<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
REGISTRATION NO. 33-94210
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. 1 (X)
Post-Effective Amendment No. ( )
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 1 (X)
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
(Exact Name of Registrant)
First Providian Life and Health Insurance Company
(Formerly National Home Life Assurance Company of New York)
(Name of Depositor)
520 Columbia Drive
Johnson City, New York 13790
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (607) 772-8750
Kimberly A. Scouller, Esq.
First Providian Life and Health Insurance Company
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esquire
Margaret E. Hankard, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b) of Rule 485.
On _____________, pursuant to paragraph (b)(1)(v) of Rule 485.
60 days after filing pursuant to paragraph (a)(1) of Rule 485.
On _____________, pursuant to paragraph (a)(1) of Rule 485.
75 days after filing pursuant to paragraph (a)(2) of Rule 485.
On _____________, 1995 pursuant to paragraph (a)(2) of Rule 485.
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant has
elected to register an indefinite amount of securities being offered pursuant to
this Registration Statement.
<PAGE>
The Registrant hereby amends this Registration Statement on such date as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
- -------
FORM N-4 PROSPECTUS CAPTION
- -------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ GLOSSARY
3. Synopsis............................... HIGHLIGHTS; FEE TABLE;
Performance Measures
4. Condensed Financial Information........ Not Applicable
5. General Description of Registrant,
Depositor, and Portfolio Companies..... First Providian Life and
Health Insurance Company;
First Providian Life and
Health Insurance Company
Separate Account C; The
Portfolios; Voting Rights
6. Deductions............................. Charges and Deductions;
FEDERAL TAX CONSIDERATIONS;
FEE TABLE
7. General Description of Variable Annuity CONTRACT FEATURES;
Contracts.............................. Distribution-at-Death Rules;
Voting Rights; Allocation of
Purchase Payments; Exchanges
Among the Portfolios;
Additions, Deletions, or
Substitutions of Investments
8. Annuity Period......................... Annuity Payment Options
9. Death Benefit.......................... Death of Annuitant Prior to
Annuity Date
10. Purchases and Contract Value........... Contract Application and
Purchase Payments; Accumulated
Value
11. Redemptions............................ Full and Partial Withdrawals;
Annuity Payment Options; Right
to Cancel Period
12. Taxes.................................. FEDERAL TAX CONSIDERATIONS
13. Legal Proceedings...................... Part B: Legal Proceedings
14. Table of Contents of the Statement
of Additional Information.............. Table of Contents of the
Providian Marquee Statement of
Additional Information
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
- ------- -----------------------
FORM N-4 INFORMATION CAPTION
- -------- -------------------
<S> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ THE COMPANY
18. Services............................... Part A: Auditors; Part B:
SAFEKEEPING OF ACCOUNT
ASSETS; DISTRIBUTION OF THE
CONTRACTS
19. Purchase of Securities Being DISTRIBUTION OF THE
Offered................................ CONTRACTS; Exchanges
20. Underwriters........................... DISTRIBUTION OF THE
CONTRACTS
21. Calculation of Performance Data........ PERFORMANCE INFORMATION
22. Annuity Payments....................... Computations of Annuity Income
Payments
23. Financial Statements................... FINANCIAL STATEMENTS
</TABLE>
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT C
PROSPECTUS
for the
PROVIDIAN MARQUEE VARIABLE ANNUITY
Offered by
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A New York Stock Company)
Administrative Offices
520 Columbia Drive
Johnson City, New York 13790
The Providian Marquee variable annuity contract (the "Contract"), offered
through First Providian Life and Health Insurance Company (the "Company",
"us", "we" or "our"), provides a vehicle for investing on a tax-deferred
basis in 12 investment company Portfolios. The Contract is a group variable
annuity contract and is intended for retirement savings or other long-term
investment purposes.
The minimum initial Purchase Payment for Non-Qualified Contracts is $5,000.
The minimum initial Purchase Payment for Qualified Contracts is $2,000 (or
$50 monthly by payroll deduction). The Contract is a flexible-premium
deferred variable annuity that provides for a Right to Cancel Period of 10
days (20 days for replacement) plus a 5 day grace period to allow for mail
delivery, during which you may cancel your investment in the Contract.
Your Net Purchase Payments for the Contract may be allocated among 12
Subaccounts of First Providian Life and Health Insurance Company's Separate
Account C. Assets of each Subaccount are invested in one of the following
Portfolios (which are contained within six open-end, diversified investment
companies):
<TABLE>
<CAPTION>
<S> <C>
/-/ Fidelity Money Market Portfolio /-/ T. Rowe Price Equity Income
Portfolio
/-/ Fidelity Equity-Income Portfolio /-/ T. Rowe Price New America
Growth Portfolio
/-/ Fidelity Growth Portfolio /-/ T. Rowe Price International
Stock Portfolio
/-/ Fidelity Asset Manager Portfolio /-/ OpCap Advisors Managed
Portfolio
/-/ Dreyfus Growth and Income Portfolio /-/ OpCap Advisors Small Cap
Portfolio
/-/ Dreyfus Quality Bond Portfolio /-/ OpCap Advisors U.S.
Government Income
Portfolio
</TABLE>
Your initial Net Purchase Payment(s) will, when your Contract is issued, be
invested immediately in your chosen Portfolios, unless you indicate
otherwise.
The Contract's Accumulated Value varies with the investment performance of
the Portfolios you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed. The
Contract offers a number of ways of withdrawing monies at a future at any
time, although in many instances withdrawals made prior to age 59 1/2 are
subject to a 10% penalty tax (and a portion may be subject to ordinary income
taxes) and may be subject to a surrender charge of up to 7%. If you elect an
Annuity Payment Option, Annuity Payments may be received on a fixed and/or
variable basis. You also have significant flexibility in choosing the Annuity
Date on which Annuity Payments begin.
-1-
<PAGE>
This Prospectus sets forth the information you should know before investing
in the Contract. It must be accompanied by a current Prospectus for each
Fund. Please read the Prospectuses carefully and retain them for future
reference. A Statement of Additional Information for the Contract Prospectus,
which has the same date as this Prospectus, has also been filed with the
Securities and Exchange Commission, is incorporated herein by reference and
is available free by calling our Administrative Offices at 1-800-250-1828.
The Table of Contents of the Statement of Additional Information is included
at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Contract is available only in the State of New York.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
The date of this Prospectus is August __, 1996.
-2-
<PAGE>
TABLE OF CONTENTS
Page
GLOSSARY.................................................................. 4
HIGHLIGHTS................................................................ 7
FEE TABLE................................................................. 10
Financial Statements...................................................... 13
Performance Measures...................................................... 13
Additional Performance Measures........................................... 13
Yield and Effective Yield................................................. 14
The Company and the Separate Account...................................... 15
Variable Insurance Products Fund and Variable Insurance Products Fund II.. 16
Dreyfus Variable Investment Fund.......................................... 16
T. Rowe Price Equity Series, Inc.......................................... 16
T. Rowe Price International Series, Inc................................... 16
OCC Accumulation Trust.................................................... 16
The Portfolios............................................................ 17
CONTRACT FEATURES......................................................... 19
Right to Cancel Period.................................................. 19
Contract Application and Purchase Payments.............................. 19
Purchasing by Wire...................................................... 20
Allocation of Purchase Payments......................................... 20
Charges and Deductions.................................................. 20
Accumulated Value....................................................... 22
Exchanges Among the Portfolios.......................................... 22
Full and Partial Withdrawals............................................ 23
Systematic Withdrawal Option............................................ 23
Dollar Cost Averaging Option............................................ 24
IRS-Required Distributions.............................................. 24
Minimum Balance Requirement............................................. 25
Designation of an Annuitant's Beneficiary............................... 25
Death of Annuitant Prior to Annuity Date................................ 26
Annuity Date............................................................ 26
Lump Sum Payment Option................................................. 26
Annuity Payment Options................................................. 26
Deferment of Payment.................................................... 28
FEDERAL TAX CONSIDERATIONS................................................ 28
GENERAL INFORMATION....................................................... 34
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<PAGE>
GLOSSARY
Accumulation Unit - A measure of your ownership interest in the Contract
prior to the Annuity Date.
Accumulation Unit Value - The value of each Accumulation Unit which is
calculated each Valuation Period.
Accumulated Value - The value of all amounts accumulated under the Contract
prior to the Annuity Date.
Adjusted Death Benefit - The sum of all Net Purchase Payments made during the
first six Contract Years, less any partial withdrawals taken. During each
subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial withdrawals taken during the current six-year
period. After the Annuitant attains age 75, the Adjusted Death Benefit will
remain equal to the Death Benefit on the last day of the six-year period
before age 75 occurs plus any Net Purchase Payments subsequently made, less
any partial withdrawals subsequently taken.
Annual Contract Fee - The $30 annual fee charged by the Company to cover the
cost of administering each Contract. The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender, on a pro rata basis, from
each Subaccount.
Annuitant - The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
Annuitant's Beneficiary - The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.
Annuity Date - The date on which Annuity Payments begin. The Annuity Date is
always the first day of the month you specify.
Annuity Payment - One of a series of payments made under an Annuity Payment
Option.
Annuity Payment Option - One of several ways in which withdrawals from the
Contract may be made. Under a Fixed Annuity Option (see "Annuity Payment
Options," page 9), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 9), the dollar amount of each Annuity Payment may change over time,
depending upon the investment experience of the Portfolio or Portfolios you
choose. Annuity Payments are based on the Contract's Accumulated Value as of
10 Business Days prior to the Annuity Date.
Annuity Unit - Unit of measure used to calculate Variable Annuity Payments
(see "Annuity Payment Options," page 9).
Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.
Business Day - A day when the New York Stock Exchange is open for trading.
Company ("we", "us", "our") - First Providian Life and Health Insurance
Company, a New York stock company.
Contract - The group flexible premium variable annuity contract described in
this Prospectus, participation in which may be evidenced by a certificate
issued to the Contract Owner.
Contract Anniversary - Any anniversary of the Contract Date.
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<PAGE>
Contract Date - The date of issue of this Contract.
Contract Owner ("you", "your") - The person or persons designated as the
Contract Owner in the Contract application. The term shall also include any
person named as Joint Owner. A Joint Owner shares ownership in all respects
with the Contract Owner. Prior to the Annuity Date, the Contract Owner has
the right to assign ownership, designate beneficiaries, make permitted
withdrawals and Exchanges among Subaccounts.
Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.
Death Benefit - The greater of the Contract's Accumulated Value on the date
the Company receives due Proof of Death of the Annuitant or the Adjusted
Death Benefit.
Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount.
Funds - Each of (i) Variable Insurance Products Fund, (ii) Variable Insurance
Products Fund II, (iii) Dreyfus Variable Investment Fund, (iv) T. Rowe Price
Equity Series, Inc., (v) T. Rowe Price International Series, Inc. and (vi)
OCC Accumulation Trust. The Separate Account invests in the Portfolios
contained within the Funds.
General Account - The account which contains all of our assets other than
those held in our separate accounts.
Net Purchase Payment - Any Purchase Payment less the applicable Premium Tax,
if any.
Non-Qualified Contract - Any Contract other than those described under the
Qualified Contract reference in this Glossary.
Owner's Designated Beneficiary - The person to whom ownership of this
Contract passes upon the Contract Owner's death, unless the Contract Owner
was also the Annuitant - in which case the Annuitant's Beneficiary is
entitled to the Death Benefit. (Note: this transfer of ownership to the
Owner's Designated Beneficiary will generally not be subject to probate, but
will be subject to estate and inheritance taxes. Consult with your tax and
estate adviser to be sure which rules will apply to you.)
Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.
Portfolio - A separate investment portfolio of the Funds. The Funds currently
offer 12 portfolios in the Providian Marquee variable annuity: the Money
Market Portfolio ("Fidelity Money Market"), the Equity-Income Portfolio
("Fidelity Equity-Income") and the Growth Portfolio ("Fidelity Growth") of
Variable Insurance Products Fund; the Asset Manager Portfolio ("Fidelity
Asset Manager") of Variable Insurance Products Fund II; the Dreyfus Growth
and Income Portfolio ("Dreyfus Growth and Income") and the Dreyfus Quality
Bond Portfolio ("Dreyfus Quality Bond") of Dreyfus Variable Investment Fund;
the T. Rowe Price Equity Income Portfolio ("T. Rowe Price Equity Income") and
the T. Rowe Price New America Growth Portfolio ("T. Rowe Price New America
Growth") of T. Rowe Price Equity Series, Inc.; the T. Rowe Price
International Stock Portfolio ("T. Rowe Price International Stock") of T.
Rowe Price International Series, Inc.; and the OpCap Advisors Managed
Portfolio ("OpCap Advisors Managed"), the OpCap Advisors Small Cap Portfolio
("OpCap Advisors Small Cap") and the OpCap Advisors U.S. Government Income
Portfolio ("OpCap Advisors U.S. Government Income") of OCC Accumulation Trust
(each, a "Portfolio" and collectively, the "Portfolios"). In this Prospectus,
Portfolio will also be used to refer to the Subaccount that invests in the
corresponding Portfolio.
-5-
<PAGE>
Premium Tax - A regulatory tax that may be assessed by your state on the
Purchase Payments you make to this Contract. The amount which we must pay as
Premium Tax, if any, will be deducted from each Purchase Payment or from your
Accumulated Value as it is incurred by us.
Proof of Death - (a) A certified death certificate; (b) a certified decree of
a court of competent jurisdiction as to the finding of death; (c) a written
statement by a medical doctor who attended the deceased; or (d) any other
proof of death satisfactory to the Company.
Purchase Payment - Any premium payment. The minimum initial Purchase Payment
is $5,000 for Non-Qualified Contracts and $2,000 for Qualified Contracts (or
$50 monthly by payroll deduction for Qualified Contracts); each additional
Purchase Payment must be at least $500 for Non-Qualified Contracts or $50 for
Qualified Contracts. Purchase Payments may be made at any time prior to the
Annuity Date as long as the Annuitant is living.
Qualified Contract - An annuity contract as defined under Sections 403(b) and
408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.
Separate Account - That portion of First Providian Life and Health Insurance
Company Separate Account C dedicated to the Contract. The Separate Account
consists of assets that are segregated by First Providian Life and Health
Insurance Company and, for Contract Owners, invested in the Portfolios. The
Separate Account is independent of the general assets of the Company.
Subaccount - That portion of the Separate Account that invests in shares of
the Funds' Portfolios. Each Subaccount will only invest in a single
Portfolio. The investment performance of each Subaccount is linked directly
to the investment performance of one of the 12 Portfolios.
Surrender Value - The Accumulated Value, less any applicable contingent
deferred sales load (i.e., surrender charge) and any Premium Taxes incurred
but not yet deducted.
Valuation Period - The relative performance of your Contract is measured by
the Accumulation Unit Value. This value is calculated each Valuation Period.
A Valuation Period is defined as the period of time between the close of
business on one Business Day and the close of business on the following
Business Day.
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<PAGE>
HIGHLIGHTS
You can find definitions of important terms in the Glossary (page 4).
THE PROVIDIAN MARQUEE VARIABLE ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in 12
investment company Portfolios. Monies may be subsequently withdrawn from the
Contract either as a lump sum or as annuity income as permitted under the
Contract. Accumulated Values and Annuity Payments depend on the investment
experience of the selected Portfolios. The investment performance of the
Portfolios is not guaranteed. Thus, you bear all investment risk for monies
invested under the Contract.
WHO SHOULD INVEST
The Contract is designed for investors seeking long term, tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax
brackets. The Contract is offered as both a Qualified Contract and a Non-
Qualified Contract. Both Qualified and Non-Qualified Contracts offer tax-
deferral on increases in the Contract's value prior to withdrawal or
distribution -- however, Purchase Payments made by Contract Owners of
Qualified Contracts may be excludible or deductible from gross income in the
year such payments are made, subject to certain statutory restrictions and
limitations. (See "Federal Tax Considerations," page 28.)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 12 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
12 Portfolios offered by the Funds: Fidelity Money Market, Fidelity Equity-
Income, Fidelity Growth, Fidelity Asset Manager, Dreyfus Growth and Income,
Dreyfus Quality Bond, T. Rowe Price Equity Income, T. Rowe Price New America
Growth, T. Rowe Price International Stock, OpCap Advisors Managed, OpCap
Advisors Small Cap and OpCap Advisors U.S. Government Income. The assets of
each Portfolio are separate, and each Portfolio has distinct investment
objectives and policies as described in the corresponding Fund or Portfolio
Prospectus. .....................................................Page 17
CONTRACT OWNER
The Contract Owner is the person designated as the owner of the Contract in
the Contract application. The Contract Owner may designate any person as a
Joint Owner. A Joint Owner shares ownership in all respects with the Contract
Owner. Prior to the Annuity Date, the Contract Owner has the right to assign
ownership, designate beneficiaries, and make permitted withdrawals and
Exchanges among the Subaccounts.
ANNUITANT
The Annuitant is a person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
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<PAGE>
ANNUITANT'S BENEFICIARY
The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the
Annuity Date.
HOW TO INVEST
To invest in the Contract, please consult your adviser who will assist you in
completing the Contract application. You will need to select an Annuitant.
The Annuitant may not be older than age 75. The minimum initial Purchase
Payment is $5,000 for Non-Qualified Contracts, and $2,000 (or $50 monthly by
payroll deduction) for Qualified Contracts; subsequent Purchase Payments must
be at least $500 for Non-Qualified Contracts or $50 for Qualified Contracts.
Additional Purchase Payments after the first Contract Year are limited to
$10,000 annually. You may make subsequent Purchase Payments at any time
before the Contract's Annuity Date, as long as the Annuitant specified in the
Contract is living............................................. Page 19
ALLOCATION OF PURCHASE PAYMENTS
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your chosen Portfolios immediately upon our receipt thereof, IN
WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO
THE PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. You must fill out and send
us the appropriate form or comply with other designated Company procedures if
you would like to change how subsequent Net Purchase Payments are allocated.
...............................................................page 20
RIGHT TO CANCEL PERIOD
The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day period to allow for mail delivery, during which you
may cancel your investment in the Contract. To cancel your investment, please
return your Contract to us or to the agent from whom you purchased the
Contract. When we receive the Contract, we will return the Accumulated Value
of your Purchase Payment(s) invested in the Portfolios plus any loads, fees
and/or Premium Taxes that may have been subtracted from such amount. Page 19
EXCHANGES
You may make unlimited Exchanges among the Portfolios, provided you maintain
a minimum balance of $1,000, except in cases where Purchase Payments are made
by monthly payroll deduction, in each Subaccount to which you have allocated
a portion of your Accumulated Value. No fee is currently imposed for such
Exchanges; however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year. Exchanges must not reduce the value of any
Subaccount below $1,000, except in cases where Purchase Payments are made by
monthly payroll deduction, or that remaining amount will be transferred to
your other Subaccounts on a pro rata basis. (See also "Charges and
Deductions," page 20). .............................................. Page 22
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<PAGE>
DEATH BENEFIT
If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value or the
Adjusted Death Benefit on the date we receive due proof of the Annuitant's
death. During the first six Contract Years, the Adjusted Death Benefit will
be the sum of all Net Purchase Payments made, less any partial withdrawals
taken. During each subsequent six-year period, the Adjusted Death Benefit
will be the Death Benefit on the last day of the previous six-year period
plus any Net Purchase Payments made, less any partial withdrawals taken
during the current six-year period. After the Annuitant attains age 75, the
Adjusted Death Benefit will remain equal to the Death Benefit on the last day
of the six-year period before age 75 occurs plus any Net Purchase Payments
subsequently made, less any partial withdrawals subsequently taken. The
Annuitant's Beneficiary may elect to receive these proceeds as a lump sum or
as Annuity Payments. If the Annuitant dies on or after the Annuity Date, any
unpaid payments certain will be paid, generally to the Annuitant's
Beneficiary, in accordance with the Contract.....................Page 25
ANNUITY PAYMENT OPTIONS
In addition to the full and partial withdrawal privileges, you may also
choose to create an income stream by requesting an annuity income from us. As
the Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your annuity. We provide you with a variety of options as it
relates to those payments. At your discretion, payments may be either fixed
or variable or both. Fixed payouts are guaranteed for a designated period or
for life (either single or joint). Variable payments will vary depending on
the performance of the underlying Portfolio or Portfolios selected....Page 26
CONTRACT AND POLICYHOLDER INFORMATION
If you have questions about your Contract, please telephone our
Administrative Offices at 1-800-250-1828 between the hours of 8:00 A.M. to
5:00 P.M. Eastern time. Please have the Contract number and the Contract
Owner's name ready when you call. As Contract Owner you will receive periodic
statements confirming any financial transactions that take place, as well as
quarterly statements and an annual statement.
CHARGES AND DEDUCTIONS UNDER THE CONTRACT
The Contract has an annual mortality and expense risk charge of 1.25%. The
Contract has no front-end sales load and up to 10% of the Accumulated Value
can be withdrawn once per year without a surrender charge. However,
additional withdrawals are subject to a surrender charge of up to 7% during
the first six Contract Years.
The Contract also includes administrative charges and policy fees which pay
for administering the Contract, and management, advisory and other fees,
which reflect the costs of the Funds............................Page 20
FULL AND PARTIAL WITHDRAWALS
You may withdraw all or part of the Surrender Value of the Contract before
the earlier of the Annuity Date or the Annuitant's death. Withdrawals made
prior to age 59 1/2 may be subject to a 10% penalty tax (and a portion may be
subject to ordinary income taxes)................................Page 23
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<PAGE>
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that may
be assessed) that you would incur as an owner of a Contract (see page 20). The
purpose of this table is to assist you in understanding the various costs and
expenses that you would bear directly or indirectly as a purchaser of the
Contract. The fee table reflects all expenses for both the Separate Account and
the Funds. For a complete discussion of Contract costs and expenses, see
"Charges and Deductions," page 20.
<TABLE>
<CAPTION>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases........................................ None
Contingent Deferred Sales Load (surrender charge)...................... 7%*
Exchange Fees.......................................................... None
ANNUAL CONTRACT FEE.................................................... $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets
in the Separate Account)
Mortality and Expense Risk Charge...................................... 1.25%
Administrative Charge.................................................. .15%
-----
Total Annual Separate Account Expenses................................. 1.40%
</TABLE>
*Up to 10% of the Accumulated Value as of the last Contract Anniversary (10%
of the initial Net Purchase Payment during the first Contract Year) can be
withdrawn once per year, or pursuant to a series of systematic withdrawals,
without a surrender charge (the "Penalty Free Amount"). Additional
withdrawals in excess of the Penalty Free Amount in the first Contract Year
are subject to a 7% charge on the portion of such withdrawal that consists
of Net Purchase Payments. The charge decreases one percentage point per
year until after the sixth Contract Year at which time there is no
surrender charge. The total surrender charges assessed will not exceed 8.5%
of the Purchase Payments under the Contract.
PORTFOLIO ANNUAL EXPENSES
Except as indicated, the figures below are based on expenses for fiscal year
1995 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
Management
and Total Portfolio
Advisory Other Annual
Expenses Expenses Expenses
-------- -------- --------
<S> <C> <C> <C>
Fidelity Money Market.............. 0.24% 0.09% 0.33%
Fidelity Equity-Income............. 0.51% 0.10% 0.61%
Fidelity Growth.................... 0.61% 0.09% 0.70%
Fidelity Asset Manager*............ 0.71% 0.08% 0.79%
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Dreyfus Growth and Income**........ 0.72% 0.20% 0.92%
Dreyfus Quality Bond**............. 0.61% 0.20% 0.81%
T. Rowe Price Equity Income........ 0.85% 0.00% 0.85%
T. Rowe Price New America Growth... 0.85% 0.00% 0.85%
T. Rowe Price International Stock.. 1.05% 0.00% 1.05%
OpCap Advisors Managed***.......... 0.80% 0.14% 0.94%
OpCap Advisors Small Cap***........ 0.80% 0.20% 1.00%
OpCap Advisors U.S. Government
Income***......................... 0.60% 0.40% 1.00%
</TABLE>
*The expenses for the Fidelity Asset Manager Portfolio were reduced by use
of a portion of the brokerage commissions paid by the Fund. Without this
reduction, the Total Portfolio Annual Expenses would have been 0.81%. There
is no guarantee that any fee waivers and/or expense reimbursements will
continue in the future.
**From time to time, the Dreyfus Growth and Income and Quality Bond
Portfolios' investment adviser in its sole discretion may waive all or part
of its fees and/or voluntarily assume certain of the Portfolios' expenses.
For a more complete description of the Portfolios' fees and expenses, see
the Dreyfus Variable Investment Fund's Prospectus. During 1995, certain
fees were waived and/or expenses were assumed, in each case on a voluntary
basis. Without such waivers or reimbursements, the Management and Advisory
Expenses, Other Expenses and Total Portfolio Annual Expenses that would
have been incurred for the fiscal year ended December 31, 1995, would have
been: 0.75%, 0.20% and 0.95%, respectively, for the Dreyfus Growth and
Income Portfolio; and 0.65%, 0.20% and 0.85%, respectively, for the Dreyfus
Quality Bond Portfolio. There is no guarantee that any fee waivers or
expense reimbursements will continue in the future. See the Dreyfus
Variable Investment Fund's Prospectus for a discussion of fee waiver and/or
expense reimbursements.
***The annual expenses of the OCC Accumulation Trust Portfolios as of December
31, 1995 have been restated to reflect new management fee and expense
limitation arrangements in effect as of May 1, 1996. Effective May 1, 1996,
the expenses of the Portfolios of the OCC Accumulation Trust are
contractually limited by OpCap Advisors so that their respective annualized
operating expenses do not exceed 1.25% of their respective average daily
net assets. Furthermore, through April 30, 1997, the annualized operating
expenses of the Portfolios will be voluntarily limited by OpCap Advisors so
that the annualized operating expenses of these Portfolios do not exceed
1.00% of their respective average daily net assets. Without such voluntary
expense limitations, and taking into account the revised contractual
provisions effective May 1, 1996 concerning management fees and expense
limitations, the Management Fees, Other Expenses and Total Portfolio Annual
Expenses incurred for the fiscal year ended December 31, 1995 would have
been: 0.80%, 0.14% and 0.94%, respectively, for the OpCap Advisors Managed
Portfolio; 0.80%, 0.39% and 1.19%, respectively, for the OpCap Advisors
Small Cap Portfolio; and 0.60%, 0.65% and 1.25%, respectively, for the
OpCap Advisors U.S. Government Income Portfolio.
The following example illustrates the expenses that you would incur on a $1,000
Purchase Payment over various periods, assuming (1) a 5% annual rate of return
and (2) redemption at the end of each period.
-11-
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity Money Market.................. $88.25 $106.46 $127.07 $210.19
Fidelity Equity-Income................. $91.07 $115.01 $141.48 $239.76
Fidelity Growth........................ $91.97 $117.74 $146.07 $249.08
Fidelity Asset Manager................. $92.87 $120.47 $150.64 $258.31
Dreyfus Growth and Income.............. $94.18 $124.39 $157.20 $271.48
Dreyfus Quality Bond................... $93.08 $121.07 $151.65 $260.35
T. Rowe Price Equity Income............ $93.48 $122.28 $153.67 $264.41
T. Rowe Price New America Growth....... $93.48 $122.28 $153.67 $264.41
T. Rowe Price International Stock...... $95.48 $128.30 $163.71 $284.47
OpCap Advisors Managed................. $94.38 $124.99 $158.20 $273.50
OpCap Advisors Small Cap............... $94.98 $126.80 $161.21 $279.50
OpCap Advisors U.S. Government Income.. $94.98 $126.80 $161.21 $279.50
</TABLE>
The following example illustrates the expenses that you would incur on a $1,000
Purchase Payment over various periods, assuming (1) a 5% annual rate of return
and (2) you do not surrender your Contract or you annuitize at the end of each
period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity Money Market.................. $18.25 $56.46 $ 97.07 $210.19
Fidelity Equity-Income................. $21.07 $65.01 $111.48 $239.76
Fidelity Growth........................ $21.97 $67.74 $116.07 $249.08
Fidelity Asset Manager................. $22.87 $70.47 $120.64 $258.31
Dreyfus Growth and Income.............. $24.18 $74.39 $127.20 $271.48
Dreyfus Quality Bond................... $23.08 $71.07 $121.65 $260.35
T. Rowe Price Equity Income............ $23.48 $72.28 $123.67 $264.41
T. Rowe Price New America Growth....... $23.48 $72.28 $123.67 $264.41
T. Rowe Price International Stock...... $25.48 $78.30 $133.71 $284.47
OpCap Advisors Managed................. $24.38 $74.99 $128.20 $273.50
OpCap Advisors Small Cap............... $24.98 $76.80 $131.21 $279.50
OpCap Advisors U.S. Government Income.. $24.98 $76.80 $131.21 $279.50
</TABLE>
The Annual Contract Fee is reflected in these examples as a percentage equal to
the estimated total amount of fees collected during a calendar year divided by
the estimated total average net assets of the Portfolios during the same
calendar year. The fee is assumed to remain the same in each year of the above
periods. (With respect to partial year periods, if any, in the examples, the
Annual Contract Fee is pro-rated to reflect only the applicable portions of the
partial year period.) The Annual Contract Fee will be deducted on each Contract
Anniversary and upon surrender, on a pro rata basis, from each Subaccount. The
Company may deduct Premium Taxes, if any, as they are incurred.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown, subject to the guarantees in the Contract.
-12-
<PAGE>
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company (as well as
the Independent Auditors' Report thereon) are contained in the Statement of
Additional Information. No financial statements are included for the
Separate Account because, as of the date of this Prospectus, the Subaccounts
which invest in the Portfolios offered by the Providian Marquee Variable
Annuity had not commenced operations with respect to the Portfolios, and
consequently had no assets or liabilities.
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Fidelity Money Market Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the Quest for Value Accumulation Trust
(now known as the OCC Accumulation Trust) that is included in the Contract
(the "New Trust"), at which time the New Trust commenced operations. The
total net assets for each of the OpCap Advisors Small Cap and OpCap Advisors
Managed Portfolios immediately after the transaction were $139,812,573 and
$682,601,380, respectively, with respect to the Old Trust and, with respect
to the New Trust were $8,129,274 and $51,345,102, for the OpCap Advisors
Small Cap and OpCap Advisors Managed Portfolios, respectively. For the
period prior to September 16, 1994, performance figures for each of the OpCap
Advisors Small Cap and OpCap Advisors Managed Portfolios reflect the
performance of the corresponding Portfolios of the Old Trust.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as
prescribed by the rules of the Securities and Exchange Commission (the
"SEC"), is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The Standardized Average Annual Total Return
assumes a single $1,000 payment made at the beginning of the period and full
redemption at the end of the period. It reflects the deduction of all
applicable sales loads (including the contingent deferred sales load), the
Annual Contract Fee and all other Portfolio, Separate Account and Contract
level charges except Premium Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE
ANNUAL TOTAL RETURN
The Company may show actual Total Return (i.e., the percentage change in the
value of an Accumulation Unit) for one or more Subaccounts with respect to
one or more periods. The Company may also show actual Average Annual Total
Return (i.e., the average annual change in Accumulation Unit Values) with
respect to one or more periods. For one year, the actual Total Return and the
actual Average Annual Total Return are effective annual rates of return
-13-
<PAGE>
and are equal. For periods greater than one year, the actual Average Annual
Total Return is the effective annual compounded rate of return for the periods
stated. Because the value of an Accumulation Unit reflects the Separate Account
and Portfolio expenses (see "Fee Table") the actual Total Return and actual
Average Annual Total Return also reflect these expenses. These percentages do
not reflect the Annual Contract Fee, any sales loads or Premium Taxes (if any)
which, if included, would reduce the percentages reported.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentage reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract was
in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values. They reflect a deduction for the Separate
Account expenses and Portfolio expenses. These returns do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any) which, if included,
would reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
YIELD AND EFFECTIVE YIELD
The Company may also show yield and effective yield figures for the Subaccount
investing in shares of the Fidelity Money Market Portfolio. "Yield" refers to
the income generated by an investment in Fidelity Money Market over a seven-day
period, which is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in Fidelity Money Market is assumed to be reinvested. Therefore the
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. These figures do not reflect
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total return
investment performance. For each Subaccount other than Fidelity Money Market for
which the Company advertises yield, the Company shall furnish a yield quotation
referring to the Portfolio computed in the following manner: the net investment
income per Accumulation Unit earned during a recent one month period is divided
by the Accumulation Unit Value on the last day of the period.
