<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
REGISTRATION NO. 33-94204
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.
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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
- ------- PROSPECTUS CAPTION
FORM N-4 ------------------
- --------
<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 Contracts............... CONTRACT FEATURES; 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
Advisor's Edge 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
Offered............................ DISTRIBUTION OF THE
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 ADVISOR'S EDGE 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 Advisor's Edge variable annuity contract (the "Contract"), offered
through First Providian Life and Health Insurance Company (the "Company", "us",
"we" or "our," and formerly, "National Home Life Assurance Company of New
York"), provides a vehicle for investing on a tax-deferred basis in 17
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 17
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 five open-end, diversified investment
companies):
<TABLE>
<CAPTION>
<S> <C>
. DFA SMALL VALUE PORTFOLIO . FEDERATED HIGH INCOME BOND FUND II
. DFA LARGE VALUE PORTFOLIO . FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
. DFA INTERNATIONAL VALUE PORTFOLIO . MONTGOMERY GROWTH PORTFOLIO
. DFA INTERNATIONAL SMALL PORTFOLIO . MONTGOMERY EMERGING MARKETS PORTFOLIO
. DFA SHORT-TERM FIXED PORTFOLIO . WANGER U.S. SMALL CAP ADVISOR
. DFA GLOBAL BOND PORTFOLIO . WANGER INTERNATIONAL SMALL CAP ADVISOR
. FEDERATED AMERICAN LEADERS FUND II . WEISS, PECK & GREER'S CORE LARGE-CAP STOCK FUND
. FEDERATED UTILITY FUND II . WEISS, PECK & GREER'S CORE SMALL-CAP STOCK FUND
. FEDERATED PRIME MONEY FUND II
</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 date,
including a lump sum payment and several Annuity Payment Options. Full or
partial withdrawals of the Contract's Surrender Value may be made 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). 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.
<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
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TABLE OF CONTENTS
Page
----
GLOSSARY.................................................... 4
HIGHLIGHTS.................................................. 7
FEE TABLE................................................... 9
Financial Statements........................................ 12
Performance Measures........................................ 13
Additional Performance Measures............................. 13
Yield and Effective Yield................................... 14
The Company and the Separate Account........................ 14
DFA Investment Dimensions Group Inc......................... 15
The Federated Insurance Series.............................. 15
The Montgomery Funds III.................................... 16
Wanger Advisors Trust....................................... 16
Tomorrow Funds Retirement Trust............................. 16
The Portfolios.............................................. 16
CONTRACT FEATURES........................................... 20
Right to Cancel Period.................................... 20
Contract Application and Purchase Payments................ 20
Purchasing by Wire........................................ 21
Allocation of Purchase Payments........................... 21
Charges and Deductions.................................... 21
Accumulated Value......................................... 23
Exchanges Among the Portfolios............................ 23
Full and Partial Withdrawals.............................. 24
Systematic Withdrawal Option.............................. 24
Dollar Cost Averaging Option.............................. 25
IRS - Required Distributions.............................. 25
Minimum Balance Requirement............................... 26
Designation of an Annuitant's Beneficiary................. 26
Death of Annuitant Prior to Annuity Date.................. 27
Annuity Date.............................................. 27
Lump Sum Payment Option................................... 27
Annuity Payment Options................................... 27
Deferment of Payment...................................... 29
FEDERAL TAX CONSIDERATIONS.................................. 29
GENERAL INFORMATION......................................... 35
3
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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 27), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options," page
27), 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 ").
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 will be evidenced by a certificate
issued to the Contract Owner.
Contract Anniversary - Any anniversary of the Contract Date.
4
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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) DFA Investment Dimensions Group Inc., (ii) Federated
Insurance Series (advised by Federated Advisers), (iii) The Montgomery Funds III
(advised by Montgomery Asset Management, L.P.), (iv) Wanger Advisors Trust
(advised by Wanger Asset Management, L.P.) and (v) Tomorrow Funds Retirement
Trust (advised by Weiss, Peck & Greer, L.L.C.). The Separate Account invests in
the Portfolios.
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 17 Portfolios in the Providian Advisor's Edge: the VA Small Value
Portfolio (the "DFA Small Value Portfolio"), the VA Large Value Portfolio (the
"DFA Large Value Portfolio"), the VA International Value Portfolio (the "DFA
International Value Portfolio"), the VA International Small Portfolio (the "DFA
International Small Portfolio"), the VA Short-Term Fixed Portfolio (the "DFA
Short-Term Fixed Portfolio") and the VA Global Bond Portfolio (the "DFA Global
Bond Portfolio") of DFA Investment Dimensions Group Inc.; the Federated American
Leaders Fund II (the "Federated American Leaders Portfolio"), the Federated
Utility Fund II (the "Federated Utility Portfolio"), the Federated Prime Money
Fund II (the "Federated Prime Money Portfolio"), the Federated Fund for U.S.
Government Securities II (the "Federated U.S. Government Securities Portfolio")
and the Federated High Income Bond Fund II (the "Federated High Income Bond
Portfolio") of Federated Insurance Series; the Montgomery Variable Series:
Growth Fund (the "Montgomery Growth Portfolio") and the Montgomery Variable
Series: Emerging Markets Fund (the "Montgomery Emerging Markets Portfolio") of
The Montgomery Funds III; the Wanger U.S. Small Cap Advisor (the "Wanger U.S.
Small Cap Advisor Portfolio") and the Wanger International Small Cap Advisor
(the "Wanger International Small Cap Advisor Portfolio") of Wanger Advisors
Trust; and the Core Large-Cap Stock Fund (the "Weiss, Peck & Greer Core Large-
Cap Stock
5
<PAGE>
Portfolio") and the Core Small-Cap Stock Fund (the "Weiss, Peck & Greer Core
Small-Cap Stock Portfolio") of the Tomorrow Funds Retirement 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.
