interest rate.
Non-participating - The policy is non-participating meaning it does not share in
Our profits. You will not receive any dividends.
Annual Report - At least once each Policy Year, We will send You a report
showing at least the current Cash Value, the value of the General Account and
each division of the Separate Account applicable to the policy, premiums paid,
incurred charges and any outstanding policy loans for the period covered by the
report. We will also furnish any other reports and information required by
applicable law, rules and regulations.
Illustration of Benefits and Values - We will provide illustrations of Death
Benefits and Cash Values at any time after the Policy Date upon Your written
request. This illustration will be based on the existing Cash Value at the time
of request and maximum cost of insurance rates. Additional illustrations may be
made based on the existing Cash Value and current mortality assumptions. For
these additional reports, We may charge a fee not to exceed $50.00.
Termination - All coverage under the policy will end on the date any one of the
following events occurs:
(1) You request in writing that coverage end;
(2) The survivor of the Insureds dies;
(3) The Grace Period ends without payment of a sufficient premium.
PREMIUM PROVISIONS
Premium Payments - The initial premium is due and payable on the Policy Date and
is payable on or before the delivery of the policy. The initial premium may not
be less than the minimum initial premium. The minimum initial premium is equal
to the Minimum Annual Premium, as shown on Page 3, divided by 4. No premium
payment may be less than as shown on Page 3. After the initial premium is paid
any subsequent premiums can be paid at any time. All premiums are payable in
advance at Our Home Office or to Our authorized agent in exchange for a receipt.
This receipt must be signed by an authorized Officer of Ours.
Minimum Premium - The Minimum Annual Premium and the period for which it applies
are shown on Page 3. The policy may terminate in accordance with the
Continuation of Insurance provision during the period shown if the cumulative
premium paid is less than the cumulative Minimum Premium due. The cumulative
premium paid is equal to the sum of all premiums paid under the policy since the
Policy Date, less any Debt and Withdrawals. The cumulative Minimum Premium due
is equal to the Minimum Annual Premium shown on Page 3, divided by twelve, and
multiplied by the number of completed policy months. During the first 3 policy
months the cumulative Minimum Premium requirement is met through payment of the
minimum initial premium on the Policy Date.
The addition of riders may increase the amount of the Minimum Annual Premium.
Decreases in the Specified Amount or the deletion of riders will have no effect
on the amount of Minimum Annual Premium. If the policy terminates in accordance
with the Grace Period provision and is subsequently reinstated, this provision
will no longer apply.
<PAGE>
PREMIUM PROVISIONS (CONTINUED)
Planned Periodic Premium and Premium Frequency - The Planned Periodic Premium
and Premium Frequency, as shown on Page 3, are selected by You. The Planned
Periodic Premium is the amount of premium You intend to pay. The Premium
Frequency is how often You intend to pay the Planned Periodic Premium. Payment
of the Planned Periodic Premium is Your option.
We will send You Planned Periodic Premium payment reminder notices. If the mode
of premium payment is preauthorized check, government allotment or payroll
deduction, notice of any Planned Periodic Premium due will not be sent.
Changes in Premium Frequency and increases or decreases in the Planned Periodic
Premium may be made by You by providing Us with written notification. We reserve
the right to limit the amount of any increase. No premium payment may be less
than as shown on Page 3.
Payment of a Planned Periodic Premium may not prevent the policy from
terminating. Failure to pay a Planned Periodic Premium will not, in itself,
cause the policy to terminate. The policy will terminate only if the conditions
occur as described in the Grace Period provision.
Planned Periodic Premium payments may be made at any time prior to the Younger
Insured's Attained Age 100.
Allocation of Net Premiums - You will determine the allocation of the Net
Premiums among the General Account and the divisions of the Separate Account.
The minimum percentage that may be allocated to any of these accounts is 5%.
Unscheduled Premiums - Premium payments in addition to the Planned Periodic
Premium may be made at any time prior to the Younger Insured's Attained Age 100.
We reserve the right to limit the amount of additional premium payments.
If there is an existing policy loan, premium payments in the amount of the
Planned Periodic Premium, received at the Premium Frequency, will be applied as
premium. Premium payments in excess of the Planned Periodic Premium or premium
payments received other than at the Premium Frequency will first be applied as
policy loan repayments, then as premium when the Debt is repaid.
Grace Period - If on a Monthly Anniversary Day, the conditions described in the
Continuation of Insurance provision have not been met, a Grace Period of 51 days
will be permitted for payment of the minimum amount needed to continue the
policy. We will send a notice at the start of the Grace Period to You at Your
last known address and to any assignee of record. The Grace Period will end 51
days after We mail the notice.
If the policy enters the Grace Period during the Minimum Premium period because
the conditions described in paragraph (1) of the Continuation of Insurance
Provision have not been met on a Monthly Anniversary Day, then We will require
payment of at least the cumulative Minimum Premium amount needed to continue the
policy.
If the policy enters the Grace Period at any time after the Minimum Premium
period then We will require payment of any overdue monthly deductions due and
unpaid during the Grace Period and any additional amount required to restore the
Surrender Value to an amount sufficient to cover the cost of a monthly deduction
for the month following the end of the Grace Period. If the minimum amount
needed is not provided, the policy will terminate at the end of such period.
However, coverage will not end sooner than 30 days after We have mailed a notice
to You and any assignee of record, at the last known address. If the survivor of
the Insureds dies during the Grace Period. We will deduct any amount due and
unpaid during the Grace Period from the proceeds of the policy.
Page 10
<PAGE>
PREMIUM PROVISIONS (CONTINUED)
Reinstatement - You may apply to reinstate the policy after it has terminated.
We will reinstate the policy if
We receive:
(1) Your written request for reinstatement within five years after the end of
the Grace Period and prior to the Younger Insured's Attained Age 100;
(2) satisfactory proof that the Insureds or the survivor of the Insureds are
living and are insurable at the original rating classes or class;
(3) payment of a premium large enough, after deduction of any policy expense
charges, to restore the Cash Value to an amount sufficient to cover the
cost of monthly deductions for at least 3 policy months following the
effective date of reinstatement; and
(4) payment or reinstatement of any Debt against the policy which existed on
the date of termination.
The effective date of a reinstated policy or the Reinstatement Date is the date
We approve the application for reinstatement. The Accumulation Value or the
policy on the Reinstatement Date shall be the Accumulation Value on the date of
termination plus the premium received to reinstate the policy. Any Surrender
Charges in effect on reinstatement shall be as defined in the Surrender Charge
provision based on the original Policy Date. If a policy terminates and is
subsequently reinstated the Minimum Premium provision will no longer apply.
DEATH BENEFIT PROVISIONS
Death Benefit - The Death Benefit of the policy will be as defined under one of
the options below. The Death Benefit Option for the policy is as shown on Page
3. Date of death means the date of death of the survivor of the Insureds
Option I - Under Option I, the Death Benefit shall be the greater of:
(1) the Specified Amount; or
(2) the Accumulation Value on the date of death multiplied by the corridor
percentage.
Option II - Under Option II, the Death Benefit shall be equal to the Specified
Amount plus the Accumulation Value on the date of death. However, the Death
Benefit can never be less than the Accumulation Value on the date of death
multiplied by the corridor percentage as shown on Page 3C.
Under either option, the Death Benefit will be reduced by any Debt on the date
of death. The Accumulation Value at the beginning of the month of death used in
calculating the Death Benefit above is after subtracting all parts of the
monthly deduction for the month except for the cost of insurance.
If the policy is in force at the Younger Insured's Attained Age 100, the
Specified Amount and Death Benefit Option are subject to change automatically as
described below in the Changes in Insurance Coverage provision.
Changes in Insurance Coverage - Upon written request, the insurance coverage may
be changed at any time after the first policy anniversary. The changes which can
be made are:
(1) a decrease in the Specified Amount;
(2) a change in the existing Death Benefit Option.
Any change is subject to the following conditions:
(1) Any decrease will become effective on the Monthly Anniversary Day that
coincides with or next follows Our receipt of the request. At least twelve
months must elapse between decreases.
(2) Any change approved by Us will become effective on the effective date shown
in the Supplemental Policy Specifications Page subject to deduction of the
first month's cost of insurance from the Accumulation Value of the policy.
(3) The minimum Specified Amount which must be in effect at any time is as
shown on Page 3B.
(4) Any decrease in the Specified Amount must be for an amount not less than as
shown on Page 3B.
<PAGE>
DEATH BENEFIT PROVISIONS (CONTINUED)
Changes in Insurance Coverage (Cont'd) - You may request in writing to change
the Death Benefit Option. If Your request is to change from Option I to Option
II, the Specified Amount will be decreased by the amount of the Accumulation
Value. If the request is to change from Option II to Option I, the Specified
Amount will be increased by the amount of Accumulation Value. Evidence of
insurability satisfactory to Us will be required on a change from Option I to
Option II. The effective date of change shall be the Monthly Anniversary Day
that coincides with or next follows the day the request for change is received.
If the policy is in force at the Younger lnsured's Attained Age 100, the
following will occur:
(1) the Specified Amount will be set equal to the Accumulation Value and the
Death Benefit Option will be set to Option I. Thereafter the Specified
Amount will be equal to the amount of any Accumulation Value. The Death
Benefit may not be changed after that date;
(2) items (2) and (3) of the Monthly Deduction provision and the Monthly
Accumulation Value Adjustment provision will no longer apply;
(3) no further premiums will be accepted.
Page 12
<PAGE>
POLICY VALUE PROVISIONS
General Account Accumulation Value - The Accumulation Value in the General
Account on the Policy Date is equal to the portion of the Net Premium which has
been paid and allocated to the General Account, less the portion of the first
monthly deduction allocated to the General Account.
On each Monthly Anniversary Day, the Accumulation Value in the General Account
is equal to (1) plus (2) plus (3) plus (4) plus (5) minus (6) minus (7) minus
(8) where:
(1) is the Accumulation Value in the General Account on the preceding Monthly
Anniversary Day;
(2) is one month's interest on item (1);
(3) is any Net Premium received since the preceding Monthly Anniversary Day
plus interest from the date the Net Premium is received to the Monthly
Anniversary Day;
(4) is any Monthly Accumulation Value Adjustment amount plus one month's
interest;
(5) is the sum of all Accumulation Values transferred to the General Account
from a division of the Separate Account since the preceding Monthly
Anniversary Day plus interest from the date the Accumulation Value is
transferred to the Monthly Anniversary Day;
(6) is the sum of all Accumulation Values transferred from the General Account
to a division of the Separate Account since the preceding Monthly
Anniversary Day and interest from the date the Accumulation Value is
transferred to the Monthly Anniversary Day;
(7) is all Withdrawals from the General Account since the preceding Monthly
Anniversary Day plus interest from the date of Withdrawal to the Monthly
Anniversary Day; and
(8) is the portion of the monthly deduction allocated to the Accumulation Value
in the General Account to cover the policy month following the Monthly
Anniversary Day.
On any date other than a Monthly Anniversary Day, the Accumulation Value will be
calculated on a consistent basis.
General Account Interest Rate - The Accumulation Value in the General Account
will earn interest daily at the guaranteed minimum effective annual rate as
shown on Page 3. Interest in excess of the guaranteed minimum rate may be
applied in the calculation of the Accumulation Value at such increased rates as
We may determine. The policy's Accumulation Value held in the General Account
for policy loan collateral will earn interest daily at the effective annual rate
as shown on Page 3.
Separate Account Accumulation Values - The Accumulation Value in each division
on the Policy Date is equal to the portion of the Net Premium which has been
paid and allocated to that division, less the portion of the first monthly
deduction allocated to the policy's Accumulation Value in that division.
At the end of each Valuation Period after the Policy Date, the policy's
Accumulation Value in a division is equal to (1) plus (2) plus (3) minus (4)
minus (5) where:
(1) is the Accumulation Value in the division on the preceding Valuation Date
multiplied by the Net Investment Factor for the current Valuation Period;
(2) is any Net Premium received during the current Valuation Period which is
allocated to the division;
(3) is all Accumulation Values transferred to the division from another
division or the General Account during the current Valuation Period;
(4) is all Accumulation Values transferred from the division to another
division or the General Account and Accumulation Values transferred to
secure a policy Debt during the current Valuation Period; and
(5) is all Withdrawals from the division during the current Valuation Period.
In addition, whenever a Valuation Period includes the Monthly Anniversary Day,
the Accumulation Value at the end of such period is reduced by the portion of
the monthly deduction allocated to the division and increased by any Monthly
Accumulation Value Adjustment amount.
Net Investment Factor - We calculate the Net Investment Factor for a Valuation
Period for each division by dividing (1) by (2) and subtracting (3) from the
result, where:
(1) is the sum of:
(a) the net asset value of a Fund share held in the Separate Account for
that division determined at the end of the current Valuation Period,
plus
(b) the per share amount of any dividend or capital gain distributions
made for shares held in the Separate Account for that division if the
ex-dividend date occurs during the Valuation Period;
(2) is the net asset value of a Fund share held in the Separate Account for
that division determined as of the end of the preceding Valuation Period;
and
(3) is the daily charge representing the Mortality & Expense Risk Charge as
shown on Page 3A. This charge is equal, on an annual basis, to the
percentage shown on Page 3A of the daily net asset value of Fund shares
held in the Separate Account for that division.
The Net Investment Factor may be greater than, less than, or equal to 1. This
being the case, values in a division may increase or decrease from Valuation
Period to Valuation Period.
<PAGE>
POLICY VALUE PROVISIONS (CONTINUED)
Monthly Deduction - The monthly deduction for a policy month shall be calculated
as (1) plus (2) plus (3) plus (4) where:
(1) is the Monthly Administrative Charge shown on Page 3A. If You already own a
policy on the same plan of insurance with Us, We will waive the Monthly
Administrative Charge for this policy while a Monthly Administrative Charge
is being paid on Your other policy with Us, provided the Life Insureds are
the same on both policies.
(2) is the cost of insurance described herein and the cost of additional
benefits provided by rider for the policy month;
(3) is the Monthly Unit Expense Charge shown on Page 3A; and
(4) is the Monthly Acquisition Charge shown on Page 3A.
You may specify how the monthly deduction for a policy month will be allocated
among the General Account or a division of the Separate Account. If not
specified, the monthly deduction for a policy month will be allocated among the
General Account and the divisions of the Separate Account in the same proportion
that the Accumulation Value in the General Account less and Debt and in each
division bears to the total Accumulation Value of the policy, less any Debt at
the beginning of the policy month.
Cost of Insurance - The cost of insurance is determined on a monthly basis. The
cost of insurance is calculated as (1), multiplied by the result of (2) minus
(3), where:
(1) is the cost of insurance rate as described in the Cost of Insurance Rates
provision;
(2) is the Death Benefit at the beginning of the policy month, divided by
1.0032737;
(3) is the Accumulation Value at the beginning of the policy month, prior to
the monthly deduction for the cost of insurance.
Cost of Insurance Rates - The monthly cost of insurance rate is based on the
Policy Year and the sex and rating class or classes of the Insureds. Monthly
cost of insurance rates will be determined by Us based upon future expectations
including charges for mortality experience, a provision for amortization of
sales charges, reinsurance costs and other administrative charges.
Changes in Interest and Cost of Insurance Rates - Changes in the interest rate
in excess of the rate guaranteed to be credited to the General Account and
monthly cost of insurance rates will be based upon changes in future
expectations as to investment earnings, mortality experience, persistency,
expenses (including reinsurance costs) and federal income tax law (except taxes
related to deferred acquisition costs).
Any change in cost of insurance rates will apply to all pairs of Insureds of the
same ages, class or classes and duration. However, the cost of insurance rates
can never be greater than those shown in the Table of Monthly Guaranteed Cost of
Insurance Rates on Page 4.
Such guaranteed maximum rates are based on the 1980 CSO Male/Female Mortality
Tables with appropriate increases for rated risks.
Monthly Accumulation Value Adjustment - A Monthly Accumulation Value Adjustment
will be calculated at the beginning of the second Policy Year and in each
succeeding Policy Year. The adjustment will be a monthly amount that is
allocated among the General Account and the divisions of the Separate Account
proportionately to the allocation of Net Premiums. The adjustment is calculated
as (1) multiplied by the result of (2) plus (3) minus (4), but not less than
zero, where:
(1) is the Monthly Accumulation Value Adjustment Factor as shown on Page 3C.
This factor varies by Policy Year;
(2) is the Accumulation Value in the Separate Account at the beginning of the
Policy Year;
(3) is the outstanding Type B Loan balance at the beginning of the Policy Year;
and,
(4) is the Monthly Accumulation Value Adjustment Threshold as specified on Page
3C.
Page 4
<PAGE>
POLICY VALUE PROVISIONS (CONTINUED)
Continuation of Insurance - The policy and all its riders will continue in force
according to the terms of coverage as long as the Surrender Value is sufficient
to cover the monthly deduction. If, during the Minimum Premium period, the
Surrender Value is not sufficient, then the policy and all riders will continue
in force as long as:
(1) the cumulative Minimum Premium requirement has been met.
Otherwise the policy will terminate according to the Grace Period provision. If
premiums are discontinued on any date, the value on that date will be used to
provide insurance under this provision.
Basis of Computation - The basis of computation for minimum cash values and
reserves are fully explained on Page 3A.
Such guaranteed maximum rates are based on the 1980 CSO Male/Female Mortality
Tables with appropriate increases for rated risks.
SURRENDER AND WITHDRAWAL PROVISIONS
Surrender - Upon written request and while either Insured is living. You may
surrender the policy for the Surrender Value.
The amount payable will be the Surrender Value as of the date We receive Your
written request. Should the death of the survivor of the Insureds occur after
the date of written request but prior to the date We receive the written
request, the surrender request will be considered void and the terms of the
Death Benefit provisions will apply.
Surrender Charge - The charge for surrender of the policy will be the amount
shown on Page 3A for the number of completed policy months preceding surrender.
There will be a partial charge if there is a decrease in the Specified Amount
while there is a surrender charge in effect.
Surrender charges are computed based on the number of thousands of Specified
Amount. The partial charge for a decrease in Specified Amount will be based on
the per thousand charge for the number of thousands of the decrease.
A new schedule of surrender charges will be provided after a change in such
charges.
Withdrawals - Upon written request You may make a Withdrawal from the policy.
Any Withdrawal is subject to the following conditions:
(1) The amount withdrawn may not exceed the Surrender Value;
(2) The minimum amount that may be withdrawn is shown on Page 3B;
(3) A charge as shown on Page 3B will be deducted from the amount of each
Withdrawal;
(4) The Accumulation Value will be reduced by the sum of the Withdrawal and a
prorata portion of the Surrender Charge in effect on the date of the
Withdrawal. The remaining Accumulation Value and schedule of surrender
charges will be determined by multiplying each of these values by a
numerical factor. This numerical factor is equal to:
Amount of Withdrawal
1 - ----------------------------------------
Cash Value Immediately Before Withdrawal
(5) The Death Benefit will be reduced by an amount equal to the reduction in
the Accumulation Value. This will result in a reduction of the Specified
Amount if the Death Benefit is Option I by an amount equal to the reduction
in the Accumulation Value. The Specified Amount remaining in force after
any Withdrawal must be as shown on Page 3B.
You may allocate the Withdrawal among the General Account and the divisions of
the Separate Account.
If You do not specify the allocation, then the Withdrawal will be allocated
among the General Account and the divisions of the Separate Account in the same
proportion that the Accumulation Value in the General Account, less any Debt,
and the Accumulation Value in each division bears to the total Accumulation
Value of the policy, less any Debt, on the date of Withdrawal.
<PAGE>
SEPARATE ACCOUNT PROVISIONS
Separate Account - The variable benefits under the policy are provided through
investments in the Separate Account, as shown on Page 3B. We established the
Separate Account as a separate investment account to support variable life
insurance contracts. We will not allocate assets to the Separate Account to
support the operation of any contracts or policies that are not variable life
insurance.
The assets of the Separate Account are owned by Us. However, these assets are
not part of Our General Account. Income, gains and losses, whether or not
realized, from assets allocated to the Separate Account will be credited to or
charged against the account without regard to Our other income, gains or losses.
Assets equal to the reserves and other liabilities of the Separate Account will
not be charged with liabilities that arise from any other business We may
conduct. Such assets shall not be available to general creditors of Ours in the
event of Our insolvency to the full extent permitted by applicable law. We shall
have the right to transfer to Our General Account any assets of the Separate
Account which are in excess of such reserves and other policy liabilities.
The Separate Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940. The
Separate Account is also subject to the laws of the State of New Hampshire which
regulate the operations of insurance companies incorporated in New Hampshire.
The investment policy of the Separate Account will not be changed without the
approval of the Insurance Commissioner of New Hampshire. The approval process is
on file with the Insurance Commissioner of the state in which the policy was
delivered.
Divisions - The Separate Account has several divisions. Each division will buy
shares of a separate series of the Funds as defined on Page 3B. Each series
represents a separate investment portfolio of the Funds. All divisions of the
Separate Account are shown on Page 3B. You will determine the percentage of Net
Premiums which will be allocated to each division. No less than 5% of the Net
Premium may be allocated to any one account. Allocation percentages must be zero
or a whole number not greater than 100. The sum of the Net Premium allocation
percentages must equal 100.
Income, gains and losses, whether or not realized, from the assets of the
Separate Account are credited to or charged against that division without regard
to income, gains or losses in other divisions of the Separate Account or in the
General Account.
We will value the assets of each division of the Separate Account at the end of
each Valuation Period.
Page 16
<PAGE>
SEPARATE ACCOUNT PROVISIONS (CONT'D)
Transfers - You may transfer amounts between the General Account and the
divisions of the Separate Account in a form and manner acceptable to Us. The
amount available for transfer from the General Account or a division is the
value of the General Account or the division as of the end of the Valuation
Period during which We receive all the requirements for the transaction. The
minimum amount that may be transferred and the minimum amount that must remain
in the General Account and in each division after the transfer is specified on
Page 38. No amounts under this minimum amount may be transferred out of any
division of the Separate Account unless such lesser amount constitutes the
entire balance. A transfer charge as specified on Page 38 will be imposed each
time amounts are transferred, except with respect to policy loans and the first
12 transfers of each Policy Year. The transfer charge will be deducted from the
amount that is transferred. We will make transfers so that the Accumulation
Value on the date of transfer will not be affected by the transfer except to the
extent of the transfer charge. You may make up to 20 transfers per Policy Year.
We may revoke or modify the transfer privilege at any time.
As long as any portion of the policy's Accumulation Value is allocated to a
division of the Separate Account, the policy's Accumulation Value and Cash Value
will reflect the investment performance of the chosen division(s) of the
Separate Account. The Death Benefit may also reflect the performance of the
chosen division(s) of the Separate Account.
At any time, you may transfer 100% of the policy's Accumulation Value to the
General Account. While 100% of the policy's Accumulation Value is allocated to
the General Account, minimum benefits for the policy will be fixed and
guaranteed.
No transfer charge will be imposed for a transfer of the total Accumulation
Value in the Separate Account to the General Account. However, any transfer from
the General Account to the division(s) of the Separate Account will be subject
to the transfer charge.
Optional Features - Dollar Cost Averaging and Automatic Portfolio Rebalancing
are two optional features available under the policy. You may not elect to have
Dollar Cost Averaging and Automatic Portfolio Rebalancing at the same time.
Transfers and/or adjustments pursuant to either of these features will occur
on the Monthly Anniversary Day in the month in which the transaction is to take
place or the next succeeding business day if the Monthly Anniversary Day falls
on a holiday or a weekend. The applicable authorization form must be on file
with Us before either feature may begin. Neither feature guarantees profits nor
protects against losses. These features are currently available at no charge,
however, We reserve the right to assess a charge to either or both of these
features, no greater than cost and with 30 days advance notice to you. We
reserve the right to modify the terms and conditions of these features upon 30
days advance notice to you.