Please refer to the Statement of Additional Information for a description of the
method used to calculate a Portfolio's yield and total return, and a list of the
indexes and other benchmarks used in evaluating a Portfolio's performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
-14-
<PAGE>
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria. Performance figures will be calculated in accordance with standardized
methods established by each reporting service.
THE COMPANY AND THE SEPARATE ACCOUNT
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
The Company (formerly National Home Life Assurance Company of New York) is a
stock life insurance company incorporated under the laws of the State of New
York on March 23, 1970, with administrative offices at 520 Columbia Drive,
Johnson City, New York 13790. The Company is principally engaged in offering
life insurance, annuity contracts, and accident and health insurance and is
admitted to do business in 10 states and the District of Columbia. The Company
is ultimately wholly-owned by Providian Corporation, a publicly-held diversified
consumer financial services company whose shares are traded on the New York
Stock Exchange with assets of $26.8 billion as of December 31, 1995.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT C
The Separate Account was established by the Company as a separate account under
the laws of the State of New York on November 4, 1994, pursuant to a resolution
of the Company's Board of Directors. The Separate Account is a unit investment
trust registered with the SEC under the Investment Company Act of 1940 (the
"1940 Act"). Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account. The
Separate Account meets the definition of a "separate account" under the federal
securities laws.
The assets of the Separate Account are owned by the Company and the obligations
under the Contract are obligations of the Company. These assets are held
separately from the other assets of the Company and are not chargeable with
liabilities incurred in any other business operation of the Company (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of the Separate Account). Income, gains and losses incurred on the
assets in the Separate Account, whether or not realized, are credited to or
charged against the Separate Account without regard to other income, gains or
losses of the Company. Therefore, the investment performance of the Separate
Account is entirely independent of the investment performance of the General
Account assets or any other separate account maintained by the Company.
The Separate Account has dedicated 12 Subaccounts to the Contract, each of which
invests solely in a corresponding Portfolio of the Funds. Additional Subaccounts
may be established at the discretion of the Company. The Separate Account also
includes other subaccounts which are not available under the Contract.
-15-
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund and Variable Insurance Products Fund II (each,
a "Fidelity Fund" and collectively, the "Fidelity Funds") are diversified, open-
end management investment companies organized by Fidelity Management & Research
Company ("FMR") and registered under the 1940 Act. Each Fidelity Fund consists
of several investment portfolios, including the Money Market, Equity-Income,
Growth and Asset Manager Portfolios available as part of the Providian Marquee.
FMR serves as the Fidelity Funds' investment adviser.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is a diversified, open-end management
investment company organized under the 1940 Act. The Dreyfus Variable Investment
Fund consists of eleven separate investment portfolios, including the Growth and
Income and Quality Bond Portfolios, which are the only portfolios available as
part of the Providian Marquee. The Dreyfus Corporation serves as this Fund's
investment adviser.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Series Inc. is a Maryland corporation organized in 1994 and
is registered with the SEC under the 1940 Act as a diversified, open-end
management investment company, commonly known as a "mutual fund." Currently, the
fund consists of the Equity-Income and the New America Growth Portfolios, each
of which represents a separate class of shares having different objectives and
investment policies, and both of which are available as part of the Providian
Marquee. T. Rowe Price Associates, Inc. is responsible for the selection and
management of this Fund's portfolio investments and serves as the Fund's
investment adviser.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Series, Inc. is a Maryland corporation organized in
1994 and is registered with the SEC under the 1940 Act as a diversified, open-
end management investment company, commonly known as a "mutual fund." The
corporation is a series fund and has the authority to issue other series in
addition to the International Stock Portfolio currently available as part of the
Providian Marquee. Rowe Price-Fleming International, Inc. is responsible for
selection and management of this Fund's portfolio investments and serves as the
Fund's investment adviser.
OCC ACCUMULATION TRUST
OCC Accumulation Trust is a Massachusetts business trust and is registered with
the SEC under the 1940 Act as a diversified, open-end management investment
company. The Fund receives investment advice with respect to each of its
portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital, a
registered investment adviser. The Fund currently consists of seven series,
including the OpCap Advisors Managed, OpCap Advisors Small Cap and OpCap
Advisors Government Income Portfolios available as part of the Providian
Marquee. The OCC Accumulation Trust was formerly known as the Quest for Value
Accumulation Trust.
-16-
<PAGE>
THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUSES)
FOR MORE INFORMATION CONCERNING THE RISKS ASSOCIATED WITH EACH PORTFOLIO'S
INVESTMENTS, PLEASE REFER TO THE APPLICABLE UNDERLYING FUND PROSPECTUS.
FIDELITY MONEY MARKET PORTFOLIO ("FIDELITY MONEY MARKET")
Fidelity Money Market seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. It invests only in
high-quality U.S. dollar denominated money market instruments of domestic and
foreign issuers.
FIDELITY EQUITY-INCOME PORTFOLIO ("FIDELITY EQUITY-INCOME")
Fidelity Equity-Income seeks reasonable income by investing primarily in income-
producing equity securities. In choosing these securities the Portfolio will
also consider the potential for capital appreciation. The Portfolio'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.
FIDELITY GROWTH PORTFOLIO ("FIDELITY GROWTH")
Fidelity Growth seeks to achieve capital appreciation normally through the
purchase of common stocks (although the Portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
FIDELITY ASSET MANAGER PORTFOLIO ("FIDELITY ASSET MANAGER")
Fidelity Asset Manager seeks high total return with reduced risk over the long-
term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
DREYFUS GROWTH AND INCOME PORTFOLIO ("DREYFUS GROWTH AND INCOME")
Dreyfus Growth and Income is a non-diversified Portfolio, the goal of which is
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. The Portfolio invests in equity and debt securities
and money market instruments of domestic and foreign issuers.
DREYFUS QUALITY BOND PORTFOLIO ("DREYFUS QUALITY BOND")
Dreyfus Quality Bond is a diversified Portfolio, the goal of which is to provide
the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus Quality
Bond Portfolio invests in debt obligations of corporations, the U.S. Government
and its agencies and instrumentalities, and major U.S. banking institutions.
T. ROWE PRICE EQUITY INCOME PORTFOLIO ("T. ROWE PRICE EQUITY INCOME")
T. Rowe Price Equity Income seeks to provide substantial dividend income as well
as long-term capital appreciation by investing primarily in dividend-paying
common stocks of established companies. In pursuing its objective, the Portfolio
emphasizes companies with favorable prospects for both increasing dividend
income and capital appreciation.
-17-
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO ("T. ROWE PRICE NEW AMERICA GROWTH")
T. Rowe Price New America Growth seeks long-term growth of capital through
investments primarily in the common stocks of U.S. growth companies which
operate in service industries. In pursuing its objective, this Portfolio invests
primarily in companies deriving a majority of their revenues or operating
earnings from service-related activities and in companies whose prospects are
closely tied to service industries. This Portfolio may also invest up to 25% of
its assets in non-service related growth companies in pursuit of capital
appreciation whose earnings are believed to hold the prospect of superior
growth.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ("T. ROWE PRICE INTERNATIONAL
STOCK")
T. Rowe Price International Stock seeks long-term growth of capital, through
investments primarily in common stocks of established, non-U.S. companies.
OPCAP ADVISORS MANAGED PORTFOLIO ("OPCAP ADVISORS MANAGED")
OpCap Advisors Managed seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary over time based on the
investment manager's assessments of the relative outlook for such
investments.
OPCAP ADVISORS SMALL CAP PORTFOLIO ("OPCAP ADVISORS SMALL CAP")
OpCap Advisors Small Cap seeks capital appreciation through investments in a
diversified portfolio consisting primarily of equity securities of companies
with market capitalizations under $1 billion.
OPCAP ADVISORS U.S. GOVERNMENT INCOME PORTFOLIO ("OPCAP ADVISORS U.S.
GOVERNMENT INCOME")
The investment objective of OpCap Advisors U.S. Government Income is to seek a
high level of current income together with the protection of capital. This
Portfolio seeks to achieve its investment objective by investing exclusively in
debt obligations, including mortgage-backed securities, issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
OTHER PORTFOLIO INFORMATION
There is no assurance that a Portfolio will achieve its stated investment
objective.
Additional information concerning the investment objectives and policies of the
Portfolios and the investment advisory services, total expenses and charges can
be found in the current prospectuses for the corresponding Funds. THE FUNDS' OR
PORTFOLIOS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company as well as other
insurance companies or to a person or plan, including a pension or retirement
plan receiving favorable tax treatment under the Code, that qualifies to
purchase shares of the Funds under Section 817(h) of the Code. Although we
believe it is unlikely, a material conflict could arise among the interests of
the Separate Account and one or more of the other participating separate
-18-
<PAGE>
accounts and other qualified persons or plans. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing their separate accounts from the Funds if required by law,
to resolve the matter.
CONTRACT FEATURES
The rights and benefits under the Contract are described below and in the
Contract. The Company reserves the right to make any modification to conform
the Contract to, or give the Contract Owner the benefit of, any federal or
state statute or any rule or regulation of the United States Treasury
Department.
RIGHT TO CANCEL PERIOD
A Right to Cancel Period exists for 10 days after you receive the Contract
(20 days for replacement) plus a 5 day grace period to allow for mail
delivery. You may cancel the Contract during the Right to Cancel Period by
returning the Contract to our Administrative Offices, 520 Columbia Drive,
Johnson City, New York 13790, or to the agent from whom you purchased the
Contract or mailing it to us at P.O. Box 1950, Binghamton, New York 13902.
Upon cancellation, the Contract is treated as void from the Contract Date and
when we receive the Contract, we will return the Accumulated Value of your
Purchase Payment(s) invested in the Portfolios plus any loads, fees and/or
Premium Taxes that may have been subtracted from such amount.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should send your completed
application and your initial Purchase Payment to the address indicated on
your application, or to such other location as the Company may from time to
time designate. If you wish to make personal delivery by hand or courier to
the Company of your completed application and initial Purchase Payment
(rather than through the mail), you must do so at our Administrative Offices,
520 Columbia Drive, Johnson City, NY 13790. Your initial Purchase Payment for
a Non-Qualified Contract must be equal to or greater than the $5,000 minimum
investment requirement. The initial Purchase Payment for a Qualified
Contract must be equal to or greater than $2,000 (or you may establish a
payment schedule of $50 a month by payroll deduction).
The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within two Business Days after acceptance of the
application and the initial Purchase Payment. Acceptance is subject to the
application being received in good order, and the Company reserves the right
to reject any application or initial Purchase Payment.
If the initial Purchase Payment cannot be credited because the application is
incomplete, we will contact the applicant, explain the reason for the delay
and will refund the initial Purchase Payment within five Business Days,
unless the applicant instructs us to retain the initial Purchase Payment and
credit it as soon as the necessary requirements are fulfilled.
Additional Purchase Payments may be made at any time prior to the Annuity
Date, as long as the Annuitant is living. Any additional Purchase Payments
must be for at least $500 for Non-Qualified Contracts, or $50 for Qualified
Contracts, and are limited to $10,000 annually after the first Contract
Anniversary. If additional Purchase Payments are received prior to the close
of the New York Stock Exchange (generally 4:00 P.M. Eastern time) they will
be credited to the Accumulated Value at the close of business that same day.
Additional Purchase Payments received after the close of the New York Stock
Exchange are processed the next Business Day.
Total Purchase Payments may not exceed $1,000,000 without our prior approval.
-19-
<PAGE>
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at
1-800-250-1828.
ALLOCATION OF PURCHASE PAYMENTS
You specify in the Contract application how your Net Purchase Payments will
be allocated. You may allocate each Net Purchase Payment to one or more of
the Portfolios as long as such portions are whole number percentages provided
that no Portfolio may contain a balance less than $1,000, except in cases
where Purchase Payments are made by monthly payroll deduction. You may choose
not to allocate any monies to a particular Portfolio. You may change
allocation instructions for future Net Purchase Payments by sending us the
appropriate Company form or by complying with other designated Company
procedures.
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your Portfolios immediately upon our receipt thereof, IN WHICH
CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD.
CHARGES AND DEDUCTIONS
No sales load is deducted from Purchase Payments and up to 10% of the
Accumulated Value as of the last Contract Anniversary (10% of the initial Net
Purchase Payment during the first Contract Year), can be withdrawn once per
year, or pursuant to a series of systematic withdrawals, without a surrender
charge (the "Penalty Free Amount"). Additional withdrawals in excess of the
Penalty Free Amount are subject to a surrender charge according to the
following schedule on the portion of such withdrawal that consists of Net
Purchase Payments:
<TABLE>
<CAPTION>
SURRENDER
CONTRACT YEAR CHARGE
------------- ------
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. There will be no surrender charge assessed on
the death of the Annuitant or after the sixth Contract Year.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contract. The annual charge is assessed daily based on the
net asset value of the Separate Account. The annual mortality and expense
risk charge is 1.25% of the net asset value of the Separate Account.
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We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on
us. Conversely, if the charge proves more than sufficient, any excess will be
added to the Company surplus and will be used for any lawful purpose,
including any shortfall on the costs of distributing the Contract.
The mortality risk borne by us under the Contract, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.
The expense risk borne by us under the Contract is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering
the Contract.
ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE
An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts.
For any Contract with amounts allocated to the Subaccounts, the $30 fee is
assessed per Contract, not per Portfolio chosen. The Annual Contract Fee will
be deducted on each Contract Anniversary and upon surrender, on a pro rata
basis, from each Subaccount. These deductions represent reimbursement for the
costs expected to be incurred over the life of the Contract for issuing and
maintaining each Contract and the Separate Account.
EXCHANGES
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a
balance less than $1,000, except in cases where Purchase Payments are made by
monthly payroll deduction. We reserve the right to charge a $15 fee in the
future for Exchanges in excess of 12 per Contract Year.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The contingent deferred sales load or other administrative charges or fees
may be reduced for sales of Contracts to a trustee, employer or similar
entity representing a group where the Company determines that such sales
result in savings of sales and/or administrative expenses. In addition,
directors, officers and bona fide full-time employees (and their spouses and
minor children) of the Company, its ultimate parent company, Providian
Corporation and certain of their affiliates and certain sales representatives
for the Contract are permitted to purchase Contracts with substantial
reduction of the contingent deferred sales load or other administrative
charges or fees or with a waiver or modification of certain minimum or
maximum purchase and transaction amounts or balance requirements. Contracts
so purchased are for investment purposes only and may not be resold except to
the Company.
In no event will reduction or elimination of the contingent deferred sales
loads or other fees or charges or waiver or modification of transaction or
balance requirements be permitted where such reduction, elimination, waiver
or modification will be unfairly discriminatory to any person. Additional
information about reductions in charges is contained in the Statement of
Additional Information.
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TAXES
Under present laws, the Company will not incur New York state or local taxes.
If there is a change in state or local tax laws, charges for such taxes may
be made. The Company does not expect to incur any federal income tax
liability attributable to investment income or capital gains retained as part
of the reserves under the Contract. (See "Federal Tax Considerations," page
28.) Based upon these expectations, no charge is currently being made to the
Separate Account for corporate federal income taxes that may be attributable
to the Separate Account.
The Company will periodically review the question of a charge to the Separate
Account for federal income taxes related to the Separate Account. Such a
charge may be made in future years for any federal income taxes incurred by
the Company. This might become necessary if the tax treatment of the Company
is ultimately determined to be other than what the Company currently believes
it to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in the Company's
tax status. In the event that the Company should incur federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contracts, the Accumulated Value of the Contract would be
correspondingly adjusted by any provision or charge for such taxes.
PORTFOLIO EXPENSES
The value of the assets in the Separate Account reflect the fees and expenses
paid by the Portfolios. A complete description of these expenses is found in
the "Fee Table" section of this Prospectus and in each Fund's Prospectus and
Statement of Additional Information.
ACCUMULATED VALUE
At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the
Accumulated Value from the previous Business Day increased by: (i) any
additional Net Purchase Payments received by the Company and (ii) any
increase in the Accumulated Value due to investment results of the selected
Portfolio(s); and reduced by: (i) any decrease in the Accumulated Value due
to investment results of the selected Portfolio(s), (ii) a daily charge to
cover the mortality and expense risks assumed by the Company, (iii) any
charge to cover the cost of administering the Contract, (iv) any partial
withdrawals, and (v) any charges for any Exchanges made after the first
twelve in any Contract Year.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds. Requests for Exchanges, received by mail or by
telephone, prior to the close of the New York Stock Exchange (generally 4:00
P.M. Eastern time) are processed at the close of business that same day.
Requests received after the close of the New York Stock Exchange are
processed the next Business Day. If you experience difficulty in making a
telephone Exchange your Exchange request may be made by regular or express
mail. It will be processed on the date received.
To take advantage of the privilege of initiating transactions by telephone,
you must first elect the privilege by completing the appropriate section of
the application or by completing a separate telephone authorization form at a
later date. To take advantage of the privilege of authorizing a third party
to initiate transactions by telephone, you must first complete a third party
authorization form.
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The Company will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Prior to the acceptance of any
request, the caller will be asked by a customer service representative for
his or her Contract number and social security number. In addition, telephone
communications from a third party authorized to transact in an account will
undergo reasonable procedures to confirm that instructions are genuine. The
third party caller will be asked for his or her name, company affiliation (if
appropriate), the Contract number to which he or she is referring, and the
social security number of the Contract Owner. All calls will be recorded, and
this information will be verified with the Contract Owner's records prior to
processing a transaction. Furthermore, all transactions performed by a
customer service representative will be verified with the Contract Owner
through a written confirmation statement. Neither the Company nor the Funds
shall be liable for any loss, cost or expense for action on telephone
instructions that are believed to be genuine in accordance with these
procedures.
FULL AND PARTIAL WITHDRAWALS
At any time before the Annuity Date and while the Annuitant is living, you
may make a partial or full withdrawal of the Contract to receive all or part
of the Surrender Value by sending a written request to our Administrative
Offices. Full or partial withdrawals may only be made before the Annuity Date
and all partial withdrawal requests must be for at least $500. The amount
available for full or partial withdrawal is the Surrender Value at the end of
the Valuation Period during which the written request for withdrawal is
received. The Surrender Value is an amount equal to the Accumulated Value,
less any applicable contingent deferred sales load (i.e., surrender
charge) and any Premium Taxes incurred but not yet deducted. The withdrawal
amount may be paid in a lump sum to you, or if elected, all or any part may
be paid out under an Annuity Payment Option. (See "Annuity Payment Options,"
page 26).
You can make a withdrawal by sending the appropriate Company form to our
Administrative Offices. Your proceeds will normally be processed and mailed
to you within two Business Days after the receipt of the request but in no
event will it be later than seven calendar days, subject to postponement in
certain circumstances. (See "Deferment of Payment," page 28).
Payments under the Contract of any amounts derived from premiums paid by
check may be delayed until such time as the check has cleared your bank. If,
at the time the Contract Owner requests a full or partial withdrawal, he has
not provided the Company with a written election not to have federal income
taxes withheld, the Company must by law withhold such taxes from the taxable
portion of any full or partial withdrawal and remit that amount to the
federal government. Moreover, the Code provides that a 10% penalty tax may be
imposed on certain early withdrawals. (See "Federal Tax Considerations," page
28.)
Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, the total amount paid upon withdrawal of
the Contract (taking into account any prior withdrawals) may be more or less
than the total Net Purchase Payments made.
SYSTEMATIC WITHDRAWAL OPTION
You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semiannual or annual basis. The minimum
amount for each withdrawal is $250.
This option may be elected by completing the Systematic Withdrawal Request
Form. This form must be received by us at least 30 days prior to the date
systematic withdrawals will begin. Each withdrawal will be processed on the
day and at the frequency indicated on the Systematic Withdrawal Request Form.
The start date for the systematic withdrawals must be between the first and
twenty-eighth day of the month. You may
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discontinue the Systematic Withdrawal Option at any time by notifying us in
writing at least 30 days prior to your next scheduled withdrawal date.
A surrender charge will apply when withdrawals in any of the first six
Contract Years exceed 10% of that year's beginning Accumulated Value. (See
"Charges and Deductions," page 20.) Each systematic withdrawal is subject to
federal income taxes on the taxable portion, and may be subject to a 10%
federal penalty tax if you are under age 59 1/2. You may elect to have
federal income taxes withheld from each withdrawal at a 10% rate on the
Systematic Withdrawal Request Form. For a discussion of the tax consequences
of withdrawals, see "Federal Tax Considerations" on page 28 of the
Prospectus. You may wish to consult a tax adviser regarding any tax
consequences that might result prior to electing the Systematic Withdrawal
Option.
We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days written notice. We also reserve the right to charge a fee for
such service.
DOLLAR COST AVERAGING OPTION
If you have at least $5,000 of Accumulated Value in Fidelity Money Market,
you may choose to have a specified dollar amount transferred from this
Portfolio to other Portfolios in the Separate Account on a monthly basis. The
main objective of Dollar Cost Averaging is to shield your investment from
short term price fluctuations. Since the same dollar amount is transferred to
other Portfolios each month, more units are purchased in a Portfolio if the
value per unit is low and less units are purchased if the value per unit is
high. Therefore, a lower average cost per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.
This Dollar Cost Averaging Option may be elected on the application or at a
later date. The minimum amount that may be transferred each month into any
Portfolio is $250. The maximum amount which may be transferred is equal to
the Accumulated Value in Fidelity Money Market when elected, divided by 12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the
proportions you specify on the appropriate Company form, or, if none are
specified, in accordance with your original investment allocation. If, on any
transfer date, the Accumulated Value is equal to or less than the amount you
have elected to have transferred, the entire amount will be transferred and
the option will end. You may change the transfer amount once each Contract
Year, or cancel this option by sending the appropriate Company form to our
Administrative Offices which must be received at least seven days before the
next transfer date.
IRS-REQUIRED DISTRIBUTIONS
Prior to the Annuity Date, if you or, if applicable, a Joint Owner dies
before the entire interest in the Contract is distributed, the value of the
Contract must be distributed to the Owner's Designated Beneficiary (unless
the Contract Owner was also the Annuitant-in which case the Annuitant's
Beneficiary is entitled to the Death Benefit) as described in this section so
that the Contract qualifies as an annuity under the Code. If the death occurs
on or after the Annuity Date, the remaining portions of such interest will be
distributed at least as rapidly as under the method of distribution being
used as of the date of death. If the death occurs before the Annuity Date,
the entire interest in the Contract will be distributed within five years
after date of death or be paid under an Annuity Payment Option under which
payments will begin within one year of the Contract Owner's death and will be
made for the life of the Owner's Designated Beneficiary or for a period not
extending beyond the life expectancy of that beneficiary. The Owner's
Designated Beneficiary is the person to whom ownership of the Contract passes
by reason of death.
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If any portion of the Contract Owner's interest is payable to (or for the
benefit of) the surviving spouse of the Contract Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner.
MINIMUM BALANCE REQUIREMENT
We will transfer the balance in any Portfolio that falls below $1,000, except
in cases where Purchase Payments are made by monthly payroll deduction, due
to a partial withdrawal or Exchange, to the remaining Portfolios held under
that Contract on a pro rata basis. In the event that the entire value of the
Contract falls below $1,000, and if no Purchase Payment has been received
within three years, we reserve the right to liquidate the account. You would
be notified that the Accumulated Value of your account is below the
Contract's minimum requirement and be allowed 60 days to make an additional
investment before the account is liquidated. Proceeds would be promptly paid
to the Contract Owner. The full proceeds would be taxable as a withdrawal. We
will not exercise this right with respect to Qualified Contracts.
DESIGNATION OF AN ANNUITANT'S BENEFICIARY
The Contract Owner may select one or more Annuitant's Beneficiaries and name
them in the application. Thereafter, while the Annuitant is living, the
Contract Owner may change the Annuitant's Beneficiary by sending us the
appropriate Company form. Such change will take effect on the date such form
is signed by the Contract Owner but will not affect any payment made or other
action taken before the Company acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate Company form and obtaining approval from the Company. Changes in
the Annuitant's Beneficiary may then be made only with the consent of the
designated irrevocable Annuitant's Beneficiary.
If the Annuitant dies prior to the Annuity Date, the following will apply
unless the Contract Owner has made other provisions.
(a) If there is more than one Annuitant's Beneficiary, each will share in the
Death Benefits equally;
(b) If one or two or more Annuitant's Beneficiaries have already died, that
share of the Death Benefit will be paid equally to the survivor(s);
(c) If no Annuitant's Beneficiary is living, the proceeds will be paid to the
Contract Owner;
(d) Unless otherwise provided, if an Annuitant's Beneficiary dies at the same
time as the Annuitant, the proceeds will be paid as though the
Annuitant's Beneficiary had died first. Unless otherwise provided, if an
Annuitant's Beneficiary dies within 15 days after the Annuitant's death
and before the Company receives due proof of the Annuitant's death,
proceeds will be paid as though the Annuitant's Beneficiary had died
first.
If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's
named beneficiary(ies) when due. If no Annuitant's Beneficiary survives the
Annuitant, the right to any amount payable will pass to the Contract Owner.
If the Contract Owner is the Annuitant, this right will pass to his or her
estate. If a Life Annuity with Period Certain option was elected, and if the
Annuitant dies on or after the Annuity Date, any unpaid payments certain will
be paid to the Annuitant's Beneficiary or your designated Payee.
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DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and
is payable upon receipt of due Proof of Death of the Annuitant as well as
proof that the Annuitant died prior to the Annuity Date. Upon receipt of this
proof, the Death Benefit will be paid within seven days, or as soon
thereafter as the Company has sufficient information about the Annuitant's
Beneficiary to make the payment. The Annuitant's Beneficiary may receive the
amount payable in a lump sum cash benefit or under one of the Annuity Payment
Options.
The Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive due Proof of Death; or
(2) The Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit will be the
sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be
the Death Benefit on the last day of the previous six-year period plus any
Net Purchase Payments made, less any partial withdrawals taken during the
current six-year period. After the Annuitant attains age 75, the Adjusted
Death Benefit will remain equal to the Death Benefit on the last day of the
six year period before age 75 occurs plus any Net Purchase Payments
subsequently made, less any partial withdrawals subsequently taken.
ANNUITY DATE
You may specify an Annuity Date in the application, which can be no later
than the first day of the month after the Annuitant's 85th birthday, without
the Company's prior approval. The Annuity Date is the date that Annuity
Payments are scheduled to commence under the Contract unless the Contract has
been surrendered or an amount has been paid as proceeds to the designated
Annuitant's Beneficiary prior to that date.
You may advance or defer the Annuity Date. However, the Annuity Date may not
be advanced to a date prior to 30 days after the date of receipt of a written
request or, without the Company's prior approval, deferred to a date beyond
the first day of the month after the Annuitant's 85th birthday. The Annuity
Date may only be changed by written request during the Annuitant's lifetime
and must be made at least 30 days before the then-scheduled Annuity Date. The
Annuity Date and Annuity Payment Options available for Qualified Contracts
may also be controlled by endorsements, the plan or applicable law.
LUMP SUM PAYMENT OPTION
You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated
Value, less any applicable deferred sales load (i.e., surrender charge) and
any Premium Taxes incurred but not yet deducted.
ANNUITY PAYMENT OPTIONS
All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each
payment will be set on the Annuity Date and will not change. The following
Annuity Payment Options are available under the Contract:
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Life Annuity-Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.
Joint and Last Survivor Annuity-Monthly Annuity Payments are paid for the
life of two Annuitants and thereafter for the life of the survivor, ceasing
with the last Annuity Payment due prior to the survivor's death.
Life Annuity with Period Certain-Monthly Annuity Payments are paid for the
life of an Annuitant, with a Period Certain of not less than 120, 180, or 240
months, as elected.
Installment or Unit Refund Life Annuity-Available as either a Fixed
(Installment Refund) or Variable (Unit Refund) Annuity Option. Monthly
Annuity Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.
Designated Period Annuity-Only available as a Fixed Annuity Option. Monthly
Annuity Payments are paid for a Period Certain as elected, which may be from
10 to 30 years.
Before the Annuity Date and while the Annuitant is living, you may change the
Annuity Payment Option by written request. The request for change must be
made at least 30 days prior to the Annuity Date and is subject to the
approval of the Company. If an Annuity Payment Option is chosen that depends
on the continuation of the life of the Annuitant, proof of birth date may be
required before Annuity Payments begin. For Annuity Payment Options involving
life income, the actual age of the Annuitant will affect the amount of each
payment. Since payments to older Annuitants are expected to be fewer in
number, the amount of each Annuity Payment will generally be greater.
All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one
option, the Company must be told what part of the Accumulated Value is to be
paid under each option.
If at the time of any Annuity Payment you have not provided the Company with
a written election not to have federal income taxes withheld, the Company
must by law withhold such taxes from the taxable portions of such Annuity
Payment and remit that amount to the federal government.
In the event that an Annuity Payment Option is not selected, the Company will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with
Period Certain Option and the annuity benefit sections of the Contract. That
portion of the Accumulated Value that has been held in a Portfolio prior to
the Annuity Date will be applied under a Variable Annuity Option based on the
performance of that Portfolio. Subject to approval by the Company, you may
select any other Annuity Payment Option then being offered by the Company.
All Fixed Annuity Payments and the initial Variable Annuity Payment are
guaranteed to be not less than as provided by the Annuity Tables and the
Annuity Payment Option elected by the Contract Owner. The minimum payment,
however, is $100. If the Accumulated Value is less than $2,000 the Company
has the right to pay that amount in a lump sum. From time to time, the
Company may require proof that the Annuitant or Contract Owner is living.
Annuity Payment Options are not available to: (1) an assignee; or (2) any
other than a natural person, except with the consent of the Company.
We may, at the time of election of an Annuity Payment Option, offer more
favorable rates in lieu of the guaranteed rates specified in the Annuity
Tables found in the Contract.
The value of Variable Annuity Payments will reflect the investment experience
of the chosen Portfolio. Only one Variable Annuity Option may be chosen from
among those made available by the Company for each Portfolio. The Annuity
Tables, which are contained in the Contract and are used to calculate the
value of the initial Variable Annuity Payment, are based on an assumed
interest rate of 4%. If the actual net investment experience exactly equals
the assumed interest rate, then the Variable Annuity Payments will remain the
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same (equal to the first Annuity Payment). However, if actual investment
experience exceeds the assumed interest rate, the Variable Annuity Payments
will increase; conversely, they will decrease if the actual experience is
lower. The method of computation of Variable Annuity Payments is described in
more detail in the Statement of Additional Information.
The value of all payments, both fixed and variable, will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater
for life annuities than for joint and survivor annuities, because they are
expected to be made for a shorter period.
After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate Company form or by calling our
Administrative Offices at 1-800-250-1828.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum Death Benefit due from the
Separate Account will occur within seven days from the date the election
becomes effective except that the Company may be permitted to defer such
payment if: (1) the New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the New York Stock Exchange is otherwise
restricted; or (2) an emergency exists as defined by the SEC, or the SEC
requires that trading be restricted; or (3) the SEC permits a delay for the
protection of Contract Owners.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on
Annuity Payments, and on the economic benefits to the Contract Owner,
Annuitant or Annuitant's Beneficiary, depends on the terms of the Contract,
the Company's tax status and upon the tax status of the individuals
concerned. The following discussion is general in nature and is not intended
as tax advice. You should consult a tax advisor regarding the tax
consequences of purchasing a Contract. No attempt is made to consider any
applicable state or other tax laws. Moreover, the discussion is based upon
the Company's understanding of the federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of the federal income tax laws, the Treasury regulations or the
current interpretations by the Internal Revenue Service. We reserve the
right to make uniform changes in the Contract to the extent necessary to
continue to qualify the Contract as an annuity. For a discussion of federal
income taxes as they relate to the Funds, please see the accompanying
Prospectuses for the Funds.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Contracts Owned by Non-Natural Persons" and "Diversification
Standards," pages 30 and 31, respectively).
Section 72 provides that the proceeds of a full or partial withdrawal from a
Contract prior to the Annuity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract," as that term is defined in the Code. The "investment in the
Contract" can generally be described as the cost of the Contract, and
generally constitutes all Purchase Payments paid for the Contract less any
amounts received under the Contract that are excluded from the individual's
gross income. The
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taxable portion is taxed at ordinary income tax rates. For purposes of this
rule, a pledge or assignment of a Contract is treated as a payment received
on account of a partial withdrawal of a Contract.
