<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998
REGISTRATION NO. 33-75714
811-8374
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. ____ / /
POST-EFFECTIVE AMENDMENT NO. 4 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 5 /X/
ALEXANDER HAMILTON VARIABLE ANNUITY
SEPARATE ACCOUNT
(EXACT NAME OF REGISTRANT)
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
(NAME OF DEPOSITOR)
100 N. Greene St., Greensboro, NC 27401
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(336) 691-3000
NAME AND ADDRESS OF
AGENT FOR SERVICE: COPY TO:
Shari J. Lease, Esquire Joan E. Boros, Esquire
Alexander Hamilton Life Insurance Jorden Burt Boros Cicchetti
Company of America Berenson & Johnson LLP
One Granite Place 1025 Thomas Jefferson Street, N.W.
Concord, NH 03301 Suite 400 East
Washington, D.C. 20007
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
immediately upon filing pursuant to paragraph (b)
--
on December 31, 1997 pursuant to paragraph (b)
--
60 days after filing pursuant to paragraph (a)(i)
--
X on May 1, 1998 pursuant to paragraph (a)(i)
--
75 days after filing pursuant to paragraph (a)(ii)
--
on _______ pursuant to paragraph (a)(ii) of Rule 485
--
IF APPROPRIATE CHECK THE FOLLOWING BOX:
this Post-Effective Amendment designates a new effective
-- date for a new effective date for a previously filed
Post-Effective Amendment.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after effectiveness of the Registration Statement
TITLE OF SECURITIES BEING REGISTERED:
Variable Portion of Contracts issued by the Separate Account
No filing fee is due because an indefinite number of shares is deemed to have
been registered in reliance on Section 24(f) of the Investment Company Act of
1940.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus)
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- ----------------. . . . . . . . . . . . . . . ------------------
<S> <C>
1. Cover Page . . . . . . . . . . . . . . . Cover Page
2. Definitions. . . . . . . . . . . . . . . Definitions
3. Synopsis . . . . . . . . . . . . . . . Summary; Historical
Performance Data
4. Condensed Financial Information . . . . Condensed Financial
Information
5. General
(a) Depositor . . . . . . . . . . . . . Alexander Hamilton Life
Insurance Company of America;
Additional Information about
the Company
(b) Registrant. . . . . . . . . . . . . Alexander Hamilton Variable
Annuity Separate Account
(c) Portfolio Company . . . . . . . . . The Subaccounts
(d) Fund Prospectus . . . . . . . . . . The Subaccounts
(e) Voting Rights . . . . . . . . . . . Voting Rights
6. Deductions and Expenses
(a) General . . . . . . . . . . . . . . Charges and Deductions
(b) Sales Load %. . . . . . . . . . . . Surrender Charge
(c) Special Purchase Plan.. . . . . . . Not Applicable
(d) Commissions . . . . . . . . . . . . Distributor of the Contracts
(e) Fund Expenses . . . . . . . . . . . Other Expenses Including
Investment Advisory Fees
(f) Expenses - Registrant.. . . . . . . Not Applicable
7. Contracts
(a) Persons with Rights . . . . . . . . The Alexander Hamilton Life
Insurance Company of America
Variable Annuity Contract;
Distributions Under The
Contract; Voting Rights
<PAGE>
(b)(i) Allocation of Premium
Payments . . . . . . . . . . . Premium Payments
(ii) Transfers. . . . . . . . . . . Transfers
(iii) Exchanges. . . . . . . . . . . Not Applicable
(c) Changes. . . . . . . . . . . . Addition, Deletion or
Substitution of Investments
(d) Inquiries. . . . . . . . . . . Summary; Annuity Payments;
Annuity Payment Options;
Benefit; General Provisions
8. Annuity Period . . . . . . . . . . . . . Annuity Payment Options
9. Death Benefit. . . . . . . . . . . . . . Death Benefit
10. Purchase and Contract Balances
(a) Purchases . . . . . . . . . . . . . Contract Application and
Issuance of Contracts
(b) Valuation . . . . . . . . . . . . . Contract Value
(c) Daily Calculation . . . . . . . . . The Separate Account Value
(d) Underwriter . . . . . . . . . . . . Distributor of the Contracts
11. Redemptions
(a) By Contract Owners. . . . . . . . . Surrenders
By Annuitant. . . . . . . . . . . . Not Applicable
(b) Texas ORP . . . . . . . . . . . . . Restrictions Under the Texas
ORP Retirement Program
(c) Check Delay . . . . . . . . . . . . Surrenders
(d) Lapse . . . . . . . . . . . . . . . Lapse
(e) Free Look . . . . . . . . . . . . . Summary; Right to Examine the
Contract
12. Taxes . . . . . . . . . . . . . . . Certain Federal Income Tax
Consequences
13. Legal Proceedings. . . . . . . . . . . . Legal Proceedings
14. Table of Contents for the
Statement of Additional Information . .. Statement of Additional
Information Table of Contents
</TABLE>
PART B
<TABLE>
<CAPTION>
Statement of
Additional
Item of Form N-4 Information Caption
- ---------------- -------------------
<S> <C>
15. Cover Page . . . . . . . . . . . . . . . Cover Page
16. Table of Contents. . . . . . . . . . . . Table of Contents
17. General Information
and History . . . . . . . . . . . . (Prospectus) Alexander
Hamilton Life Insurance
Company of America; Additional
Information About the Company
<PAGE>
18. Services
(a) Fees and Expenses
of Registrant . . . . . . . . . . Not Applicable
(b) Management Contracts. . . . . . . . Not Applicable
(c) Custodian . . . . . . . . . . . . . Records, Reports and Services
Independent
Auditors. . . . . . . . . . . . . . Financial Statements
(d) Assets of Registrant. . . . . . . . Not Applicable
(e) Affiliated Person . . . . . . . . . Not Applicable
(f) Principal Underwriter . . . . . . . Not Applicable
19. Purchase of Securities
Being Offered. . . . . . . . . . . . . . (Prospectus) The Alexander
Hamilton Life Insurance
Company of America Variable
Annuity Contract
Offering Sales Load. . . . . . . . . . . (Prospectus) Surrender Charge
20. Underwriters . . . . . . . . . . . . . . (Prospectus) Distributor of
the Contracts
21 . Calculation of Performance
Data . . . . . . . . . . . . . . . (Prospectus) Performance Data;
Performance Data and
Calculations
22. Annuity Payments . . . . . . . . . . . . (Prospectus) Annuity Income
Payments; Annuity Payment
Options
23. Financial Statements . . . . . . . . . . Financial Statements
</TABLE>
PART C - - OTHER INFORMATION
<TABLE>
<CAPTION>
Item of Form N-4 Part C Caption
- ---------------- --------------
<S> <C>
24. Financial Statements
and Exhibits . . . . . . . . . . . . . . Financial Statements and
Exhibits
(a) Financial Statements. . . . . . . . Financial Statements
(b) Exhibits. . . . . . . . . . . . . . Exhibits
25. Directors and Officers of. . . . . . . . The Company's Directors
the Depositor. . . . . . . . . . . . . . and Officers
26. Persons Controlled By or
Under Common Control . . . . . . . . . . Persons Controlled By or Under
Common Control with the
Depositor or Registrant
<PAGE>
27. Number of Contract Owners. . . . . . . . Number of Contract Owners
28. Indemnification. . . . . . . . . . . . . Indemnification
29. Principal Distributor of the
Underwriters . . . . . . . . . . . . . . Contracts
30. Location of Accounts
and Records. . . . . . . . . . . . . . . Location of Accounts and
Records
31. Management Services. . . . . . . . . . . Management Services
32. Undertakings . . . . . . . . . . . . . . Undertakings
Signature Page . . . . . . . . . . . . . Signatures
</TABLE>
<PAGE>
THE ALLEGIANCE VARIABLE ANNUITY
ISSUED BY
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
100 N. Greene St.
PROSPECTUS Greensboro, NC 27401 MAY 1, 1998
This Prospectus describes The Allegiance Variable Annuity (the
"Contract"), an individual flexible premium multi-funded deferred variable
annuity offered by Alexander Hamilton Life Insurance Company of America (the
"Company"). The Contract provides for the accumulation of capital on a
tax-deferred basis for retirement or other long-term purposes. A minimum
initial Premium Payment of only $2,000 is required to purchase a Contract
(although a lower minimum may apply to certain tax-qualified Contracts). You
generally may make additional Premium Payments of at least $50 each at any
time before the Maturity Date. Additional limitations on Premium Payments
apply.
You may allocate Premium Payments to one or more Variable Sub-accounts
of the Alexander Hamilton Variable Annuity Separate Account (the "Separate
Account"), in which the Contract Value varies to reflect investment
performance, or to one or more Interest Rate Guarantee Periods of the Capital
Developer Account, in which a specified rate of interest is credited to the
Contract Value (subject to a Market Value Adjustment), or to a combination of
these Variable Sub-accounts and Interest Rate Guarantee Periods. The Separate
Account currently has 18 different Variable Sub-accounts (the "Variable
Sub-accounts"). Assets of each Variable Sub-account are invested in a
corresponding portfolio (each, a "Fund") of the Jefferson Pilot Variable
Fund, Inc., the Fidelity's Variable Insurance Products Funds ("VIP" and "VIP
II"), the MFS Variable Insurance Trust, or the Oppenheimer Variable Account
Funds. Each Fund is described in separate prospectuses that accompany this
Prospectus. Certain Fund options may not be available in all states. The
Contract Value allocated to the Separate Account will vary up or down in
accordance with the investment performance of the Fund(s) you select.
Therefore, you bear the entire investment risk for all amounts allocated to
the Separate Account. The Capital Developer Account currently has two
Interest Rate Guarantee Periods: one year and seven years. The Market Value
Adjustment could decrease the value of amounts prematurely surrendered,
withdrawn, transferred, or annuitized from the Capital Developer Account, but
amounts invested in the Capital Developer Account are guaranteed to earn
interest at an annual rate of at least 3% per year before any applicable
Surrender Charges. The Capital Developer Account may not be available in all
states. There is no guaranteed or minimum Surrender Value for the Variable
Sub-accounts, so the Surrender Value with respect to amounts allocated to the
Variable Sub-accounts could be less than the Premium Payments allocated
thereto.
The Contract provides for annuity payments to be made by the Company on a
fixed or a variable basis for the life of the Annuitant or for some other
period, beginning on the Maturity Date that you select. Prior to the Maturity
Date, you can transfer amounts among the 20 allocation options including the two
fixed Interest Rate Guarantee Periods of the Capital Developer Account and the
18 Variable Sub-accounts of the Separate Account (collectively, the "Investment
Options"). After the Maturity Date, transfers are permitted among the Variable
Sub-accounts. Prior to the Maturity Date, you can also Surrender the Contract or
withdraw a portion of the Surrender Value in exchange for a cash payment;
however, Surrenders and Withdrawals may be taxable, subject to a Surrender
Charge, a Market Value Adjustment, an Annual Administrative Fee, and/or a tax
penalty, and payment of Surrenders from the Capital Developer Account may be
delayed.
This Prospectus sets forth your rights under the Contract, and information
regarding the Investment Options that you should know before investing. A
Statement of Additional Information dated May 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and is available without charge, upon
Request by calling the Variable Annuity Service Center at 1-800-289-1776. The
Table of Contents of the Statement of Additional Information is included at the
end of this Prospectus. The Statement of Additional Information, as supplemented
from time to time, is incorporated herein by reference.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR
EACH OF THE FOLLOWING FUNDS: JEFFERSON PILOT VARIABLE FUND, INC., VARIABLE
INSURANCE PRODUCTS FUND; VARIABLE INSURANCE PRODUCTS FUND II; MFS VARIABLE
INSURANCE TRUST, AND THE OPPENHEIMER VARIABLE ACCOUNT FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES DIVISION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES DIVISION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CONTRACTS AND SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY. INVESTING IN THE CONTRACTS INVOLVES CERTAIN INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
Page
---------
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA . . . . . . . . . 12
INVESTMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Separate Account . . . . . . . . . . . . . . . . . . . . . . . . 12
The Sub-Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Capital Developer Account. . . . . . . . . . . . . . . . . . . . 16
THE ALLEGIANCE VARIABLE ANNUITY CONTRACT . . . . . . . . . . . . . . . 17
Contract Application and Issuance of Contracts . . . . . . . . . . . 17
Premium Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Initial Premium Payment. . . . . . . . . . . . . . . . . . . . . . 18
Additional Premium Payments. . . . . . . . . . . . . . . . . . . . 18
Allocation of Premium Payments . . . . . . . . . . . . . . . . . . 18
Payment Not Honored by Bank. . . . . . . . . . . . . . . . . . . . 18
Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Separate Account Value . . . . . . . . . . . . . . . . . . . . 18
The Capital Developer Account Value. . . . . . . . . . . . . . . . 19
Minimum Contract Value . . . . . . . . . . . . . . . . . . . . . . 19
Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Telephone Transfers and Reallocations. . . . . . . . . . . . . . . 24
Dollar Cost Averaging. . . . . . . . . . . . . . . . . . . . . . . . 20
Automatic Rebalancing. . . . . . . . . . . . . . . . . . . . . . . . 25
DISTRIBUTIONS UNDER THE CONTRACT . . . . . . . . . . . . . . . . . . . 20
Surrenders and Partial Withdrawals . . . . . . . . . . . . . . . . . 20
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . . . . . . 22
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Election of Annuity Payment Option . . . . . . . . . . . . . . . . 22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Annuity Payment Options. . . . . . . . . . . . . . . . . . . . . . . 23
Death Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Death of Contract Owner Prior to Maturity Date . . . . . . . . . . 25
IRS Required Distribution. . . . . . . . . . . . . . . . . . . . . 26
Death of Annuitant Prior to Maturity Date. . . . . . . . . . . . . 26
Death of Annuitant on or After Maturity Date . . . . . . . . . . . 26
Death of Contract Owner on or After Maturity Date. . . . . . . . . 26
Contract Owner's Spouse as Beneficiary . . . . . . . . . . . . . . 26
Payment of Death Benefit to Beneficiary. . . . . . . . . . . . . . 26
Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Change of Contract Owner . . . . . . . . . . . . . . . . . . . . . . 27
Restrictions Under the Texas Optional Retirement Program . . . . . . 27
Restrictions Under Qualified Contracts . . . . . . . . . . . . . . . 27
Restrictions Under Section 403(b) Plans. . . . . . . . . . . . . . . 27
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . 27
Surrender Charge . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Market Value Adjustment. . . . . . . . . . . . . . . . . . . . . . . 28
Reduction in Charges for Certain Groups. . . . . . . . . . . . . . . 29
Mortality and Expense Risk Charge. . . . . . . . . . . . . . . . . . 29
Administrative Expense Charge. . . . . . . . . . . . . . . . . . . . 30
Annual Administrative Fee. . . . . . . . . . . . . . . . . . . . . . 30
Transfer Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Premium Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Federal, State and Local Taxes . . . . . . . . . . . . . . . . . . . 30
Other Expenses Including Investment Advisory Fees. . . . . . . . . . 30
i
<PAGE>
TABLE OF CONTENTS -- (CONTINUED)
Page
---------
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . 31
Taxation of Annuities. . . . . . . . . . . . . . . . . . . . . . . . 31
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Possible Changes in Taxation . . . . . . . . . . . . . . . . . . . 31
Surrenders and Partial Withdrawals . . . . . . . . . . . . . . . . 32
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . 32
Penalty Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Death Benefit Proceeds . . . . . . . . . . . . . . . . . . . . . . 32
Transfers, Assignments, or Exchanges of the Contract . . . . . . . 33
Generation-Skipping Transfers. . . . . . . . . . . . . . . . . . . 33
Multiple Contracts . . . . . . . . . . . . . . . . . . . . . . . . 33
Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 33
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Qualified Pension and Profit Sharing Plans . . . . . . . . . . . . 34
Individual Retirement Annuities and Individual Retirement
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Tax-Sheltered Annuities. . . . . . . . . . . . . . . . . . . . . . 34
Section 457 Deferred Compensation ("Section 457") Plans. . . . . . 34
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
DISTRIBUTOR OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . 35
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT. . . . . . . . . . . 36
Addition, Deletion, or Substitution of Investments . . . . . . . . . 36
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Company Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
GENERAL CONTRACT PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 38
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 40
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS. . . . . . . . . 41
APPENDIX I - SURRENDPR CHARGE CALCULATION . . . . . . . . . . . . . . I-1
APPENDIX II - MARKET VALUE ADJUSTMENT CALCULATION AND
EXAMPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
FUND PROSPECTUSES
Jefferson Pilot Variable Fund, Inc . . . . . . . . . . . . . . . . . CAF-l
Fidelity's Variable Insurance Products Funds (VIP and VIP II). . . . VIP-I
MFS Variable Insurance Trust . . . . . . . . . . . . . . . . . . . . MFSRS-1
Oppenheimer Variable Account Funds (OVAF). . . . . . . . . . . . . . OVAF-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON 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.
ii
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD -- The period from the Contract Date to the date
preceding the Maturity Date.
ACCUMULATION UNIT -- A unit of measure used to determine the Separate
Account Value during the Accumulation Period.
ANNUITANT(s) -- The person(s) upon whose life the Annuity Payments are to
be based. You will be deemed the Annuitant unless you name another to be the
Annuitant in the Contract Application. An Annuitant must be a natural person.
The Annuitant(s) named in the Application cannot be changed.
ANNUITY PAYMENTS -- The payments from the Company to the Payee that will
begin on the Maturity Date. The amount of Annuity Payments will be based on the
Contract Value and the age of the Annuitant on the Maturity Date, as well as on
the Annuity Payment Option and payment frequency selected.
ANNUITY PAYMENT OPTIONS -- Options available for methods of receiving
Annuity Payments.
ANNUITY PERIOD -- The period which begins on the Maturity Date and ends
with the last Annuity Payment.
ANNUITY UNIT -- A unit of measure used to determine the amount of each
Variable Annuity Payment.
APPLICATION - The document you signed that evidences your application for
the Contract.
BENEFICIARY - The persons or entities designated by you in the Application
(or as subsequently changed by you) to receive the Death Benefit provided by the
Contract.
CAPITAL DEVELOPER ACCOUNT -- An allocation alternative under the Contract
that provides a Guaranteed Interest Rate for a specified Interest Rate Guarantee
Period. This rate will never be less than 3% per year. The Capital Developer
Account is guaranteed by the Company and is not part of the Separate Account.
CAPITAL DEVELOPER ACCOUNT VALUE -- The portion of Contract Value held in
the Capital Developer Account.
CODE -- The Internal Revenue Code of 1986, as amended.
COMPANY (OUR, WE, US) - Alexander Hamilton Life Insurance Company of
America.
CONTRACT -- The Allegiance Variable Annuity, an individual flexible premium
multi-funded variable annuity contract that is described in this Prospectus.
CONTRACT DATE - The effective date of coverage under the Contract and the
date from which the Company measures Contract Years, quarters, months, and
anniversaries.
CONTRACT OWNER (you, your) - The person or entity entitled to the ownership
rights of the Contract. The Contract Owner is the person in whose name the
Contract is issued. It is the person or entity named in the Application, unless
otherwise changed. Joint Contract Owners are permitted only if they are spouses.
CONTRACT VALUE - The value of all of the Accumulation Units held under the
Contract in the Separate Account plus the value of all amounts held under the
Contract in the Capital Developer Account.
CONTRACT YEAR - The first Contract Year is the annual period which begins
on the Contract Date. Subsequent Contract Years begin on each anniversary of the
Contract Date.
DEATH BENEFIT -- The amount payable upon the death of any Contract Owner.
DUE PROOF OF DEATH -- Information required by the Company to process a
claim for a Death Benefit, including a death certificate and a death claim form
acceptable to the Company.
1
<PAGE>
FIXED ANNUITY OPTIONS -- Annuity Payment Options under the Contract that
provide for scheduled and fixed payments.
FUNDS -- the Jefferson Pilot Funds, VIP Funds, MFS Funds and Oppenheimer
Funds.
GUARANTEED INTEREST RATE -- The applicable effective annual interest rate
which the Company will credit and compound annually on the Capital Developer
Account Value during each Interest Rate Guarantee Period. The rate is guaranteed
to be at least three percent per year.
INTEREST RATE GUARANTEE PERIOD -- A specified period which begins on the
date that a Premium Payment is allocated to (or a portion of Contract Value is
transferred to) the Capital Developer Account to accumulate at a Guaranteed
Interest Rate. Currently, the Company offers one and seven-year Interest Rate
Guarantee Periods.
INVESTMENT OPTION -- Each Interest Rate Guarantee Period of the Capital
Developer Account and each Variable Sub-account of the Separate Account.
ISSUE AGE -- The age of the Contract Owner on the Contract Date.
JEFFERSON PILOT VARIABLE FUND, INC. ("JPVF") -- an open-end diversified
management investment company registered under the 1940 Act. JPVF was previously
known as Chubb America Fund, Inc. and changed its name as part of the
acquisition of Chubb Life and its affiliates by Jefferson-Pilot Corporation.
JEFFERSON PILOT FUNDS -- the portfolios of the Jefferson Pilot Variable
Fund, Inc. which are available under the Contracts -- Domestic Growth Stock
Portfolio, World Growth Stock Portfolio, International Equity Portfolio, Growth
Portfolio, Growth and Income Portfolio, Emerging Growth Portfolio, Capital
Growth Portfolio, High Yield Bond Portfolio, Money Market Portfolio, and
Balanced Portfolio.
MARKET VALUE ADJUSTMENT -- A positive or negative adjustment applied to the
Capital Developer Account Value in the event of a premature full Surrender,
Partial Withdrawal, Transfer, or annuitization that is requested prior to the
end of an Interest Rate Guarantee Period. The Market Value Adjustment does not
apply during the last 30 days of the Interest Rate Guarantee Period.
MATURITY DATE -- The date on which the Company makes the first Annuity
Payment under the Contract. The latest Maturity Date that may be elected is the
Annuitant's 85th birthday or 10 years from the Contract Date, whichever is
later.
MFS FUNDS -- mutual fund series of the MFS Variable Insurance Trust which
are available under the Contracts -- MFS Research Series and MFS Utilities
Series.
MFS VARIABLE INSURANCE TRUST -- an open-end management investment company
registered under the 1940 Act.
NET PREMIUM PAYMENT -- A Premium Payment less any applicable Premium Tax.
OPPENHEIMER FUNDS -- the Portfolios of the Oppenheimer Variable Account
Funds which are available under the Contract -- Oppenheimer Strategic Bond Fund
and Oppenheimer Bond Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS ("OVAF") -- an open-end management
investment company registered under the 1940 Act.
PAYEE -- The person or entity who will receive Annuity Payments under the
Contract.
PREMIUM PAYMENT -- A payment to the Company under the Contract.
PREMIUM TAX -- A tax imposed by certain states when a Premium Payment is
made, when Annuity Payments begin, when a partial withdrawal is made, or when
the Contract is surrendered.
REQUEST -- A request in a form satisfactory to the Company, which is
received by the Company's Variable Annuity Service Center.
2
<PAGE>
SEPARATE ACCOUNT -- The Alexander Hamilton Variable Annuity Separate
Account, a separate account of Alexander Hamilton Life Insurance Company of
America, which consists of assets set aside by the Company, the investment
performance of which is kept separate from that of the general assets and all
other separate account assets of the Company. The Separate Account is registered
as a unit investment trust under the Investment Company Act of 1940.
SEPARATE ACCOUNT VALUE -- The portion of Contract Value held in the
Separate Account. There is no guaranteed or minimum Separate Account Value.
SURRENDER VALUE -- Proceeds payable upon a surrender of the Contract, equal
to (a) the Contract Value (b) plus or minus any applicable Market Value
Adjustment, (c) minus any applicable Surrender Charge, (d) minus the Annual
Administrative Fee, and (e) minus any applicable Premium Tax.
THE VIP TRUSTS -- the Variable Insurance Products Fund ("VIP") and the
Variable Insurance Products Fund II ("VIP II"), which are open-end diversified
management investment companies registered under the 1940 Act.
TREASURY RATE -- The applicable effective annual U.S. Treasury Rate used by
the Company for determining the Market Value Adjustment applicable to a
surrender, withdrawal, transfer, or annuitization from the Capital Developer
Account at any given time.
VALUATION DAY -- Any day on which the New York Stock Exchange is open for
trading except for normal holiday closing or when the Securities and Exchange
Commission has determined that a state of emergency exists.
VALUATION PERIOD -- The period of time beginning at the close of business
on the New York Stock Exchange on any Valuation Day and ending at the close of
business on the next Valuation Day. A Valuation Period may be more than one day.
VARIABLE ANNUITY OPTIONS -- Annuity Payment Options under the Contract that
provide for payments which vary as to dollar amount in relation to the
investment performance of specified Variable Sub-accounts.
VARIABLE ANNUITY SERVICE CENTER -- P.O. Box 515, Concord, NH 03302-0515.
Notices, Requests, and Premium Payments under the Contract must be sent to the
Company's Administrative Service Center.
VARIABLE SUB-ACCOUNT -- Separate Account assets are divided into Variable
Sub-accounts. Assets of each Variable Sub-account will be invested in shares of
any of the corresponding Funds. The Company reserves the right to eliminate or
add Variable Sub-accounts and to change investment companies or to substitute
other investments for Fund shares.
VIP FUNDS -- the portfolios of the VIP Trusts which are available under the
Contracts -- VIP Equity Income Portfolio, VIP II Index 500 Portfolio, VIP Growth
Portfolio and VIP II Contrafund Portfolio.
3
<PAGE>
THE ALLEGIANCE VARIABLE ANNUITY
SUMMARY
THE CONTRACT
The Allegiance Variable Annuity Contract is an individual flexible premium
multi-funded deferred variable annuity which can be purchased on a non-qualified
basis ("Non-qualified Contract") or in connection with certain plans qualifying
for favorable federal income tax treatment ("Qualified Contract"). A Contract
may be purchased with an initial Premium Payment of at least $2,000 (although a
lower minimum may apply to certain Qualified Contracts).
You may make additional Premium Payments of at least $50 each at any time
before the Maturity Date. (See "Premium Payments," p. 17.) You may allocate
Premium Payments to any combination of the 20 Investment Options under the
Contract. However, over the life of your Contract, you are currently limited to
allocating your Premium Payments to no more than 16 of the Variable Sub-accounts
in existence now or added in the future. The Company reserves the right to
modify this limitation in the future. The Investment Options currently available
are the 18 Variable Sub-accounts of the Alexander Hamilton Variable Annuity
Separate Account (the "Separate Account"), and the two Interest Rate Guarantee
Periods of the Capital Developer Account. (See "Investment Options," p. 12.)
These Investment Options may not be available in all states.