Dollar Cost Averaging - Under this feature, You deposit a "Designated Amount,"
subject to a minimum of $3,000, into a "Repository Account" (Money Market
Division of the Separate Account or the General Account) and elect to have a
specified "Periodic Transfer Amount" automatically transferred to one or more
divisions of the Separate Account on a monthly, quarterly or semi-annual basis.
This feature allows You to systematically allocate Net Premiums to divisions of
the Separate Account at various prices which may be higher or lower than the
price You would pay if You allocated the entire amount at one time and at one
price. Each Periodic Transfer Amount is subject to a minimum of $250. A minimum
of 5% of the Periodic Transfer Amount must be transferred to any specified
division. We reserve the right to change these minimum amounts at Our
discretion. If a transfer would reduce Accumulation Value in the Repository
Account to less than the Periodic Transfer Amount, We reserve the right to
include such remaining Accumulation Value in the amount transferred.
The feature will continue until You give notification of cancellation of the
feature.
<PAGE>
SEPARATE ACCOUNT PROVISIONS (CONT'D)
Automatic Portfolio Rebalancing - This feature provides a method for
establishing fixed proportions between various types of allocations on a
systematic basis. Under this feature, Your allocation between divisions of the
Separate Account and the General Account will be automatically re-adjusted to
the desired allocation, subject to a minimum of 5% per division or General
Account, on a quarterly, semi-annual or annual basis. Automatic re-adjustments
will continue until You provide Us with notification of a change in allocation
or cancellation of the feature.
Addition, Deletion, or Substitution of Investments - We reserve the right,
subject to compliance with applicable law, to make additions to, deletions from,
or substitutions for the shares of a series that are held by the Separate
Account or that the Separate Account may purchase. We reserve the right to
eliminate the shares of any series of the Funds and to substitute shares of
another series of the Funds or of another open-end, registered investment
company, if the shares or series are no longer available for investment or if in
Our judgement, further investment in any eligible series should become
inappropriate in view of the purposes of the policy. We will not substitute any
shares attributable to Your interest in a division of the Separate Account
without notice to You and prior approval of the Securities and Exchange
Commission, to the extent required by the Investment Company Act of 1940. This
shall not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from permitting conversion between
series or classes of policies or contracts on the basis of requests made by
policyowners.
We reserve the right to establish additional divisions of the Separate Account,
each of which would invest in a new series of the Funds or in shares of another
open-end, registered investment company. We reserve the right to eliminate
existing divisions of the Separate Account. We also reserve the right to
transfer assets of the Separate Account to another Separate Account of Ours or
of an affiliated life insurance company.
If We consider it to be in the best interest of persons having voting privileges
under the policies, the Separate Account may be operated as a management company
under the Investment Company Act of 1940; or it may be reregistered under that
Act in the event registration is no longer required or it may be combined with
other separate accounts.
Page 18
<PAGE>
POLICY LOAN PROVISIONS
Policy Loans - A loan will be granted at any time, upon the sole security of the
portion of the Cash Value required to repay the loan. The maximum loan amount is
90% of this policy's Cash Value on the date of the loan. Any prior Debt to Us
against this policy will be deducted from the amount available for loan.
You may allocate the policy loan among the General Account and the divisions of
the Separate Account. If You do not specify the allocation, then the policy loan
will be allocated among the General Account and the divisions of the Separate
Account in the same proportion that the Accumulation Value in the General
Account, less any Debt, and the Accumulation Value in each division bears to the
total Accumulation Value of the policy, less any Debt, on the date of the policy
loan. Accumulation Value in each division equal to the policy loan allocated to
each division will be transferred to the General Account and reduce the
Accumulation Value in that division. If loan interest is not paid when due, an
amount of Accumulation Value equal to the loan interest will also be
transferred.
If the Debt exceeds the policy's Accumulation Value in the General Account, We
will transfer Accumulation Value equal to the excess Debt from the divisions of
the Separate Account to the General Account as security for the excess Debt. The
amount transferred will be allocated among the divisions in the same proportion
that the Accumulation Value in each division bears to the policy's total
Accumulation Value in all divisions of the Separate Account.
Types of Policy Loans - There are two (2) types of policy loans which We will
grant to You - Type A and Type B. The type of loan which We will grant depends
upon the amount of unloaned Type A balance available at the time the loan is
taken. The unloaned Type A balance is the Cash Value, less the threshold, and
less the sum of any outstanding Type A loans as defined below. The threshold is
as shown on Page 3 and is the Guideline Single Premium for the policy at issue
as defined in Section 7702 of the Internal Revenue Code of 1986 entitled "Life
Insurance Contract Defined." If the Specified Amount decreases, the threshold
will not change.
A Type A loan is a policy loan granted by Us when the unloaned Type A balance
before the loan is taken exceeds the loan requested.
A Type B loan is a policy loan granted by Us when the unloaned Type A balance
before the loan is taken less than or equal to zero.
When the unloaned Type A balance before the loan is taken exceeds zero, but is
less than the loan requested, a Type A loan equal to the unloaned Type A balance
will be granted by Us. The remainder of the requested loan will be a Type B
loan.
We will grant a Type A loan first before a Type B loan. Once a policy loan is
granted, it remains a Type A or a Type B until it is repaid.
Policy Loan Interest - The interest charged by Us on a policy loan depends upon
the type of loan granted. The Type A policy loan interest rate and the Type B
policy loan interest rate as shown in Page 3.
Interest accrues on a daily basis from the date of the loan and is compounded
annually. Interest is payable at the end of each Policy Year. Interest unpaid on
a policy anniversary is added to and becomes part of the loan principal and
bears interest on the same rate.
Policy Loan Repayment - Any Debt may be repaid, in whole or in part, at any time
while the policy is in force. Repayments will be used to reduce policy loans
until fully paid in the following order.
(1) Any or all Type B loans: then
(2) Any or all Type A Loans.
When a loan repayment is made, Accumulation Value securing the Debt in the
General Account equal to the loan repayment will be allocated among the General
Account and divisions of the Separate Account using the same percentages used to
allocate Net Premiums.
If the total Debt equals or exceeds the Cash Value at any time, the policy will
terminate. The policy will not terminate until 61 days after notice has been
mailed to You and to the assignee, if any, at the address last reported to Us.
<PAGE>
PAYMENT OPTIONS
Election of an Option - Any proceeds to be paid under the policy may be paid as
an income under any one of the options stated below. The election of an option
or change of prior election must be made in writing to Us at Our Home Office. If
an option is not chosen by You prior to the death of the survivor of the
Insureds, the primary Beneficiary may make such election.
Unless we agree otherwise, any such payments will be made only to a natural
person taking in his own right. An option may be elected only if the amount of
the proceeds is $25,000 or more. We may change the interval of payments to 3, 6,
or 12 months, if necessary to increase the guaranteed payments to at least
$250.00 each.
Option A - Installments of a Specified Amount - Payments of an agreed amount to
be made each month until the proceeds and interest are exhausted.
Option B - Installments for a Specified Period - Payments to be made each month
for an agreed number of years.
Option C - Life Income - Payments to be made each month for the lifetime of the
Payee. It is guaranteed that payments will be made for a minimum of 10, 15, or
20 years as agreed upon.
Option D - Interest - Payment of interest on the proceeds held by Us. The amount
of interest payment is calculated at the compound rate of 3% per year. Interest
payments will be made in 12-, 6-, 3-, or 1-month intervals as agreed upon.
Supplementary Contract - When the proceeds of the policy become payable, a
supplementary contract setting forth the terms of the option chosen will be
issued to the Payee. The first payment under Option or A, B, or C shall be
payable on the effective date of such option. The first payment under Option D
shall be payable at the end of the first agreed payment interval.
Interest - The interest rate for Options A, B, and D will not be less than 3%
per year. The interest rate for Option C will not be less than 2 1/2% per year.
Interest in addition to that stated may be paid or credited from time to time
under any option but only at Our sole discretion.
Withdrawal Value - Unless otherwise stated in the election of an option, the
Payee shall have the right to receive the Withdrawal Value under that option.
For Options A and D the Withdrawal Value shall be any unpaid balance of proceeds
plus interest.
For Option B the Withdrawal Value shall be the commuted value of the remaining
payments. Such value will be calculated on the same basis as the original
payments.
For Option C the Withdrawal Value shall be the commuted value of any remaining
guaranteed payments. In this event the payments will be resumed at the end of
the guaranteed period if the Payee should be alive on that date. The payments
will then continue for the lifetime of the Payee.
Under any of these options, the Payee shall have the right to receive the
Withdrawal Value in partial amounts. However, the partial amounts shall not be
less than the smaller of the Withdrawal Value or $100.
Death of Payee - If the Payee dies before the proceeds are exhausted or the
prescribed payments made, a final payment will be made in one sum to the estate
of the last surviving Payee. The amount to be paid will be calculated as
described for the applicable option in the Withdrawal Value provision.
Limitation on Rights of Payee and Claims of Creditors Neither the amount
retained under an option nor any payment made under an option can be assigned or
pledged. To the extent permitted by law such amounts or payments shall not be
subject to claims of creditors or legal process.
Page 20
<PAGE>
SETTLEMENT OPTIONS
TABLES OF MONTHLY INSTALLMENTS UNDER OPTION B OR C
Monthly installments are shown for each $1,000 of net proceeds applied. The ages
shown are ages nearest birthday when the first monthly installment is payable.
<TABLE>
<CAPTION>
OPTION B TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Years Monthly Years Monthly Years - Monthly Years Monthly Years Monthly
Installment Installment Installment Installment Installment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $84.47 7 $13.16 13 $7.71 19 $5.73 25 $4.71
2 42.86 8 11.68 14 7.26 20 5.51 26 4.59
3 28.99 9 10.53 15 6.87 21 5.32 27 4.48
4 22.06 10 9.61 16 6.53 22 5.15 28 4.37
5 17.91 11 8.86 17 6.23 23 4.99 29 4.27
6 15.14 12 8.24 18 5.96 24 4.84 30 4.18
Multiply the monthly installment by 11.84 for annual, by 5.96 for semi-annual or by 2.99 for quarterly installments.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION C TABLE
LIFE INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Attained Attained
Age of Payee MONTHLY INSTALLMENTS Age of Payee MONTHLY INSTALLMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
GUARANTEED GUARANTEED
Male Female 10 Years 15 Years 20 Years Male Female 10 Years 15 Years 20 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16 or 21 or
Under Under $2.83 $2.82 $2.81 51 56 $4.60 $4.44 $4.24
17 22 2.85 2.84 2.84 52 57 4.69 4.52 4.30
18 23 2.88 2.87 2.86 53 58 4.79 4.60 4.36
19 24 2.90 2.89 2.88 54 59 4.90 4.69 4.41
20 25 2.93 2.92 2.91 55 60 5.01 4.77 4.47
21 26 2.95 2.95 2.93 56 61 5.12 4.86 4.53
22 27 2.98 2.97 2.96 57 62 5.23 4.94 4.59
23 28 3.01 3.00 2.99 58 63 5.35 5.03 4.64
24 29 3.04 3.03 3.02 59 64 5.48 5.12 4.70
25 30 3.08 3.07 3.05 60 65 5.61 5.21 4.75
26 31 3.11 3.10 3.08 61 66 5.74 5.30 4.80
27 32 3.14 3.13 3.11 62 67 5.87 5.39 4.85
28 33 3.18 3.17 3.15 63 68 6.01 5.48 4.90
29 34 3.22 3.20 3.18 64 69 6.16 5.56 4.94
30 35 3.26 3.24 3.22 65 70 6.30 5.65 4.98
31 36 3.30 3.28 3.25 66 71 6.45 5.73 5.02
32 37 3.34 3.32 3.29 67 72 6.60 5.82 5.05
33 38 3.39 3.36 3.33 68 73 6.76 5.90 5.09
34 39 3.43 3.41 3.37 69 74 6.91 5.97 5.12
35 40 3.48 3.45 3.41 70 75 7.07 6.05 5.14
36 41 3.53 3.50 3.45 71 76 7.23 6.12 5.17
37 42 3.59 3.55 3.50 72 77 7.38 6.18 5.19
38 43 3.64 3.60 3.54 73 78 7.54 6.24 5.20
39 44 3.70 3.65 3.59 74 79 7.69 6.30 5.22
40 45 3.76 3.71 3.64 75 80 7.84 6.35 5.23
41 46 3.82 3.77 3.69 76 81 7.98 6.39 5.24
42 47 3.88 3.82 3.74 77 82 8.13 6.43 5.25
43 48 3.95 3.88 3.79 78 83 8.26 6.47 5.26
44 49 4.02 3.95 3.84 79 84 8.39 6.50 5.26
45 50 4.09 4.01 3.90 80 or 85 or 8.51 6.53 5.27
46 51 4.17 4.08 3.95 Over Over
47 52 4.25 4.15 4.01
48 53 4.33 4.22 4.07
49 54 4.42 4.29 4.12
50 55 4.50 4.37 4.18
Multiply the monthly installment by 11.80 for annual, by 5.93 for semi-annual or by 2.98 for quarterly installments.
</TABLE>
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
Page 22
<PAGE>
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Adjustable Death Benefit Payable On The Death Of The Survivor Of The Insureds
No Death Benefit Payable on the Death of the First Insured Unless Rider Attached
Premium Payments May be Made At Any Time And, Within Limits, In Any Amount
The Specified Amount May Be Decreased
And Death Benefit Option May Be Changed
Additional Benefits, If Any, As Indicated On Page 3
Some Benefits Reflect Investment
Non-participating - No Dividends
<PAGE>
[LOGO]
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
JOINT AND LAST SURVIVOR
GUARANTEED DEATH BENEFIT (GDB) RIDER
EFFECTIVE DATE -
The Rider is part of the policy to which it is attached. It takes effect on the
Policy Date of the policy unless a later Effective Date is shown above. In the
Rider, "We", "Us", or "Our" means the Jefferson Pilot Financial Insurance
Company; "You" and "Your" means the Owner of the policy; and "Insureds" means
the persons named on Page 3 of the policy.
CONSIDERATION - In return for the payment of the monthly deductions and receipt
of any application for the Rider, We will provide the benefit described in the
Rider.
BENEFIT - We guarantee that the death benefit of the policy will be no less than
the Specified Amount, regardless of the investment experience of the divisions
within the Separate Account, provided that the GDB Cumulative Minimum Premium
Requirements have been satisfied.
The Rider has no loan value and no surrender value.
CUMULATIVE MINIMUM PREMIUM REQUIREMENT - On each Monthly Anniversary Day, We
will determine if the GDB Cumulative Minimum Premium Requirement for the Rider
has been met. The GDB Cumulative Minimum Premium Requirement is met provided
that (a) is greater than or equal to (b), where:
(a) is the sum of all previous premium payments under the policy less any Debt
and Withdrawals; and
(b) is the GDB Minimum Annual Premium, as shown on Page 3 of the policy, divided
by twelve, multiplied by the number of completed policy months.
If this requirement has been met, the policy is guaranteed to remain in force
during the next policy month. If this requirement is not met, We will notify You
of the premium payments required in order to continue benefits under the Rider.
A Grace Period of 61 days will be provided. If the necessary premiums are not
received during this Grace Period, the Rider will terminate without value.
Any increase in the Specified Amount as a result of any Rider attached to the
policy or any change in the Death Benefit Option in the policy, will require an
increase in the GDB Minimum Annual Premium. Any decrease in Specified Amount
will require a decrease in the GDB Minimum Annual Premium. Such increase or
decrease will become effective on the effective date shown in the Supplemental
Policy Specifications Page that will be sent to you as a result of any increase
or decrease.
The Cumulative Minimum Premium Requirement will be the sum of the Cumulative
Minimum Premium Requirements for the Initial Specified Amount and each
respective increase or decrease to the Specified Amount.
CHANGES UPON THE YOUNGER INSURED'S ATTAINED AGE 100
If the Rider is still in force upon the Younger Insured's Attained Age 100, the
following changes under the policy will occur. These changes will supersede any
changes to the contrary stipulated upon the Younger Insured's Attained Age 100
in the Changes in Insurance Coverage provision of the policy:
(1) If the policy's Accumulation Value is equal to or less than the Specified
Amount, the Specified Amount will remain unchanged. We will transfer 100% of
the policy's Accumulation Value to the General Account. Minimum benefits for
the policy will be fixed and guaranteed thereafter. No transfer charge will
be imposed as a result of this transfer to the General Account.
(2) If the policy's Accumulation Value is greater than the Specified Amount, the
Specified Amount will be changed upon the Younger Insured's Attained Age 100
as stipulated in the Changes in Insurance Coverage provision of the policy.
In addition, We will transfer to the General Account the amount of
Accumulation Value that was equal to the Specified Amount immediately prior
to the Younger Insured's Attained Age 100.
(3) The GDB cost per $1,000 of Specified Amount as shown on Page 3 will cease.
<PAGE>
MONTHLY DEDUCTION - The monthly deduction for the
Rider will be (a), multiplied by (b), divided by $1,000, where:
(a) is the Specified Amount of the policy; and
(b) is the GDB cost per $1,000 of Specified Amount as shown on Page 3.
TERMINATION - The Rider will cease as soon as one or the following occurs:
(1) The GDB Cumulative Minimum Premium Requirement remains unsatisfied at the
end of the Grace Period;
(2) The policy is surrendered or terminated;
(3) The death of the Survivor of the Insureds;
(4) We receive Your written request to terminate the Rider.
/s/ David A. Stonecipher /s/ Robert A. Reed
President Secretary
<PAGE>
[LOGO]
[LETTERHEAD OF JEFFERSON PILOT APPEARS HERE]
JOINT AND LAST SURVIVOR
TEMPORARY TERM INSURANCE (TTI) RIDER
The Rider is part of the policy to which it is attached. It takes effect on the
Policy Date of the policy. In the Rider, "We", "Us", or "Our" means Jefferson
Pilot Financial Insurance Company; "You" means the Owner of the policy; and
"Insureds" means the persons named on Page 3 of the policy.
CONSIDERATION - In return for the payment of the monthly deductions and receipt
of any application for the Rider, We will provide the benefit described in the
Rider.
BENEFIT - Upon receipt of proof that the survivor of the Insureds has died while
the Rider is in force and before the TTI Expiry Date, We will pay the named
beneficiary the amount of insurance in force under the Rider on the date of
death of the survivor of the Insureds.
AMOUNT OF INSURANCE - The amount of insurance under the Rider is the TTI Rider
Amount shown on Page 3 of the policy.
MONTHLY DEDUCTION - The monthly deduction for the Rider will be (a), plus (b),
multiplied by (c), divided by $1,000, where:
(a) is the monthly cost of insurance rate for the Rider;
(b) is the TTI Annual Expense Charge per $1,000 of Rider Amount, divided by 12,
as shown on Page 3 of the policy; and
(c) is the amount of insurance under the Rider as shown on Page 3 of the policy.
EXPIRY DATE - The Expiry Date of the Rider is the TT1 Expiry Date shown on Page
3 of the policy.
COST OF INSURANCE RATES - The monthly cost of insurance rate for the Rider is
based on the Policy Year and the sex and rating class or classes of the
Insureds. Monthly cost of insurance rates will be determined by Us based upon
future expectations, including charges for mortality experience, a provision for
amortization of sales charges, reinsurance costs and other administrative
charges. Any change in cost of insurance rates will be based upon changes in
future expectations as to mortality experience, persistency, expenses (including
reinsurance costs) and federal income tax law (except taxes related to deferred
acquisition costs). Any change in cost of insurance rates will apply to all
Insureds of the same ages, class or classes and duration. We will consider
changes in the cost of insurance rates when cost of insurance rates for new
issues change. However, the cost of insurance rates can never be greater than
those shown in the Table of Monthly Guaranteed Cost of Insurance rates on Page 3
of the policy. Such guaranteed maximum rates are based on the 1980 CSO Male or
Female Mortality Table, with appropriate increases for rated risks.
TERMINATION - The Rider will cease as soon as one of the following occurs:
(1) The monthly deduction for the Rider remains unpaid at the end of the Grace
Period as defined in the policy;
(2) The policy is surrendered or terminated;
(3) The TTI Expiry Date is attained; or
(4) We receive Your written request to terminate the Rider.
/s/ David A. Stonecipher /s/ Robert A. Reed
President Secretary
<PAGE>
[LOGO]
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
JOINT AND LAST SURVIVOR
POLICY EXCHANGE OPTION (PEO) RIDER
The Rider is part of the policy to which it is attached. It takes effect on the
Policy Date of the policy, In the Rider, "We", "Us", or "Our" means the
Jefferson Pilot Financial lnsurance Company; "You' and "Your' means the Owner of
the policy; and 'Insureds' means the persons named on Page 3 of the policy.
Consideration - In return for receipt of any application for the Rider, We will
provide the benefit described in the Rider.
Benefit - We will exchange the policy for two individual policies, one on the
life of each of the Insureds, sublect to the conditions stated in the Rider.
Exchange Option Events - This option may be exercised only if one of the
following events occurs:
(1) A final divorce decree on the Insureds' marriage is issued and in effect for
at least 12 months.
(2) The Federal Tax Law is changed, resulting in:
(a) the repeal of the unlimited marital deduction provision; or
(b) a reduction of at least 50% in the maximum federal estate tax bracket.
This option may be exercised on or within 6 months after an Exchange Option
Event occurs.
In addition, the Conditions for Exchange listed below must be met.
CONDITIONS FOR EXCHANGE -
(1) The policy and the Rider must be in force and not within the Grace Period
as defined in the policy.
(2) The Owner of each new policy must have an insurable interest in the
Insured's life.
(3) The Owner of each new policy and the Insured must sign the application for
the new policy.
(4) Your written request satisfactory to Us must be received at Our Home Office
on or within 6 months after an Exchange Option Event occurs.
(5) Evidence of the Exchange Option Event satisfactory to Us must be received
at Our Home Office on or within 6 months after the date an Exchange Option
Event occurs.
(6) The policy must be returned to Us before the exchange date.
(7) The policy, including any attached riders, will terminate on the day before
the exchange date. This date is the termination date.
(8) Both of the Insureds under the policy must be living on the exchange date.
(9) Any assignee must agree in writing to the exchange
(10) If the Exchange Option Event is the divorce of the Insureds, the Insureds
are not remarried to each other on the Exchange Date.
<PAGE>
NEW POLICIES
(1) Each new policy will be for one half of the policy's Specified Amount.
(2) The exchange date will be the policy's Monthly Anniversary Day following
receipt of Your request for exchange. The Issue Date and Policy Date for
each new policy will be the exchange date.
(3) Each new policy will be a whole life plan being issued by Us on the Policy
Date of the new policy.
(4) Premiums for each new policy will be based on Our published rates on the
Policy Date of the new policy. The premiums will depend on each new policy's
plan, initial specified amount, rating class, and the Insured's Attained
Age.
(5) The rating class for each new policy will be the individual rating class
assigned to each Insured when the policy was underwritten.
(6) Each new policy will be subject to one half the amount of any outstanding
Debt on the policy. If the outstanding Debt on a new policy exceeds the
amount available for a loan under that policy, the outstanding Debt must be
reduced to equal the available loan value of the new policy. Any excess must
be paid in cash to Us.
(7) The time periods in the Suicide and Incontestability provisions of each new
policy will be measured from the Issue Date of the policy.
(8) Each new policy will be subject to any existing assignment of the policy.
Additional benefit riders will be available with each new policy Only with Our
consent. Evidence of insurability at the Insured's Attained Age will be required
if additional benefit riders are requested. All riders on each new policy will
be subject to Our rules on the Policy Date of the new policy.
EXCHANGE VALUES - One half of the Accumulation Value of the policy will be
allocated to each new policy on the exchange date. The Rider has no cash or loan
value.
Termination - The Rider will cease as soon as one of the following occurs:
(1) One of the Insureds under the policy dies.
(2) The policy is surrendered or terminated.
(3) We receive Your written request to terminate the Rider.
(4) Upon the older Insured's Attained Age 80.