Upon receipt of a full or partial withdrawal or an Annuity Payment under the
Contract, you will be taxed if the value of the Contract exceeds the
investment in the Contract. Ordinarily, the taxable portion of such payments
will be taxed at ordinary income tax rates.
For Fixed Annuity Payments, in general, the taxable portion of each payment
is determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of Annuity Payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed at ordinary income
tax rates. For Variable Annuity Payments, in general, the taxable portion is
determined by a formula 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.
The remaining portion of each payment is taxed at ordinary income tax rates.
Once the excludible portion of Annuity Payments to date equals the investment
in the Contract, the balance of the Annuity Payments will be fully taxable.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies the Company of that election.
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals (i) made on or after the death of the Contract Owner or, where
the Contract Owner is not an individual, the death of the Annuitant, who is
defined as the individual the events in whose life are of primary importance
in affecting the timing and payment under the Contracts; (ii) attributable to
the taxpayer's becoming disabled within the meaning of Code Section 72(m)(7);
(iii) that are part of a series of substantially equal periodic payments made
at least annually for the life (or life expectancy) of the taxpayer, or joint
lives (or joint life expectancies) of the taxpayer and his or her
beneficiary; (iv) from a qualified plan (note, however, other penalties may
apply); (v) under a qualified funding asset (as defined in Code Section
130(d)); (vi) under an immediate annuity contract as defined in Section
72(u)(4); or (vii) that are purchased by an employer on termination of
certain types of qualified plans and that are held by the employer until the
employee separates from service. Other tax penalties may apply to certain
distributions as well as to certain contributions and other transactions
under Qualified Contracts.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the year
in which the modification occurs will be increased by an amount (as
determined under Treasury Regulations) equal to the tax that would have been
imposed but for item (iii) above, plus interest for the deferral period. The
foregoing rule applies if the modification takes place (a) before the close
of the period that is five years from the date of the first payment and after
the taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59
1/2.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not a separate entity 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 on the assets of the
Separate Account are reinvested and taken into account in determining the
Accumulated Value. Under existing federal income tax law, the Separate
Account's investment income, including realized net capital gains, is not
taxed to the Company. The
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Company reserves the right to make a deduction for taxes should they be
imposed with respect to such items in the future.
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract, a Contract must generally
provide the following two distribution rules: (a) if any Contract Owner dies
on or after the Annuity Date and before the entire interest in the Contract
has been distributed, the remaining portion of such interest must be
distributed at least as quickly as the method in effect on the Contract
Owner's death; and (b) if any Contract Owner dies before the Annuity Date,
the entire interest must generally be distributed within five years after the
date of death. To the extent such interest is payable to the Owner's
Designated Beneficiary, however, such interests may be annuitized over the
life of that Owner's Designated Beneficiary or over a period not extending
beyond the life expectancy of that Owner's Designated Beneficiary, so long as
distributions commence within one year after the Contract Owner's death. If
the Owner's Designated Beneficiary is the spouse of the Contract Owner, the
Contract (together with the deferral on tax on the accrued and future income
thereunder) may be continued unchanged in the name of the spouse as Contract
Owner. The term Owner's Designated Beneficiary means the natural person named
by the Contract Owner as a beneficiary and to whom ownership of the Contract
passes by reason of the Contract Owner's death (unless the Contract Owner was
also the Annuitant-in which case the Annuitant's Beneficiary is entitled to
the Death Benefit).
If the Contract Owner is not an individual, the "primary Annuitant" (as
defined under the Code) is considered the Contract Owner. The primary
Annuitant is the individual who is of primary importance in affecting the
timing or the amount of payout under a Contract. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of joint
Contract Owners, the distribution will be required at the death of the first
of the Contract Owners.
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger tax on the gain
in the Contract to the Contract Owner at the time of such transfer. The
investment in the Contract of the transferee will be increased by any amount
included in the Contract Owner's income. This provision, however, does not
apply to those transfers between spouses or incident to a divorce which are
governed by Code Section 1041(a).
CONTRACTS OWNED BY NON-NATURAL PERSONS
Where the Contract is held by a non-natural person (for example, a
corporation), the Contract is generally not treated as an annuity contract
for federal income tax purposes, and the income on that Contract (generally
the increase in the net Accumulated Value less the payments) is includible in
taxable income each year. The rule does not apply where the non-natural
person is only a nominal owner such as a trust or other entity acting as an
agent for a natural person. If an employer is the nominal owner of a
Contract, and the beneficial owners are employees, then the Contract is not
treated as being held by a non-natural person. The rule also does not apply
where the Contract is acquired by the estate of a decedent, where the
Contract is a qualified funding asset for structured settlements, where the
Contract is purchased on behalf of an employee upon termination of a
qualified plan, and in the case of an immediate annuity.
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ASSIGNMENTS
A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating
such a transfer or assignment of a Contract should contact a tax adviser with
respect to the potential tax effects of such a transaction.
MULTIPLE CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent
of the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of Code
Section 72(e) through the serial purchase of annuity contracts or otherwise.
In addition, there may be other situations in which the Treasury Department
may conclude that it would be appropriate to aggregate two or more Contracts
purchased by the same Contract Owner. Accordingly, a Contract Owner should
consult a tax adviser before purchasing more than one Contract or other
annuity contracts.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, the Separate Account will be
required to diversify its investments. The Regulations generally require that
on the last day of each quarter of a calendar year, no more than 55% of the
value of the Separate Account is represented by any one investment, no more
than 70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is represented by
any four investments. A "look-through" rule applies that suggests that each
Subaccount of the Separate Account will be tested for compliance with the
percentage limitations by looking through to the assets of the Portfolios in
which each such division invests. All securities of the same issuer are
treated as a single investment. Each government agency or instrumentality
will be treated as a separate issuer for purposes of those limitations.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible
that regulations or revenue rulings may be issued in this area at some time
in the future. It is not clear, at this time, what these regulations or
rulings would provide. It is possible that when the regulations or ruling are
issued, the Contract may need to be modified in order to remain in
compliance. For these reasons, the Company reserves the right to modify the
Contract, as necessary, to prevent the Contract Owner from being considered
the owner of assets of the Separate Account.
We intend to comply with the Regulations to assure that the Contract
continues to be treated as annuity contracts for federal income tax purposes.
403(b) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by
public school systems and certain tax-exempt organizations (Code Section
501(c)(3) organizations) for their employees under Section 403(b) of the
Code; except, as discussed below and subject to any conditions in an
employer's plan, a Contract used in
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connection with a Section 403(b) Plan offers the same benefits and is subject
to the same charges described in this Prospectus.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan
meets certain Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended
until prior loan balances are paid in full. The loan amount must be at least
$1,000 with a minimum vested Accumulated Value of $2,000. The loan amount may
not exceed the lesser of (a) or (b), where (a) is 50% of the Contract's
vested Accumulated Value on the date on which the loan is made, or $10,000,
and (b) is $50,000 reduced by the excess, if any, of the highest outstanding
balance of loans within the preceding 12 months ending on the day before the
current loan is made, over the outstanding balance of loans on the date on
which the loan is made. If you are married, your spouse must consent in
writing to a loan request. This consent must be given within the 90-day
period before the loan is to be made.
The loan interest rate is variable, is determined monthly, and is based on
the Moody's Corporate Bond Yield Averages-Monthly Average Corporates (the
"Average"), which is published by Moody's Investors Service, Inc. We will
notify you of the initial loan interest rate at the time the loan is made.
The initial interest rate may be increased or reduced by us during the life
of the loan based on changes of the Average. If a change in the Average would
cause the initial loan interest rate (or a subsequent rate that has been
previously increased or reduced by us) to be reduced by 0.50% per annum or
more, we must reduce the loan interest rate. If a change in the Average would
cause the initial loan interest rate (or a subsequent rate that has been
previously increased or reduced by us) to be increased by 0.50% per annum, we
may increase the loan interest rate at our discretion. In no event will the
loan interest rate be greater than the maximum allowed by the insurance
regulations of the State of New York.
On the first Business Day of each calendar month, the Company will determine
a loan interest rate. The loan interest rate for the calendar month in which
the loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which
the loan anniversary occurs.
Principal and interest on loans must be amortized in quarterly installments
over a five year term except for certain loans for the purchase of a
principal residence. If the loan interest rate is adjusted, future payments
will be adjusted so that the outstanding loan balance is amortized in equal
quarterly installments over the remaining term. The remainder of each
repayment will be credited to the individual account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is
not made when due, plus interest, will be treated as a distribution, as
permitted by law. The loan payment may be taxable to the borrower, and may be
subject to the early withdrawal tax penalty. When a loan is made, the number
of Accumulation Units equal to the loan amount will be withdrawn from the
individual account and placed in the Collateral Fixed Account. Accumulation
Units taken from the individual account to provide a loan do not participate
in the investment experience of the related Portfolios. Unless instructed to
the contrary by you, the loan amount will be withdrawn on a pro rata basis
from the Portfolios to which Accumulated Value has been allocated. Until the
loan is repaid in full, that portion of the Collateral Fixed Account shall be
credited with interest at a rate of 2% less than the loan interest rate
applicable to the loan. However, the interest rate credited to the Collateral
Fixed Account will never be less than the guaranteed rate of 3%.
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A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be
the date that the Company receives the loan request form in good order.
Payment is due within 30 calendar days after the due date. Subsequent
quarterly installments are based on the first due date.
When repayment of principal is made, Accumulation Units will be reallocated
on a current value basis among the same investment Portfolios and in the same
proportion as when the loan was initially made, unless you specify otherwise.
If a repayment in excess of a billed amount is received, the excess will be
applied towards the principal portion of the outstanding loan. Payments
received which are less than the billed amount will not be accepted and will
be returned to you.
If a partial surrender is taken from your individual account due to
nonpayment of a billed quarterly installment, the date of the surrender will
be the first Business Day following the 30 calendar day period in which the
repayment was due.
Prepayment of the entire loan is allowed. At the time of prepayment, the
Company will bill you for any accrued interest. The Company will consider the
loan paid when the loan balance and accrued interest are paid.
If the individual account is surrendered with an outstanding loan balance,
the outstanding loan balance and accrued interest will be deducted from the
Surrender Value. If the individual account is surrendered, with an
outstanding loan balance, due to the Contract Owner's death or the election
of an Annuity Payment Option, the outstanding loan balance and accrued
interest will be deducted.
The Company may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since the Company has
no information concerning the outstanding loans that you may have with other
companies, it will only use the information available under Contracts issued
by the Company.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary
reduction agreement and to any earnings on the entire 403(b) individual
account credited on and after January 1, 1989. Surrenders of these amounts
are allowed only if the Contract Owner (a) has died, (b) has become disabled,
as defined in the Code, (c) has attained age 59 1/2, or (d) has separated
from service. Surrenders are also allowed if the Contract Owner can show
"hardship," as defined by the Internal Revenue Service, but the surrender is
limited to the lesser of Purchase Payments made on or after January 1, 1989
or the amount necessary to relieve the hardship. Even if a surrender is
permitted under these provisions, a 10% federal tax penalty may be assessed
on the withdrawn amount if it does not otherwise meet the exceptions to the
penalty tax provisions. (See "Taxation of Annuities in General," page 28.)
Under the Code, you may request a full or partial surrender of an amount
equal to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although
the Code surrender restrictions do not apply to this amount, a 10% federal
penalty tax may be assessed on the withdrawn amount if it does not otherwise
meet the exceptions to the penalty tax provisions (See "Taxation of Annuities
in General," page 28.)
The Company believes that the Code surrender restrictions do not apply to
tax-free transfers pursuant to Revenue Ruling 90-24. The Company further
believes that the surrender restrictions will not apply to any
"grandfathered" amount transferred pursuant to Revenue Ruling 90-24 into
another 403(b) Contract.
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GENERAL INFORMATION
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio of the Funds, or of
another registered, open-end management investment company, if the shares of
the Portfolios are no longer available for investment, or, if in the
Company's judgment, investment in any Portfolio would be inappropriate in
view of the purposes of the Separate Account. To the extent required by the
1940 Act, substitutions of shares attributable to a Contract Owner's interest
in a Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
New Portfolios may be established at the discretion of the Company. Any new
Portfolio will be made available to existing Contract Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Portfolios if marketing, tax, investment or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Contract, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be deregistered
under the 1940 Act in the event such registration is no longer required, or
may be combined with one or more other separate accounts.
VOTING RIGHTS
The Funds do not hold regular meetings of shareholders. The Directors/
Trustees of each Fund may call special meetings of shareholders as may be
required by the 1940 Act or other applicable law. To the extent required by
law, the Portfolio shares held in the Separate Account will be voted by the
Company at shareholder meetings of each Fund in accordance with instructions
received from persons having voting interests in the corresponding Portfolio.
Fund shares as to which no timely instructions are received or shares held by
the Company as to which Contract Owners have no beneficial interest will be
voted in proportion to the voting instructions that are received with respect
to all Contracts participating in that Portfolio. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis to
reduce the votes eligible to be cast.
The number of votes that are available to a Contract Owner will be calculated
separately for each Portfolio. That number will be determined by applying his
or her percentage interest, if any, in a particular Portfolio to the total
number of votes attributable to the Portfolio.
Prior to the Annuity Date, a Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per
share of the applicable Portfolio. After the Annuity Date, the person
receiving Annuity Payments has the voting interest. The number of votes after
the Annuity Date will be determined by dividing the reserve for such Contract
allocated to the Portfolio by the net asset value per share of the
corresponding Portfolio. After the Annuity Date, the votes attributable to a
Contract decrease as the reserves allocated to the Portfolio decrease. In
determining the number of votes, fractional shares will be recognized.
The number of votes of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the
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corresponding Fund. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
by such Fund.
AUDITORS
Ernst & Young LLP serves as independent auditors for the Separate Account and
the Company and will audit their financial statements annually.
LEGAL MATTERS
Jorden Burt Berenson & Johnson LLP of Washington, D.C. has provided legal
advice relating to the federal securities laws applicable to the issue and
sale of the Contracts. All matters of New York law pertaining to the
validity of the Contract and the Company's right to issue such Contracts have
been passed upon by Kimberly A. Scouller, Esquire, on behalf of the
Company.
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TABLE OF CONTENTS FOR THE PROVIDIAN MARQUEE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
PAGE
THE CONTRACT...................................................................2
Computation of Variable Annuity Income Payments...............................2
Exchanges.....................................................................3
Exceptions to Charges and to Transaction or Balance Requirements..............3
GENERAL MATTERS................................................................3
Non-Participating.............................................................3
Misstatement of Age or Sex....................................................3
Assignment....................................................................3
Annuity Data..................................................................4
Annual Statement..............................................................4
Incontestability..............................................................4
Ownership.....................................................................4
PERFORMANCE INFORMATION........................................................4
Money Market Subaccount Yields................................................4
30-Day Yield for Non-Money Market Subaccounts.................................5
Standardized Average Annual Total Return for Subaccounts......................5
ADDITIONAL PERFORMANCE MEASURES................................................6
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return..........................................................6
Non-Standardized Total Return Year-to-Date....................................6
Non-Standardized One Year Return..............................................6
Non-Standardized Hypothetical Total Return and Non-Standardized Hypothetical
Average Annual Total Return..................................................6
Individualized Computer Generated Illustrations..............................11
PERFORMANCE COMPARISONS.......................................................12
SAFEKEEPING OF ACCOUNT ASSETS.................................................13
THE COMPANY...................................................................14
STATE REGULATION..............................................................14
RECORDS AND REPORTS...........................................................14
DISTRIBUTION OF THE CONTRACTS.................................................14
LEGAL PROCEEDINGS.............................................................14
OTHER INFORMATION.............................................................15
FINANCIAL STATEMENTS..........................................................15
Audited Financial Statements.................................................15
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FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PROVIDIAN MARQUEE VARIABLE ANNUITY
Offered by
First Providian Life and Health Insurance Company
(A New York Stock Company)
Administrative Offices
520 Columbia Drive
Johnson City, New York 13790
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Providian Marquee variable annuity contract (the
"Contract") offered by First Providian Life and Health Insurance Company (the
"Company"). You may obtain a copy of the Prospectus dated August __, 1996, by
calling 1-800-250-1828 or by writing to our Administrative Offices, 520 Columbia
Drive, Johnson City, New York 13790. 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 PROSPECTUS FOR THE CONTRACT.
August __, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- ----------------- ----
<S> <C>
THE CONTRACT............................................................... 2
Computation of Variable Annuity Income Payments.......................... 2
Exchanges................................................................ 3
Exceptions to Charges and to Transaction or Balance Requirements......... 3
GENERAL MATTERS............................................................ 3
Non-Participating........................................................ 3
Misstatement of Age or Sex............................................... 3
Assignment............................................................... 3
Annuity Data............................................................. 4
Annual Statement......................................................... 4
Incontestability......................................................... 4
Ownership................................................................ 4
PERFORMANCE INFORMATION.................................................... 4
Money Market Subaccount Yields........................................... 4
30-Day Yield for Non-Money Market Subaccounts............................ 5
Standardized Average Annual Total Return for Subaccounts................. 5
ADDITIONAL PERFORMANCE MEASURES............................................ 6
Non-Standardized Actual Total Return and Non-Standardized
Actual Average Annual Total Return....................................... 6
Non-Standardized Total Return Year-to-Date............................... 6
Non-Standardized One Year Return......................................... 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 6
Individualized Computer Generated Illustrations.......................... 11
PERFORMANCE COMPARISONS.................................................... 12
SAFEKEEPING OF ACCOUNT ASSETS.............................................. 13
THE COMPANY................................................................ 14
STATE REGULATION........................................................... 14
RECORDS AND REPORTS........................................................ 14
DISTRIBUTION OF THE CONTRACTS.............................................. 14
LEGAL PROCEEDINGS.......................................................... 14
OTHER INFORMATION.......................................................... 15
FINANCIAL STATEMENTS....................................................... 15
Audited Financial Statements............................................. 15
</TABLE>
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THE CONTRACT
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract which may be of interest to Contract
Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the
Accumulated Value (or the portion of the Accumulated Value used to provide
variable payments) is applied under the Annuity Tables contained in your
Contract corresponding to the Annuity Payment Option elected by the Contract
Owner and based on an assumed interest rate of 4%. This will produce a dollar
amount which is the first monthly payment. The Company may, at the time annuity
income payments are computed, offer more favorable rates in lieu of the
guaranteed rates specified in the Annuity Tables.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit
Value for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) = the Annuity Unit Value for the immediately preceding
Business Day;
(b) = the Net Investment Factor for the day;
(c) = the investment result adjustment factor (.99989255 per day),
which recognizes an assumed interest rate of 4% per year
used in determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) = any increase or decrease in the value of the Subaccount
due to investment results;
(b) = a daily charge for the mortality and expense risks assumed
by the Company corresponding to an annual rate of 1.25%;
(c) = a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of
the Subaccount, plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.
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EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, the
Company will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The Company may reduce any applicable sales loads and reduce administrative
charges or other deductions from Purchase Payments in certain situations where
the Company expects to realize significant economies of scale or other economic
benefits with respect to the sales of Contracts. This is possible because sales
costs do not increase in proportion to the dollar amount of the Contracts sold.
For example, the per-dollar transaction cost for a sale of a Contract equal to
$5,000 is generally much higher than the per-dollar cost for a sale of Contract
equal to $1,000,000. As a result, any applicable sales charge declines as a
percentage of the dollar amount of Contracts sold as the dollar amount
increases.
The Company may also reduce any applicable sales loads and reduce administrative
charges and fees on sales to directors, officers and bona fide full-time
employees (and their spouses and minor children) of the Company, its ultimate
parent company, Providian Corporation, and certain of their affiliates and
certain sales representatives for the Contract. The Company may also grant
waivers or modifications of certain minimum or maximum purchase and transaction
amounts or balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of the Company.
MISSTATEMENT OF AGE OR SEX
The Company may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, the
Company will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced, the
Company will (1) in the case of underpayment, pay the full amount due with the
next payment; (2) in the case of overpayment, deduct the amount due from one or
more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. The Company is not responsible for the validity
of any assignment. No assignment will be recognized until the Company receives
the appropriate Company form notifying the Company of such assignment. The
interest of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the
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assignee shall be paid in one sum notwithstanding any settlement agreement in
effect at the time assignment was executed. The Company shall not be liable as
to any payment or other settlement made by the Company before receipt of the
appropriate Company form.
ANNUITY DATA
The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.
ANNUAL STATEMENT
Once each Contract Year, the Company will send you an annual statement of the
current Accumulated Value allocated to each Subaccount; and any Purchase
Payments, charges, Exchanges or withdrawals during the year. This report will
also give you any other information required by law or regulation. You may ask
for an annual statement like this at any time. We will also send you quarterly
statements. However, we reserve the right to discontinue quarterly statements
at any time.
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Company form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time the Company may require proof that the
Contract Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts including the yield and effective
yield of the Fidelity Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the estimated total amount of fees
collected during a calendar year divided by the estimated total average net
assets of the Portfolios during the same calendar year. The fee is assumed to
remain the same in each year of the applicable period. (With respect to partial
year periods, if any, the Annual Contract Fee is pro-rated to reflect only the
applicable portion of the partial year period.)
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Fidelity Money Market Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
-4-
<PAGE>
Effective Yield = [((Base Period Return)+1)/365/7/]-1
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:
YIELD = 2[(a-b+1)/6/-1]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursement)
[c] equals the average daily number of Units outstanding during the
period
[d] equals the maximum offering price per Accumulation Unit on the
last day of the period
Yield on a Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
P(1 + T)/n/ = ERV
Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or fractional
portion thereof)
-5-
<PAGE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show Non-Standardized Actual Total Return (i.e., the percentage
change in the value of an Accumulation Unit) for one or more Subaccounts with
respect to one or more periods. The Company may also show Non-Standardized
Actual Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Actual Total Return and the Non-Standardized Actual Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized Actual Average Annual Total
Return is the effective annual compounded rate of return for the periods stated.
Because the value of an Accumulation Unit reflects the Separate Account and
Portfolio expenses (See Fee Table in the Prospectus), the Non-Standardized
Actual Total Return and Non-Standardized Actual Average Annual Total Return also
reflect these expenses. However, these percentages do not reflect the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported by the Company.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentage reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN*
The Company may show Non-Standardized Hypothetical Total Return and
Non-Standardized Hypothetical Average Annual Total Return, calculated on the
basis of the historical performance of the Portfolios (calculated beginning from
the end of the year of inception for each Portfolio) and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values. They reflect a deduction for the Separate
Account expenses and Portfolio expenses. However, they do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
-6-
<PAGE>
<TABLE>
<CAPTION>
HYPOTHETICAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
Since Inception
1 Year 3 Year 5 Year Year-End
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.39% 9.22% 17.04% 111.59%
Fidelity Equity-Income Portfolio 33.20% 64.01% 144.98% 178.59%
Fidelity Growth Portfolio 33.46% 54.96% 139.48% 214.52%
Fidelity Asset Manager Portfolio 15.32% 27.69% 69.90% 79.26%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 55.79%
Dreyfus Quality Bond Portfolio 18.73% 27.02% 57.96% 60.88%
T. Rowe Price Equity Income Portfolio 32.87% N/A N/A 40.70%
T. Rowe Price New America Growth
Portfolio 48.96% N/A N/A 48.65%
T. Rowe Price International Stock
Portfolio 9.62% N/A N/A 10.37%
OpCap Advisors Managed Portfolio 43.52% 58.08% 166.30% 164.28%
OpCap Advisors Small Cap Portfolio 13.62% 30.71% 128.72% 143.02%
OpCap Advisors Government Income 10.07% N/A N/A 11.73%
Portfolio
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
(Based on Single Initial Purchase)
Since Inception
1 Year 3 Year 5 Year Year-End
------ ------ ------ ---------------
Fidelity Money Market Portfolio 4.39% 2.98% 3.20% 5.60%
Fidelity Equity-Income Portfolio 33.20% 17.93% 19.63% 11.74%
Fidelity Growth Portfolio 33.46% 15.69% 19.08% 13.22%
Fidelity Asset Manager Portfolio 15.32% 8.48% 11.18% 9.68%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 30.61%
Dreyfus Quality Bond Portfolio 18.73% 8.30% 9.57% 9.33%
T. Rowe Price Equity Income Portfolio 32.87% N/A N/A 21.57%
T. Rowe Price New America Growth
Portfolio 48.96% N/A N/A 25.46%
T. Rowe Price International Stock
Portfolio 9.62% N/A N/A 5.81%
OpCap Advisors Managed Portfolio 43.52% 16.49% 21.64% 14.00%
OpCap Advisors Small Cap Portfolio 13.62% 9.34% 17.99% 12.72%
OpCap Advisors Government Income 10.07% N/A N/A 10.48%
Portfolio
</TABLE>
* On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Quest For Value Accumulation Trust that is included
in the Contract (the "New Trust"), at which time the New Trust commenced
operations. The total net assets for each of the Small Cap and Managed
Portfolios immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OpCap Advisors Small Cap and OpCap
Advisors Managed Growth Portfolios, respectively. For the period prior to
September 16, 1994, the performance figures above for each of the OpCap Advisors
Small Cap and OpCap Advisors Managed Portfolios reflect the performance of the
corresponding Portfolios of the Old Trust.
-7-
<PAGE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in the Portfolios based on monthly reinvestment of dividends over a specific
period of time.
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
FIDELITY EQUITY INCOME PORTFOLIO FIDELITY EQUITY INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
------------------------ ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A
12/31/87 $ 4,000 $ 1,950 -2.51% -2.51% 12/31/87 $50,000 $ 48,743 -2.51% -2.51%
12/31/88 $ 6,000 $ 4,779 20.99% 12.46% 12/31/88 $50,000 $ 58,975 20.99% 8.60%
12/31/89 $ 8,000 $ 7,843 15.70% 14.00% 12/31/89 $50,000 $ 68,233 15.70% 10.92%
12/31/90 $10,000 $ 8,221 -16.48% 1.09% 12/31/90 $50,000 $ 56,991 -16.48% 3.33%
12/31/91 $12,000 $13,247 29.60% 9.52% 12/31/91 $50,000 $ 73,860 29.60% 8.12%
12/31/92 $14,000 $17,572 15.25% 11.01% 12/31/92 $50,000 $ 85,126 15.25% 9.27%
12/31/93 $16,000 $22,828 16.63% 12.25% 12/31/93 $50,000 $ 99,286 16.63% 10.30%
12/31/94 $18,000 $26,211 5.57% 10.90% 12/31/94 $50,000 $104,817 5.57% 9.69%
12/31/95 $20,000 $37,583 33.22% 14.48% 12/31/95 $50,000 $139,637 33.22% 12.09%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY GROWTH PORTFOLIO FIDELITY GROWTH PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A
12/31/87 $ 4,000 $ 2,044 2.21% 2.21% 12/31/87 $50,000 $ 51,104 2.21% 2.21%
12/31/88 $ 6,000 $ 4,609 13.96% 9.83% 12/31/88 $50,000 $ 58,240 13.96% 7.93%
12/31/89 $ 8,000 $ 8,570 29.67% 18.92% 12/31/89 $50,000 $ 75,519 29.67% 14.73%
12/31/90 $10,000 $ 9,199 -12.97% 5.67% 12/31/90 $50,000 $ 65,727 -12.97% 7.08%
12/31/91 $12,000 $16,068 43.47% 16.25% 12/31/91 $50,000 $ 94,300 43.47% 13.53%
12/31/92 $14,000 $19,475 7.79% 14.02% 12/31/92 $50,000 $101,646 7.79% 12.55%
12/31/93 $16,000 $25,276 17.70% 14.82% 12/31/93 $50,000 $119,636 17.70% 13.27%
12/31/94 $18,000 $26,889 -1.42% 11.46% 12/31/94 $50,000 $117,937 -1.42% 11.32%
12/31/95 $20,000 $38,563 33.49% 14.98% 12/31/95 $50,000 $157,433 33.49% 13.59%
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
FIDELITY ASSET MANAGER PORTFOLIO FIDELITY ASSET MANAGER PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A
12/31/90 $ 4,000 $ 2,105 5.23% 5.23% 12/31/90 $50,000 $52,613 5.23% 5.23%
12/31/91 $ 6,000 $ 4,960 20.84% 15.23% 12/31/91 $50,000 $63,580 20.84% 12.76%
12/31/92 $ 8,000 $ 7,666 10.15% 12.76% 12/31/92 $50,000 $70,031 10.15% 11.89%
12/31/93 $10,000 $11,554 19.53% 15.26% 12/31/93 $50,000 $83,709 19.53% 13.75%
12/31/94 $12,000 $12,551 -7.40% 7.67% 12/31/94 $50,000 $77,511 -7.40% 9.16%
12/31/95 $14,000 $16,782 15.33% 9.67% 12/31/95 $50,000 $89,396 15.33% 10.17%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY MONEY MARKET PORTFOLIO FIDELITY MONEY MARKET PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1983 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1983
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A 12/31/83 $50,000 N/A N/A N/A
12/31/84 $ 4,000 $ 2,178 8.88% 8.88% 12/31/84 $50,000 $54,442 8.88% 8.88%
12/31/85 $ 6,000 $ 4,453 6.60% 7.37% 12/31/85 $50,000 $58,033 6.60% 7.73%
12/31/86 $ 8,000 $ 6,789 5.21% 6.31% 12/31/86 $50,000 $61,055 5.21% 6.88%
12/31/87 $10,000 $ 9,224 4.95% 5.78% 12/31/87 $50,000 $64,077 4.95% 6.40%
12/31/88 $12,000 $11,885 5.89% 5.81% 12/31/88 $50,000 $67,849 5.89% 6.30%
12/31/89 $14,000 $14,939 7.59% 6.29% 12/31/89 $50,000 $73,000 7.59% 6.51%
12/31/90 $16,000 $18,045 6.53% 6.35% 12/31/90 $50,000 $77,765 6.53% 6.51%
12/31/91 $18,000 $20,968 4.60% 5.98% 12/31/91 $50,000 $81,346 4.60% 6.27%
12/31/92 $20,000 $23,530 2.45% 5.32% 12/31/92 $50,000 $83,335 2.45% 5.84%
12/31/93 $22,000 $25,985 1.79% 4.71% 12/31/93 $50,000 $84,822 1.78% 5.43%
12/31/94 $24,000 $28,766 2.79% 4.41% 12/31/94 $50,000 $87,189 2.79% 5.19%
12/31/95 $26,000 $32,125 4.42% 4.41% 12/31/95 $50,000 $91,039 4.42% 5.12%
</TABLE>
<TABLE>
<CAPTION>
DREYFUS QUALITY BOND PORTFOLIO DREYFUS QUALITY BOND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A 12/31/89 $50,000 N/A N/A N/A
12/31/90 $ 4,000 $ 2,019 0.97% 0.97% 12/31/90 $50,000 $50,483 0.97% 0.97%
12/31/91 $ 6,000 $ 4,523 12.52% 8.47% 12/31/91 $50,000 $56,805 12.52% 6.59%
12/31/92 $ 8,000 $ 7,209 10.52% 9.46% 12/31/92 $50,000 $62,781 10.52% 7.88%
12/31/93 $10,000 $10,472 13.72% 11.07% 12/31/93 $50,000 $71,392 13.72% 9.31%
12/31/94 $12,000 $11,733 -5.93% 5.38% 12/31/94 $50,000 $67,161 -5.93% 6.08%
12/31/95 $14,000 $16,308 18.75% 8.83% 12/31/95 $50,000 $79,755 18.75% 8.09%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO T. ROWE PRICE EQUITY INCOME
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,658 32.89% 32.89% 12/31/95 $50,000 $66,446 32.89% 32.89%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE INTERNATIONAL PORTFOLIO T. ROWE PRICE INTERNATIONAL
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,193 9.64% 9.64% 12/31/95 $50,000 $54,818 9.64% 9.64%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW AMERICAN GROWTH FUND T. ROWE PRICE NEW AMERICAN
PORTFOLIO GROWTH FUND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,980 48.99% 48.99% 12/31/95 $50,000 $74,495 48.99% 48.99%
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS MANAGED PORTFOLIO OPCAP ADVISORS MANAGED PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1988 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A
12/31/89 $ 4,000 $ 2,504 25.19% 25.19% 12/31/89 $50,000 $62,595 25.19% 25.19%
12/31/90 $ 6,000 $ 3,229 -28.32% -13.46% 12/31/90 $50,000 $44,868 -28.32% -5.27%
12/31/91 $ 8,000 $ 7,809 49.36% 13.77% 12/31/91 $50,000 $67,015 49.36% 10.26%
12/31/92 $10,000 $ 7,861 -19.86% -0.70% 12/31/92 $50,000 $53,706 -19.86% 1.80%
12/31/93 $12,000 $ 9,046 -8.26% -3.32% 12/31/93 $50,000 $49,270 -8.26% -0.29%
12/31/94 $14,000 $10,124 -8.35% -4.84% 12/31/94 $50,000 $45,156 -8.35% -1.68%
12/31/95 $16,000 $17,402 43.53% -0.25% 12/31/95 $50,000 $64,814 43.53% 3.78%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1994 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------- ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,201 10.07% 10.07% 12/31/95 $50,000 $55,035 10.07% 10.-7%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS SMALL CAPITAL PORTFOLIO OPCAP ADVISORS SMALL CAPITAL PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1988 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A
12/31/89 $ 4,000 $ 2,290 14.52% 14.52% 12/31/89 $50,000 $57,259 14.52% 14.52%
12/31/90 $ 6,000 $ 3,225 -24.82% -13.52% 12/31/90 $50,000 $43,047 -24.82% -7.21%
12/31/91 $ 8,000 $ 8,457 61.85% 18.17% 12/31/91 $50,000 $69,670 61.85% 11.69%
12/31/92 $10,000 $ 8,457 -19.13% 2.24% 12/31/92 $50,000 $56,345 -19.13% 3.03%
12/31/93 $12,000 $10,143 -3.01% 0.47% 12/31/93 $50,000 $54,650 -3.01% 1.79%
12/31/94 $14,000 $ 9,917 -18.33% -5.42% 12/31/94 $50,000 $44,634 -18.33% -1.87%
12/31/95 $16,000 $13,541 13.63% -0.42% 12/31/95 $50,000 $50,715 13.63% 0.20%
</TABLE>
Individualized Computer Generated Illustrations
The Company may from time to time use computer-based software available through
Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolios; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
-11-
<PAGE>
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Subaccount invests, and the market conditions during the given period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and marketing materials may, from time to time, include information
concerning the rating of First Providian Life and Health Insurance Company as
determined by one or more of the ratings services listed below, or other
recognized rating services. Reports and promotional literature may also contain
other information including (i) the ranking of any Subaccount derived from
rankings of variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or by other rating services, companies,
publications, or other person who rank separate accounts or other investment
products on overall performance or other criteria, and (ii) the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by graphs, charts, or otherwise, and which may
include a comparison, at various points in time, of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable basis.