THE INVESTMENT OPTIONS
THE ALEXANDER HAMILTON VARIABLE ANNUITY SEPARATE ACCOUNT. The Separate
Account, a separate account of the Company, invests in shares of five separate
Funds. They currently are the Jefferson Pilot Variable Fund, Inc., managed by
Jefferson Pilot Investment Advisory Corporation; the Variable Insurance Products
Fund and the Variable Insurance Products Fund II, managed by Fidelity Management
& Research Company; the MFS Variable Insurance Trust, managed by Massachusetts
Financial Services Company and the Oppenheimer Variable Account Funds, managed
by OppenheimerFunds, Inc. Each of the 18 Variable Sub-accounts of the Separate
Account invests solely in a corresponding Portfolio of a Fund. Because the
Separate Account Value will increase or decrease depending on the investment
experience of the selected Variable Sub-accounts, you bear the entire investment
risk with respect to Premium Payments allocated to, and amounts transferred to,
the Separate Account. (See "The Separate Account," p. 12.)
THE CAPITAL DEVELOPER ACCOUNT. The Company currently offers two different
Interest Rate Guarantee Periods in the Capital Developer Account, lasting for
one and seven years (not all periods are available in all states). The Capital
Developer Account provides for fixed accumulations at a specified Guaranteed
Interest Rate. Amounts allocated to the Capital Developer Account may be subject
to a Market Value Adjustment upon a premature Surrender, Partial Withdrawal,
transfer, or annuitization requested 31 days or more prior to the end of the
Interest Rate Guarantee Period. Because of this adjustment and for other
reasons, the amount payable upon Partial Withdrawal or Surrender or applied to a
transfer or annuitization may be more or less than the Capital Developer Account
Value at the time of the transaction. However, the Market Value Adjustment will
never reduce the earnings on amounts allocated to the Capital Developer Account
to less than three percent per year before any applicable Surrender Charges.
(See "The Capital Developer Account," p. 16.)
TRANSFERS
You may transfer Contract Value during the Accumulation Period (I.E., prior
to the Maturity Date) among the Investment Options subject to certain
limitations. The minimum transfer amount is $250 for transfers from any Variable
Sub-account and $1,000 for transfers from the Capital Developer Account.
Transfers from Interest Rate Guarantee Periods may be subject to a Market Value
Adjustment. (See "Transfers," p. 19.)
4
<PAGE>
During the Annuity Period (I.E., after the Maturity Date), if a Variable
Annuity Option is chosen then a portion of the Separate Account Value may be
transferred from one Variable Sub-account to any other Variable Sub-account. No
transfers are permitted when a Fixed Annuity Option is chosen. (See "Transfers,"
p. 19.)
A fee equal to $10 may be imposed for each transfer in excess of 15 during
any Contract Year. Although the Company reserves the right to impose a $10 fee,
it currently has no plans to do so.
SURRENDERS AND PARTIAL WITHDRAWALS
You may elect to Surrender all or withdraw a portion of the Surrender Value
in exchange for a cash payment at any time prior to the Maturity Date. The
minimum Partial Withdrawal amount is $250 from a Variable Sub-account and $1,000
from the Capital Developer Account. Following any Partial Withdrawal, the
Contract Value must be at least $2,000. Partial Withdrawals and Full Surrenders
are subject to any applicable Surrender Charge, Market Value Adjustment, Annual
Administrative Fee, and state Premium Taxes. (See "Surrenders and partial
Withdrawals," p. 20.) Federal income taxes and a tax penalty may be applicable.
(See "Certain Federal Income Tax Consequences," p. 31.) After the Maturity Date,
Surrenders and Partial Withdrawals generally are not permitted.
The Separate Account Value remaining in any Variable Sub-account
immediately following a Partial Withdrawal must be at least $250, and the
Capital Developer Account Value remaining in an Interest Rate Guarantee Period
immediately following a Partial Withdrawal must be at least $1,000. If the
processing of a Partial Withdrawal request would result in a remaining Variable
Sub-account value of less than $250 or a remaining Interest Rate Guarantee
Period value of less than $1,000, the Company will treat the Partial Withdrawal
request as a request for withdrawal of the entire Contract amount in the
relevant Variable Sub-account or Interest Rate Guarantee Period.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE SURRENDER VALUE COULD BE LESS THAN THE
TOTAL PREMIUM PAYMENTS ALLOCATED TO THAT ACCOUNT. AMOUNTS ALLOCATED TO THE
CAPITAL DEVELOPER ACCOUNT ARE GUARANTEED TO EARN INTEREST AT A MINIMUM RATE OF
THREE PERCENT PER YEAR BEFORE ANY APPLICABLE SURRENDER CHARGES. AFTER THE
APPLICATION OF SURRENDER CHARGES THE SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE CAPITAL DEVELOPER ACCOUNT COULD BE LESS THAN THE TOTAL PREMIUM
PAYMENTS ALLOCATED TO IT.
DEATH BENEFIT
In the event that any Contract Owner dies prior to the Maturity Date, a
Death Benefit is payable to the Beneficiary upon receipt of Due Proof of Death,
an election of the Death Benefit Option, and return of the Contract. The Death
Benefit will at least equal the Contract Value at the time of payment. No
Surrender Charge, Market Value Adjustment, or Annual Administrative Fee is
imposed upon amounts paid as a Death Benefit. (See "Death Benefit," p. 25.)
CHARGES AND DEDUCTIONS
SURRENDER CHARGE. A declining Surrender Charge will be deducted from the
amount of any Partial Withdrawal or Full Surrender during the first seven
Contract Years to help defray sales expenses. The Surrender Charge in the first
three Contract Years is 6% of the Contract Value withdrawn or surrendered, and
declines by one percentage point for each of the next four Contract Years. The
Surrender Charge percentages are as follows:
YEAR 1 2 3 4 5 6 7 8+
---- - - - - - - - --
PERCENTAGE 6 6 6 5 4 3 2 0
The Surrender Charge will also be imposed on the Maturity Date if it occurs
during the first seven Contract Years and you choose an annuity option of less
than five years. (The Contract may not be annuitized during the first Contract
Year.)
The Surrender Charge will not apply to certain distributions. (See
"Surrender Charge," p. 27.)
5
<PAGE>
Each Contract Year, a Free Withdrawal Amount, equal to 10% of the Contract
Value at the time of the Surrender or Partial Withdrawal, will not be subject to
any Surrender Charge. THE COMPANY GUARANTEES THAT THE AGGREGATE SURRENDER CHARGE
WILL NEVER EXCEED 8.5% OF THE TOTAL PREMIUM PAYMENTS. (See "Surrender Charge,"
p. 27.)
MARKET VALUE ADJUSTMENT. A positive or negative Market Value Adjustment
will be applied to any Full Surrender, Partial Withdrawal, transfer, or
annuitization of Capital Developer Account Value 31 days or more prior to the
end of the Interest Rate Guarantee Period. The Market Value Adjustment does not
apply to amounts transferred from the one year Interest Rate Guarantee Period
pursuant to the Dollar Cost Averaging Option.
The Market Value Adjustment may be positive or negative depending on the
Guaranteed Interest Rate credited and the Treasury Rate for the remainder of the
Interest Rate Guarantee Period, so it could increase or decrease the amount of a
Full Surrender, Partial Withdrawal, transfer, or annuitization. The adjustment
is based on a comparison of the Guaranteed Interest Rate applicable to the
Interest Rate Guarantee Period and the Treasury Rate for the Term to Maturity
that most closely approximates the remaining duration of the Interest Rate
Guarantee Period from which the Partial Withdrawal, Surrender, transfer, or
annuitization is made. In general, if the Guaranteed Interest Rate does not
exceed the applicable Treasury Rate by at least 0.4%, then a negative Market
Value Adjustment may be applied, and YOU COULD RECEIVE AN AMOUNT LOWER THAN THE
AMOUNT OF CAPITAL DEVELOPER ACCOUNT VALUE ON THE DATE OF THE SURRENDER, PARTIAL
WITHDRAWAL, TRANSFER, OR ANNUITIZATION. However, you will never receive less
than the amount allocated to the Capital Developer Account, accumulated at an
annual interest rate of three percent less any applicable Surrender Charges. If
the Guaranteed Interest Rate exceeds the applicable Treasury Rate by more than
0.4%, then a positive Market Value Adjustment may be applied, and you could
receive an amount higher than the Capital Developer Account Value. No Market
Value Adjustment will be applied to any Surrender, Partial Withdrawal, transfer,
or annuitization from an Interest Rate Guarantee Period made during the last 30
days of the Interest Rate Guarantee Period. (See "Market Value Adjustment," p.
28.)
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a daily charge equal
to a percentage of the net assets in the Separate Account for the mortality and
expense risks assumed by the Company. The effective annual rate of this charge
is 1.25% of the Separate Account Value. The Mortality and Expense Risk Charge
does not apply to the Capital Developer Account. (See "Mortality and Expense
Risk Charge," p. 29.)
ADMINISTRATIVE EXPENSE CHARGE. The Company deducts a daily charge equal to
a percentage of the net assets in the Separate Account for administering the
Separate Account. The effective annual rate of this charge is 0.15% of the
Contract Value. The amount of the fee is guaranteed not to increase. The
Administrative Expense Charge does not apply to the Capital Developer Account.
(See 'Administrative Expense Charge," p. 30.)
ANNUAL ADMINISTRATIVE FEE. An Annual Administrative Fee is imposed each
year for Contract maintenance and related administrative expenses. This charge
is the lesser of $30 per Contract Year or 2% of Contract Value. The amount of
the fee is guaranteed not to increase. It will be deducted from the Contract
Value on the last day of each Contract Year and upon Full Surrender of the
Contract before a Contract Anniversary. The Annual Administrative Fee will not
be deducted if 100% of Contract Value is held in the Capital Developer Account,
and it will not be deducted for a Contract Year if, on the last day of that
Contract Year, the Contract Value is $30,000 or greater. (See "Annual
Administrative Fee," p. 30.)
TRANSFER CHARGE. A fee equal to $10 may be imposed for each transfer in
excess of 15 during any Contract Year. Although the Company reserves the right
to impose a $10 fee, it currently has no plans to do so.
TAXES. The Company may incur Premium Taxes relating to the Contracts.
Depending upon applicable state law, the Company will deduct any Premium Taxes
related to a particular Contract from Premium Payments, from the Contract Value
upon Partial Withdrawal or Surrender, or on the Maturity Date. (See "Premium
Taxes," p. 30.)
6
<PAGE>
No charges are currently made against the Variable Sub-accounts or the
Capital Developer Accounts for federal, state, or local taxes other than state
Premium Taxes. However, the Company may deduct charges for such taxes in the
future. (See "Federal, State and Local Taxes," p. 30.)
FUND EXPENSES. The Separate Account Value will reflect the investment
advisory fee and other expenses incurred by the Funds.
EXPENSE DATA. The charges and deductions explained above are summarized in
the following tables. This tabular information regarding expenses assumes that
the entire Contract Value is in the Separate Account.
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Sales Load on Premium Payments. . . . . . . . . none
Maximum Surrender Charge
(as a % of Contract Value Surrendered)(1). . . 6%
Annual Administrative Fee . . . . . . . . . . . The lesser of $30 per
Contract or 2% of
Contract Value
Transfer Fee. . . . . . . . . . . . . . . . . . No Fee for First 15 each
year; $10 for each
additional transfer
(currently not assessed)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of account value)
Mortality and Expense Risk Charge . . . . . . . 1.25%
Administrative Expense Charge . . . . . . . . . 0.15%
-----
Total Separate Account Annual Expenses . . . . 1.40%
</TABLE>
- -------------------------
(1) The Surrender Charge is not applicable after the seventh Contract Year or
to the first 10% of Contract Value withdrawn or surrendered during each
Contract Year. (See "Free Surrender Amount," p. 28.)
7
<PAGE>
FUND ANNUAL EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
JPVF Growth Portfolio . . . . . . . . . . 0.75% 0.25% 1.00%(1)
JPVF High Yield Bond Portfolio. . . . . . 0.75% 0.20% 0.95%(1)
JPVF International Equity Portfolio . . . 1.00% 0.40% 1.40%(1)
JPVF Balanced Portfolio . . . . . . . . . 0.75% 0.22% 0.97%
JPVF Capital Growth Portfolio . . . . . . 1.00% 0.13% 1.13%
JPVF Domestic Growth Stock Portfolio. . . 0.75% 0.10% 0.85%
JPVF Emerging Growth Portfolio. . . . . . 0.80% 0.36% 1.16%
JPVF Growth and Income Portfolio. . . . . 0.75% 0.13% 0.88%
JPVF Money Market Portfolio . . . . . . . 0.50% 0.12% 0.62%
JPVF World Growth Stock Portfolio . . . . 0.75% 0.13% 0.88%
MFS Research Series . . . . . . . . . . . 0.75% 0.25% 1.00%(2)
MFS Utilities Series. . . . . . . . . . . 0.75% 0.25% 1.00%(2)
Oppenheimer Bond Fund . . . . . . . . . . 0.74% 0.04% 0.78%
Oppenheimer Strategic Bond Fund . . . . . 0.75% 0.10% 0.85%
VIP Equity-Income Portfolio . . . . . . . 0.51% 0.07% 0.58%(3)
VIP Growth Portfolio. . . . . . . . . . . 0.61% 0.08% 0.69%(3)
VIP II Contrafund Portfolio . . . . . . . 0.61% 0.13% 0.74%(3)
VIP II Index 500 Portfolio. . . . . . . . 0.13% 0.15% 0.28%(4)
</TABLE>
- ------------------------
(1) Total Fund Annual Expenses for these Portfolios are based on estimated
"Other Expenses" for the fiscal year ending December 31, 1998.
(2) The Adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% during the current fiscal year. Otherwise, "Other
Expenses" for the Research Series and Utilities Series would be 0.73% and
2.00%, respectively, and "Total Fund Annual Expenses" would be 1.48% and
2.75%, respectively.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .56% for Equity-Income
Portfolio, .67% for the Growth Portfolio, and .71% for Contrafund
Portfolio.
(4) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the funds' management fee, other
expenses and total expenses would have been .28%, .15%, and .43%
respectively.
8
<PAGE>
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets (and assuming the entire Contract Value is allocated to
the applicable Variable Sub-account):
1. If you surrender the Allegiance Contract, you would pay the
following expenses on a $1,000 investment assuming a 5%
annual return on assets.*
<TABLE>
<CAPTION>
SUB-ACCOUNTS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
JPVF Growth Portfolio . . . . . . . . . . $ 87 $145
JPVF High Yield Bond Portfolio. . . . . . $ 86 $144
JPVF International Equity Portfolio . . . $ 90 $157
JPVF Balanced Portfolio . . . . . . . . . $ 86 $145 $189 $345
JPVF Capital Growth Portfolio . . . . . . $ 88 $149 $197 $365
JPVF Domestic Growth Stock Portfolio. . . $ 85 $141 $182 $330
JPVF Emerging Growth Portfolio. . . . . . $ 88 $150 $199 $369
JPVF Growth and Income Portfolio. . . . . $ 85 $142 $184 $334
JPVF Money Market Portfolio . . . . . . . $ 83 $134 $170 $301
JPVF World Growth Stock Portfolio . . . . $ 85 $142 $184 $334
MFS Research Series . . . . . . . . . . . $ 87 $145 $190 $349
MFS Utilities Series. . . . . . . . . . . $ 87 $145 $190 $349
Oppenheimer Bond Fund . . . . . . . . . . $ 84 $139 $179 $321
Oppenheimer Strategic Bond Fund . . . . . $ 85 $141 $182 $330
VIP Equity-Income Portfolio . . . . . . . $ 83 $133 $168 $296
VIP II Contrafund Portfolio . . . . . . . $ 84 $138 $176 $316
VIP II Index 500 Portfolio. . . . . . . . $ 80 $124 $152 $256
VIP Growth Portfolio. . . . . . . . . . . $ 84 $136 $174 $310
</TABLE>
- --------------
* These expense figures also apply if the Contract is annuitized for less
than five years.
9
<PAGE>
2. If you annuitize for a period of five years or greater, or do not
surrender the Allegiance Contract, you would pay the following
expenses on a $1,000 investment assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
SUB-ACCOUNTS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
JPVF Growth Portfolio . . . . . . . . . . $ 25 $ 81
JPVF High Yield Bond Portfolio. . . . . . $ 25 $ 79
JPVF International Equity Portfolio . . . $ 29 $ 93
JPVF Balanced Portfolio . . . . . . . . . $ 25 $ 80 $143 $345
JPVF Capital Growth Portfolio . . . . . . $ 28 $ 85 $152 $365
JPVF Domestic Growth Stock Portfolio. . . $ 24 $ 76 $137 $330
JPVF Emerging Growth Portfolio. . . . . . $ 27 $ 86 $154 $369
JPVF Growth and Income Portfolio. . . . . $ 24 $ 77 $138 $334
JPVF Money Market Portfolio . . . . . . . $ 21 $ 69 $124 $301
JPVF World Growth Stock Portfolio . . . . $ 24 $ 77 $138 $334
MFS Research Series . . . . . . . . . . . $ 25 $ 81 $145 $349
MFS Utilities Series. . . . . . . . . . . $ 25 $ 81 $145 $349
Oppenheimer Bond Fund . . . . . . . . . . $ 23 $ 74 $133 $321
Oppenheimer Strategic Bond Fund . . . . . $ 24 $ 76 $137 $330
VIP Equity-Income Portfolio . . . . . . . $ 21 $ 68 $122 $296
VIP II Contrafund Portfolio . . . . . . . $ 22 $ 73 $131 $316
VIP II Index 500 Portfolio. . . . . . . . $ 18 $ 58 $105 $256
VIP Growth Portfolio. . . . . . . . . . . $ 22 $ 71 $128 $310
</TABLE>
The above tables are intended to assist you in understanding the costs and
expenses that will be borne, directly or indirectly, by Premium Payments
allocated to the Separate Account. These include the expenses of the underlying
Funds. (See "Charges and Deductions," p. 27, and the prospectus for each
underlying Fund.) In addition to the expenses listed above, Premium Taxes may be
applicable.
These examples reflect the Annual Administrative Fee as an annual charge of
.01% of assets, based on an anticipated average Contract Value of $30,000.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Separate Account. The data should be read in conjunction with
the financial statements, related notes, and other financial information
included in the Statement of Additional Information.
The following table sets forth certain information regarding the Variable
Subaccounts for a Contract since the commencement of business operations on
February 28, 1996.
10
<PAGE>
The Accumulation Unit values and the number of Accumulation Units
outstanding for each Variable Subaccount for each of the periods indicated are
as follows:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
JPVF Money Market Sub-account*
Accumulation unit value
- - Beginning of period $ 1.027 1.000
- - End of period $ 1.062 1.027
Number of accumulation units
- - End of period 1,023,738 480,732
- -------------------------------------------------------------------------------
JPVF Balanced Sub-account*
Accumulation unit value
- - Beginning of period $ 10.801 10.000
- - End of period $ 12.910 10.801
Number of accumulation units
- - End of period 104,886 27,907
- -------------------------------------------------------------------------------
JPVF Growth & Income Sub-account*
Accumulation unit value
- - Beginning of period $ 9.975 10.000
- - End of period $ 12.477 9.975
Number of accumulation units
- - End of period 105,759 40,125
- -------------------------------------------------------------------------------
JPVF Capital Growth Sub-account*
Accumulation unit value
- - Beginning of period $ 11.844 10.000
- - End of period $ 14.527 11.844
Number of accumulation units
- - End of period 142,456 53,999
- -------------------------------------------------------------------------------
JPVF Emerging Growth Sub-account*
Accumulation unit value
- - Beginning of period $ 10.344 10.000
- - End of period $ 12.469 10.344
Number of accumulation units
- - End of period 132,225 88,358
- -------------------------------------------------------------------------------
JPVF World Growth Stock Sub-account*
Accumulation unit value
- - Beginning of period $ 10.985 10.000
- - End of period $ 11.179 10.985
Number of accumulation units
- - End of period 123,760 101,024
- -------------------------------------------------------------------------------
Oppenheimer Bond Sub-account*
Accumulation unit value
- - Beginning of period $ 10.223 10.000
- - End of period $ 10.915 10.223
Number of accumulation units
- - End of period 151,322 10,568
- -------------------------------------------------------------------------------
</TABLE>
Note: No condensed financial information is available for the eleven new
Sub-accounts added to the Contract as of January 1, 1998.
* On December 5, 1997, the Company substituted shares of various Portfolios of
the Jefferson Pilot Variable Fund, Inc. and the Oppenheimer Bond Fund for the
then existing shares of the Alexander Hamilton Variable Insurance Trust and
the Federated Prime Money Fund II.
11
<PAGE>
RIGHT TO EXAMINE CONTRACT
You have a limited time period in which to return a Contract for
cancellation and a refund as set forth in your Contract. The applicable period
will depend on the state in which the Contract is issued. In most states it is
10 days after the Contract is delivered to you. For a Contract issued as a
replacement for another contract, the period is 20 days. The Company will
refund, as provided in the Contract and depending on the state in which the
Contract is issued, either (i) the Contract's Accumulation Value without
reduction for the contingent deferred sales charge or administrative charges
that would otherwise apply or (ii) all Premium Payments less any Partial
Withdrawals.
For Contracts requiring a refund of Premium Payments, the Company will
allocate any Premium Payments made prior to the expiration of the free look
period (plus 5 days to allow for mailing time) to the JPVF Money Market
Sub-account. Five days after the expiration of the free look period, the Premium
Payments will be allocated to the Variable Sub-accounts in accordance with the
directions set forth in your application.
In order to cancel the Contract you must deliver or mail a written notice
to the Company's Variable Annuity Service Center or the registered
representative from whom it was purchased and return the Contract. Notice of
cancellation given by mail and return of the Contract are effective upon being
postmarked, properly addressed and postage paid. The Contract will then be void
as if it had never been issued.
FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN THE CONTRACT
If you are a natural person, there should be no federal income tax on
increases in the Contract Value (if any) until a distribution under the Contract
occurs (E.G., a Partial Withdrawal, Surrender, or Annuity Payment) or is deemed
to occur (E.G., a pledge or assignment of a Contract). Generally, a portion of
any distribution or deemed distribution will be taxable as ordinary income. The
taxable portion of certain distributions may be subject to withholding. In
addition, a penalty tax may apply to certain distributions or deemed
distributions under the Contract. (See "Certain Federal Income Tax
Consequences," p. 31.) You should consult your tax advisor before initiating a
distribution.
INQUIRIES AND WRITTEN NOTICES AND REQUESTS
Any questions about procedures or the Contract, or any Request required to
be directed to the Company, should be sent to the Company's Variable Annuity
Service Center: P.0. Box 515, Concord, New Hampshire 03302-0515 or faxed to
603-226-5123. Telephone requests and inquiries may be made by calling
1-800-289-1776. All inquiries and Requests should include the Contract number,
your name and the Annuitant's name and should be signed by you.
VARIATIONS IN CONTRACT PROVISIONS
Certain provisions of the contracts may vary from the descriptions in this
Prospectus in order to comply with different state laws. Any such variations
will be included in the Contract itself or in riders or endorsements.
* * *
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS, IN THE STATEMENT OF ADDITIONAL
INFORMATION, IN THE PROSPECTUS FOR EACH OF THE UNDERLYING FUNDS AND IN THE
CONTRACT, ALL OF WHICH SHOULD BE REFERRED TO FOR MORE DETAILED INFORMATION. THIS
PROSPECTUS GENERALLY DESCRIBES ONLY THE CONTRACT AND THE SEPARATE ACCOUNT.
SEPARATE PROSPECTUSES ATTACHED HERETO DESCRIBE EACH FUND.
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
The Company, 100 N. Greene St., Greensboro, North Carolina 27401,
is a stock life insurance company. It was incorporated under the laws of
Michigan on October 31, 1963. It is principally engaged in the sale of life
insurance and annuities, and is licensed in Canada, the District of Columbia,
and all states except New York. As of December 31, 1997, the Company had assets
of over $9.3 billion on a GAAP basis. The Company is wholly-owned by
Jefferson-Pilot Corporation, a $23.1 billion asset company based in Greensboro,
North Carolina. Jefferson-Pilot Corporation is in the insurance business through
Jefferson-Pilot Life Insurance Company and Jefferson Pilot Financial Insurance
Company ("JP Financial"), and in the communications business through television
and radio stations. The obligations under the Contracts are obligations of the
Company.
For more information about the Company, see "Additional Information About
the Separate Account," p. 36.
12
<PAGE>
INVESTMENT OPTIONS
Premium Payments paid under a Contract may be allocated to the 18 Variable
Sub-accounts of the Separate Account, to the two Interest Rate Guarantee Periods
of the Capital Developer Account, or to a combination of these Investment
Options. These Investment Options may not be available in all states. However,
over the life of your Contract, you are currently limited to allocating your
Premium Payments to no more than 16 of the Variable Sub-accounts in existence
now or in the future. The Company reserves the right to modify this limitation
in the future. THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE FOR ANY PREMIUM
PAYMENTS OR AMOUNTS ALLOCATED TO ANY VARIABLE SUB-ACCOUNT.
THE SEPARATE ACCOUNT
ALEXANDER HAMILTON VARIABLE ANNUITY SEPARATE ACCOUNT. The Alexander
Hamilton Variable Annuity Separate Account of Alexander Hamilton Life Insurance
Company of America (the "Separate Account") was established as a separate
investment account under the laws of the State of Michigan on January 24, 1994.
The Separate Account receives and invests the Net Premium Payments under the
Contracts that are allocated to it for investment in shares of one or more
mutual fund portfolios.
The Separate Account currently is divided into 18 Variable Sub-accounts.
Additional Variable Sub-accounts may be established in the future at the
discretion of the Company, and the Company reserves the right to add or remove
Variable Sub-accounts. Currently, each Variable Sub-account invests in
corresponding shares of the Jefferson Pilot Funds, VIP Funds, the MFS Funds, and
the Oppenheimer Funds. On December 5, 1997, the Company and the Separate
Account, pursuant to an Order issued by the Securities and Exchange Commission,
substituted shares of the various investment portfolios of the Jefferson Pilot
Funds and of the Oppenheimer Bond Fund of Oppenheimer Variable Account Funds for
shares of various investment funds of the Alexander Hamilton Variable Insurance
Trust and the Federated Prime Money Fund II of Federated Insurance Series. The
assets of the Separate Account are owned by the Company. Under Michigan
insurance regulations, an insurer issuing contracts on a variable basis shall
maintain in each separate account assets having a value equal to the reserves
and other reasonable liabilities and obligations with respect to the account,
and a separate account shall not be charged with liabilities arising out of
other separate accounts or out of other business of the insurer unless the
liabilities have a specific and determinable relation to or dependence upon the
separate account. The Company reserves the right to transfer assets of the
Separate Account in excess of the reserves and other Contract liabilities with
respect to the Separate Account to the Company's general account. The income, if
any, and gains or losses realized or unrealized on each Variable Sub-account are
credited to or charged against that Variable Sub-account without regard to other
income, gains or losses of the Company. Therefore, the investment performance of
any Variable Sub-account should be entirely independent of the investment
performance of the Company's general account assets or any other separate
account maintained by the Company. You bear the entire investment risk with
respect to the Contract Value allocated to the Separate Account, and the
Separate Account Value could be more or less than the Net Premium Payments
allocated to and transfers into the Separate Account.