/s/ David A. Stonecipher /s/ Robert A. Reed
President Secretary
<PAGE>
[LOGO]
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
JOINT AND LAST SURVIVOR
AUTOMATIC INCREASE (AIR) RIDER
The Rider is part of the policy to which it is attached and it takes effect on
the Policy Date of the policy. In the Rider, "We", "Us", and "Our" means
Jefferson Pilot Financial Insurance Company; "You" and "Your" means the Owner of
the policy; and "Insureds" means the persons named on Page 3 of the policy.
CONSIDERATION - In return for the payment of the monthly deductions and receipt
of any application for the Rider, We will provide the benefit described in the
Rider.
BENEFIT - We will increase the Specified Amount of the policy on the first day
of each new Policy Year by an amount equal to a percentage of the Specified
Amount in effect on the last day of the previous Policy Year.
INCREASE PERCENTAGE FACTOR - The increase percentage factor has been selected by
You and is shown on Page 3 of the policy.
EXPIRY DATE - The Expiry Date of the Rider is the AIR Expiry Date shown on Page
3 of the policy.
MONTHLY DEDUCTION - The monthly deduction for the Rider will be (a) multiplied
by (b), divided by $1,000, where:
(a) is the AIR Annual Cost per $1,000 of Specified Amount for the Rider, divided
by 12, as shown on Page 3 of the policy; and
(b) is the policy's Specified Amount.
MAXIMUM AMOUNT OF INCREASE - The maximum amount of all increases from the
operation of the Rider will be the Maximum Amount of all AIR Increases as shown
on Page 3 of the policy.
TERMINATION - The Rider will cease as soon as one of the following occurs:
(1) The monthly deduction for the Rider remains unpaid at the end of the Grace
Period as defined in the policy.
(2) The policy is surrendered or terminated.
(3) The younger Insured attains age 100.
(4) We receive Your written request to terminate the Rider.
(5) We receive Your written request to cease any scheduled increase.
(6) The amount of any increase in the Specified Amount of the policy as a
result of the operation of the Rider is less than the AIR Minimum Annual
Increase Amount as shown on Page 3 of the policy.
(7) The maximum amount of increases permitted under the Rider has been
attained.
(8) The Expiry Date for the Rider shown on Page 3 is attained.
/s/ David A. Stonecipher /s/ Robert A. Reed
President Secretary
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
By and Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
-----------------------------------
CHUBB LIFE INSURANCE COMPANY OF AMERICA
---------------------------------------
and
OPPENHEIMERFUNDS, INC.
---------------------
THIS AGREEMENT, made and entered into this 26th day of December ,1997
by and among Chubb Life Insurance Company of America, a New Hampshire
Corporation (hereinafter the "Company") on its own behalf and on behalf of each
separate account of the Company named in Schedule I to this Agreement, as may be
amended from time to time by mutual consent (each account referred to as the
"Accounts"), Oppenheimer Variable Account Funds, an open-end diversified
management investment company organized under the laws of the State of
Massachusetts (hereinafter the "Fund") and Oppenheimer Funds, Inc., a Colorado
Corporation (hereinafter the "Adviser").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts to be offered by insurance companies
(hereinafter "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio (collectively the "Portfolios") of securities and other assets (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be amended from time to time by mutual consent); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (alternatively referred to as the "SEC" or the
"Commission"), dated July 16, 1986 (File No. 812-6234), granting Participating
Insurance Companies and variable annuity and variable life insurance
<PAGE>
separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the
"1940 Act") and Rules 6e-2(b)(1 5) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 and serves as the investment adviser to the
Fund;
WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts (hereinafter "Contracts") under the 1933
Act (unless an exemption from registration is available); and
WHEREAS, the Accounts are duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of New Hampshire, to set aside and
invest assets attributable to the Contracts. (The Contract(s) and the Account(s)
covered by the Agreement are specified in Schedule 2 attached hereto, as may be
amended from time to time by mutual consent); and
WHEREAS, the Company has registered the Accounts as unit investment
trusts under the 1940 Act (unless an exemption from registration is available);
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Accounts to fund the Contracts named in Schedule 3
and the Fund is authorized to sell such shares to unit investment trusts such as
the Accounts at net asset value;
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<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Adviser and the Company agree as follows:
ARTICLE I. Sale of Fund Shares
--------------------
1.1. The Fund agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Accounts, executing such orders
on a daily basis at the net asset value next computed after receipt by the Fund
or its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each of the Accounts and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such order by 9:30 am. New York time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire or by a credit for
any shares redeemed.
1.3. The Fund agrees to make an indefinite number of Fund shares
available for purchase at the applicable net asset value per share by the
Company for their separate Accounts listed in Schedule 2, on those days on which
the Fund calculates its net asset value pursuant to rules of the SEC; provided,
however, that the Board of Trustees of the Fund (hereinafter the "Trustees") 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 their fiduciary duties under
federal and any applicable state laws, in the best interests of the shareholders
of any Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified pension
and retirement plans or such other
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<PAGE>
persons as are permitted under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), and regulations
promulgated thereunder, the sale of which will not impair the tax treatment
currently afforded the contracts.
1.5. The Fund shall not sell Fund shares to any insurance company or
separate account unless a contractual obligation is in effect with respect to
such sales to abide by the conditions of the Mixed and Shared Funding Exemptive
Order that are addressed in Section 3.4 and Article VII of this Agreement.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.6, the Company shall be the designee of the Fund for receipt of
requests for redemption and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives written (or facsimile) notice of such
request for redemption by 9:30 am. New York time on the next following Business
Day. Payment shall be made within the time period specified in the Fund's
prospectus or statement of additional information, in federal funds transmitted
by wire to the Company's account as designated by the Company in writing from
time to time.
1.7. The Company shall pay for the Fund shares on the next Business
Day after an order to purchase shares is made in accordance with the provisions
of Section 1.6 hereof Payment shall be in federal funds transmitted by wire
pursuant to the instructions of the Fund's treasurer or by a credit for any
shares redeemed.
1.8. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
-4-
<PAGE>
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
1.9. Issuance and transfer of the Funds' shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each of the Accounts or the appropriate subaccount of each
of the Accounts.
1.10. The Fund shall furnish notice as soon as reasonably
practicable to the Company of any income, dividends or capital gain
distributions payable on the Portfolio's shares. The Company hereby elects to
receive all such dividends and distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right to
revoke this election on 10 business days notice and thereafter to receive all
such dividends and distributions in cash. The Fund shall notify the Company of
the number of shares so issued as payment of such dividends and distributions.
1.11. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m. New
York time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act (unless an exemption from registration is
available) and, that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws and that the sale
of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable state
law and that it has registered the Accounts as a unit investment
-5-
<PAGE>
trust in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, and that it will maintain such
registration for so long as any Contracts are outstanding. The Company shall
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company shall register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. Subject to Article VI hereof, the Company represents that it
believes that the Contracts are currently and at the time of issuance will be
treated as annuity contracts under applicable provisions of the Internal Revenue
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Adviser immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall take
all reasonable steps to remain, registered under the 1940 Act for as long as the
Fund shares are sold. The Fund shall amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Fund shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
-6-
<PAGE>
2.5. If the Fund considers the adoption of one or more plans under
Rule 12b-1 under the 1940 Act to finance distribution expenses (a "12b-1 Plan"),
the Company agrees to provide the Trustees any information as may be reasonably
necessary for the Trustees to determine whether to adopt a 12b-1 Plan or Plans.
The Fund shall notify the Company upon commencing to finance distribution
expenses pursuant to Rule 12b-1.
2.6. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and intends to continue to comply with applicable provisions of the 1940 Act.
2.7. The Adviser represents and warrants that it is and intends to
remain duly registered under all applicable federal and state securities laws
and that it shall perform its obligations for the Fund in compliance with any
applicable state and federal securities laws.
2.8. The Fund and Adviser each represent and warrant that all of its
respective Directors, Trustees, officers, employees, investment advisers, and
transfer agent of the Fund are and shall continue to be at all times covered by
a blanket fidelity bond (which may, at the Fund's election, be in the form of a
joint insured bond) or similar coverage for the benefit of the Fund in an amount
not less than the minimal coverage as required currently by Section 17(g) and
Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from time
to time. The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable insurance company.
2.9. The Company represents and warrants that all of its directors,
officers, employees, agents, investment advisers, and other individuals and
entities dealing with the money and/or securities of the Fund are covered by a
blanket fidelity bond or similar coverage in an amount not less than $3 million.
The aforesaid includes coverage for larceny and embezzlement and is issued by a
reputable insurance company. The Company agrees that any amount received under
such bond in connection with claims that derive from arrangements described in
this Agreement will be paid by the Company for the
-7-
<PAGE>
benefit of the Fund. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always in effect,
and agrees to notify the Fund and the Adviser in the event that such coverage no
longer applies.
ARTICLE III. Prospectus and Proxy Statements: Voting
---------------------------------------
3.1. The Fund or the Adviser, at its expense, shall provide a
typewritten copy of the Fund's current prospectus and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is supplemented or amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense). Upon request, the
Adviser shall be permitted to review and approve the typeset form of the Fund's
prospectus prior to such printing.
3.2. The Fund's prospectus shall state that the statement of
additional information for the Fund is available from the Fund (or its transfer
agent) and shall print and provide such Statement to the Company and to any
owner of a Contract or prospective owner who requests such Statement at the
Fund's expense.
3.3. The Fund or the Adviser, at its expense, shall provide the
Company with a typewritten copy of the Fund's communications to shareholders for
printing and distributing to Contract owners and with copies of the Fund's proxy
material and semi-annual and annual reports to shareholders (or may, at the Fund
or the Advisers option, reimburse the Company for the pro rata cost of printing
such reports) in such quantities as the Company shall reasonably require, for
distributing to Contract owners at the Company's expense. Upon request, the
Adviser shall be permitted to review and approve the typeset form of such proxy
material, communications and shareholder reports prior to such printing.
3.4. If and to the extent required by law (or the Mixed and Shared
Funding Exemptive Order) the Company shall:
(i) solicit voting instructions from Contract owners;
-8-
<PAGE>
(ii) vote the Fund shares in accordance with instructions
received from Contract owners or participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received
from the Company's Contract owners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable Contract owners. The Company
reserves the right to vote Fund shares held in any of the Accounts in their own
right, to the extent permitted by law.
3.5. The Fund will comply with all applicable provisions of the
1940 Act requiring voting by shareholders.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least fifteen business
days prior to its use. No such material shall be used if the Fund or its
***designee reasonably objects in writing to such use within fifteen business
days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or the Adviser concerning
either of them in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus for the Fund shares, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or
-9-
<PAGE>
other promotional material approved by the Fund or its designee, except with the
permission of the Fund. The Fund agrees to respond to any request for approval
in a prompt and timely basis.
4.3. The Adviser or Fund shall furnish or cause to be furnished, to
the Company or its designee, each piece of sales literature or other promotional
material which the Adviser or Fund prepared or caused to be prepared, in which
the Company or its separate account is named, at least fifteen business days
prior to its use. No such material shall be used if the Company or its designee
reasonably objects in writing to such use within fifteen business days after
receipt of such material.
4.4. The Adviser and the Fund shall not give any information or make
any representations on behalf of the Company or concerning the Company, each of
the Accounts, or the Contracts, other than information or representations
contained in (i) the registration statement or prospectus for the Contracts, as
such registration statement and prospectus may be amended or supplemented from
time to time, (ii) reports for the Accounts which are in the public domain or
approved by the Company for distribution to Contract owners or participants, or
(iii) sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials in which the Company or its separate account is named, applications
for exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to any Portfolio or its shares, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
-10-
<PAGE>
action letters, and all amendments to any of the above, that relate to the
Contracts or each of the Accounts, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, 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, electronic media, or other public
media), sales literature (i.e., any written communication distributed or made
---
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees of the Adviser,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
4.8. The Company agrees and acknowledges that the Adviser is the
sole owner of the Oppenheimer Funds, Inc. clasped hands mark and that all use of
any designation comprised in whole or part of such mark under this Agreement
shall inure to the benefit of the Adviser or the Fund. The Company shall not use
such mark on its own behalf or on behalf of each of the Accounts in connection
with marketing the Contracts without prior written consent of the Adviser, which
consent shall not be unreasonably withheld, delayed or conditioned. Upon
termination of this Agreement for any reason, the Company shall cease all use of
any such mark.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Adviser shall pay no fee or other compensation to
the Company under this Agreement. and the Company shall pay no fee or other
compensation to the Fund or Adviser. except as provided herein or in any other
written agreement.
-11-
<PAGE>
5.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, the preparation of all statements and
notices required by any federal or state law, and all applicable taxes on the
issuance and transfer of the Fund's shares to the Company.
5.3. The Company shall bear the expenses of typesetting, printing
and distributing the Fund's prospectus to Contract owners and prospective
Contract owners issued by the Company and of distributing the Fund's proxy
materials, communications and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Treasury Regulation 1.817-5.
ARTICLE VII.Potential Conflicts
-------------------
7.1. The Board of Trustees of the Fund (the "Board") will monitor
the Fund for the existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate
-12-
<PAGE>
accounts investing in the Fund. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Participating Insurance Companies or by variable annuity contract and
variable life insurance Contract owners; or (f) a decision by an insurer to
disregard the voting instructions of Contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company report any potential or existing conflicts of which it is aware
to the Board. The Company agrees to assist the Board in carrying out its
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner with all information
reasonably necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded and by confirming in writing,
at the Fund's request, that the Company is unaware of any such potential or
existing material irreconcilable conflicts.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested Trustees, that a material irreconcilable conflict exists,
the Company and the relevant Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
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<PAGE>
the disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity Contract owners or life insurance
Contract owners, of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Contract owners the
option of making such a change; and (2) establishing a new registered management
investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of Contract owners voting instructions, and if the
Company and/or the Fund and the Adviser reasonably determine that a material
irreconcilable conflict (as set forth in the Mixed and Shared Funding Exemptive
Order) may arise as a result, then the Company may be required, at the Fund's
election, to withdraw any of the Accounts' investment in the Fund and terminate
this Agreement. Any such withdrawal and termination must take place within six
(6) months after the Fund gives written notice that this provision is being
implemented. Until such withdrawal and termination is implemented, the Fund
shall continue to accept and implement orders by the Company for the purchase
and redemption of shares of the Fund. Such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw any of the Accounts' investment in the Fund and terminate this
Agreement within six (6) months after the Fund informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict. Until such withdrawal and termination is
-14-
<PAGE>
implemented, the Fund shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Fund, subject to
applicable regulatory limitation. Such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw any of the Accounts' investment in the
Fund and terminate this Agreement within six (6) months after the Board informs
the Company in writing of the foregoing determination, provided, however, that
such withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. Upon request, the Company shall at least annually submit to
the Board such reports, materials or data as the Board may reasonably request so
that the Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder. with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, the (a) the Fund and/or the Participating Insurance
Companies (including the Company),
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<PAGE>
as appropriate, shall take such reasonable steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 7.1, 7.2, 7.3, 7.4 and
7.5 of this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
--------------- -- -----------
(a). The Company agrees to indemnify and hold harmless
the Fund and the Adviser, each member of their Board of Trustees or Board of
Directors, each of their officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances which they were made; provided that
this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on
behalf of the Fund or the Adviser for
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<PAGE>
use in the registration statement, prospectus or
statement of additional information for the
Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for
use in connection with the sale of the Con tracts
or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations
contained in the Fund registration statement, Fund
prospectus or sales literature or other
promotional material of the Fund not supplied by
the Company or persons under its control) or
wrongful conduct of the Company or persons under
its control, with respect to the sale or
distribution of the Contracts or Fund shares,
provided any such statement or representation or
such wrongful conduct was not made in reliance
upon and in conformity with information furnished
to the Company by or on behalf of the Advisor or
the Fund; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in
the Fund registration statement, Fund prospectus,
statement of additional information or sales
literature or other promotional material 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 in light of the
circumstances in which they were made, if such
statement or omission was made in reliance upon
information furnished to the Fund or the Adviser
by or on behalf of the Company or persons under
its control; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Company.
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance
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<PAGE>
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.2. Indemnification by Adviser and Fund
-----------------------------------
8.2(a)(1). The Adviser agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Adviser) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement,
prospectus, statement of additional information 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 in light of the
circumstances m which they were made; provided that
this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission
or such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Adviser or the Fund by or on
behalf of the Company for use in the Contracts, the
Contract or Fund registration statement, prospectus
or statement of additional information, or sales
literature or other promotional material for the
Contracts or of the Fund; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statement, the
Contract or Fund prospectus, statement of
additional information, or sales literature or
other promotional material for the Contracts or of
the Fund not supplied by the Adviser or the Fund or
persons under the control of the Adviser or the
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<PAGE>
Fund respectively) or wrongful conduct of the
Adviser or persons under its control, with respect
to the sale or distribution of the Contracts,
provided any such statement or representation or
such wrongful conduct was not made in reliance upon
and in conformity with information furnished to the
Adviser or the Fund by or on behalf of the Company;
or
(iii) arise out of any untrue statement or allegedly
untrue statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature covering
the Contracts (or any amendment thereof or
-------
supplement thereto), or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statement or statements therein not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund or persons under the control of
the Adviser; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the
Adviser in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Adviser;
except to the extent provided in Sections 8.2(b) and 8.2(c) hereof. This
indemnification shall be in addition to any liability which the Adviser may
otherwise have.
8.2(a)(2) The Fund agrees to indemnify and hold harmless the
Indemnified Parties [as defined in Section 8.2(a)(1)] against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the operations of the Fund and:
(i) arise out of or are based upon (a) any untrue statement
or alleged untrue statement of any material fact or (b)
the omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements made therein, in light
of the circumstances in which they were made, not
misleading, if such fact, statement or omission is
contained in the Contracts, or in the registration
statement for the Fund or the Contracts, or in the
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<PAGE>
prospectus or statement of additional information for
the Contracts or the Fund, or in any amendment to any
of the foregoing, or in sales literature or other
promotional material for the Contracts or of the Fund,
provided, however, that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement, fact or omission or such alleged statement,
fact or omission was made in reliance upon and in
conformity with information furnished to the Adviser or
the Fund by or on behalf of the Indemnified Party; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract or Fund registration statement, the Contract
or Fund prospectus, statement of additional
information, or sales literature or other promotional
material for the Contracts or of the Fund not supplied
by the Adviser or the Fund or persons under the control
of the Adviser or the Fund respectively) or wrongful
conduct of the Fund or persons under its control with
respect to the sale or distribution of Contracts,
provided any such statement or representation or such
wrongful conduct was not made in reliance upon and in
conformity with information furnished to the Adviser or
the Fund by or on behalf of the Company; or
(iii) 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 o r result from any other
material breach of this Agreement by the F u n d
(including a failure, whether unintentional or in good
faith or otherwise. to comply with the diversification
requirements specified in Article VI of this
Agreement);
except to the extent provided in Section 8.2(b) and 8.3 hereof. This
indemnification shall be in additional to any liability which the Fund may
otherwise have.
(b). The Fund and Adviser shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
-20-
<PAGE>
8.3 Indemnification Procedure
-------------------------
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party 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 indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provisions of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party'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 indemnifying party 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, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any
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<PAGE>
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. 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 X. Termination
-----------
10.1 This Agreement shall terminate:
(a) at the option of any party upon six month's advance
written notice to the other parties unless otherwise agreed in a separate
written agreement among the parties; or
(b) at the option of the Company to the extent that shares
of Portfolios are not reasonably available to meet the requirements of the
Contracts as determined by the Company reasonably and in good faith; or
(c) at the option of the Fund or the Adviser upon
institution of formal proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Contracts,
the administration of the Contracts, the operation of the Accounts, or the
purchase of the Fund
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<PAGE>
shares, which would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Adviser by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, which would
have a material adverse effect on the Adviser's or the Fund's ability to perform
its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals or the vote of the Contract owners having an
interest in any of the Accounts (or any subaccount) to substitute the shares of
another investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media The Company will give
45 days prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the Board, or a majority of the disinterested
Board members, that an irreconcilable material conflict exists among the
interests of (i) all Contract owners of variable insurance products of all
separate accounts or (ii) the interests of the Participating Insurance Companies
investing in the Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code, or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet
the diversification requirements specified in Article VI hereof or if the
Company reasonably believes that the Fund will fall to meet such requirements;
or
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<PAGE>
(i) at the option of any party to this Agreement, upon
another party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either the Fund or the
Adviser has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(k) at the option of the Fund or the Adviser, if the Fund or
Adviser respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or the Adviser; or
(l) subject to the Fund's compliance with Article VI hereof,
at the option of the Fund in the event any of the Contracts are not issued or
sold in accordance with applicable requirements of federal and/or state law.
Termination shall be effective immediately upon notice by the Fund to terminate
the Agreement.
10.2 Notice Requirement.
------------------
(a) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior written notice shall be
given in advance of the effective date of termination as required by such
provisions.
(b) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt
written notice of the election to terminate this Agreement for cause shall be
furnished by the party terminating the Agreement to the non-terminating parties,
with said termination to be effective upon receipt of such notice by the non-
terminating parties.
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<PAGE>
(c) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice
of the election to terminate this Agreement for cause shall be furnished by the
party terminating this Agreement to the non-terminating parties. Such prior
written notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3 It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination.
----------------------
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement and subject to Section 1.3 of this
Agreement, the Company may require the Fund to continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts ") Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Adviser, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but
need not be for more than 90 days.
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<PAGE>
10.5 Except as necessary to implement Contract owner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Contract owners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
90 days after the Company shall have notified the Fund or the Adviser of its
intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be deemed duly given only if sent by hand,
evidenced by written receipt or by certified mail, return receipt requested, 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. All notices shall be deemed given on the date received or rejected by the
addressee.
If to the Fund:
Oppenheimer Variable Account Funds
6803 South Tucson Way
Englewood, CO 80112
Attn: George Bowen, Vice President, Secretary & Treasurer
If to the Adviser:
Oppenheimer Funds, Inc.
2 World Trade Center
New York, NY 10048-0669
Attn: Andrew J. Donohue, Esq.
Executive Vice President and General Counsel
If to the Company:
Chubb Life Insurance Company of America
P.O. Box 515
Concord, NH 03302-0515
Attn: Charlene Grant, Assistant Counsel
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<PAGE>
ARTICLE XII. Miscellaneous
-------------
12.1. The Company and the Adviser each understand and agree that
the obligations of the Fund under this Agreement are not binding upon any
shareholder or Trustee of the Fund personally, but bind only the Fund and the
Fund's property; the Company and the Adviser each represent that it has notice
of the provisions of the Declaration of Trust of the Fund disclaiming
shareholder and Trustee liability for acts or obligations of the Fund
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential and all information
reasonably identified as confidential in writing by any other party hereto
(including without limitation the names and addresses of the owners of the
Contracts) and, except as contemplated by this Agreement, shall not disclose,
disseminate or utilize such confidential information until such time as it may
come into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. 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.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as applicable,
by such party and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.
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<PAGE>
12.9. Except as may otherwise be required under Article VII, the
rights, remedies and obligations contained in this Agreement are cumulative and
are in addition to any and all rights, remedies and obligations, at law or in
equity, which the parties hereto are entitled to under state and federal laws.
12.10. It is understood by the parties that this Agreement is not
an exclusive arrangement in any respect.
12.11. The foregoing constitutes the entire Agreement between the
parties hereto, and shall not be modified, amended or assigned except by an
Agreement in writing signed by an authorized representative of each such party.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed as of the date specified
below.
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By its authorized officer,
By: /s/[SIGNATURE ILLEGIBLE]
--------------------------
Title: Executive Vice President
--------------------------
DATE: December 26, 1997
--------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By its authorized officer,
By: /s/[SIGNATURE ILLEGIBLE]
--------------------------
Title: Vice President & Secretary
--------------------------
Date: January 8, 1998
--------------------------
OPPENHEIMER FUNDS, INC.