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's 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 17 Portfolios.
Surrender Value - The Accumulated Value less 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.
6
<PAGE>
HIGHLIGHTS
YOU CAN FIND DEFINITIONS OF IMPORTANT TERMS IN THE GLOSSARY (PAGE 4).
PROVIDIAN ADVISOR'S EDGE
The Contract provides a vehicle for investing on a tax-deferred basis in 17
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," at page 29.)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 17 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following 17
Portfolios offered by the Funds: the DFA Small Value Portfolio, the DFA Large
Value Portfolio, the DFA International Value Portfolio, the DFA International
Small Portfolio, the DFA Short-Term Fixed Portfolio, the DFA Global Bond
Portfolio, the Federated American Leaders Portfolio, the Federated Utility
Portfolio, the Federated Prime Money Portfolio, the Federated U.S. Government
Securities Portfolio, the Federated High Income Bond Portfolio, the Montgomery
Growth Portfolio, the Montgomery Emerging Markets Portfolio, the Wanger U.S.
Small Cap Advisor Portfolio, the Wanger International Small Cap Advisor
Portfolio, the Weiss, Peck & Greer Core Large-Cap Stock Portfolio and the Weiss,
Peck & Greer Core Small-Cap Stock Portfolio. The assets of each Portfolio are
separate, and each Portfolio has distinct investment objectives and policies as
described in the corresponding Fund Prospectus.....................Page 16
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.
7
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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 advisor 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 for Qualified Contracts (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. 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 20
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 21
RIGHT TO CANCEL PERIOD
The Contract 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. 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 fees and/or Premium
Taxes that may have been subtracted from such amount...............Page 20
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. A $15 fee is currently imposed 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
21.)................................................................Page 23
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
8
<PAGE>
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 27
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 Contract. 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 27
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 no sales charges and has an annual mortality and expense risk
charge of .50%. Contract Owners may withdraw up to 100% of the Accumulated Value
without incurring a surrender charge. 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 21
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 thereof may be
subject to ordinary income taxes)..................................Page 24
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that may
be assessed by your state) that you would incur as an owner of a Contract (see
page 21). 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
9
<PAGE>
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 21.
<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.................................... None
Contingent Deferred Sales Load (surrender charge).................. None
Exchange Fees (for Exchanges in excess of twelve per Contract Year) $15
ANNUAL CONTRACT FEE................................................ $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in
the Separate Account)
Mortality and Expense Risk Charge.................................. .50%
Administrative Charge.............................................. .15%
----
Total Annual Separate Account Expenses............................. .65%
</TABLE>
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PORTFOLIO ANNUAL EXPENSES
Except as may be indicated, the figures below are based on actual expenses for
(as a percentage of each Portfolio's average net assets after fee waiver and/or
expense reimbursement, if applicable).
<TABLE>
<CAPTION>
MANAGEMENT TOTAL PORTFOLIO
AND ADVISORY OTHER OPERATING
EXPENSES EXPENSES EXPENSES
------------ -------- ---------------
<S> <C> <C> <C>
DFA Small Value Portfolio................................ 0.50% 0.70% 1.20%
DFA Large Value Portfolio................................ 0.25% 0.95% 1.20%
DFA International Value Portfolio*....................... 0.40% 0.93% 1.33%
DFA International Small Portfolio........................ 0.50% 0.91% 1.41%
DFA Short-Term Fixed Portfolio........................... 0.25% 0.59% 0.84%
DFA Global Bond Portfolio*............................... 0.25% 1.06% 1.31%
Federated American Leaders Portfolio**................... 0.00% 0.85% 0.85%
Federated Utility Portfolio**............................ 0.00% 0.85% 0.85%
Federated Prime Money Portfolio**........................ 0.00% 0.80% 0.80%
Federated U.S. Government Securities Portfolio**......... 0.00% 0.80% 0.80%
Federated High Income Bond Portfolio**................... 0.00% 0.80% 0.80%
Montgomery Growth Portfolio***........................... 1.00% 0.25% 1.25%
Montgomery Emerging Markets Portfolio***................. 1.25% 0.50% 1.75%
Wanger U.S. Small Cap Advisor Portfolio****.............. 1.00% 0.35% 1.35%
Wanger International Small Cap Advisor Portfolio****..... 1.30% 0.50% 1.80%
Weiss, Peck & Greer Core Large-Cap Stock Portfolio*****.. 0.00% 1.50% 1.50%
Weiss, Peck & Greer Core Small-Cap Stock Portfolio*****.. 0.00% 1.50% 1.50%
</TABLE>
*Based on actual expenses for the period January 13, 1995 (commencement of
operations) to November 30, 1995 (end of fiscal year) for these Portfolios.
**The expense figures shown reflect actual expenses for fiscal year 1995
including voluntary waivers of a portion of the management fees and/or
assumption of expenses. The maximum Management and Advisory Expenses, Other
Expenses, and Total Portfolio Annual Expenses absent the voluntary waivers would
have been as follows: 0.75%, 1.46% and 2.21%, respectively, for the Federated
American Leaders Portfolio; 0.75%, 2.34% and 3.09%, respectively, for the
Federated Utility Portfolio; 0.50%, 2.99% and 3.49%, respectively, for the
Federated Prime Money Portfolio; 0.60%, 5.01% and 5.61%, respectively, for the
Federated U.S. Government Securities Portfolio; and 0.60%, 3.60% and 4.20%,
respectively, for the Federated High Income Bond Portfolio.
***The figures shown above are based on estimated expenses for the fiscal year
1996 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement). The expense figures shown reflect anticipated
voluntary waivers of a portion of the management fees and/or assumption of
expenses. The maximum Management and Advisory Expenses, Other Expenses, and
Total Portfolio Annual Expenses absent the anticipated voluntary waivers are
estimated to be as follows: 1.00%, 0.56%, and 1.56%, respectively, for the
Montgomery Growth Portfolio and 1.25%, 0.95%, and 2.20%, respectively, for the
Montgomery Emerging Markets Portfolio.