The Separate Account is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940 Act")
as a unit investment trust. It meets the definition of a "separate account"
under the Federal securities laws. However, the SEC does not supervise the
management or the investment practices or policies of the Separate Account or of
the Company.
When required by law or regulation, an investment objective of the Separate
Account may be changed. It will only be changed if approved by the appropriate
insurance official of the State of Michigan or deemed approved in accordance
with such law or regulation. If so required, the request to obtain such approval
will be filed with the insurance official of the state or the district in which
the Contract is delivered.
THE SUB-ACCOUNTS
Eighteen Variable Sub-accounts, each of which reflects the investment
performance of a specific underlying Fund, are available under the Contracts.
All Sub-accounts may not be available in all states. Ten Sub-accounts invest in
shares of the Jefferson Pilot Funds, four Sub-accounts invest in shares of the
VIP Funds, two Sub-accounts invest in shares of the MFS Funds and two
Sub-accounts invest in shares of the Oppenheimer Funds. JPVF, the VIP Trusts,
MFS Variable Insurance Trust and Oppenheimer Variable Account Funds are open-end
management investment companies and, with the exception of the MFS Utilities
Fund, all of the Funds available under the Contracts are diversified. Each Fund
is managed by a registered investment adviser.
13
<PAGE>
The investment adviser for JPVF is Jefferson Pilot Investment Advisory
Corporation (formerly known as "Chubb Investment Advisory Corporation"), One
Granite Place, Concord, New Hampshire, 03301. Jefferson Pilot Investment
Advisory Corporation has contracted with eight unaffiliated companies, Templeton
Global Advisors, Limited, Pioneering Management Corporation, Janus Capital
Corporation, Warburg Pincus Asset Management Inc. (formerly known as "Warburg,
Pincus Counsellors, Inc."), Lombard Odier International Portfolio Management,
Limited, J.P. Morgan Investment Management Inc., Strong Capital Management, Inc.
and Massachusetts Financial Services Company to act as sub-investment managers
to the Jefferson Pilot Funds.
The investment adviser for the VIP Trusts is Fidelity Management & Research
Company ("Fidelity Management"), 82 Devonshire Street, Boston, Massachusetts.
For certain of the VIP Funds Fidelity Management has entered into sub-advisory
agreements with affiliated companies.
The investment adviser for the MFS Variable Insurance Trust is
Massachusetts Financial Services Company ("MFS").
The investment adviser for the Oppenheimer Variable Account Funds is
OppenheimerFunds, Inc.
14
<PAGE>
The investment objective of each Fund is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIO CHOICES
- ------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JPVF Growth Capital growth by investing primarily in equity securities Strong Capital
Portfolio that the Sub-Investment Manager believes have above- Management, Inc.
average growth prospects.
- ------------------------------------------------------------------------------------------------------------------------
JPVF Long-term growth of capital through investments in Lombard Odier
International securities whose primary trading markets are outside the International
Equity Portfolio United States. Portfolio
Management Limited
- ------------------------------------------------------------------------------------------------------------------------
JPVF Capital Seeks capital growth. Realization of income is not a Janus Capital
Growth significant investment consideration and any income Corporation
Portfolio realized will be incidental.
- ------------------------------------------------------------------------------------------------------------------------
JPVF Domestic Reasonable income and growth of capital by investing Pioneering
Growth Stock primarily in a diversified portfolio of equity securities Management
Portfolio issued by companies organized in the U.S. and considered Corporation
by the Sub-Investment Manager to be undervalued in light
of the company's earning power and growth potential.
- ------------------------------------------------------------------------------------------------------------------------
JPVF Emerging Long-term growth of capital. Dividend and interest MFS
Growth income from portfolio securities, if any, is incidental to
Portfolio the Portfolio's investment objective of long-term growth.
- ------------------------------------------------------------------------------------------------------------------------
JPVF World Long-term capital growth through a policy of investing Templeton Global
Growth primarily in stocks of companies organized in the U.S. or Advisors, Limited
Stock Portfolio 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.
- ------------------------------------------------------------------------------------------------------------------------
MFS Research Seeks to provide long-term growth of capital and future MFS
income.
- ------------------------------------------------------------------------------------------------------------------------
MFS Utilities Seeks capital growth and current income (income above MFS
that available from a portfolio invested entirely in equity
securities).
- ------------------------------------------------------------------------------------------------------------------------
VIP Growth Seeks to achieve capital appreciation. Fidelity Management
- ------------------------------------------------------------------------------------------------------------------------
VIP II Seeks long-term capital appreciation. Fidelity Management
Contrafund
- ------------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Seeks investment results that correspond to the total Fidelity Management
return of common stocks publicly traded in the United
States, as represented by the S&P 500.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
EQUITY AND FIXED-INCOME PORTFOLIO CHOICES
- ------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
<S> <C> <C>
JPVF Balanced Reasonable current income and long-term capital growth, J.P. Morgan
Portfolio consistent with conservation of capital, by investing Investment
primarily in common stocks and fixed income securities. Management Inc.
- ------------------------------------------------------------------------------------------------------------------------
JPVF Growth and Long-term growth of capital by investing primarily in a Warburg Pincus Asset
Income Portfolio wide range of equity issues that may offer capital Management, Inc.
appreciation and, secondarily, to seek a reasonable level
of current income.
- ------------------------------------------------------------------------------------------------------------------------
VIP Equity- Seeks reasonable income by investing primarily in Fidelity Management
Income income-producing equity securities. In choosing these
securities the fund will also consider the potential for
capital appreciation. The fund's goal is to achieve a yield
which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of
500 Stocks (S&P 500).
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
FIXED-INCOME PORTFOLIO CHOICES
- ------------------------------------------------------------------------------------------------------------------------
Fund Name Objective Manager
- ------------------------------------------------------------------------------------------------------------------------
JPVF High High level of current income by investing primarily in MFS
Yield Bond corporate obligations with emphasis on higher yielding,
Portfolio higher risk, lower-rated or unrated securities.
Capital growth, if any, is a consideration incidental to the
primary objective of high current income.
- ------------------------------------------------------------------------------------------------------------------------
JPVF Money Seeks to achieve as high a level of current income as is MFS
Market consistent with preservation of capital and liquidity.
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer High level of current income by investing primarily in a OppenheimerFunds,
Bond Fund diversified portfolio of high yield fixed-income securities. Inc.
As a secondary objective, to seek capital growth when
consistent with its primary objective.
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Seeks a high level of current income principally derived OppenheimerFunds.
Strategic Bond from interest on debt securities and to enhance such Inc.
Fund income by writing covered call options on debt securities.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
AN INVESTMENT IN THE JPVF MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT OR THE FDIC OR ANY OTHER AGENCY.
* * *
THERE IS NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS STATED OBJECTIVE. More
detailed information, including a description of each Fund's investment
objective and policies and a description of risks involved in investing in each
of the Funds and of each Fund's fees and expenses is contained in the prospectus
for each Fund. With regard to the JPVF High Yield Bond Portfolio and other Funds
investing in higher yielding, higher risk, lower-rated or unrated securities,
please consult the appropriate section of the corresponding prospectus for a
description of the risks associated with such investments.
16
<PAGE>
Current copies of such prospectuses are attached to this Prospectus. INFORMATION
CONTAINED IN EACH FUND'S PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ALLOCATING
PREMIUM PAYMENTS OR TRANSFERRING CONTRACT VALUE TO A VARIABLE SUB-ACCOUNT OF THE
SEPARATE ACCOUNT.
THE CAPITAL DEVELOPER ACCOUNT
PREMIUM PAYMENTS ALLOCATED TO THE CAPITAL DEVELOPER ACCOUNT AND TRANSFERS
TO THE CAPITAL DEVELOPER ACCOUNT ARE NOT PART OF THE SEPARATE ACCOUNT. RATHER,
THE CAPITAL DEVELOPER ACCOUNT IS GUARANTEED BY THE GENERAL ACCOUNT OF THE
COMPANY, WHICH SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF EXEMPTIVE
AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE CAPITAL DEVELOPER ACCOUNT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1993 ACT") NOR IS THE CAPITAL
DEVELOPER ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940 (1940 ACT"). ACCORDINGLY, NEITHER THE CAPITAL DEVELOPER
ACCOUNT NOR ANY INTERESTS THEREIN GENERALLY ARE SUBJECT TO THE PROVISIONS OF THE
1933 OR 1940 ACTS AND THE COMPANY HAS BEEN ADVISED THAT THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS
PROSPECTUS WHICH RELATE TO THE CAPITAL DEVELOPER ACCOUNT. DISCLOSURES REGARDING
THE CAPITAL DEVELOPER ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
Within the Capital Developer Account, the Company currently offers two
Interest Rate Guarantee Periods, lasting for one and seven years. Both provide
for fixed accumulations at a specified Guaranteed Interest Rate on Premium
Payments allocated to, and amounts transferred to, the Capital Developer
Account. Amounts allocated to the Capital Developer Account may be subject to a
Market Value Adjustment upon a Surrender, Partial Withdrawal, Transfer or
annuitization requested more than 30 days prior to the end of the Interest Rate
Guarantee Period. The Market Value Adjustment will never reduce the return on
amounts allocated to the Capital Developer Account to less than 3% per year
before any applicable Surrender Charge. Because of this adjustment and for other
reasons, the amount payable upon Partial Withdrawal or Surrender or applied to a
transfer or annuitization may be more or less than the Capital Developer Account
Value at the time of transaction.
Premium Payments will be allocated to the Interest Rate Guarantee Periods
to the extent elected by the Contract Owner at the time of the initial Premium
Payment or as subsequently elected. In addition, all or part of the Separate
Account Value may be transferred to one or more of the Interest Rate Guarantee
Periods prior to Maturity Date.
Contract Value in the Interest Rate Guarantee Periods will not share in the
investment performance of the Company's general account or any portion thereof.
Instead, the Company will pay a specified rate of interest, the Guaranteed
Interest Rate, for each Interest Rate Guarantee Period. The interest rate
credited to each Interest Rate Guarantee Period will vary in the sole discretion
of the Company, but it will never be less than 3% annually. There is no specific
formula for the determination of the Guarantee Interest Rate. Some of the
factors that the Company may consider in determining the Guaranteed Interest
Rate are: general economic trends; rates of return currently available and
anticipated on the Company's investments; expected investment yields; regulatory
and tax requirements; and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE INTEREST RATE GUARANTEE PERIODS WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. The Company resets this rate periodically. It
currently resets the rate bi-weekly, but in the future the rate may be reset
more or less frequently. Due to the Market Value Adjustment and Surrender
Charge, the Contract Owner assumes the risk that the Surrender Value of amounts
allocated to the Capital Developer Account (or the proceeds of a transfer or
amount annuitized) will be less than the Capital Developer Account Value.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Company's Board of Directors has set no
limitations.
SURRENDERS, PARTIAL WITHDRAWALS, TRANSFERS, AND ANNUITIZATIONS OF CAPITAL
DEVELOPER ACCOUNT VALUE FROM AN INTEREST RATE GUARANTEE PERIOD MAY BE SUBJECT TO
A MARKET VALUE ADJUSTMENT (AS WELL AS A SURRENDER CHARGE. THEREFORE, THE NET
AMOUNT YOU RECEIVE MAY BE LESS THAN THE AMOUNT REQUESTED FOR WITHDRAWAL,
TRANSFER OR SURRENDER. (SEE "SURRENDER CHARGE, "P. 27 AND "MARKET VALUE
ADJUSTMENT," P. 28.)
17
<PAGE>
The Company will invest the assets that support the Capital Developer
Account in those assets chosen by the Company and allowed by applicable state
laws regarding the nature and quality of investment that may be made by life
insurance companies and the percentage of their assets that may be committed to
any particular type of investment. In general, these laws permit investments,
within specified limits and subject to certain qualifications, in federal, state
and municipal obligations, corporate bonds, preferred and common stocks, real
estate mortgages, real estate and certain other investments.
THE ALLEGIANCE VARIABLE ANNUITY CONTRACT
The Allegiance Variable Annuity Contract (the "Contract") is an individual
Flexible Premium Multi-Funded Deferred Variable Annuity Contract. The Contract
may be purchased on a non-qualified basis ("Non-qualified Contract"). The
Contract may also be purchased in connection with retirement plans or individual
retirement accounts that qualify for favorable federal income tax treatment
("Qualified Contract").
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE UNDER THE CONTRACT, SO
THE AMOUNT RECEIVED ON SURRENDER COULD BE LESS THAN THE AMOUNT OF PREMIUM
PAYMENTS. HOWEVER AMOUNTS ALLOCATED TO THE CAPITAL DEVELOPER ACCOUNT ARE
GUARANTEED TO EARN A MINIMUM RATE OF INTEREST OF AT LEAST THREE PERCENT PER YEAR
BEFORE ANY APPLICABLE SURRENDER CHARGE.
CONTRACT APPLICATION AND ISSUANCE OF CONTRACTS
Before it will issue a Contract, the Company must receive a completed
Application and an initial Premium Payment of at least $2,000 (although a lower
minimum may apply to certain Qualified Contracts). The initial Premium Payment
can be made in a single payment or by twelve equal systematic payments over the
first 12 Contract Months. The systematic payments must be made via automatic
debits or automated clearing house transfers from a checking or savings account.
The Company reserves the right to reject any Application or Premium Payment. For
a Non-qualified Contract, the Contract Owner (or the Annuitant, if different
than the Contract Owner) must be age 90 or younger. The Contract Owner (who
generally must also be the Annuitant for Qualified Contracts) must be age 80 or
younger for certain types of Qualified Contracts. The Contract is not available
in all states.
If the Application is properly completed and can be accepted in the form
received, the initial Net Premium Payment will be credited to the Contract Value
within 2 business days after the later of receipt of the Application or receipt
of the initial Premium Payment at the Company's Administrative Service Center.
(The Net Premium Payment is the total Premium Payment less any applicable
Premium Tax.) If the initial Net Premium Payment allocated to the Separate
Account cannot be credited because the Application or other issuing requirements
are incomplete, the applicant will be contacted within 5 business days and given
an explanation for the delay, and the initial Premium Payment will be returned
at that time unless the applicant consents to the Company's retaining the
initial Premium Payment and crediting it as soon as the necessary requirements
are fulfilled. In that event, the initial Net Premium Payment will be credited
to the Contract Value within 2 business days of the Application's completion.
The Contract will become effective on the date the initial Net Premium
Payment is credited to the Contract Value.
PREMIUM PAYMENTS
All Premium Payments, checks, or electronic fund transfers should be made
payable to Alexander Hamilton Life Insurance Company of America and sent to the
Company's Administrative Service Center. Receipts will be provided upon request.
A confirmation of each transaction will be provided. Premium Payments may be
made directly by the Contract Owner on a flexible basis, through the systematic
investment program, on a monthly or quarterly basis, or through a group billing
or payroll deduction arrangement on a periodic basis.
18
<PAGE>
INITIAL PREMIUM PAYMENT. 'The minimum initial Premium Payment is currently
$2,000 (although a lower minimum may apply to certain Qualified Contracts).
However, the minimum initial premium can be made in 12 equal monthly payments
when a Contract Owner has elected the systematic investment program for
additional premiums to be automatically withdrawn monthly from the Contract
Owner's bank account or when an applicant is part of a periodic group billing or
payroll deduction arrangement. The Company reserves the right to increase or
decrease this amount for Contracts issued after some future date. The initial
Premium Payment is the only Premium Payment required to be paid under a
Contract. The maximum initial Premium Payment that the Company will currently
accept without its prior approval is $1,000,000.
ADDITIONAL PREMIUM PAYMENTS. Prior to the Maturity Date and before a Death
Benefit has become payable, you may make additional Premium Payments at any
interval. The minimum additional Premium Payment under the Contract is $50. The
Company reserves the right to limit the dollar amount of any additional Premium
Payments. Cumulative Premium Payments under the Contract may not exceed
$1,000,000 without the prior approval of the Company. Additional Premium
Payments will be credited to Contract Value as of the Valuation Period during
which they are received by the Company at its Administrative Service Center.
ALLOCATION OF PREMIUM PAYMENTS. Premium Payments will be allocated among
the 18 Variable Sub-accounts as specified by you in the Application. (If you
fail to specify how Premium Payments are to be allocated, the Application cannot
be accepted). You must allocate Premium Payments to one or more Variable
Sub-accounts of the Separate Account or to one or more Interest Rate Guarantee
Periods, or some combination thereof in whole percentages (totaling 100%). Any
allocation to a Variable Sub-account must be at least $50 and in increments of
5% of a Premium Payment. Any allocation to an Interest Rate Guarantee Period of
the Capital Developer Account must be at least $1,000. Premium Payments
allocated to an Interest Rate Guarantee Period will be credited with interest
from the day after they are received.
The allocation specified in the Application will continue to be used for
additional Premium Payments unless you request a change of allocation. You may
change the allocation instructions for Net Premium Payments any time before the
Maturity Date by Request to the Company's Administrative Service Center. You
must specify your new allocation choices. The allocation change will apply to
Premium Payments received with or after the Request.
PAYMENT NOT HONORED BY BANK. Any payment due under the Contract which is
derived, all or in part, from any amount paid to the Company by check or draft
may be postponed until such time as the Company determines that such instrument
has been honored.
CONTRACT VALUE
On the Contract Date, the Contract Value equals the initial Net Premium
Payment. Thereafter, on any day on or before the Maturity Date, the Contract
Value equals the sum of the Separate Account Value and the Capital Developer
Account Value. The Contract Value will increase by (1) any additional Premium
Payments received by the Company; (2) any increases in the Contract Value due to
investment results of the selected Variable Sub-accounts; (3) interest credited
to the Capital Developer Account; and (4) any positive Market Value Adjustments.
The Contract Value will decrease by (1) any Partial Withdrawals or Full
Surrenders, including applicable charges; (2) any decreases in the Contract
Value due to investment results of the selected Variable Sub-accounts; (3) the
Mortality and Expense Risk Charge, the Administrative Expense Charge, any
applicable Transfer Charge, and, on the last day of any Contract Year, the
Annual Administrative Fee; (4) any negative Market Value Adjustment; and (5)
taxes, when applicable. The Company will inform you of your Contract Value upon
request.
The Contract Value is expected to change from Valuation Period to Valuation
Period. A Valuation Period is the period between successive Valuation Days. A
Valuation Day is any day that the New York Stock Exchange is open for trading.
Holidays are generally not Valuation Days.
THE SEPARATE ACCOUNT VALUE. When a Net Premium Payment is allocated or an
amount is transferred to a Variable Sub-account, it is credited to the Separate
Account Value in the form of Accumulation Units. Each Variable Sub-account has a
distinct Accumulation Unit value. The number of units credited is determined by
dividing the portion of the Net Premium Payment or amount transferred by the
dollar value of one Accumulation Unit of the Variable Sub-account as of the end
of the Valuation Period during which the allocation or transfer is made. When
amounts are transferred out of, or withdrawn or surrendered from, a Variable
Sub-account, Accumulation Units are cancelled or redeemed in a similar manner.
19
<PAGE>
The Separate Account Value will be determined on every Valuation Day. For
each Variable Sub-account, the Accumulation Unit value for a given Valuation
Period is based on the net asset value of a share of the corresponding Fund.
Therefore, the Accumulation Units will fluctuate in value from day to day based
on the investment experience of the corresponding Fund and the Separate Account
Value will increase or decrease to reflect the investment performance of the
corresponding Fund. The Separate Account Value also reflects expenses borne by
the Fund(s) and the deduction of certain charges. The determination of Variable
Sub-account Accumulation Unit values is described in detail in the Statement of
Additional Information.
THE CAPITAL DEVELOPER ACCOUNT VALUE. When a Net Premium Payment is
allocated or an amount is transferred to an Interest Rate Guarantee Period, it
is credited to a new Interest Rate Guarantee Period. (See "The Capital Developer
Account," p. 16.) In addition, interest at specified interest rates is credited
to the Capital Developer Account Value. When amounts are surrendered or
withdrawn from, transferred out of, or annuitized from an Interest Rate
Guarantee Period, the Capital Developer Account Value is reduced accordingly,
and it may also be increased or decreased by any Market Value Adjustment. (See
"Market Value Adjustment," p. 28.) Unlike the Separate Account, there are no
Accumulation Units in the Capital Developer Account.
MINIMUM CONTRACT VALUE. A minimum Contract Value of $2,000 for
Non-qualified Contracts must be maintained during the Accumulation Period. If
you fail to maintain the minimum Contract Value and no Premium Payments have
been made in the past two years, then the Company may, upon ninety (90) days
notice forwarded to your most current address given us, cancel the Contract and
return the Contract Value less any applicable fees to you in one lump sum. If
you make sufficient Premium Payments to restore the Contract Value to at least
the minimum Contract Value within 90 days of the date of notice, the Contract
will not be cancelled.
TRANSFERS
You can transfer Contract Value to or from Interest Rate Guarantee Periods
of the Capital Developer Account and/or any Variable Sub-account of the Separate
Account, within certain limits, as described below. The Company reserves the
right to restrict the transfer privilege in any way. A Request for a transfer,
made by you, must be received at the Company's Administrative Service Center
before a transfer will be effected.
The Company reserves the right to defer transfers among Variable
Sub-accounts or to the Capital Developer Account as permitted by the Investment
Company Act of 1940, as amended. Such delay may occur because (i) the New York
Stock Exchange is closed for trading (other than usual weekend or holiday
closing); (ii) the SEC determines that a state of emergency exists; or (iii) an
order or pronouncement of the SEC permits a delay for your protection.
TRANSFERS DURING THE ACCUMULATION PERIOD are subject to the following
provisions:
- There is no limit to the number of transfers that can be made. No fee is
imposed on the first 15 transfers in each Contract Year during the
Accumulation Period, but a fee equal to $10 may be imposed for each
transfer in excess of 15 during any Contract Year. Although the Company
reserves the right to impose the $10 fee, it currently has no plans to
do so.
- Transfers from an Interest Rate Guarantee Period that are made within 30
days of the end of the Interest Rate Guarantee Period are not subject to
a Market Value Adjustment. All other transfers from Interest Rate
Guarantee Periods are subject to a Market Value Adjustment.
- If, after a transfer, the remaining Contract Value in the Variable
Sub-account from which the transfer was made would be less than $250,
the Company may include that remaining Contract Value as part of the
transfer.
- The minimum amount you may transfer among the Variable Sub-accounts is
$250 or the entire Contract Value remaining in the Investment Option.
The minimum amount that may be transferred to or from an Interest Rate
Guarantee Period of the Capital Developer Account is $1,000.
20
<PAGE>
DURING THE ANNUITY PERIOD, under any Variable Annuity Option, you (whether
you are the Annuitant or not) may transfer Separate Account Value among Variable
Sub-accounts, subject to the following provisions:
- There is no limit to the number of transfers that can be made. No fee is
imposed on the first 15 transfers in each Contract Year during the
Annuity Period, but there may be a charge of $10 for each transfer in
excess of 15 during any Contract Year. The Company reserves the right to
charge the fee, however, it currently has no plans to do so. The Company
will provide at least 30 days notice of its intention to impose such
fee.
- If, after a transfer, the remaining Separate Account Value in the
Variable Sub-account from which the transfer was made is less than $250,
the Company may include that remaining Separate Account Value as part of
the transfer.
- The minimum amount you may transfer from a Variable Sub-account is $250
or the entire Contract Value remaining in the Variable Sub-account.
Transfers between Variable Sub-accounts during the Annuity Period will be
processed based on the formula outlined in the Statement of Additional
Information (see "Annuity Period Transfer Formulas").
NO TRANSFERS OF AMOUNTS APPLIED TO A FIXED ANNUITY OPTION ARE PERMITTED.
TELEPHONE TRANSFERS AND REALLOCATIONS. You or your authorized
representative may request transfers by telephone of Contract Value or
reallocation of Premium Payments (including allocation changes pursuant to
existing Dollar Cost Averaging and Automatic Rebalancing programs), provided
that the appropriate authorization form is on file with the Company. You will be
asked to provide the Company with personal identification information, such as
social security number and date of birth, at the time of such request for
verification purposes. Although procedures have been established that are
reasonably designed to reduce the risk of unauthorized telephone transfers or
allocation changes, there still exists some risk. Neither the Company, Jefferson
Pilot Variable Corporation, nor any of their affiliates are liable for any loss
resulting from unauthorized telephone transfers or allocation changes if the
procedures have been followed, and you bear the risk of loss in such situation.
DOLLAR COST AVERAGING
Under the Dollar Cost Averaging program, if elected, you can instruct the
Company to automatically transfer a specified dollar amount from any Variable
Sub-account or the One Year Interest Rate Guarantee Period of the Capital
Developer Account to the Variable Sub-accounts or the One Year Interest Rate
Guarantee Period. The program is not available in connection with the Seven Year
Interest Rate Guarantee Period of the Capital Developer Account. The automatic
transfers can occur monthly or quarterly, and the amount transferred each time
must be at least $50. At the time the program begins, there must be a minimum
value of $5,000 in the Contract. Automatic transfers from the One Year Interest
Rate Guarantee Period of the Capital Developer Account taken under the Dollar
Cost Averaging program will not be subject to a Market Value Adjustment.
Dollar Cost Averaging, a long-term investment method which provides for
regular, level investments over time, results in the purchase of more
Accumulation Units when the Accumulation Unit Value is low, and fewer
Accumulation Units when the Accumulation Unit Value is high. However, there is
no guarantee that the Dollar Cost Averaging program will result in a higher
Contract Value, protect against loss, or otherwise be successful.
The Dollar Cost Averaging program can be elected when purchasing the
Contract or at a later date. The election can specify that only a certain number
of transfers will be made, in which case the program will terminate when that
number of transfers has been made. Otherwise, the program will terminate when
the amount in the Variable Sub-account or the One Year Interest Rate Guarantee
Period of the Capital Developer Account, as applicable, equals $250 or less.
There is no charge for this program. Transfers made as part of the Dollar Cost
Averaging program do not count toward the 15 free transfers that are permitted
annually under the Contract.
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AUTOMATIC REBALANCING
An automatic rebalancing program is also available to you. This program
provides a method for re-establishing fixed proportions between selected
Variable Sub-accounts on a systematic basis. Under this program, the allocation
between Variable Sub-accounts will be automatically readjusted to the desired
allocation, subject to a minimum of 5% per Variable Sub-account, on a quarterly
or annual basis. Transfers made as a result of this program do not count toward
the 15 free transfers that are permitted annually under the Contract. This
program does not guarantee profits nor protect against losses.
You may not elect to have Dollar Cost Averaging and Automatic Rebalancing
at the same time. The applicable authorization form must be on file at the
Company before either program may begin. The Company reserves the right to
modify the terms and conditions of these programs upon 30 days advance notice to
contract owners.
DISTRIBUTIONS UNDER THE CONTRACT
SURRENDERS AND PARTIAL WITHDRAWALS
Prior to the Maturity Date, you may surrender all (a "Surrender" or "Full
Surrender") or withdraw a portion (a "Partial Withdrawal") of the Surrender
Value in exchange for a cash payment from the Company by sending a Request,
signed by you, to the Company's Administrative Service Center. The Surrender
Value is the Contract Value plus or minus any Market Value Adjustment minus any
applicable Surrender Charge, Annual Administrative Fee, and any applicable
Premium Taxes. THERE IS NO MINIMUM OR GUARANTEED SURRENDER VALUE FOR AMOUNTS
ALLOCATED OR TRANSFERRED TO THE VARIABLE SUB-ACCOUNTS OF THE SEPARATE ACCOUNT.