By its authorized officer
By: /s/[SIGNATURE ILLEGIBLE]
--------------------------
Title: Vice President
--------------------------
Date: January 2, 1998
--------------------------
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<PAGE>
SCHEDULE 1
Chubb Separate Account A
-29-
<PAGE>
SCHEDULE 2
Portfolios of Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund (1/1/98)
Oppenheimer Strategic Bond Fund (1/1/98)
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<PAGE>
SCHEDULE 3
Chubb Ensemble II Variable Universal Life Policy
-31-
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
CHUBB LIFE INSURANCE COMPANY OF AMERICA
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 9 day of December 1997, by and
-
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), CHUBB LIFE INSURANCE COMPANY OF AMERICA, a New Hampshire corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, Jefferson-Pilot Variable Corporation, the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
---- -- ----- ------
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
--------
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 9:30 a.m. New York time on the next
following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
-2-
<PAGE>
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemption's, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby elects
to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
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 Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies. and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
-3-
<PAGE>
2.3. The Company represents and warrants that Jefferson-Pilot Variable
Corporation, the underwriter for the individual variable annuity and the
variable life policies, is a member in good standing of the NASD and is a
registered broker-dealer with the SEC. The Company represents and warrants
that the Company and Jefferson-Pilot Variable Corporation will sell and
distribute such policies in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the registration statement for its Shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify the
Shares for sale in accordance with the laws of the various states only if
and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
---------------------------------------
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares prospectuses, taking account
of other relevant factors affecting the expense of printing. such as
covers,
-4-
<PAGE>
columns, graphs and charts; the Trust or its designee to bear the cost of
printing the Shares' prospectus portion of such document for distribution
to owners of existing Policies funded by the Shares and the Company to bear
the expenses of printing the portion of such document relating to the
Accounts; provided, however, that the Company shall bear all printing
--------
expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Policies not funded by the
Shares. In the event that the Company requests that the Trust or its
designee provides the Trust's prospectus in a "camera ready" or diskette
format, the Trust shall be responsible for providing the prospectus in the
format in which it or MFS is accustomed to formatting prospectuses and
shall bear the expense of providing the prospectus in such format (e.g.,
----
typesetting expenses), and the Company shall bear the expense of adjusting
or changing the format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order.
The Trust and MFS will notify the Company of any changes of interpretations
or amendments to the Mixed and Shared Funding Exemptive Order.
-5-
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
-------------- --- -----------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust. or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the registration
statement, prospectus or statement of additional information for the
Shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or
in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved by the Trust, MFS or their respective
designees, except with the permission of the Trust, MFS or their respective
designees. The Trust, MFS or their respective designees each agrees to
respond to any request for approval on a prompt and timely basis. The
Company shall adopt and implement procedures reasonably designed to ensure
that information concerning the Trust, MFS or any of their affiliates which
is intended for use only by brokers or agents selling the Policies (i.e.,
----
information that is not intended for distribution to Policy owners or
prospective Policy owners) is so used, and neither the Trust, MFS nor any
of their affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4. is
neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other of the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
-6-
<PAGE>
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner.
The Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, 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, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
---- --- --------
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in amounts agreed
to by the Trust in writing. Each party, however, shall, in accordance with
the allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
-7-
<PAGE>
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
--------------- --- -------------------
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h)(l) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
--------- -------- ---------
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are
disregarded. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and t'erminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
--------- -------
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
-8-
<PAGE>
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
---------------
8.1. INDEMNIFICATION BY THE COMPANY
------------------------------
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including reasonable counsel
fees) to which any Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(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 reasonable
reliance upon and in conformity with information furnished to
the Company or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or statement
of additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or its designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Trust by or on
behalf of the Company; or
-9-
<PAGE>
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
----------------------------
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement 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 reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Trust, MFS or the
Underwriter; or
-10-
<PAGE>
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company or
any Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than under this section. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party. After notice
from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional
counsel obtained by it, and the indemnifying party shall not be liable to
such Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
-11-
<PAGE>
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. 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 and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
----------------------------
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
-----------
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof, or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares: or
-12-
<PAGE>
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) days' prior written notice to the Trust of the
Date of any proposed vote or other action taken to replace the
Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. NOTICES
-------
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile (followed by written confirmation via
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.
-13-
<PAGE>
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
CHUBB LIFE INSURANCE COMPANY OF AMERICA
One Granite Place
P.O. Box 515
Concord, New Hampshire 03302-0515
Facsimile No.: (603) 226-5448
Attn: Charlene Grant
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
-------------
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as it may come into the
public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
-14-
<PAGE>
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and liabilities
of each Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
-15-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By its authorized officer,
By: /s/ Ronald R. Angarella
-------------------------
Ronald R. Angarella
Title: Senior Vice President
-----------------------------
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE
PORTFOLIOS
By its authorized officer and not individually
By: /s/ A. Keith Brodkin
-------------------------
A. Keith Brodkin
Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer.
By: /s/ Jeffrey L. Shames
-------------------------
Jeffrey L. Shames
Director and President
-16-
<PAGE>
As of 12/9/97
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
==================================================================================================================================
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
==================================================================================================================================
<S> <C> <C>
Separate Account A Ensemble II Variable Universal Life MFS Utilities Series
August 20, 1984 MFS Research Series
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
PARTICIPATION AGREEMENT
among
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
and
CHUBB LIFE INSURANCE COMPANY OF AMERICA
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
THIS AGREEMENT, made and entered into as of this 1st day of May, 1995, by
and among Chubb Life Insurance Company of America, a New Hampshire Corporation,
and The Colonial Life Insurance Company of America, a New Jersey Corporation,
(hereinafter collectively the "Companies"), on their own behalf and on behalf of
each segregated asset account of the Companies set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), and the TEMPLETON VARIABLE PRODUCTS SERIES FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FRANKLIN TEMPLETON DISTRIBUTORS, INC.
(hereinafter the "Underwriter"), a California corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable annuity and variable life insurance contracts to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, as set forth on Schedule B hereto, each representing the interest in
a particular managed portfolio of securities and other assets and one or more of
which may be made available under this Agreement as set forth on Schedule C
hereto, as may be amended from time to time by mutual agreement of the parties
hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated November 16, 1993 (File No.812-8546), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the Investment Company Act of 1940, as amended (the "1940 Act") and Rules 6e
2(b)( 15) and 6e3-T(b)( IS) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by separate accounts funding variable annuity
and variable life insurance contracts issued by both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Templeton Investment Counsel, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state laws; and
1
<PAGE>
WHEREAS, the Companies have registered or will register certain variable
annuity and variable life insurance contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolutions of the Boards of Directors of the
Companies, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable annuity and variable life
insurance contracts; and
WHEREAS, the Companies have registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Companies intend to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity and variable
life insurance contracts and the Underwriter is authorized to sell such shares
to unit investment trusts such as each Account at net asset value.
NOW THEREFORE, in consideration of their mutual promises, the Companies,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Companies those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. The Companies' order may net the purchase and
redemption requests related to each Portfolio. For purposes of this Section 1.1,
the Companies shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designees shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m., St.
Petersburg time on the next following Business Day. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and on which
the Fund calculates its net asset value pursuant to the rules of the Securities
and Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Companies and their Accounts
on those days on which the Fund calculates its net asset value pursuant to rules
of the Securities and Exchange Commission and the Fund shall use reasonable
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Fund (hereinafter the "Board") 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 Board acting in good faith and
in light of the fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
2
<PAGE>
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Companies' request, any
full or fractional shares of the Fund held by the Companies executing such
requests on a daily basis at the net value asset next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Companies shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice of such
request for redemption by 10:00 a.m., St. Petersburg time, on the next following
Business Day.
1.6 The Companies agree to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Companies agree that all net amounts
available under the variable annuity and variable life insurance contracts with
the form number(s) which are listed on Schedule D attached hereto and
incorporated herein by this reference, as such Schedule D may be amended from
time to time hereafter by mutual written agreement of all the parties hereto
(the ("Contracts"), shall be invested in the Fund, in such other Funds advised
by the Adviser as may be mutually agreed to in writing by the parties hereto, in
the Companies' general account, or invested in an investment company other than
the Fund.
1.7 The Companies shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Companies
and shall become the responsibility of the Fund. Proceeds for liquidation of
shares of the Fund will be wired from the Fund's custodial account to an account
designated by the Companies.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Companies or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate sub-account of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. Dividends and capital gains
distributions shall be reinvested in additional shares at the ex-date net asset
value. The Company reserves the right to revoke this election and to receive all
such income, dividends or capital gain distributions in cash. The Fund shall
notify the Companies of the number of shares so issued as payment of such
dividends and distributions.
1.10 The Fund shall make the net asset value per share for each Portfolio
available to the Companies on a daily basis as soon as reasonably practical
after the net asset value per share is calculated (normally by 6:00 p.m., St.
Petersburg time) and shall use its best efforts to make such net asset value per
share available by 6:30 p.m., St Petersburg time.
1.11 The Fund shall send to the Companies within five business days after
the end of each month, separate month statements of account confirming all
transactions made in the Companies separate accounts listed in Schedule A.
3
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Companies represent and warrant that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material aspects with all applicable Federal and State laws
and that the sale of the Contract shall comply in all material aspects with
state insurance suitability requirements. The Companies further represent and
warrant that they are insurance companies duly organized and in good standing
under applicable law and that they have legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under the applicable state laws and have registered or, prior to any issuance or
sale of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable state and federal securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required to order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and that it will make every effort to maintain such
qualification under Subchapter M or any successor or similar provision) and that
it will notify the Companies immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Companies represent that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that they will make every effort to maintain such treatment and
that they will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 The Fund does not intend to make any payments to finance distribution
expenses pursuant to Rule I 2b-l under the 1940 Act or otherwise, although it
may make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12 b-l, the Fund undertakes to have its
Board of Trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- l to finance distribution
expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
Commonwealth of Massachusetts and the Fund and the Underwriter represent that
their respective operations are and shall at all times remain in material
compliance with the laws of the Commonwealth of Massachusetts and the State of
California to the extent required to perform this Agreement.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker dealer with the Securities
and Exchange Commission. The Underwriter further represents that it will sell
and distribute the Fund shares in accordance with the laws of the State of
California,
4
<PAGE>
and all applicable state and federal securities laws, including without
limitation, the 1933 Act, the 1934 Act and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material aspects with the 1940 Act
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable state and
federal securities laws and that the Adviser shall perform its obligations for
the Fund in compliance in all material respects with the laws of the State of
Florida and all applicable state and federal securities laws.
2.10 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers and other
individuals/entities dealing with the money and or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund, in an amount not less than the
minimal coverage as required currently by Rule 17g-l of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11 The Companies represent and warrant that all of their directors,
officers and employees dealing with money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond, protecting
against losses resulting from any act of fraud or dishonesty by the Companies'
employees, in an amount not less than $5 million. The Companies agree to make
all reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
2.12 The Companies agree and acknowledges that the Underwriter or its
affiliates is the sole owner of the names "Templeton" and "Franklin Templeton"
and of the marks shown on Schedule F attached hereto, and that all use of any
designation comprised in whole or in part of such name or mark under this
Agreement shall inure to the benefit of the Underwriter or its affiliates.
Except as expressly provided herein, the Companies shall not use any such name
or mark on own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of the
Underwriter or its affiliates. Upon termination of this Agreement for any
reason, the Companies shall cease all use of any such name or mark as soon as
reasonably practicable.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1 The Underwriter shall provide the Companies (at the Companies'
expense) with as many copies of the Fund's current prospectus as the Companies
may reasonably request or, at the option of the Companies, with camera ready
copy of the Fund's current prospectus. If requested by the Companies in lieu
thereof, the Fund shall provide such documentation (including a final copy of
the new prospectus as set in type at the Fund's expense) and other assistance as
is reasonably necessary for the Companies once each year (or more frequently if
the prospectus for the Fund is amended) to have the prospectus for the Contracts
and the Fund's prospectus printed together in one document (such printing to be
at the Companies' expense).
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Companies and to any owner of a
Contract or prospective owner who requests such Statement.
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3.3 The Fund, at its expense, shah I provide the companies with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Companies shall reasonably require for
distributing to Contract Owners.
3.4 If and to the extent required by haw, the Companies shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Fund shares in
accordance with the instructions received from Contract owners: and (iii) vote
Fund shares for which no instructions have been received in the same proportion
as Fund shares of such Portfolio for which instructions have been received; so
long as and to the extent that the Securities and Exchange Commission continues
to interpret the 1940 Act to require pass-through voting privileges for variable
contract owners. The Companies reserve the right to vote Fund shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Fund calculates voting privileges
in a manner consistent with the standards set forth on Schedule G attached
hereto, and incorporated herein by reference, which standards will also be
provided to the other Participating Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIALS AND INFORMATION
4.1 The Companies shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
materials in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such materials shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2 The Companies shall not give any information or make any
representation or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement or prospectus may be amended or
supplemented from time to time, or in published reports for the Fund which are
in the public domain, or in reports or proxy statements for the Fund, or in
sales literature or other promotional materials approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter or its designee shall furnish, or shall cause to
be furnished, to the Companies or its designee, each piece of sales literature
or other promotional material in which the Companies and/or their separate
account(s) are named, at least fifteen Business Days prior to its use. No such
material shall be used if the Companies or their designee reasonably objects to
such use within fifteen Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Companies or concerning the Companies, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Companies for distribution to
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Contract Owners, or in sales literature or other promotional materials approved
by the Companies or its designee, except with the permission of the Companies.
4.5 The Fund will provide to the Companies at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, applications for exemptions, requests for no-action
letters, relevant portions of sales literature and other promotional materials,
and all amendments to any of the above that relate to the Fund and its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commissions.
4.6 The Companies will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such documents with the
Securities and Exchange Commission.
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, portions of the
following that refer to the Fund or affiliates of the Fund: advertisements (such
as material published or designed for use in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Companies under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b- l to finance distribution
expenses, then the Underwriter may make payments to the Companies or to the
Underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all shares are
registered and authorized for issuance in accordance with applicable federal
law, and, if and to the extent deemed advisable by the Fund, in accordance with
the applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares, preparation
and filing of the Fund's prospectus and registration statement, proxy materials
and reports, setting the prospectus in type, setting in type and printing the
proxy materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any state or federal law, all taxes on the issuance and
transfer of the Fund's shares.
5.3 The Companies shall bear the expenses of printing and distributing the
Fund's prospectus to owners of the Contracts issued by the Companies and of
distributing the Fund's proxy materials and reports to such Contract owners.
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ARTICLE VI. DIVERSIFICATION
6.1 The Fund shall comply with Section 817(h) and 851 of the lnternal
Revenue Code of 1986, if applicable, and the regulations thereunder, and the
applicable provisions of Section 5(b)(1) of the 1940 Act. The Underwriter or the
Fund shall provide the Companies with a letter from the appropriate officer
within ten Business Days following the end of each calendar quarter of the Fund,
certifying the Fund's compliance during that calendar quarter with the
diversification requirements and qualification as a regulated investment
company, and including a detailed listing of individual securities held by each
Portfolio of the Fund. In the event of a breach of this Article VI by the Fund,
it will take all reasonable steps (a) to immediately notify the Companies of
such breach and (b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance, tax
or securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Companies if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Companies will report any potential or existing conflicts of which
it is aware to the Board. The Companies will assist the Board in carrying out
its responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Companies to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Companies and other Participating Insurance companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the questions whether such segregation should be implemented to a
vote of all affected Contract Owners and, as appropriate, segregating the assets
of any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Companies to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Companies
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account: provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and
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<PAGE>
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Underwriter and the Fund shall continue to accept and implement
orders by the Companies for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Companies conflicts with
the majority of other state regulators, then the Companies will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Companies
in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested member
of the Board. Until the end of the foregoing six month period, the Underwriter
and the Fund shall continue to accept and implement orders by the Companies for
the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Section 7.3 and 7.6 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Companies shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Companies will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Companies in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act of the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
the (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue to effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANIES
(a) The Companies agree to indemnify and hold harmless the Fund and each
trustee of the Board and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act and to indemnify and hold
harmless the Underwriter and each director and officer and each person, if any,
who controls the Underwriter within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Companies) or litigation Including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
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<PAGE>
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Companies by
or on behalf of the Fund or the Underwriter for use in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Companies or persons under its control) or wrongful
conduct of the Companies or persons under its control, with respect to
the sale or distribution of the Contracts or Fund share; 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
thereof 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 Companies; or
(iv) arise as a result of any failure by the Companies to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Companies in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Companies, as limited by and in accordance with the
provisions of Section 8.1(b) and 8.1(c) hereof.
(b) The Companies shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to the Fund
or the Underwriter, whichever is applicable.
(c) The Companies shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Companies in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service or any designated agent), but failure to notify the Companies of
any such claim shall not relieve the Companies 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 Companies shall be entitled to participate,
at their own expense, in the defense of such action. The Companies also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Companies to such party of the
Companies'
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<PAGE>
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Companies
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Indemnified Parties will promptly notify the Companies of the
commencement any litigation or proceedings against them in connection with the
issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2 INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter agrees to indemnify and hold harmless the Companies,
the underwriter of the contracts and each of their directors and officers and
each person, if any, who controls the Companies within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or 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, providing 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 Underwriter by or on behalf of the Companies for use in
the Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information
furnished to the Companies by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the qualification representation specified
in Section
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2.3 of this Agreement and the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Underwriter, as limited by and in accordance
with the provisions of Section 8.2(b) and 8.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Companies or each Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service or any designated agent), but failure to notify the Underwriter of
any such claims shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter shall be entitled to
participate, at its own expense, in the defense of such action. The Underwriter
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
(d) The Companies agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of each Account
8.3 INDEMNIFICATION BY THE FUND
(a) The Fund agrees to indemnify and hold harmless the Companies, and each
of their directors and officers and each person, if any, who controls the
Companies within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
results from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Fund, and arise out
of or result from any material breach of any representation and/or warranty made
by the Fund in this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund; as limited by and in accordance with the
provisions of Sections 8.3(b) and 8.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the fund nor any Trustee,
officer, agent or employee of the Fund shall be personally liable hereunder, nor
shall any resort be had to other private property for the satisfaction of any
claim or obligation hereunder, but only the Fund shall be liable.
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<PAGE>
(b) The Fund shall not be liable under this indemnification provision with
respect to any losses claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise from such Indemnified
Party's will misfeasance, bad faith, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to the
Companies, the Fund, the Underwriter or each Account, whichever is applicable.
(c) The Fund shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service or 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 shall be entitled to participate, at its own expense, in the defense of
such action. 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.
(d) The Companies and the Underwriter agree promptly to notify the Fund of
the commencement of any litigation or proceedings against it or any of its
respective officers and directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of the
Accounts, or the sale or acquisition of shares of the Fund.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) immediate termination by the Companies' upon written notice to the Fund
and the Underwriter with respect to any Portfolio based upon the Companies
determination that shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts; or
(c) immediate termination by the Companies upon written notice to the Fund
and the Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued, or sold in accordance with
applicable state and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Companies; or
(d) immediate termination by the Companies upon written notice to the Fund
and the Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar provision, or if
the Companies reasonably believe the Fund may fail to so qualify; or
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(e) immediate termination by the Companies upon written notice to the Fund
and the Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified in
Article VI hereof; or
(f) immediate termination by the Companies upon written notice to the Fund
and the Underwriter, if the Companies shall determine, in their sole
judgment exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(g) termination by the Fund or the Underwriter by written notice to the
Companies, if the Companies give the Fund and the Underwriter the written
notice specified in Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, any termination under this
Section 10.1(h) shall be effective forty-five (45) days after the notice
was given.
10.2 Effect of Termination
Notwithstanding any termination of this Agreement, the Fund and the
Underwriter shall, at the option of the Companies, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
ARTICLE XI. 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 such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
700 Central Avenue
St. Petersburg, FL 33701
Attn: Thomas M. Mistele, Secretary
If to the Company:
One Granite Place
Concord,NH 03301
Attn: General Counsel
If to the Underwriter:
700 Central Avenue
St Petersburg, FL 33701
Attn: Thomas M. Mistele, Vice President
14
<PAGE>
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their constructions or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the
Securities and Exchange Commission, 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.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
12.9 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the Commission granting
exemptive relief therefrom and the conditions of such orders.
15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date first above written.
Companies:
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By its authorized officer
SEAL By: /s/ Russell C. Simpson
--------------------------------
Russell C. Simpson
Title: Vice President and Treasurer
----------------------------
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
By its authorized officer
SEAL By: /s/ Russell C. Simpson
--------------------------------
Russell C. Simpson
Title: Vice President and Treasurer
----------------------------
Fund:
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By its authorized officer,
SEAL By: /s/ Thomas M. Mistele
--------------------------------
Thomas M. Mistele
Title: Secretary
----------------------------
Underwriter:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
By its authorized officer,
SEAL By: /s/ Thomas M. Mistele
--------------------------------
Thomas M. Mistele
Title: Vice President
-----------------------------
16
<PAGE>
SCHEDULE A
BOARD DATE OF RESOLUTION OF COMPANY'S
NAME OF ACCOUNT WHICH ESTABLISHED THE ACCOUNT
- --------------- -----------------------------
Chubb Separate Account A August 20, 1984
(Chubb Life Insurance
Company of America)
Colonial Separate Account B March 2, 1994
(The Colonial Life
Insurance Company of
America)
17
<PAGE>
SCHEDULE B
TEMPLETON VARIABLE PRODUCTS SERIES FUND PORTFOLIOS
Templeton Money Market Fund
Templeton Bond Fund
Templeton Stock Fund
Templeton Asset Allocation Fund
Templeton International Fund
18
<PAGE>
SCHEDULE C
TEMPLETON VARIABLE PRODUCT SERIES FUND PORTFOLIOS
AVAILABLE UNDER THIS AGREEMENT:
Templeton International Fund
19
<PAGE>
SCHEDULE D
VARIABLE ANNUITY CONTRACTS WHICH MAY BE INVESTED
IN THE PORTFOLIOS LISTED ON SCHEDULE C:
FORM NUMBER NAME
- ----------- ----
NONE
VARIABLE LIFE CONTRACTS WHICH MAY BE INVESTED
IN THE PORTFOLIOS LISTED ON SCHEDULE C:
FORM NUMBER NAME
- ----------- ----
Form 86-01 A (or such other form Flexible Premium
numbers as may be approved in Variable Life
certain states) (Chubb Life Insurance Policy
Insurance Company of America)
Form 94-141NY Flexible Premium
(The Colonial Life Insurance Variable Life
Company of America) Insurance Policy
20
<PAGE>
SCHEDULE E
OTHER INVESTMENT COMPANIES CURRENTLY AVAILABLE UNDER
VARIABLE LIFE CONTRACTS LISTED ON SCHEDULE D:
Chubb America Fund, Inc.
World Growth Stock Portfolio
Money Market Portfolio
Gold Stock Portfolio
Bond Portfolio
Domestic Growth Stock Portfolio
Growth and Income Portfolio
Capital Growth Portfolio
Balanced Portfolio
Emerging Growth Portfolio
21
<PAGE>
SCHEDULE F
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
22
<PAGE>
SCHEDULE G
STANDARDS FOR VOTING SHARES OF THE TEMPLETON VARIABLE PRODUCTS SERIES FUND
("FUND") HELD BY CHUBB SEPARATE ACCOUNT A AND COLONIAL SEPARATE ACCOUNT B (THE
"ACCOUNTS") AND FOR TABULATING PARTICIPANT VOTING INSTRUCTIONS.
Chubb Separate Account A and Colonial Separate Account B will vote in accordance
with instructions received from owners of variable insurance contracts having
values allocated to the Fund. Shares of the Fund for which no instructions are
received will be voted by the Accounts for or against or in abstention with
respect to the proposal in the same proportion as shares for which instructions
are received by that entity.