****The figures above are based on estimated expenses for fiscal year 1996 as a
percentage of each Portfolio's average net assets. The advisor has agreed to
reimburse the U.S. Small Cap Advisor Portfolio and the International Small Cap
Advisor Portfolio in the event certain fees and expenses payable by the
Portfolios in any fiscal year exceed 1.50% and 1.90%, respectively, of average
daily net assets.
*****The figures shown are based on estimated expenses in fiscal year 1996
(after fee waiver and expense reduction). Management and Advisory Expenses,
Other Expenses, and Total Portfolio Annual Expenses absent the voluntary fee
reduction and expense limitation waivers are estimated to be as follows: 0.75%,
3.90% and 4.65%, respectively, for the Weiss, Peck & Greer Core Large-Cap Stock
Portfolio and 0.75%,
11
<PAGE>
4.49% and 5.24%, respectively, for the Weiss, Peck & Greer Core Small-Cap Stock
Portfolio. For each of these Portfolios, 0.25% of the figure representing Other
Expenses is attributable to a service fee payable by the Tomorrow Funds
Retirement Trust under non-Rule 12b-1 service plans. For more information,
please refer to the section entitled "Service Plans" in the attached prospectus
for the Tomorrow Funds Retirement Trust.
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. As noted in the table above, the
Contract imposes no surrender or withdrawal charges of any kind. Your expenses
are identical whether you continue the Contract or withdraw the entire value of
your Contract at the end of the applicable period as a lump sum or under one of
the Contract's Annuity Payment Options.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
DFA Small Value Portfolio........................... $19.13 $59.15 $101.67 $219.95
DFA Large Value Portfolio........................... $19.13 $59.15 $101.67 $219.95
DFA International Value Portfolio................... $20.43 $63.12 $108.35 $233.64
DFA International Small Portfolio................... $21.24 $65.55 $112.44 $241.97
DFA Short-Term Fixed Portfolio...................... $15.50 $48.09 $ 82.94 $181.05
DFA Global Bond Portfolio........................... $20.23 $62.51 $107.33 $231.55
Federated American Leaders Portfolio................ $15.60 $48.40 $ 83.47 $182.15
Federated Utility Portfolio......................... $15.60 $48.40 $ 83.47 $182.15
Federated Prime Money Portfolio..................... $15.09 $46.85 $ 80.84 $176.63
Federated U.S. Government Securities Portfolio...... $15.09 $46.85 $ 80.84 $176.63
Federated High Income Bond Portfolio................ $15.09 $46.85 $ 80.84 $176.63
Montgomery Growth Portfolio......................... $19.63 $60.68 $104.25 $225.24
Montgomery Emerging Markets Portfolio............... $24.65 $75.83 $129.63 $276.57
Wanger U.S. Small Cap Advisor Portfolio............. $20.63 $63.73 $109.38 $235.73
Wanger International Small Cap Advisor Portfolio.... $25.15 $77.33 $132.14 $281.55
Weiss, Peck & Greer Core Large-Cap Stock Portfolio.. $22.14 $68.28 $117.02 $251.25
Weiss, Peck & Greer Core Small-Cap Stock Portfolio.. $22.14 $68.28 $117.02 $251.25
</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 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 portion of the
partial year period.) The Annual Contract Fee will be deducted on each Contract
Anniversary and upon surrender or annuitization of the Contract, on a pro rata
basis, from each Subaccount. The Company may also deduct Premium Taxes, if any,
as incurred by the Company.
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.
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 of the
Separate Account which invest in the Portfolios offered by the Providian
Advisor's Edge Variable Annuity had not commenced operations with respect to the
Portfolios, and consequently had no assets or liabilities.
12
<PAGE>
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield and
effective yield of the Federated Prime Money Portfolio, 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.
Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which include the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance. (See also "VA Large
Value Portfolio," page 17.)
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 ("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 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 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, however, do not
reflect the Annual Contract Fee 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 which 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 Portfolios 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 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
13
<PAGE>
Separate Account expenses and Portfolio expenses. They do not include the Annual
Contract Fee 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 Federated Prime Money Portfolio. "Yield" refers to
the income generated by an investment in the Federated Prime Money Portfolio
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 the Federated Prime Money Portfolio 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 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 the Federated Prime Money
Portfolio 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.
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
14
<PAGE>
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 17 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.
DFA INVESTMENT DIMENSIONS GROUP INC. (ADVISED BY DIMENSIONAL FUND ADVISORS
INC.)
DFA Investment Dimensions Group Inc. is an open-end management investment
company organized under Maryland law in 1981, and is registered under the 1940
Act. The Fund issues 28 series of shares, including the DFA Small Value
Portfolio, the DFA Large Value Portfolio (formerly, the DFA Global Value
Portfolio), the DFA International Value Portfolio, the DFA International Small
Portfolio, the DFA Short-Term Fixed Portfolio and the DFA Global Bond Portfolio,
which are the only portfolios available as part of the Providian Advisor's Edge.
Dimensional Fund Advisors Inc. serves as this Fund's investment advisor.
THE FEDERATED INSURANCE SERIES (ADVISED BY FEDERATED ADVISERS)
The Federated Insurance Series is an open-end management investment company
organized as a Massachusetts business trust and registered under the 1940 Act.
The Fund consists of five investment portfolios available as part of the
Providian Advisor's Edge: the Federated American Leaders Portfolio, the
Federated Utility Portfolio, the Federated Prime Money Portfolio, the Federated
U.S. Government Securities Portfolio and the Federated High Income Bond
Portfolio. Federated Advisers serves as this Fund's investment advisor.