The proceeds payable upon a Partial Withdrawal will be the Partial
Withdrawal amount requested, increased or decreased by applicable Market Value
Adjustment and then decreased by any applicable Surrender Charge. For Partial
Withdrawals, you must specify the Investment Option from which the withdrawal
should be taken; otherwise we will prorate the amount based on your current
Contract Value allocation.
No Market Value Adjustment is imposed on Surrenders or Partial Withdrawals
made from an Interest Rate Guarantee Period during the last 30 days of the
Interest Rate Guarantee Period.
The minimum amount that can be withdrawn is $250 ($1,000 from any
Guaranteed Interest Period of the Capital Developer Account) unless the Company
agrees otherwise or unless a smaller amount is required to comply with the Code.
Qualified Contracts may be subject to required minimum distribution
requirements. (See "Certain Federal Income Tax Consequences," p. 31.) In
addition, following any Partial Withdrawal, the remaining Contract Value must be
at least $2,000. If the processing of a Partial Withdrawal request would result
in a remaining Contract Value of less than $2,000, the Company may treat the
Partial Withdrawal request as a request for a Full Surrender of the Contract,
and you will receive the Surrender Value. Following payment of the Surrender
Value, the Contract will be cancelled. If the amount requested to be withdrawn
or surrendered from an Investment Option is greater than the Contract Value of
that Investment Option, the Company will pay you the entire Contract Value of
that Investment Option, plus or minus any Market Value Adjustment, minus any
Surrender Charge and minus any Annual Administrative Fee and any charge for
applicable Premium Taxes that may apply.
The Separate Account Value remaining in any Variable Sub-account
immediately following a Partial Withdrawal must be at least $250. The Capital
Developer Account Value remaining in an Interest Rate Guarantee Period
immediately following a Partial Withdrawal must be at least $1,000. If the
processing of a withdrawal request would result in Separate Account Value
remaining in a Variable Sub-account of less than $250 or Capital Developer
Account Value remaining in an Interest Rate Guarantee Period of less than
$1,000, the Company may treat the withdrawal request as a request for withdrawal
of the entire Separate Account Value remaining in the relevant Variable
Sub-account or the entire Capital Developer Account Value remaining in the
relevant Interest Rate Guarantee Period.
You may Surrender the Contract at any time prior to the Maturity Date by
sending a Request to the Company at its Administrative Service Center. After the
Maturity Date, no Surrenders or Partial Withdrawals are permitted. (See "Annuity
Payment Options," p. 23.)
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Withdrawals and Surrenders will be processed using the Separate Account
Value for the Valuation Period during which the Request for Withdrawal or
Surrender is received by the Company at its Administrative Service Center. The
Company will pay all Partial Withdrawals and Full Surrender requests to you or
to any other Payee that you designate within 5 business days (unless you choose
a later date) following receipt by the Company at its Administrative Service
Center of your Request and all requirements necessary to process the request,
except as follows:
- CAPITAL DEVELOPER ACCOUNT -- The Company reserves the right, when
permitted by law, to defer payment of any Partial Withdrawal or Full
Surrender from the Interest Rate Guarantee Periods for up to 6 months.
Interest will be paid on any amount deferred for 30 days or more at a
rate of at least 3.0% per year.
- SEPARATE ACCOUNT - The Company reserves the right to defer the payment
of any Partial Withdrawal or Full Surrender from the Separate Account as
permitted by the Investment Company Act of 1940, as amended. Such delay
may occur because (i) the New York Stock Exchange is closed for trading
(other than usual weekend or holiday closing); (ii) the SEC determines
that a state of emergency exists; or (iii) an order or pronouncement of
the SEC permits a delay for your protection.
In addition, a Premium Payment amount is not available to satisfy a Partial
Withdrawal or Full Surrender until the check or other instrument by which such
Premium Payment was made has been honored.
Since you assume the entire investment risk with respect to Premium
Payments and transfers allocated to the Separate Account, and because Partial
Withdrawals and Surrenders are subject to a Surrender Charge, an Annual
Administrative Fee, and possibly Premium Taxes, THE TOTAL AMOUNT PAID UPON FULL
SURRENDER MAY BE MORE OR LESS THAN THE TOTAL PREMIUM PAYMENTS ALLOCATED TO THE
SEPARATE ACCOUNT (taking any prior Partial Withdrawals into account). Following
a Full Surrender, or at any time Partial Withdrawals reduce the Contract Value
to zero, all of your rights and those of the Annuitant will terminate.
PARTIAL WITHDRAWALS (INCLUDING SYSTEMATIC WITHDRAWALS DESCRIBED BELOW) AND
SURRENDERS MAY BE TAXABLE AND A PENALTY TAX MAY APPLY PRIOR TO AGE 591/2. (SEE
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES," P. 31.)
SYSTEMATIC WITHDRAWAL PLAN
Under the Systematic Withdrawal Plan, you can instruct the Company to make
automatic withdrawal payments to you monthly, quarterly, semi-annually or
annually from a specified Variable Sub-account. The minimum monthly payment is
$250, the minimum quarterly payment is $750, the minimum semi-annual payment is
$1,500, and the minimum annual payment is $3,000, or the amounts can be the
minimum required amounts to comply with qualified plan requirements. The request
for systematic withdrawal must specify a date for the first payment, which must
be at least 30 but not more than 90 days after the form is submitted. The
Surrender Charge will not apply to the first 10% of Contract Value (determined
at the time of the Withdrawal) that is withdrawn during a Contract Year. Amounts
withdrawn in excess of 10% will be subject to any applicable Surrender Charge.
After the seventh Contract Year, amounts withdrawn will no longer be subject to
a Surrender Charge. Systematic Withdrawals may not be taken from the Interest
Rate Guarantee Periods. Systematic Withdrawals may result in certain tax
consequences. (See "Certain Federal Income Tax Consequences," p. 31.)
ANNUITY PAYMENTS
The Company will make Annuity Payments beginning on the Maturity Date,
provided that the Contract is in force on that date. The Annuity Payment Option
and frequency of Annuity Payments may not be changed after Annuity Payments
begin. Unless you specify otherwise, the Payee of the Annuity Payments is the
Annuitant. The dollar amount of the payments will depend on numerous factors
including the Contract Value on the Maturity Date, the type of Annuity and
Annuity Payment Option you elected, the frequency of payments you elected, and
possibly the age of the Annuitant on the Maturity Date.
MATURITY DATE. Initially, you select the Maturity Date at the time the
Application is completed. You may change the Maturity Date from time to time, by
submitting a Request to the Company, provided that notice of each change is
received by the Company's Administrative Service Center at least 30 days prior
to the then-current Maturity Date along with the written consent of any
irrevocable Beneficiaries. The latest Maturity Date which may be elected for a
Non-qualified Contract, unless otherwise consented to by the Company, is the
Annuitant's 85th birthday or the tenth Contract
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anniversary (whichever is later) and for a Qualified Contract, the date the
Annuitant attains age 70 1/2, unless you demonstrate that the minimum required
distribution under the Code is being made. If you do not select a Maturity Date,
the Maturity Date will be the Annuitant's 85th birthday (for a Non-qualified
Contract) or the date the Annuitant attains age 701/2 (for a Qualified
Contrast).
ELECTION OF ANNUITY PAYMENT OPTION. During your lifetime and that of the
Annuitant and prior to the Maturity Date, you may choose an Annuity Payment
Option. You may change the option, but a Request specifying a change of option
and the written consent of any irrevocable Beneficiary must be received by the
Company's Administrative Service Center at least 30 days prior to the Maturity
Date. If no election is made at least 30 days prior to the Maturity Date,
Annuity Payments will be made as an annuity for the Annuitant's life with
Annuity Payments guaranteed for 10 years. (See 'Annuity Payment Options,"
below.) You may not change the Annuity Payment Option after the Maturity Date.
If the Maturity Date is in the first seven Contract Years and if an Annuity
Payment Option of less than five years is elected, then the surrender charge
will be deducted.
If any Contract Owner or the Annuitant (if the owner is a non-natural
person) dies prior to the Maturity Date, the Beneficiary may receive a Death
Benefit. (See "Death Benefit," p. 25.)
TAXES. All or part of each Annuity Payment will be taxable. (See "Certain
Federal Income Tax Consequences," p.31.) The Company may be required by state
law to pay a Premium Tax on the amount of Premiums, on Partial Withdrawals or
Surrenders or on the amount applied to an Annuity Payment Option. The Company
will deduct a charge for the amount of any Premium Taxes when it is required by
law to pay such Premium Taxes.
ANNUITY PAYMENT OPTIONS
The Contract provides four Annuity Payment Options which are described
below. Three of these are offered as EITHER a fixed annuity or a variable
annuity (Option I is only available as a fixed annuity). You may elect a fixed
annuity, a variable annuity, or a combination of both. If you elect a
combination, you must specify what part of the Contract Value is to be applied
to the Fixed and Variable Payment Options. Unless specified otherwise, the
Capital Developer Account Value will be used to provide a fixed annuity and the
Separate Account Value will be used to provide a variable annuity. Variable
Annuity Payments will be based on the Variable Sub-account(s) that you select,
or on the allocation of the Separate Account Value among the Variable
Sub-accounts.
If the amount of the Annuity Payments will depend on the age of the
Annuitant, the Company reserves the right to ask for satisfactory proof of the
Annuitant's age. If Annuity Payments are contingent upon the survival of the
Annuitant, the Company may require evidence satisfactory to it that such
Annuitant is living. The Company may delay making Annuity Payments until
satisfactory proof is received.
On the Maturity Date, the sum of (i) the Capital Developer Account Value
and (ii) the Separate Account Value, plus or minus (iii) any Market Value
Adjustment, minus (iv) any applicable Surrender Charge, minus (v) any Premium
Tax, will be applied to provide for Annuity Payments under the selected Annuity
Payment Option.
The Contract's annuity purchase rates are based on the 1983 Individual
Annuity Mortality Table a with Projection Scale G, with 10 years' projected
mortality improvement and with interest compounded annually at 3%. (The
projection of mortality improvement results in smaller Annuity Payments than you
would receive without this projection.) Unisex tables will be used for Qualified
Contracts (other than IRAs), and sex-distinct tables will be used, where
permitted, for Non-qualified Contracts and IRAs. If you ask, the Company will
provide you with a copy of those annuity purchase rate tables.
A FIXED ANNUITY provides for Annuity Payments which will remain constant
pursuant to the terms of the Annuity Payment Option elected. The effect of
choosing a fixed annuity is that the amount of each payment will be set on the
Maturity Date and will not change. If a fixed annuity is selected, the Separate
Account Value used to provide the fixed annuity will be transferred to the
general assets of the Company, and may become subject to the claims of the
Company's third party creditors. The Annuity Payments will be fixed in amount by
the fixed annuity provisions selected and, for some options, the age of the
Annuitant. The fixed annuity payment amounts are determined by applying the
annuity purchase rate specified in the Contract to the portion of the Contract
Value allocated to the Fixed Annuity Option that you select. However, if the
Company's annuity purchase rates in effect on the Maturity Date would result in
higher Annuity Payments, then those more favorable rates will be used.
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A VARIABLE ANNUITY provides for payments that fluctuate or vary in dollar
amount, based on the investment performance of your selected allocations to one
or more Variable Sub-accounts. The variable annuity purchase rate tables in the
Contract reflect an assumed interest rate of 3.0%, so if the actual net
investment performance of the Variable Sub-account is less than this rate, then
the dollar amount of the actual Variable Annuity Payments will decrease. If the
actual net investment performance of the Variable Sub-account is higher than
this rate, then the dollar amount of the actual Variable Annuity Payments will
increase. If the net investment performance exactly equals the 3.0% rate, then
the dollar amount of the actual Variable Annuity Payments will remain constant.
- - ANNUITY UNITS AND PAYMENTS. The dollar amount of each Variable Annuity
Payment depends on the number of Annuity Units credited to that Annuity
Payment Option and the value of those units. The number of Annuity Units
is determined as follows:
1. The dollar amount of the first payment with respect to each
Variable Sub-account is determined by multiplying the portion of
the Contract Value to be applied to the Variable Sub-account by
the variable annuity purchase rate specified in the Settlement
Option table in the Contract.
2. The number of Annuity Units credited in each Variable Sub-account
is then determined by dividing the dollar amount of the first
payment by the value of one Annuity Unit in that Variable
Sub-account on the Maturity Date.
3. The amount of each subsequent Annuity Payment equals the product
of the Annuitant's number of Annuity Units and the Annuity Unit
values on the payment date. The amount of each payment may vary.
- - ANNUITY UNIT VALUE. The value of the Annuity Units will increase or
decrease on a daily basis to reflect the investment performance of the
applicable Fund. The value of an Annuity Unit in a Variable Sub-account
on any Valuation Day is determined as follows:
1. The value of the Annuity Unit for the Variable Sub-account on the
preceding Valuation Day is multiplied by the Net Investment
Factor for the Valuation Period.
2. The result in (1) is then multiplied by a factor (slightly less
than one) to compensate for the interest assumption built into
the variable annuity purchase rates.
The Net Investment Factor reflects the investment experience of the
applicable Fund and certain charges (See the Statement of Additional Information
for a detailed description of the Net Investment Factor).
You may choose to receive Annuity Payments under any one of the Annuity
Payment Options described below. The Company may consent to other plans of
payment before the Maturity Date. Additionally, you may also elect to receive
the Contract Value less any applicable Surrender Charge as of the Maturity Date
in a lump sum payment.
NOTE CAREFULLY: UNDER ANNUITY PAYMENT OPTIONS II AND III IT WOULD BE
POSSIBLE FOR ONLY ONE ANNUITY PAYMENT TO BE MADE IF THE ANNUITANT(S) WERE TO DIE
BEFORE THE DUE DATE OF THE SECOND ANNUITY PAYMENT; ONLY TWO ANNUITY PAYMENTS IF
THE ANNUITANT(S) WERE TO DIE BEFORE THE DUE DATE OF THE THIRD ANNUITY PAYMENT;
AND SO FORTH.
The following Annuity Options are available:
ANNUITY PAYMENT OPTION I -- INCOME FOR SPECIFIED PERIOD (AVAILABLE AS A
FIXED ANNUITY PAYMENT OPTION ONLY) -- Payments will be made for a specified
period. The specified period must be at least 5 years and cannot be more
than 30 years.
ANNUITY PAYMENT OPTION II - LIFE INCOME -- Payments will be made as long as
the Annuitant lives with optional guaranteed periods (Life Income with
Period Certain).
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ANNUITY PAYMENT OPTION III -- (1) JOINT AND LAST SURVIVOR LIFE INCOME
PAYMENTS -- Payments will be made during the joint lifetime of two
Annuitants, continuing in the same amount during the lifetime of the
surviving Annuitant; or (2) Joint and 50% or 75% Survivor Annuity --
Payments will be made during the joint lifetime of two Annuitants,
continuing during the lifetime of the surviving Annuitant and will be
computed on the basis of one-half or three-fourths of the Annuity Payment
(or units) in effect during the joint lifetime.
ANNUITY PAYMENT OPTION IV -- SPECIAL INCOME SETTLEMENT AGREEMENT -- The
Company will pay the proceeds in accordance with terms agreed upon in
writing by you and the Company.
During the Annuity Period, you may (whether or not you are the Annuitant),
upon Request, transfer a portion of any Variable Sub-account to another Variable
Sub-account within the Separate Account. (See "Transfers," p. 19.) However,
during the Annuity Period, no Partial Withdrawals or Surrenders are permitted.
A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, the Company has not
received a proper written election not to have federal income taxes withheld,
the Company must by law withhold such taxes from the taxable portion of such
annuity payments and remit that amount to the federal government. (See "Certain
Federal Income Tax Consequences," p. 31.)
Except as otherwise agreed to by you and the Company, Annuity Payments will
be payable monthly. If the Contract Value is less than $2,000 (or an amount that
would provide monthly Annuity Payments of less than $20 under any Annuity
Payment Option) on the Maturity Date, the Company will make payment in a lump
sum. The Company may require proof from the Payee of the Annuitant's survival as
a condition of future payments.
DEATH BENEFIT
DEATH OF CONTRACT OWNER PRIOR TO MATURITY DATE. If any Contract Owner dies
before the Maturity Date, a Death Benefit will be paid to the Beneficiary, if
living. The Death Benefit is payable upon the Company's receipt of Due Proof of
Death, as well as proof that the death occurred during the Accumulation Period.
Upon the Company's receipt of this proof and an election of a Death Benefit
Option and return of the Contract, the Death Benefit generally will be payable
after the Company has sufficient information to make the Death Benefit
payment(s). If an election by the Beneficiary to receive Annuity Payments as
described below under "Payment of Death Benefit to Beneficiary" is not received
by the Company within 90 days following the date Due Proof of Death of the
Contract Owner is received by the Company, the Beneficiary will be deemed to
have elected to receive the Death Benefit in the form of a single cash payment
on such 90th day.
The determination of the Death Benefit depends upon the Contract Owner's
Issue Age (age when the Contract was issued). If any Contract Owner dies and his
or her Issue Age is less than or equal to age 75, the amount of the Death
Benefit is equal to the greatest of:
(A) the sum of all Premium Payments less any "Adjusted Partial
Withdrawals," with interest compounded at 4% per year (compounding
continues up to the date of death but in any event ends at the
Contract Owner's age 75);
(B) the Contract Value as of the most recent fifth Contract Anniversary
occurring while the Contract Owner was living and before the Contract
Owner's age 75, plus any Premium Payments and minus any "Adjusted
Partial Withdrawals" made since that Contract Anniversary; and
(C) the Contract Value as of the date the Company has sufficient
information to make the Death Benefit payment.
(For purposes of (A) and (B), above, the Death Benefit will be calculated as of
the date of the Contract Owner's death but will never be greater than 200% of
all Premium Payments, less any Partial Withdrawals.)
The "Adjusted Partial Withdrawal" for each Partial Withdrawal is the
product of (a) times (b) where:
(a) is the ratio of the amount of the Partial Withdrawal to the Contract
Value on the date of (but immediately prior to the Partial Withdrawal;
and
(b) is the Death Benefit on the date of (but immediately prior to) the
Partial Withdrawal.
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If any Contract Owner dies and his or her Issue Age is greater than age 75,
the amount of the Death Benefit is equal to the Contract Value on the date the
Company has received Due Proof of Death, election of a payment option, and
return of the Contract.
If the Contract Owner is deemed a non-natural person (i.e., a trust or
corporation) under Section 72 of the Code, the Death Benefit is payable upon the
death of the primary Annuitant. (The "primary Annuitant" is that individual
whose life affects the timing or amount of Annuity Payments under the Contract.)
The Death Benefit in such situation is equal to the Contract Value on the date
the Company has received Due Proof of Death of the primary Annuitant, election
of a payment option, and return of the Contract.
Payment of the Death Benefit will be in full settlement of the Company's
liability under the Contract, and the Contract will be cancelled on the date the
Death Benefit is determined and paid.
Death Benefit payments will be made in a lump sum or in accordance with the
Contract Owner's or Beneficiary's election, as described below. The Contract
Value will be calculated as of the date the Company receives at its
Administrative Service Center Due Proof of Death and all requirements necessary
to make the payment. The Contract will end on such date.
IRS REQUIRED DISTRIBUTION. Federal tax law requires that if any Contract
Owner dies before the Maturity Date, then the entire value of the Contract must
generally be distributed within five years of the date of the Contract Owner's
death. Special rules may apply to the Contract Owner's spouse. See "Federal Tax
Matters," in the Statement of Additional Information, for a detailed description
of these rules. Other rules apply to Qualified Contracts. (See "Certain Federal
Income Tax Consequences," p. 31.)
DEATH OF ANNUITANT PRIOR TO MATURITY DATE. If the Annuitant is not the
Contract Owner and the Annuitant dies prior to the Maturity Date, you may name a
new Annuitant. If no new Annuitant is named, the Contract Owner becomes the new
Annuitant.
If the Contract Owner is a non-natural person (i.e., a trust or
corporation) for purposes of Code Section 72, then the primary Annuitant's death
will be treated as the death of the Contract Owner and will result in payment of
the Contract Value. (No enhanced Death Benefit will apply.)
DEATH OF ANNUITANT ON OR AFTER MATURITY DATE. If the Annuitant dies while
there are remaining guaranteed Annuity Payments to be made, the Company will
continue to make the remaining guaranteed Annuity Payments to only one of the
following, in this order: (1) the named Payee, if any and if living, (2) the
Contract Owner, if living, (3) the Beneficiary, if any and if living, and (4)
the Contract Owner's estate. Annuity Payments will be paid at least as rapidly
as under the Annuity Payment Option in effect at the time of death. However, the
recipient of the remaining Annuity Payments can elect to accelerate payment of
the remaining Annuity Payments. No amount will be payable to a Beneficiary under
any Annuity Payment Option if the Annuitant dies after all guaranteed Annuity
Payments have been made.
DEATH OF CONTRACT OWNER ON OR AFTER MATURITY DATE. If any Contract Owner
dies after the Maturity Date and before the Annuitant, the Company will pay any
remaining guaranteed Annuity Payments to only one of the following, in this
order: (1) any named Payee, if living, (2) any joint Contract Owner, if living,
(3) any Beneficiary, if living, (4) the deceased Contract Owner's estate.
Annuity Payments will be paid at least as rapidly as under the Annuity Payment
Option in effect at the time of death.
CONTRACT OWNER'S SPOUSE AS BENEFICIARY. If the Beneficiary is the deceased
Contract Owner's surviving spouse, the Contract Owner's spouse may choose not to
receive the Death Benefit and may continue the Contract and become the Contract
Owner. If the deceased Contract Owner is also the Annuitant, the Contract
Owner's spouse will be the new Annuitant. If the Contract Owner's spouse chooses
to continue the Contract, no Death Benefit will be paid because of the Contract
Owner's death.
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PAYMENT OF DEATH BENEFIT TO BENEFICIARY. Instead of accepting the Death
Benefit, the Beneficiary (after any Contract Owner's death) can choose by
Request to receive Annuity Payments based on his or her life expectancy. Payment
under any payment option must be for the life of the Beneficiary or for a number
of years that is not more than the life expectancy of the Beneficiary, at the
time of any Contract Owner's death (as determined for federal tax purposes), and
must begin within one year of any Contract Owner's death.
BENEFICIARY. You may name more than one Beneficiary in the Application. You
may change a Beneficiary by sending a Request, signed by you, to the Company's
Administrative Service Center. When the Administrative Service Center records
the change, it will take effect as of the date the Company received your Request
at its Administrative Service Center. You may designate the amount or percentage
of the Death Benefit that each Beneficiary receives, either in the Application
or by a Request, signed by you. If you do not make such a designation, the Death
Benefit will be paid in equal shares to each Beneficiary. The Company will
comply with all state and federal laws requiring notification of the change in
Beneficiary.
CHANGE OF CONTRACT OWNER. You may change the Contract Owner while the
Annuitant is alive by sending a Request to the Company. The change will be
effective on the date the Request is recorded by the Company, but will be
subject to any payment made or action taken by the Company before recording the
change. When the change takes effect, all rights of ownership in the Contract
will pass to the new Contract Owner. Changing the Contract Owner does not change
the Annuitant, or the Beneficiary. Changing the Contract Owner may have tax
implications (See "Certain Federal Income Tax Considerations," p. 31.) The
Company will comply with all state and federal laws requiring notification of
the change in Contract Owner. The Annuitant named in the Application can not be
changed unless that Annuitant dies prior to the Maturity Date.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interest in a
variable annuity contract issued under the ORP only upon: (1) termination of
employment in the Texas public institutions of higher education; (2) retirement;
or (3) death. Accordingly, a participant in the ORP (or the participant's estate
if the participant has died) will be required to obtain a certificate of
termination from the employer or a certificate of death before the Contract can
be surrendered.
RESTRICTIONS UNDER QUALIFIED CONTRACTS
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plan in respect of which Qualified Contracts are issued.
RESTRICTIONS UNDER SECTION 4O3(b) PLANS
Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Contract used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.
CHARGES AND DEDUCTIONS
The Company will make certain charges and deductions under the Contract in
order to compensate it for incurring expenses in distributing the Contract,
bearing mortality and expense risks under the Contract, and administering the
Separate Account and the Contracts. The Company may also deduct charges for
transfers, Premium Taxes, and other federal, state or local taxes. Charges and
expenses are also deducted from the Funds.
SURRENDER CHARGE
The Company will incur expenses relating to the sale of Contracts,
including commissions to registered representatives and other promotional
expenses. In connection with a Partial Withdrawal, Full Surrender, or an Annuity
Payment Option of less than five years during the first seven Contract Years,
the Company will impose a Surrender Charge on the amount withdrawn or
surrendered net of any Market Value Adjustment, and, before any deductions for
the Annual Administrative Fee or Premium Taxes. The Surrender Charge is
calculated as a percentage of the Contract Value withdrawn, surrendered, or
annuitized. The Surrender Charge schedule is as follows:
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACT YEAR 1 2 3 4 5 6 7 8+
------------- --- --- --- --- --- --- --- ----
Surrender Charge 6% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
The Surrender Charge may not be applied under the following circumstances:
1. If you cancel the Contract during the "Right to Examine Contract"
period.
2. If you choose to annuitize the Contract after the first Contract Year
and you choose an Annuity Payment Option of longer than five years.
3. Payment of the Death Benefit.
4. On any Free Surrender Amount. (See below.)
5. To comply with the minimum distribution requirements of the Internal
Revenue Code.
6. If, subsequent to the Contract Date, you become confined to a hospital
or a state-licensed inpatient nursing care facility ("nursing care
facility") and meet all of the following conditions:
(a) You were not confined to a nursing care facility at any time on
or before the Contract Date;
(b) You have been confined to a nursing care facility for at least 30
consecutive days;
(c) It is medically necessary for you to be confined to the nursing
care facility; and
(d) You send the Company a Request for a Surrender or Partial
Withdrawal along with the Request for waiver of Surrender Charges
while you are confined or within 90 days after your discharge
from such facility.
7. If You are diagnosed as suffering from an illness that reduces your
life expectancy to 12 months or less from the date of diagnosis, the
Company reserves the right to require, at the Company's expense, a
second opinion from a physician acceptable to both you and the
Company.
The Company will tell you the amount of Surrender Charge that would be
assessed upon a Withdrawal or Surrender upon request. More information about how
the Surrender Charge is calculated for Partial Withdrawals and Full Surrenders
is in Appendix I. The Company may waive or reduce the Surrender Charge for
Contracts sold to certain groups (See "Reduction in Charges for Certain Groups,"
p. 29).
The Company anticipates that the Surrender Charge will not generate
sufficient funds to pay the cost of distributing the Contracts.