Each contract Participant has the right to give instructions as to how shares of
the Fund attributable to the Participant's account should be voted,
notwithstanding that the contract owner may be the Participant's employer.
Contract owners will instruct the Accounts to vote in accordance with such
instructions. Fractional shares also will be voted in accordance with
instructions received.
23
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND,
---------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
CHUBB LIFE INSURANCE COMPANY OF AMERICA
---------------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of May, 1996 by
and among CHUBB LIFE INSURANCE COMPANY OF AMERICA, (hereinafter the "Company"),
a New Hampshire corporation, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No.812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "'Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") 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 Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable life insurance and variable annuity
contracts with the form number(s) which are listed on Schedule A attached hereto
and incorporated herein by this reference, as such Schedule A may be amended
from time to time hereafter by mutual written agreement of all the parties
hereto, (the "Contracts") shall be invested in the Fund, in such other Funds
advised by the Adviser as may be mutually agreed to in writing by the parties
hereto. in the Company's general account, or in an investment company other than
the Fund. The Company agrees to notify the Fund of the addition of any non-
Fidelity mutual funds within a reasonable time after any such addition.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund. Proceeds for
3
<PAGE>
liquidation of shares of the Fund will be wired from the Fund's custodial
account to an account designated by the Company.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 408:30 of the New Hampshire Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New Hampshire and
all applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
4
<PAGE>
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New Hampshire and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New Hampshire to the extent required to perform
this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New Hampshire and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New Hampshire and any applicable state and federal securities laws.
5
<PAGE>
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements: Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund will reimburse the Company in
an amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same procedures
shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the
6
<PAGE>
cost of printing any prospectuses or Statements of Additional Information other
than those actually distributed to existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No
7
<PAGE>
such material shall be used if the Fund or its designee reasonably objects to
such use within fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article [V, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published. or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display. signs or billboards, motion pictures, or other public media), sales
literature (i.e.,
---
8
<PAGE>
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b- 1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law.
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.8 17-S, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
9
<PAGE>
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change: and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account: provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place
10
<PAGE>
within six (6) months after the Fund gives written notice that this provision is
being implemented, and until the end of that six month period the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1. 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
11
<PAGE>
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control. with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement: or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
12
<PAGE>
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it. and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
13
<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 Underwriter or
Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for
the Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund, Adviser
or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto.
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance. bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified
14
<PAGE>
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);or
(ii) 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;
15
<PAGE>
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund 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.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement. the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
16
<PAGE>
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice
to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity.
10.2. Effect of Termination. Notwithstanding any termination of this
--------- -----------
Agreement, the Fu and the Underwriter shall at the option of the Company,
continue to make available additional shares 0 the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts").
17
<PAGE>
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as oppose to Fund shares attributable to the Company's assets held in
the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as "Legally Required Redemption") or (iii) as permitted
by an order of the SEC pursuant to Section 26(b) the 1940 Act. Upon request, the
Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. 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:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Chubb Life Insurance Company of America
One Granite Place
Concord, NH 03301
Attention: Law Department
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
18
<PAGE>
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument
12.5 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.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing. each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations. at law or in equity. which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
19
<PAGE>
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days
after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon
as practical after the delivery thereof to stockholders, but
this subsection (c) shall not apply so long as the Company is a
direct or indirect wholly-owned subsidiary of the Chubb
Corporation;
(d) any registration statement (without exhibits) and financial
reports of the Company's separate account(s) utilizing Fidelity
mutual funds filed with the Securities and Exchange Commission
or any state insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof, but nothing in this
subsection (e) shall require the Company to disclose any
information that would otherwise be privileged or would result
in the public disclosure of facts not otherwise available to
the public.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Ronald Angarella
-------------------------
Name: Ronald Angarella
-------------------------
Title: Senior Vice President, Sales
-------------------------
20
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
By: _________________________
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: _________________________
Kurt A. Lange
President
21
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Chubb Separate Account A Form 86-01
August 20, 1984
</TABLE>
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contract owner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
C. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
----
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place in
another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded and
considered to be not received for purposes of vote tabulation. Any Cards
--------
that have "kicked out" (e.g. mutilated, illegible) of the procedure are
"hand verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
------
review and approve tabulation format
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the formal vote. Fidelity
Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
1. Chubb America Fund, Inc.
Domestic Growth Stock Portfolio
World Growth Stock Portfolio
Growth and Income Portfolio
Emerging Growth Portfolio
Capital Growth Portfolio
Money Market Portfolio
Gold Stock Portfolio
Balanced Portfolio
Bond Portfolio
2. Templeton Variable Products Series Fund
Templeton International Fund
26
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND II,
------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
CHUBB LIFE INSURANCE COMPANY OF AMERICA
---------------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of May, 1996
by and among CHUBB LIFE INSURANCE COMPANY OF AMERICA, (hereinafter the
"Company"), a New Hampshire corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, [986 (File No.812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") 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 Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable life insurance and variable annuity
contracts with the form number(s) which are listed on Schedule A attached hereto
and incorporated herein by this reference. as such Schedule A may be amended
from time to time hereafter by mutual written agreement of all the parties
hereto, (the "Contracts") shall be invested in the Fund, in such other Funds
advised by the Adviser as may be mutually agreed to in writing by the parties
hereto, in the Company's general account, or in an investment company other than
the Fund. The Company agrees to notify the Fund of the addition of any non-
Fidelity mutual funds within a reasonable time after any such addition.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund. Proceeds for
3
<PAGE>
liquidation of shares of the Fund will be wired from the Fund's custodial
account to an account designated by the Company.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 408:30 of the New Hampshire Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act. duly authorized for
issuance and sold in compliance with the laws of the State of New Hampshire and
all applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
4
<PAGE>
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- 1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no feet' or "defensive" Rule 12b- 1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b- 1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- 1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New Hampshire and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New Hampshire to the extent required to perform
this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New Hampshire and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New Hampshire and any applicable state and federal securities laws.
5
<PAGE>
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the.
minimal. coverage as required currently by Rule 17g-( 1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements: Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund will reimburse the Company in
an amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same procedures
shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the
6
<PAGE>
cost of printing any prospectuses or Statements of Additional Information other
than those actually distributed to existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No
7
<PAGE>
such material shall be used if the Fund or its designee reasonably objects to
such use within fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company.
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares.
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials. applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e.,
---
8
<PAGE>
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b- 1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus. proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all time comply with Section 817(h)
of the Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by Regulation
1.817-5.
9
<PAGE>
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place
10
<PAGE>
within six (6) months after the Fund gives written notice that this provision is
being implemented, and until the end of that six month period the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
11
<PAGE>
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement: or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
12
<PAGE>
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
13
<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 Underwriter or Fund by or on
behalf of the Company for use in the Registration Statement
or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for
the Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund, Adviser
or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund: or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
14
<PAGE>
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) 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;
15
<PAGE>
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund 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.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
16
<PAGE>
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company;
or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor
or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity.
10.2. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts").
17
<PAGE>
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. 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:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Chubb Life Insurance Company of America
One Granite Place
Concord, NH 03301
Attention: Law Department
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
18
<PAGE>
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
19
<PAGE>
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days
after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon
as practical after the delivery thereof to stockholders, but
this subsection (c) shall not apply so long as the Company is a
direct or indirect wholly-owned subsidiary of the Chubb
Corporation;
(d) any registration statement (without exhibits) and financial
reports of the Company's separate account(s) utilizing Fidelity
mutual funds filed with the Securities and Exchange Commission
or any state insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof, but nothing in this
subsection (e) shall require the Company to disclose any
information that would otherwise be privileged or would result
in the public disclosure of facts not otherwise available to
the public.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Ronald Angarella
---------------------------------
Name: Ronald Angarella
---------------------------------
Title: Senior Vice President, Sales
---------------------------------
20
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND II
By: ____________________________________
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: ____________________________________
Kurt A. Lange
President
21
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Chubb Separate Account A Form 86-01
August 20, 1984
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
----
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place in
another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
------------
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. if the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
-------
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
1. Chubb America Fund, Inc.
Domestic Growth Stock Portfolio
World Growth Stock Portfolio
Growth and Income Portfolio
Emerging Growth Portfolio
Capital Growth Portfolio
Money Market Portfolio
Gold Stock Portfolio
Balanced Portfolio
Bond Portfolio
2. Templeton Variable Products Series Fund
Templeton International Fund
26
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE] APPLICATION FOR
LIFE INSURANCE
<TABLE>
<S> <C>
PART I
- ---------------------------------------------------------------------------------------------------------------
PROPOSED INSURED A - PERSONAL INFORMATION
1. PRINT Name as it is to appear on your policy (Last, First & Middle)
-----------------------------------------------------------------------------------------------------------
2. Sex: [_]M [_]F 3. Birthdate:____/____/____ 4. Age (Nearest Birthday):__________________
(mm) (dd) (yy)
5 U.S. Citizen: [_]Yes [_]No 6. Permanent U.S. Resident: [_]Yes [_]No
7. Birthplace (State/Country):_______________ 8. Social Security No.: ________________________________
9. Home Telephone: ( )_________________ 10. Business Telephone: ( )________________________
11. Driver License Number and State:__________________________________________________________________________
12. Home Address: Street________________________________________________________ Apt.________________________
City__________________________________________ State ______________________ Zip_________________________
13. Occupation and Duties:____________________________________________________________________________________
14. Employer:___________________________________________ Length of Current Employment:_______________________
15. Business Address: Street__________________________________________________________________________________
City__________________________________________ State ______________________ Zip_________________________
16. Personal Finances:
a) Annual Earned Income ________________________________ Unearned Income ________________________________
b) Total Assets _________________________ Total Liabilities ______________ Net Worth ____________________
c) Have you ever filed for bankruptcy? [_]Yes [_]No (If "yes", COMPLETE Financial Supplement)
17. In the past 5 years, have you smoked a cigarette, cigar or pipe, chewed tobacco or used tobacco or nicotine
in any form?
[_] Yes, Last Used ____________________________________ on_________/________
(Type OF tobacco/nicotine) (Month) (Year)
[_] No, Never Used
LIFE INSURANCE IN FORCE AND PENDING FOR PROPOSED INSURED A
18. Life insurance in force? [_]Yes [_]No
If "yes", describe all life coverage below. Include individual and group coverage(s).
Face Amount
Policy Insurance Including Double Annual Date
Company Number Plan Term Riders Indemnity Premium Issued
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
19. Is there any life insurance policy or annuity contract in force with any
Company that will be changed, lapsed or replaced as a result of this
application? If "yes", CIRCLE the above Company and number(s) and complete
replacement forms, if required. [_]Yes [_]No
20. Are you now applying for or have you in the past six months applied for
insurance with any other Company? If "yes", give details. ____________________________________ [_]Yes [_]No
</TABLE>
Page 1 of 9
<PAGE>
PROPOSED INSURED B, OTHER INSURED OR INSURED SPOUSE - PERSONAL INFORMATION
21. PRINT Name as it is to appear on your policy (Last, First & Middle)
<TABLE>
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
22. Sex: [_] M [_] F 23. Birthdate: ____/___/____/ 24. Age (Nearest Birthday):______________________
(mm) (dd) (yy)
25. U.S. Citizen: [_] Yes [_] No 26. Permanent U.S. Resident: [_] Yes [_] No
27. Birthplace (State/Country):________________________ 28. Social Security No.:________________________________
29. Home Telephone: ( )_____________________________ 30. Business Telephone: ( )___________________________
31. Driver License Number and State: ____________________________________________________________________________
32. Home Address: Street _______________________________________________ Apt.____________________________________
City __________________________________________________ State __________________________ Zip__________________
33. Occupation and Duties:________________________________________________________________________________________
34. Employer:__________________________________________________ Length of Current Employment:_____________________
35. Business Address: Street______________________________________________________________________________________
City___________________________________________ State_______________________________ Zip______________________
36. Personal Finances:
a) Annual Earned Income ___________________________ Unearned Income _________________________________________
b) Total Assets ______________________ Total Liabilities ______________ Net Worth ___________________________
c) Have you ever filed for bankruptcy? [_] Yes [_] No (If "yes", COMPLETE Financial Supplement)
37. In the past 5 years, have you smoked a cigarette, cigar or pipe, chewed tobacco or used tobacco or nicotine in
any form?
[_] Yes, Last Used __________________________________ on_______/______
(Type of tobacco/nicotine) (Month) (Year)
[_] No, Never Used
</TABLE>
LIFE INSURANCE IN FORCE AND PENDING FOR PROPOSED INSURED B, OTHER INSURED OR
INSURED SPOUSE
38. Life insurance in force? [_] Yes [_] No
If "yes", describe all life coverage below. Include individual and group
coverage(s).
<TABLE>
<CAPTION>
Face Amount
Policy Insurance Including Double Annual Date
Company Number Plan Term Riders Indemnity Premium Issued
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
39. Is there any life insurance policy or annuity contract in force with any
Company that will be changed, lapsed or replaced as a result of this
application? If "yes", CIRCLE the above Company and number(s) and complete
replacement forms, if required. [_] Yes [_] No
40. Are you now applying for or have you in the past six months applied for
insurance with any other Company? If "yes", give details. ______________ [_] Yes [_] No
</TABLE>
<PAGE>
<TABLE>
<S> <C>
COMPLETE QUESTIONS #41 THROUGH #49 FOR ALL PRODUCTS
---
LIFE INSURANCE APPLIED FOR
41. Face Amount: $ ____________________________________
42. Plan of Insurance: ________________________________
For Universal/Variable Life Plans - Death Benefit To Be Paid Under: [_] Option I [_] Option II
(For Variable Life lnsurance also complete appropriate Application Supplement For Variable Life Insurance)
43. OPTIONAL BENEFIT RIDERS: (NOT AVAILABLE WITH ALL PLANS. CHECK ONLY IF DESIRED.)
[_] Waiver of Premium/Monthly Deductions Rider [_] Other Insured Term Rider (Amount $___________________)
[_] Return of Premium Rider [_] Spouse Term Insurance Rider (Amount $ _______________)
[_] Guaranteed Insurability Option Rider [_] Children's Term Insurance Rider (Units ______________)
[_] Guaranteed Minimum Death Benefit Rider (Complete Children's Term Insurance Supplement)
[_] Exchange of Insured Rider [_] Terminal Illness Accelerated Benefit Rider
[_] Accidental Death Benefit/Double & Triple Indemnity Rider (Amount $ ________________)
[_] Automatic Increase Rider (Increase Percentage Factor ______ % Years to increase )
[_] Primary Insured/Yearly Renewable Term Rider (Amount $ _______________________ )
[_] Waiver of Specified Premium Rider (For Universal/Variable Life Only - Monthly Amount $ __________________ )
--------------------------------
[_] Other (Specify Optional Benefit Rider Name, Amount, Duration, etc.)
---------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING ADDITIONAL RIDERS ARE AVAILABLE ONLY WITH CERTAIN SURVIVORSHIP PRODUCTS. CHECK ONLY IF DESIRED.
[_] Waiver of Specified Premium Rider (Mthly. Amt.$ ______ [_] PROPOSED INSURED - A [_] PROPOSED INSURED - B)
[_] Waiver of Monthly Deductions Rider ([_] PROPOSED INSURED - A [_] PROPOSED INSURED - B)
[_] Supplemental Coverage Rider (Face Amount $ __________________ )
[_] Joint First Death Term Insurance Rider (Face Amount $ __________________ Years of Coverage ________________ )
[_] Survivor Security Option Rider (Years of Coverage ____________________________ )
[_] Temporary Term Insurance (Estate Protection) Rider
[_] Policy Exchange Option Rider (Are Proposed Insured A and B legally married to each other? [_] Yes [_] No)
[_] Other (Specify Optional Benefit Rider Name, Amount, Duration, etc.)
- ----------------------------------------------------------------------------------------------------------------------------------
OWNER
44. Complete if Owner is other than Proposed Insured A.
Name:________________________________________________________________________________________________________________________
Relationship to Proposed Insured A: _________________________________________________________________________________________
Address: ____________________________________________________________________________________________________________________
Social Security No. or Tax I.D. No.: ___________________________________ Birth Date/Trust Date:______/________/_______
(mm) (dd) (yy)
PREMIUM INFORMATION
45. Planned Periodic Premium: $ _____________________ Pour-In Amount: $ _____________
46. Non-Forfeiture Option (not available with all plans) If a premium is not paid, cash value to be used for:
[_] Automatic Premium Loan [_] Extended Term Insurance [_] Reduced Paid-Up Insurance
47. Premium to be paid: [_] Annually [_] Semi-Annually [_] Quarterly [_] Monthly [_] PAC/COM [_] HFI
[_] List Bill [_] PDF (Complete Transmittal) [_] Other:__________________________________________________
48. Premium bill to be sent to: [_] Proposed Insured A at: [_] Home Address [_] Owner at address listed in #44
[_] Business Address
[_] Other "Care of" name and mailing address: ___________________________________________________
____________________________________________________________________________________________________________________________
R.F.D., P.O. Box, Street, Apt. or Suite No., city, state & Zip
49. Was Conditional Receipt given? [_]Yes [_] No If "yes", give amount of advance payment: $ ________________
</TABLE>
Page 3 of 9
<PAGE>
COMPLETE QUESTIONS #50 THROUGH #56 FOR ALL PRODUCTS
---
50. So any future benefit dispersal can be promptly processed, complete all the
below identification data for each beneficiary and CIRCLE whether PRIMARY
(P) or CONTINGENT (C).
BENEFICIARY DESIGNATION for PROPOSED INSURED A
OR
FOR SURVIVORSHIP POLICY AND RIDERS (EXCLUDING JOINT FIRST DEATH TERM RIDER):
<TABLE>
<CAPTION>
Full Name Relationship Birthdate City and State of Residence
<S> <C> <C> <C>
P C ___________________________ _______________ _____________ _____________________________________________________
P C ___________________________ _______________ _____________ _____________________________________________________
P C ___________________________ _______________ _____________ _____________________________________________________
BENEFICIARY DESIGNATION for JOINT FIRST DEATH TERM RIDER:
PROPOSED P C _________________ _______________ _____________ _____________________________________________________
INSURED-A P C _________________ _______________ _____________ _____________________________________________________
PROPOSED P C _________________ _______________ _____________ _____________________________________________________
Insured-B P C _________________ _______________ _____________ _____________________________________________________
BENEFICIARY DESIGNATION for OTHER INSURED or INSURED SPOUSE RIDER:
Full Name Relationship Birthdate City and State of Residence
P C ___________________________ _______________ _____________ _____________________________________________________
P C ___________________________ _______________ _____________ _____________________________________________________
P C ___________________________ _______________ _____________ _____________________________________________________
</TABLE>
ADDITIONAL INFORMATION REGARDING PROPOSED INSURED A, PROPOSED INSURED B, OTHER
INSURED OR INSURED SPOUSE
In items #51 through #56 below the word "you" refers to Proposed Insured A,
Proposed Insured B, Other Insured or Insured Spouse. For any "yes" answer,
IDENTIFY PERSON TO WHOM IT APPLIES.
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
51. Do you plan to participate in or have you within the past 3 years
participated in organized auto, boat, or motorcycle racing, skin or scuba
diving, parachuting or skydiving, hang gliding, or mountain, rock or
technical climbing? If "yes", COMPLETE Avocation Supplement. [_] [_]
52. Do you plan to fly or have you in the past 3 years flown any aircraft (i.e.
airplane, glider, helicopter, balloon, ultra-lite) as a pilot, student pilot,
crew member or as a passenger on other than commercial airlines?
If "yes", COMPLETE Aviation Supplement. [_] [_]
53. Have you within the past 3 years been convicted of a moving violation, or
had your driver license restricted or revoked? If "yes", give details: _________________________ [_] [_]
________________________________________________________________________________________________
________________________________________________________________________________________________
54. Have you received benefits or had insurance premiums waived on any insurance
in the past 5 years? If "yes", give details: ___________________________________________________ [_] [_]
________________________________________________________________________________________________
________________________________________________________________________________________________
55. Do you intend to live or travel outside of the United States or Canada? If
"yes", give details: [_] [_]
_________________________________________________________________________________________________
_________________________________________________________________________________________________
56. Have you had life, disability or health insurance rated, modified, rejected, cancelled, or had
renewal or reinstatement refused in the past 5 years? If "yes", give details: ___________________ [_] [_]
_________________________________________________________________________________________________
_________________________________________________________________________________________________
</TABLE>
Page 4 of 9
<PAGE>
MEDICAL HISTORY OF PROPOSED INSURED A
(Complete questions #57 through #67 whenever a medical or paramedical is NOT
required.)
57. a. Name and address of your personal physician and/or health care facility.
If none, write "none".
_________________________________________________________________________
b. Date and reason last consulted? _________________________________________
c. WHAT TREATMENT WAS GIVEN or medication prescribed? ______________________
MEDICAL QUESTIONS
For the following questions, explain "yes" answers in the space provided on the
following page. Identify question number, condition, include diagnoses, dates,
durations, treatments and medications prescribed and names and addresses of all
attending medical professionals and treatment facilities.
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
58. Height _________ ft. _________ in. Weight _________ lbs.
a. Has your weight changed 10 pounds or more in the past year? [_] [_]
b. If "yes", how much? _________ lbs. Explain. __________________________
Yes No
59. Have you been diagnosed by a member of the medical profession or been
treated for ANY DISEASE, DISORDER OR SYNDROME OF:
a. the eyes, ears, nose, mouth or throat? [_] [_]
b. the heart or blood vessels, including chest pain, palpitation, high blood pressure, rheumatic
fever, heart murmur or heart attack? [_] [_]
c. the lungs, including shortness of breath, chronic cough, bronchitis, pleurisy, asthma,
emphysema or tuberculosis? [_] [_]
d. the head or brain, spinal cord or nervous system, including dizziness, fainting, convulsions,
headaches, depression, stress, chronic fatigue, paralysis, loss of consciousness, mental or
nervous disorder, stroke, or anxiety? [_] [_]
e. the urinary tract, kidneys or bladder, including sugar, albumin, blood or pus in urine, stone
or kidney failure? [_] [_]
f. the stomach, esophagus, liver, gall bladder, pancreas, spleen, colon, intestines, rectum or
anus, including hepatitis, internal bleeding, ulcer, colitis, inflammatory bowel disease or
diverticulitis? [_] [_]
g. the muscles, nerves, cartilage or bones, including the neck, spine, back and joints, neuritis,
sciatica, disc degeneration or trauma, rheumatism, arthritis, bursitis, fibromyalgia, gout,
strain, sprain, amputation or deformity? [_] [_]
h. the sexual organs-breasts, uterus, fallopian tubes, ovaries, vagina, penis, prostate or
testicles, including hysterectomy or prostatectomy? [_] [_]
i. the thyroid, pituitary, adrenal or parathyroid glands, including diabetes? [_] [_]
j. the blood, including anemia or leukemia? [_] [_]
k. any cancer, benign or malignant tumor, polyp or cyst? [_] [_]
l. any other health impairment, congenital deformity or medically or surgically treated
condition not mentioned above? [_] [_]
60. Are you now planning to seek medical advice or treatment? [_] [_]
61. Within the past 30 days, have you taken any medication or non-prescription drug? [_] [_]
62. Except as legally prescribed by a physician, have you used cocaine,
barbiturates, marijuana, heroin, morphine, amphetamines, hallucinogens, or any
other controlled substance in the past 10 years? [_] [_]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
63. Have you ever been treated by a member of the medical profession, or
diagnosed as having, chronic infections, deficiency of the immune system,
human immune deficiency virus (HIV) infection, Acquired Immune Deficiency
Syndrome (AIDS) or any other immune system disease, disorder or syndrome? [_] [_]
64. In the past 10 years, have you received or been advised to receive,
treatment or counseling for alcohol or drug use or been a member of any self-
help group such as Alcoholics Anonymous (AA) or Narcotics Anonymous (NA)? [_] [_]
65. Other than previously answered, have you in the past 5 years: [_] [_]
a. had a checkup, consultation, illness, injury or surgery? [_] [_]
b. been a patient in a hospital, clinic or other medical facility? [_] [_]
c. had an electrocardiogram, x-ray, blood, urine or other diagnostic test? [_] [_]
d. been advised to have any diagnostic test, hospitalization or surgery which
was not completed? [_] [_]
66. Did either of your parents or any of your brothers or sisters ever have a stroke,
diabetes, cancer, high blood pressure, heart or kidney disease? [_] [_]
</TABLE>
67. Family Age if Age at
Record Living Present Health Death Cause of Death
--------------------------------------------------------------------------
Father
--------------------------------------------------------------------------
Mother
--------------------------------------------------------------------------
Brothers
--------------------------------------------------------------------------
Sisters
--------------------------------------------------------------------------
EXPLAIN "YES" ANSWERS BELOW. IDENTIFY QUESTION NUMBER, CONDITION, INCLUDE
DIAGNOSES, DATES, DURATIONS, TREATMENTS AND MEDICATIONS PRESCRIBED, AND NAMES
AND ADDRESSES OF ALL ATTENDING MEDICAL PROFESSIONALS AND TREATMENT FACILITIES.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Page 6 of 9
<PAGE>
MEDICAL HISTORY OF PROPOSED INSURED B, OTHER INSURED OR INSURED SPOUSE
(COMPLETE QUESTIONS #68 THROUGH #78 WHENEVER A MEDICAL OR PARAMEDICAL IS NOT
REQUIRED.)