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing share
prices of major industrial corporations, public utilities, and transportation
companies. Produced by the Dow Jones & Company, it is cited as a principal
indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industrial, transportation, and financial and
public utility companies, which can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestments of all dividends
paid by stocks listed on its index. Taxes due on any of these distributions
are not included, nor are brokerage or other fees calculated into the
Standard & Poor's figures.
. Lipper Analytical Services, Inc., a reporting service that ranks funds in
various fund categories by making comparative calculations using total
return. Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, we may quote the
Portfolios' Lipper rankings in various fund categories in advertising and
sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial reporting
service which publishes weekly average rates of 50 leading bank and thrift
institution money market deposit accounts. The rates
-12-
<PAGE>
published in the index are an average of the personal account rates offered
on the Wednesday prior to the date of publication by ten of the largest banks
and thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest rate
is used. Rates are subject to change at any time specified by the
institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities and finance. The average maturity of these bonds approximates nine
years. Tracked by Shearson Lehman, Inc., the index calculates total returns
for one month, three month, twelve month, and ten year periods and year-to-
date.
. Shearson Lehman Government/Corporate (Long-Term) Index, an index composed of
the same types of issues as defined above. However, the average maturity of
the bonds included in this index approximates 22 years.
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or any
agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.
. Morningstar, Inc., an independent rating service that publishes the bi-weekly
Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-listed
mutual funds of all types, according to their risk-adjusted returns. The
maximum rating is five stars, and ratings are effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective)
yield. From time to time, the Fund will quote its Money ranking in
advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price
of the stocks. The index also provides figures for changes in price from the
beginning of the year to date, and for a twelve month period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Assets are
kept physically segregated and held separate and apart from the Company's
General Account assets. The General Account contains all of the assets of the
-13-
<PAGE>
Company. Records are maintained of all purchases and redemptions of eligible
Portfolio shares held by each of the Subaccounts and the General Account.
THE COMPANY
All the stock of the Company is owned by Veterans Life Insurance Company, which
is a subsidiary of Providian Life and Health Insurance Company, a Missouri
insurance company ("PLH"). Providian Corporation owns a 4% interest,
Commonwealth Life Insurance Company owns a 61% interest, Peoples Security Life
Insurance Company owns a 15% interest and Capital Liberty, L.P. owns a 20%
interest in PLH. A 5% interest in Capital Liberty, L.P. is owned by Providian
Corporation, which is the general partner, and 76% and 19% interests,
respectively, are held by two limited partners, Commonwealth Life Insurance
Company and Peoples Security Life Insurance Company, which are both wholly owned
by Providian Corporation.
STATE REGULATION
The Company is a stock life insurance company organized under the laws of the
State of New York, and is subject to regulation by the New York State Department
of Insurance. An annual statement is filed with the New York Superintendent of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31st of the
preceding calendar year. Periodically, the New York Superintendent of Insurance
examines the financial condition of the Company, including the liabilities and
reserves of the Separate Account.
In addition, the Company is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the Contracts will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
the Company or by its Administrator. As presently required by the Investment
Company Act of 1940 and regulations promulgated thereunder, the Company will
mail to all Contract Owners at their last known address of record, at least
semi-annually, reports containing such information as may be required under that
Act or by any other applicable law or regulation.
DISTRIBUTION OF THE CONTRACTS
Providian Securities Corporation ("PSC"), the principal underwriter of the
Contracts, is a wholly owned subsidiary of Providian Financial Services, Inc.,
which is a wholly owned subsidiary of Providian Corporation. PSC is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. Commissions and
expense allowance payments not to exceed, in the aggregate, 6.75% of Purchase
Payments may be paid to entities which sell the Contracts. Additional payments
may be made for other services not directly related to the sale of the
Contracts.
The Contracts are offered to the public through brokers licensed under the
federal securities laws and New York State insurance laws that have entered into
agreements with PSC. The offering of the Contracts is continuous and PSC does
not anticipate discontinuing the offering of the Contracts. However, PSC does
reserve the right to discontinue the offering of the Contracts.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. The Company is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
-14-
<PAGE>
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 this Statement of Additional Information.
Statements contained in 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.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company for the years
ended December 31, 1995 and 1994, including the Reports of Independent Auditors'
thereon, which are also included in this Statement of Additional Information,
should be distinguished from the financial statements of the Separate Account
and 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. No
financial statements are included for the Separate Account because, as of the
date of this Prospectus, the Subaccounts of the Separate Account, which invest
in the Portfolios offered by the Providian Marquee Variable Annuity, had not
commenced operations and consequently had no assets or liabilities with respect
thereto.
-15-
<PAGE>
Statutory-Basis Financial Statements
First Providian Life and Health
Insurance Company
Years ended December 31, 1995, 1994 and 1993
with Report of Independent Auditors
<PAGE>
First Providian Life and Health Insurance Company
Statutory-Basis Financial Statements
Years ended December 31, 1995, 1994 and 1993
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................... 1
Audited Financial Statements
Balance Sheets (Statutory-Basis)................................. 3
Statements of Operations (Statutory-Basis)....................... 4
Statements of Changes in Capital and Surplus (Statutory-Basis)... 5
Statements of Cash Flows (Statutory-Basis)....................... 6
Notes to Financial Statements.................................... 7
</TABLE>
<PAGE>
Report of Independent Auditors
Board of Directors
First Providian Life and Health Insurance Company
We have audited the accompanying statutory-basis balance sheets of First
Providian Life and Health Insurance Company (formerly National Home Life
Assurance Company of New York) as of December 31, 1995 and 1994, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits of the accompanying statutory-basis financial statements
in accordance with generally accepted auditing standards; however, as discussed
in the following paragraph, we were not engaged to determine or audit the
effects of the variances between statutory accounting practices and generally
accepted accounting principles. Generally accepted auditing standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion on the accompanying statutory-
basis financial statements.
The Company presents its financial statements in conformity with accounting
practices prescribed or permitted by the New York Department of Insurance. When
statutory-basis financial statements are presented for purposes other than for
filing with a regulatory agency, generally accepted auditing standards require
that the auditors' report on such statements indicate whether they are presented
in conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained in Note 1, and the Company has not determined the effects of those
variances. Accordingly, we were not engaged to audit, and we did not audit, the
effects of those variances. Since the accompanying financial statements do not
purport to be a presentation in conformity with generally accepted accounting
principles, we are not in a position to express, and we do not express, an
1
<PAGE>
opinion on the financial statements referred to above as to fair presentation of
financial position, results of operations, or cash flows in conformity with
generally accepted accounting principles.
In our opinion, the statutory-basis financial statements referred to above
present fairly, in all material respects, the financial position of First
Providian Life and Health Insurance Company at December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with accounting practices
prescribed or permitted by the New York Department of Insurance.
/s/ Ernst & Young
Louisville, Kentucky
April 23, 1996
2
<PAGE>
First Providian Life and Health Insurance Company
Balance Sheets (Statutory-Basis)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Bonds $191,710,780 $200,852,923
Preferred stocks 1,599,164 -
Policy loans 2,007,632 1,897,720
Cash and short-term investments 11,873,445 8,262,655
--------------------------------
Total cash and invested assets 207,191,021 211,013,298
Deferred and uncollected premiums 3,225,228 3,314,149
Accrued investment income 2,873,293 3,107,400
Federal income taxes recoverable from - 146,954
parent
Other admitted assets 1,211,288 216,696
Separate account assets 66,759,108 40,598,773
--------------------------------
Total admitted assets $281,259,938 $258,397,270
================================
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate policy reserves $121,170,215 $133,208,340
Policy and contract claims 2,388,452 2,658,872
Premiums received in advance 342,612 392,849
Accrued commissions, general expenses 358,355 285,416
and taxes
Amounts due to affiliates 1,215,793 175,977
Asset valuation reserve 1,703,042 1,464,704
Interest maintenance reserve 9,587,138 10,020,226
Other liabilities 791,487 582,178
Separate account liabilities 66,759,108 40,598,773
--------------------------------
Total liabilities 204,316,202 189,387,335
Capital and surplus:
Capital stock, $2 par value, 1,000,000
shares authorized, issued and 2,000,000 2,000,000
outstanding
Paid-in surplus 10,485,844 10,485,844
Special surplus fund 1,357,319 1,285,200
Unassigned surplus 63,100,573 55,238,891
--------------------------------
Total capital and surplus 76,943,736 69,009,935
--------------------------------
Total liabilities and capital and $281,259,938 $258,397,270
surplus
================================
</TABLE>
See accompanying notes.
3
<PAGE>
First Providian Life and Health Insurance Company
Statements of Operations (Statutory-Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums earned:
Life and annuity $ 12,372,922 $13,110,578 $13,949,278
Accident and health 5,924,086 6,348,666 7,059,153
Annuity deposit funds 17,120,829 19,334,798 33,606,698
Net investment income 15,717,675 15,676,926 15,930,141
Commissions and expense allowances on
reinsurance ceded 377,609 547,557 452,194
Amortization of interest maintenance
reserve 416,590 502,734 450,975
-----------------------------------------------
51,929,711 55,521,259 71,448,439
Benefits and expenses:
Accident and health, life and other 32,303,968 33,654,860 27,966,653
benefits
(Decrease) increase in aggregate
policy reserves (11,814,714) (8,465,615) 3,165,928
Interest on reinsurance reserves 141,441 230,614 236,752
Commissions 44,486 139,262 566,706
General insurance expenses 3,746,966 3,813,137 6,380,732
Insurance taxes, licenses, and fees 888,802 1,197,074 772,206
Net transfers to separate accounts 14,167,774 13,061,338 23,773,315
-----------------------------------------------
39,478,723 43,630,670 62,862,292
Net gain from operations before federal
income taxes 12,450,988 11,890,589 8,586,147
Federal income tax expense 4,559,235 4,371,167 3,014,636
-----------------------------------------------
Net gain from operations 7,891,753 7,519,422 5,571,511
Net realized capital gains (losses),
net of income taxes (1995-($95,973),
1994-($3,452), 1993-$3,142,526) and
excluding gains (losses) transferred
to the interest maintenance reserve
(1995-($16,497), 1994-($433), 87,090 (3,687) 93,776
1993-$5,819,228)
-----------------------------------------------
Net income $ 7,978,843 $ 7,515,735 $ 5,665,287
===============================================
</TABLE>
See accompanying notes.
4
<PAGE>
First Providian Life and Health Insurance Company
Statements of Changes in Capital and Surplus (Statutory-Basis)
<TABLE>
<CAPTION>
SPECIAL
CAPITAL PAID-IN SURPLUS SURPLUS UNASSIGNED
STOCK FUND SURPLUS
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1993 $2,000,000 $10,485,844 $1,121,903 $42,499,818
Net income - - - 5,665,287
(Increase) decrease in nonadmitted
assets and related items - - 81,770 (57,398)
Increase in asset valuation reserve - - - (85,312)
Prior year federal income
tax adjustment - - - (106,397)
-------------------------------------------------------------
Balances, December 31, 1993 2,000,000 10,485,844 1,203,673 47,915,998
Net income - - - 7,515,735
(Increase) decrease in nonadmitted
assets and related items - - 81,527 (87,772)
Increase in asset valuation reserve - - - (105,070)
-------------------------------------------------------------
Balances, December 31, 1994 2,000,000 10,485,844 1,285,200 55,238,891
Net income - - - 7,978,843
Change in net unrealized
gains on investments - - - 54,651
Change in reserves due to change in
valuation basis - - - 131,831
(Increase) decrease in nonadmitted
assets and related items - - 72,119 (65,305)
Increase in asset valuation reserve - - - (238,338)
-------------------------------------------------------------
Balances, December 31, 1995 $2,000,000 $10,485,844 $1,357,319 $63,100,573
=============================================================
</TABLE>
See accompanying notes.
5
<PAGE>
First Providian Life and Health Insurance Company
Statements of Cash Flows (Statutory-Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Cash and short-term investments
provided:
Operations:
Premiums and annuity fund deposits $ 35,413,986 $38,753,531 $ 54,325,820
Investment income received 16,280,847 15,429,377 16,015,532
Allowances on reinsurance ceded and
other income received 377,609 547,701 452,194
-----------------------------------------------
52,072,442 54,730,609 70,793,546
Benefits paid 32,574,937 34,391,688 28,314,886
Commissions, expenses and taxes paid 9,075,459 9,973,432 10,424,728
Net increase in policy loans 109,912 150,203 254,072
Net transfers to separate accounts 14,174,868 13,065,404 23,783,146
-----------------------------------------------
55,935,176 57,580,727 62,776,832
-----------------------------------------------
Total cash (applied) provided by (3,862,734) (2,850,118) 8,016,714
operations
Investments sold, matured, or repaid 116,523,787 28,805,309 258,856,203
Other cash provided:
Receivable from affiliates 46,820 - 693,242
Investment receivables - 10,558,989 -
Other items 257,157 392,463 94,983
-----------------------------------------------
Total other cash provided 303,977 10,951,452 788,225
-----------------------------------------------
Total cash and short-term investments 112,965,030 36,906,643 267,661,142
provided
Cash and short-term investments applied:
Investments acquired 109,277,115 29,329,333 258,543,702
Other cash applied:
Payable to affiliates - 2,056,604 -
Drafts outstanding - 569,667 -
Investment receivables - - 10,558,989
Other items 77,125 23,790 275,731
-----------------------------------------------
Total other cash applied 77,125 2,650,061 10,834,720
-----------------------------------------------
Total cash and short-term investments 109,354,240 31,979,394 269,378,422
applied
-----------------------------------------------
Increase (decrease) in cash and
short-term investments 3,610,790 4,927,249 (1,717,280)
Cash and short-term investments:
Beginning of year 8,262,655 3,335,406 5,052,686
-----------------------------------------------
End of year $ 11,873,445 $ 8,262,655 $ 3,335,406
===============================================
</TABLE>
See accompanying notes.
6
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES
NATURE OF OPERATIONS
First Providian Life and Health Insurance Company (FPLH), formerly National Home
Life Assurance Company of New York, is domiciled in New York and is a wholly
owned subsidiary of Veterans Life Insurance Company (VLIC), a wholly owned
subsidiary of Providian Life and Health Insurance Company (PLH), formerly
National Home Life Assurance Company. PLH is wholly-owned by a limited
partnership consisting of Providian Corporation (PVN) and two of its insurance
subsidiaries. FPLH sells and services life and accident and health insurance
products, primarily utilizing direct response methods, such as television,
telephone and mail to reach low to middle-income households nationwide. FPLH
also sells and services individual accumulation products, primarily utilizing
financial planners and stock brokerage firms.
MANAGEMENT'S ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant estimates are utilized in the calculation of
benefit reserves. It is reasonably possible that these estimates may change in
the near term, thereby possibly having a material effect on the financial
statements.
BASIS OF PRESENTATION
The accompanying financial statements of FPLH have been prepared in accordance
with the accounting practices prescribed or permitted by the New York Department
of Insurance. Such practices vary from generally accepted accounting principles
(GAAP). The more significant variances from GAAP are as follows:
INVESTMENTS
Investments in bonds are reported at amortized cost or fair value based on
their National Association of Insurance Commissioners (NAIC) rating; for GAAP,
such fixed maturity investments are designated at purchase as held-to-maturity,
trading or available-for-sale. Held-to-maturity fixed investments are reported
at amortized cost,
7
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
and the remaining fixed maturity investments are reported at fair value with
unrealized holding gains and losses reported in operations for those designated
as trading and as a separate component of shareholders' equity for those
designated as available-for-sale.
Fair values of investments in bonds and preferred stocks are generally based on
values specified by the Securities Valuation Office (SVO) of the NAIC, rather
than on values provided by outside broker confirmations or internally
calculated estimates. However, for certain investments, the NAIC does not
provide a value and FPLH uses either admitted asset investment amounts (i.e.,
statement values) as allowed by the NAIC, fair values provided by outside
broker confirmations or internally calculated estimates. Changes between cost
and admitted asset investment amounts are credited and charged directly to
unassigned surplus rather than to a separate surplus account.
Under a formula prescribed by the NAIC, FPLH defers the portion of realized
capital gains and losses attributable to changes in the general level of
interest rates on sales of certain liabilities and fixed income investments,
principally bonds, and amortizes such deferrals into income on a straight-line
basis over the remaining period to maturity based on groupings of individual
liabilities or investments sold. The net accumulated unamortized balance of
such deferrals is reported as an interest maintenance reserve (IMR) in the
accompanying balance sheet. Realized gains and losses are reported in income
net of tax and transfers to the IMR. The asset valuation reserve (AVR) is also
determined by a NAIC prescribed formula and is reported as a liability rather
than a valuation allowance. The AVR represents a provision for possible
fluctuations in the value of bonds and other invested assets. Changes to the
AVR are charged or credited directly to unassigned surplus. Under GAAP,
realized gains and losses are reported in the income statement on a pretax
basis in the period that the asset giving rise to the gain or loss is sold and
direct write-downs are recorded (or valuation allowances are provided, where
appropriate under GAAP) when there has been a decline in value deemed to be
other than temporary, in which case, write-downs (or provisions) for such
declines are charged to income.
POLICY ACQUISITION COSTS
Costs of acquiring and renewing business are expensed when incurred. Under
GAAP, acquisition costs related to traditional life insurance, to the extent
recoverable from future policy revenues, are deferred and amortized over the
premium-paying period of the related policies using assumptions consistent
with those used in computing policy
8
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
benefit reserves. For universal life insurance and investment-type contracts,
to the extent recoverable from future gross profits, deferred policy
acquisition costs are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally agents' debit balances
and furniture and equipment, are excluded from the balance sheets and are
charged directly to unassigned surplus.
PREMIUMS
Revenues for universal life policies and investment-type contracts consist of
the entire premium received and benefits represent the death benefits paid and
the change in policy reserves. Under GAAP, premiums received in excess of
policy charges are not recognized as premium revenue and benefits represent the
excess of benefits paid over the policy account value and interest credited to
the account values.
BENEFIT RESERVES
Certain policy reserves are calculated using prescribed interest and mortality
assumptions rather than on estimated expected experience and actual account
balances as is required under GAAP.
INCOME TAXES
Deferred income taxes are not provided for differences between the financial
statement and the tax bases of assets and liabilities.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined.
9
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Other significant accounting policies followed in preparing the accompanying
statutory-basis financial statements are as follows:
INVESTMENTS
Bonds, preferred stocks and short-term investments are stated at values
prescribed by the NAIC, as follows:
Bonds not backed by other loans are stated at amortized cost using the
interest method.
Loan-backed bonds and structured securities are valued at amortized cost
using the interest method. Anticipated prepayments are considered when
determining the amortization of related discounts or premiums. Prepayment
assumptions are obtained from dealer survey values or internal estimates and
are consistent with the current interest rate and economic environment. The
retrospective adjustment method is used to value such securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition. Short-term investments and cash are carried
at cost.
Preferred stocks are reported at fair value as determined by the SVO of the
NAIC.
Bond and other loan interest is credited to income as it accrues. For
securities, FPLH follows the guidelines of the NAIC for each security on an
individual basis in determining the admitted or nonadmitted status of accrued
income amounts.
Net income includes realized gains and losses on investments sold, net of tax
and transfers to the IMR. The cost of investments sold is determined on a
first-in, first-out basis.
10
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
annuity contracts, and for which the contract holder, rather than FPLH, bears
the investment risk. Separate account contract holders have no claim against
the assets of the general account of FPLH. Separate account assets are reported
at fair value. The operations of the separate accounts are not included in the
accompanying financial statements. Fees charged on separate account
policyholder deposits are included in net transfers to separate accounts in the
accompanying statements of operations.
POLICY RESERVES
Unearned premiums represent the portion of premiums written which are
applicable to the unexpired terms of accident and health policies in force,
calculated principally by the application of monthly pro rata fractions.
Liabilities for unearned premiums are included in aggregate policy reserves.
FPLH waives deduction of deferred fractional premiums upon death of insureds.
FPLH's policy is not to return any portion of the final premium beyond the date
of death. Surrender values are not promised in excess of the legally computed
reserves. Additional premiums are charged for policies issued on substandard
lives according to underwriting classification. Mean reserves are determined by
computing the regular mean reserve for the plan at the issued age and holding
in addition one-half of the extra premium charged for the year.
The tabular interest has been determined from the basic data for the
calculation of policy reserves. The tabular less actual reserve released and
the tabular cost have been determined by formula as described in the NAIC
instructions.
POLICY AND CONTRACT CLAIMS
Policy and contract claims, principally related to accident and health
policies, include amounts determined on an individual case basis for reported
losses and estimates of incurred but not reported losses developed on the basis
of experience. These estimates are subject to the effects of trends in claim
severity and frequency. Although
11
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
considerable variability is inherent in such estimates, management believes
that the reserves for claims and claim expenses are adequate. The methods of
making such estimates and establishing the resulting reserves are continually
reviewed and updated, and any adjustments resulting therefrom are reflected in
earnings currently.
PREMIUMS, BENEFITS AND EXPENSES
For individual and most group life policies, premiums are reported as earned on
the policy/certificate anniversary. For individual and group annuities,
premiums and annuity fund deposits are recorded as earned when collected. For
individual and group accident and health policies, premiums are recorded as
earned on a pro rata basis over the coverage period for which the premiums were
collected or due. Benefit claims (including an estimated provision for claims
incurred but not reported), policy reserve changes and expenses are charged to
income as incurred.
REINSURANCE
Reinsurance premiums, benefits and expenses are accounted for in a manner
consistent with that used in accounting for original policies issued and the
terms of reinsurance contracts. Premiums, benefits, expenses and aggregate
policy reserves are recorded net of reinsured amounts.
PERMITTED STATUTORY ACCOUNTING PRACTICES
FPLH's statutory-basis financial statements are prepared in accordance with
accounting practices prescribed or permitted by the New York Department of
Insurance. "Prescribed" statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ
from state to state, may differ from company to company within a state, and may
change in the future. The NAIC currently is in the process of recodifying
statutory accounting practices, the result of which is expected to
12
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
constitute the only source of "prescribed" statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1997, will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that FPLH uses to prepare its
statutory-basis financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.
2. INVESTMENTS
The tables below contain amortized cost (carrying value or statement value) and
fair value information on bonds.
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
-------------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
DECEMBER 31, 1995
U.S. government obligations $ 39,767 $ 2,109 $ - $ 41,876
States and political subdivisions 5,393 603 - 5,996
Corporate and other 109,735 8,718 209 118,244
Mortgage-backed 36,816 - - 36,816
-------------------------------------------------------
$191,711 $11,430 $ 209 $202,932
=======================================================
DECEMBER 31, 1994
U.S. government obligations $ 20,364 $ 4 $ 1,151 $ 19,217
States and political subdivisions 5,396 19 149 5,266
Corporate and other 102,000 794 4,973 97,821
Mortgage-backed 73,093 173 5,045 68,221
-------------------------------------------------------
$200,853 $ 990 $11,318 $190,525
=======================================================
</TABLE>
13
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of bonds at December 31, 1995, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because certain borrowers may have the right to call or prepay
obligations, sometimes without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------------------
<S> <C> <C>
(In Thousands)
Due in one year or less $ 499 $ 505
Due after one year through five years 26,159 26,227
Due after five years through ten years 57,426 59,211
Due after ten years 70,811 80,173
------------------------
154,895 166,116
Mortgage-backed securities 36,816 36,816
------------------------
$191,711 $202,932
========================
</TABLE>
Proceeds during 1995 and 1994 from sales, maturities and calls of bonds were
$116,526,000 and $30,121,000, respectively. Gross gains of $1,127,000 and
$582,000 and gross losses of $1,150,000 and $583,000 in 1995 and 1994,
respectively, were realized on those sales.
The cost and related fair value of preferred stocks of unaffiliated companies
were $1,545,000 and $1,599,000 at December 31, 1995. The difference between cost
and statement value of $55,000 at December 31, 1995 was credited directly to
unassigned surplus as of that date and does not affect net income. FPLH did not
own any preferred stock at December 31, 1994.
Included in investments are securities having admitted asset values of
$1,564,000 at December 31, 1995 which were on deposit with various state
insurance departments to satisfy regulatory requirements.
14
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
FPLH limits credit risk by diversifying its investment portfolio among public
and private placement bonds and preferred stocks. It further diversifies these
portfolios between and within industry sectors, by geography and by property
type. Credit risk is also limited by maintaining stringent underwriting
standards and purchasing insurance protection in certain cases. In addition,
FPLH establishes credit approval processes, limits and monitoring procedures on
an individual counterparty basis. As a result, management believes that
significant concentrations of credit risk do not exist.
3. FEDERAL INCOME TAXES
FPLH and its affiliates (PLH and VLIC) file a consolidated federal income tax
return. Under a written agreement, FPLH and its affiliates allocate the federal
income tax liability among the members of the consolidated return group in the
ratio that each member's separate return tax liability for the year bears to the
sum of the separate return tax liabilities of all members with current credits
for net operating losses. The final settlement under this agreement is made
after the annual filing of the consolidated U.S. Corporate Income Tax Return
with the Internal Revenue Service.
Income before income taxes differs from taxable income principally due to
differences in the statutory and tax treatment of certain investment items and
deferred acquisition costs.
At December 31, 1995, accumulated earnings of FPLH for federal income tax
purposes included approximately $1,631,000 of "Policyholders' Surplus," a
special memorandum tax account. This memorandum account balance has not been
currently taxed, but income taxes computed at current rates will become payable
if this surplus is distributed. Provisions of the Deficit Reduction Act of 1984
(the "Act") do not permit further additions to the Policyholders' Surplus
account. "Shareholders' Surplus" is also a special memorandum tax account, and
generally represents an accumulation of taxable income (net of tax thereon) plus
the dividends-received deduction, tax-exempt interest, and certain other special
deductions as provided by the Act. At December 31, 1995, the balance in the
Shareholders' Surplus account amounted to approximately $73,196,000. There is no
present intention to make distributions in excess of Shareholders' Surplus.
15
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS
FPLH entered into an agreement effective January 1, 1992 with PLH for the
performance of administrative services, management support services and
marketing services for FPLH. PLH, as compensation, receives an amount equal to
the actual cost of providing these services. Amounts paid to PLH for these
services were $2,800,000 in 1995, $2,400,000 in 1994 and $4,900,000 in 1993.
On November 1, 1995, FPLH executed a Revolving Credit Note with PLH allowing for
FPLH to borrow from PLH up to $5,000,000. The note is a demand note expiring
November 1, 1996 with interest payable at the prime rate. At December 31, 1995,
there was no outstanding balance and no borrowings were made during the year.
FPLH participates in a short-term investment agreement with PVN and other
affiliates which provides for the centralization of short-term investment
operations. FPLH retains the right to participate in or withdraw its funds on a
daily basis. FPLH had invested $800,000 and $1,200,000 in this short-term
agreement as of December 31, 1995 and 1994, respectively.
FPLH participates in various benefit plans sponsored by PVN and the related
costs allocated to FPLH are not significant.
FPLH is a party to a reinsurance agreement with VLIC whereby FPLH cedes a pro
rata portion of accident and health policies according to issue dates.
Reinsurance ceded to VLIC has reduced net gain from operations before federal
income taxes by $600,000 in 1995, $700,000 in 1994 and $500,000 in 1993.
16
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE
Certain premiums and benefits are ceded to other nonaffiliated insurance
companies under various reinsurance agreements. The ceded reinsurance agreements
provide FPLH with increased capacity to write larger risks.
FPLH's ceded reinsurance agreements with affiliated and nonaffiliated insurance
companies have reduced (increased) certain items in the accompanying financial
statements by the following amounts:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
(In Thousands)
Benefits paid or provided $ 884 $ 895 $1,378
Commission and expense allowances
on reinsurance ceded (378) (548) (452)
Interest on reinsurance reserves (141) (231) (237)
Policy and contract claims* 45 45 46
Unearned premium reserves* 2 2 2
Aggregate policy reserves* 13 13 13
Premiums received in advance* 1 1 3
</TABLE>
*At year end
For long-duration contracts, the effect of reinsurance on life and annuity
premiums earned in 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS PREMIUMS PREMIUMS
EARNED EARNED EARNED
-----------------------------------
<S> <C> <C> <C>
(In Thousands)
Direct $12,398 $13,132 $13,974
Ceded (25) (21) (5)
-----------------------------------
Net $12,373 $13,111 $13,949
===================================
</TABLE>
17
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE (CONTINUED)
For short-duration contracts, the effect of reinsurance on accident and health
premiums written and earned in 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS PREMIUMS PREMIUMS
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In Thousands)
Direct $ 7,523 $ 7,662 $ 8,150 $ 8,241 $ 8,992 $ 9,186
Ceded (1,738) (1,738) (1,892) (1,892) (2,127) (2,127)
------------------------------------------------------------------
Net $ 5,785 $ 5,924 $ 6,258 $ 6,349 $ 6,865 $ 7,059
==================================================================
</TABLE>
Amounts payable or recoverable for reinsurance on paid or unpaid life and health
claims are not subject to periodic or maximum limits. At December 31, 1995, FPLH
reinsurance recoverables are not material and no individual reinsurer owed FPLH
an amount equal to or greater than 3% of FPLH"s surplus.
FPLH remains obligated for amounts ceded in the event that the reinsurers do not
meet their obligations.
6. ANNUITY RESERVES
The withdrawal provisions of FPLH's annuity reserves at December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-----------------------
(In Thousands)
<S> <C> <C>
Subject to discretionary withdrawal at $ 66,727 44.6%
market value
Subject to discretionary withdrawal
(without
adjustment) at book value with 79,169 52.9%
minimal or no
charge or adjustment
Not subject to discretionary withdrawal 3,666 2.5%
-------------------
Total annuity reserves and before 149,562 100.0%
reinsurance
=========
Less reinsurance -
--------
Net annuity reserves $149,562*
========
</TABLE>
* Includes $66,727,000 of annuities reported in FPLHs separate account
liability.