THE COMPANY GUARANTEES THAT THE AGGREGATE SURRENDER CHARGE WILL NEVER
EXCEED 8.5% OF THE TOTAL PREMIUM PAYMENTS MADE UNDER THE CONTRACT.
FREE SURRENDER AMOUNT. A Surrender Charge is imposed on partial withdrawals
and full surrenders (and certain annuitizations) in the first seven Contract
Years. However, you are entitled to withdraw up to 10% of the Contract Value
each year without Surrender Charge. The penalty-free withdrawal is equal to 10%
of the Contract Value as of the date of the withdrawal, less the sum of the
penalty-free withdrawals previously taken during the Contract Year, and will not
be less than zero. Because the Contract Value may change from day to day, the
Free Surrender Amount or any remaining portion thereof may increase or decrease
on any day. Any cumulative amount surrendered or withdrawn in excess of the
annual Free Surrender Amount during one of the first seven Contract Years is
subject to the Surrender Charge, as applicable. Unused Free Surrender Amounts
cannot be accumulated and carried from one Contract Year to the next. The Free
Surrender Amount does not apply to amounts applied to an Annuity Payment Option.
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MARKET VALUE ADJUSTMENT
The proceeds of a Partial Withdrawal, Full Surrender, or Transfer made from
an Interest Rate Guarantee Period of the Capital Developer Account 31 days or
more prior to the end of the Interest Rate Guarantee Period will be increased or
decreased by the application of the Market Value Adjustment. Where applicable,
the Market Value Adjustment is applied to the Capital Developer Account Value.
NO MARKET VALUE ADJUSTMENT IS APPLIED TO ANY PARTIAL WITHDRAWAL, SURRENDER: OR
TRANSFER FROM AN INTEREST RATE GUARANTEE PERIOD MADE DURING THE LAST 30 DAYS OF
THE INTEREST RATE GUARANTEE PERIOD. IN ADDITION, NO MARKET VALUE ADJUSTMENT WILL
APPLY TO TRANSFERS FROM THE ONE YEAR INTEREST RATE GUARANTEE PERIOD OF THE
CAPITAL DEVELOPER ACCOUNT UNDER THE DOLLAR COST AVERAGING PROGRAM.
The Market Value Adjustment will reflect the relationship between (a) the
Treasury Rate for the period, the term to maturity of which most closely
approximates the duration remaining in the Interest Rate Guarantee Period from
which the Partial Withdrawal, Surrender, or transfer is made, and (b) the
Guaranteed Interest Rate applicable to the Interest Rate Guarantee Period from
which the Partial Withdrawal, Surrender, or Transfer is made at the time of the
transaction.
Generally, if your Guaranteed Interest Rate does not exceed the applicable
Treasury Rate by at least 0.4%, then the application of the Market Value
Adjustment will reduce the proceeds of a Partial Withdrawal, Surrender or
transfer. Similarly, if your Guaranteed Interest Rate exceeds the applicable
Treasury Rate by more than 0.4%, the application of the Market Value Adjustment
will increase the proceeds of a Partial Withdrawal, Surrender, or transfer.
For example, assume that a Contract Owner selects an initial Interest Rate
Guarantee Period of seven years and the Guaranteed Interest Rate for that
duration is 8% per annum, and, at the end of four years, the Contract Owner
makes a Partial Withdrawal. If the three year Treasury Rate is then 6%, the
Market Value Adjustment will be positive and will increase the proceeds. On the
other hand, if the Treasury Rate is higher than the Guaranteed Interest Rate,
for example 10%, the application of the Market Value Adjustment will cause a
decrease in the amount payable.
The formula for calculating the Market Value Adjustment is set forth in
Appendix II to this Prospectus, which contains illustrations of the application
of the Market Value Adjustment.
The Market Value Adjustment will never reduce the return on amounts
allocated to the Capital Developer Account below three percent per year.
REDUCTION IN CHARGES FOR CERTAIN GROUPS
The Company may reduce or eliminate the Annual Administrative Fee or
Surrender Charge on Contracts that have been sold to (1) employees and sales
representatives of the Company or its affiliates; (2) customers of the Company
or distributors of the Contracts who are transferring existing contract values
to a Contract; (3) individuals or groups of individuals when sales of the
Contract result in savings of sales or administrative expenses; or (4)
individuals or groups of individuals where Premium Payments are to be made
through an approved group payment method and where the size and type of the
group results in savings of administrative expenses.
In no event will reduction or elimination of the Annual Administrative Fee
or Surrender Charge be permitted where such reduction or elimination will be
unfairly discriminatory to any person.
MORTALITY AND EXPENSE RISK CHARGE
The Company imposes a daily charge as compensation for bearing certain
mortality and expense risks in connection with the Contracts. This charge is
1.25% annually (equal to a daily rate of .003403%) of the daily value of net
assets in the Separate Account. (Approximately 0.50% is estimated to be
attributable to mortality risks, and approximately 0.75% is estimated to be
attributable to expense risks.) The Mortality and Expense Risk Charge is
reflected in the Accumulation Unit value or Annuity Unit value for each Variable
Sub-account. The Mortality and Expense Risk Charge will not be deducted with
respect to amounts held in the Capital Developer Account.
Contract Values and Annuity Payments are not affected by changes in actual
mortality experience nor by actual expenses incurred by the Company. The
mortality risks assumed by the Company arise from its contractual obligations to
make Annuity Payments determined in accordance with the annuity tables and other
provisions contained in the Contract. Thus, you are assured that neither the
Annuitant's own longevity nor an unanticipated improvement in general life
expectancy will adversely affect the Annuity Payments that the Annuitant will
receive under the Contract.
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<PAGE>
The Company also bears substantial risk in connection with the Death
Benefit. During the Accumulation Period, if the Contract Owner's Issue Age is
less than 75, the Company will pay a Death Benefit that could be greater than
the Contract Value. Otherwise, the Death Benefit is based on the Contract Value.
The Death Benefit is paid without imposition of a Surrender Charge or
application of the Market Value Adjustment.
The expense risk assumed by the Company is the risk that the Company's
actual expenses in administering the Contract and the Separate Account will
exceed the amount recovered through the Annual Administrative Fee and the
Administrative Expense Charge.
ADMINISTRATIVE EXPENSE CHARGE
The Company deducts a daily charge equal to a percentage of the net assets
in the Separate Account for administering the Separate Account. The effective
annual rate of this charge is 0.15% (equal to a daily rate of .000411%) of the
Contract Value. The amount of this charge is guaranteed not to increase. The
Administrative Expense Charge does not apply to any amounts held in the Capital
Developer Account.
ANNUAL ADMINISTRATIVE FEE
In order to cover the costs of administering the Contracts, the Company
deducts an Annual Administrative Fee from the Contract Value of each Contract on
the last day of each Contract Year and upon Full Surrender of the Contract. This
Annual Administrative Fee is the lesser of $30 or 2% of Contract Value on the
last day of the applicable Contract Year. It is guaranteed not to increase. The
Company does not anticipate realizing any profit from this charge. The Annual
Administrative Fee will be deducted pro rata from the Investment Options in the
same proportion that the amount of Contract Value in each Investment Option
bears to the total Contract Value. The Annual Administrative Fee will be waived
if, on the last day of that Contract Year, the Contract Value is $30,000 or
greater or if 100% of Contract Value is allocated to the Capital Developer
Account. No Annual Administrative Fee is deducted after the Maturity Date.
The Company may waive or reduce the Annual Administrative Fee for the
Contracts sold to certain groups (See "Reduction in Charges for Certain Groups,"
p. 29).
TRANSFER CHARGE
A fee equal to $10 maybe imposed for each Transfer in excess of 15 during
any Contract Year. Although the Company reserves the right to impose a $10 fee,
it currently has no plans to do so.
PREMIUM TAXES
The Company may pay Premium Taxes in connection with Premium Payments under
the Contracts. Depending upon applicable state law, the Company will deduct the
Premium Taxes paid with respect to a particular Contract when it is required to
pay them. This deduction may be made from the Premium Payments, from the
Contract Value on the Maturity Date (thus reducing the Contract Value), upon a
Partial Withdrawal, or upon the Full Surrender of a Contract. Premium Taxes may
range from 0% to 3.5% of Premium Payments or of Contract Value.
FEDERAL, STATE AND LOCAL TAXES
No charges are currently made for federal, state, or local taxes other than
state Premium Taxes. However, the Company reserves the right to deduct charges
in the future for such taxes or other economic burden resulting from the
application of any tax laws that the Company determines to be attributable to
the Contracts.
OTHER EXPENSES INCLUDING INVESTMENT ADVISORY FEES
Each Fund is responsible for all of its expenses. In addition, charges will
be made against each Fund for investment advisory services provided to the Fund.
The net assets of each Fund will reflect deductions in connection with the
investment advisory fee and other expenses.
For more information concerning the investment advisory fee and other
charges against the Funds, see the prospectuses for each Fund, current copies of
which accompany this Prospectus.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS A GENERAL DESCRIPTION OF FEDERAL TAX
CONSIDERATIONS RELATING TO THE CONTRACT AND IS NOT INTENDED AS TAX ADVICE. THIS
DISCUSSION IS NOT INTENDED TO ADDRESS THE TAX CONSEQUENCES RESULTING FROM ALL OF
THE SITUATIONS IN WHICH A PERSON MAY BE ENTITLED TO OR MAY RECEIVE A
DISTRIBUTION UNDER THE CONTRACT. ANY PERSON CONCERNED ABOUT THESE TAX
IMPLICATIONS SHOULD CONSULT A COMPETENT TAX ADVISOR BEFORE INITIATING ANY
TRANSACTION. THIS DISCUSSION IS BASED UPON THE COMPANY'S UNDERSTANDING OF THE
PRESENT FEDERAL INCOME TAX LAWS AS THEY ARE CURRENTLY INTERPRETED BY THE
INTERNAL REVENUE SERVICE. NO REPRESENTATION IS MADE AS TO THE LIKELIHOOD OF THE
CONTINUATION OF THE PRESENT FEDERAL INCOME TAX LAWS OR OF THE CURRENT
INTERPRETATION BY THE INTERNAL REVENUE SERVICE. MOREOVER NO ATTEMPT HAS BEEN
MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
The Contract may be purchased on a non-qualified basis ("Non-qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). Qualified Contracts are designed
for use by individuals whose Premium Payments are comprised solely of proceeds
from and/or contributions under retirement plans which are intended to qualify
as plans entitled to special income tax treatment under Sections 401, 403(b),
408, or 457 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Contract may also be purchased for use with a Roth IRA under the rules of
Section 408A of the Code. Information regarding the Roth IRA is contained in a
separate Roth IRA Disclosure Statement available from the Company. The ultimate
effect of Federal income taxes on the amounts held under a Contract, on Annuity
Payments, and on the economic benefit to you, the Annuitant, or the Beneficiary
depends on the type of retirement plan, on the tax and employment status of the
individual concerned and on the employer's tax status. In addition, certain
requirements must be satisfied in purchasing a Qualified Contract with proceeds
from a tax qualified plan and receiving distributions from a Qualified Contract
in order to continue receiving favorable tax treatment. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of the Contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the Contract. The following
discussion assumes that a Qualified Contract is purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special Federal income tax treatment.
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. The Company believes that if you are a natural person, you generally
are not taxed on increases in the value of a Contract until distribution occurs
by withdrawing all or part of the Contract Value (E.G., Partial Withdrawals,
Full Surrenders or Annuity Payments under the Annuity Payment Option elected).
For this purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Contract Value (and in the case of a Qualified Contract, any
portion of an interest in the qualified plan) generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a single
lump sum payment or an annuity) is taxable as ordinary income.
The owner of any Non-qualified annuity contract who is not a natural person
generally must include in income any increase in the excess of the contract's
value over the "investment in the contract" (discussed below) during the taxable
year. There are some exceptions to this rule, and a prospective Contract Owner
that is not a natural person may wish to discuss these with a competent tax
advisor.
POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
nonqualified variable annuities by taxing the owner on the gain in any
sub-account if the owner transferred funds between various investment options.
Although as of the date of this prospectus Congress has not passed any
legislation regarding the taxation of annuities, there is always the possibility
that the tax treatment of annuities could change by legislation or other means
(such as IRS regulations, revenue rulings, judicial decisions, etc.). Moreover,
it is also possible that any change could be retroactive (that is, effective
prior to the date of the change).
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<PAGE>
SURRENDERS AND PARTIAL WITHDRAWALS. In the case of a Surrender or
Partial Withdrawal under a QUALIFIED CONTRACT, under Section 72(e) of the
Code a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total
accrued benefit for the balance under the retirement plan. The "investment in
the contract" generally equals the amount of any premium payments paid by or
on behalf of any individual with after tax contributions. For a Contract
issued in connection with qualified plans, the "investment in the contract"
can be zero. Special tax rules may be available for certain distributions
from a Qualified Contract.
With respect to NON-QUALIFIED CONTRACTS, Partial Withdrawals (including
systematic withdrawals) are generally treated as taxable income to the extent
that the Contract Value immediately before the Partial Withdrawal exceeds the
"investment in the contract" at that time. The Contract Value immediately
before a Partial Withdrawal will be increased by any positive Market Value
Adjustment which results from such a Partial Withdrawal. Full Surrenders are
treated as taxable income to the extent that the amount received exceeds the
"investment in the contract."
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
Annuity Payment Option elected under the Contract, in general, only the
portion of the Annuity Payment that represents the amount by which the
Contract Value exceeds the "investment in the contract" will be taxed; after
the "investment in the contract" is recovered, the full amount of any
additional Annuity Payments is taxable. For variable annuity payments, the
taxable portion is generally determined by an equation that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount
is determined by dividing the "investment in the contract" by the total
number of expected periodic payments. However, the entire distribution will
be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For Fixed Annuity Payments, in general, there
is no tax on the portion of each payment which represents the same ratio that
the "investment in the contract" bears to the total expected value of the
Annuity Payments for the term of the payments; however, the remainder of each
Annuity Payment is taxable. Once the "investment in the contract" has been
fully recovered, the full amount of any additional Annuity Payments is
taxable. If Annuity Payments cease as a result of an Annuitant's death before
full recovery of the "investment in the contract," the decedent is allowed a
deduction for the unrecovered amount on his or her final income tax return.
PENALTY TAX. In the case of a distribution pursuant to a Non-qualified
Contract, there may be imposed a Federal penalty tax equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty
tax on distributions: (1) made on or after the date on which you attain age
59 1/2; (2) made as a result of your death or disability; (3) received in
substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the lives or life expectancies of you and a "designated
beneficiary"; (4) resulting from the direct rollover of the Contract into
another qualified contract or individual retirement annuity; (5) allocable to
investment in the Contract before August 14, 1982; (6) under a qualified
funding asset (as defined in Code Section 130(d)); (7) under an immediate
annuity (as defined in Code Section 72(u)(4)); or (8) which are purchased by
an employer on termination of certain types of qualified plans and which are
held by the employer until the employee separates from service. Other tax
penalties may apply to certain distributions under a Qualified Contract.
DEATH BENEFIT PROCEEDS. Amounts may be distributed because of the death of
a Contract Owner. Generally, such amounts are includable in the income of the
recipient as follows:
(1) if distributed in a lump sum, such amounts are taxed in the same
manner as a Full Surrender as described above, or
(2) if distributed under an Annuity Payment Option, such amounts are taxed
in the same manner as Annuity Payments as described above.
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<PAGE>
For these purposes, the investment in the Contract is not affected by the
owner's death. That is, the investment in the Contract remains the amount of any
purchase payments paid which were not excluded from gross income.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT. A transfer of
ownership of a Contract, the designation of an Annuitant or Beneficiary other
than yourself, or the exchange of a Contract may result in certain tax
consequences to you that are not discussed herein. If you are contemplating any
such transfer, assignment. or exchange of a Contract, you should contact a
competent tax adviser with respect to the potential tax effects of such
transaction.
GENERATION-SKIPPING TRANSFERS. The Company may be required to determine
whether the Death Benefit or any other payment constitutes a "direct skip" as
defined in Code Section 2612, and the amount of the generation-skipping transfer
tax on the generation-skipping transfer resulting from such direct skip. A
direct skip may occur when property is transferred to or a Death Benefit is paid
to an individual determined to be two or more generations younger than you. If
the generation-skipping transfer tax is applicable, the Company may be required
to withhold the amount of such tax and remit to the Internal Revenue Service the
tax the Company is required to pay by Section 2603 of the Code.
MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that are
issued by the Company (or its affiliates) to you during any calendar year are
treated as one annuity contract for purposes of determining the amount
includable in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract and
separate deferred annuity contract as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws. A prospective purchaser of more than one annuity contract in a
calendar year should consult with a competent tax advisor before making such a
purchase.
WITHHOLDING. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not to have
tax withheld from distributions, although withholding is mandatory for certain
types of Qualified Contracts.
OTHER TAX CONSEQUENCES. As noted above, the foregoing discussion of the
Federal income tax consequences under the Contract is not exhaustive and special
rules are provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal income tax consequences discussed herein
reflect the Company's understanding of current law, and the law may change.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Contract depend
on your individual circumstances or those of the recipient of the distribution.
A competent tax advisor should be consulted for further information.
QUALIFIED PLANS
The Contract is designed for use with several types of qualified
plans. The tax rules applicable to Contract Owners in qualified
plans, including restrictions on contributions and benefits, taxation of
distributions, and any tax penalties, vary according to the type of plan and
the terms and conditions of the plan itself. Various tax penalties may apply
to contributions in excess of specified limits, aggregate distributions in
excess of $150,000 annually, distributions that do not satisfy specified
requirements, and certain other transactions with respect to qualified plans.
Therefore, no attempt is made to provide more than general information about
the use of the Contract with the various types of qualified plans. Contract
Owners, Annuitants and Beneficiaries are cautioned that the rights of any
person to any benefits under Qualified Contracts may be subject to the terms
and conditions of the plans themselves, regardless of the terms and
conditions of the Contract. Some retirement plans are subject to distribution
and other requirements that are not incorporated into our Contract
administration procedures. Contract Owners, Participants and Beneficiaries
are responsible for determining that contributions, distributions and other
transactions with respect to the Contracts comply with applicable law.
Following are brief descriptions of the various types of qualified plans in
connection with which the Company will issue the Contract. Contracts for all
types of qualified plans may not be available in all states. When issued in
connection with a qualified plan, the Contract will be amended as necessary
to conform to the requirements of the Code.
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<PAGE>
QUALIFIED PENSION AND PROFIT SHARING PLANS. Sections 401(a) of the Code
permits corporate employers to establish various types of retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "HR. 10," permits self-employed individuals to
establish qualified plans for themselves and their employees. These retirement
plans may permit the purchase of the Contracts to accumulate retirement savings
under the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if the Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
to their specific needs.
INDIVIDUAL RETIREMENT ANNUITIES AND INDIVIDUAL RETIREMENT ACCOUNTS.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as "IRA"). IRAs
are subject to limitations on the amount which may be contributed and
deducted and the time when distributions may commence. Also, distributions
from certain other types of qualified plans may be "rolled over" on a
tax-deferred basis into an IRA. The sale of a Contract for use with an IRA
may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of a Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke their
purchase within 7 days of the earlier of the establishment of the IRA or
their purchase. Purchasers should seek competent advice as to the suitability
of the Contract for use with IRAs. The Internal Revenue Service has not
addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with IRA
qualification requirements.
Section 408A of the Code permits eligible individuals to contribute to a
Roth IRA. Purchasers should seek competent advice as to the suitability of
the Contract for use with the Roth IRA.
TAX-SHELTERED ANNUITIES. Section 403(b) of the Code permits public school
employees and employees of certain types of religious, charitable,
educational, and scientific organizations specified in Section 501(c)(3) of
the Code to purchase annuity contracts and, subject to certain limitations,
exclude the amount of premiums from gross income for tax purposes. However,
these payments may be subject to FICA (Social Security) taxes. These annuity
contracts are commonly referred to as "Tax-Sheltered Annuities." Subject to
certain exceptions, withdrawals under Tax-Sheltered Annuities which are
attributable to contributions made pursuant to salary reduction agreements
are prohibited unless made after you attain age 59 1/2, upon your separation
from service, upon your death or disability, or for an amount not greater
than the total of such contributions in the case of hardship.
SECTION 457 DEFERRED COMPENSATION ("SECTION 457") PLANS. Under Section 457
of the Code, employees of (and independent contractors who perform services for)
certain state and local governmental units or certain tax-exempt employers may
participate in a Section 457 plan of their employer allowing them to defer part
of their salary or other compensation. The amount deferred and any income on
such amount will not be taxable until paid or otherwise made available to the
employee.
The maximum amount that can be deferred under a Section 457 plan in any tax
year is ordinarily one-third of the employee's includable compensation, up to
$7,500. Includable compensation means earnings for services rendered to the
employer which is includable in the employee's gross income, but excluding any
contributions under the Section 457 plan or a Tax-Sheltered Annuity. During the
last three years before an individual attains normal retirement age, additional
"catch-up" deferrals are permitted.
The deferred amounts will be used by the employer to purchase the Contract.
The Contract will be issued to the employer, and all Contract Values will be
subject to the claims of the employer's creditors. The employee has no rights or
vested interest in the Contract and is only entitled to payment in accordance
with the Section 457 plan provisions. The plans may permit participants to
specify the form of investment for their deferred compensation account.
Depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations. Present federal income tax law does not allow tax-free transfers or
rollovers for amounts accumulated in a Section 457 plan, except for transfers to
other Section 457 plans in certain limited cases.
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GENERAL
At the time the initial Premium Payment is paid, a prospective purchaser
must specify whether a Non-qualified Contract or a Qualified Contract is being
purchased. If the initial Premium Payment is derived from an exchange or
surrender of another annuity contract, the Company may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. The Company will require that persons
purchase separate Contracts if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate Contract
would require the minimum initial Premium Payment stated above. Additional
Premium Payments under a Contract must qualify for the same federal income tax
treatment as the initial Premium Payment under the Contract; the Company will
not accept an additional Premium Payment under a Contract if the Federal income
tax treatment of such Premium Payment would be different from that of the
initial Premium Payment.
DISTRIBUTOR OF THE CONTRACTS
Jefferson Pilot Variable Corporation (formerly Jefferson-Pilot Investor
Services, Inc.) is the principal underwriter of the Contracts. Jefferson Pilot
Variable Corporation will enter into one or more contracts with various
broker-dealers for the distribution of the Contracts. Commissions of up to 8.5%
of Premium Payments may be paid on Contract sales as currently permitted by
National Association of Securities Dealers, Inc. ("NASD") rules and regulations.
In certain circumstances, commissions may be paid in installments over time.
Jefferson Pilot Variable Corporation, a wholly owned subsidiary of
Jefferson-Pilot Corporation, is a member of the NASD. Its mailing address is One
Granite Place, Concord, NH 03301. There may be other underwriters in the future.
In addition to the payment of commissions, the Company may from time to
time pay or allow additional promotional incentives, in the form of cash or
other compensation, to broker-dealers that sell variable annuity contracts. In
some instances, such other incentives may be offered only to certain
broker-dealers that sell or are expected to sell during specified time periods
certain minimum amounts of variable annuity contracts. The Company's payment of
promotional incentives is subject to applicable state insurance law and
regulation.
VOTING RIGHTS
There are no voting rights associated with the Capital Developer Account
Value.
With respect to the Separate Account Value, the Company will be the
"shareholder" of the Funds and as such, the Company will have certain voting
rights. However, to the extent required by law, the Company will vote shares of
the Funds held by the Separate Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the Funds. If, however, the 1940 Act or any
'regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote the Funds' shares in its own right, it may elect to do so. The
Company reserves the right, when permitted by law, to restrict or eliminate any
of the voting rights of Contract Owners or other persons who have voting rights
as to the Separate Account.
Before the Maturity Date, you hold the voting interest in the selected
Funds. The number of votes that you have the right to instruct will be
calculated separately for each Variable Sub-account. The number of votes that
you have the right to instruct for a particular Variable Sub-account will be
determined by dividing your Contract Value in the Variable Sub-account by the
net asset value per share of the corresponding Fund in which the Variable
Sub-account invests. Fractional shares will be counted.
After the Maturity Date, the person receiving Annuity Payments has the
voting interest, and the number of votes decreases as Annuity Payments are made
and as the reserves for the Contract decrease. The person's number of votes will
be determined by dividing the reserve for the Contract allocated to the
applicable Variable Sub-account by the net asset value per share of the
corresponding Fund. Fractional shares will be counted.
36
<PAGE>
The number of votes that you or the person receiving income payments has
the right to instruct will be determined as of the date established by the Funds
for determining shareholders eligible to vote at the meeting. The Company will
solicit voting instructions by sending you or other persons entitled to vote
written requests for instructions prior to that meeting in accordance with
procedures established by the Funds, as applicable. Fund shares as to which no
timely instructions are received may be voted in proportion to the voting
instructions that are received with respect to all Contracts participating in
the same Variable Sub-account. Shares held by the Company or its affiliates in
which you or other persons entitled to vote have no beneficial interest may be
voted by the shareholder thereof (the Company or its affiliates) in its sole
discretion.
Each person having a voting interest in a Variable Sub-account will receive
proxy material, reports, and other materials relating to the appropriate Fund.
It should be noted that the Funds are not required to, and do not intend
to, hold annual or other regular meetings of shareholders.
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
The Company reserves the right to transfer assets of the Separate Account,
which it determines to be associated with the class of policies to which the
Contract belongs, to another separate account. If this type of transfer is made,
the term "Separate Account," as used herein shall then mean the separate account
to which the assets were transferred.
The Company further reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Separate Account or that the Separate Account may purchase. If the shares of
a Fund are no longer available for investment or if in the Company's judgment
further investment in any Fund should become inappropriate in view of the
purposes of the Separate Account, the Company may redeem the shares, if any, of
that Fund and substitute shares of another Fund or of another registered
open-end management investment company. The Company will not substitute any
shares attributable to a Contract's interest in a Variable Sub-account of the
Separate Account without notice and prior approval of the SEC and state
insurance authorities, if required by law.
The Company also reserves the right to establish additional Variable
Sub-accounts of the Separate Account, each of which would invest in shares
corresponding to a new investment portfolio of the existing Funds or in shares
of another investment company. Subject to applicable law and any required SEC
approval, the Company, may, in its sole discretion, establish new Variable
Sub-accounts or eliminate one or more Variable Sub-accounts if marketing needs,
tax considerations or investment conditions warrant. Any new Variable
Sub-accounts may be made available to existing Contract Owners on a basis to be
determined by the Company.
If any of these substitutions or changes are made, the Company may by
appropriate endorsement change the Contract to reflect the substitution or
change. If the Company deems it to be in the best interest of Contract Owners
and Annuitants, and subject to any approvals that may be required under
applicable law, the Separate Account maybe operated as a management investment
company under the 1940 Act; it may be deregistered under the Act if registration
is no longer required; or it may be combined with other separate accounts of the
Company. Further, the Company reserves the right, when permitted by law, to
manage the Separate Account under the direction of a committee at any time. The
Company will notify you of its intent to exercise any such reserved rights with
respect to the Separate Account. You will have thirty-one (31) days after you
receive any such notification to accept or reject the change(s) described
therein. If you choose not to accept such change(s), you may request to cancel
your Contract and receive the Surrender Value.