15
<PAGE>
THE MONTGOMERY FUNDS III (ADVISED BY MONTGOMERY ASSET MANAGEMENT, L.P.)
The Montgomery Funds III (the "Montgomery Fund"), an open-end management
investment company, was organized as a Delaware business trust in 1994 and is
registered under the 1940 Act. The Montgomery Fund consists of two
professionally managed investment portfolios available as part of the Providian
Advisor's Edge: the Montgomery Growth Portfolio and the Montgomery Emerging
Markets Portfolio. Montgomery Asset Management, L.P. ("MAM"), a limited partner
of Montgomery Asset Management, Inc., was organized as a California limited
partnership in 1990 and is the Montgomery Fund's investment advisor. MAM has
general oversight responsibility for the investment advisory services provided
to the Montgomery Fund. In addition, MAM is authorized to make investment
decisions for the assets of each Portfolio.
WANGER ADVISORS TRUST (ADVISED BY WANGER ASSET MANAGEMENT, L.P.)
Wanger Advisors Trust, an open-end management investment company, was organized
as a Massachusetts business trust in 1994 and is registered under the 1940 Act.
The Fund consists of two series available as part of the Providian Advisor's
Edge: the Wanger U.S. Small Cap Advisor Portfolio and the Wanger International
Small Cap Advisor Portfolio. Wanger Asset Management, L.P., a limited
partnership managed by its general partner, Wanger Asset Management, Ltd.,
serves as this Fund's investment advisor.
TOMORROW FUNDS RETIREMENT TRUST (ADVISED BY WEISS, PECK & GREER, L.L.C.)
Tomorrow Funds Retirement Trust, an open-end management investment company, was
organized as a Delaware business trust in 1995 and is registered under the 1940
Act. The Fund consists of six series, including the Weiss, Peck & Greer Core
Large-Cap Stock Portfolio and the Weiss, Peck & Greer Core Small-Cap Stock
Portfolio, which are the only series available as part of the Providian
Advisor's Edge. Weiss, Peck & Greer, L.L.C. serves as this Fund's investment
advisor.
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.
16
<PAGE>
VA SMALL VALUE PORTFOLIO ("DFA SMALL VALUE PORTFOLIO")
The investment objective of the DFA Small Value Portfolio is to achieve long-
term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in common stocks of U.S. companies with shares that have
a high book value in relation to their market value (a "book to market ratio")
and whose market capitalizations are smaller than that of the company having the
median market capitalization of companies whose shares are listed on the NYSE. A
company's shares will be considered to have a high book to market ratio if the
ratio equals or exceeds the ratios of any of the 30% of companies with the
highest position book to market ratios whose shares are listed on the NYSE.
VA LARGE VALUE PORTFOLIO ("DFA LARGE VALUE PORTFOLIO")
The investment objective of the DFA Large Value Portfolio is to achieve long-
term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in common stocks of U.S. Companies that have a high book
to market ratio and whose market capitalizations equal or exceed that of the
company having the median market capitalization of companies whose shares are
listed on the NYSE. Pursuant to a special meeting of this Portfolio's
shareholders held on September 15, 1995, the DFA Large Value Portfolio's
investment policy was changed to permit the Portfolio to achieve its investment
objective by investing substantially all of its assets in the stock of U.S.
companies and the sale of the Portfolio's non-U.S. securities to another series
of shares of DFA Investment Dimensions Group Inc.
VA INTERNATIONAL VALUE PORTFOLIO ("DFA INTERNATIONAL VALUE PORTFOLIO")
The investment objective of the DFA International Portfolio is to achieve long-
term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in the stocks of large non-U.S. companies that have a
high book to market ratio in countries with developed markets.
VA INTERNATIONAL SMALL PORTFOLIO ("DFA INTERNATIONAL SMALL PORTFOLIO")
The investment objective of the DFA International Small Portfolio is to achieve
long-term capital appreciation. This Portfolio provides investors with access to
securities portfolios consisting of small Japanese, United Kingdom, Continental
and Pacific Rim companies. The Portfolio seeks to achieve its investment
objective by investing its assets in a broad and diverse group of marketable
stocks of (1) Japanese small companies which are traded in the Japanese
securities markets; (2) United Kingdom small companies which are traded
principally on the International Stock Exchange of the United Kingdom and the
Republic of Ireland; (3) small companies organized under the laws of certain
European countries; and (4) small companies located in Australia, New Zealand
and Asian countries whose shares are traded principally on the securities
markets located in those countries.
VA SHORT-TERM FIXED PORTFOLIO ("DFA SHORT-TERM FIXED PORTFOLIO")
The investment objective of the DFA Short-Term Fixed Portfolio is to achieve a
stable real value (i.e., a return in excess of the rate of inflation) of
invested capital with a minimum of risk. This Portfolio seeks to achieve its
investment objective by investing in U.S. government obligations, U.S.
government agency obligations, dollar denominated obligations of foreign issuers
issued in the U.S., bank obligations, including U.S. subsidiaries and branches
of foreign banks, corporate obligations, commercial paper, repurchase agreements
and obligations of supranational organizations. Generally, this Portfolio will
acquire obligations which mature within one year from the date of settlement,
but substantial investments may be made in obligations maturing within two years
from the date of settlement when greater returns are available.
17
<PAGE>
VA GLOBAL BOND PORTFOLIO ("DFA GLOBAL BOND PORTFOLIO")
The DFA Global Bond Portfolio seeks to provide a market rate of return for a
global fixed income portfolio with low relative volatility of returns. This
Portfolio will invest primarily in obligations issued or guaranteed by the U.S.
and foreign governments, their agencies and instrumentalities, obligations of
other foreign issuers rated AA or better and supranational organizations, such
as the World Bank, the European Investment Bank, European Economic Community,
and European Coal and Steel Community and corporate debt obligations.