68. A. NAME AND ADDRESS OF YOUR PERSONAL PHYSICIAN AND/OR HEALTH CARE FACILITY.
IF NONE, WRITE "NONE".
________________________________________________________________________
B. DATE AND REASON LAST CONSULTED? ________________________________________
C. WHAT TREATMENT WAS GIVEN OR MEDICATION PRESCRIBED? _____________________
MEDICAL QUESTIONS
For the following questions, explain "yes" answers in the space provided on the
following page. Identify question number, condition, include diagnoses, dates,
durations, treatments and medications prescribed and names and addresses of all
attending medical professionals and treatment facilities.
Yes No
69. Height _________ ft. _________ in. Weight _________ lbs.
a. Has your weight changed 10 pounds or more in the
past year? [_] [_]
b. If "yes", how much? _________ lbs. Explain.
___________________
Yes No
70. Have you been diagnosed by a member of the medical
profession or been treated for ANY DISEASE, DISORDER OR
SYNDROME OF:
a. the eyes, ears, nose, mouth or throat? [_] [_]
b. the heart or blood vessels, including chest pain,
palpitation, high blood pressure, rheumatic fever, heart
murmur or heart attack? [_] [_]
c. the lungs, including shortness of breath, chronic cough,
bronchitis, pleurisy, asthma, emphysema or tuberculosis? [_] [_]
d. the head or brain, spinal cord or nervous system,
including dizziness, fainting, convulsions, headaches,
depression, stress, chronic fatigue, paralysis, loss of
consciousness, mental or nervous disorder, stroke, or
anxiety? [_] [_]
e. the urinary tract, kidneys or bladder, including sugar,
albumin, blood or pus in urine, stone or kidney failure? [_] [_]
f. the stomach, esophagus, liver, gall bladder, pancreas,
spleen, colon, intestines, rectum or anus, including
hepatitis, internal bleeding, ulcer, colitis,
inflammatory bowel disease or diverticulitis? [_] [_]
g. the muscles, nerves, cartilage or bones, including the
neck, spine, back and joints, neuritis, sciatica, disc
degeneration or trauma, rheumatism, arthritis, bursitis,
fibromyalgia, gout, strain, sprain, amputation or
deformity? [_] [_]
h. the sexual organs - breasts, uterus, fallopian tubes,
ovaries, vagina, penis, prostate or testicles, including
hysterectomy or prostatectomy? [_] [_]
i. the thyroid, pituitary, adrenal or parathyroid glands,
including diabetes? [_] [_]
j. the blood, including anemia or leukemia? [_] [_]
k. any cancer, benign or malignant tumor, polyp or cyst? [_] [_]
l. any other health impairment, congenital deformity or
medically or surgically treated condition not mentioned
above? [_] [_]
71. Are you now planning to seek medical advice or treatment? [_] [_]
72. Within the past 30 days, have you taken any medication or
non-prescription drug? [_] [_]
73. Except as legally prescribed by a physician, have you used
cocaine, barbiturates, marijuana, heroin, morphine,
amphetamines, hallucinogens, or any other controlled
substance in the past 10 years? [_] [_]
Page 7 of 9
<PAGE>
YES NO
74. Have you ever been treated by a member of the medical
profession, or diagnosed as having, chronic infections,
deficiency of the immune system, human immune deficiency
virus (HIV) infection, Acquired Immune Deficiency Syndrome
(AIDS) or any other immune system disease, disorder or
syndrome? [_] [_]
75. In the past 10 years, have you received or been advised
to receive, treatment or counseling for alcohol or drug
use or been a member of any self-help group such as
Alcoholics Anonymous (AA) or Narcotics Anonymous (NA)? [_] [_]
76. Other than previously answered, have you in the past
5 years:
a. had a checkup, consultation, illness, injury or
surgery? [_] [_]
b. been a patient in a hospital, clinic or other medical
facility? [_] [_]
c. had an electrocardiogram, x-ray, blood, urine or
other diagnostic test? [_] [_]
d. been advised to have any diagnostic test,
hospitalization or surgery which was not completed? [_] [_]
77. Did either of your parents or any of your brothers or
sisters ever have a stroke, diabetes, cancer, high blood
pressure, heart or kidney disease? [_] [_]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
78. Family Age if Age at
Record Living Present Health Death Cause of Death
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Father
-------------------------------------------------------------------------------------------------------------------------------
Mother
-------------------------------------------------------------------------------------------------------------------------------
Brothers
-------------------------------------------------------------------------------------------------------------------------------
Sisters
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXPLAIN "YES" ANSWERS BELOW. IDENTIFY QUESTION NUMBER, CONDITION, INCLUDE
DIAGNOSES, DATES, DURATIONS, TREATMENTS AND MEDICATIONS PRESCRIBED, AND NAMES
AND ADDRESSES OF ALL ATTENDING MEDICAL PROFESSIONALS AND TREATMENT FACILITIES.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Page 8 of 9
<PAGE>
79. SPECIAL REQUEST
- --------------------------------------------------------------------------------
Requested date of issue: _______________________
Is requested date to save age? [_] Yes [_] No
- --------------------------------------------------------------------------------
80. HOME OFFICE CORRECTIONS
(For Home Office use only where permitted by state statute or regulation.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF UNDERSTANDING AND ACKNOWLEDGEMENT
I/We understand and agree that:
1. This Application consists of: (a) Part I Application; (b) Part II Medical
Application(s), if required; (c) any Amendments to the application(s)
attached thereto; and (d) any Supplements all of which are required by the
Company for the plan, amount and benefits applied for.
2. Unless otherwise provided by the Conditional Receipt, the insurance applied
for will not take effect unless and until the policy is issued by the
Company, the policy is delivered to the Owner by the agent, and payment of
the first premium occurs during the life of all persons proposed for
insurance while the health of all Proposed Insureds and the financial status
of the Proposed Insured(s) and/or business has not changed since the date
below.
3. No agent, broker or medical examiner has the authority to waive the answers
to any questions, to determine insurability, to waive any of the Company's
rights or requirements, or to make or alter any contract or policy.
4. The Owner of the policy applied for may be named herein; if not, Proposed
Insured A will be the Owner.
5. The Company has the right to require medical examinations and diagnostic
tests to determine insurability and shall have 60 days from the date of this
application in which to consider and act upon the issuance of any insurance
policy. If within such period, a policy has not been delivered and if no
written notice of approval or rejection has been received, this application
shall be deemed to have been rejected.
6. Any changes or corrections made by the Company and noted in Question #80 are
agreed to by the Proposed Insured(s) and Owner upon acceptance of a policy
containing this Application with the noted changes and/or corrections. In
those states where written consent is required, amendments as to the plan,
amount, class of risk, age at issue, or to any benefits will be made only
with the written consent of the Proposed Insured(s) and Owner.
7. If Question #49 is answered "yes", I/We acknowledge that I/We have received a
copy of the Life Insurance Conditional Receipt and have read and understood
its terms.
8. I/WE ACKNOWLEDGE receipt of the Notice on the Medical Information Bureau, the
Notice of Investigative Consumer Reports, and the Description of Information
Practices.
9. I/WE HAVE READ, or have had read to me/us, the completed Application for Life
Insurance before signing below. All statements and answers in this
application are correctly recorded, and are full, complete and true to the
best of my/our knowledge and belief. I/WE UNDERSTAND that any false
statements or material misrepresentations shall result in the loss of
coverage under the policy. ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING
THAT HE/SHE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN
APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT IS
GUILTY OF INSURANCE FRAUD.
Signed at _____________________, this________ day of_______________ __________
(city and state) (month) (year)
__________________________________________ _________________________________
SIGNATURE OF APPLICANT/OWNER IF OTHER SIGNATURE OF PROPOSED INSURED A
THAN PROPOSED INSURED(S). If Firm, Trust, (If under age 15, signature of
or Corporation, print its name and that parent or legal guardian).
of authorized person who will sign below
on its behalf.
__________________________________________ _________________________________
Signature and title of authorized person SIGNATURE OF PROPOSED INSURED B,
signing on behalf of Firm, Trust or Other Insured or Insured Spouse
Corporation named above. (If under age 15, signature of
parent or legal guardian).
___________________________ _____________ _________________________________
PRINT NAME OF LICENSED Agent's Code. SIGNATURE OF LICENSED AGENT OR
AGENT OR BROKER. BROKER.
Page 9 of 9
<PAGE>
AGENT'S REPORT
PROPOSED INSURED(S)
IF ANY PROPOSED INSURED IS UNDER AGE 15, SUBSTITUTE "APPLICANT/OWNER" FOR
PROPOSED INSURED(S).
1. a. How long and how well have you known the Proposed Insured(s)?
__________________________________________________________________________
b. Are you related to the Proposed Insured(s)? [_] Yes [_] No If "yes", give
details.
2. What is the purpose of this insurance?
_____________________________________________________________________________
3. Answer only if Proposed Insured is under age 15.
a. Father's life insurance: In force $ ___________________________________
Applied for $ ___________________________________________________________
b. Mother's life insurance: In force $ ___________________________________
Applied for $ ___________________________________________________________
c. Are siblings also being insured? [_] Yes [_] No If "no", why not?
_________________________________________________________________________
4. Do all Proposed Insureds read and understand the English Language? [_] Yes
[_] No
If no, how was application and any medical exam completed?
_____________________________________________________________________________
5. How was the amount of insurance determined? Explain:
_____________________________________________________________________________
_____________________________________________________________________________
6. What class of risk rates did you quote?
[_] Non-Smoker Rates [_] Smoker Rates [_] Preferred Risk Discount Rates
Other: ______________________________________________________________________
AGENT SOLICITATION INFORMATION
Yes No
[_] [_] 7. Did you consult any Home Office staff on this application? If
"yes",explain: ______________________________________________
_____________________________________________________________
[_] [_] 8. Is another Agent to share your commissions? If "yes", give
Agent name and percentage.
Name:_____________________________ ________________________ %
Name:_____________________________ ________________________ %
[_] [_] 9. To the best of your knowledge will this insurance replace any
life insurance or annuity contract with this or any company?
If "yes", complete the proper forms required by your state.
[_] [_] 10. Is this policy being placed through a Chubb & Son agency or
on a Chubb & Son insured?
11. For VUL only, select one commission renewal schedule:
[_] Schedule I (Basic Renewal) [_] Schedule 2 (Renewal Plus Trail)
BUSINESS FINANCES (COMPLETE ONLY IF THIS IS BUSINESS INSURANCE)
12. What is the business purpose of this insurance?
[_]Buy-Sell [_]Executive Bonus [_]Key Person [_]Split Dollar
[_]Other: __________________________________________________________________
13. Type of business: [_]Corporation [_]Partnership [_]Sole Proprietorship
[_] Other: _________________________________________________________________
14. Proposed Insured(s) is/are: [_]Employee(s) [_] Owner(s) (of _________ % of
business)
15. Total Business Assets ______________________________________
Total Business Liabilities _________________________________
Total Business Net Worth ___________________________________
16. Net Profit After Taxes for Past Two Years:
Last Year ____________________ Previous Year ____________________
17. Are applications being submitted on other business associates? [_] Yes [_]
No
18. Is application signed by authorized officer or partner other than Proposed
Insured? [_] Yes [_] No If "no", explain:
____________________________________________________________________________
19. What insurance does the business maintain on the lives of each corporate
officer/keyperson/partner and the amount of business insurance on each?
<TABLE>
<CAPTION>
Amount Amount
Name Title % Of Ownership In Force Applied For
<S> <C> <C> <C> <C>
__________________________________________________ _________________ % $ __________________ $ _______________
__________________________________________________ _________________ % $ __________________ $ _______________
__________________________________________________ _________________ % $ __________________ $ _______________
__________________________________________________ _________________ % $ __________________ $ _______________
</TABLE>
I declare that I asked the Proposed Insured(s) each question. The answers have
been recorded by me exactly as stated and that I know nothing affecting the
insurability of the Proposed Insured(s) which is not fully recorded in this
application.
_________________________________________________ ________________________
DATE SIGNATURE OF LICENSED
AGENT OR BROKER
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT APPEARS HERE]
NOTICE ON THE MEDICAL INFORMATION BUREAU
Information on your insurability or that of your spouse or minor children will
be treated as confidential. The Company or its reinsurers may make a brief
report on it to the Medical Information Bureau, Inc. (MIB). This is a non-profit
organization to which a number of life and health insurers belong. It runs an
exchange of information for its members. If you, your spouse, or any of your
minor children apply to other MIB members for life or health insurance, or file
a claim with one of them, the MIB, if asked, will give the member the
information in its file.
If you ask, the MIB will disclose any information it may have in its files on
you or your spouse or minor children. If you think the file is wrong, you may
write or telephone and ask that it be changed. Your rights are set forth in the
Federal Fair Credit Reporting Act. You can write to the MIB at: Box 105, Essex
Station, Boston, MA 02112. You can reach the MIB by phone at (617) 426-3660.
The Company or its reinsurers may also give information in their files to life
and health insurers to which you, your spouse or minor children apply for life
or health insurance or with which you file a claim.
NOTICE OF INVESTIGATIVE CONSUMER REPORTS
As part of the routine processing of your application, an investigative consumer
report may be made. Through this report we obtain information about you by
talking to you, your neighbors, friends, and others whom you know. The report
has information as to your character, general reputation, personal traits and
life-style, except as may be related directly or indirectly to your sexual
orientation.
If a report is made, you have the right to a personal interview. You can request
it on the Authorization to Obtain and Disclose Information. If a report is made,
you may receive a copy upon written request.
You may write for more details on the nature and scope of this report. If you
want more details, write to Jefferson Pilot Financial Insurance Company at the
above address.
DESCRIPTION OF INFORMATION PRACTICES
To issue and service your insurance coverage and later to settle any claim, we
need to collect information about you. Our sources are set forth below. If you
wish to learn about our information practices in more detail, please write to
Jefferson Pilot Financial Insurance Company at the above address.
TYPES OF INFORMATION COLLECTED: Age, Job, Pay, Health, Financial Data,
Character, Reputation, Personal Traits, Life-style, except as may be related
directly or indirectly to your sexual orientation, Other Personal
Characteristics.
SOURCE OF INFORMATION: Insured, Applicant, Doctors, Hospitals, Employers, Other
Insurers to which you have applied, the MIB, Consumer Reporting Agencies, Banks.
DISCLOSURE TO THIRD PARTIES WITHOUT PRIOR AUTHORIZATION: The information may at
times be disclosed to third parties without your consent. This is only done when
required by law or for business reasons.
ACCESS AND CORRECTION: You can obtain access to the personal information in our
files; you may also request us to correct, amend or delete what you think is
wrong or not related to your coverage. If you want to know how to do so, please
write to Jefferson Pilot Financial Insurance Company and we will advise you how
to go about it.
_____________________________________
TO BE GIVEN TO THE PROPOSED INSURED A
_____________________________________
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT APPEARS HERE]
NOTICE ON THE MEDICAL INFORMATION BUREAU
Information on your insurability or that of your spouse or minor children will
be treated as confidential. The Company or its reinsurers may make a brief
report on it to the Medical Information Bureau, Inc. (MIB). This is a non-profit
organization to which a number of life and health insurers belong. It runs an
exchange of information for its members. If you, your spouse, or any of your
minor children apply to other MIB members for life or health insurance, or file
a claim with one of them, the MIB, if asked, will give the member the
information in its file.
If you ask, the MIB will disclose any information it may have in its files on
you or your spouse or minor children. If you think the file is wrong, you may
write or telephone and ask that it be changed. Your rights are set forth in the
Federal Fair Credit Reporting Act. You can write to the MIB at: Box 105, Essex
Station, Boston, MA 02112. You can reach the MIB by phone at (617) 426-3660.
The Company or its reinsurers may also give information in their files to life
and health insurers to which you, your spouse or minor children apply for life
or health insurance or with which you file a claim.
NOTICE OF INVESTIGATIVE CONSUMER REPORTS
As part of the routine processing of your application, an investigative consumer
report may be made. Through this report we obtain information about you by
talking to you, your neighbors, friends, and others whom you know. The report
has information as to your character, general reputation, personal traits and
life-style, except as may be related directly or indirectly to your sexual
orientation.
If a report is made, you have the right to a personal interview. You can request
it on the Authorization to Obtain and Disclose Information. If a report is made,
you may receive a copy upon written request.
You may write for more details on the nature and scope of this report. If you
want more details, write to Jefferson Pilot Financial Insurance Company at the
above address.
DESCRIPTION OF INFORMATION PRACTICES
To issue and service your insurance coverage and later to settle any claim, we
need to collect information about you.
Our sources are set forth below. If you wish to learn about our information
practices in more detail, please write to
Jefferson Pilot Financial Insurance Company at the above address.
TYPES OF INFORMATION COLLECTED: Age, Job, Pay, Health, Financial Data,
Character, Reputation, Personal Traits, Life-style, except as may be related
directly or indirectly to your sexual orientation, Other Personal
Characteristics.
SOURCE OF INFORMATION: Insured, Applicant, Doctors, Hospitals, Employers, Other
Insurers to which you have applied, the MIB, Consumer Reporting Agencies, Banks.
DISCLOSURE TO THIRD PARTIES WITHOUT PRIOR AUTHORIZATION: The information may at
times be disclosed to third parties without your consent. This is only done when
required by law or for business reasons.
ACCESS AND CORRECTION: You can obtain access to the personal information in our
files; you may also request us to correct, amend or delete what you think is
wrong or not related to your coverage. If you want to know how to do so, please
write to Jefferson Pilot Financial Insurance Company and we will advise you how
to go about it.
_____________________________________
TO BE GIVEN TO THE PROPOSED INSURED B
_____________________________________
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT APPEARS HERE]
LIFE INSURANCE
CONDITIONAL RECEIPT
RECEIVED from ___________________________________________ the sum of $ as
advance payment for an insurance policy on the life/lives of
_______________________________________________ Proposed Insured(s) on an
application made to the Company which bears the same date and number as this
Conditional Receipt.
NOTE: THIS CONDITIONAL RECEIPT IS VOID IF THE INSURANCE APPLIED FOR TOGETHER
WITH ANY OTHER INSURANCE ON SUCH LIFE UNDER ANY AND ALL OTHER RECEIPTS OF
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY AND INSURANCE IN FORCE WITH THE
COMPANY EXCEEDS [$625,000] ON ANY ONE LIFE INCLUDING ALL BENEFIT RIDERS. THIS
RECEIPT IS ALSO VOID If ANY PROPOSED INSURED IS IN EXCESS OF AGE 70 ON THE DATE
OF ITS ISSUE. THIS RECEIPT DOES NOT APPLY TO ANY ALTERNATE OR ADDITIONAL
POLICIES APPLIED FOR. ANY MONIES RECEIVED WITH AN APPLICATION WHICH EXCEEDS THE
ABOVE LIMITS WILL BE RETURNED AT ONCE.
DATE CONDITIONAL INSURANCE BEGINS. SUBJECT TO THE FOLLOWING CONDITIONS AND THOSE
OF THE POLICY APPLIED FOR the insurance will begin on the insurability date
which is the latest of the date the minimum advance payment is paid, the date of
completion of the application and any supplement(s) required by our underwriting
rules and practices for all Proposed Insureds, or the date of completion of all
required medical exams.
CONDITIONS:
(1) All persons proposed for insurance must be insurable on the insurability
date at the Company's standard premium rates according to our
underwriting rules and practices for the policy exactly as applied for,
with no exclusions, restriction or change in coverage; and
(2) a minimum advance payment equal to two months of the annual premium for
the insurance applied for has been made.
DATE CONDITIONAL INSURANCE ENDS: Coverage under this Receipt, if it has begun,
ends on the earliest of the following dates:
(1) The date the policy is issued as applied for and delivered to the Owner
with the first premium paid in full; or
(2) sixty days after the insurability date.
If the conditions above are not met then no insurance becomes effective under
this receipt and our only liability under this receipt is to refund the advance
payment. No agent of the Company has authority to make, alter or modify the
terms of this receipt.
Return of the advance payment will be made to the Owner if insurance is declined
or the policy, if any, as issued is not taken. If the policy is taken, the
advance payment will be a credit toward the first year's premium due under the
policy.
I/we certify that I/we have read the terms of this receipt and have had them
explained to me/us by the agent or broker. I/we understand that the insurance
applied for shall not be effective unless and until all the conditions of this
receipt are met. Any person WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE/SHE
IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A
CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT IS GUILTY OF INSURANCE FRAUD.
<TABLE>
<CAPTION>
<S> <C>
_______________________________________________________________________ __________________________
Signature of Proposed Insured A (if under age 15, signature of parent Date
or legal guardian).
_______________________________________________________________________ __________________________
Signature OF Proposed Insured B, Other Insured or Insured Spouse (if Date
under age 15, signature of parent or guardian).
_______________________________________________________________________ __________________________
Signature of Applicant/Owner If other than Proposed Insured(s). Date
_______________________________________________________________________ __________________________
Signature of Licensed Agent or Broker. Date
</TABLE>
ALL CHECKS MUST BE MADE PAYABLE TO JEFFERSON PILOT FINANCIAL INSURANCE COMPANY.
DO NOT MAKE CHECKS PAYABLE TO THE AGENT OR BROKER OR LEAVE THE PAYEE BLANK.
GIVE TO OWNER ONLY IF ADVANCED PAYMENT IS PAID.
<PAGE>
[LETTER OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
AUTHORIZATION TO OBTAIN & DISCLOSE INFORMATION
I/We authorize any medical practitioner, medically related facility,
psychologist, psychiatrist, insurer or reinsurer, Medical Information Bureau
(MIB), financial institution, consumer reporting agency, accountant, lawyer,
employer, Social Security Administration or Internal Revenue Service to give the
Company or its agents any records or knowledge of me/us or that of my/our minor
children that they may have, whether medical or non-medical, nervous or mental
conditions, including any use of drugs or alcohol as well as any hobbies and
finances. No consumer reporting agency is to obtain information from the MIB.
I/We understand that the information obtained may be used by the Company to
determine eligibility for insurance, or to administer my/our coverage. The
Company may not give the information to any person or entity EXCEPT: (1) a
reinsurer, or other insurers to whom I/We have applied or may apply; (2) MIB; or
(3) any other person or entity who performs business or legal services in
connection with the administration of my/our insurance coverage. Information may
be disclosed as allowed by law.
I/We agree that a copy of this Authorization shall be as valid as the original;
this Authorization shall be valid for two years from the date shown below. I/We
may have a copy upon request.