37
<PAGE>
PERFORMANCE DATA
From time-to-time the company may use the yield of the JPVF Money Market
Variable Sub-account and total returns of other Variable Sub-accounts in
advertisements and sales literature. In addition, total returns for all of the
Variable Sub-accounts may be advertised. These figures will be based on
historical performance for the Funds and are not intended to and do not indicate
future performance.
JPVF MONEY MARKET VARIABLE SUB-ACCOUNT YIELD. The yield of the JPVF Money
Market Variable Sub-account refers to the annualized income generated by an
investment in that Variable Sub-account over a specified seven-day period. The
yield is "annualized" by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of that investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment in that Variable
sub-account is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
OTHER VARIABLE SUB-ACCOUNT YIELD. The Company may from time to time
advertise or disclose the current annualized yield of one or more of the
Variable Sub-accounts of the Separate Account (except the JPVF Money Market
Variable Sub-account) for 30-day periods. The annualized yield of a Variable
Sub-account refers to income generated by the Variable Sub-account over a
specific 30-day period. Because the yield is annualized, the yield generated by
a Variable Sub-account during the 30-day period is assumed to be generated each
30-day period over a 12-month period. The yield is computed by: (i) dividing the
net investment income of the Variable Sub-account less Variable Sub-account
expenses for the period, by (ii) the maximum offering price per unit on the last
day of the period times the daily average number of units outstanding for the
period, (iii) compounding that yield for a 6-month period, and (iv) multiplying
that result by 2. Expenses attributable to the Variable Sub-account include (i)
the Annual Administrative Fee, (ii) the Mortality and Expense Risk Charge and
(iii) the Administrative Expense Charge.
Because of the charges and deductions imposed by the Separate Account, the
yield for a Variable Sub-account of the Separate Account will be lower than the
yield for its corresponding Fund. The yield calculations do not reflect the
effect of any Surrender Charge or Premium Taxes that may be applicable to a
particular Contract. The yield on amounts held in the Variable Sub-accounts of
the Separate Account normally will fluctuate over time. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. A Variable Sub-account's actual yield is affected by
the types and quality of its investments and its operating expenses.
TOTAL RETURN. Total returns for the Sub-accounts maybe calculated pursuant
to a standardized formula or in non-standardized manners. The standardized total
return of the Variable Sub-accounts refers to return quotations assuming an
investment has been held in the Variable Sub-account for various periods of time
including, but not limited to. one year, five years, and ten years (if the
Variable Sub-account has been in operation for those periods), and a period
measured from the date the Variable Sub-account commenced operations. The total
return quotations will represent the average annual compounded rates of return
that would equate an initial investment of $1,000 to the redemption value of
that investment as of the last day of each of the periods for which total return
quotations are provided. Accordingly, the total return quotations will reflect
not only income but also changes in principal value (that is, changes in the
Accumulation Unit values), whereas the yield figures will only reflect income.
In addition, the standardized total return quotations will reflect the Surrender
Charge imposed on Partial Withdrawals and Full Surrenders, but the standardized
yield figures will not.
In addition, the Company may from time to time also disclose total return
in non-standard formats and cumulative total return for the Variable
Sub-accounts. The non-standard average annual total return and cumulative total
return would not reflect the Surrender Charge, which if reflected would lower
the performance figures for periods of less than seven years.
The Company may from time to time also disclose standard total returns and
non-standard total returns for the Variable Sub-accounts based on or covering
periods of time other than those indicated above. All non-standard performance
data will only be disclosed if the standard total return is also disclosed. For
additional information regarding the calculation of performance data, please
refer to the Statement of Additional Information.
38
<PAGE>
PERFORMANCE COMPARISONS. From time to time, in advertisements, sales
literature, or in reports to you, the Company may compare the performance of the
Variable Sub-accounts to that of other variable accounts or investment vehicles
with similar investment objectives or to relevant indices published by
recognized mutual fund or variable annuity statistical rating services or
publications of general variable annuity statistical rating services or
publications of general interest such as Forbes or Money magazines. For example,
a Variable Sub-account's performance might be compared to that of other accounts
or investments with a similar investment objective as compiled by Lipper
Analytical Services, Inc., VARDs, Morningstar, Inc., or by others. In addition,
a Variable Sub-account's performance might be compared to that of recognized
stock market indicators including, but not limited to, the Standard & Poor's 500
Stock Index (which is a group of unmanaged securities widely regarded by
investors as representative of the stock market in general) and the Dow Jones
Industrial Average (which is a price-weighted average of 30 large, well-known
industrial stocks that are generally the leaders in their industry). Performance
comparisons should not be considered representative of the future performance of
a Variable Sub-account.
GENERAL. Performance data may also be calculated for shorter or longer base
periods. The Separate Account may use various base periods as may be deemed
necessary or appropriate to provide investors with the most informative
performance data information, depending on the then-current market conditions.
Performance will vary from time to time, and historical results will not be
representative of future performance. Performance information may not provide a
basis for comparison with other investments or other investment companies using
a different method of calculating performance. Current yield is not fixed and
varies with changes in investment income and Accumulation Unit values. The JPVF
Money Market Variable Sub-account yield will be affected if it experiences a net
inflow of new money which it invested at interest rates different from those
being earned on its then-current investments. An investor's principal in a
Variable Sub-account and a Variable Sub-account's return are not guaranteed and
will fluctuate according to market conditions. Also, as noted above, advertised
performance data figures will be historical figures for a Contract during the
Accumulation Period.
COMPANY RATINGS
The Company may from time to time publish (in advertisements, sales
literature and reports to you) the ratings and other information assigned to it
by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Duff & Phelps, and Fitch Investors Services. The purpose of
the ratings is to reflect the financial strength and/or claims-paying ability of
the Company and should not be considered as bearing on the investment
performance of assets held in the Separate Account. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, culminating in
the assignment of Best's Ratings. These ratings reflect A.M. Best Company's
current opinion of the relative financial strength and operating performance of
an insurance company in comparison to the norms of the life/health insurance
industry. In addition, the claims-paying ability of the Company as measured by
Standard and Poor's Insurance Ratings Services, Duff & Phelps, or Fitch
Investors Services may be referred to in such advertisements, sales literature,
or reports. These ratings are opinions regarding an operating insurance
company's financial capacity to meet the obligations of its insurance and
annuity policies in accordance with their terms. Such ratings do not reflect the
investment performance of the Separate Account or the degree of risk associated
with an investment in the Separate Account.
GENERAL CONTRACT PROVISIONS
ENTIRE CONTRACT
The entire contract consists of the Contract, any attached riders and
endorsements, and the attached copy of the Application. Only the Company's
President, or one of its Executive Vice Presidents may change the Contract. The
change must be in writing. No change will be made in the Contract unless you
agree to it in writing. No agent is authorized to change the Contract or to
change or waive any provisions of the Contract.
39
<PAGE>
RELIANCE ON INFORMATION PROVIDED IN APPLICATION
In issuing the Contract, the Company will rely on the statements made in
the Application. The Company deems all such statements to be representations and
not warranties. The Company assumes that these statements are true and complete
to the best of the knowledge and belief of those who made them. The Company will
not use any statement made in connection with the Application to void the
Contract unless that statement is a material misrepresentation and is part of
the Application.
THE COMPANY'S ABILITY TO CONTEST THE CONTRACT
The Company will not contest the Contract from the Contract Date.
MEASUREMENT OF DATES
Contract Years, Quarters, Months, and Anniversaries are measured from the
Contract Date, except where otherwise specified.
CALCULATION OF AGE
References in the Contract to a person's age on any date refer to his or
her age on that person's last birthday.
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, any amount payable under
the Contract will be what would have been purchased at the correct age. If
payments were made based on incorrect age, the Company will increase or reduce a
later payment or payments to adjust for the error. Any adjustment will include
interest, at 6.0% per year, from the date of the wrong payment to the date the
adjustment is made.
ASSIGNMENT OF THE CONTRACT
While the Annuitant is living, and except for Qualified Contracts, you may
assign the Contract or any interest you have in it. Any irrevocable Beneficiary
must agree to the assignment. If there is a joint Contract Owner, the joint
Contract Owner must agree to any assignment. Your interest, and anyone else's,
will then be subject to that assignment. As Contract Owner, you still have the
rights of ownership that you have not assigned.
An assignee cannot change the Contract Owner, Annuitant or Beneficiary, and
may not elect an alternative payment option. Any amount payable to the assignee
will be made in one lump sum.
To assign the Contract, you must provide the Company with a copy of the
assignment. The Company is not responsible for the validity of any assignment.
An assignment will be subject to any payment previously made by the Company or
any other action the Company may take before recording the assignment.
State law such as those governing marital property may affect your ability
to encumber the Contract.
NONPARTICIPATING
The Contract is nonparticipating and will not share in any surplus earnings
of the Company. No dividends are payable on the contract.
NON-BUSINESS DAYS
If the due date for any activity required by the Contract falls on a
non-business day for the Company, performance will be rendered on the first
business day following the due date.
REGULATORY REQUIREMENTS
All interest guarantees, surrender benefits, and amounts payable at death
will not be less than the minimum benefits approved under the laws and
regulations of the state in which the Contract is delivered.
The Company will administer the Contract in accordance with the U.S. tax
laws and regulations in order to retain its status as an annuity contract.
The Contract is deemed to include all state and federal laws that apply.
40
<PAGE>
LEGAL PROCEEDINGS
The Company is not involved in any litigation that is of material
importance in relation to its general account assets. In addition, there are no
legal proceedings to which the Separate Account is a party.
AVAILABLE INFORMATION
The Company has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933 relating to the Contracts offered by this Prospectus.
This Prospectus has been filed as part of the Registration Statement and does
not contain all of the information set forth in the Registration Statement.
Reference is hereby made to such Registration Statement for further information
relating to the Company and the Contracts. The Registration Statement may be
inspected and copied at the public reference facilities of the SEC at Room 1024,
450 Fifth Street, N.W, Washington, D.C. 20549. Copies of such materials also can
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W, Washington, D.C. 20549, at prescribed rates.
41
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
More Information About the Contract. . . . . . . . . . . . . . . . . . B-3
Determination of Variable Sub-account Accumulation Unit Values . . . B-3
Annuity Period Transfer Formulas . . . . . . . . . . . . . . . . . . B-4
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Records and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . B-5
Custody of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Performance Data and Calculations. . . . . . . . . . . . . . . . . . . B-6
Money Market Variable Sub-account Yield. . . . . . . . . . . . . . . B-6
Other Variable Sub-account Yield . . . . . . . . . . . . . . . . . . B-7
Variable Sub-account Total Return Calculations: Standardized . . . . B-9
Other Performance Data: Non-Standardized . . . . . . . . . . . . . . B-9
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . B-10
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Taxation of the Company. . . . . . . . . . . . . . . . . . . . . . . B-11
Tax Status of the Contracts. . . . . . . . . . . . . . . . . . . . . B-12
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . B-14
</TABLE>
42
<PAGE>
APPENDIX I
SURRENDER CHARGE CALCULATION
A Surrender Charge, which will not exceed 8.5% of total Premiums paid, is
deducted from the Contract Value upon Partial Withdrawal or Full Surrender of
the Contract, unless certain conditions apply. (See "Surrender Charge," p. 24.)
The Surrender Charge is calculated as follows:
(S -- FREE) x X% = SC, but not less than zero.
Where:
(S) is the gross Surrender or Partial Withdrawal Amount.
(FREE) is the 10% Free Surrender Amount (net of any other
applicable withdrawals that may have been taken and
applied toward the current Contract Year).
(SC) is the Surrender Charge Amount.
(X) is the following Surrender Charge percentage:
<TABLE>
<CAPTION>
CONTRACT YEAR PERCENTAGE
------------- ----------
<S> <C>
1 6
2 6
3 6
4 5
5 4
6 3
7 2
8 0
</TABLE>
EXAMPLE.
Assume a Contract Value of $50,000 at the end of the third Contract Year.
Also assume that no Market Value adjustment has been taken and no previous
partial surrenders were made.
1) If there is a Full Surrender at the end of the third Contract Year:
Surrender Charge = ($50,000 - $5,000) x .06 = $2,700.00
Thus, the Surrender proceeds would be $50,000 - $2,700.00 = $47,300.00.
Premium Taxes may also be applicable.
NOTE: The Annual Administrative Fee ($30) applies to Full Surrenders only
when Contract Value is less than $30,000.
2) If there is a Partial Surrender of $10,000 at the end of the third Contract
Year:
Surrender Charge = ($10,000 - $5000) x .06 = $300.00
Thus, the Contract Value would be reduced by $10,000 and you would receive
$9,700. Premium Taxes may also be applicable.
I-1
<PAGE>
APPENDIX II
MARKET VALUE ADJUSTMENT
The formula which will be used to determine the Market Value Adjustment is:
( )
( ( ) (N/12) )
( ( 1 + I ) -1 )
( ( ------------ ) ) X A
( ( 1 + J + .004 ) )
( ( ) )
( )
NOTE: The Market Value Adjustment will be limited so that it does
not reduce the return on the Capital Developer Account below 3.0% per
year.
I = The Guaranteed Interest Rate in effect for the current Interest Rate
Guarantee Period (expressed as a decimal, (E.G., 1% = .01).)
J = The Current U.S. Treasury Bill, Note or Bond rate (as quoted by the
Wall Street Journal and expressed as a decimal (E.G., 1% = .01)) in
effect for the period most closely approximating the duration
remaining in the current Interest Rate Guarantee Period (Fractional
years will be rounded to the nearest month and the interest rate will
be calculated using interpolation). If the period is less than 1 year
then the Company will use the 1 year Treasury Bill rate.
N = The number of complete months from the Surrender or Partial Withdrawal
to the end of the current Interest Rate Guarantee Period.
A = The amount surrendered, withdrawn or transferred.
The ".004" in the formula is a factor designed to cover anticipated costs of
liquidating investments. Thus, the Guaranteed Interest Rate ("I") must be at
least 0.04% higher than the Treasury Rate ("J") for there to be a positive
market value adjustment. If I is lower than J or higher but less than 0.04%
higher, the Market Value Adjustment is negative.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Assume a Capital Developer Account Value of $50,000, a seven year guarantee
period with a Guaranteed Interest Rate of 6%, and an original payment of $43,000
at the beginning of the current guarantee period.
1) If there is a Full Surrender at the beginning of the fourth Contract Year
with four years remaining in the interest rate guarantee period:
(a) if the current rate for a four year Treasury Note is 5%:
( )
( ( ) (48/12) )
Market Value Adjustment $50,000 x ( ( 1.06 ) -1 )
( (------) ) = $1,148.28
( (1.054 ) )
( ( ) )
( )
Free Surrender Amount = ($51,148.28 x .10) = $5,114.83
Surrender Charge = ($51,148.28-$5,114.83) x .05 = $2,301.67
Thus, the surrender proceeds = $51,148.28 - $2,301.67
= $48,846.61 - any applicable Premium Taxes;
(b) if the current rate for the three year Treasury Note is 7%:
( )
( ( ) (48/12) )
Market Value Adjustment $50,000 x ( ( 1.06 ) -1 )
( (------) ) = -$2,556.54
( (1.074 ) )
( ( ) )
( )
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)3 - 50,000 = -3,012.74
Since - 2,556.54 is greater than - 3,012.74, the actual Market Value
Adjustment is - 2,556.54
II-1
<PAGE>
Free Surrender Amount = ($47,443.46 x .10) = $4,744.35
Surrender Charge = ($47,443.46 - $4,744.35) x .05 = $2,134.96
Thus, the Surrender proceeds = $47,443.46 - $2,134.96
= $45,308.50 - any applicable Premium Taxes
2) If there is a Full Surrender at the beginning of the tenth Policy Year
(thus, no Surrender Charge applies) with three years remaining in the
interest rate guarantee period:
(a) if the current rate for a three year Treasury Note is 5%:
( )
( ( ) (36/12) )
Market Value Adjustment $50,000 x ( ( 1.06 ) -1 )
( (------) ) = $858.76
( (1.054 ) )
( ( ) )
( )
Free Surrender Amount = $50,858.76
Surrender Charge = 0
Thus, the surrender proceeds = $50,858.76 - any applicable Premium Taxes;
(b) if the current rate for a three year Treasury Note is 7%:
( )
( ( ) (36/12) )
Market Value Adjustment $50,000 x ( ( 1.06 ) -1 )
( (------) ) = -$1,929.93
( (1.074 ) )
( ( ) )
( )
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)4 - 50,000 = -1,603.12
Since -1,929.93 is less than -1,603.12, the actual Market Value Adjustment
is -1,603.12
Free Surrender Amount = $48,396.88
Surrender Charge = 0
Thus, the surrender proceeds = $48,396.88 - any applicable Premium Taxes
3) If there is a partial surrender of $10,000 at the beginning of the fourth
Contract Year with four years remaining in the interest rate guarantee
period:
(a) if the current rate for a four year Treasury Note is 5%:
( )
( ( ) (48/12) )
Market Value Adjustment $10,000 x ( ( 1.06 ) -1 )
( (------) ) = $229.66
( (1.054 ) )
( ( ) )
( )
Free Surrender Amount = ($50,229.66 x .10) = $5,022.97
Surrender Charge = ($10,000 - $5,022.97) x .05 = $248.85
Thus, the Surrender proceeds = $10,000 + $229.66 - $248.85
= $9,980.81 - any Applicable Premium Taxes;
(b) if the current rate for a three year Treasury Note is 7%:
( )
( ( ) (48/12) )
Market Value Adjustment $10,000 x ( ( 1.06 ) -1 )
( (------) ) = -$511.31
( (1.074 ) )
( ( ) )
( )
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)3 - 50,000 = -3,012.74
Since -511.31 is less than -3,012.74, the actual Market Value Adjustment is
-511.31
Free Surrender Amount = ($49,488.69 x .10) = $4,948.87
II-2
<PAGE>
Surrender Charge = ($10,000 - $4,948.87) x .05 = $252.56
Thus, the surrender proceeds = $10,000 - $511.31 - $252.56
= $9,236.13 - any applicable Premium Taxes.
4) If there is a partial surrender of $10,000 at the beginning of the tenth
Contract Year (thus no Surrender Charge applies) with three years remaining
in the interest rate guarantee period:
(a) if the current rate for a two year Treasury Note is 5%:
( )
( ( ) (36/12) )
Market Value Adjustment $10,000 x ( ( 1.06 ) -1 )
( (------) ) = $171.75
( (1.054 ) )
( ( ) )
( )
Free Surrender Amount = $10,171.75
Surrender Charge = 0
Thus, the Surrender proceeds = $10,171.75 - any Applicable Premium Taxes;
(b) if the current rate for a two year Treasury Note is 7%:
( )
( ( ) (36/12) )
Market Value Adjustment $10,000 x ( ( 1.06 ) -1 )
( (------) ) = -$385.99
( (1.074 ) )
( ( ) )
( )
Minimum Market Value Adjustment with 3% guaranteed return =
43,000 x (1.03)4 - 50,000 = -1,603.12
Since -385.99 is greater than -1,603.12, the actual Market Value Adjustment
is -385.99
Free Surrender Amount = $9,614.01
Surrender Charge = 0
Thus, the surrender proceeds = $10,000 - $385.99
= $9,614.01 - any applicable Premium Taxes.
II-3
<PAGE>
ALEXANDER HAMILTON ALLEGIANCE VARIABLE ANNUITY
Offered by
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
100 N. Greene St.
Greensboro, North Carolina 27401
------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information expands upon certain subjects discussed
in the current Prospectus for the Alexander Hamilton Life Insurance Company of
America Variable Annuity Contract (the "Contract") offered by Alexander Hamilton
Life Insurance Company of America. You may obtain a copy of the Prospectus
dated May 1, 1998 by calling 1-800-289-1776, or by writing to the Company at its
Administrative Service Center, One Granite Place, P.O. Box 515, Concord, New
Hampshire 03302-0515. Terms used in the current Prospectus for the Contract
are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE CONTRACT, THE JEFFERSON PILOT
VARIABLE FUND, INC.; THE VARIABLE INSURANCE PRODUCTS FUND; THE VARIABLE
INSURANCE PRODUCTS FUND II; THE MFS VARIABLE INSURANCE TRUST; AND THE
OPPENHEIMER VARIABLE ACCOUNT FUNDS.
Dated: May 1, 1998
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
More Information About the Contract . . . . . . . . . . . . . . . . . . . . 3
Determination of Variable Subaccount Accumulation Unit Values . . . . . . . 3
Annuity Period Transfer Formulas. . . . . . . . . . . . . . . . . . . . . . 4
Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custody of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Performance Data and Calculations . . . . . . . . . . . . . . . . . . . . . 6
Money Market Variable Subaccount Yield. . . . . . . . . . . . . . . . . 6
Other Variable Subaccount Yields. . . . . . . . . . . . . . . . . . . . 6
Variable Subaccount Total Return Calculations: Standardized. . . . . . 7
Other Performance Data: Non-Standardized . . . . . . . . . . . . . . . 8
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Taxation of the Company. . . . . . . . . . . . . . . . . . . . . . . . .12
Tax Status of the Contracts. . . . . . . . . . . . . . . . . . . . . . .12
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
In order to supplement the description in the Prospectus, the following provides
additional information about the Company and the Contract which may be of
interest to you.
2
<PAGE>
MORE INFORMATION ABOUT THE CONTRACT
DETERMINATION OF VARIABLE SUBACCOUNT ACCUMULATION UNIT VALUES
ACCUMULATION UNITS. Accumulation Units are used to account for all amounts
allocated to or withdrawn from the Separate Account. The Company will determine
the number of Accumulation Units of a Variable Subaccount by dividing the Net
Premium Payment allocated to (or the amount withdrawn from) the Variable
Subaccount by the dollar value of one Accumulation Unit on the date of the
transaction. The Separate Account Value will consist of the sum of the value of
all Accumulation Units in all Variable Subaccounts credited to the Contract on
the applicable Valuation Day.
ACCUMULATION UNIT VALUE. The value of an Accumulation Unit in a Variable
Subaccount on any Valuation Day is the product of (a) the value on the preceding
Valuation Day and (b) the Net Investment Factor for the Variable Subaccount for
the Valuation Period just ended. The value of an Accumulation Unit in each of
the initial seven Variable Subaccounts was arbitrarily established at the
inception of the Separate Account's operation. The value was established at $10
for each of the eighteen Variable Subaccounts except the Money Market Variable
Subaccount, for which the value was established at $1, the JPVF Growth
Subaccount, for which the value was established at $14.655, the JPVF High Yield
Bond Subaccount, for which the value was established at $11.909, and the JPVF
International Equity Subaccount, for which the value was established at $11.371.
A VALUATION DAY is every day on which the Company and the New York Stock
Exchange ("NYSE") are open for business, but shall not include any day on which
trading on the NYSE is restricted, or on which an emergency exists, as
determined by the Securities and Exchange Commission and/or respective governing
bodies of the NYSE so that valuation or disposal of securities is not
practicable.
A VALUATION PERIOD is the period of time beginning at the close of trading
of the New York Stock Exchange on any Valuation Day and ending at the close of
business on the next Valuation Day. A Valuation Period may be one day or more
than one day.
NET INVESTMENT FACTOR. The Company calculates the Net Investment Factor
for a Valuation Period for each Variable Subaccount by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the sum of:
(1) the net asset value of a Fund share held in the Separate Account
for that Variable Subaccount determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distributions made for shares held in the Separate Account for
that Variable Subaccount if the ex-dividend date occurs during
the Valuation Period.
3
<PAGE>
(b) is the net asset value of a Fund share held in the Separate Account
for that Variable Subaccount determined as of the end of the preceding
Valuation Period.
(c) is a factor representing the Mortality and Expense Risk Charge and the
Administrative Expense Charge. This factor is equal, on an annual
basis, to 1.40% (1.25% + 0.15%) of the daily net asset value of Fund
shares held in the Separate Account for that Variable Subaccount.
The Net Investment Factor may be greater or less than one; therefore, the
Accumulation Unit value may increase or decrease.
ANNUITY PERIOD TRANSFER FORMULAS
During the Annuity Period, you may transfer Separate Account Value from one
Variable Subaccount to another, subject to certain limitations. Interest Rate
Guarantee Periods are not available during the Annuity Period, thus none will be
available for transfers. (See "Transfers,"
p. 16 of the Prospectus.)
Transfers during the Annuity Period are implemented according to the
following formula:
1. Determine the number of units to be transferred from the Variable
Subaccount as follows:
= D/AUV1
2. Determine the number of Annuity Units remaining in such Variable
Subaccount (after the transfer):
= UNIT1 - D/AUV1
3. Determine the number of Annuity Units in the transferee Variable
Subaccount (after the transfer):
= UNIT2 + D/AUV2
4. Subsequent Annuity Payments will reflect the changes in Annuity Units
in each Variable Subaccount as of the next Annuity Payment's due
date.
Where:
(AUV1) is the Annuity Unit value of the Variable Subaccount that the
transfer is being made from.
(AUV2) is the Annuity Unit value of the Variable Subaccount that the
transfer is being made to.
(UNIT1) is the number of units in the Variable Subaccount that the
transfer is being made from, before the transfer.
(UNIT2) is the number of units in the Variable Subaccount that the
transfer is being made to, before the transfer.
(D) is the dollar amount being transferred.
4
<PAGE>
ADMINISTRATION
The Company or its affiliates will be providing administrative services.
The services provided by the Company or its affiliates include issuance and
redemption of the Contract, maintenance of records concerning the Contract and
certain Contract Owner services.
If the Company or its affiliates do not continue to provide these services,
the Company will attempt to secure similar services from such sources as may
then be available. Services will be purchased on a basis which, in the Company's
sole discretion, affords the best service at the lowest cost. The Company,
however, reserves the right to select a provider of services which the Company,
in its sole discretion, considers best able to perform such services in a
satisfactory manner even though the costs for the service may be higher than
would prevail elsewhere.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be
maintained by the Company. As presently required by the Investment Company Act
of 1940 and regulations promulgated thereunder, the Company will mail to you at
your last known address of record, at least annually, reports containing such
information as may be required under that Act or by any other applicable law or
regulation. You will also receive confirmation of each financial transaction
and any other reports required by law or regulation.
CUSTODY OF ASSETS
The assets of each of the Variable Subaccounts of the Separate Account are
held in the custody of Citibank,N.A. The assets of each of the Variable
Subaccounts of the Separate Account are segregated and held separate and apart
from the assets of the other Variable Subaccounts and from the Company's general
account assets. The Administrator maintains records of all purchases and
redemptions of Fund shares by each of the Variable Subaccounts.
PRINCIPAL UNDERWRITER
During the year ended December 31, 1996 Jefferson Pilot Variable
Corporation ("JPVC") (formerly Jefferson-Pilot Investor Services, Inc.) was paid
$25,128.35 in brokerage commissions, and FMG Distributors, the principal
underwriter until being replaced by JPVC, was paid $25,367.11 in brokerage
commissions. FMG Distributors were also paid $41,666.67 for underwriting
activities for 1996. During the year ended December 31, 1997, JPVC received
$341,003 in brokerage commissions, of which it retained $66,407.