FEDERATED AMERICAN LEADERS FUND II ("FEDERATED AMERICAN LEADERS PORTFOLIO")
The primary investment objective of the Federated American Leaders Portfolio is
to achieve long-term growth of capital. The Portfolio's secondary objective is
to provide income. The Portfolio pursues its investment objectives by investing,
under normal circumstances, at least 65% of its total assets in common stock of
"blue-chip" companies. This Portfolio was formerly known as the Federated Equity
Growth and Income Portfolio.
FEDERATED UTILITY FUND II ("FEDERATED UTILITY PORTFOLIO")
The investment objective of the Federated Utility Portfolio is to achieve high
current income and moderate capital appreciation. The Portfolio endeavors to
achieve its objective by investing primarily in a professional managed and
diversified portfolio of equity and debt securities of utility companies.
FEDERATED PRIME MONEY FUND II ("FEDERATED PRIME MONEY PORTFOLIO")
The investment objective of the Federated Prime Money Portfolio is to provide
current income consistent with stability of principal and liquidity. The
Portfolio pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II ("FEDERATED U.S. GOVERNMENT
SECURITIES PORTFOLIO")
The investment objective of the Federated U.S. Government Securities Portfolio
is to provide current income. Under normal circumstances, the Portfolio pursues
its investment objective by investing at least 65% of the value of its total
assets in securities issued or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities. This
Portfolio was formerly known as the Federated U.S. Government Bond
Portfolio.
FEDERATED HIGH INCOME BOND FUND II ("FEDERATED HIGH INCOME BOND PORTFOLIO")
The investment objective of the Federated High Income Bond Portfolio is to seek
high current income. The Portfolio endeavors to achieve its investment objective
by investing primarily in a diversified portfolio of professionally managed
fixed income securities. The fixed income securities in which the Portfolio
intends to invest are lower-rated corporate debt obligations, which are commonly
referred to as "junk-bonds." Some of these fixed income securities may involve
equity features. Capital growth will be considered, but only when consistent
with the investment objective of high current income. This Portfolio was
formerly known as the Federated Corporate Bond Portfolio.
MONTGOMERY VARIABLE SERIES: GROWTH FUND ("MONTGOMERY GROWTH PORTFOLIO")
The investment objective of the Montgomery Growth Portfolio is capital
appreciation, which, under normal conditions it seeks by investing at least 65%
of its total assets in equity securities of domestic companies. The Portfolio
emphasizes investments in common stocks but also invests in other types of
equity securities. In addition to capital appreciation, the Portfolio emphasizes
value.
18
<PAGE>
MONTGOMERY VARIABLE SERIES: EMERGING MARKETS FUND ("MONTGOMERY EMERGING MARKETS
PORTFOLIO")
The investment objective of the Montgomery Emerging Markets Portfolio is capital
appreciation, which, under normal conditions it seeks by investing at least 65%
of its total assets in equity securities of companies in countries having
emerging markets. For these purposes, the Portfolio defines an emerging market
country as having an economy that is or would be considered by the World Bank or
the United Nations to be emerging or developing. The Portfolio invests primarily
in common stock but may also invest in other types of equity securities, and in
certain types of debt securities issued by the governments of emerging market
countries that are or may be eligible for conversion into investments in
emerging market companies under debt conversion programs sponsored by such
governments.
WANGER U.S. SMALL CAP ADVISOR ("WANGER U.S. SMALL CAP ADVISOR PORTFOLIO")
The investment objective of the Wanger U.S. Small Cap Advisor Portfolio is to
seek long-term growth of capital. The Portfolio pursues its investment objective
by investing primarily in stocks of small and medium size United States
companies. The Portfolio may also invest in debt securities, including lower-
rated debt securities, which may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."
WANGER INTERNATIONAL SMALL CAP ADVISOR ("WANGER INTERNATIONAL SMALL CAP ADVISOR
PORTFOLIO")
The investment objective of the Wanger International Small Cap Advisor Portfolio
is to seek long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in the stocks of small and medium size foreign
companies. The Portfolio may also invest in debt securities, including lower-
rated debt securities, which may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."
WEISS, PECK & GREER'S CORE LARGE-CAP STOCK FUND ("WEISS, PECK & GREER CORE
LARGE-CAP STOCK PORTFOLIO") AND WEISS, PECK & GREER'S CORE SMALL-CAP STOCK
FUND ("WEISS, PECK & GREER CORE SMALL-CAP STOCK FUND")
The investment objective of the Weiss, Peck & Greer Core Large-Cap Stock
Portfolio is to seek to exceed the performance of publicly traded large
capitalization stocks in the aggregate, as represented by the S&P 500 Corporate
Stock Price Index. The S&P 500 Corporate Stock Price Index is an unmanaged index
of 500 common stocks. The S&P 500 Corporate Stock Price Index represents
approximately 70% of the total domestic U.S. equity market capitalization. The
investment objective of the Weiss, Peck & Greer Core Small-Cap Stock Portfolio
is to seek to exceed the performance of publicly traded small capitalization
stocks in the aggregate, as represented by the Russell 2000 Index. The Russell
2000 Index is an unmanaged index of 2000 common stocks of small capitalization
companies. Each of these Portfolios pursues its investment objective by
investing in a portfolio of securities that is considered more "efficient" than
the applicable benchmark. An efficient portfolio is one that has the maximum
expected return for any level of risk. While each Portfolio will generally be
substantially fully invested in equity securities which comprise the applicable
benchmark, each Portfolio may invest up to 10% of its total assets in securities
that are issued or guaranteed by the U.S. Government or its agencies,
authorities, instrumentalities or sponsored enterprises.