18
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SEPARATE ACCOUNTS
Separate accounts held by FPLH primarily represent funds held for individual
policyholders. The separate accounts do not have any minimum guarantees and the
investment risks associated with market value changes are borne entirely by the
policyholder. Information regarding the separate accounts of FPLH as of and for
the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NONGUARANTEED
----------------
(In Thousands)
<S> <C>
Premiums, deposits and other $16,982
considerations
================
Reserves for separate accounts* $66,727
================
</TABLE>
*Reserves for separate accounts are exclusive of $32,000 which represents
transfers due the general account as of December 31, 1995.
FPLH's nonguaranteed separate account liabilities ($66,727,000) are subject to
discretionary withdrawal at market value.
A reconciliation of the amounts transferred to and from FPLH's separate accounts
for the year ended December 31, 1995 is presented below:
<TABLE>
<CAPTION>
1995
----------------
(In Thousands)
<S> <C>
Transfers as reported in the Summary of
Operations of
FPLHs Separate Accounts Annual
Statements:
Transfers to separate accounts $16,982
Transfers from separate accounts (2,858)
----------------
Net transfers to separate accounts 14,124
Reconciling adjustments:
Fees paid to external fund manager 44
Transfers as reported in the Summary
of Operations $14,168
of FPLH's Life, Accident &
Health Annual Statement
================
</TABLE>
19
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. PREMIUMS AND ANNUITY CONSIDERATIONS DEFERRED AND UNCOLLECTED
Deferred and uncollected life insurance premiums and annuity considerations as
of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NET OF
TYPE GROSS LOADING LOADING
- -------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Ordinary new $ 323 $ 218 $ 105
Ordinary renewal 3,233 991 2,242
------------------------------
Total ordinary 3,556 1,209 2,347
Group new 6 6 -
Group renewal 1,407 529 878
------------------------------
Total group $1,413 $ 535 $ 878
------------------------------
Total $4,969 $1,744 $3,225
==============================
</TABLE>
9. STATUTORY RESTRICTIONS ON DIVIDENDS
FPLH is restricted from distributing any dividends to shareholders without prior
approval from the New York Department of Insurance.
10. CONTINGENCIES
In the ordinary course of business, FPLH is a defendant in litigation
principally involving insurance policy claims for damages, including
compensatory and punitive damages. In the opinion of management, the outcome of
such litigation will not result in a loss which would be material to FPLH's
financial position at December 31, 1995.
20
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating fair value
disclosures for the following financial instruments:
BONDS AND PREFERRED STOCKS
The fair values of bonds and preferred stocks are generally based on published
quotations of the SVO of the NAIC. However, for certain investments, the SVO
does not provide a value and FPLH uses either admitted asset investment amounts
(i.e., statement values) as allowed by the NAIC, values provided by outside
broker confirmations or internally calculated estimates. The fair values of
FPLH's bonds and preferred stocks are disclosed in Note 2.
POLICY LOANS
The carrying values of policy loans reported in the accompanying balance sheets
approximate their fair values.
CASH AND SHORT-TERM INVESTMENTS
The carrying values of cash and short-term investments reported in the
accompanying balance sheets approximate their fair values.
INVESTMENT CONTRACTS
The fair values of investment-type fixed annuity contracts are estimated using
discounted cash flow calculations, based on current interest rates for similar
contracts. The fair values of variable annuity contracts approximate their
carrying values.
21
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and fair values of FPLH's liabilities for investment-type
contracts at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------------------------
<S> <C> <C>
(In Thousands)
DECEMBER 31, 1995
Fixed annuity contracts $ 82,835 $ 85,511
Variable annuity contracts 66,727* 66,727
-------------------------
$149,562 $152,238
=========================
DECEMBER 31, 1994
Fixed annuity contracts $ 95,909 $ 95,513
Variable annuity contracts 40,557* 40,557
-------------------------
$136,466 $136,070
=========================
</TABLE>
*Included in FPLH's separate account liabilities.
The fair values for FPLH's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in FPLH's overall
management of interest rate risk, such that FPLH's exposure to changing interest
rates is minimized through the matching of investment maturities with amounts
due under insurance contracts.
22
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Part A. None
Part B. As of the date of the Prospectus and Statement of Additional
Information, First Providian Life and Health Insurance
Company Separate Account C had no assets and therefore, no
financial statements are presented with respect to the
Separate Account.
To be filed by amendment.
Part C. None
(b) Exhibits.
(1) Resolution of the Board of Directors of First Providian Life
and Health Insurance Company ("First Providian") authorizing
establishment of the Separate Account./1/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./1/
(4) (a) Form of variable annuity contract./1/
(5) (a) Form of Application./1/
(6) (a) Amended and Restated Charter of First Providian/1/
(b) By-Laws of First Providian as amended February 28,
1995./1/
(7) Not Applicable.
(8) (a) Form of Participation Agreement for the Funds./1/
(9) (a) Opinion and Consent of Counsel./1/
(b) Consent of Counsel./1/
(10) Consent of Independent Auditors./1/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Computation.
(14) Not Applicable.
- -------------------------------------
/1/Filed herewith.
<PAGE>
Item 25. Directors and Officers of the Depositor
Chairman of the Board & President David J. Miller
Senior Vice President/Human Resources
and Corporate Communications John H. Rogers
Senior Vice President David B. Smith
Senior Vice President Martin Renninger
Vice President & Qualified Actuary Brian Alford
Vice President Edward A. Biemer
Vice President, Treasurer &
Senior Financial Officer Dennis E. Brady
Vice President Gregory J. Garvin
Vice President Carolyn M. Kerstein
Vice President/Underwriting William J. Kline
Vice President Jeffrey P. Lammers
Vice President & Secretary Susan E. Martin
Vice President Kevin P. McGlynn
Vice President Douglas E. Menges
Vice President Thomas B. Nesspor
Vice President G. Eric O'Brien
Vice President and Actuary John C. Prestwood, Jr.
Vice President Nancy B. Schuckert
Vice President Joseph D. Strenk
Vice President William C. Tomilin
Assistant Vice President Geralyn Barbato
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President Joan G. Chandler
Assistant Vice President &
Assistant Treasurer John A. Mazzuca
Assistant Vice President and
Consumer Services Officer Rosalie M. Smith
Assistant Controller Joseph C. Noone
Second Vice President Cindy L. Chanley
Second Vice President Michele Coan
Second Vice President Karen H. Fleming
Second Vice President Michael F. Lane
Second Vice President Michael K. Mingus
Second Vice President Robin Morgan
Second Vice President John R. Pegues
Second Vice President Frank J. Rosa
Second Vice President William W. Strickland
Second Vice President Janice L. Weaver
Second Vice President/Investments Terri L. Allen
Second Vice President/Investments Tom Bauer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments Curt M. Burns
Second Vice President/Investments Joel L. Coleman
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments James Grant
Second Vice President/Investments Theodore M. Haag
Second Vice President/Investments Frederick B. Howard
<PAGE>
Second Vice President/Investments Diane J. Hulls
Second Vice President/Investments William H. Jenkins
Second Vice President/Investments Frederick C. Kessell
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments Mark E. Lamb
Second Vice President/Investments Monika Machon
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Jack McCabe
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Wayne R. Nelis
Second Vice President/Investments James G. Nickerson
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Debra K. Pellman
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments James A. Skufca
Second Vice President/Investments Robert A. Smedley
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President and Assistant
Secretary Edward P. Reiter
Assistant Secretary L. Jude Clark
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary Ann Malinyak
Assistant Secretary John F. Reesor
Assistant Secretary Kimberly A. Scouller
Assistant Secretary R. Michael Slaven
Product Compliance Officer James T. Bradley
DIRECTORS:
Dennis E. Brady David J. Miller
I. Donald Britton Thomas B. Nesspor
Patricia A. Collins Brian H. Perry
Jack M. Dann Martin Renninger
Jeffrey H. Goldberger Rosalie M. Smith
Susan E. Martin Paul Yakulis
Item 26. Persons controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor, First Providian Life and Health Insurance Company ("First
Providian"), is directly and indirectly wholly owned by Providian Corporation.
The Registrant is a segregated asset account of First Providian.
The following chart indicates the persons controlled by or under common
control with First Providian:
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- -------------------------------- --------------- ----------------------------------
<S> <C> <C> <C>
Providian Corporation Delaware 100% Publicly Owned
Providian Agency Group, Inc. Kentucky 100% Providian Corp.
Benefit Plans, Inc. Delaware 100% Providian Corp.
DurCo Agency, Inc. Virginia 100% Benefit Plans, Inc.
Providian Assignment Corporation Kentucky 100% Providian Corp.
Providian Financial Services, Inc. Pennsylvania 100% Providian Corp.
Providian Securities Corporation Pennsylvania 100% Providian Financial Srvs, Inc.
Wannalancit Corp. Massachusetts 100% Providian Corp.
Providian Investment Delaware 100% Providian Corp.
Advisors, Inc.
Providian Capital Management, Inc. Delaware 100% Providian Corp.
Providian Capital Mgmt. Delaware 100% Providian Capital Management, Inc.
Real Estate Services, Inc.
Capital Real Estate Development Corp. Delaware 100% Providian Corp.
KB Currency Advisors, Inc. Delaware 33 1/3% Capital Real Estate Dev. Corp.
33 1/3% Jonathan M. Berg
33 1/3% Andrew J. Krieger
Capital General Development Corp. Delaware 100% Providian Corp.
Commonwealth Life Insurance Co. Kentucky 100% Capital General Development Corp.
Agency Holding I, Inc. Delaware 100% Commonwealth Life Ins. Co.*
Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc.
Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Insurance Co.
Peoples Security Life North Carolina 100% Capital General Development Corp.
Insurance Company
Ammest Realty Corporation Texas 100% Peoples Security Life Insurance Co.
Agency Holding II, Inc. Delaware 100% Peoples Security Life Insurance Co.
Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc.
Agency Holding III, Inc. Delaware 100% Peoples Security Life Insurance Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc.
Capital 200 Block Corporation Delaware 100% Providian Corp.
Capital Broadway Corporation Kentucky 100% Providian Corp.
Capital Security Life Ins. Co. North Carolina 100% Providian Corp.
Security Trust Life Insurance Company Kentucky 100% Capital Security Life Insurance Co.
Independence Automobile Florida 100% Capital Security Life Insurance Co.
Association., Inc.
Independence Automobile Club Georgia 100% Capital Security Life Insurance Co.
Southlife, Inc . Tennessee 100% Providian Corp.
College Resource Group, Inc. Kentucky 100% Providian Corp.
Knight Insurance Agency, Inc. Massachusetts 100% College Resource Group, Inc.
Knight Tuition Payment Plans, Inc. Massachusetts 100% Knight Insurance Agency, Inc.
Knight Insurance Agency (New New Hampshire 100% Knight Insurance Agency, Inc.
Hampshire), Inc.
Providian Bancorp, Inc. Delaware 100% Providian Corp.
First Deposit Service Corporation California 100% Providian Bancorp, Inc.
First Deposit Life Insurance Co. Arkansas 100% Providian Bancorp, Inc.
First Deposit National Bank United States 100% Providian Bancorp, Inc.
Winnisquam Community New Hampshire 96% First Deposit National Bank
Development Corp. 4% First New Hampshire Bank
Providian Credit Corporation Delaware 100% Providian Bancorp, Inc.
Providian National Bank United States 100% Providian Bancorp, Inc.
Providian National Bancorp California 100% Providian Bancorp, Inc.
Commonwealth Premium Finance California 100% Providian National Bancorp
Providian Credit Services, Inc. Utah 100% Providian Bancorp, Inc.
National Liberty Corporation Pennsylvania 100% Providian Corp.
National Home Life Corporation Pennsylvania 100% National Liberty Corporation
Compass Rose Development Corp. Pennsylvania 100% National Liberty Corporation
Association Consultants, Inc. Illinois 100% National Liberty Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Valley Forge Associates, Inc. Pennsylvania 100% National Liberty Corporation
Veterans Benefits Plans, Inc. Pennsylvania 100% National Liberty Corporation
Veterans Insurance Services, Inc. Delaware 100% National Liberty Corporation
Financial Planning Services, Inc. Washington, DC 100% National Liberty Corporation
Providian Auto and Home Missouri 100% Providian Corp.
Insurance Company
Academy Insurance Group, Inc. Delaware 100% Providian Auto and Home
Insurance Co.
Academy Life Insurance Company Missouri 100% Academy Insurance Group, Inc.
Pension Life Insurance Company New Jersey 100% Academy Insurance Group, Inc.
of America
Academy Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Ammest Development Corporation, Inc. Kansas 100% Academy Insurance Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance Group, Inc.
Ammest Massachusetts Ins. Massachusetts 100% Academy Insurance Group, Inc.
Agency, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
AMPAC, Inc. Texas 100% Academy Insurance Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Financial Group, Inc.
Military Associates Inc. Pennsylvania 100% Academy Insurance Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Group, Inc.
Unicom Administrative Services, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Unicom Administrative Services, Germany 100% Unicom Admin. Services, Inc.
GmbH
Providian Property and Casualty Kentucky 100% Providian Auto and Home
Insurance Company Insurance Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Providian Fire Insurance Company Kentucky 100% Providian Property and Casualty
Insurance Co.
Capital Liberty L.P. Delaware 5% Providian Corp. (General Partnership
(Limited Partnership) Interest)
76% Commonwealth Life Insurance
Company (Limited Partnership Interest)
19% Peoples Security Life Insurance Co.
(Limited Partnership Interest)
Providian Life and Health Missouri 4% Providian Corp.;
Insurance Company 61% Commonwealth Life Ins. Company;
15% Peoples Security Life Insurance. Co.;
20% Capital Liberty, L.P.
Veterans Life Insurance Company Illinois 100% Providian Life and Health Ins. Co.
Providian Services, Inc. Pennsylvania 100% Veterans Life Insurance Co.
First Providian Life and Health New York 100% Veterans Life Insurance Co.
Insurance Company
</TABLE>
Item 27. Number of Contract Owners
As of July 15, 1996, there were no Contract Owners.
Item 28. Indemnification.
Section 722 of McKinney's New York Business Corporation Law permits a
corporation to indemnify any person who is or is threatened to be made a party
to any action or proceeding, whether civil or criminal, including an action by
or in the right of any other corporation or joint venture, partnership, trust,
employee benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorney's
fees actually and necessarily incurred as a result of such action or proceeding,
or any appeal therein, if such director or officer acted in good faith, for a
purpose which he reasonably believed to be (a) in the best interests of the
corporation or (b) in the case of service for any other corporation or entity,
not opposed to the best interests of the corporation and (c) in criminal actions
or proceedings, has no reasonable cause to believe his conduct was unlawful.
With respect to actions or proceedings brought by or in the right of the
corporation to procure judgment in its favor, Section 722 permits the
indemnification described above subject to the following prohibition: no
indemnification shall be made in respect of (a) a threatened or pending action
which is settled or otherwise disposed of or (b) any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which the action was brought, or
if no action was brought, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper.
Pursuant to the laws of the State of New York, Article VIII of the First
Providian's Bylaws provide as follows:
<PAGE>
ARTICLE VIII
------------
Section 1 - Indemnification of Directors, Officers and Employees
- ----------------------------------------------------------------
So far as permitted by the laws of the State of New York, any person made
a party to any action, suit, or proceeding by reason of the fact that he, his
testator or intestate, is or was a director, officer, or employee of the
Company, or of any corporation which he served as such at the request of the
Company, shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action, suit, or proceeding, or in
connection with any appeal therein, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties. If said action, suit, or proceeding shall be settled with the approval
of the Board of Directors and the Court, such director, officer or employee,
upon application for payment of such indemnity, shall be entitled to such
indemnity in such amount that the Court shall approve as reasonable; provided,
however, that in the judgment of the Board of Directors, said director, officer,
or employee had not in any substantial way been derelict in the performance of
his duties as charged in such action, suit, or proceeding. The foregoing right
to indemnification shall be in addition to other rights to which any such
director, officer, or employee may be entitled as a matter of law.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person or registration in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions of 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 Underwriters
(a) Providian Securities Corporation, which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account C, also serves as the principal underwriter for variable
life insurance policies funded by Separate Account I, Separate
Account II and Separate Account V of Providian Life and Health
Insurance Company (formerly National Home Life Assurance Company).
(b) Directors and Officers
Positions and Officers
Name with Underwriter
---- ----------------
Jeffrey P. Lammers President, Assistant Secretary and Director
Harvey E. Willis Vice President and Secretary
Kimberly A. Scouller Vice President and Chief Compliance
Officer
Mark Nerderman Vice President
Michael F. Lane Vice President
<PAGE>
Sarah J. Strange Vice President
Elaine J. Robinson Treasurer
Michael G. Ayers Controller
Frederick C. Kessell Director
Robert. L. Walker Director
Item 30. Location of Accounts and Records
The books, accounts and other documents required by Section 31(a) under
the Investment Company Act and the rules promulgated thereunder will be
maintained in the physical possession of First Providian Life and Health
Insurance Company at its administrative offices at 520 Columbia Drive, Johnson
City, New York 13790.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 31. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted;
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to sent for a Statement of Additional
Information;
(c) The Registrant hereby 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.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant and the Depositor, have caused this amended Registration
Statement to be signed on its behalf in the County of Jefferson Commonwealth of
Kentucky on the 18th day of July, 1996.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY SEPARATE ACCOUNT C (REGISTRANT)
By: First Providian Life and Health Insurance Company
By: David J. Miller*
------------------------------------------------
David J. Miller
Chairman of the Board and President
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY (DEPOSITOR)
By: David J. Miller*
------------------------------------------------
David J. Miller
Chairman of the Board and President
/s/ R. Michael Slaven
*By: ------------------------------------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
David J. Miller* Director, Chairman of the Board July 18, 1996
- --------------------------- and President
David J. Miller
Dennis E. Brady* Director, Vice President, July 18, 1996
- --------------------------- Treasurer and Senior Financial
Dennis E. Brady Officer
(Chief Accounting Officer)
Susan E. Martin* Director, Vice President and July 18, 1996
- --------------------------- Secretary
Susan E. Martin
I. Donald Britton* Director July 18, 1996
- ---------------------------
I. Donald Britton
Patricia A. Collins* Director July 18, 1996
- ---------------------------
Patricia A. Collins
Jack M. Dann* Director July 18, 1996
- ---------------------------
Jack M. Dann
Jeffrey H. Goldberger* Director July 18, 1996
- ---------------------------
Jeffrey H. Goldberger
Brian H. Perry* Director July 18, 1996
- ---------------------------
Brian H. Perry
Marin Renninger* Director and Senior Vice July 18, 1996
- --------------------------- President
Martin Renninger
Paul Yakulis* Director July 18, 1996
- ---------------------------
Paul Yakulis
Rosalie M. Smith* Director July 18, 1996
- ---------------------------
Rosalie M. Smith
Thomas B. Nesspor* Director and Vice President July 18, 1996
- ---------------------------
Thomas B. Nesspor
</TABLE>
* By: /s/ R. Michael Slaven
----------------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
SEPARATE ACCOUNT C
PROVIDIAN MARQUEE VARIABLE ANNUITY
INDEX TO EXHIBITS
EXHIBIT 1 RESOLUTION BY THE BOARD OF DIRECTORS OF FIRST PROVIDIAN LIFE
AND HEALTH INSURANCE COMPANY AUTHORIZING ESTABLISHMENT OF THE
SEPARATE ACCOUNT
EXHIBIT 3(a) FORM OF SELLING AGREEMENT
EXHIBIT 4(a) FORM OF VARIABLE ANNUITY CONTRACT
EXHIBIT 5(a) FORM OF APPLICATION
EXHIBIT 6(a) AMENDED AND RESTATED CHARTER OF FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
EXHIBIT 6(b) BY-LAWS OF FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
EXHIBIT 8(a) FORM OF PARTICIPATION AGREEMENT FOR THE FUNDS
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
EXHIBIT 13 PERFORMANCE COMPUTATION
<PAGE>
Exhibit 1
RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS
NATIONAL HOME LIFE ASSURANCE COMPANY OF NEW YORK
November 4, 1994
BE IT RESOLVED, That the Board of Directors of National Home Life Assurance
Company of New York ("Company"), pursuant to the provisions of Section 4240 of
the New York Insurance Statutes, hereby establishes a separate account
designated "National Home Life Assurance Company of New York Separate Account C"
(hereinafter "Separate Account C") for the following use and purposes, and
subject to such conditions as hereinafter set forth:
FURTHER RESOLVED, That Separate Account C is established for the purpose of
providing for the issuance by the Company of flexible premium multi-funded
variable annuity contracts ("Contracts"), or other insurance contracts, and
shall constitute a separate account into which are allocated amounts paid to or
held by the Company under such Contracts and shall be kept on file in the
Secretary's Office; and
FURTHER RESOLVED, That the income, gains and losses, whether or not
realized, from assets allocated to Separate Account C shall, in accordance with
the Contracts, be credited to or charged against such account without regard to
other income, gains, or losses of the Company; and
FURTHER RESOLVED, That Separate Account C shall be divided into Company
Funds, within which are Subaccounts that shall invest in the shares of a
designated corresponding portfolio, and net premiums under the Contracts shall
be allocated to the eligible portfolios set forth in the Contracts in accordance
with instructions received from owners of the Contracts; and
FURTHER RESOLVED, That the Executive Committee of the Board of Directors
expressly reserves the right to add or remove any Subaccounts of Separate
Account C as it may hereafter deem necessary or appropriate; and
FURTHER RESOLVED, That the President, Executive Vice President, any Senior
Vice President, any Vice President, Secretary or Treasurer, and each of them,
with full power to act without the others, be, and they hereby are, severally
authorized to invest such amount or amounts of the Company's cash in Separate
Account C or in any Subaccount thereof as may be deemed necessary or appropriate
to facilitate the commencement of Separate Account C's operations and/or to meet
any minimum capital requirements under the Investment Company Act of 1940; and
FURTHER RESOLVED, That the President, the Executive Vice President, any
Senior Vice President, any Vice President, Secretary or Treasurer, and each of
them, with full power to act without the others, be, and they hereby are,
severally authorized to transfer cash from time to time between the Company's
general account and Separate Account C as deemed necessary or appropriate and
consistent with the terms of the Contracts; and
FURTHER RESOLVED, That the Executive Committee of the Board of Directors of
the Company reserves the right to change the designation of Separate Account C
hereafter to such other designation as it may deem necessary or appropriate; and
<PAGE>
FURTHER RESOLVED, That the President, Executive Vice President, any Senior
Vice President, Secretary, Treasurer, or any Vice President, and each of them,
with full power to act without the others, with such assistance from the
Company's independent certified public accountants, legal counsel and
independent consultants or others as they may require, be, and they hereby are,
severally authorized and directed to take all action necessary to: (a) Register
Separate Account C as a unit investment trust under the Investment Company Act
of 1940, as amended; (b) Register the Contracts in such amounts, which may be an
indefinite amount, as the said officers of the Company shall from time to time
deem appropriate under the Securities Act of 1933; and (c) Take all other
actions which are necessary in connection with the offering of said Contracts
for sale and the operations of Separate Account C in order to comply with the
Investment Company Act of 1940, the Securities Exchange Act of 1934, the
Securities Act of 1933, and other applicable federal laws, including the filing
of any amendments to registration statements, any undertakings, and any
applications for exemptions from the Investment Company Act of 1940 or other
applicable federal laws as the said officers of the Company shall deem necessary
or appropriate; and
FURTHER RESOLVED, That the President, Executive Vice President, any Senior
Vice President, Secretary, Treasurer, or any Vice President, and each of them,
with full power to act without the others, hereby are severally authorized and
empowered to prepare, execute and cause to be filed with the Securities and
Exchange Commission on behalf of Separate Account C, and by the Company as
sponsor and depositor, a Form of Notification of Registration Statement under
the Securities Act of 1933 registering the Contracts, and any and all amendments
to the foregoing on behalf of Separate Account C and the Company and on behalf
of and as attorney-in-fact for the principal executive officer and/or the
principal financial officer and/or the principal accounting officer and/or any
other officer of the Company; and
FURTHER RESOLVED, That the President, Executive Vice President, any Senior
Vice President, Secretary, Treasurer or any Vice President, and each of them,
with full power to act without the others, hereby is severally authorized on
behalf of Separate Account C and on behalf of the Company to take any and all
action that each of them may deem necessary or advisable in order to offer and
sell the Contracts, including any registrations, filings and qualifications both
of the Company, its officers, agents and employees, and of the Contracts, under
the insurance and securities laws of any of the states of the United States of
America or other jurisdictions, and in connection therewith to prepare, execute
and deliver and file all such applications, reports, covenants, resolutions,
applications for exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which the said officers or legal counsel of the Company may deem
necessary or desirable (including entering into whatever agreements and
contracts may be necessary) in order to maintain such registrations or
qualifications for as long as the said officers or legal counsel deem it to be
in the best interests of Separate Account C and the Company; and
<PAGE>
FURTHER RESOLVED, That the President, Executive Vice President, and Senior
Vice President, Secretary, Treasurer, or any Vice President, and each of them,
with full power to act without the others, be, and they hereby are, severally
authorized in the names and on behalf of Separate Account C and the Company to
execute and file irrevocable written consents on the part of Separate Account C
and the Company to be used in such states wherein such consents to service of
process may be requisite under the insurance or securities laws therein in
connection with said registration or qualification of the Contracts and to
appoint the appropriate state official, or such other person as may be allowed
by said insurance or securities laws, agent of Separate Account C and of the
Company for the purpose of receiving and accepting process; and
FURTHER RESOLVED, That the President, Executive Vice President, and Senior
Vice President, Secretary, Treasurer, or any Vice President, and each of them,
with full power to act without the others, be, and hereby is, severally
authorized to establish procedures under which the Company will institute
procedures for providing voting rights for owners of the Contracts with respect
to securities owned by Separate Account C; and
FURTHER RESOLVED, That the President, the Executive Vice President, any
Senior Vice President, Secretary, Treasurer, or any Vice President, and each of
them, with full power to act without the others, is hereby severally authorized
to execute such agreement or agreements as deemed necessary and appropriate with
such entity who will be appointed distributor for the Contracts and with one or
more qualified banks or other qualified entities to provide administrative
and/or custodial services in connection with the establishment and maintenance
of Separate Account C and the design, issuance, and administration of the
Contacts.
FURTHER RESOLVED, That the President, Executive Vice President, any Senior
Vice President, Secretary, Treasurer, or any Vice President, and each of them,
with full power to act without the others, are hereby severally authorized to
execute and deliver such agreements and other documents and do such acts and
things as each of them may deem necessary or desirable to carry out the
foregoing resolutions and the intent and purposes thereof.
<PAGE>
EXHIBIT 3(a)
VARIABLE ANNUITY
MANAGING GENERAL AGENT AGREEMENT
1
<PAGE>
MANAGING GENERAL AGENT AGREEMENT
================================================================================
THIS AGREEMENT is made and effective the ___ day of _____________, 199__, by and
among Providian Securities Corporation ("PSC"), First Providian Life and Health
Insurance Company ("FPLH") and the Managing General Agent and/or an affiliated
broker/dealer as set forth on Schedule A attached hereto and incorporated herein
by reference (collectively referred to as "MGA"). PSC and MGA are registered
with the Securities and Exchange Commission (the "SEC") as broker/dealers under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and are
members of the National Association of Securities Dealers, Inc. (the "NASD").
PSC has been appointed as the principal underwriter of the registered products
(the "PLANS") of FPLH (FPLH and PSC are collectively referred to as "COMPANY").
WHEREAS, COMPANY offers various PLANS for sale to the public; and
WHEREAS, MGA is duly life insurance licensed, securities registered and lawfully
authorized to market and distribute certain of these PLANS, as set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT. COMPANY hereby appoints MGA to sell the PLANS listed (a) on
each Schedule B attached hereto and incorporated herein by reference, and
(b) on each Schedule B hereafter sent to MGA by COMPANY, which shall be
deemed to be attached hereto and incorporated herein by reference, to the
extent authorized by and only in the State of New York (the "State"). MGA
must be duly life insurance licensed and authorized in the State before
soliciting any PLAN in the State. No exclusive rights are granted to MGA.
MGA accepts this appointment as an independent contractor, on the terms
herein.
2. AUTHORITY AND RESPONSIBILITY. MGA is authorized and responsible to
recommend in the State for appointment, use and supervise qualified
professional insurance agents and solicitors who are duly life insurance
licensed, appointed and securities registered to sell the PLANS
("SUBPRODUCERS"). MGA shall ensure that MGA and/or SUBPRODUCERS: (a)
collect and submit purchase payments to COMPANY; (b) deliver the PLAN
contract to the purchaser, unless the contract has been sent by COMPANY to
the purchaser; (c) document each transaction, including the fact of
delivery, and maintain any other documentation reasonably requested by
COMPANY; (d) responsibly perform in good faith each authorized action
hereunder in accordance with COMPANY'S administrative procedures and
cooperate with COMPANY as required to provide service for the PLANS; (e)
make a determination with respect to each purchaser of a PLAN that such
purchaser's investment in the PLAN is suitable as to such purchaser based
upon a thorough review of the current financial situation and needs of the
purchaser (or purchasers, if joint) and notify COMPANY promptly upon its
learning any circumstances that render such suitability information
inaccurate; and (f) adopt, abide by and enforce the principles set forth in
the Ethics Code attached hereto. No variation of this authority and
responsibility shall be permitted except with COMPANY'S prior written
consent.
3. PROHIBITIONS. MGA and SUBPRODUCERS have no authority to, and MGA shall
ensure that MGA and/or any SUBPRODUCERS shall not (a) make any promise or
incur any debt on
2
<PAGE>
behalf of COMPANY; (b) hold itself out as an employee or affiliate of
COMPANY; (c) misrepresent, add, alter, waive, discharge or omit any
provision of the PLANS, the then current prospectuses for the PLANS or the
underlying funds or confirmation statements or other COMPANY materials; (d)
waive any forfeiture, extend the time of making any payments, or alter or
substitute any of COMPANY'S forms; (e) use, or supply to a third party for
use, any of COMPANY'S forms other than for purposes of this Agreement; (f)
take any action which is likely to induce the surrender, transfer,
exchange, cancellation or non-renewal of any PLANS; (g) pay or allow to be
paid any inducement not specified in the contract for the PLANS; (h) cause
any premium or consideration to be rebated, in any manner whatsoever,
directly or indirectly; (i) give or offer to give, on COMPANY'S behalf, any
advice or opinion regarding the taxation of any purchaser's or prospective
purchaser's income or estate in connection with the sale or solicitation
for sale of any PLANS; (j) sign or allow any person to sign a form or other
document for another except pursuant to a proper power of attorney approved
by COMPANY; (k) negotiate, deposit or co-mingle purchase payments; (l)
enter into any contracts with sub-agents for the solicitation of PLANS or
to share commissions with anyone not licensed and under contract with
COMPANY; (m) engage in speculation of human life in any way; (n) solicit or
take purchase orders for PLANS in a state other than the purchaser's state
of residence in order to circumvent the insurance laws of such purchaser's
state of residence; or (o) take any other action beyond the scope of the
authority granted under this Agreement.
4. REPRESENTATIONS AND WARRANTIES. MGA represents and warrants that it and
each person or entity to whom it or FPLH pays commissions pursuant to this
Agreement or with whom it contracts to sell PLANS will have sound business
reputations and backgrounds, will be duly licensed and appointed to
represent COMPANY and securities registered in compliance with all
applicable laws and regulations prior to and during the sale of any PLANS
pursuant to this Agreement, will comply with applicable procedures, ethics
principles, manuals and regulations of COMPANY and all other applicable
laws and regulations. MGA represents and warrants that it has full power
and authority to enter into this Agreement and to perform its obligations
hereunder. COMPANY represents and warrants that all PLANS have been filed
with and approved by the New York insurance department and that COMPANY is
licensed to do business by the New York insurance department. Further,
COMPANY represents and warrants that the PLANS have been filed and
registered as appropriate with the SEC and NASD and are in compliance with
the applicable regulations promulgated under the EXCHANGE ACT.