I/We want to be interviewed if an Investigative Consumer Report is
required. [_] Yes [_] No
Signed at ______________________,this_____ dayof __________________ ___________
(city and state) (month) (year)
<TABLE>
<CAPTION>
____________________________________________________________ _________________________________________________________________
<S> <C>
Signature oF Proposed Insured A age 15 or over. Signature of Proposed Insured B, Other Insured or Insured Spouse
(Print name if under age 15 for identifying purposes.) age 15 or over.
(Print name if under age 15 for identifying purposes.)
______________________________________________________________ _________________________________________________________________
Signature of Parent or legal guardian if any Proposed Insured Signature of Licensed Agent or Broker.
is under age 15.
</TABLE>
List of Children if proposed for insurance:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
APPLICATION SUPPLEMENT FOR
VARIABLE LIFE INSURANCE
/ /
A. PROPOSED INSURED A: _____________________ Birthdate: _____________________
/ /
PROPOSED INSURED B: _____________________ Birthdate: _____________________
- --------------------------------------------------------------------------------
B. PREMIUM PAYOR (Complete if the Premium Payor is other than the Proposed
Insureds)
l. Name of Payor: ________________________________________________________
2. Relationship to Proposed Insureds:_____________________________________
- --------------------------------------------------------------------------------
C. ALLOCATION OF NET PREMIUMS ([5%] is the minimum allowed for any account
used. Use whole numbers only - no fraction or decimals. Total sum of
percentage allocations must equal 100%.)
<TABLE>
<CAPTION>
Separate Account Name of Fund Sub-Advisor Name of Fund Advisor
- ---------------- ------------------------ ---------------------
<S> <C> <C>
l. [JPVF International Equity] _______ % [Lombard Odier International [Jefferson Pilot Investment
Portfolio Management, Ltd.] Advisory Corporation]
2. [JPVF World Growth Stock] _______ % [Templeton Global Advisors, Inc.] [Jefferson Pilot Investment
Advisory Corporation]
3. [JPVF Emerging Growth] _______ % [Massachusetts Financial [Jefferson Pilot Investment
Services Company] Advisory Corporation]
4. [JPVF Growth] _______ % [Strong Capital Management, Inc.] [Jefferson Pilot Investment
Advisory Corporation]
5. [JPVF Capital Growth] _______ % [Janus Capital Corporation] [Jefferson Pilot Investment
Advisory Corporation]
6. [JPVF Small Company] _______ % [Pioneering Management Corp.] [Jefferson Pilot Investment
Advisory Corporation]
7. [JPVF Growth & Income] _______ % [Warburg Pincus Asset [Jefferson Pilot Investment
Management, Inc.] Advisory Corporation]
8. [JPVF Global Hard Assets] _______ % [Van Eck Associates Corporation] [Jefferson Pilot Investment
Advisory Corporation]
g. [JPVF Balanced] _______ % [J.P Morgan Investment [Jefferson Pilot Investment
Management, Inc.] Advisory Corporation]
1O.[JPVF High Yield] _______ % [Massachusetts Financial [Jefferson Pilot Investment
Services Company] Advisory Corporation]
11.[JPVF Money Market] _______ % [Massachusetts Financial [Jefferson Pilot Investment
Services Company] Advisory Corporation]
12.[Fidelity VIP Growth] _______ % [N/A] [Fidelity Management & Research]
13.[Fidelity VIP Equity-Income] _______ % [N/A] [Fidelity Management & Research]
14.[Fidelity VIP-Il Contrafund] _______ % [N/A] [Fidelity Management & Research]
15.[Fidelity VIP-Il Index 500] _______ % [Bankers Trust Company] [Fidelity Management & Research]
16.[MFS Research] _______ % [N/A] [Massachusetts Financial
Services Company]
17.[MFS Utilities] _______ % [N/A] [Massachusetts Financial
Services Company]
18.[Oppenheimer Strategic Bond] _______ % [N/A] [Oppenheimer Funds, Inc.]
19.[Oppenheimer Bond] _______ % [N/A] [Oppenheimer Funds, Inc.]
20.Templeton International] _______ % [N/A] [Templeton Investment Counsel,
Inc.]
21 [Other] ____________________
</TABLE>
Note: Your choice is limited to a maximum of 17 of the Separate Account
divisions shown above over the life of the contract.
General Account _______ %
---------------
Total 100 %
-------
Page 1 of 2
<PAGE>
D. MONTHLY CHARGES
Monthly insurance and administrative charges will be deducted from the
General Account and divisions of the Separate Account on a pro rata basis
unless the box is checked below:
[_] Deduct all charges from the ______________ division (any single division
or the General Account may be noted).
- --------------------------------------------------------------------------------
E. SUITABILITY
YES NO
[_] [_] 1. Have you, the Proposed Insureds, and the Owner, if other than
the Proposed Insureds, received a Prospectus for the policy
applied for?
2. Do you understand that, under the policy applied for
(exclusive of any optional benefits):
[_] [_] a. There are two death benefit options to choose between?
[_] [_] b. The amount of death benefit above the Specified Amount
under Option II may increase or decrease depending on the
policy's investment experience?
[_] [_] c. The cash value under Options I and II may increase or
decrease depending on the policy's investment experience?
[_] [_] 3. With this in mind, is the policy applied for in accord with
your insurance objective and your anticipated financial
needs?
- -------------------------------------------------------------------------------
CASH VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE EXPERIENCE OF THE
SEPARATE ACCOUNT. THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED
CONDITIONS.
I/We have read or have had read to me/us the completed Application Supplement
for Variable Life Insurance before signing below. All statements and answers
in this Supplement are correctly recorded and are full, complete and true to
the best of my/our knowledge and belief. I/We agree that this Application
Supplement for Variable Life Insurance constitutes a part of the Application
for Life Insurance. I/We understand that any false statements or material
misrepresentations shall result in the loss of coverage under the policy.
Signed at _____________________, this ________ day of _____________ __________
(city and state) (month) (year)
________________________________________ ___________________________________
Signature of Applicant/Owner if other Signature of Proposed Insured A (If
than Proposed Insureds. If Firm, Trust, under age 15, signature of parent
or Corporation, print its name and that or legal guardian)
of authorized person who will sign below
on its behalf.
________________________________________ ___________________________________
Signature and title of authorized person Signature of Proposed Insured B (If
signing on behalf of Firm, Trust or under age 15, signature of parent
Corporation named above. or legal guardian).
I declare that I asked the Proposed Insureds each question. The answers have
been recorded by me exactly as stated.
________________________________________ ___________________________________
Signature of Registered Representative Signature of Registered Principal
<PAGE>
[LETTERHEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
December 1, 1998
Jefferson Pilot Financial Insurance Company
One Granite Place
Concord, New Hampshire 03301
RE: JPF SEPARATE ACCOUNT C
----------------------
Gentlemen:
This opinion is furnished in connection with the filing by Jefferson Pilot
Financial Insurance Company ("JP Financial") of a Registration Statement on Form
S-6 under the Securities Act of 1933 (the "Act") of interests in JPF Separate
Account C (the "Separate Account") under Ensemble Survivorship Life, its
survivorship flexible premium variable life insurance policy (the "Policy").
I am familiar with the terms of the Policies and the Registration Statement and
Exhibits hereto. I have also examined all such corporate records of JP Financial
and such other documents and laws as I considered appropriate as a basis for the
opinion hereinafter expressed. On the basis of such examination, it is my
opinion that:
1. JP Financial is a corporation duly organized and validly existing
under the laws of the State of New Hampshire.
2. The Separate Account is a separate account of JP Financial validly
existing pursuant to the New Hampshire Revised Statutes Annotated and
the regulations issued thereunder, under which income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the Policy, credited to or charged
against the Separate Account without regard to other income, gains or
losses of JP Financial.
<PAGE>
Jefferson Pilot Financial Insurance Company
Page Two
December 1, 1998
3. Assets allocated to the Separate Account will be owned by JP
Financial; JP Financial is not a trustee with respect thereto. The
Policy provides that the portion of the assets of the Separate Account
equal to the reserves and other Policy liabilities with respect to the
Separate Account will not be chargeable with liabilities arising out
of any other business JP Financial may conduct. JP Financial reserves
the right to transfer assets of the Separated Account in excess of
such reserves and other Policy liabilities to its General Account.
4. The Policy (including any units duly credited thereunder) have been
duly authorized by JP Financial and when issued and sold in
jurisdictions that have approved the policy form for sale in
accordance with the insurance law of that jurisdiction, each Policy
(including any such units) will constitute validly issued and binding
obligations of JP Financial in accordance with its terms. Purchasers
of the Policy are subject only to the deductions, charges and fees set
forth in the Prospectus.
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement of the Separate Account filed under the Act.
Sincerely,
/s/ Charlene Grant
Charlene Grant
Assistant Counsel
<PAGE>
[LETTER HEAD OF JEFFERSON PILOT FINANCIAL APPEARS HERE]
December 1, 1998
Jefferson Pilot Financial Insurance Company
One Granite Place
Concord, New Hampshire 03301
RE: JPF Separate Account C (the "Separate Account")
ENSEMBLE SURVIVORSHIP LIFE
Gentlemen:
This opinion is furnished in connection with the filing of post-effective
amendment No.3 to the registration statement of Jefferson Pilot Financial
Insurance Company ("JP Financial") on Form S-6 ("Registration Statement") under
the Securities Act of 1933 (the "Act") of interests in the Separate Account
under its variable life insurance policies (collectively, the "Policies"). This
opinion covers the survivorship flexible premium variable life insurance policy
("Ensemble Survivorship").
I am familiar with the terms of the Policies and the Registration Statement and
Exhibits thereto. In my opinion:
1. The illustrations of death benefits, accumulation value and cash value
for the Policies in Appendix A of the prospectus, based on the assumptions
stated in the illustrations, are consistent with the provisions of the
Policies.
The Policies have not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear
disproportionately more favorable to prospective purchasers of Policies for
the age(s), gender(s), smoking status(es), and underwriting class(es)
illustrated in Appendix A than to prospective purchasers of Policies for
other age(s), gender(s), smoking status(es), and underwriting class(es).
The particular illustrations shown were not selected for the purpose of
making this relationship appear more favorable. Generally, the rates for
non-smokers are lower than for smokers and the rates for females are lower
than for males.
<PAGE>
Jefferson Pilot Financial Insurance Company
Page Two
December 1, 1998
2. The illustrations of death benefits, accumulation value and cash value
for the Policies, set forth in Appendix A of the prospectus, based on the
net return of the twenty divisions of JPF Separate Account C and the
assumptions stated with the example, are consistent with the provisions of
the Policies.
The illustrations in Appendix A have not been designed so as to make the
relationship between premiums and benefits appear disproportionately more
favorable to prospective purchasers of Policies for age(s), gender(s),
smoking status(es) and underwriting class(es) illustrated in Appendix A
than to prospective purchasers of Policies for other age(s), gender(s),
smoking status(es) and underwriting class(es). Generally, the rates for
non-smokers are lower than for smokers and the rates for females are lower
than for males.
3. The illustrations set forth in Appendix A of the prospectus contain
both the current and guaranteed rates of cost of insurance charges to be
used for those Policies.
These rates have not been designed so as to make the relationship between
current and guaranteed rates appear disproportionately more favorable to
prospective purchasers of Policies for the age(s), gender(s), smoking
status(es) and underwriting class(es) illustrated in Appendix A than to
prospective purchasers of Policies for other age(s), gender(s), smoking
status(es) and underwriting class(es). The particular illustrations shown
were not selected for the purpose of making this relationship appear more
favorable. Generally, the rates for non-smokers are lower than for smokers
and the rates for females are lower than for males.
I hereby consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Sincerely,
/s/ Richard Dielensnyder
Richard Dielensnyder, FSA, MAAA
Assistant Vice President and
Product Actuary
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 9, 1998 with respect to the
financial statements of Chubb Life Insurance Company of America and subsidiaries
and March 13, 1998 with respect to the financial statements of Chubb Separate
Account C in Post-Effective Amendment No. 3 to the Registration Statement (Form
S-6 No. 33-01781) and related Prospectus for the registration of units of
interest in the JPF Separate Account C (formerly Chubb Sperate Account C) under
survivorship flexible premium variable life insurance policies offered by
Jefferson Pilot Financial Insurance Company (formerly Chubb Life Insurance
Company of America).
ERNST & YOUNG LLP
Greensboro, North Carolina
December 1, 1998
<PAGE>
JEFFERSON PILOT FINANCIAL INSURANCE COMPANY
Administrative Procedures For
Survivorship Flexible Premium Variable Life Insurance
ENSEMBLE SURVIVORSHIP LIFE
--------------------------
November 20, 1998
This document sets forth the information called for under Rule 6e-
(T)(b)(12)(iii) under the Investment Company Act of 1940 ("1940 Act"). The Rule
provides exemptions from sections 22(d), 22(e), and 27(c)(1) of the 1940 Act,
and Rule 22c-l thereunder, for issuance, transfer and redemption procedures
under the Survivorship Flexible Premium Variable Life Insurance Policy
("Policy") to the extent necessary to comply with other provisions of Rule 6e-
3(T), state insurance law or established administrative procedures of Jefferson
Pilot Financial Insurance Company ("JP Financial" or the "Company"). To qualify
for the exemptions, procedures must be reasonable, fair and not discriminatory
and must be disclosed in the registration statement filed by the Separate
Account.
JP Financial believes its procedures meet the requirements of Rule
6e3(T)(b)(12) (iii), as described below.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page No.
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<S> <C>
1. Purchase and Related Transactions................................ 1
(a) Premium Schedule & Underwriting Standards................... 1
(b) Application and Initial Premium Processing.................. 3
(c) Reinstatement............................................... 5
(d) Misstatement of Age or Sex.................................. 6
(e) Exchange of Policy.......................................... 6
(f) Policyowner Illustrations................................... 6
2. Redemption Procedures: Surrender and Related Transactions........ 7
(a) Surrender, Withdrawal....................................... 7
(b) Decreases in Specified Amount............................... 9
(c) Benefit Claims.............................................. 10
(d) Policy Loans................................................ 11
3. Transfers........................................................ 13
(a) General..................................................... 13
(b) Dollar Cost Averaging....................................... 14
4. Refunds.......................................................... 15
(a) Free Look Period............................................ 15
(b) Suicide..................................................... 15
(c) Incontestability............................................ 15
5. Billing and Collection Procedures................................ 15
6. Change in Division Allocation.................................... 17
(a) General..................................................... 17
(b) Automatic Portfolio Rebalancing............................. 17
7. Incomplete Allocation Request.................................... 18
</TABLE>
<PAGE>
TABLE OF CONTENTS (CONTINUED)
-----------------------------
<TABLE>
<CAPTION>
Page No.
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<S> <C>
8. Telephone Transfers, Loans and Reallocations................... 18
9. Combined Requests.............................................. 18
10. Unpaid Checks.................................................. 19
11. Notifications.................................................. 19
12. Role of Jefferson Pilot Securities Corporation................. 20
13. Role of JP Financial Policy Issue and Underwriting Department.. 20
14. Role of JP Financial Customer Service Department............... 20
</TABLE>
<PAGE>
1. PURCHASE AND RELATED TRANSACTIONS
(a) Premium Schedule and Underwriting Standards
-------------------------------------------
Premiums for the Policies will not be the same for all policyowners. JP
Financial may require the policyowner to pay a first premium sufficient to keep
the Policy in force for three policy months. With the help of the registered
representative, Policyowners will determine a Planned Periodic Premium payment
schedule that provides for a level premium payable at a fixed interval for a
specified period of time. Factors considered in setting the Planned Periodic
Premium payment schedule and selection of death benefit option include, but are
not limited to, the insureds' age and risk classification; the policyowner's
economic circumstances, including future obligations, retirement and tax
sheltering needs; the policyowner's risk tolerance regarding market needs; and
the death benefit needs of the beneficiary. Payment of premiums in accordance
with this schedule is not, however, mandatory and failure to make payments in
accordance with the schedule will not of itself cause the Policy to lapse.
Instead, policyowners may make premium payments in any amount, at any frequency,
subject only to the minimum premium amount,/1/ and the maximum premium
limitations set forth in the Internal Revenue Code (the "Code"). If at any time
a premium is paid which would result in total premiums exceeding the current
maximum premium limitation, JP Financial will accept only that portion of the
premium which will make total premiums equal such maximum. Any portion of the
premium in excess of such maximum will be returned to the policyowner and no
further premiums will be accepted until allowed by the then current maximum
premium limitations set forth in the Code. The policyowner will be notified when
premiums may be paid again. Also, the Code provides for significant tax
consequences if policies are deemed to be modified endowment contracts. JP
Financial's procedures for monitoring whether a policy may become a modified
endowment contract are set forth herein, If at any time during the year JP
Financial determines the Technical and Miscellaneous Revenue Act (TAMRA)
guidelines have been violated and excess premiums have been remitted which would
cause the policy to be deemed a modified endowment contract, JP Financial will
give written notice of this fact to the policyowner. The notice will set forth
the policyowner's options with respect to the policy.
_______________________
/1/ The minimum premium amount acceptable will be $250.
1
<PAGE>
The notice gives the policyowner the right to request a refund of the excess
premium, or to request an increase of the policy's face amount. Either of these
options would avoid having the policy deemed a modified endowment contract. The
policyowner may choose any option by returning an enclosed election form. If the
policyowner does not return the election form within 60 days, JP Financial will
take no action with respect to the policy and it will become a modified
endowment contract. The written notice also includes some general information
regarding modified endowment contracts and their tax aspects.
The policy will remain in force so long as the cash value, less any outstanding
policy debt, is sufficient to pay certain monthly charges imposed in connection
with the Policy. Thus, the amount of a premium, if any, that must be paid to
keep the Policy in force depends upon the cash value of the Policy, which in
turn depends on such factors as the investment experience and the cost of
insurance charge. The cost of insurance rate utilized in computing the cost of
insurance charge will vary. The chief reason is that the principle of pooling
and distribution of mortality risks is based upon the assumption that each
insured incurs an insurance rate commensurate with his or her mortality risk
which is actuarially determined based upon factors such as issue age, policy
year, sex, rating class, and the Specified Amount of the Policy. For two
Policies with the same sex, rating class and attained age, the cost of insurance
rate for the Policy with the younger age on its policy date will never exceed,
and in some cases will be less than, that for a Policy with an older age on its
policy date. Accordingly, while not all insureds will be subject to the same
cost of insurance rate, there will be a single "rate" for all insureds in a
given actuarial category. The use of policy year as a factor in defining an
actuarial category is appropriate because the recovery of the cost of a policy
depends, in part, upon the length of time such policy has been in force. For
example, an insured who was younger at issue has maintained his policy in force
for a longer period in order to achieve the same attained age as the insured who
was older at issue. Thus, part of the cost of the policy which was supported by
surplus of the Company has been recovered for the insured who was younger at
issue. This allows the Company to reduce the cost of insurance rate below that
of the insured whose policy has been in force for a shorter period. For
administrative convenience, policy year is not used as an actuarial factor after
the tenth policy year.
2
<PAGE>
Current cost of insurance rates will be determined by JP Financial based upon
expectations as to future mortality experience. The cost of insurance rates are
guaranteed not to exceed rates based upon the Commissioner's 1980 Standard
Ordinary Mortality Table Male or Female.
The Company currently provides a guaranteed monthly deduction adjustment for
qualified Ensemble Survivorship policyowners. The guaranteed monthly deduction
adjustment is an amount added to the Policy's accumulation value. The adjustment
is calculated as an annual amount at the beginning of each policy year,
beginning with the second policy year, for each month of that policy year during
which the adjustment is in effect. The adjustment will apply so long as it meets
or exceeds a $12 annual threshold.
The Policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. State insurance laws
prohibit unfair discrimination among insureds but recognize that premiums may be
based upon factors such as issue age, policy year, sex, health and occupation.
Jefferson Pilot Financial may modify its underwriting requirements, in
accordance with company practice in effect when the policy is issued, for
policies issued in connection with group arrangements.
(b) Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application, JP Financial will follow certain
insurance underwriting procedures (e.g., evaluation of risks) designed to
determine whether the applicant is insurable. This process may involve such
verification procedures as medical examinations and may require that further
information be provided by the proposed applicant before a determination can be
made. A Policy will not be issued until the underwriting procedure has been
completed.
The insurance coverage will begin on the policy date, unless otherwise required
by insurance law or concepts such as "conditional receipt". Ordinarily, if the
application is approved and money is received, the policy date will be the later
of the date of application or the date of any
3
<PAGE>
required medical examination in accordance with JP Financial's underwriting
requirements. If a premium is not paid with the application, the policy date is
the issue date. Coverage will begin on the date the premium is received. The
policyholder may request that the Policy be backdated for the purposes of saving
insurance age or conforming to employment related requirements (e.g. common
enrollment date). If the policy date is after the date of the application and
any required medical examination, the contestable period starts from the date of
the application or required medical examination, whichever is later. If the
policy date is before the dates of the application and any required medical
examination, the contestable period starts from the policy date.
If the initial premium is received prior to the date JP Financial either issues
the Policy or offers to issue the Policy on a basis other than standard and/or
other than as applied for, the net premium less monthly deductions for the
period between the policy date and the issue date/2/ will be placed in the
General Account. If this amount is equal to or greater than $500, it will be
credited with interest at the rate currently being credited to the General
Account for the period between the date the premium is received (or the policy
date, whichever is later) and the issue date. In those instances when JP
Financial declines to issue a Policy, the full premium paid, if equal to or
greater than $500, will be returned with interest; interest will be credited
from the date the premium is received to the date the application is rejected.
However, this practice will not apply if the Policy is issued as applied for by
the applicant or is issued on a standard basis and delivery of the Policy is not
accepted or the "free look" right is exercised.
The initial net premium will be placed in the General Account prior to the
allocation date. On the allocation date the initial net premium deposited in the
General Account, plus interest earned, will be allocated, as directed by the
policyowner in the application, among the divisions of the Separate Account and
the General Account. Any other premiums received prior to the allocation date
will also be deposited in the General Account. The allocation date is
- -------------------
/2/ 2. The issue date is the date JP Financial either gives the Policy
underwriting approval, or offers to issue the Policy on a basis other than
standard and/or as applied for.
4
<PAGE>
25 days from the day JP Financial mailed the policy to the agent for delivery to
the policyowner.
Under JP Financial's current rules, the minimum Specified Amount at issue is
$100,000. JP Financial reserves the right to revise its rules from time to time
to specify a different minimum Specified Amount at issue.
(c) Reinstatement
-------------
A policy which terminates under the grace period provision of this contract may
be reinstated at any time within five (5) years after the date of termination.
The policy year of reinstatement will be measured from the Policy Date. The
reinstatement must occur prior to the maturity date of the Policy. The following
items must be submitted to JP Financial for each reinstatement:
(1) A written application for reinstatement.
(2) Evidence of insurability sufficient to prove to the Company's
satisfaction that the insured is still able to meet the underwriting
standards for the "actuarial category" to which the Policy was originally
assigned.
(3) A premium large enough, after the deduction of premium expense charges,
to cover:
a. Monthly deductions for at least three policy months following the
effective date of reinstatement.
b. Any due and unpaid monthly administrative charges.
c. Any due and unpaid monthly expense charges.
Upon request for reinstatement, JP Financial will determine the premium amount
needed to reinstate the Policy based on the insured's attained age, sex, policy
year, rating class, and the Specified Amount of the Policy.
JP Financial will notify the policyowner of the premium amount needed to
reinstate the Policy. JP Financial will also require repayment or reinstatement
of any policy debt which existed on the date of lapse before a Policy may be
reinstated. Upon approval of the reinstatement, the
5
<PAGE>
effective date of the reinstated Policy will be the next Monthiversary/3/
following the date JP Financial approves the application for reinstatement.