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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'
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
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 fees and/or Premium Taxes that may have been subtracted from
such amount.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
If an applicant wishes to purchase a Contract, the applicant should send his or
her completed application and initial Purchase Payment to the address indicated
on the application, or to such other location as the Company may from time to
time designate. If the applicant wishes to make personal delivery by hand or
courier to the Company of the completed application and initial Purchase Payment
(rather than through the mail), he or she must do so at our Administrative
Offices at 520 Columbia Drive, Johnson City, New York 13790. The 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
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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. Additional Purchase Payments must be for at
least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts.
Additional Purchase Payments received prior to the close of the New York Stock
Exchange (generally 4:00 P.M. Eastern time) are 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.
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 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
There are no sales charges for the Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contracts. The annual charge is assessed daily based on the net
asset value of the Separate Account. The annual mortality and expense risk
charge is .50% of the net asset value of the Separate Account.
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 Contracts.
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The mortality risk borne by us under the Contracts, 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 Contracts 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 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. A $15 fee is currently imposed for Exchanges in excess of 12
per Contract Year.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The 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 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 are permitted to purchase
Contracts with substantial reduction of 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 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 Contracts. (See "Federal Tax Considerations," page 29.)
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, if exercised by
the Company, (v) any charges for any Exchanges made after the first 12 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 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 27.)
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 29.)
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 29.)
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, semi-annual 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.
Each systematic withdrawal is subject to federal income taxes on the taxable
portion, and may be subject to a 10% federal tax penalty 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 29 of
your Prospectus. You may wish to consult a tax advisor 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 the Federated Prime Money
Portfolio, 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 the Federated Prime Money Portfolio 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, 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, 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 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
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"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:
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.
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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 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," page 31, and
"Diversification Standards," page 32.)
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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 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.
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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
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
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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.
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 advisor 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 advisor 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 Subaccount 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
Contracts may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contracts, as necessary,
to prevent the Contract Owner from being considered the owner of assets of the
Separate Account.
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We intend to comply with the Regulations to assure that the Contracts continue
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 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.
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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%.
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 29.)
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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 29.)
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.
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.
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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 Contracts, 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 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 ADVISOR'S EDGE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
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.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION.................................................... 4
Federated Prime Money Portfolio Subaccount Yields....................... 5
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 6
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........................................ 7
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................. 7
Individual Computer Generated Illustrations............................. 7
PERFORMANCE COMPARISONS.................................................... 7
SAFEKEEPING OF ACCOUNT ASSETS.............................................. 9
THE COMPANY................................................................ 10
STATE REGULATION........................................................... 10
RECORDS AND REPORTS........................................................ 10
DISTRIBUTION OF THE CONTRACTS.............................................. 10
LEGAL PROCEEDINGS.......................................................... 11
OTHER INFORMATION.......................................................... 11
FINANCIAL STATEMENTS....................................................... 11
Audited Financial Statements............................................. 11
</TABLE>
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FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE PROVIDIAN ADVISOR'S EDGE 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 Advisor's Edge 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....................................................................................... 4
Annuity Data..................................................................................... 4
Annual Statement................................................................................. 4
Incontestability................................................................................. 4
Ownership........................................................................................ 4
PERFORMANCE INFORMATION........................................................................... 4
Federated Prime Money Portfolio Subaccount Yields................................................ 5
30-Day Yield for Non-Money Market Subaccounts.................................................... 5
Standardized Average Annual Total Return for Subaccounts......................................... 6
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................................................................. 7
Non-Standardized Hypothetical Total Return and Non-Standardized Hypothetical Average
Annual Total Return............................................................................ 7
Individualized Computer Generated Illustrations.................................................. 7
PERFORMANCE COMPARISONS........................................................................... 7
SAFEKEEPING OF ACCOUNT ASSETS..................................................................... 9
THE COMPANY....................................................................................... 10
STATE REGULATION.................................................................................. 10
RECORDS AND REPORTS............................................................................... 10
DISTRIBUTION OF THE CONTRACTS..................................................................... 10
LEGAL PROCEEDINGS................................................................................. 11
OTHER INFORMATION................................................................................. 11
FINANCIAL STATEMENTS.............................................................................. 11
Audited Financial Statements.................................................................... 11
</TABLE>
<PAGE>
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 assessed at an annual rate of .50% for the
mortality and expense risks assumed by the Company;
(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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<PAGE>
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. This 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. A $15 fee is currently imposed 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 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 sale 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 a 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 their affiliates and certain sales
representatives for the Contract. The Company may also grant waivers or
modifications of certain minimum or maximum purchase or 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.
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<PAGE>
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 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 Federated Prime Money 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.
-4-
<PAGE>
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.)
Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which includes the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance.
FEDERATED PRIME MONEY PORTFOLIO SUBACCOUNT YIELDS
Current yield for Federated's Prime Money 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:
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 the 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.
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<PAGE>
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 any
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)
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.
-6-
<PAGE>
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts which 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 Portfolios 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 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. 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. However, they reflect a deduction for the Separate Account expenses and
Portfolio expenses. 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.
INDIVIDUALIZED COMPUTER GENERATED ILLUSTRATIONS
The Company may from time to time use computer-based software available through
Morningstar, CDA/Wiesenberger 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 Portfolio; (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
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
-7-
<PAGE>
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 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.
-8-
<PAGE>
. 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
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<PAGE>
of the assets of the 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 1 of each year covering the operations and
reporting on the financial condition of the Company as of December 31 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.
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.
The Contracts are offered to the public through persons or entities 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.
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<PAGE>
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.
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, respectively, including the Report 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 Advisor's Edge
Variable Annuity, had not commenced operations and consequently had no assets or
liabilities with respect thereto.
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<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 Participating Agreement for the Funds./1/
(b) Form of Marketing Agreement./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) Not Applicable.
(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 ADVISOR'S EDGE 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
EXHIBIT 8(b) FORM OF MARKETING AGREEMENT
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<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.
BENEFITS UNDER THIS CERTIFICATE WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO AMOUNT.
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 .50% 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.