5. COMMISSIONS, SERVICE FEES, EXPENSES AND CHARGEBACKS. COMPANY shall pay MGA,
for sales in the State, so long as it is properly insurance licensed, the
commissions, service fees and expenses (the "Commissions") set forth on the
applicable Schedule B for each purchase payment received and accepted by
COMPANY due to MGA'S sales efforts. MGA shall pay to COMPANY, or COMPANY
may offset from payments due, the chargebacks (the "Chargebacks") set forth
on the Schedule B. However, any Chargeback due on partially refunded,
returned or surrendered PLANS shall only be due to the extent of the
following fraction:
The amount refunded, returned or surrendered less any amount then
entitled to be withdrawn by the policyowner without penalty pursuant
to the policyowner's annual right to "free withdrawals" in the PLAN
contract, divided by total purchase payments made under the PLAN.
By submitting purchase orders for PLANS listed in the Schedule Bs attached
hereto, or by submitting purchase orders of PLANS listed on future Schedule
Bs, MGA affirms its acceptance
3
<PAGE>
of the Commissions and terms set forth therein. COMPANY reserves the right,
upon thirty days' notice to MGA, to revise any Commissions or Chargebacks
payable on PLANS issued, renewed, converted or exchanged in the future. No
payments will be made to MGA on PLANS which are surrendered or canceled and
subsequently reinstated or rewritten.
6. INDIVIDUAL AGENT COMMISSIONS. COMPANY shall be solely liable for the prompt
payment of Commissions to SUBPRODUCERS with regard to the sale of PLANS.
Payment to SUBPRODUCERS will be based upon the general agent commission as
reflected on COMPANY'S form general agent level Schedule B as submitted by
MGA to COMPANY.
7. INDEMNIFICATION. Each party (herein "INDEMNIFIER") agrees to defend,
indemnify and hold harmless the other party and its affiliated companies,
officers, directors, employees and agents and each person who controls or
has controlled such other parties within the meaning of the Securities Act
of 1933, as amended, or the EXCHANGE ACT, with respect to any and all
losses, damages, claims or expenses (including reasonable attorneys' fees)
which any of the foregoing may incur arising from or in connection with
INDEMNIFIER'S performance, non-performance and/or breach of any warranty,
representation or other provision of this Agreement or any unlawful acts or
practices by INDEMNIFIER involving the PLANS.
8. APPROVAL OF ADVERTISING. No sales promotion or other advertising materials
or training materials ("Sales Materials") relating to the PLANS shall be
used unless approved in writing by COMPANY prior to such use. No
representations in connection with the sale or solicitation for sale of the
PLANS, other than those contained in the currently effective registration
statement and prospectus for each PLAN filed with SEC, or in the approved
Sales Materials, shall be made by MGA, any SUBPRODUCER or registered
representatives. Further, solicitations for sales of the PLANS shall be
made only in the State. One hard copy of each piece of Sales Material shall
be supplied to COMPANY within ten days of first use. COMPANY reserves the
right to audit MGA'S Sales Materials files.
9. CONFIDENTIALITY. Except as required by law, regulation, subpoena, court
order or other lawful authority, all information communicated to one party
by another party relating to COMPANY, MGA or any SUBPRODUCER, whether
before the effective date or during the term of this Agreement, shall be
received in strict confidence, shall be used by it, and its employees,
agents, attorneys or accountants, only for the purposes of this Agreement,
and no such information shall be disclosed by the recipient party, its
employees, agents, attorneys or accountants, without the prior written
consent of the other party. Each party shall take all reasonable
precautions to prevent the disclosure to outside parties of such
information including, without limitation, the terms of this Agreement.
10. TERMINATION. This Agreement shall continue in force for one year from its
effective date and thereafter shall be automatically renewed from year to
year for one year; provided that COMPANY may terminate this Agreement
immediately if (a) MGA materially breaches this Agreement, (b) ceases to be
registered under the EXCHANGE ACT or a member in good standing of the NASD,
(c) fails to comply with any licensing laws or any other regulation and/or
(d) becomes insolvent, bankrupt or suffers some other financial impairment
that may affect MGA'S or COMPANY'S performance of this Agreement. Any party
may terminate this Agreement, in whole or with respect to a Schedule B, at
any time, without cause, upon thirty days' written notice to the other
parties. Sections 3, 7, 9 and 11 of this Agreement shall survive the
termination of this Agreement to the maximum extent permitted by law. MGA
shall settle all accounts with COMPANY and shall continue to be responsible
for all applicable Chargebacks.
4
<PAGE>
11. EFFECT OF TERMINATION. Except as stated in the next sentence, no further
Commissions are payable after termination, for whatever reason, of this
Agreement applicable Schedule B. Unless this Agreement or applicable
Schedule B has been terminated for cause (including the reasons set forth
in 10(a), 10(b), 10(c), 10(d) or the failure to produce new business under
this Agreement or applicable Schedule B for one Year), your portion of any
trailer Commission will continue to be paid for policies issued prior to
such termination while such policies remain in force until five years after
termination of this Agreement or applicable Schedule B.
12. MISCELLANEOUS PROVISIONS.
(a) This Agreement shall be governed as to its validity, interpretation and
effect by the laws of the State of New York.
(b) This Agreement, including Schedule A, each Schedule B, the Ethics Code
and any Software Addendum, contains the entire understanding and
agreement between the parties hereto with respect to the subject matter
hereof and with respect to the sale and solicitation for sale of the
PLANS which are variable annuities and supersedes all prior and/or
contemporaneous discussion, agreements and understandings. MGA and the
COMPANY hereby acknowledge that they have not relied upon any
representations other than the representations expressly contained
within this Agreement. This Agreement may not be amended or
supplemented except by a written agreement or Schedule B.
(c) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and, to the extent
permissible hereunder, assigns.
(d) COMPANY reserves the unconditional right to refuse to accept purchase
orders procured by MGA for failure to meet COMPANY'S underwriting or
other standards. Furthermore, COMPANY reserves the unconditional right
to modify any of the PLANS in any respect whatsoever or suspend the
sale of any of the PLANS, in whole or in part, at any time without
prior notice.
(e) Each party hereto grants to the other the right to audit its records
relating to the terms and conditions of this Agreement upon reasonable
notice during reasonable business hours in order to confirm compliance
with this Agreement.
(f) This Agreement or any of the rights or obligations hereunder may not be
assigned by any party without the prior written consent of the other
parties hereto.
(g) Nothing in this Agreement, nor any acts of the parties hereto, shall be
deemed or construed by the parties hereto, or either of them, or any
third party to create the relationship of employer and employee, or a
partnership or joint venture, or except to the extent expressly
provided herein, principal and agent, among COMPANY and MGA or
SUBPRODUCERS.
(h) Any notice required to be given by one party to another shall be (i)
personally delivered or (ii) mailed by registered or certified mail,
postage prepaid, if to COMPANY, at 400 West Market Street, Louisville,
Kentucky 40202, Attn: Jeff Lammers, and if to MGA and/or any
SUBPRODUCER, at the addresses set forth on Schedule A or different
address as set forth in a written notice from one party to the other in
compliance with this subsection (h).
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year set forth next to their respective names below.
FIRST PROVIDIAN LIFE AND HEALTH PROVIDIAN SECURITIES CORPORATION
INSURANCE COMPANY
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- -------------------------------
- ------------------------------------ ------------------------------------
Print Name of MANAGING GENERAL AGENT Print Name of BROKER/DEALER Above
Above
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- ------------------------------
6
<PAGE>
SCHEDULE A
MANAGING GENERAL AGENT BROKER DEALER INFORMATION FOR
FIRST PROVIDIAN LIFE & HEALTH VARIABLE ANNUITY
NAME OF BROKER DEALER: _____________________________________________
ADDRESS OF BROKER DEALER: _____________________________________________
_____________________________________________
_____________________________________________
CITY COUNTY STATE ZIP
CONTACT PERSON AT BROKER DEALER: ______________________________________
PHONE NUMBER OF CONTACT PERSON AT BROKER DEALER: _______________________
LIST OF AGENCIES FOR
FIRST PROVIDIAN LIFE & HEALTH VARIABLE ANNUITY
MANAGING GENERAL AGENT AGREEMENT
(SOLE PROPRIETORS' AGENCIES SHOULD BE INCLUDED IF APPLICABLE)
- ----------------------------------------
Name, Tax Identification Number and
Address for AGENCIES
- ----------------------------------------
Name:
- ----------------------------------------
Tax ID:
- ----------------------------------------
Address:
- ----------------------------------------
Name:
- ----------------------------------------
Tax ID:
- ----------------------------------------
Address:
- ----------------------------------------
Name:
- ----------------------------------------
Tax ID:
- ----------------------------------------
Address:
- ----------------------------------------
Name:
- ----------------------------------------
Tax ID:
- ----------------------------------------
Address:
- ----------------------------------------
7
<PAGE>
ETHICS CODE
First Providian Life and Health Insurance Company ("Company") has committed to
the Principles of Ethical Market Conduct and Code of Life Insurance Ethical
Market Conduct developed by the American Council of Life Insurance and endorsed
by its Board of Directors. As part of the implementation of those principles
and code, Company requires that its Managing General Agents ("MGA") adopt, abide
by and enforce the following Ethics Code:
1. MGA will conduct business according to high standards of honesty and
fairness and render that service to its customers which, in the same
circumstances, it would apply to or demand for itself. To conduct its
business according to high standards of honesty and fairness, MGA will
implement policies and procedures designed to provide reasonable
assurance that:
A. Its agents make reasonable efforts to determine the insurable
needs or financial objectives of its customers based upon
relevant information obtained from the customer and enter into
transactions which assist the customer in meeting his or her
insurable needs or financial objectives.
B. It maintains compliance with applicable laws and regulations.
C. In cooperation with consumers, regulators and others, it
affirmatively seeks to improve the practices for sales and
marketing of annuity products.
D. This Code of Ethics is reflected in company policies and
practices.
2. MGA will provide competent and customer-focused sales and service. To
provide for competent sales and service of annuity products, MGA will
develop policies and procedures designed to provide reasonable
assurance that:
A. Its agents are of good character and business repute, and have
appropriate qualifications and experience.
B. Its agents are duly licensed or otherwise qualified under state
law.
C. Its agents are adequately trained to focus on customers' needs
and objectives.
D. Its agents have adequate knowledge of Company's Products and
their operation.
E. Its agents are trained in the need to comply with applicable
insurance laws and regulations and the concepts in this Code of
Ethics.
F. Its agents participate in continuing education.
3. MGA will engage in active and fair competition. To maintain and
enhance competition in the marketplace, MGA will develop policies and
procedures designed to provide reasonable assurance that:
A. It maintains compliance with applicable state and federal laws
fostering fair competition.
B. Its agents do not replace existing life insurance policies and
annuity contracts without first communicating to the customer, in
a manner consistent with Ethics Principle 4 below, information
that he or she needs in order to ascertain whether such
replacement of existing policies or contracts may or may not be
in his or her best interest.
8
<PAGE>
C. Its agents refrain from disparaging competitors.
4. MGA will provide advertising and sales materials that comply with the
Managing General Agent Agreement and that are clear as to purpose and
honest and fair as to content. To comply with this principle, MGA
will develop policies and procedures designed to provide reasonable
assurance that:
A. Presentation of any material designed to lead to sales or
solicitation of annuity products is done in a manner consistent
with the best interests of the customer. All such sales or
solicitation communications should be based upon the principles
of fair dealing and good faith, and will have a sound basis in
fact.
B. Materials presented as part of a sale are comprehensible in light
of the complexity of the product being sold.
C. It maintains compliance with applicable laws and regulations
related to advertising, unfair trade practices, sales
illustrations and other similar provisions.
D. Illustrations of premiums and consideration, costs, values and
benefits are accurate and fair, and contain appropriate
disclosure of amount which are not guaranteed and those which are
guaranteed in the policy or contract.
5. MGA will provide a means for fair and expeditious handling of customer
complaints and disputes. To assist in the resolution of any
complaints and disputes that may arise concerning market conduct, MGA
will develop policies and procedures designed to provide reasonable
assurance that:
A. Its agents notify Company immediately of any customer complaints.
B. In cooperation with Company, complaints are identified, evaluated
and handled in compliance with applicable state law and
regulations related to consumer complaint handling.
C. Good faith efforts are made to resolve complaints and disputes
without resorting to civil litigation.
6. MGA will maintain a system of supervision that is reasonably designed
to achieve compliance with this Ethics Code. In so doing, MGA will:
A. Establish and enforce policies and procedures reasonable designed
to comply with this Ethics Code.
B. Implement an adequate system of supervision of the market
activities of its agents in order to monitor their compliance
with this Ethics Code and applicable laws and regulations.
C. Conduct compliance training sessions.
D. Audit and monitor agents' sales practices.
E. Provide each of its agents with a copy of this Ethics Code.
9
<PAGE>
EXHIBIT 4(a)
A NEW YORK STOCK COMPANY . HOME OFFICE: JOHNSON CITY, NEW YORK 13790
1-800-250-1828
We, First Providian Life and Health Insurance Company, have issued this
Certificate on the life of the Annuitant in consideration of our receipt of your
Application and your Initial Purchase Payment.
This plan provides a monthly Annuity Payment for the life of the Annuitant.
Payments start on the Annuity Date.
The smallest annual rate of investment return that would have to be earned on
the assets of the Separate Account so that the dollar amount of variable Annuity
Payments will not decrease is 4.00%. A daily charge corresponding to an annual
charge of 1.25% per year is applied to the assets of the Separate Account by the
Company, plus a daily charge corresponding to an annual charge of .15% plus $30
to cover the cost of maintaining and administering the Certificate. See the
"Separate Account" section of this Certificate, beginning on Page 6, for more
details.
BENEFITS UNDER THIS CERTIFICATE WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO AMOUNT.
RIGHT TO CANCEL CERTIFICATE
IF FOR ANY REASON YOU ARE NOT SATISFIED WITH THIS CERTIFICATE, YOU MAY RETURN IT
TO US WITHIN 10 DAYS (20 DAYS IF THIS CERTIFICATE IS REPLACING A PREVIOUSLY
EXISTING LIFE INSURANCE OR ANNUITY CERTIFICATE) OF THE DATE YOU RECEIVED IT.
YOU MAY RETURN IT BY DELIVERING OR MAILING IT TO US AT P.O. BOX 1950,
BINGHAMTON, NEW YORK, 13902, OR TO THE AGENT FROM WHOM YOU PURCHASED THIS
CERTIFICATE. IF RETURNED, THE CERTIFICATE SHALL BE VOID FROM THE CERTIFICATE
DATE. WE WILL RETURN THE ACCUMULATED VALUE AS OF THE DATE WE RECEIVE YOUR
CERTIFICATE, PLUS ANY LOADS, FEES, AND/OR PREMIUM TAXES THAT MAY HAVE BEEN
SUBTRACTED FROM YOUR PURCHASE PAYMENT(S).
READ THE CERTIFICATE CAREFULLY.
We have caused this Certificate to be signed by our President and Secretary.
David Aplington David Miller
Secretary President
FLEXIBLE PREMIUM MULTI-FUNDED VARIABLE DEFERRED ANNUITY CERTIFICATE
THE DETAILS OF THE VARIABLE PROVISION BEGIN ON PAGE 6
NONPARTICIPATING
Page 1
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page No.
<S> <C>
Right to Cancel Certificate 1
Certificate Schedule Page 3
Definitions 4
The Separate Account 6
Exchanging Units 6
Partial or Full Withdrawals 6
Systematic Withdrawal Option 7
Dollar Cost Averaging 7
Accumulated Value 8
Death Benefit 8
Ownership, Assignment and Beneficiary 8
Death of Annuitant 9
Death of Annuitant's Beneficiary 9
Death of Owner 9
General Provisions 10
Annuity Payment Options 10
Annuity Tables 11
</TABLE>
<PAGE>
CERTIFICATE SCHEDULE PAGE
Please address all correspondence to First Providian Life and Health Insurance
Company, P.O. Box 1950, Binghamton, New York, 13902. Include the Certificate
Number on all correspondence in order to facilitate the processing of the
request.
CERTIFICATE SCHEDULE
<TABLE>
<CAPTION>
<S> <C> <C>
Certificate Owner: JOHN DOE Certificate Number: SPECIMEN
Joint Owner: N/A Certificate Date: 09/01/1990
Annuitant: JOHN DOE Annuity Date: 10/01/2020
Annuitant's Beneficiary: MARY DOE, WIFE Initial Purchase Payment: $5,000
Group Policyholder: ABC Group
</TABLE>
Each Subaccount of First Providian Life and Health Insurance Company Separate
Account C offered in this Certificate invests in a corresponding portfolio of
the First Providian Life and Health Marquee Fund(s) (the "Fund(s)"). These
portfolios are listed below. The allocation of the initial Net Purchase Payment
that you chose is also shown below.
SEPARATE ACCOUNT ALLOCATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fidelity Money Market Portfolio ___% T. Rowe Price Equity Income Portfolio ___%
Fidelity Asset Manager Portfolio ___% T. Rowe Price International Stock Portfolio ___%
Fidelity Equity-Income Portfolio ___% T. Rowe Price New America Growth Portfolio ___%
Fidelity Growth Portfolio ___% Quest for Value Managed Portfolio ___%
Dreyfus Growth and Income Portfolio ___% Quest for Value Small Cap Portfolio ___%
Dreyfus Quality Bond Portfolio ___% Quest for Value US Government Income Portfolio ___%
</TABLE>
PARTIAL AND FULL WITHDRAWALS
Withdrawal Factors: Withdrawal Factors are used to calculate withdrawal fees for
full and partial withdrawals. The .00 Withdrawal Factor results in no penalty.
Certificate Year 1 2 3 4 5 6 Thereafter
- -----------------------------------------------------------------------------
Withdrawal Factor .07 .06 .05 .04 .03 .02 .00
These Withdrawal Factors apply in each of the first six Certificate Years. For
the first partial withdrawal or series of systematic withdrawals each
Certificate Year, a Withdrawal Factor of .00 will apply to that portion of the
withdrawal that is equal to or less than 10% of the total of the Accumulated
Value as of the Certificate Date or, if more recent, the last Certificate
Anniversary (the "Penalty Free Amount"). The Withdrawal Factors shown above
apply to any full withdrawal. In addition, they apply to any partial withdrawal
or series of systematic withdrawals or any portion of a partial or systematic
withdrawal in a Certificate Year in excess of the Penalty Free Amount.
The withdrawal fee for a full withdrawal will be calculated by multiplying the
applicable Withdrawal Factor by the Withdrawal Fee Basis, which is the total of
all Net Purchase Payments made less any portion of that total that has been
previously withdrawn whether penalty free or not. The withdrawal fee for partial
and systematic withdrawals that exceed the Penalty Free Amount in a Certificate
Year will be calculated by multiplying the applicable Withdrawal Factor by the
portion of the Withdrawal Fee Basis that exceeds the Penalty Free Amount
regardless of the current Accumulated Value.
CERTIFICATE CHARGES:
. Daily charge corresponding to an annual charge of .15% of the value of the
Subaccounts, plus a $30 annual fee to cover the cost of administering the
Certificate
. Daily charge corresponding to an annual charge of 1.25% of the value of the
Subaccounts for mortality and expense risk.
. We have the right to charge an administrative fee of $15 for each exchange
after the first 12 exchanges made in any Certificate Year.
. We have the right to charge an administrative fee of $2 per systematic
withdrawal for each systematic withdrawal taken.
NYC-B-MARQUEE
Page 3
<PAGE>
DEFINITIONS
Whenever used in this Certificate, the following shall mean:
ADJUSTED DEATH BENEFIT
During the first six Certificate Years, the Adjusted Death Benefit will be equal
to the sum of all Net Purchase Payments made less any partial withdrawals.
During each subsequent six-year period, the Adjusted Death Benefit will be equal
to the Death Benefit on the last day of the previous six-year period, plus any
Net Purchase Payments made, less any partial withdrawals made during the current
six-year period. For any six-year period after the one in which the Annuitant
attains age 75, the Adjusted Death Benefit will be equal to the Death Benefit on
the last day of the six-year period before age 75 occurs, plus any Net Purchase
Payments subsequently made, less any partial withdrawals subsequently taken.
ANNUITANT
The person whose life is used to determine the duration of any Annuity Payments
and upon whose death, prior to the Annuity Date, benefits under this Certificate
are paid.
ANNUITANT'S BENEFICIARY
The person or persons to whom any benefits are due upon the Annuitant's death.
ANNUITY DATE
The date on which Annuity Payments begin. The Annuity Date is always the first
day of a month.
ANNUITY PAYMENT
One of a series of payments made under an Annuity Payment Option. Annuity
Payments are based on the lifetime or life expectancy of the Annuitant unless an
Annuity Payment Option that pays only for a Period Certain is elected.
ANNUITY PAYMENT OPTION
One of several ways in which the Accumulated Value of this Certificate can be
paid. Under a FIXED ANNUITY OPTION, the dollar amount of each Annuity Payment
does not change over time. Under a VARIABLE ANNUITY OPTION, the dollar amount of
each Annuity Payment may change over time, depending upon the investment
experience of the underlying portfolio or portfolios you choose. Annuity
Payments are based on the Certificate's Accumulated Value on the Annuity Date.
ANNUITY UNIT
Unit of measure used to calculate Variable Annuity Payments.
BUSINESS DAY
A day when the New York Stock Exchange is open for trading.
CERTIFICATE ANNIVERSARY
Any anniversary of the Certificate Date.
CERTIFICATE DATE
The date of issue of this Certificate.
CERTIFICATE YEAR
A period of 12 months starting with the Certificate Date or any Certificate
Anniversary.
CODE
The Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated thereunder.
DEATH BENEFIT
Prior to the Annuity Date, the Certificate's Accumulated Value on the date we
receive proof of the Annuitant's death or, if greater, the Adjusted Death
Benefit.
EXCHANGE
One Exchange will be deemed to occur with each voluntary transfer from any
Subaccount.
INITIAL PURCHASE PAYMENT
The first payment you make to purchase this Certificate. The Initial Purchase
Payment must be at least $5,000 for Non-Qualified Certificates and $2,000 (or
$50 if payments are to be made by monthly payroll deduction) for Qualified
Page 4
<PAGE>
Certificates. In no event, however, can the Initial Purchase Payment be greater
than $1,000,000, without our consent. The Initial Purchase Payment less any
applicable Premium Tax, will be credited to your Accumulated Value within two
Business Days after we receive your Initial Purchase Payment.
NET PURCHASE PAYMENT
Any Purchase Payment less any applicable Premium Tax.
NON-QUALIFIED CERTIFICATE
Any Certificate other than those described under the Qualified Certificate
definition in this Definitions section.
OWNER'S DESIGNATED BENEFICIARY
The person you designate to receive your interest in this Certificate if you die
before the Annuity Date, pursuant the Code.
PAYEE
You, the Annuitant, the Beneficiary, or any other person, estate, or legal
entity to whom benefits are to be paid.
PREMIUM TAX
A regulatory tax that may be assessed by your state on the Purchase Payments you
make to this Certificate. The amount that we must pay as Premium Tax will be
deducted from each Purchase Payment or from your Accumulated Value as it is
incurred by us.
PROOF OF DEATH
A certified death certificate; a certified decree from a court of competent
jurisdiction as to the finding of death; a written statement by a medical doctor
who attended the deceased; or any other proof of death satisfactory to us.
PURCHASE PAYMENT
An amount you invest in this Certificate. Purchase Payments after the Initial
Purchase Payment may be made at any time prior to the Annuity Date as long as
the Annuitant is living. Each Purchase Payment after the Initial Purchase
Payment must be at least $1,000 for Non-Qualified Certificates or $50 for
Qualified Certificates. The total of all Purchase Payments in any Certificate
Year, after the first Certificate Year, may not exceed $10,000. The total of all
Purchase Payments may not exceed $1,000,000 without our consent. Additional Net
Purchase Payments received prior to the close of the New York Stock Exchange
will be credited to your Accumulated Value at the close of business that same
day. Additional Net Purchase Payments received after the close of the New York
Stock Exchange will be credited the following Business Day.
QUALIFIED CERTIFICATE
An annuity Certificate as defined under Sections 401(a), 403(b) and 408(b) of
the Code.
SEC
The Securities and Exchange Commission.
SEPARATE ACCOUNT
First Providian Life and Health Insurance Company Separate Account C. The
Separate Account consists of assets that are segregated by us and invested in
the Fund(s) as shown on the Schedule Page. The investment performance of the
Separate Account is independent of the performance of the general assets of the
Company.
SUBACCOUNT
That portion of the Separate Account that invests in shares of the Fund's(s')
portfolios. Each Subaccount will invest only in a single portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of the underlying portfolio of the Fund(s) in which it invests.
WE, US, OURS
"We" means First Providian Life and Health Insurance Company. "Us," "our" and
"ours" also refer to First Providian Life and Health Insurance Company.
WRITTEN REQUEST (OR WRITTEN NOTICE)
Any notice, change or request in writing by you to us. It is how you let us
know any requests you have or changes you want to make to this Certificate.
Such request must be in a format and content acceptable to us. A signature
guarantee may be required for your protection.
YOU, YOUR, YOURS
Page 5
<PAGE>
"You" refers to the purchaser ("Owner") of this Certificate unless another Owner
is named by you, the purchaser. The term shall also include any person named as
JOINT OWNER. A Joint Owner shares ownership in all respects with the Owner. The
Owner has the right to assign ownership to a person or party other than himself.
"YOUR" and "YOURS" also refer to the Owner and the Joint Owner.
Page 6
<PAGE>
THE SEPARATE ACCOUNT
NATURE OF THE SEPARATE ACCOUNT
The Separate Account is registered with the SEC under the Investment Company Act
of 1940 as a Unit Investment Trust type of investment company. It is also
subject to the laws of the State of New York where we have a plan of operation
for it on file. You may request a copy of the plan from us for a nominal fee to
cover the cost of postage. We established the Separate Account to support
variable annuity Certificates. We own the assets of the Separate Account and
keep them separate from the assets of our general investment account.
We use the assets of the Separate Account to buy shares in the Fund(s). The
Separate Account has Subaccounts that are invested in corresponding specific
portfolios of the Fund(s). Income and realized and unrealized gains and losses
from assets in each Subaccount are credited to, or charged against, the
Subaccount without regard to income, gains or losses in our other investment
accounts.
We will determine the value of the assets in the Separate Account at the end of
each Business Day. In order to determine the value of an asset on a day that is
not a Business Day, we will use the value of that asset as of the end of the
next Business Day on which trading takes place.
We will always keep assets in the Separate Account with a value at least equal
to the total investment amount under Certificates similar to this one. To the
extent those assets do not exceed this total, we use them to support only those
Certificates and do not use those assets to support any other business. We may
use any excess over this amount in any way we choose.
SUBACCOUNTS
The Separate Account has several Subaccounts. Each Subaccount invests in a
corresponding portfolio of the Fund(s). The portfolios available on the
Certificate Date are listed on the Certificate Schedule Page.
ALLOCATIONS TO THE SUBACCOUNTS
You determine, using whole percentages, what portion of the initial Net Purchase
Payment will be allocated among the Subaccounts. The Certificate Schedule Page
will show your initial allocation percentages. You may choose to allocate
nothing to a particular Subaccount. The minimum balance for each Subaccount
must be at least $1,000, except when Purchase Payments for this Certificate are
made by monthly payroll deduction.
You may change the allocation percentages for additional Net Purchase Payments
at any time. The change will take effect on the date we receive notice from you
in writing if received prior to the close of the New York Stock Exchange.
Notices received after the close of the New York Stock Exchange are processed
the next Business Day.
EXCHANGING UNITS
EXCHANGES
You may make as many Exchanges among Subaccounts during a Certificate Year as
you wish, provided you maintain a minimum balance of $1,000, except when
Purchase Payments for this Certificate are made by monthly payroll deduction, in
any Subaccount to which you have allocated a portion of your Net Purchase
Payments. Exchanges may be subject to an administrative charge, as shown on the
Certificate Schedule Page.
Exchanges must be made in writing.
If you make an Exchange from one Subaccount to any of the other Subaccounts at
any time prior to the Annuity Date, we will reduce the value of that Subaccount
by the amount exchanged.
PARTIAL OR FULL WITHDRAWALS
You may make a partial or full withdrawal of your Accumulated Value at any time
before the Annuity Date and while the Annuitant is living. You may not make a
partial or full withdrawal after the Annuity Date. You may elect to have the
full withdrawal amount paid in a lump sum, or you may elect to have it all paid
out under an Annuity Payment Option. The proceeds of a full withdrawal may not
be used as a Purchase Payment for a new Certificate that invests in the Fund.
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If you make a partial or full withdrawal (including a systematic withdrawal) at
any time during the first six Certificate Years, we have the right to reduce the
amount withdrawn by an amount equal to (a) the applicable Withdrawal Factor, if
any, shown on the Certificate Schedule Page, multiplied by (b) the amount of the
withdrawal which exceeds the Penalty Free Amount. As a result, you will receive
a withdrawal amount equal to the amount withdrawn from the Subaccount less the
applicable charges described above, if applicable.
The value of that Subaccount will be reduced by an amount equal to the amount
withdrawn.
On the date we receive your Written Request for a partial withdrawal, the
Accumulated Value will be reduced by an amount equal to the withdrawal amount,
subject to the following:
1. Partial withdrawals will be deducted from the Subaccounts as directed by you
in your Written Request for partial withdrawal. In the absence of specific
direction from you, we will make deductions from the Subaccounts to which you
have allocated Net Purchase Payments on a pro rata basis.
2. The minimum partial withdrawal is $500.
3. If a partial withdrawal or exchange would reduce the value in a Subaccount to
less than $1,000, except when Purchase Payments for this Certificate are made
by monthly payroll deduction , the remaining balance in that Subaccount
will be transferred to the other Subaccounts in which the Certificate's
Accumulated Value is then allocated on a pro rata basis. If the balance
under this Certificate is less than $1,000, and if no Purchase Payment has
been received within three years, we reserve the right to liquidate the
account. You will be notified if your balance is below the minimum, and will
be given 60 days in which to make an additional Purchase Payment.
On the date we receive your Written Request for full withdrawal, the amount
payable is the Accumulated Value less any applicable Withdrawal Factor as shown
on the Certificate Schedule Page.
SYSTEMATIC WITHDRAWAL OPTION
You may elect to have a specified dollar amount withdrawn from that portion of
your Certificate's Accumulated Value which is allocated to the Subaccounts, on a
monthly, quarterly, semiannual or annual basis. The minimum amount for each
withdrawal is $250.
You may elect this option by completing a Systematic Withdrawal Request Form.
We must receive it at least 30 days prior to the date you want systematic
withdrawals to begin. We will process each systematic withdrawal as of the
date, or the next Business Day, and at the frequency specified by you in your
Systematic Withdrawal Request Form. We will forward the withdrawal amount to
you within 10 Business Days of the process date.
You may change the amount to be withdrawn or elect to cancel this option at
anytime provided we receive Written Notice at least 30 days prior to the next
systematic withdrawal date.
We reserve the right to discontinue offering this systematic withdrawal option
upon 30 days' Written Notice. We also reserve the right to charge a fee for
administering this option. Any fee we may charge will be shown on the
Certificate Schedule Page. During the first six Certificate Years, a Withdrawal
Factor will apply to the amount of systematic withdrawals that exceeds the
Penalty Free Amount.
DOLLAR COST AVERAGING
If you have at least $5,000 of Accumulated Value in the money market portfolio,
you may elect to have a specified dollar amount transferred from that Subaccount
to other Subaccounts on a monthly basis.
The minimum amount you may transfer each month is $250 for each Subaccount. The
maximum amount you may transfer is equal to the portion of your Accumulated
Value allocated to the money market portfolio when you made your election,
divided by 12. You may change the amount to be transferred once each
Certificate Year provided we receive notice by phone or in writing at least
seven days prior to the next transfer date.
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We will make this transfer on the same date each month as the Certificate Date.
The dollar amount will be allocated to the Subaccounts in the proportions you
specified in your notice. If, on any transfer date, the portion of your
Accumulated Value allocated to the money market portfolio is equal to or less
than the amount you elected to have transferred, we will transfer the entire
amount and this option will no longer be in effect.
You may cancel this option at any time provided we receive notice by phone or in
writing at least seven days prior to the next transfer date.