The Company, on its own behalf and on behalf of the Separate Account,
entered into a Principal Underwriter Agreement with JPVC dated November 1, 1996.
JPVC is a wholly-owned subsidiary of Jefferson-Pilot Corporation and is an
affiliate of the Company.
5
<PAGE>
PERFORMANCE DATA AND CALCULATIONS
MONEY MARKET VARIABLE SUBACCOUNT YIELD
The Yield of the Money Market Variable Subaccount for a seven-day period is
calculated by a standardized method prescribed by rules of the Securities and
Exchange Commission. Under this method, the yield quotation is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Accumulation Unit of
the Money Market Variable Subaccount at the beginning of such seven-day period,
subtracting a hypothetical charge reflecting deductions from contract owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7) with the resulting yield figure carried to at
least the nearest hundredth of one percent. The Separate Account may also
compute the Money Market Variable Subaccount's yield on an annualized basis.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical account having a
balance of one Accumulation Unit of the Money Market Variable Subaccount at the
beginning of such seven-day period, dividing such net change in account value by
the value of the account at the period to determine the base period return, and
annualizing this quotient on a 365-day basis.
The SEC also permits the Separate Account to disclose the effective yield
of the Money Market Variable Subaccount for the same seven-day period,
determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return by adding one to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result.
The yield on amounts held in the Money Market Variable Subaccount normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. The Money Market Variable Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the JPVF Money Market Portfolio, the types and quality of portfolio
securities held by the JPVF Money Market Portfolio, and its operating expenses.
The yield figures do not reflect Surrender Charges or Premium Taxes.
OTHER VARIABLE SUBACCOUNT YIELDS
The yield of Variable Subaccounts other than the Money Market Variable
Subaccount based on a thirty-day period is calculated by a standardized method
prescribed by rules of the Securities and Exchange Commission. The yield is
computed by dividing the net investment income per Accumulation Unit earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
YIELD = 2[(a-b+1)6 -1]
---
cd
6
<PAGE>
Where:
a = net investment income earned during the period by the portfolio company
attributable to shares owned by the Subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Accumulation Units outstanding during the
period.
d = the maximum offering price per Accumulation Unit on the last day of the
period.
The Company may from time to time advertise or disclose the current
annualized yield of one or more of the Variable Subaccounts of the Separate
Account (except the Money Market Variable Subaccount) for 30-day periods. The
annualized yield of a Variable Subaccount refers to income generated by the
Variable Subaccount over a specific 30-day period. Because the yield is
annualized, the yield generated by a Variable Subaccount during the 30-day
period is assumed to be generated each 30-day period over a 12-month period.
The 30-day yield is calculated according to the following formula:
6
Yield = 2 (a-b)
-----
cd + 1 -1
Where:
a = Net investment income of the Variable Subaccount for the 30-day period
attributable to the Variable Subaccount's unit.
b = Expenses of the Variable Subaccount for the 30-day period.
c = The average number of units outstanding.
d = The unit value at the close (highest) of the last day in the 30-day period.
Because of the charges and deductions imposed by the Separate Account, the
yield for a Variable Subaccount of the Separate Account will be lower than the
yield for its corresponding Fund. The yield calculations do not reflect the
effect of any Premium Taxes or Surrender Charge that may be applicable to a
particular Contract. Surrender Charges range from 6% to 2% of the amount
withdrawn based on the Contract Year of Surrender. The yield on amounts held in
the Variable Subaccounts of the Separate Account normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. A Variable
Subaccount's actual yield is affected by the types and quality of the Funds'
investments and its operating expenses.
VARIABLE SUBACCOUNT TOTAL RETURN CALCULATIONS: STANDARDIZED
The Company may from time to time also disclose average annual total
returns for one or more of the Variable Subaccounts for various periods of time.
Average annual total return quotations are computed by finding the average
annual compounded rates of return over one, five and ten year periods and for
the life of the Variable Subaccount that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
n
P (1 + T) = ERV
7
<PAGE>
Where:
P = hypothetical initial Premium Payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the one, five or ten-
year period (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of the
one, five, or ten-year period.
The Surrender Charge on Contracts and all recurring fees that are charged
to all shareholder accounts (the Annual Administrative Fee) are recognized in
the ending redeemable value for standard total return figures. These figures
will not reflect any Premium Taxes.
The following table shows the Standardized Average Annual Total Return for
the Allegiance Variable Annuity subaccounts for the period ended December 31,
1997.
<TABLE>
<CAPTION>
Since
1997 Inception
------ ---------
<S> <C> <C>
JPVF Money Market Sub-account* 0.41% 0.09%
JPVF Balanced Sub-account* 16.53% 12.00%
JPVF Growth and Income account* 22.08% 10.23%
JPVF Capital Growth Sub-account* 19.66% 19.54%
JPVF Domestic Growth Stock Sub-account** N/A N/A
JPVF Emerging Growth Sub-account* 17.55% 9.92%
JPVF World Growth Stock Sub-account* -1.23% 2.91%
JPVF Growth Sub-account** N/A N/A
JPVF High Yield Bond Sub-account** N/A N/A
JPVF International Equity Sub-account** N/A N/A
MFS Research Series Sub-account** N/A N/A
MFS Utilities Series Sub-account** N/A N/A
Oppenheimer Bond Sub-account* 3.76% 1.96%
Oppenheimer Strategic Bond Sub-account** N/A N/A
VIP Equity-Income Sub-account** N/A N/A
VIP Growth Sub-account** N/A N/A
VIP II Contrafund Sub-account** N/A N/A
VIP II Index 500 Sub-account** N/A N/A
</TABLE>
* Performance information reflects the substitution of the funds in which
these Variable Sub-accounts invest which occurred on December 5, 1997. The
inception date for these Variable Sub-accounts was February 27, 1996.
** These Sub-accounts were added to the Contract as of January 1, 1998, and
therefore, no standardized performance information is available as of
December 31, 1997.
OTHER PERFORMANCE DATA: NON-STANDARDIZED
The Company may from time to time also disclose average annual total
returns in non-standardized formats in conjunction with the standard format
described above. The non-standard format calculation varies from the standard
format calculation described above in that it will NOT
8
<PAGE>
take any Surrender Charges or the Annual Administrative Fee into account and
will be based on an average contract size of $30,000.
The standardized performance calculation described above is based on the
inception date of each Variable Sub-account. However, for the non-standardized
performance calculation, if a Fund was in existence prior to the inception date
of the corresponding Variable Sub-account, the performance for the Variable
Sub-account will be calculated on a hypothetical basis by applying the Mortality
and Expense Risk Charge and the Administrative Expense Charge to the historical
performance of the corresponding Fund as if the Contract has been in existence
back to the inception date of the Fund.
The following table shows the non-standardized average annual total return
for the Allegiance Variable Annuity Sub-accounts for the periods ended December
31, 1997.
<TABLE>
<CAPTION>
Since
Sub-Accounts 1 Year 3 Years 5 Years 10 Years Inception*
- ------------ ------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
JPVF Money Market 3.40% 3.39% 2.58% 3.45% 3.61% (8/1/85)
JPVF Balanced 14.71% 14.68% 9.60% N/A 9.80% (5/1/92)
JPVF Growth and Income 27.13% 26.57% 16.77% N/A 16.06% (5/1/92)
JPVF Capital Growth 27.61% 27.97% 19.72% N/A 22.09% (5/1/92)
JPVF Domestic Growth Stock*** 21.88% 21.40% 16.77% 15.39% 14.19% (4/18/86)
JPVF Emerging Growth 18.79% N/A N/A N/A 25.25% (5/1/95)
JPVF World Growth Stock 13.72% 15.31% 14.09% 11.80% 11.43% (8/1/85)
JPVF Growth** N/A N/A N/A N/A N/A (1/1/98)
JPVF High Yield Bond** N/A N/A N/A N/A N/A (1/1/98)
JPVF International Equity** N/A N/A N/A N/A N/A (1/1/98)
MFS Research Series*** 16.92% N/A N/A N/A 19.72% (7/26/95)
MFS Utilities Series*** 29.87% N/A N/A N/A 26.11% (1/3/95)
Oppenheimer Bond 7.38% 8.54% 6.63% 7.73% 8.20% (4/3/85)
Oppenheimer Strategic Bond*** 5.56% 9.84% N/A N/A 5.78% (5/3/93)
VIP Equity-Income*** 24.49% 22.58% 17.81% 14.77% 12.79% (10/9/86)
VIP Growth*** 20.13% 21.85% 16.00% 15.37% 13.80% (10/9/86)
VIP II Contrafund*** 22.47% N/A N/A N/A 26.40% (1/3/95)
VIP II Index 500*** 30.84% 28.91% 18.29% N/A 18.25% (8/27/92)
</TABLE>
* The date listed next to each performance figure in this column is the
inception date of the Fund underlying each corresponding Variable
Sub-account.
** These Sub-accounts and their corresponding Funds were established and added
to the Contract as of January 1, 1998, and therefore, no performance
information is available as of December 31, 1997.
*** These Sub-accounts were added to the Contract as of January 1, 1998, and
therefore, while non-standardized performance figures are available, no
standardized performance figures are available as of December 31, 1997.
9
<PAGE>
The Company may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. Cumulative total return
figures represent the cumulative change in value of an investment in a
Sub-account over the indicated periods. The cumulative returns will be
calculated using the following formula, assuming no Surrender Charge or Annual
Administrative Fee.
CTR = ERV - P
-------
P
Where:
CTR = the cumulative total return net of a Variable Subaccount's
recurring charges for the period;
ERV = ending redeemable value at the end of the one, five or ten-year
(or other) period (or fractional portion thereof) of a
hypothetical $30,000 Premium Payment made at the beginning of the
one, five, or ten-year (or other) period.
P = a hypothetical initial Premium Payment of $30,000.
The following table shows the Non-Standardized Cumulative Total Return for
the Allegiance Variable Annuity Sub-accounts for the period ended December 31,
1997.
<TABLE>
<CAPTION>
Since
Sub-Accounts 1 Year Inception*
- ------------ ------ ----------
<S> <C> <C> <C>
JPVF Money Market 3.40% 55.36% (8/1/85)
JPVF Balanced 14.71% 69.97% (5/1/92)
JPVF Growth and Income 27.13% 132.76% (5/1/92)
JPVF Capital Growth 27.61% 210.18% (5/1/92)
JPVF Domestic Growth Stock*** 21.88% 373.25% (4/18/86)
JPVF Emerging Growth 18.79% 82.46% (5/1/95)
JPVF World Growth Stock 13.72% 283.83% (8/1/85)
JPVF Growth** N/A N/A (1/1/98)
JPVF High Yield Bond** N/A N/A (1/1/98)
JPVF International Equity** N/A N/A (1/1/98)
MFS Research Series*** 16.92% 55.02% (7/26/95)
MFS Utilities Series*** 29.87% 100.31% (1/3/95)
Oppenheimer Bond 7.38% 173.11% (4/3/85)
Oppenheimer Strategic Bond*** 5.56% 29.97% (5/3/93)
VIP Equity-Income*** 24.49% 286.69% (10/9/86)
VIP Growth*** 20.13% 327.29% (10/9/86)
VIP II Contrafund*** 22.47% 101.71% (1/3/95)
VIP II Index 500*** 30.84% 145.09% (8/27/92)
</TABLE>
* The date listed next to each performance figure in this column is the
inception date of the Fund underlying each corresponding Variable
Sub-account.
** These Sub-accounts and their corresponding Funds were established and added
to the Contract as of January 1, 1998, and therefore, no performance
information is available as of December 31, 1997.
*** These Sub-accounts were added to the Contract as of January 1, 1998, and
therefore, while non-standardized performance figures are available, no
standardized performance figures are available as of December 31, 1997.
10
<PAGE>
All non-standard performance data will only be advertised if the standard
total return performance data is also included in the advertisement.
OTHER INFORMATION
The following is a partial list of those publications which may be cited in
advertising or sales literature describing investment results or other data
relative to one or more of the Variable Subaccounts. Other publications may
also be cited.
<TABLE>
<S> <C>
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of the American Society of CLU & ChFC Journal of Commerce
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman
</TABLE>
FEDERAL TAX MATTERS
The Allegiance Variable Annuity Contract is designed for use by individuals
as either a non-qualified annuity contract or as an annuity contract purchased
for a qualified retirement plan under Section 401, 403(b), 408, 408A or 457 of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of Federal income taxes on the Contract Value will depend on numerous factors
that are explained in the Prospectus (See "Certain Federal Income Tax
Consequences"). THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX
ADVICE. Any person concerned about these tax implications should consult a
competent tax advisor. This discussion is based upon the Company's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of these present federal income tax laws or of
the current interpretations by the Internal Revenue Service. Moreover, no
attempt has been made to consider any applicable state or other tax laws.
11
<PAGE>
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Code. The following discussion assumes that the Company is taxed as a
life insurance company under Part I of Subchapter L. Since the Separate Account
is not an entity separate from the Company, and its operations form a part of
the Company, it will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. Investment income and realized capital gains
are automatically applied to increase reserves under the Contract. Under
existing federal income tax law, the Company believes that the Separate Account
investment income and realized net capital gains will not be taxed to the extent
that such income and gains are applied to increase the reserves under the
Contract.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account, and
therefore, the Company does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
the Company being taxed on income or gains attributable to the Separate Account,
then the Company may impose a charge against the Separate Account (with respect
to some or all contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACTS
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Trust be "adequately diversified" in
accordance with Treasury regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. sec. 1.817-5, which affect how a Fund's assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The
Treasury Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., you),
rather than the insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would be issued by
way of regulations or rulings on the "extent to which policyholders may direct
their investments to particular subaccounts without being treated as owners of
the underlying assets."
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
policy values. These differences could result in your being treated as the
owner of a pro rata portion of the assets of the Separate Account. In addition,
the Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the
12
<PAGE>
Contract as necessary to attempt to prevent you from being considered the owner
of a pro rata share of the assets of the Separate Account or to otherwise
qualify the Contract for favorable tax treatment.
Both non-qualified and qualified annuity contracts are required to comply
with certain minimum distribution requirements in order to be treated as annuity
contracts under the Code. Owners of non-qualified annuity contracts are
generally not required to commence distributions under the annuity contract
prior to the maturity date of the contract. However, if the Owner of a
non-qualified annuity dies before the contract matures, the beneficiary is
required to either (i) annuitize the contract within one year of the Owner's
death, or (ii) totally withdraw all funds from the annuity within five years of
the Owner's death. Owners of qualified annuity contracts (other than Roth IRAs)
are, however, generally required to commence distributions from the annuity
contract when they attain age 70 1/2, and to receive distributions over the
Owner's life expectancy (or over the joint life expectancy of the Owner and the
Owner's spouse). There are special rules that allow a surviving spouse to take
over the annuity contract at the Owner's death and treat the contract as if it
had originally been purchased by the surviving spouse. If the Owner dies once
distributions have begun (for both qualified and non-qualified annuities), the
beneficiary must continue to receive distributions at least as rapidly as the
Owner was receiving them. Further details regarding the minimum distribution
rules are contained in the Prospectus (See "Death Benefits").
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Contracts has been provided to the
Company by Jorden Burt Boros Cicchetti Berenson & Johnson of Washington D.C.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus for the Contracts or this Statement
of Additional Information. Statements contained in the Prospectus and this
Statement of Additional Information concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the Securities and
Exchange Commission.
EXPERTS
The financial statements of The Alexander Hamilton Variable Annuity
Separate Account of Alexander Hamilton Life Insurance Company of America as of
December 31, 1997, and for the year then ended, appearing in this Statement of
Additional Information and this Registration Statement have been audited by
__________________ independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
13
<PAGE>
The statutory basis financial statements of Alexander Hamilton Life
Insurance Company of America as of December 31, 1997, and for each of the years
in the two-year period ended December 31, 1997, appearing in this Statement of
Additional Information and this Registration Statement have been audited by
__________________ independent auditors, as set forth in their report thereon
(which contains an adverse opinion with respect to conformity with generally
accepted accounting principles) appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of the Company included in this Statement of
Additional Information should be considered only as bearing on the ability of
the Company to meet its obligations under the Contracts. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account, nor do they necessarily bear on the Guaranteed Interest Rates
declared from time to time for the Capital Developer Account Interest Rate
Guarantee Periods.
14
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part A and Part B of
this Registration Statement except that the financial statements of
the Separate Account and the Company will be filed as part of the
Post-Effective Amendment to be filed in April, 1998.
(b) Exhibits:
(1) Resolution of the Board of Directors of Alexander Hamilton Life
Insurance Company of America authorizing establishment of the
Separate Account.1 /
(2) Not Applicable.
(3) Principal Underwriting Agreement by and between Alexander Hamilton
Life Insurance Company of America, on its own behalf and on the behalf
of the Separate Account, and Jefferson-Pilot Investor Services, Inc.
3/
(4) (a) Form of Contract for the Alexander Hamilton Life Insurance
Company of America Variable Annuity.2/
(b) Form of IRA Endorsement.2/
(c) Form of IRA Disclosure and Financial Disclosure Endorsement.2/
(d) Form of TSA Endorsement.2/
(e) Form of 401(a) Endorsement.2/
(5) (a) Form of Application for the Alexander Hamilton Life Insurance
Company of America Variable Annuity Contract.4/
(b) Form of Application Supplement for 1035 Exchange.2/
(6) (a) Charter of Alexander Hamilton Life Insurance Company of
America.1/
(b) By-Laws of Alexander Hamilton Life Insurance Company of America
1/
(7) Not Applicable.
(8) (a) Participation Agreement by and between Alexander Hamilton Life
Insurance Company of America, Fidelity Distributors Corporation
and Variable Insurance Products Fund.4/
C-1
<PAGE>
(b) Participation Agreement by and between the Alexander Hamilton
Life Insurance Company of America, Fidelity Distributors
Corporation and Variable Insurance Products Fund II.4/
(c) Participation Agreement by and between Alexander Hamilton Life
Insurance Company of America, Massachusetts Financial Services
Company and MFS Variable Insurance Trust.4/
(9) Opinion and Consent of Counsel.2/
(10) Not Applicable.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule of Computation of Performance.4/
1/ Incorporated by reference to the initial Registration Statement on Form N-4
for the Alexander Hamilton Variable Annuity Separate Account filed on
February 24, 1994 (Registration No. 33-75714).
2/ Incorporated by reference to the Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on September 8, 1995 (Registration
No. 33-75714).
3/ Incorporated by reference to the Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 for the Alexander Hamilton Variable
Annuity Separate Account filed on May 2, 1997 (Registration
No. 33-75714).
4/ Filed herewith
C-2
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Position and Offices
Business Address with Depositor
- ---------------- --------------
David A. Stonecipher Director; Chairman of the
Board and President
Dennis R. Glass Director; Executive Vice
President and Treasurer
John D. Hopkins Director; Executive Vice
President and General Counsel
Kenneth C. Mlekush Director; Executive Vice
President
James T. Ponder Director; Executive
Vice President
E. Jay Yelton Director; Executive Vice
President
Reggie D. Adamson Senior Vice President-
Finance
Charles P. Elam Senior Vice President and
Annuity Actuary
John C. Ingram Senior Vice President-
Securities
Hal B. Phillips Senior Vice President and
Life Actuary
Dale E. Cooper Vice President-Variable
Products
Russell C. Simpson Vice President
Robert A. Reed Vice President and
Secretary
Donna L. Drew Second Vice President
32991 Hamilton Court
Farmington Hills, MI 48334
*/ Except as otherwise noted, the Principal business address for each officer
and director is 100 N. Greene St., Greensboro, North Carolina, 27401.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
C-3
<PAGE>
The Company owns the assets comprising each Variable Subaccount of the
Registrant. The Company is an wholly-owned subsidiary of Jefferson-Pilot
Corporation.
Separate financial statements are filed for the Registrant.
The following is a list of corporations controlled by Jefferson-Pilot
Corporation:
<TABLE>
<CAPTION>
Organized % Voting
Under Stock
Names of Subsidiaries Laws of: Owned by
- --------------------- -------- Parent
------
<S> <C> <C>
Jefferson-Pilot Life Insurance Company North Carolina 100%
Jefferson Pilot Variable Corporation North Carolina 100%
Jefferson-Pilot Communications Company North Carolina 100%
Alexander Hamilton Life Insurance Company
of America Michigan 100%
Alexander Hamilton Capital Management, Inc. Michigan 100%
AH (Michigan) Life Insurance Company Michigan 100%
First Alexander Hamilton Life Insurance Company New York 100%
Chubb Life Insurance Company of America New Hampshire 100%
Chubb Colonial Life Insurance Company New Jersey 100%
Chubb Sovereign Life Insurance Company New Hampshire 100%
Jefferson Pilot Securities Corporation New Hampshire 100%
</TABLE>
Omitted from the list are subsidiaries of Jefferson-Pilot Corporation and the
other companies listed which, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary. Since none of the
companies listed is a subsidiary of the registrant, only the financial
statements of the registrant are filed.
C-4
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 13, 1998, there were 246 Owners of the Contracts, 133 of which
owned non-qualified Contracts and 113 of which owned qualified Contracts.
ITEM 28. INDEMNIFICATION
The following provisions regarding the Indemnification of Directors and Officers
of the Depositor are applicable:
Section 450.1562 of Michigan Compiled Laws allows a corporation to indemnify a
person who was or is party or is threatened to be made a party to a threatened,
pending, or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for profit or not, against
expenses, including attorneys' fees, and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action or suit, if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation or its shareholders,
Indemnification shall not be made for a claim, issue, or matter in which the
person has been found liable to the corporation. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the '1933 Act') may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company
C-5
<PAGE>
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered), the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Jefferson Pilot Variable Corporation also acts as principal underwriter for
the following:
- Jefferson-Pilot Separate Account A of Jefferson-Pilot Life Insurance
Company
- Chubb Separate Account A of Chubb Life Insurance Company of America
- Chubb Separate Account C of Chubb Life Insurance Company of America
- Colonial Separate Account B of Chubb Colonial Life Insurance Company
- Colonial Separate Account D of Chubb Colonial Life Insurance Company
Jefferson Pilot Variable Fund, Inc.
(b) The Directors and Officers of Jefferson Pilot Variable Corporation, the
principal underwriter for the Registrant, are as follows:
NAME AND PRINCIPAL POSITIONS AND
BUSINESS ADDRESS OFFICES WITH UNDERWRITER
- ---------------- ------------------------
Ronald R. Angarella Director and President
David K. Booth Vice President, Marketing
W. Thomas Boulter Chief Compliance Officer
Charles C. Cornelio Director
Kevin Haddad Compliance Officer
100 N. Greene Street
Greensboro, NC 27401
Carol R. Hardiman Director
Shari J. Lease Secretary
John A. Weston Chief Financial Officer
Stafford Moser Assistant Vice President, Marketing
100 N. Greene Street
Greensboro, NC 27401
Address (except as otherwise noted):
One Granite Place
Concord, NH 03301
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NAME OF NET UNDERWRITING
PRINCIPAL DISCOUNTS AND COMPENSATION BROKERAGE
UNDERWRITER COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1997 Jefferson Pilot $ 0 $ 0 $ 66,407 $ 0
Variable
Corporation
</TABLE>
C-6
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by the Company, at 100 North Green St., Greensboro, North Carolina
27401 and/or One Granite Place, Concord, New Hampshire 03301.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as Premium Payments under the Contract may be accepted
(except in accordance with SEC staff no-action correspondence)
(b) Registrant undertakes that it will include either (i) a postcard or
similar written communication affixed to or included
C-7
<PAGE>
in the Prospectus that the applicant can remove to send for a Statement of
Additional Information or (ii) a space in the Contract Application that an
applicant can check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) Alexander Hamilton Life Insurance Company of America hereby
represents that the fees and charges deducted under the contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Alexander Hamilton Life
Insurance Company of America.
SECTION 403(b) REPRESENTATIONS
The Company represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88), regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on Section
403(b) Contracts, and that paragraphs numbered (1) through (4) of that letter
will be complied with.
STATEMENT PURSUANT TO RULE 6c-7: TEXAS OPTIONAL RETIREMENT PROGRAM
The Company and the Separate Account rely on 17 C.F.R. Section 270.6c-7, and
represent that the provisions of that Rule have been or will be complied with.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greensboro, State of
North Carolina on this 20th day of February, 1998.
ALEXANDER HAMILTON VARIABLE ANNUITY
SEPARATE ACCOUNT
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF
AMERICA
Depositor
/s/ David A. Stonecipher
----------------------------------------
David A. Stonecipher
Chairman of the Board, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ David A. Stonecipher
Director; Chairman of the Board, President February 20, 1998
David A. Stonecipher
/s/ Dennis R. Glass
Director; Executive Vice President February 20, 1998
Dennis R. Glass and Treasurer
/s/ John D. Hopkins
Director; Executive Vice President February 20, 1998
John D. Hopkins and General Counsel
/S/ Kenneth C. Mlekush
Director; Executive Vice President February 20, 1998
Kenneth C. Mlekush
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ James T. Ponder
Director; Executive Vice President February 20, 1998
James T. Ponder
/s/ E. Jay Yelton
Director; Executive Vice President February 20, 1998
E. Jay Yelton
/s/ Donna L. Drew
Director; Second Vice President February 20, 1998
Donna L. Drew
</TABLE>
C-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Page
No. Exhibit No.
--- ------- ---
<S> <C>
(5)(a) Form of Application for the
Alexander Hamilton Life
Insurance Company of America
Variable Annuity Contract. . . . . . . . . . . . . . . . . . . .
(8)(a) Participation Agreement by and
between Alexander Hamilton
Life Insurance Company of America,
Fidelity Distributors Corporation and
Variable Insurance Products Fund . . . . . . . . . . . . . . . .
(8)(b) Participation Agreement by and
between Alexander Hamilton
Life Insurance Company of America,
Fidelity Distributors Corporation and
Variable Insurance Products Fund II. . . . . . . . . . . . . . .
(8)(c) Participation Agreement by and
between Alexander Hamilton
Life Insurance Company of America,
Massachusetts Financial Services
Company and MFS Variable Insurance
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13) Schedule of Computation of Performance . . . . . . . . . . . . .
</TABLE>
<PAGE>
[Allegiance LOGO] Variable Annuity Application
Alexander Hamilton Life Insurance Company of America . . . . .
1. CONTRACT OWNER
/ / Male
- ----------------------------------------------------- / / Female
Name
- ----------------------------------------------------------------
Address
- ----------------------------------------------------------------
City State Zip
/ /
- ----------------------------------------------------------------
Date of Birth Social Security or Taxpayer I.D.
( )
- ------------------------
Daytime Telephone
2. JOINT OWNER (SPOUSE ONLY-NOT AVAILABLE
FOR QUALIFIED PLANS)
/ / Male
- ---------------------------------------------------- / / Female
Name
/ /
- ----------------------------------------------------------------
Date of Birth Social Security or Taxpayer I.D.