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 OUR 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 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 7
Death Benefit 8
Ownership, Assignment and Beneficiary 8
Death of Annuitant 8
Death of Annuitant's Beneficiary 9
Death of Owner 9
General Provisions 9
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.
<TABLE>
<CAPTION>
CERTIFICATE SCHEDULE
<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 The Advisor's Edge 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.
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ALLOCATIONS
<S> <C> <C> <C>
DFA Global Bond Portfolio _____% Federated's Prime Money Fund _____%
DFA Global Value Portfolio _____% Federated's U.S. Government Bond Fund _____%
DFA International Small Portfolio _____% Federated's Corporate Bond Fund _____%
DFA International Value Portfolio _____% Wanger U.S. Small Cap Advisor _____%
DFA Short-Term Fixed Portfolio _____% Wanger International Small Cap Advisor _____%
DFA Small Value Portfolio _____% Weiss, Peck & Greer Core Large-Cap Stock Fund _____%
Federated's Equity Growth and Income Fund _____% Weiss, Peck & Greer Core Small-Cap Stock Fund _____%
Federated's Utility Fund _____% Montgomery Growth Fund _____%
Montgomery Emerging Markets Fund _____%
</TABLE>
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 .50% 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.
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
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
sales load and applicable Premium Tax, if any, will be credited to your
Accumulated Value within two Business Days after we receive your Initial
Purchase Payment.
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NET PURCHASE PAYMENT
Any Purchase Payment less the applicable sales load and Premium Tax, if any.
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 to Section 72(s) of 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 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
"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.
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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 still 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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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.
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.
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.
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 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
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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; and
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.
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 Beneficiary'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.
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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. 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.
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 regulations, 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 this Certificate and to treat this Certificate as his or her
own.
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.
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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 the 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 the 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.
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.
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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.
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:
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(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 ADVISOR'S EDGE
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.
<TABLE>
<CAPTION>
<S> <C>
DFA Short-Term Fixed Income _____________%
DFA Small Value _____________%
DFA International Small _____________%
DFA International Value _____________%
DFA Large Value _____________%
DFA Global Bond _____________%
Federated American Leaders Fund II _____________%
Federated Utility Fund II _____________%
Federated Prime Money Fund II _____________%
Federated Fund For
U.S. Government Securities II _____________%
Federated High Income Bond Fund II _____________%
Montgomery Emerging Markets _____________%
Montgomery Growth _____________%
Wanger U.S. Small Cap _____________%
Wanger International Small Cap _____________%
Weiss Peck & Greer Core Large Cap _____________%
Weiss Peck & Greer Core Small Cap _____________%
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.
<S> <C>
DFA Short-Term Fixed Income $_____________
DFA Small Value $_____________
DFA International Small $_____________
DFA International Value $_____________
DFA Large Value $_____________
DFA Global Bond $_____________
Federated American Leaders Fund II $_____________
Federated Utility Fund II $_____________
Federated Fund For
U.S. Government Securities II $_____________
Federated High Income Bond Fund II $_____________
Montgomery Emerging Markets $_____________
Montgomery Growth $_____________
Wanger U.S. Small Cap $_____________
Wanger International Small Cap $_____________
Weiss Peck & Greer Core Large Cap $_____________
Weiss Peck & Greer Core Small Cap $_____________
[_] 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
</TABLE>
<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
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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
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Section 1 - Amendments
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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.
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ARTICLE XI
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Section 1 - Waivers
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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
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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.
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EXHIBIT 8(a)
ADVISOR'S EDGE
PARTICIPATION AGREEMENT
AMONG
_____________________________________
_____________________________________
_____________________________________
AND
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page
- --------- ----------- ----
<S> <C> <C>
1 Sales of Fund Shares............. 1
2 Proxy Solicitations and Voting... 5
3 Representations and Warranties... 6
4 Sales Material and Information... 10
5 Fees and Expenses................ 13
6 Indemnification.................. 14
7 Potential Conflicts.............. 26
8 Term and Termination............. 30
9 Notices.......................... 33
10 Miscellaneous.................... 35
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into this _____ day of__________, 1996, by
and among First Providian Life and Health Insurance Company ("Company"), on its
own behalf and on behalf of First Providian Life and Health Insurance Company
Separate Account C, a segregated asset account of the Company ("Account"),
____________________________________ ("Fund"), the Fund's investment adviser,
_____________________________________________ ("Adviser") and
__________________________("____") (collectively, "Parties").
Company, Fund, Adviser and ________ intending to be legally bound, hereby
agree as follows:
1. Sales of Fund Shares
1.1 Fund shares shall be sold by the respective portfolios of Fund listed
on Schedule 1.1 hereto, as amended from time to time by the Parties
("Portfolios"), and purchased by Company for the appropriate subaccount of
Account at the net asset value next computed after receipt by Fund or its
designee of each order of the Account, in accordance with the provisions of this
Agreement, the then current prospectuses of the Fund that describe the
Portfolios and the variable annuity contract that uses the Portfolios as an
underlying investment medium (the "Contracts"). For purposes of this Section
1.1, Company shall be the designee of Fund for receipt of such orders from
Account and receipt by such designee shall constitute receipt by Fund; provided
that company receives the order by 4:00 p.m. Louisville (Eastern) time and Fund
receives notice from Company by
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telephone or facsimile (or by such other means as Fund and Company may agree to
in writing) of such order no later than 10:30 a.m. Louisville (Eastern) time on
the next following Business Day, provided that Company shall use its best
efforts to communicate such order to Fund by 10:00 a.m. Louisville (Eastern)
time. Fund will cause its transfer agent to send confirmation to Company and
Fund by 10:30 a.m. Louisville (Eastern) time on the same Business Day that
Company communicates the orders to Funds. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission (the "SEC"). Company may purchase Portfolio shares for its
own account subject to (a) receipt of prior written approval by Adviser; and (b)
such purchases being in accordance with the then current prospectuses of the
Fund that describe the Portfolios and the Contracts. Wire orders for payment for
shares purchased will be sent to Fund prior to 3:00 p.m. Louisville (Eastern)
time on the same Business Day that Company communicates the orders to Fund in
accordance with written instructions provided by Fund to Company.