ACCUMULATED VALUE
ACCUMULATED VALUE
On the Certificate Date, the Accumulated Value is equal to your initial Net
Purchase Payment. On any Business Day after the Certificate Date, the
Accumulated Value is equal to the Accumulated Value from the previous Business
Day
PLUS:
1. Any additional Net Purchase Payments received; and
2. Any increase in the value of the Subaccount(s), due to investment results,
to which the Accumulated Value is allocated;
LESS:
1. Any decrease in the value of the Subaccount(s), due to investment results,
to which the Accumulated Value is allocated;
2. A charge, as described on the Certificate Schedule Page, for mortality and
expense risks assumed by us;
3. The charges, as described on the Certificate Schedule Page, to cover our
costs in administering the Certificate;
4. An administrative charge, as described on the Certificate Schedule Page,
for certain exchanges made;
5. An administrative charge, as described on the Certificate Schedule Page,
for each systematic withdrawal; and
6. Any withdrawals.
DEATH BENEFIT
DEATH BENEFIT PRIOR TO THE ANNUITY DATE
We will pay the Death Benefit to the Annuitant's Beneficiary when we receive
proof that the Annuitant died prior to the Annuity Date. The Death Benefit may
be paid as a lump sum cash benefit or an annuity payment benefit. If you and
the Annuitant are the same person and the Annuitant's Beneficiary is your
surviving spouse, then the Annuitant's Beneficiary may elect to be treated as
the Owner's Designated Beneficiary pursuant to the "Owner's Death Before Entire
Interest is Distributed" provision.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY
OWNERSHIP OF THE CERTIFICATE
The Annuitant is the Owner unless you have designated another person as Owner or
Annuitant. During the Annuitant's lifetime, all rights and privileges under
this Certificate may be exercised solely by the Owner. From time to time, we
may require proof that the Annuitant is still living.
ASSIGNMENT OF THE CERTIFICATE
We are not responsible for the validity or effect of any assignment. No
assignment will be recognized until we receive Written Notice and acknowledge
receipt of such notice. The interest of any Annuitant's Beneficiary that the
assignor has the right to change shall be subordinate to the interest of an
assignee. Any amount paid to the assignee shall be paid in one sum,
notwithstanding any settlement agreement in effect at the time the assignment
was executed. We shall not be liable as to any payment or other settlement made
by us before we acknowledged the notice.
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ANNUITANT'S BENEFICIARY
You may name an Annuitant's Beneficiary in writing. You may make this
designation irrevocable by a Written Notice filed and approved by us. An
irrevocable Annuitant's Beneficiary may be changed only with such Beneficary's
own written consent. Changes in Annuitant's Beneficiary must be made by Written
Notice to us. The change will take effect on the date the notice is signed. We
will acknowledge in writing receipt of the notice. The change will not affect
any payment made or other action taken before we acknowledged the notice.
DEATH OF ANNUITANT
ANNUITANT'S DEATH PRIOR TO ANNUITY DATE
If the Owner and the Annuitant are different and the Annuitant dies prior to the
Annuity Date, the following will apply unless you have made other provisions:
1. If there is more than one Annuitant's Beneficiary, each will share the Death
Benefit equally.
2. If one of two or more Annuitant's Beneficiaries has already died, that share
of the Death Benefit will be paid equally to the survivor(s).
3. If no Annuitant's Beneficiary is living, the proceeds will be paid to you.
If you are deceased, the proceeds will be paid to your legal
representatives, or if the proceeds have been assigned by you, then they
will be paid to the assignee(s).
4. U nless otherwise provided, if an Annuitant's Beneficiary dies at the same
time as the Annuitant, the proceeds will be paid as though the Annuitant's
Beneficiary had died first.
5. Unless otherwise provided, if an Annuitant's Beneficiary dies within 15 days
after the Annuitant's death and before we receive due proof of the
Annuitant's death, proceeds will be paid as though the Annuitant's
Beneficiary had died first.
The Annuitant's Beneficiary may choose to receive a lump sum payment or to
receive a series of payments under one of the Annuity Payment Options available
under the Certificate.
ANNUITANT'S DEATH ON OR AFTER ANNUITY DATE
If the Annuitant dies on or after the Annuity Date, any unpaid Payments Certain
will be paid to the Annuitant's Beneficiary.
DEATH OF ANNUITANT'S BENEFICIARY
DEATH OF ANNUITANT'S BENEFICIARY
If an Annuitant's Beneficiary who is currently receiving Annuity Payments dies,
any remaining Payments Certain will be paid as they come due to the named
beneficiary of the Annuitant's Beneficiary.
DEATH OF OWNER
OWNER'S DEATH BEFORE ENTIRE INTEREST IS DISTRIBUTED
If you die before the entire interest in this Certificate is distributed:
1. The following applies:
(a) If you die on or after the Annuity Date, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of death; and
(b) If you die before the Annuity Date, the entire interest in this
Certificate will be distributed as follows:
(i) within five years after the date of the Owner's death;
(ii) over the lifetime of the Owner's Designated Beneficiary of this
Certificate; or
(iii) over a period that does not exceed the life expectancy, as
defined by the Code, of the Owner's Designated Beneficiary of
this Certificate.
Subparagraphs (ii) and (iii) apply only to individuals, and such payments
must start within one year of the date of such Owner's death. For
Individual Retirement Accounts ("IRAs"), any annuity option chosen must
meet the requirements of the Code.
2. Special rule where surviving spouse is the Owner's Designated Beneficiary:
If the Owner's Designated Beneficiary is your surviving spouse, then
subparagraph (b) above shall be applied by treating your spouse as the
original Certificate Owner. The surviving spouse may elect to become the
Owner under the Certificate and to treat the Certificate as his or her own.
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SPECIAL RULES FOR NONNATURAL OWNERS
If a nonnatural person is named as Owner of this Certificate, then the Annuitant
shall be treated as the Owner and the entire interest in this Certificate must
be distributed within five years of: (1) the Annuitant's death prior to the
Annuity Date, or (2) a change in the Annuitant.
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire Certificate consists of this Certificate, including any riders or
endorsements, and the Certificate Owner's Application, a copy of which was
attached at issue. Changes to this Certificate are not valid unless we make
them in writing. They must be signed by one of our Executive Officers. No
agent has the authority to change this Certificate or to waive any of its
provisions.
INCONTESTABILITY
This Certificate is incontestable from the Certificate Date.
NONPARTICIPATING
This Certificate is nonparticipating. This means we do not pay dividends on it.
The Certificate will not share in our profits or surplus.
PROTECTION OF PROCEEDS AND PAYMENTS
To the extent permitted by law, neither the proceeds nor any payments under this
Certificate shall be subject to the claims of creditors or legal process.
ANNUAL STATEMENT
You will receive an annual statement once each year. It will show such things
as the beginning and ending account values, as well as any Additional Purchase
Payments, withdrawals, exchanges or charges for the year that apply to this
Certificate. The statement may contain other information required by law or
regulation.
MISSTATEMENT OF AGE OR SEX
If the Annuitant's age or sex is misstated, payments will be adjusted to the
amount that would have been provided for at the correct age or sex. If payments
have already commenced and the misstatement has caused an underpayment, the full
amount of the underpayment will be paid with the next scheduled payment. If the
misstatement has caused an overpayment, the amount of such overpayment will be
deducted from one or more future payments.
DEFERMENT OF PAYMENT
If a lump sum or cash withdrawal is to be paid from the Separate Account,
payment will be made within seven calendar days from the date the election
becomes effective.
We may defer payment in cases where the New York Stock Exchange is closed for
other than usual weekends or holidays or trading has been restricted by the SEC
or otherwise, or an emergency exists as defined by the SEC, or when the SEC
allows us to defer payments in order to protect our Certificate Owners.
CERTIFICATE AMENDMENT
We will amend this Certificate from time to time in cases where we are acting to
comply with Code or are acting to maintain the tax-deferred status of this
Certificate, pursuant to those provisions or regulations.
RIGHTS RESERVED BY THE COMPANY
Subject to any required approval by the SEC, the New York Department of
Insurance, and any other regulatory authority, we reserve the right to take
certain actions. These actions include:
1. To deregister the Separate Account under the Investment Company Act of 1940;
2. To combine any two or more separate accounts;
3. To operate the Separate Account as a management investment company or any
other form permitted by law;
4. To substitute shares of another fund or units of a trust if shares of the
Fund(s) are not available, or if, in our judgment, further investment in
such shares is no longer appropriate; and
5. To add or delete funds (including the Fund(s)), portfolios and corresponding
Subaccounts.
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ANNUITY PAYMENT OPTIONS
You may elect that Annuity Payments be received on a fixed basis, a variable
basis, or some combination of both.
PROCEEDS
The normal Annuity Date is the first day of the month following the Annuitant's
85th birthday. However, you may choose to advance the Annuity Date. You must
make this request in writing at least 30 days prior to the requested Annuity
Date and during the Annuitant's lifetime. On the Annuity Date the proceeds to
be applied under a Payment Option will be equal to the Certificate's Accumulated
Value on the Annuity Date less any applicable Premium Tax. In no event will the
Annuity Date be later than the Annuitant's age 85.
ANNUITY PAYMENTS
Annuity Payments are made monthly starting on the Annuity Date. Annuity
Payments based on a Fixed Payment Option and the initial Annuity Payment based
on a Variable Payment Option are guaranteed to be no less than the amount
provided by the Annuity Tables. The minimum payment is $100. The number of
payments made in a year may be adjusted to maintain this minimum. If the
Accumulated Value is less than $2,000, we have the right to pay that amount in a
lump sum. We may require proof of the Annuitant's age before making payments.
From time to time, we may require proof that the Annuitant is living.
PAYMENT OPTIONS
1. Life Annuity - We will make monthly Annuity Payments for the life of the
Annuitant, ceasing with the last payment due prior to his or her death.
2. Life Annuity with 120, 180 or 240 Monthly Payments Certain - We will make
monthly Annuity Payments for the life of the Annuitant, or, if the Annuitant
dies, for 120, 180 or 240 months as elected. If, at any given age, the same
amount would be payable for different periods certain, we will deem an
election to have been made for the longest period certain which could have
been elected at such age for such amount.
3. Installment or Unit Refund Life Annuity - We will make monthly Annuity
Payments for the life of an Annuitant, with a Period Certain determined by
dividing the Accumulated Value by the first Annuity Payment.
4. Joint and Last Survivor Annuity - We will make monthly Annuity Payments for
the life of two Annuitants and thereafter for the life of the survivor,
ceasing with the last payment due prior to the survivor's death.
5. Designated Period Annuity - We will make monthly Annuity Payments for a
Period Certain which may be from 10 to 30 years, as elected. This option is
available on a fixed basis only.
ANNUITY TABLES
The Annuity Tables show the guaranteed minimum amount of monthly Annuity Payment
for each $1,000 of Accumulated Value for each Fixed Annuity Option. We will, at
the time of election of a Fixed Annuity Payment Option, offer more favorable
rates in lieu of the guaranteed rates shown in the Annuity Tables if current
SPIA rates are higher than the minimum guaranteed rates. The amount of each
Annuity Payment will depend on the Annuitant's sex and age on the birthday
nearest to the date the first Annuity Payment is due.
We base the tables for the first four Options on the 1983 Table "A" Mortality
Table projected for mortality improvement to the year 2000 using Projection
Scale G and an interest rate of 4% a year. The table for Option 5 is based on
an interest rate of 4% a year. On request we will furnish the amount of monthly
Annuity Payment per $1,000 applied for any ages not shown. We will treat any
Payee who is over age 85 at the date Annuity Payments begin as being age 85 on
that date.
FIXED PAYMENT AMOUNTS
With respect to a Fixed Payment Option, the amounts shown on the tables
represent the guaranteed minimum for each Annuity Payment.
VARIABLE PAYMENT AMOUNTS
With respect to a Variable Payment Option, the amounts shown on the tables
represent the first Annuity Payment, based on the assumed interest rate of 4%.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units.
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The number of Annuity Units is determined by dividing the first Annuity Payment
by the Annuity Unit value for the selected Subaccount 10 Business Days prior to
the Annuity Date. The number of Annuity Units for the Subaccount then remains
fixed, unless an exchange of Annuity Units is made. After the first Annuity
Payment, the dollar amount of each subsequent Annuity Payment is equal to the
number of Annuity Units multiplied by the Annuity Unit value for the Subaccount
on the due date of the Annuity Payment.
The Annuity Unit value for each Subaccount will be established at $10. The
Annuity Unit value for any subsequent Business Day is equal to (a) times (b)
times (c), where:
(a) is the Annuity Unit value on the immediately preceding Business Day;
(b) is the Net Investment Factor for the day;
(c) is the Investment Result Adjustment Factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in determining the
Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) Any increase or decrease in the value of the Subaccount due to investment
results.
(b) A charge, as described on the Certificate Schedule Page, for mortality and
expense risks assumed by us.
(c) A charge, as described on the Certificate Schedule Page, to cover the cost
of administering the account.
When Annuity Payments begin, neither expenses actually incurred other than taxes
on the investment return, nor mortality actually experienced, shall adversely
affect the dollar amount of variable Annuity Payments.
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EXHIBIT 5(a)
[LOGO FOR PROVIDIAN] Providian Marquee
Variable Annuity
First Providian Life and Health Insurance Company Application
520 Columbia Drive
Johnson City, New York 13790
================================================================================
Certificate Information
Type of Annuity: [_] Non-Qualified [_] Qualified (If transfer or rollover,
please complete form
FM-0937)(NY))
[_] IRA [_] SEP/SAR-SEP [_] 403(b)
1035 Exchange: [_] Yes (complete company information & FM-0937(NY)) [_] No
Replacement: Will the Annuity applied for here replace any life insurance
or annuity from this or any other company?
[_] Yes (complete company information) [_] No
Company:________________________ Certificate #:____________
================================================================================
Owner Sex: [_] Male [_] Female
Name:___________________________________________________________________________
Mailing Address:________________________________________________________________
Street City State Zip
Social Security No.:___________ Date of Birth: __________ Phone: _____________
================================================================================
Joint-owner (not applicable to qualified certificate) Sex: [_] Male [_] Female
Name:___________________________________________________________________________
Mailing Address:________________________________________________________________
Street City State Zip
Social Security No.:___________ Date of Birth: __________ Phone: _____________
================================================================================
Annuitant (Cannot be older than 75) Sex: [_] Male [_] Female
[_] Check if same as Owner
Name:___________________________________________________________________________
Mailing Address:________________________________________________________________
Street City State Zip
Social Security No.:___________ Date of Birth: __________ Phone: _____________
================================================================================
Annuitant's Beneficiary(ies)
(a) Primary Beneficiary
Name:___________________________________________________________________________
Social Security No.:___________ Date of Birth: __________ Phone: _____________
(b) Secondary Beneficiary
Name:___________________________________________________________________________
Social Security No.:___________ Date of Birth: __________ Phone: _____________
================================================================================
Owner's Designated Beneficiary (complete if Owner and Annuitant are not the
same)
Name:___________________________________________________________________________
Mailing Address:________________________________________________________________
Street City State Zip
Social Security No.:___________ Date of Birth: __________ Phone: _____________
================================================================================
WARNING NOTICE -- Any person who knowingly, and with intent to injure, defraud
or deceive any insurance company, files a statement of claim or submits an
application containing any false, incomplete or misleading information commits a
fraudulent act, which is a crime and may be subject to criminal and civil
penalties.
<PAGE>
===============================================================================
Initial Purchase Payment
Initial Purchase $_________
You may allocate your Initial Purchase Payment to as many of the Annuity's
subaccounts as you like. Please indicate each allocation below; note that the
minimum balance per portfolio must be at least $1,000. Your allocations must
equal your total Initial Purchase Payment.
. Fidelity Money Market Portfolio _____________%
. Fidelity Equity-Income Portfolio _____________%
. Fidelity Growth Portfolio _____________%
. Fidelity Asset Manager Portfolio _____________%
. Dreyfus Growth and Income Portfolio _____________%
. Dreyfus Quality Bond Portfolio _____________%
. T. Rowe Price Equity Income Portfolio _____________%
. T. Rowe Price New America Growth
Portfolio _____________%
. T. Rowe Price International Stock
Portfolio _____________%
. OpCap Advisors Managed Portfolio _____________%
. OpCap Advisors Small Cap Portfolio _____________%
. OpCap Advisors U.S. Government
Income Portfolio _____________%
Total _____________%
Future purchases may be allocated as shown above; or, you may select a different
allocation at the time of your purchase if you prefer.
===============================================================================
Dollar Cost Averaging (Minimum transfer per subaccount or fixed account option,
$250 per month)
Each month, please dollar cost average from the Money Market Portfolio the
following amounts over the period indicated below.
To establish dollar cost averaging you must have allocated sufficient funds to
the Money Market Portfolio.
. Fidelity Money Market Portfolio $_____________
. Fidelity Equity-Income Portfolio $_____________
. Fidelity Growth Portfolio $_____________
. Fidelity Asset Manager Portfolio $_____________
. Dreyfus Growth and Income Portfolio $_____________
. Dreyfus Quality Bond Portfolio $_____________
. T. Rowe Price Equity Income Portfolio $_____________
. T. Rowe Price New America Growth
Portfolio $_____________
. T. Rowe Price International Stock
Portfolio $_____________
. OpCap Advisors Managed Portfolio $_____________
. OpCap Advisors Small Cap Portfolio $_____________
. OpCap Advisors U.S. Government
Income Portfolio $_____________
[_] 12 months ($5,000 min. Purchase Payment) [_] 24 months ($10,000 min.
Purchase Payment)
[_] 36 months ($15,000 min. Purchase Payment) See prospectus for additional
details
===============================================================================
Commencement of Annuity Payments
The Annuitant will begin receiving annuity payments on the first day of the
month of or after the Annuitant's 85th birthday, or earlier date if specified
below. Note: qualified money may be subject to earlier distribution rules. You
may amend this election in the future. However, in no event may the Annuity
Start Date be later than the Annuitant's age 85.
Annuity Start Date: ___________________________________________________________
===============================================================================
Statement of Owner(s)
I/We acknowledge receipt of a current prospectus, declare all statements in this
application are true to the best of our knowledge and belief, and agree this
Application shall be a part of the Annuity Certificate Issued by the company.
We understand certain payments and values provided by the Certificate will vary
as to the dollar amount to the extent they are based on the investment
experience of the selected Subaccount(s). With this in mind, we feel the
Certificate applied for will meet anticipated financial needs. The accumulation
values under the Separate Account provisions of the Certificate being applied
for are variable and are not guaranteed as to fixed dollar amounts.
- ----------------------------------------------------------------------------
Signature of Owner Date Signature of Joint-owner Date
(if one is designated)
==============================================================================
Agency/Agent
To the best of my knowledge, the annuity applied for here [_] does [_] does not
replace any life insurance or annuity in this or any other company. I hereby
certify that I witnessed the signature(s) above and that his/her answer to
the question above is true to the best of my knowledge and belief.
Agent's Name: ______________________ Agency: ________________________________
Agent's Address: _____________________________________________________________
Agent's Signature: _________________ Agent's License Number: ________________
Agent's Number: ____________________ Telephone Number: ______________________
==============================================================================
Mailing Instructions
Mailed this signed application and check to: Time dated commercial express mail
may be sent to:
First Providian Life and Health First Providian Life and Health
Insurance Company Insurance Company
P.O. Box 1950 520 Columbia Avenue
Binghamton, New York 13902 Johnson City, New York 13970
<PAGE>
Exhibit 6(a)
AMENDED AND RESTATED CHARTER
OF
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
Section 1. The name of this corporation shall be First Providian Life
and Health Insurance Company. The name of this Corporation was formed under
National Home Life Assurance Company of New York.
Section 2. The principal office of the Corporation shall be located
in Johnson City, County of Broome and State of New York.
Section 3. The kind of insurance to be transacted by the Corporation
is life insurance and accident and health insurance as defined in Paragraphs 1,
2 and 3(i) (ii) and (iii) of the Insurance Law of the State of New York, namely:
(1) "Life insurance," means every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the
granting of endowment benefits, additional benefits in the event of
death by accident, additional benefits to safeguard the contract from
lapse, accelerated payments of part or all of the death benefit or a
special surrender value upon diagnosis (a) of terminal illness defined
as a life expectancy of twelve months or less, or (B) of a medical
condition requiring extraordinary medical care or treatment regardless
of life expectancy, or provide a special surrender value, upon total
and permanent disability of the insured, and optional modes of
settlement of proceeds. "Life insurance" also includes additional
benefits to safeguard the contract against lapse in the event of
unemployment of the insured. Amounts paid the insurer for life
insurance and proceeds applied under optional modes of settlement or
under dividend options may be allocated by the insurer to one or more
separate accounts pursuant to section four thousand two hundred forty
of this chapter.
(2) "Annuities," means all agreements to make periodical payments for
a period certain or where the making or continuance of all or some of
a series of such payments, or the amount of any such payment, depends
upon the continuance of human life, except payments made under the
authority of paragraph one hereof. Amounts paid the insurer to provide
annuities and proceeds applied under optional modes of settlement or
under dividend
1
<PAGE>
options may be allocated by the insurer to one or more separate
accounts pursuant to section four thousand two hundred forty of this
chapter.
(3) "Accident and health insurance," means (i) insurance against death
or personal injury by accident or by any specified kind or kinds of
accident and insurance against sickness, ailment or bodily injury,
including insurance providing disability benefits pursuant to article
nine of the workers' compensation law, except as specified in item
(ii) hereof; and (ii) non-cancelable disability insurance, meaning
insurance against disability resulting from sickness, ailment or
bodily injury (but excluding insurance solely against accidental
injury) under any contract which does not give the insurer the option
to cancel or otherwise terminate the contract at or after one year
from its effective date or renewal date;
and such other kind or kinds of business to the extent necessarily or properly
incidental to the kind or kinds of business which the Corporation is
specifically authorized to transact as stated above.
Section 4. The corporate powers of this Corporation shall be exercised
through a Board of Directors and through such officers and agents as such Board
shall empower.
Section 5. The Board of Directors of this Corporation shall be not less
than thirteen nor more than nineteen in number, and shall be determined by the
provisions of the By-Laws. However, in no case shall the number of directors be
less than thirteen. Directors shall be elected at each annual meeting of
stockholders and each director so elected shall hold office until the next
annual meeting of stockholders and until his successor is elected and qualified.
In the event that the number of directors duly elected and serving shall be less
than thirteen, the Corporation shall not for that reason be dissolved, but the
vacancy or vacancies shall be filled as provided in Section 7 hereof. No
director shall be personally liable to the Corporation or any of its
shareholders for damages for any breach of duty as a director; provided,
however, that the foregoing provision shall not eliminate or limit (i) the
liability of a director if a judgment or other final adjudication adverse to him
or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or any violation of the Insurance Law or a
knowing violation of any other law or that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled;
or (ii) the liability of a director for any act or omission prior to the
adoption of this amendment by the shareholders of the Corporation.
2
<PAGE>
Section 6. The annual meeting of the stockholders of the Corporation shall
be held in the State of New York and in accordance with the By-Laws on the first
Monday in May in each and every year, or if such day in any year be a legal
holiday, then the next succeeding business day. Notice of the time and place of
such meeting shall be given as prescribed in the By-Laws and as required by law,
including notice to the Superintendent of Insurance of the State of New York to
the extent required by law. At such meeting the stockholders shall select a
Board of Directors and shall transact such other business as may legally come
before the meeting.
At any meeting of the stockholders, the holders of a majority of the shares of
the capital stock of the Corporation, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number shall be required by law, and, in that case,
the representation of the number so required shall constitute a quorum.
At any regular or special stockholders' meeting, each stockholder shall be
entitled to vote in person, or by general power of attorney, or by proxy,
appointed by an instrument in writing, subscribed by such stockholder, or by his
duly authorized attorney, and delivered to the Secretary, and shall have one
vote for each share of stock standing registered in his name on the stock books
of the Corporation. The Board of Directors may fix a day, not more than forty
days prior to the day of holding any meeting of the stockholders as the day as
of which stockholders entitled to notice of and to vote at such meeting shall be
determined, and only stockholders of record on such day shall be entitled to
notice of or to vote at such meeting.
Section 7. At all times a majority of the directors shall be citizens and
residents of the United States and not less than three thereof shall be
residents of New York. The directors need not be stockholders of the
Corporation. Each director shall be at least twenty-one years of age.
If any vacancies shall occur in the Board of Directors by death or resignation
or removal or otherwise, the remaining number of the Board at a meeting called
for that purpose on such notice as may be provided for in the By-Laws, or at any
regular meeting, shall elect a director or directors to fill the vacancy or
vacancies occasioned and each director so elected shall hold office until the
next annual meeting of stockholders. Notice of any election of a director or
directors under the provisions of this Section 7 shall be given to the
Superintendent of Insurance of the State of New York in the manner and to the
extent required by law.
A director may be removed by the majority vote of the stockholders at any
meeting of stockholders. If a request is received from the Superintendent of
Insurance of the State
3
<PAGE>
of New York for the removal of a director, the President or Secretary shall
immediately call a Special Meeting of directors and such director may be removed
by the vote of a majority of the remaining directors present at such Special
Meeting.
Section 8. The annual meeting of the Board of Directors shall be the first
meeting following its election and shall be held, without notice, immediately
after the adjournment of the annual stockholders' meeting, or within ten days
thereafter upon one day's notice in the manner provided by the By-Laws for
calling special meetings of the Board. At such annual meeting, the directors
shall elect a President from their own number, and also shall elect from their
own number or otherwise, at their discretion, such Vice Presidents and other
officers as may seem advisable to them for the conduct of the Corporation's
business, including a Secretary and a Treasurer, who shall hold their offices
from the time of their election until the next succeeding annual meeting and
until their successors are elected and qualified. Any two or more offices maybe
held by the same person, except that the duties of President and Secretary shall
not be performed by the same person. In the event of the death, resignation, or
removal of any elected officer, the Board of Directors may fill the vacancy. The
Board of Directors shall have the power to delegate powers and duties to persons
and to committees to be appointed by it. The Board of Directors shall have power
to make and shall adopt such By-Laws as may be necessary for the proper
operation of the Corporation.
Section 9. The duration of the corporate existence of this Corporation
shall be perpetual.
Section 10. The amount of the capital of this Corporation shall be
$2,000,000 and shall consist of 1,000,000 shares of a par value of $2.00 per
share.
Section 11. No stockholder of this Corporation shall have a preemptive
right because of his stockholdings to have first or at any time offered to him
any part of any of the presently authorized stock of this Corporation hereafter
optioned, issued or sold, or any part of any securities of this Corporation
presently authorized, whether or not issued, and all securities of this
Corporation which may hereafter be authorized may at any time be issued,
optioned, and contracted for sale or subscription and/or sold and disposed of by
direction of the Board of Directors of the Corporation to such person or persons
and upon such terms and conditions as may to such Board of Directors seem proper
and advisable, without first offering said stock or securities or any part
thereof to existing stockholders.
4
<PAGE>
Exhibit 6(b)
BY-LAWS
OF
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(as amended February 28, 1995)
ARTICLE I
---------
Section 1 - Stockholders' Meeting
- ---------------------------------
All meetings of the stockholders shall be held at the office of the
Company in Johnson City, New York, (as amended March 18, 1991) or at such other
place in the State of New York as may from time to time be designated by the
Board of Directors.
The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite to and shall constitute a quorum at all meetings of the stockholders
for transaction of business except as otherwise provided by law. If, however,
such majority shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than an announcement of the meeting, until the requisite amount of voting
stock shall be present. At such adjourned meeting at which the requisite amount
of voting stock shall be represented any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 2 - Voting
- ------------------
At all stockholders' meetings, stockholders may vote in person, by
proxy, or by general power of attorney produced at the meeting. No proxy shall
be valid which shall
1
<PAGE>
have been granted more than thirty-five days before the meeting which shall be
named therein, and such proxy shall not be valid after the final adjournment of
such meeting.
Section 3 - Notice of Meeting of Stockholders
- ---------------------------------------------
Proper written notice of a meeting of stockholders shall be mailed to
each stockholder at his address as it appears on the stock book of the
corporation or to the address he has designated in a written request filed with
the Secretary. Such notice shall be mailed to each stockholder not less than ten
days nor more than forty days prior to the meeting.
Section 4 - Time of Meeting
- ---------------------------
The annual stockholders' meeting shall be held on the first Monday in
May of each year at eleven o'clock A.M., or at such other hour as may from time
to time be designated by the Board of Directors.
Section 5 - Special Meeting
- ---------------------------
Special stockholders' meetings shall be held on the request of the
President or Chairman of the Board or on demand in writing by stockholders of
record owning a majority of the outstanding stock of the Company. Notice of
special stockholders' meetings shall be mailed to each stockholder not less than
three days prior to the meeting.
Section 6 - Order of Business
- -----------------------------
At the annual stockholders' meeting the order of business shall be as
follows:
1st. Roll call.
2nd. Proof of notice of meeting or waiver thereof.
3rd. Approval of minutes of preceding meeting.
2
<PAGE>
4th. Reports of officers and committees.
5th. Election of directors.
6th. Any other business.
The order of business may be change by vote of a majority of
stockholders present.
Section 7 - Action Without a Meeting
- ------------------------------------
Except as otherwise provided in the Certificate of Incorporation or by
law any action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting, prior notice or a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of all the outstanding shares entitled to vote thereon.
ARTICLE II
----------
Section 1 - Board of Directors
- ------------------------------
The property and business of the Company shall be managed by its Board
of Directors. The number of directors of the Company shall be not less than
thirteen, nor more than nineteen. Each director shall hold office from
appointment or election until the next annual meeting of stockholders and until
his successor shall have been elected and qualified. If any vacancies shall
occur in the Board of Directors by death or resignation or removal or otherwise,
such vacancies shall be filled by majority of the remaining Directors.
3
<PAGE>
The number of directors may be increased or decreased by action of the
Board of Directors, subject to the following limitations; (1) such increase or
decrease in number of directors shall require the vote of a majority of the
entire Board; (2) no decrease shall shorten the term of any incumbent director;
and (3) in no event shall the number of directors be less than thirteen.
Section 2 - Meetings of the Board of Directors
- ----------------------------------------------
The Board of Directors shall hold regular meetings quarterly at the
principal office of the Company in Johnson City, New York, (As amended March 18,
1991) or at such other place as may from time to time be designated by the Board
of Directors. The directors shall meet for the purpose of organization
immediately, or as soon as may be convenient, after the annual meeting of
stockholders, and the other regular meetings of the Board of Directors shall be
held at such times as the Board of Directors may by resolution designate. The
Secretary shall serve by mail a written notice of such regular meeting addressed
to the members of the Board of Directors not less than five days before the date
set for such meeting, unless the Board of Directors by resolution shall
otherwise direct. (As amended October 9, 1974).
Special meetings of the Board of Directors may be called by the
President on one day's notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of five members of the
Board.
4
<PAGE>
At any meeting of the Board of Directors, a majority of the Board
shall constitute a quorum for the transaction of business. Any meeting at which
a quorum shall not be in attendance may be adjourned to a time fixed by those
present.
Section 3 - Executive Committee
- -------------------------------
The Executive Committee shall consist of five members of the Board of
Directors, at least two of whom shall not be officers or salaried employees of
the Company. They shall be appointed and approved by a resolution adopted by a
majority of the entire Board at a meeting and shall hold office at the pleasure
of the Board. One member of the Committee shall be designated as Chairman. The
Executive Committee shall be vested with the powers of the Board of Directors
during the intervals when the Board is not in session, subject to such
limitations as exist by law. In the absence of the Chairman, one of the members
present shall be designated to preside at the meeting. The Committee shall meet
upon call of the Chairman or any three members thereof. A majority of the
members of the Committee, including at least one member who is not an officer or
salaried employee of the Company shall constitute a quorum, and the affirmative
vote of a majority of those present shall be necessary for any action taken by
the Committee.
The Executive Committee shall keep a record of its proceedings and
shall adopt its own rules of procedure. The Committee shall submit copies of
its minutes to the Board of Directors at its next regular meeting.
Section 4 - Finance Committee
- -----------------------------
The Finance Committee shall consist of five members of the Board of
Directors, at least two of whom shall not be officers or salaried employees of
the Company. They
5
<PAGE>
shall be appointed and approved by a resolution adopted by a majority of the
entire Board at a meeting of the Board and shall hold office at the pleasure of
the Board. One member of the Committee shall be designated as Chairman. The
Finance Committee shall be charged with the duty of supervising the investments
and loans of the Company as prescribed by law. Every purchase, sale, exchange,
or conversion of real estate, bonds, stocks, or like securities and every
collateral or mortgage loan or other investment, except policy loans, must be
authorized or approved by the Finance Committee. This Committee shall report all
purchases, sales, loans, investments, and other transactions to the Executive
Committee when the Board of Directors is not in session. The Committee shall
meet upon call of the chairman or any three members thereof. A majority of the
members of the Committee, including at least one member who is not an officer or
salaried employee of the Company shall constitute a quorum, and the affirmative
vote of a majority of those present shall be necessary for any action taken by
the Committee.