( )
- ------------------------
Daytime Telephone
3. ANNUITANT (IF OTHER THAN CONTRACT OWNER)
/ / Male
- -------------------------------------------- / / Female
Name
- ----------------------------------------------------------------
Address
- ----------------------------------------------------------------
City State Zip
/ /
- ----------------------------------------------------------------
Date of Birth Social Security or Taxpayer I.D.
( ) / /
- ----------------------------------------------------------------
Daytime Telephone Annuity Start Date
4. BENEFICIARY
- ----------------------------------------------------------------
Primary Relationship to Owner %
- ----------------------------------------------------------------
Primary Relationship to Owner %
- ----------------------------------------------------------------
Contingent Relationship to Owner
5. TYPE OF PLAN
/ / Non Qualified / / Non Qualified Deferred Comp
/ / 457 Deferred Comp / / Pension/Profit Sharing
/ / IRA / / Custodial IRA / / SEP
/ / 403(b)-ERISA / / 403(b)-Non ERISA
/ / Other
------------------------------------------------------
6. PREMIUM PAYMENT
INITIAL PREMIUM $
----------------------------------------------
If IRA, SEP-IRA or 403(b) this Payment is a:
/ / Rollover / / Transfer / / Direct Rollover
/ / Regular-IRA, SEP-IRA or 403(b) Payment for tax year
IS THIS A 1035 EXCHANGE?: / / Yes / / No -------
METHOD OF PAYMENT
/ / Systematic Investment Program (attach form)
/ / Automatic Reminder Notice
Frequency (please circle one) Q SA A
GROUP BILLING:
/ / Add to existing Group Group No.
/ / New Group ------------------------
7. INITIAL PREMIUM PAYMENT ALLOCATION
Initial and subsequent payments will be allocated as shown
below unless otherwise directed.
[CHUBB AMERICA FUND, INC.]
[World Growth Stock - Templeton) -------------%
[International Equity - Lombard Odier] -------------%
[Emerging Growth - MFS] -------------%
[Growth - Strong] -------------%
[Domestic Growth Stock - Pioneer] -------------%
[Capital Growth - Janus] -------------%
[Growth and Income - Warburg, Pincus] -------------%
[Balanced - JP Morgan] -------------%
[High Yield - MFS] -------------%
[Money Market - MFS] -------------%
[FIDELITY VP FUND]
[Equity-Income] -------------%
[Growth] -------------%
[FIDELITY VIP FUND II]
[Contrafund] -------------%
[Index 500] -------------%
[MFS VARIABLE INSURANCE TRUST]
[Research Series] -------------%
[Utilities Series] -------------%
[OPPENHEIMER VARIABLE ACCOUNTS FUND]
[Bond] -------------%
[Strategic Bond] -------------%
[CAPITAL DEVELOPER ACCOUNTS]
[1-year Interest Rate Guarantee] -------------%
[7-year Interest Rate Guarantee] -------------%
OTHER:
- ---------------------------------------------------------------%
Note: 5% minimum to any account. Total 100%
/ / I understand that where applicable, my Initial Purchase
Payment (other than amounts allocated to the Fixed Account)
may be allocated to the Money Market Variable Sub-Account
for 15 days after the Contract Date. It will then be
allocated as specified above.
<PAGE>
8. TELEPHONE TRANSFER
/ / By checking one of the following boxes, I authorize the
company to accept telephone transfers/reallocation
instructions from:
/ / Only myself / / Myself & my representative
Representative name:---------------------------------------
To change the allocation of any purchase payments and/or
transfer funds among my investment choices based on my
telephone instructions and/or the telephone instructions of
my representative (if shown above), I agree to the
established conditions and requirements stated in the
prospectus. I agree to indemnify and hold Alexander
Hamilton Life, its affiliates, any mutual fund managed by
such affiliates and their trustees, directors, officers,
employees, and agents harmless from any and all losses
(including expenses) arising from such instructions.
I am aware that telephone instructions will be recorded to
protect me and the company and will be put into effect only
when proper identification is provided.
9. SPECIAL INSTRUCTIONS
(ANNUITY ELECTIONS, ETC.)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
10. REPLACEMENT
Will this contract replace any existing life insurance or
annuity with this or any other company? / / Yes / / No
11. SIGNATURES
I hereby represent that all statements and answers given above are, to the best
of my knowledge and belief, complete and true and may be relied upon in
determining whether to issue the contract.
I agree that a photographic or facsimile copy of this application shall be valid
as the original. I further acknowledge receipt of the current prospectus for the
Allegiance variable annuity. I also acknowledge receipt of the current
prospectuses for the variable subaccounts of the Allegiance variable annuity.
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance containing any materially false
information or conceals for the purpose of misleading, information concerning
any fact material thereto commits a fraudulent insurance act, which is a crime.
(Not applicable in Oregon.)
I UNDERSTAND THAT ANNUITY PAYMENTS AND SURRENDER VALUES, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. I ALSO UNDERSTAND THAT THE CAPITAL
DEVELOPER ACCOUNT SURRENDER VALUE MAY BE SUBJECT TO A POSITIVE OR NEGATIVE
MARKET VALUE ADJUSTMENT.
- ----------------------------------------------------------------
Owner
- ----------------------------------------------------------------
Annuitant
- ----------------------------------------------------------------
Dated at (City, State)
- ----------------------------------------------------------------
Registered Representative/Agent Signature
- ----------------------------------------------------------------
Joint Owner
- ------------------- ------------------- --------------------
Month Day Year
12. TO BE COMPLETED BY REGISTERED REPRESENTATIVE
Based on the information available to you, do you believe this annuity as
applied for is a suitable investment? / / Yes / / No
IF NO, PLEASE EXPLAIN
---------------------------------------------------------
Will this contract replace or change any existing life insurance or annuity with
this or any other company? / / Yes / / No
IF YES, PLEASE EXPLAIN
---------------------------------------------------------
Please Select One Option: / / Option A / / Option B / / Option C
- ----------------------------------------------------------------
Registered Representative/Agent Signature
- ----------------------------------------------------------------
Registered Representative/Agent Name (Please Print)
- ----------------------------------------------------------------
Registered Representative/Agent Number
- ----------------------------------------------------------------
Registered Representative/Agent Telephone Number
- ----------------------------------------------------------------
Broker/Dealer Number
13. MAILING INSTRUCTIONS
Make check payable to Alexander Hamilton Life Insurance Company of America.
Please send check and application to: [One Granite Place], [P.O. Box 515],
[Concord, NH 03302-0515]
ALEXANDER HAMILTON
----------------------------------------------------------
A LIFE INSURANCE SUBSIDIARY OF JEFFERSON-PILOT CORPORATION
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 18th day of December,
1997 by and among ALEXANDER HAMILTON LIFE INSURANCE COMPANY, (hereinafter the
"Company"), a Michigan 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
<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 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 find 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 9:00 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.
<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 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, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
<PAGE>
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.
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 500.925 of the Michigan 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 Michigan 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
<PAGE>
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.
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 Michigan 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 Michigan 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 Michigan 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.
<PAGE>
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 Michigan and any applicable state and federal securities laws.
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-(l) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage fur 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 annually 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.
<PAGE>
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of 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.
<PAGE>
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 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.
<PAGE>
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., 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.
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 8
17(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
<PAGE>
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 within the grace period afforded by Regulation 1.817-5.
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 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
<PAGE>
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 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.
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
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
<PAGE>
(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.
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:
<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
<PAGE>
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to 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
<PAGE>
(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;
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.
<PAGE>
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) 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; or
<PAGE>
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives 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 specified in Section 1.6(b) given.
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"). 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 XII 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 02 109
Attention: Treasurer
If to the Company:
Alexander Hamilton Life Insurance Company
100 North Greene Street
Greensboro, North Carolina 27401
Attention: Greg Poole
<PAGE>
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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.
<PAGE>
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.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
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;
(d) any registration statement (without exhibits) and financial
reports of the Company 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
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.
ALEXANDER HAMILTON INSURANCE COMPANY
By: /s/ Dale Cooper
---------------------------
Name: Dale Cooper
Title: Vice President
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Robert C. Pozen
---------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin J. Kelly
---------------------------
Kevin J. Kelly
Vice President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- --------------------
Alexander Hamilton Variable Annuity Allegiance Variable Annuity
Separate Account
(January 24, 1994)
<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.)
<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.
<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.
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Oppenheimer Bond
Oppenheimer Strategic Bond
MFS Research
MFS Utilities
Jefferson Pilot Variable Funds, Inc.
International Equities (Lombard Odier)
World Growth Stock (Templeton)
Balanced (J.P. Morgan)
Growth & Income (Warburg Pincus)
Emerging Growth (MFS)
Growth (Strong)
Domestic Growth Stock (Pioneer)
Capital Growth (Janus)
High Yield Bond (MFS)
Money Market (MFS)
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 18th day of December,
1997 by and among ALEXANDER HAMILTON LIFE INSURANCE COMPANY, (hereinafter the
"Company"), a Michigan 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, 1986 (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 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 find 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 9:00 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 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, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
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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.
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 500.925 of the Michigan 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 Michigan 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
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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.
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 Michigan 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 Michigan 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 Michigan 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.
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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 Michigan and any applicable state and federal securities laws.
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 annually 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.
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The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of 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 arid with whatever rules the Commission may promulgate with respect
thereto.
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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 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.
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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., 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.
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 8
17(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
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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 within the grace period afforded by Regulation 1.817-5.
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 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
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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 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.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
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
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(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.
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:
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(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
14
<PAGE>
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to 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
15
<PAGE>
(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;
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.
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; or
17
<PAGE>
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives 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 specified in Section 1.6(b) was given.
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"). 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:
Alexander Hamilton Life Insurance Company
100 North Greene Street
Greensboro, North Carolina 27401
Attention: Greg Poole
18
<PAGE>
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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.
19
<PAGE>
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.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
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;
(d) any registration statement (without exhibits) and financial
reports of the Company 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.
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.
ALEXANDER HAMILTON INSURANCE COMPANY
By: /s/ Dale Cooper
------------------------------
Name: Dale Cooper
Title: Vice President
20
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Robert C. Pozen
-----------------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin J. Kelly
-----------------------------------
Kevin J. Kelly
Vice President
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Alexander Hamilton Variable Annuity Allegiance Variable Annuity
Separate Account
(January 24, 1994)
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:
Oppenheimer Bond
Oppenheimer Strategic Bond
MFS Research
MFS Utilities
Jefferson Pilot Variable Funds, Inc.
International Equities (Lombard Odier)
World Growth Stock (Templeton)
Balanced (J.P. Morgan)
Growth & Income (Warburg Pincus)
Emerging Growth (MFS)
Growth (Strong)
Domestic Growth Stock (Pioneer)
Capital Growth (Janus)
High Yield Bond (MFS)
Money Market (MFS)
26
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 17 day of November 1997, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA, a Michigan
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 Investor Services, Inc., 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.
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
2
<PAGE>
Section 1.1. hereof. In the event of net redemptions, 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.
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2.3. The Company represents and warrants that Jefferson-Pilot Investor
Service, Inc., 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 Investor Services, Inc. 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, columns, graphs and charts; the Trust
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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.
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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.
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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-l 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.
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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)(1) 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
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 to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
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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
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(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 harm less 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
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(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:
JEFFERSON-PILOT/ALEXANDER HAMILTON LIFE INSURANCE COMPANY
Variable Annuity Marketing
100 N. Greene Street
Greensboro, North Carolina 27401
Facsimile No.: (800) 944-1162
Attn: Dale Cooper
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.
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
OF AMERICA
By its authorized officer,
By: /s/ Dale Cooper
--------------------------
Title: VP
-----------------------
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. Sharnes
--------------------------
Jeffrey L. Sharnes
Director and President
16
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- --------------------------------------------------------------------------------
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Alexander Hamilton Allegiance Variable MFS Utilities Series
Variable Annuity Separate Annuity MFS Research Series
Account January 24, 1994
- --------------------------------------------------------------------------------
17
<PAGE>
Exhibit 13
ALLEGIANCE VARIABLE ANNUITY
SCHEDULE OF COMPUTATION OF PERFORMANCE
The following examples are calculated in accordance with the methods described
in the Prospectus and Statement of Additional Information:
1. NON-STANDARD AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/97
The formula for calculating non-standard average annual total return is as
follows:
n
(ERV)
(---) -1
( P )
where:
ERV = ending redeemable value for a hypothetical $1,000 payment made at
the beginning of the period
P = hypothetical initial investment of $1,000
n = 1/number of years
EXAMPLES AT AUV:
JPVFI MONEY MARKET SUBACCOUNT
12/31/96-12/31/97
1
(31,019.55)
(---------) - 1 = 3.40%
(30,000.00)
JPVFI BALANCED SUBACCOUNT
12/31/96-12/31/97
1
(34,413.28)
(---------) - 1 = 14.71%
(30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
12/31/96-12/31/97
1
(38,137.67)
(---------) - 1 = 27.13%
(30,000.00)
<PAGE>
JPVFI CAPITAL GROWTH SUBACCOUNT
12/31/96-12/31/97
1
(38,282.55)
(---------) - 1 = 27.61%
(30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
12/31/96-12/31/97
1
(36,565.06)
(---------) - 1 = 21.88%
(30,000.00)
JPVFI EMERGING GROWTH SUBACCOUNT
12/31/96-12/31/97
1
(35,636.93)
(---------) - 1 = 18.79%
(30,000.00)
JPVFI WORLD GROWTH SUBACCOUNT
12/31/96-12/31/97
1
(34,116.94)
(---------) - 1 = 13.72%
(30,000.00)
MFS RESEARCH SERIES SUBACCOUNT
12/31/96-12/31/97
1
(35,077.09)
(---------) - 1 = 16.92%
(30,000.00)
MFS UTILITIES SERIES SUBACCOUNT
12/31/96-12/31/97
1
(38,959.92)
(---------) - 1 = 29.87%
(30,000.00)
<PAGE>
OPPENHEIMER BOND SUBACCOUNT
12/31/96-12/31/97
1
(32,214.29)
(---------) - 1 = 7.38%
(30,000.00)
OPPENHEIMER STRATEGIC BOND SUBACCOUNT
12/31/96-12/31/97
1
(31,667.58 )
(--------- ) - 1 = 5.56%
(30,000.00 )
VIP EQUITY-INCOME SUBACCOUNT
12/31/96-12/31/97
1
(37,345.94)
(---------) - 1 = 24.49%
(30,000.00)
VIP GROWTH SUBACCOUNT
12/31/96-12/31/97
1
(36,037.59)
(---------) - 1 = 20.13%
(30,000.00)
VIP II CONTRAFUND SUBACCOUNT
12/31/96-12/31/97
1
(36,740.71)
(---------) - 1 = 22.47%
(30,000.00)
VIP II INDEX 500 SUBACCOUNT
12/31/96-12/31/97
1
(39,252.07)
(---------) - 1 = 30.84%
(30,000.00)
<PAGE>
THREE YEAR
Exhibit 13
JPVFI MONEY MARKET SUBACCOUNT
12/31/94-12/31/97
0.333
(33,160.75)
(---------) - 1 = 3.39%
(30,000.00)
JPVFI BALANCED SUBACCOUNT
12/31/94-12/31/97
0.333
(45,265.28)
(---------) - 1 = 14.68%
(30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
12/31/94-12/31/97
0.333
(60,864.89)
(---------) - 1 = 26.57%
(30,000.00)
JPVFI CAPITAL GROWTH SUBACCOUNT
12/31/94-12/31/97
0.333
(62,918.17)
(---------) - 1 = 27.97%
(30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
12/31/94-12/31/97
0.333
(53,710.45)
(---------) - 1 = 21.40%
(30,000.00)
<PAGE>
JPVFI WORLD GROWTH SUBACCOUNT
12/31/94-12/31/97
0.333
(46,013.89)
(---------) - 1 = 15.31%
(30,000.00)
OPPENHEIMER BOND SUBACCOUNT
12/31/94-12/31/97
0.333
(38,366.11)
(---------) - 1 = 8.54%
(30,000.00)
OPPENHEIMER STRATEGIC BOND SUBACCOUNT
12/31/94-12/31/97
0.333
(39,768.39)
(---------) - 1 = 9.84%
(30,000.00)
VIP EQUITY-INCOME SUBACCOUNT
12/31/94-12/31/97
0.333
(55,280.37)
(---------) - 1 = 22.58%
(30,000.00)
VIP GROWTH SUBACCOUNT
12/31/94-12/31/97
0.333
(54,308.21)
(---------) - 1 = 21.85%
(30,000.00)
VIP II INDEX 500 SUBACCOUNT
12/31/94-12/31/97
0.333
(64,310.38)
(---------) - 1 = 28.91%
(30,000.00)
<PAGE>
FIVE YEAR
Exhibit 13
JPVFI MONEY MARKET SUBACCOUNT
12/31/92-12/31/97
0.200
(34,077.12)
(---------) - 1 = 2.58%
(30,000.00)
JPVFI BALANCED SUBACCOUNT
12/31/92-12/31/97
0.200
(47,452.53)
(---------) - 1 = 9.60%
(30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
12/31/92-12/31/97
0.200
(65,144.12)
(---------) - 1 = 16.77%
(30,000.00)
JPVFI CAPITAL GROWTH SUBACCOUNT
12/31/92-12/31/97
0.200
(73,822.45)
(---------) - 1 = 19.72%
(30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
12/31/92-12/31/97
0.200
(65,163.56)
(---------) - 1 = 16.77%
(30,000.00)
<PAGE>
JPVFI WORLD GROWTH SUBACCOUNT
12/31/92-12/31/97
0.200
(58,012.70)
(---------) - 1 = 14.09%
(30,000.00)
OPPENHEIMER BOND SUBACCOUNT
12/31/92-12/31/97
0.200
(41,363.86)
(---------) - 1 = 6.63%
(30,000.00)
VIP EQUITY-INCOME SUBACCOUNT
12/31/92-12/31/97
0.200
(68,118.74)
(---------) - 1 = 17.81%
(30,000.00)
VIP GROWTH SUBACCOUNT
12/31/92-12/31/97
0.200
(63,030.60)
(---------) - 1 = 16.00%
(30,000.00)
VIP II INDEX 500 SUBACCOUNT
12/31/92-12/31/97
0.200
(69,499.33)
(---------) - 1 = 18.29%
(30,000.00)
<PAGE>
TEN YEAR
Exhibit 13
JPVFI MONEY MARKET SUBACCOUNT
12/31/87-12/31/97
0.100
(42,137.64)
(---------) - 1 = 3.45%
(30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
12/31/87-12/31/97
0.100
(125,693.61)
(---------) - 1 = 15.39%
(30,000.00)
JPVFI WORLD GROWTH SUBACCOUNT
12/31/87-12/31/97
0.100
(91,600.91)
(---------) - 1 = 11.80%
(30,000.00)
OPPENHEIMER BOND SUBACCOUNT
12/31/87-12/31/97
0.100
(63,182.09)
(---------) - 1 = 7.73%
(30,000.00)
VIP EQUITY-INCOME SUBACCOUNT
12/31/87-12/31/97
0.100
(119,122.46)
(---------) - 1 = 14.77%
(30,000.00)
VIP GROWTH SUBACCOUNT
12/31/87-12/31/97
0.100
(125,423.72)
(---------) - 1 = 15.37%
(30,000.00)
<PAGE>
INCEPTION
Exhibit 13
JPVFI MONEY MARKET SUBACCOUNT
8/01/85-12/31/97
0.080
(46,607.88)
(---------) - 1 = 3.61%
(30,000.00)
JPVFI BALANCED SUBACCOUNT
05/01/92-12/31/97
0.176
(50,990.60)
(---------) - 1 = 9.80%
(30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
05/01/92-12/31/97
0.176
(69,827.66)
(---------) - 1 = 16.06%
(30,000.00)
JPVFI CAPITAL GROWTH SUBACCOUNT
05/01/92-12/31/97
0.176
(93,052.63)
(---------) - 1 = 22.09%
(30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
04/18/86-12/31/97
0.085
(141,975.27)
(---------) - 1 = 14.19%
(30,000.00)
<PAGE>
JPVFI EMERGING GROWTH SUBACCOUNT
05/01/95-12/31/97
0.374
(54,737.66)
(---------) - 1 = 25.25%
(30,000.00)
JPVFI WORLD GROWTH SUBACCOUNT
08/01/85-12/31/97
0.080
(115,148.47)
(---------) - 1 = 11.43%
(30,000.00)
MFS RESEARCH SERIES SUBACCOUNT
07/26/95-12/31/97
0.411
(46,507.31)
(---------) - 1 = 19.72%
(30,000.00)
MFS UTILITIES SERIES SUBACCOUNT
01/03/95-12/31/97
0.334
(60,093.02)
(---------) - 1 = 26.11%
(30,000.00)
OPPENHEIMER BOND SUBACCOUNT
04/03/85-12/31/97
0.078
(81,932.65)
(---------) - 1 = 8.20%
(30,000.00)
OPPENHEIMER STRATEGIC BOND SUBACCOUNT
05/03/93-12/31/97
0.214
(38,991.11)
(---------) - 1 = 5.78%
(30,000.00)
<PAGE>
VIP EQUITY-INCOME SUBACCOUNT
10/09/86-12/31/97
0.089
(116,007.90)
(---------) - 1 = 12.79%
(30,000.00)
VIP GROWTH SUBACCOUNT
10/09/86-12/31/97
0.089
(128,187.07)
(---------) - 1 = 13.80%
(30,000.00)
VIP II CONTRAFUND SUBACCOUNT
01/03/95-12/31/97
0.334
(60,512.57)
(---------) - 1 = 26.40%
(30,000.00)
VIP II INDEX 500 SUBACCOUNT
08/27/92-12/31/97
0.187
(73,526.09)
(---------) - 1 = 18.25%
(30,000.00)
<PAGE>
Exhibit 13
2. NON-STANDARD CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED 12/31/97
The formula for calculating non-standard average annual total return is as
follows:
ERV-P
(-----)
( P )
where:
ERV = ending redeemable value for a hypothetical $1,000 payment made at
the beginning of the period
P = hypothetical initial investment of $1,000
EXAMPLES AT AUV:
JPVFI MONEY MARKET SUBACCOUNT
12/31/96-12/31/97
(31019.55-30000)
( ------------ ) = 3.40%
( 30,000.00)
JPVFI BALANCED SUBACCOUNT
12/31/96-12/31/97
(34413.28-30000)
( ------------ ) = 14.71%
( 30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
12/31/96-12/31/97
(38137.67-30000)
( ------------ ) = 27.13%
( 30,000.00)
JPVFI CAPITAL GROWTH SUBACCOUNT
12/31/96-12/31/97
(38282.55-30000)
( ------------ ) = 27.61%
( 30,000.00)
<PAGE>
JPVFI DOMESTIC GROWTH SUBACCOUNT
12/31/96-12/31/97
(36565.06-30000)
( ------------ ) = 21.88%
( 30,000.00)
JPVFI EMERGING GROWTH SUBACCOUNT
12/31/96-12/31/97
(35636.93-30000)
( ------------ ) = 18.79%
( 30,000.00)
JPVFI WORLD GROWTH SUBACCOUNT
12/31/96-12/31/97
(34116.94-30000)
( ------------ ) = 13.72%
( 30,000.00)
MFS RESEARCH SERIES SUBACCOUNT
12/31/96-12/31/97
(35077.09-30000)
( ------------ ) = 16.92%
( 30,000.00)
MFS UTILITIES SERIES SUBACCOUNT
12/31/96-12/31/97
(38959.92-30000)
( ------------ ) = 29.87%
( 30,000.00)
OPPENHEIMER BOND SUBACCOUNT
12/31/96-12/31/97
(32214.29-30000)
( ------------ ) = 7.38%
( 30,000.00)
<PAGE>
OPPENHEIMER STRATEGIC BOND SUBACCOUNT
12/31/96-12/31/97
(31667.58-30000)
( ------------ ) = 5.56%
( 30,000.00)
VIP EQUITY-INCOME SUBACCOUNT
12/31/96-12/31/97
(37345.94-30000)
( ------------ ) = 24.49%
( 30,000.00)
VIP GROWTH SUBACCOUNT
12/31/96-12/31/97
(36037.59-30000)
( ------------ ) = 20.13%
( 30,000.00)
VIP II CONTRAFUND SUBACCOUNT
12/31/96-12/31/97
(36740.71-30000)
( ------------ ) = 22.47%
( 30,000.00)
VIP II INDEX 500 SUBACCOUNT
12/31/96-12/31/97
(39252.07-30000)
( ------------ ) = 30.84%
( 30,000.00)
<PAGE>
INCEPTION
Exhibit 13
JPVFI MONEY MARKET SUBACCOUNT
8/01/85-12/31/97
(46607.88-30000)
( ------------ ) = 55.36%
( 30,000.00)
JPVFI BALANCED SUBACCOUNT
05/01/92-12/31/97
(50990.60-30000)
( ------------ ) = 69.97%
( 30,000.00)
JPVFI GROWTH & INCOME SUBACCOUNT
05/01/92-12/31/97
(69827.66-30000)
( ------------ ) = 132.76%
( 30,000.00)
JPVFI CAPITAL GROWTH SUBACCOUNT
05/01/92-12/31/97
(93052.63-30000)
( ------------ ) = 210.18%
( 30,000.00)
JPVFI DOMESTIC GROWTH SUBACCOUNT
04/18/86-12/31/97
(141975.27-30000)
( ------------ ) = 373.25%
( 30,000.00)
<PAGE>
JPVFI EMERGING GROWTH SUBACCOUNT
05/01/95-12/31/97
(72745.90-30000)
( ------------ ) = 142.49%
( 30,000.00)
JPVFI WORLD GROWTH SUBACCOUNT
08/01/85-12/31/97
(115148.47-30000)
( ------------ ) = 283.83%
( 30,000.00)
MFS RESEARCH SERIES SUBACCOUNT
07/26/95-12/31/97
(46507.31-30000)
( ------------ ) = 55.02%
( 30,000.00)
MFS UTILITIES SERIES SUBACCOUNT
01/03/95-12/31/97
(60093.02-30000)
( ------------ ) = 100.31%
( 30,000.00)
OPPENHEIMER BOND SUBACCOUNT
04/03/85-12/31/97
(81932.65-30000)
( ------------ ) = 173.11%
( 30,000.00)
OPPENHEIMER STRATEGIC BOND SUBACCOUNT
05/03/93-12/31/97
(38991.11-30000)
( ------------ ) = 29.97%
( 30,000.00)
<PAGE>
VIP EQUITY-INCOME SUBACCOUNT
10/09/86-12/31/97
(116007.90-30000)
( ------------ ) = 286.69%
( 30,000.00)
VIP GROWTH SUBACCOUNT
10/09/86-12/31/97
(128187.07-30000)
( ------------ ) = 327.29%
( 30,000.00)
VIP II CONTRAFUND SUBACCOUNT
01/03/95-12/31/97
(60512.57-30000)
( ------------ ) = 101.71%
( 30,000.00)
VIP II INDEX 500 SUBACCOUNT
08/27/92-12/31/97
(73526.09-30000)
( ------------ ) = 145.09%
( 30,000.00)