(d) Misstatement of Age or Sex
--------------------------
If JP Financial discovers that the age or sex of either or both of the insureds
has been misstated, the amount payable at second death will be the sum of the
following:
(1) The accumulation value on the date of second death; and
(2) The death benefit less the accumulation value on the date of
death of the second to die, multiplied by the ratio of:
a. The cost of insurance actually deducted at the beginning
of the policy month in which death occurs, to
b. The cost of insurance that should have been deducted at
the insured's true age or sex.
(e) Exchange of Policy
------------------
The policyowner may at any time, while the Policy is in force, transfer all
accumulation value to the General Account. This transfer will not incur the
normal transfer fee. While 100% of the accumulation value is allocated to the
General Account, minimum benefits are fixed and guaranteed.
(f) Policyowner Illustrations
-------------------------
It is our intention to utilize field and Home Office microcomputers in preparing
illustrations for Ensemble Survivorship Flexible Premium Variable Life
Insurance.
General Agents and Agents who are licensed with JP Financial and with Jefferson
Pilot Securities Corporation or other broker-dealers who have entered into a
selling agreement with
- ------------------
/3/ "Monthiversary" is defined as the same date in each month as the policy date
on which regular monthly processing occurs (i.e., cost of insurance deductions).
6
<PAGE>
Jefferson Pilot Securities Corporation will be supplied with diskettes
containing approved illustrations for Ensemble Survivorship Life Flexible
Premium Variable Life Insurance.
In addition, JP Financial's field offices and JP Financial's Home Office in
Concord, New Hampshire will be supplied such diskettes and will prepare
illustrations at the request of duly registered representatives.
2. "REDEMPTION PROCEDURES": SURRENDER AND RELATED TRANSACTIONS
-------------------------------------------------------------
Set out below is a summary of the principal Policy provisions and administrative
procedures which might be deemed to constitute, either directly or indirectly, a
"redemption" transaction. The summary shows that, because of the insurance
nature of the Policies, the procedures involved necessarily differ in certain
significant respects from the procedures for mutual funds and contractual plans.
(a) Surrender and Withdrawal
------------------------
At any time while the Policy is in force, the policyowner may, with the approval
of the irrevocable beneficiary or assignee, if any, request surrender or partial
surrender/withdrawal of the Policy by sending a written request to JP Financial.
At the time the written request is received, it will be reviewed for
completeness. Incomplete requirements will result in returning the items to the
policyowner for completion.
The amount payable upon surrender of the Policy is the cash value at the end of
valuation period during which the request is received, less any policy debt. The
surrender transaction will be processed upon receipt of the completed request,
with an effective date of the date received. The check will be mailed to the
policyowner within seven (7) days of receipt of the written request.
The policyowner may withdraw part of the Policy's cash value at any time in
which the Policy has cash value. The amount payable upon withdrawal cannot
exceed the policy cash value,
7
<PAGE>
less any policy debt at the end of the valuation
period during which the request is received. The minimum amount that may be
withdrawn is $500. If for any reason the withdrawal request would be for an
amount less than $500, JP Financial will furnish the policyowner with a written
explanation of why the request cannot be processed within twenty-four (24)
hours. A withdrawal charge equal to $50 will be deducted from the amount of
each withdrawal. A withdrawal will also invoke imposition of a pro rata portion
of any surrender charge.
The withdrawal transaction will be processed the day following receipt of the
request, with an effective date of the date received. A policyowner may allocate
a withdrawal among the General Account and the divisions of the Separate
Account. If no such allocation is made, a withdrawal will be allocated among the
General Account and the divisions of the Separate Account in the same proportion
that the accumulation value in the General Account, less any policy debt, and
the accumulation value in each division bears to the total accumulation value of
the Policy, less any policy debt, on the date of the withdrawal. The amount
payable for a withdrawal request that would cause the Specified Amount to be
reduced to less than $100,000 will be adjusted to the amount that would reduce
the Specified Amount to $100,000. In this event, the policyowner will be advised
in writing when the check for the withdrawal is sent.
A surrender charge will be assessed upon surrender or withdrawal. The surrender
charge for the initial Specified Amount is determined by multiplying a surrender
factor by the lesser of (1) the premiums actually received in policy year one;
or (2) the "Guideline Annual Premium" as defined in the rules and regulations
under the 1940 Act. The surrender factor depends on the length of time the
policy has been in force, as follows:
Policy Year Surrender Charge As
% of Initial Surrender Charge
1-5 100%
6 80%
7 60%
8 40%
8
<PAGE>
9 20%
10+ 0%
The surrender charge in effect at any time is the sum of the surrender charge
for the initial Specified Amount plus the surrender charge for any increase in
the Specified Amount. If the Specified Amount is decreased, the surrender charge
will not decrease.
For a withdrawal, the charge will be proportionately the same as for surrenders.
The charge will be calculated by dividing (i) by (ii) and multiplying the result
by (iii) where:
(i) is the amount of the cash value withdrawn
(ii) is the cash value
(iii) is the amount of the surrender charge on a surrender.
(b) Decreases in Specified Amount
-----------------------------
A policyowner may, at any time after the first policy anniversary, by written
request and with the approval of the irrevocable beneficiary or assignee, if
any, the policyowner may decrease the Specified Amount. Any decrease will
become effective on the Monthiversary that coincides with or next follows
receipt of the request. Any such decrease will be deducted from the Initial
Specified Amount.
The minimum decrease in Specified Amount is $25,000. No decrease may reduce
the Specified Amount to less than $100,000. Any decrease approved by JP
Financial will become effective on the date shown in the Supplemental Policy
Specifications Page, which generally will be the Monthiversary that coincides
with or next follows the day the change is approved, subject to deduction of the
first month's cost of insurance from the Policy's accumulation value.
The policyowner may request in writing to change the death benefit option. If
the request is to change from Option I to Option II, the Specified Amount will
be decreased by the
9
<PAGE>
accumulation value. Evidence of insurability satisfactory to JP Financial will
be required on a change from Option I to Option II. If the request is to change
from Option II to Option I, the Specified Amount will be increased by the
accumulation value. The effective date of the change from Option I to Option II
shall be the monthly anniversary date that coincides with or next follows the
date of underwriter approval. The effective date of the change from Option II to
Option I shall be the Monthiversary that coincides with or next follows the day
the request for change is received.
No decrease, other than one resulting from a withdrawal, may reduce the
Specified Amount below $100,000.
When a request for a Specified Amount reduction is received which would cause
the Specified Amount to be less than $100,000, the request will be adjusted to
an amount that would reduce the Specified Amount to no less than $100,000. In
this event, the policyowner will be advised in writing as to the reason the
requested Specified Amount change cannot be and was not processed as requested.
(c) Benefit Claims
--------------
While the Policy remains in force, JP Financial will usually pay a death benefit
to the named beneficiary in accordance with the designated death benefit option
within seven (7) days after receipt of due proof of death of the insured. The
registered representative may deliver the death benefit payment. If the
registered representative intends to deliver the payment, notice will be sent to
the named beneficiary informing him or her of the issuance of the check. If the
registered representative does not intend to deliver the check, the payment
check will be mailed to the named beneficiary. Payment of death benefits may,
however, be postponed due to suicide, misrepresentation and under certain other
circumstances./4/ The amount of the death benefit is determined at the end of
the valuation period during which the insured dies. The
_____________
/4/(A) The New York Stock Exchange is closed other than customary weekend and
holiday closings; (B) The Sec, by order, permits postponement for the
protection of the policyowners; (C) An emergency exists, as determined by the
Sec, as a result of which disposal of securities is not reasonably practicable
nor is it reasonably practicable to determine the value of the Separate Account
net assets.
10
<PAGE>
amount of the death benefit proceeds is guaranteed to be not less than the
current Specified Amount of the Policy. These proceeds will be reduced by any
outstanding policy debt and any due and payable charges. These proceeds will be
increased by any additional insurance provided by rider. The death benefit may
exceed the current Specified Amount of the Policy. The amount by which the death
benefit exceeds the Specified Amount depends upon the death benefit option in
effect, the accumulation value, and the corridor percentage in effect at the
date of death.
The death benefit under Death Benefit Option I is the greater of the current
Specified Amount or the Accumulation Value on the Second Death multiplied by the
corridor percentage. Under Death Benefit Option II, the death benefit is equal
to the greater of the current Specified Amount plus the Accumulation Value on
the Second Death or the Accumulation Value on the Second Death multiplied by the
corridor percentage.
Payments of benefits will be made by JP Financial out of its General Account and
assets will be transferred from the divisions of the Separate Account to the
General Account.
(d) Policy Loans
------------
The policyowner may, with the approval of the irrevocable beneficiary or
assignee, if any, request a policy loan at any time after the Right of Policy
Examination. Generally, the maximum amount which may be borrowed at any time is
ninety percent (90%) of the cash value on the date of the loan. Any prior policy
debt will be deducted from any advances made on the loan.
Any premium payments received within thirty (30) days of a policy loan will not
generally be considered in making the loan as the policyowner's check will not
have sufficient time to clear banking channels. However, if the policyowner can
provide JP Financial proof that the check has cleared the bank, the payment will
be considered in making the loan.
11
<PAGE>
The type of loan which Jefferson Pilot Financial will grant depends upon the
amount of unloaned Type A balance available at the time the loan is taken. The
unloaned Type A balance is 90% of the cash value, less the threshold, and less
the sum of any outstanding Type A loans, as defined below. The threshold is the
Guideline Single Premium for the policy at issue as defined in Section 7702 of
the Internal Revenue Code of 1986. If the Specified Amount decreases, the
threshold will not change.
A Type A loan is a policy loan which JP Financial grants when the unloaned Type
A balance before the loan is taken exceeds the loan requested.
A Type B loan is a policy loan which Jefferson PF grants when the unloaned Type
A balance before the loan is taken is less than or equal to zero.
When the unloaned Type A balance before the loan is taken exceeds zero, but is
less than the loan requested, JP Financial will grant a Type A loan equal to the
unloaned Type A balance. The remainder of the requested loan will be a Type B
loan. JP Financial will grant a Type A loan first before a Type B loan. Once a
policy loan is granted, it remains a Type A or a Type B until it is repaid. If
the interest due on a loan, either Type A or Type B, remains unpaid when due,
the interest will become principal. JP Financial will treat that as though it
were a request for a new loan in the principal amount of the unpaid interest.
The calculation of which type of loan is available will take place and the
unpaid interest will become principal of either a Type A or Type B loan.
The interest charged by JP Financial on a policy loan depends upon the type of
loan. On a Type A loan, JP Financial will charge the same interest rate as the
interest credited to the amount of the Accumulation Value held in the General
Account to secure loans, which is an effective annual rate of 4%. On a type B
loan, JP Financial will charge an effective annual interest rate of 8%.
12
<PAGE>
3. TRANSFERS
---------
Set forth below is a summary of the administrative procedures which JP Financial
will utilize in processing transfers between and among the divisions of the
Separate Account and the General Account. The summary shows that, due to the
insurance nature of the Policies, the procedures involved necessarily differ in
certain significant respects from the procedures for mutual funds and
contractual plans.
(a) General
-------
The Separate Account currently has twenty (20) divisions. Policyowners may
invest in a total of seventeen (17) divisions over the life of the Policy.
Policyowners may transfer amounts between the General Account and the divisions
of the Separate Account and among the divisions of the Separate Account The
initial allocation of premium on the allocation date will not be subject to the
charges and minimums as other transfers. The total amount transferred each time
is limited to the lesser of a) 25% of the Accumulation Value in the General
Account not being held as loan collateral; or b) $100,000. JP Financial allows
policyowners to authorize transfers in writing or by telephone. In order to make
a transfer by telephone, the proper authorization form must be on file with
Jefferson Pilot Financial. The Company will process transfers and determine all
values in connection with transfers at the end of the valuation period during
which the transfer request is received, A transfer charge of $50 will be imposed
each time amounts are transferred and will be deducted from the amount
transferred. The transfer charge is not assessed if the transfer moves all
accumulation value to the General Account. If a policyowner requests a transfer
which does not meet the minimum required amount, or cannot be processed for any
other reason, JP Financial will, within 24 hours, provide the policyowner with a
written explanation of why the transfer cannot be processed.
Currently a policyowner may make up to 20 transfers per year, with the first
twelve being free. There is no limit to the number of transfers which may be
made. Should the Company further limit the timing or number of transfers at some
future date, the policyowner will be notified of such change.
13
<PAGE>
(b) Dollar Cost Averaging
---------------------
The Company offers Ensemble II policyowners a feature called Dollar Cost
Averaging. In order to elect this feature, the policyowner must complete the
applicable authorization form. Under this feature a policyowner deposits an
amount, currently subject to a minimum of $3,000, in the Money Market Division
of the Separate Account or in the General Account and elects to have a specified
dollar amount (the "Periodic Transfer Amount") automatically transferred to one
or more of the divisions on a monthly, quarterly or semi-annual basis. The
policyowner is therefore able to systematically invest in the divisions at
various prices which may be higher or lower than the price a policyowner would
pay when investing the entire amount at one time and at one price. Each Periodic
Transfer Amount must currently be at least $250. In addition, a minimum of 5% of
the Periodic Transfer Amount must be transferred to any specified division.
These minimums are subject to change at the Company's discretion. If a transfer
pursuant to this feature would reduce accumulation value in the Money Market
Division or the General Account to less than the Periodic Transfer Amount, the
Company has the right to include this remaining accumulation value in the amount
transferred. Automatic transfers pursuant to this feature will continue until
the amount designated for Dollar Cost Averaging has been transferred, or until
the policyowner gives notification of a change in allocation or cancellation or
the feature. This feature is currently available at no charge to policyowners,
although the Company reserves the right to assess a charge, no greater than cost
and with 30 days advance notice to policyowners.
A policyowner may not elect to have Dollar Cost Averaging and Automatic
Portfolio Re-Balancing (defined and described hereinafter) at the same time.
Transfers pursuant to the Dollar Cost Averaging feature will occur on a Policy's
monthly anniversary date in the month in which the transaction is to take place
or the next succeeding business day if the monthly anniversary date falls on a
holiday or a weekend. Transfers under this feature do not count towards the
twelve free transfers or the twenty total transfers currently allowed per year.
The Company has the right to modify the terms and conditions of the Dollar Cost
Averaging feature upon 30 days advance notice to policyowners.
14
<PAGE>
4. REFUNDS
-------
(a) Free Look Period
----------------
With the approval of the irrevocable beneficiary or assignee, if any, the
Policyowner may cancel the Policy within ten (10) days after receiving it,
within 45 days of the date of the execution of the application for insurance, or
within 10 days after receipt by mail or personal delivery of a Notice of Right
of Withdrawal, whichever is later. A written request to JP Financial together
with the Policy will be required. The Policy will be deemed void from the policy
date and all premiums paid will be refunded within seven (7) days of receipt by
JP Financial of the request. The registered representative will be required to
return any commissions paid in connection with the sale.
(b) Suicide
-------
In the event the insured commits suicide, whether sane or insane, within two (2)
years of the policy date, JP Financial's liability will be limited to the return
of the premiums paid, less any policy debt and withdrawal.
(c) Incontestability
----------------
After the Policy has been in force during the lifetime of the insured for a
period of two (2) years from its policy date or from the date of application or
any medical examination required if later, JP Financial will not contest the
Policy except for an increase in the Specified Amount. This provision does not
apply to any benefits provided by a rider which grant disability benefits or an
added benefit in the event death results from an accident.
In the event of contest of the Policy during the first two (2) policy years as
to statements made in the original application, the only liability of JP
Financial will be a refund of premiums paid less any policy debt and withdrawal.
5. BILLING AND COLLECTION PROCEDURES
---------------------------------
JP Financial will assign a separate nine-digit block of numbers to be used as
policy numbers for Flexible Premium Variable Life business. Premium billing
notices will be system-generated together with billing notices for other types
of life insurance. In addition to the unique range of policy numbers, Flexible
Premium Variable Life policies will have the message, "Flexible
15
<PAGE>
Premium Variable Life" on the billing notices to distinguish them from other
types of life insurance contracts.
Flexible Premium Variable Life premiums in response to billing notices will be
sent directly to JP Financial's bank and deposited in JP Financial's bank
account. Unsolicited premiums received at JP Financial's service center in
Concord, New Hampshire will be deposited in JP Financial's account at a local
depository bank. Flexible Premium Variable Life pre-authorized check or debit
collections will be determined from the Flexible Premium Variable Life
Administrative System (VANTAGE-ONE) and subsequently deposited in JP Financial's
bank account.
For convenience, JP Financial will offer the "List Billing" mode of payment
which allows the employer to deduct premiums from the policyowners' pay checks
and remit the premiums directly to JP Financial. All Flexible Premium Variable
Life policies, paid as billed, will be entered into the Collection System
together with payments on other life contracts. Premium payments not paid as
billed will be entered into the VANTAGE-ONE System and checks will be deposited
into JP Financial's account at a local depository bank. When the VANTAGE-ONE
system-generated reports are received on the day following the processing of
premium payment transactions, the total for deposits other than Flexible Premium
Variable Life deposits will be deducted from the total bank deposit. This
difference will represent the total Flexible Premium Variable Life deposit, and
will be reconciled to the premium clearing entry on the Flexible Premium
Variable Life System accounting journal.
Based on the VANTAGE-ONE system-generated report, funds will be transferred from
JP Financial's regular bank account to the divisions of the Separate Account for
inclusion in the policyowner's unit holdings.
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6. CHANGE IN DIVISION ALLOCATION
-----------------------------
(a) General
-------
The policyowner may change the allocation of future premium payments among the
General Account and the divisions of Separate Account C by written notice or by
telephone, without payment of any fees or penalties. In order to make an
allocation change by telephone, the proper authorization form must be on file
with JP Financial. The minimum allocation percentage allowed for the General
Account or any division of Separate Account C is five percent (5%) of net
premium, unless the allocation percentage is zero.
The allocation change will be processed with an effective date of the date the
correctly completed written request is received or the telephone request is
received.
(b) Automatic Portfolio Rebalancing
-------------------------------
An Automatic Portfolio Rebalancing feature is available to Ensemble Survivorship
Life policyowners. This feature provides a method for re-establishing fixed
proportions between various types of investments on a systematic basis. The
policyowner indicates on the applicable authorization form the allocation
percentages he or she wishes to maintain among one or more of the divisions
and/or the General Account. The allocation is then automatically re-adjusted to
this desired allocation on a quarterly, semi-annual or annual basis. The
adjustment occurs on a policy's monthly anniversary date in the month in which
the transaction is to take place or the next succeeding business day if the
monthly anniversary date falls on a holiday or a weekend. There is currently a
minimum of 5% per division or General Account. A policyowner may not elect to
have Dollar Cost Averaging and Automatic Portfolio Rebalancing at the same time.
Transfers pursuant to adjustments do not count towards the 12 free transfers or
the twenty transfers currently allowed per year. The Company has the right to
modify the terms and conditions of the Automatic Portfolio Rebalancing feature
upon 30 days advance notice to policyowners.
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7. INCOMPLETE ALLOCATION REQUEST
-----------------------------
If an incomplete written change in premium allocation request is received,
future premium payments will be allocated in accordance with the previous valid
allocation. A letter requesting a corrected allocation request will be sent to
the policyowner within twenty-four (24) hours of receipt of the incomplete
allocation request
8. TELEPHONE TRANSFERS, LOANS AND REALLOCATIONS
--------------------------------------------
Policyowners may request transfers of accumulation value or reallocation of
premiums by telephone, provided that the appropriate authorization form is on
file with JP Financial. The authorization form also allows the policyowner to
authorize his or her registered representative to request such transaction by
telephone. JP Financial may also, in its discretion, permit loans to be made by
telephone, provided that the proper authorization form is on file with JP
Financial. All restrictions which apply to a transfer, loan or reallocation, as
outlined in the current prospectus, including any charges, apply to transfers,
loans or reallocation by telephone. Any changes which would effect the telephone
authorization, including cancellation, will become effective within 3 days after
receipt of written notice from the policyowner. JP Financial will require the
policyowner's birthdate and social security number or taxpayer identification
number as verification each time the policyowner or registered representative
requests a transfer, loan or reallocation by telephone. JP Financial has the
option to confirm directly with the policyowner any telephone transfer or
reallocation requests made by the policyowner's authorized registered
representative whenever JP Financial deems it necessary. Currently, JP Financial
does not permit a registered representative to request a loan on behalf of a
policyowner. Loan proceeds pursuant to a telephone request will only be mailed
to a policyowner's address currently on file with JP Financial.
9. COMBINED REQUESTS
-----------------
The policyowner may combine requests for changes in the Specified Amount and the
death benefit option and requests for withdrawals. Such combined requests will
be considered as a single transaction becoming effective as of the Monthiversary
following the date the last of the requests is completed. The policyowner may
submit combined requests for any number of
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combinations or changes not addressed above. These requests will be processed in
the order and with timing to ensure fair, reasonable and beneficial treatment to
the policyowner.
10. UNPAID CHECKS
-------------
When an unpaid item is received, a suspense account will be charged for the
amount of the check. The policyowner will be notified in writing of the unpaid
item and a premium reversal will occur. The registered representative of record
will receive a copy of the letter.
The premium reversal will be made effective the date of the original premium
payment and the General Account of JP Financial will absorb the gain or loss of
this backdated transaction. Commissions paid as a result of the original premium
payment will be recovered.
11. NOTIFICATIONS
-------------
Written policyowner notifications will be sent to the policyowner promptly when
selected transactions are processed. Transactions which will be documented
include, but are not limited to, the following:
(a) Scheduled premium payments that are billed by direct notice,
preauthorized premium payments and any payment not-paid-as billed
(b) Loan Repayments
(c) Transfers, including the initial allocation transfer from the General
Account on the allocation date and dollar cost averaging
(d) Premium Reallocations, including portfolio rebalancing
(e) Withdrawals
(f) Decreases in Specified Amount
(g) Reinstatements
(h) Policy Issue
(i) Beneficiary/Ownership Changes
(j) Assignment/Release of Assignment
(k) Refunds
(1) Loans
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(m) Surrenders
(n) Lapses
(o) First Premium Payments
(p) Unpaid Checks
12. ROLE OF JEFFERSON PILOT SECURITIES CORPORATION
----------------------------------------------
Jefferson Pilot Securities Corporation (JP Securities) will be responsible for
administering the Flexible Premium Variable Life Policy under the guidelines of
the various state and federal laws and the rules, regulations, and requirements
of the NASD. JP Securities' personnel will be registered representatives or
principals except for clerical support. The duties to be performed by JP
Securities include, but are not limited to:
(a) Approving suitability of applications for insurance and investment in
Separate Account C; and
(b) Reviewing certain items identified in 13. and 14,, after being
processed by the appropriate department in order to insure they were
processed correctly.
13. ROLE OF JP FINANCIAL POLICY ISSUE AND UNDERWRITING DEPARTMENTS
---------------------------------------------------------------
After an application has been approved for suitability requirements by JP
Securities, the application is processed by the Underwriting Department for
selection of the risk. The Policy Issue Department issues, prepares and mails
the completed Policy to the registered representative for delivery to the
policyowner.
14. ROLE OF JP FINANCIAL CUSTOMER SERVICE DEPARTMENT
------------------------------------------------
The Customer Service Department will process the following, based on review and
authorization by JP Securities:
(a) Billings,
(b) Premium Collections,
(c) Depositing of funds,
(d) Processing withdrawals, surrenders, loans, transfers, lapses,
refunds, reinstatements, loan repayments, and assignments,
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(e) Change of address, unpaid checks, reallocation of funds, and transfer
of funds,
(f) Documenting any items in Number 12 which JP Securities is not
documenting.
(g) Beneficiary and ownership changes, decreases in Specified Amount and
changes of Policy Type between Option I and Option II.
(h) Handling correspondence and inquires,
(i) Documenting Not-Paid-as-Billed Premium Payments, Transfers of funds,
Surrenders, and Reallocations of funds,
(j) Reviewing and authorizing policyowner requests for refunds, changes
of ownership, reallocations of funds, and transfers of funds.
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