The Finance Committee shall keep a record of its proceedings and shall
adopt its own rules or procedure. The Committee shall submit copies of its
minutes to the Board of Directors at its next regular meeting.
Section 5 - Audit Committee
- ---------------------------
The Audit Committee shall consist of three members of the Board of
Directors, all of whom shall not be officers or employees of the Company or of
any entity controlling, controlled by, or under common control with the Company
and who are not beneficial owners of a controlling interest in the voting stock
of the Company or any such entity. They shall be appointed and approved by a
resolution adopted by a majority of the entire
6
<PAGE>
Board at a meeting of the Board and shall hold office at the pleasure of the
Board. One member of the Committee shall be designated as Chairman. The Audit
Committee shall have the responsibility for recommending the selection of
independent certified public accountants, reviewing the Company's financial
condition, the scope and results of the independent audit and any internal
audit, nominating candidates for director for election by shareholders, and
evaluating the performance of the principal officer of the Company and
recommending to the Board of Directors the selection and compensation of such
principal officer. The Committee shall report its recommendations and findings
to the Board of Directors. The Committee shall meet upon call of the Chairman or
any two members thereof. A majority of the Committee shall constitute a quorum,
and the affirmative vote of a majority of those present shall be necessary for
any action taken by the Committee.
The Audit Committee shall keep a record of its proceedings and shall
adopt its own rules or procedure. The Committee shall submit copies of its
minutes to the Board of Directors at its next regular meeting.
Section 6 - Action Without a Meeting
- ------------------------------------
Except as otherwise provided in the Certificate of Incorporation or by
law, any action required or permitted to be taken at any regular or special
meeting of the Board of Directors may be taken without a meeting, prior notice
or a vote, if a consent in writing, setting forth the action so taken, shall be
signed by all the members of the Board of Directors.
7
<PAGE>
ARTICLE III
-----------
Section 1 - President
- ---------------------
Subject to the control of the Board of Directors and the limitations
of these By-Laws, the President shall have plenary power over all departments,
officers, assistants and employees of the Company; and such duties as are not
specifically provided for in these By-Laws shall be performed by them as he
shall direct. The President shall preside at all meetings of the Board of
Directors.
Section 2 - Vice President
- --------------------------
The Vice-President, one of whom may be designated as Executive Vice-
President shall perform such duties as are prescribed by the Board of Directors
or the President. The Executive Vice-President, and in his absence, a duly
designated Vice-President, shall perform the duties of the President on the
latter's absence.
Section 3 - Secretary
- ---------------------
The Secretary shall attend all of the meetings of the stockholders and
the Board of Directors, and act as clerk thereof and shall record all votes and
the minutes of all proceedings in a book kept for that purpose. He shall see
that proper notice in accordance with the provisions of the Charter and these
By-Laws or as required by statute is given of all regular and special meetings
of the stockholders and of special meetings of the Board of Directors. The
Secretary shall have custody and general supervision of the records and
documents of the Company and shall perform such other duties as may be required
by the Board of Directors or the President.
8
<PAGE>
Section 4 - Treasurer
- ---------------------
The Treasurer shall generally advise the Finance Committee on the
investment of corporate funds. He shall supervise the custody of the corporate
funds and securities and the deposit of all corporate moneys as authorized or
approved by the Board of Directors, the authorization and proper receipting and
vouchering of all expenditures, and the maintenance of an accurate account of
all moneys received and expended on account of the Company.
Section 5 - Assistant Secretary
- -------------------------------
The Board of Directors may elect or appoint one or more Assistant
Secretaries. In the absence of the Secretary, an Assistant Secretary designated
by the Board of Directors shall have the power to perform his duties. Assistant
Secretaries shall have such other duties as may be delegated to them by the
Board of Directors or the President.
Section 6 - Assistant Treasurers
- --------------------------------
The Board of Directors may elect or appoint one or more Assistant
Treasurers who, in the absence of the Treasurer, shall perform his duties.
Assistant Treasurers shall have such other powers and perform such other duties
as may be delegated to them by the Board of Directors or the President.
9
<PAGE>
ARTICLE IV
----------
Section 1 - Deposits and Withdrawals
- ------------------------------------
All moneys belonging to the Company shall be deposited and withdrawn
in such locations and in such manner and form as may be fixed and specified from
time to time by resolution of the Board of Directors.
ARTICLE V
---------
Section 1 - Execution of Policies, Bonds and Other Instruments
- --------------------------------------------------------------
Any and all policies shall be valid when signed by the Chairman of the
Board of Directors or the President and Secretary and countersigned by an
Authorized Agent of the Company in any jurisdiction where such countersignature
is required.
Any and all bonds, recognizances, contracts of indemnity and writing
obligatory in the nature of a bond, recognizance or conditional undertaking,
shall be valid when signed by the President or by a Vice-President and duly
attested by a Secretary or the authorized agent of the Company, and when sealed
with the seal of the Company where required by law.
All conveyances of real estate, satisfaction pieces for mortgages paid
off, and all papers and accounts other than policies, bonds, recognizances,
contracts of indemnity and writing obligatory in the nature of a bond,
recognizances or conditional undertaking, to which the seal of the Company is
required to be affixed, shall be signed by the President or by a Vice-President
and attested by the Secretary or by an Assistant Secretary.
10
<PAGE>
ARTICLE VI
----------
Section 1 - Appointment of Auditor
- ----------------------------------
The Board of Directors shall, upon the written request of the holders
or a majority of the stock of the corporation or may, upon their own motion,
appoint an auditor or certified public accountant to audit the books of the
corporation and to examine the assets and securities of the corporation at such
time or times as the Board may direct. The report of the audit shall be made to
the Board of Directors and to such other parties as they may direct.
ARTICLE VII
-----------
Section 1 - Stock Certificates and Stock Records
- ------------------------------------------------
Certificates for shares of the capital stock of the Company shall be
in such form, not inconsistent with the Charter of the Company and the laws of
the State of New York, as shall be prepared or be approved by the Board of
Directors. The certificates shall be signed by the President or a Vice-
President, and also by the Secretary or an Assistant Secretary, and sealed with
the corporate seal.
The certificates shall be consecutively numbered, and the name of the
person owning the shares represented thereby, together with the number of such
shares, and the date of issue, shall be entered on the Company's books.
No certificate hereafter issued shall be valid unless it is signed by
the President or a Vice President, and by the Secretary or an Assistant
Secretary.
11
<PAGE>
All certificates surrendered to the Company shall be cancelled, and no
new certificates shall be issued until the former certificate for the same
number of shares shall have been surrendered and cancelled.
Section 2 - Transfer of Shares
- ------------------------------
Shares of the capital stock of the Company shall be transferred only
on the books of the Company by the holder thereof in person, or by his attorney,
upon surrender or cancellation of certificates for a like number of shares.
Section 3 - Regulations
- -----------------------
In accordance with the requirements of law and the Company's Charter
and By-Laws, the Board of Directors shall have the power and authority to make
all such rules and regulations as they may deem expedient concerning issues,
transfer, and registration or certificates for shares of the capital stock of
the Company.
Section 4 - Replacement of Stock Certificate
- --------------------------------------------
Any person claiming a certificate of stock to have been lost, stolen
or destroyed, and desiring a new certificate in lieu thereof, shall make an
affidavit of such fact, reciting the circumstances attending such loss or
destruction, and shall give the Company a bond of indemnity, with a surety
company as surety thereon satisfactory to the President or a Vice President of
the Company, in at least double the then market value of such stock (excepting
the Board of Directors may, by a special resolution, authorize the acceptance of
a bond of different amount, or a bond with personal surety thereon) whereupon in
the discretion of the President or a Vice President a new certificate may be
issued of the same
12
<PAGE>
tenor and for the same number of shares as the one alleged to have been lost,
stolen or destroyed.
Section 5 - Determination of Stockholders of Record
- ---------------------------------------------------
The Board of Directors shall fix in advance a date, not more than
forty days prior to the date of a meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of stock, and in such case
only such stockholders as shall be stockholders or records on the date so fixed
shall be entitled to such notice of and to vote at such meeting, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Company after any such record date fixed as aforesaid.
ARTICLE VIII
------------
Section 1 - Indemnification of Directors, Officers and Employees
- ----------------------------------------------------------------
So far as permitted by the laws of the State of New York, any person
made a party to any action, suit, or proceeding by reason of the fact that he,
his testator or intestate, is or was a director, officer, or employee of the
Company, or of any corporation which he served as such at the request of the
Company, shall be indemnified by the Company
13
<PAGE>
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense of such action, suit,
or proceeding, or in connection with any appeal therein, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such officer, director or employee is liable for negligence or misconduct in the
performance of his duties. If said action, suit, or proceeding shall be settled
with the approval of the Board of Directors and the Court, such director,
officer or employee, upon application for payment of such indemnity, shall be
entitled to such indemnity in such amount that the Court shall approve as
reasonable; provided, however, that in the judgment of the Board of Directors,
said director, officer, or employee had not in any substantial way been derelict
in the performance of his duties as charged in such action, suit, or proceeding.
The foregoing right to indemnification shall be in addition to other rights to
which any such director, officer, or employee may be entitled as a matter of
law.
ARTICLE IX
----------
Section 1 - Code of Ethics
- --------------------------
No director, officer, or responsible employee shall have a substantial
or pecuniary interest, or hold an office or position in any other business
entity which might result in a conflict of interest between such entity, the
individual and this company without full and timely disclosure thereof to the
Board of Directors.
No director, officer, or responsible employee shall receive, in
addition to his fixed salary or compensation, any money or valuable thing,
either directly or indirectly or
14
<PAGE>
through any substantial interest in any other business entity, for negotiating,
procuring, recommending, or aiding in any purchase or sale of property, or loan,
underwriting acting, claim or settlement of any nature made by the Company; nor
shall he be pecuniarily interested, either as principal, co-principal, agent or
beneficiary, either directly or indirectly or through any substantial interest
in any other business entity in any such purchase, sale or loan.
No director shall be counted present in order to constitute a quorum
nor shall he participate in any decision of the Board or Committee thereof at
such meeting on any matter in which he may have a substantial or pecuniary
interest. Any such interest must be recorded in substance in the minutes of
such meetings.
ARTICLE X
---------
Section 1 - Amendments
- ----------------------
These By-Laws may be amended in whole or in part by a majority vote of
the whole Board of Directors at any regular or special meeting of the Board of
Directors, provided that notice of such proposed amendment or amendments is
given by delivering, mailing, or telegraphing the notice to each director one
week in advance of the meeting.
15
<PAGE>
ARTICLE XI
----------
Section 1 - Waivers
- -------------------
Whenever any notice is required to be given by any of these By-Laws,
such notice may be waived in writing by all of the persons entitled to such
notice, anything to the contrary herein notwithstanding.
ARTICLE XII
-----------
Section 1 - Dividends
- ---------------------
Without the prior written approval of the Superintendent of Insurance
of the State of New York, the Company will pay no dividend to Shareholders if,
immediately after charging such dividend, the total capital and surplus of the
Company would be less than $3,000,000.
16
<PAGE>
EXHIBIT 8(a)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into as of the ___day of April, 1996, between First
Providian Life and Health Insurance Company ("Insurance Company"), a life
insurance company organized under the laws of the State of New York, and
__________________________________("Fund"), an unincorporated business trust
organized under the laws of _________________________________.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates net asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the Fund as an
underlying investment medium. Individuals who participate under a group
Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a Contract with
a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of the Fund, as defined by the
Act.
1.8 "Adviser" shall mean and its affiliates.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an agreement
with the Fund for the purpose of making Fund shares available to serve as
the underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE>
1.11 "Separate Account" shall mean First Providian Life and Health Insurance
Company Separate Account C or designated subaccounts thereof, a separate
account established by Insurance Company in accordance with the laws of
the State of New York.
1.12 "Software Program" shall mean the software program used by the Fund for
providing Fund and account balance information including net asset value
per share. Such Program may include the Lion System. In situations where
the Lion System or any other Software Program used by the Fund is not
available, such information may be provided by telephone. The Lion System
shall be provided to Insurance Company at no charge.
1.13 Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates which invest in the Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it
has legally and validly established the Separate Account pursuant to the
laws of the State of New York for the purpose of offering to the public
certain individual variable annuity contracts; (c) it has registered the
Separate Account as a unit investment trust under the Act to serve as the
segregated investment account for the Contracts; and (d) each Separate
Account is eligible to invest in shares of the Fund without such investment
disqualifying the Fund as an investment medium for insurance company
separate accounts supporting variable annuity contracts or variable life
insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state
laws; and (c) the sale of the Contracts shall comply in all material
respects with state insurance law requirements. Insurance Company agrees to
inform the Fund promptly of any investment restrictions imposed by state
insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be credited to
or charged against such Separate Account without regard to other income,
gains, or losses from assets allocated to any other accounts of Insurance
Company. Insurance Company represents and warrants that the assets of the
Separate Account are and will be kept
<PAGE>
separate from Insurance Company's General
Account and any other separate accounts Insurance Company may have, and
will not be charged with liabilities from any business that Insurance
Company may conduct or the liabilities of any companies affiliated with
Insurance Company.
2.4 Fund represents that the Fund is registered with the Commission under the
Act as an open-end, management investment company and possesses, and shall
maintain, all legal and regulatory licenses, approvals, consents and/or
exemptions required for Fund to operate and offer its shares as an
underlying investment medium for Participating Companies. The Fund has
established eight series of shares (each, a "Series") and may in the future
establish other series of shares.
2.5 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 Insurance 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.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be, treated as life insurance policies or
annuity contracts, whichever is appropriate, 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 Adviser immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future. Insurance
Company agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of the Code,
will identify such Contract as a modified endowment contract (or
policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Series' shares available to other
Participating Companies and contractholders.
2.9 Fund represents and warrants that any of its trustees, officers,
employees, investment advisers, and other individuals/entities who deal
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 that required by Rule
<PAGE>
17g-1 under the Act. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal 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 in an amount not less than the coverage required to be maintained
by the Fund. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Adviser shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series available for purchase at the
then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell the shares of
any Series to any person, or suspend or terminate the offering of the
shares of any Series 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 and in the best interests of the
shareholders of such Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of those
Participating Companies and their affiliates. No shares of any Series will
be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Series available on a per-
share and Series basis to Insurance Company by 6:00 p.m. Eastern Time on
each Business Day by facsimile or other electronic means as agreed upon by
both parties. Any material errors in the calculation of net asset value,
dividend and capital gain information shall be reported immediately upon
discovery to Insurance Company. Non-material errors will be corrected in
the next Business Day's net asset value per share for the Series in
question.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account unit
values for the day. Using this
<PAGE>
unit value, Insurance Company will process the day's Separate Account
transactions received by it by the close of trading on the-floor of the New
York Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net
dollar amount of Series shares which will be purchased or redeemed at that
day's closing net asset value per share for such Series. The net purchase
or redemption orders will be transmitted to the Fund by Insurance Company
by 11:00 a.m. Eastern Time on the Business Day next following Insurance
Company's receipt of that information. Subject to Sections 3.6 and 3.8, all
purchase and redemption orders for Insurance Company's General Accounts
shall be effected at the net asset value per share of the relevant Series
next calculated after receipt of the order by the Fund or its Transfer
Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of shares of each Series
for the Separate Account. Fund will execute orders for any Series at the
applicable net asset value per share determined as of the close of trading
on the day of receipt of such orders by Insurance Company acting as agent
("effective trade date"), provided that the Fund receives notice of such
orders by 11:00 a.m. Eastern Time on the next following Business Day and,
if such orders request the purchase of Series shares, the conditions
specified in Section 3.8, as applicable, are satisfied. A redemption or
purchase request for any Series that does not satisfy the conditions
specified above and in Section 3.8, as applicable, will be effected at the
net asset value computed for such Series on the Business Day immediately
preceding the next following Business Day upon which such conditions have
been satisfied.
3.7 Insurance Company will make its best efforts to notify Fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
initiate such wire by 2:30 p.m. Eastern Time on the Business Day the Fund
receives the notice of the order pursuant to Section 3.5. Fund will execute
such orders at the applicable net asset value per share determined as of
the close of trading on the effective trade date if Fund receives payment
in Federal Funds by 12:00 midnight Eastern Time on the Business Day the
Fund receives the notice of the order pursuant to Section 3.5. With respect
to purchases of Money Market Portfolio shares, if applicable, if payment in
Federal Funds for any purchase is not received or is received by the Fund
after 12:00 noon Eastern Time on such Business Day, Insurance Company shall
promptly, upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in connection
with any advances to, or borrowings or overdrafts by, the Fund, or any
similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. Fund
will use its best
<PAGE>
efforts to transmit to Insurance Company the proceeds of
all redemption orders placed by Insurance Company, by the close of business
on the next Business Day following the effective trade date by wire
transfer. Should Fund need to extend the settlement on a trade, it will
immediately contact Insurance Company to discuss such extension. The above
notwithstanding, if Insurance Company's order requests the redemption of a
single Series' shares valued at or greater than $1 million dollars and such
redemption would require the Series to dispose of portfolio securities or
otherwise incur additional costs, the Fund will wire such amount to
Insurance Company within seven calendar days of the order and will
immediately notify Insurance Company of such delay.
3.9 Fund has the obligation to ensure that Series shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm by facsimile or other agreed upon electronic means each
purchase or redemption order made by Insurance Company. Transfer of
Series shares will be by book entry only. No share certificates will be
issued to Insurance Company. Insurance Company will record shares ordered
from Fund in an appropriate title for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate, by facsimile or
other agreed upon electronic means, to Insurance Company the amount of
dividend and capital gain, if any, per share of each Series. All
dividends and capital gains of any Series shall be automatically
reinvested in additional shares of the relevant Series at the applicable
net asset value per share of such Series on the payable date. - Fund
shall, on the day after the payable date or, if not a Business Day, on the
first Business Day thereafter, notify Insurance Company of the number of
shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th)
Business Day of the following month and at year-end shall provide an annual
statement providing year-end information.
<PAGE>
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to
each Contractholder and Participant.
4.3 Fund will provide to Insurance Company at least one complete copy of all
registration statement, Prospectuses, 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 Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, 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 Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series, including
but not limited to management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the relevant Series'
daily net asset value per share so as to accumulate to an annual charge at
the rate set forth in the Fund's Prospectus. Excluded from the expense
limitation described herein shall be brokerage commissions and transaction
fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or marketing
materials for prospective Insurance Company Contractholders and
Participants as Adviser and Insurance Company shall agree from time to
time.
<PAGE>
b. Distribution expenses of any Fund materials or marketing materials for
prospective Insurance Company Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing materials for
Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December 23, 1987
of the Securities and Exchange Commission under Section 6(c) of the Act
and, in particular, has reviewed the conditions to the relief set forth in
the related Notice. As set forth therein, Insurance Company agrees to
report any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the Board in carrying
out its responsibilities under such application. Insurance Company agrees
to carry out such responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that Insurance
Company is responsible for causing or creating said conflict, Insurance
Company shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but
shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Series and reinvesting such assets in a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote of all affected Contractholders and, as
appropriate, segregating the assets of any Contractholders that vote
in favor of such segregation, or offering to the affected
Contractholders the option of making such a change; and/or
b. Establishing a new registered management investment company.
<PAGE>
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote
by all Contractholders having an interest in the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund and no charge or penalty will be imposed
as a result of such withdrawal.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to bear the expense of establishing a new funding medium
for any Contract. Insurance Company shall not be required by this Article
to establish a new funding medium for any Contract if an offer to do so has
been declined by vote of a majority of the Contractholders materially
adversely affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act or
failure to act by Insurance Company pursuant to this Article VI shall
relieve Insurance Company of its obligations under, or otherwise affect the
operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, reports to shareholders and other
communications to shareholders in such quantity as Insurance Company shall
reasonably require for distributing to Contractholders or Participants; and
Fund shall provide Insurance Company with five (5) Business Days notice of
the existence of such materials prior to their receipt by Insurance
Company.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
(b) vote the Series shares in accordance with instructions received from
Contractholders or Participants; and
(c) vote Series shares for which no instructions have been received in the
same proportion as Series shares for which instructions have been
received.
<PAGE>
Insurance Company agrees at all times to vote its General Account shares in
the same proportion as Series shares for which instructions have been
received from Contractholders or Participants. Insurance Company further
agrees to be responsible for assuring that voting Fund shares for the
Separate Account is conducted in a manner consistent with the Fund's
current exemptive relief.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Adviser, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add to or delete the Fund from
the current investment media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance Company
with the following documents, in quantities as Insurance Company may
reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which shall
have the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company
shall make reasonable efforts to market the Contracts and shall comply with
all applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to the
Fund, each piece of sales literature or other promotional material in which
the Fund, its investment adviser or the administrator is named, at least
six (6) Business Days prior to its use. No such material shall be used
unless the Fund approves such material. Such approval (if given) must be
in writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. The Fund shall use all
reasonable efforts to respond within ten days of receipt.
<PAGE>
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
or any Series in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
Prospectus, as 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.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the Fund's sales literature or other promotional material in
which Insurance Company or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Insurance Company approves such material. Such approval (if given) must be
in writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Insurance Company shall use
all reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Series shares, give any
information or make any representations on behalf of Insurance Company or
concerning Insurance Company, the Separate Account, or the Contracts other
than the information or representations contained in a registration
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the Separate
Account which are in the public domain or approved by Insurance Company for
distribution to Contractholders or Participants, or in sales literature or
other promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, 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 (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, or 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, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. rules,
the Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
<PAGE>
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, Adviser,
any sub-investment adviser of a Series, and their affiliates, and each of
their directors, trustees, officers, employees, agents and each person, if
any, who controls or is associated with any of the foregoing entities or
persons within the meaning of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of Section 9.1), against any and all losses, claims,
damages or liabilities joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim
asserted) for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) (i) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in information furnished by Insurance Company for use in the
registration statement or Prospectus or sales literature or advertisements
of the Fund or with respect to the Separate Account or Contracts, 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; (ii) arise out of or as a result of
conduct, statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisements of the Fund) of Insurance Company or its agents, with
respect to the sale and distribution of Contracts for which Series' shares
are an underlying investment; (iii) arise out of the wrongful conduct of
Insurance Company or persons under its control with respect to the sale or
distribution of the Contracts or Series' shares; (iv) arise out of
Insurance Company's incorrect calculation and/or untimely reporting of net
purchase or redemption orders; or (v) arise out of any breach by Insurance
Company of a material term of this Agreement or as a result of any failure
by Insurance Company to provide the services and furnish the materials or
to make any payments provided for in this Agreement. Insurance Company will
reimburse any Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that with respect to clauses (i) and (ii) above Insurance Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or omission or alleged omission made in such registration
statement, prospectus, sales literature, or advertisement in conformity
with written information furnished to Insurance Company by the Fund
specifically for use therein. This indemnity agreement will be in addition
to any liability which Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company and each
of its directors, officers, employees, agents and each person, if any, who
controls Insurance Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Insurance Company or any
such director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) (1) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration
<PAGE>
statement or Prospectus or sales literature or advertisements of the Fund;
(2) arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or advertisements
of the Fund any material fact required to be stated therein or necessary to
make the statements therein not misleading; or (3) 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 or advertisements with respect to the Separate Account or the
Contracts and such statements were based on information provided to
Insurance Company by the Fund; and the Fund will reimburse any legal or
other expenses reasonably incurred by Insurance Company or any such
director, officer, employee, agent or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Fund will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission or alleged omission
made in such Registration Statement, Prospectus, sales literature or
advertisements in conformity with written information furnished to the Fund
by Insurance Company specifically for use therein. This indemnity agreement
will be in addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance Company
may incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate of a Series; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate; provided that the Fund shall have no obligation to
indemnify and hold harmless Insurance Company if the incorrect calculation
or incorrect or untimely reporting was the result of incorrect information
furnished by Insurance company or information furnished untimely by
Insurance Company or otherwise as a result of or relating to a breach of
this Agreement by Insurance Company.
9.4 Promptly after receipt by an indemnified party under this Article of notice
of the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. The
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Article IX, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and
<PAGE>
such indemnifying party is damaged solely as a result of the failure to
give such notice. 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, and to the
extent that the indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this Article, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX.
9.5 Insurance Company shall indemnify and hold the Fund, Adviser and any sub-
investment adviser of a Series harmless against any tax liability incurred
by the Fund under Section 851 of the Code arising from purchases or
redemptions by Insurance Company's General Accounts or the account of its
affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty as to one or more Series at
the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;
<PAGE>
b. At the option of Insurance Company, if shares of any Series are not
reasonably available to meet the requirements of the Contracts as
determined by Insurance Company. Prompt notice of election to terminate
shall be furnished by Insurance Company, said termination to be effective
ten days after receipt of notice unless the Fund makes available a
sufficient number of shares to meet the requirements of the Contracts
within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund by the Commission, National Association of
Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in Insurance
Company's reasonable judgment, materially impair the Fund's ability to meet
and perform the Fund's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by Insurance Company with said
termination to be effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal proceedings
against Insurance Company by the Commission, National Association of
Securities Dealers or any insurance regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the Fund's
reasonable judgment, materially impair Insurance Company's ability to meet
and perform Insurance Company's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by the Fund with said
termination to be effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its sole
judgment reasonably exercised in good faith, that Insurance Company has
suffered a material adverse change in its business or financial condition
or is the subject of material adverse publicity and such material adverse
change or material adverse publicity is likely to have a material adverse
impact upon the business and operation of the Fund or Adviser, the Fund
shall notify Insurance Company in writing of such determination and its
intent to terminate this Agreement, and after considering the actions taken
by Insurance Company and any other changes in circumstances since the
giving of such notice, such determination of the Fund shall continue to
apply on the sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between the
Fund and Adviser or its successors unless Insurance Company
specifically approves the
<PAGE>
selection of a new Fund investment adviser. The Fund shall promptly furnish
notice of such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use
of such shares as the underlying investment medium of Contracts issued
or to be issued by Insurance Company. Termination shall be effective
immediately upon such occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
i. At the option of the Fund if the Contracts cease to qualify as annuity
contracts or life insurance policies, as applicable, under the Code,
or if the Fund reasonably believes that the Contracts may fail to so
qualify;
j. At the option of either party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of the Fund, if the Contracts are not registered, issued
or sold in accordance with applicable federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, the Fund and Adviser may, at the option of the Fund, continue to
make available additional Series shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Adviser so elects to make additional
Series shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in the Series, redeem investments in the Fund
<PAGE>
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. In the event of a termination of this
Agreement pursuant to Section 10.2 hereof, the Fund and Adviser, as
promptly as is practicable under the circumstances, shall notify Insurance
Company whether Adviser and the Fund will continue to make Series shares
available after such termination. If Series shares continue to be made
available after such termination, the provisions of this Agreement shall
remain in effect and thereafter either the Fund or Insurance Company may
terminate the Agreement, as so continued pursuant to this Section 10.3,
upon prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by the
Fund, need not be for more than six months.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
<PAGE>
Insurance Company: First Providian Life and Health
Insurance Company
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
Attn: Bill Tomlin
with copies to: Marketing Director
First Providian Life and Health Insurance Company
520 Columbia Drive
Johnson City, New York 13790
Fund: ________________________________
_______________________________________________________
______________
________________________
_____________________________
with copies to: Adviser
_______________
________________________
__________________________________________
Notice shall be deemed to be given on the date of receipt by the addresses
as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any Trustee, officer or
shareholder of the Fund individually.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of
laws.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
By:_________________________________
Its: _______________________________
Attest: _____________________________
By: _________________________________
Attest: _________________________________
<PAGE>
SCHEDULE 1
Name of Series:
- ---------------
<PAGE>
EXHIBIT 9(a)
[LOGO OF PROVIDIAN]
Providian Corporation
400 West Market Street
Post Office Box 32830
Louisville, Kentucky 40232
502-560-2000
July 15, 1996
First Providian Life and Health Insurance Company
Administrative Offices
520 Columbia Drive
Johnson City, New York 13790
RE: First Providian Life and Health Insurance Company Separate Account C--
Opinion and Consent
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of
Pre-Effective Amendment No. 1 (the "Amendment") to the Registration Statement on
Form N-4, File No. 33-94210 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), of First Providian Life and Health
Insurance Company Separate Account C ("Separate Account C"). Separate Account C
receives and invests premiums allocated to it under a flexible premium multi-
funded annuity contract (the "Annuity Contract"). The Annuity Contract is
offered in the manner described in the prospectus contained in the Registration
Statement (the "Prospectus").
In my capacity as legal adviser to First Providian Life and Health
Insurance Company, I hereby confirm the establishment of Separate Account C
pursuant to a resolution adopted by the Board of Directors of First Providian
Life and Health Insurance Company for a separate account for assets applicable
to the Annuity Contract, pursuant to the provisions of Section 46 of the New
York Insurance Statutes. In addition, I have made such examination of the law
in addition to consultation with outside counsel and have examined such
corporate records and such other documents as I consider appropriate as a basis
for the opinion hereinafter expressed. On the basis of such examination, it is
my professional opinion that:
1. First Providian Life and Health Insurance Company is a corporation duly
organized and validly existing under the laws of the State of New York.
2. Separate Account C is an account established and maintained by First
Providian Life and Health Insurance Company pursuant to the laws of the
State of New York, under which income, capital gains and capital losses
incurred on the assets of Separate Account C are credited to or charged
against the assets of Separate Account C, without regard to the income,
capital gains or capital losses arising out of any other business which
First Providian Life and Health Insurance Company may conduct.
<PAGE>
3. Assets allocated to Separate Account C will be owned by First Providian
Life and Health Insurance Company. The assets in Separate Account C
attributable to the Annuity Contract generally are not chargeable with
liabilities arising out of any other business which First Providian Life
and Health Insurance Company may conduct. The assets of Separate Account C
are available to cover the general liabilities of First Providian Life and
Health Insurance Company only to the extent that the assets of Separate
Account C exceed the liabilities arising under the Annuity Contracts.
4. The Annuity Contracts have been duly authorized by First Providian Life and
Health Insurance Company and, when sold in jurisdictions authorizing such
sales, in accordance with the Registration Statement, will constitute
validly issued and binding obligations of First Providian Life and Health
Insurance Company in accordance with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any
deductions, charges or assessments imposed by First Providian Life and
Health Insurance Company other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment
and to the reference to my name under the heading "Legal Matters" in the
Prospectus.
Very truly yours,
/s/ Kimberly A. Scouller
- -------------------------
Kimberly A. Scouller
Assistant General Counsel
<PAGE>
Exhibit 9(b)
July 16, 1996
First Providian Life and Health
Insurance Company
20 Moores Road
Frazer, Pennsylvania 19355
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Pre-Effective Amendment No. 1 to the
Registration Statement (File No. 33-94210) filed on the date hereof by First
Providian Life and Health Insurance Company and First Providian Life and Health
Insurance Company Separate Account C with the Securities and Exchange Commission
under the Securities Act of 1933.
Very truly yours,
JORDEN BURT BERENSON
& JOHNSON LLP
By:
---------------------
<PAGE>
Exhibit No. (10)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Auditors" and to the
use of our report dated April 23, 1996, with respect to the statutory-basis
financial statements of First Providian Life and Health Insurance Company in
Pre-Effective Amendment No. 1 to the Registration Statement (Form N-4 No.
33-94210) and related Prospectus of First Providian Life and Health Insurance
Company Separate Account C - Marquee.
/s/Ernst & Young LLP
Louisville, Kentucky
July 18, 1996
<PAGE>
Exhibit (13)
PERFORMANCE COMPUTATION
PROVIDIAN MARQUEE SEPARATE ACCOUNT C PERFORMANCE
Hypothetical example for 1 year ending 12/31/95.
1 year fund 1 year hypothetical
return
Fidelity Asset Manager 16.96% 15.32%
Derivation:
(1 + 16.96%) * (1 - 1.40%) = 1.1532
The hypothetical performance is the performance of the underlying fund less
the M + E charges.