1.2 Fund will redeem the shares when requested on behalf of the Company or
the corresponding subaccount of the Account at the net asset value next computed
after receipt by Fund or its designee of each request for redemption, in
accordance with the provisions of this Agreement, the then
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current prospectuses of the Fund that describe the Portfolios and the Contracts.
For purposes of this Section 1.2, Company shall be designee for Fund for receipt
of requests for redemption from Account and receipt by such designee shall
constitute receipt by Fund; provided that Company receives the request for
redemption by 4:00 p.m. Louisville (Eastern) time and Fund receives notice from
Company by telephone or facsimile (or by such other means as Fund and Company
may agree to in writing) of such request for redemption no later than 10:30 a.m.
Louisville (Eastern) time on the next following Business Day, provided that
Company shall use its best efforts to communicate such request to Fund by 10:00
a.m. Louisville (Eastern) time. Fund will use its best efforts to transmit to
Company the proceeds of all redemption orders placed by Company by 4:00 p.m.
Louisville (Eastern) time on the same Business Day that Company communicates the
request to Fund by wire transfer in accordance with written instructions
provided by Company to Fund. In no event shall payment be delayed for a greater
period than permitted by the Investment Company Act of 1940 or the rules, orders
or regulations thereunder (the "1940 Act"). The Board of Directors of Fund
("Directors") may refuse to sell shares of any Portfolio to any person,
including Account, or suspend or terminate the offering of shares of any
particular Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is deemed, by the Directors, acting in good
faith and in light of the
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Directors' duties under applicable law, necessary in the best interests of
shareholders of any Portfolio.
1.3 Company agrees to purchase and redeem the shares of each Portfolio in
accordance with the provisions of this Agreement, of the Contracts and of the
then current prospectuses for the Contracts and Fund that describe the
Portfolios. Except as necessary to implement Owner initiated transactions, or as
otherwise required by state and/or federal laws or regulations, Company shall
not redeem Portfolio shares attributable to the Contracts.
1.4 Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Shares ordered
from Fund will be recorded in appropriate book entry titles for the Account by
Fund or its designee.
1.5 Fund shall furnish prompt notice followed by written confirmation to
Company of any income, dividends or capital gain distributions payable on the
Portfolios' shares. Company hereby elects to receive all such dividends and
distributions as are payable on shares of a Portfolio in additional shares of
that Portfolio. Fund shall notify Company or its delegates of the number of
shares so issued as payment of such dividends and distributions.
1.6 Fund shall make the net asset value per share for each Portfolio
available to Company or its delegates on a daily basis as soon as reasonably
practical after the net asset value per share is calculated
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(normally by 6:00 p.m. Louisville (Eastern) time) and shall use its best efforts
to make such net asset value per share available by 7:00 p.m. Louisville
(Eastern) time on each Business Day.
2. Proxy Solicitations and Voting
2.1 Fund agrees that the terms on which the Portfolios are offered to the
Account will not be materially altered without at least sixty (60) days prior
written notice to Company during the period in which Portfolio shares are held
by the Account.
2.2 If and to the extent required by law the Company shall:
(I) solicit voting instructions from the purchasers of the Contracts
("Owners");
(ii) vote the Portfolio shares in accordance with instructions received
from Owners; and
(iii) vote Portfolio shares for which no instructions have been received
in the same proportion as Portfolio shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for various contract owners. The Company
reserves the right to vote Portfolio shares held in any segregated asset account
in its own right, to the extent permitted by law. Company will calculate voting
privileges in a manner
5
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consistent with other separate accounts investing in the Portfolio and in
accordance with applicable law.
2.3 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund, at its option, will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act as well
as with Sections 16(a) and, if and when applicable, 16(b) and the rules
thereunder. Further, the Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of Directors and with whatever rules the SEC may promulgate with
respect thereto.
3. Representations and Warranties
3.1 Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under the laws of New York and that it has and will
maintain the capacity to issue all Contracts that may be sold; and that it is
properly licensed, qualified and in good standing to sell the Contracts in New
York. Company represents and warrants that the Contracts will be issued and sold
in compliance in all material respects with all applicable federal and state
laws.
3.2 Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act").
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3.3 Company represents and warrants that it has or will have registered the
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
3.4 Company represents that the Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will maintain such treatment and that it will
notify Adviser and Fund promptly 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.
3.5 Fund represents and warrants that it is lawfully established and
validly existing under the laws of the State of Maryland.
3.6 Fund represents and warrants that Portfolio shares sold pursuant to
this Agreement are registered under the 1933 Act and duly authorized for
issuance; that Fund shall amend the registration statement for the Portfolios
under the 1933 Act and the 1940 Act, from time to time, as required in order to
effect the continuous offering of its shares; that Fund will sell such shares in
compliance with all applicable federal and state laws; and that Fund is and will
remain registered under and complies and will comply in all material respects
with the 1940 Act. Fund shall register and qualify the shares of the Portfolios
for sale in accordance with the laws of the various states only if, and to the
extent, deemed advisable by Fund.
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3.7 Fund represents and warrants that it will invest money from the sale of
Portfolio shares in such a manner as to ensure that the Contracts will be
treated as variable annuity contracts under the Code and the regulations issued
thereunder, and that Fund will comply with Section 817(h) of the Code as amended
from time to time and with all applicable regulations promulgated thereunder.
Fund agrees to notify Company upon having a reasonable basis for believing that
any Portfolio has ceased to comply with Section 817(h) of the Code and to take
all reasonable steps to diversify such Portfolio so as to achieve compliance
within the grace period afforded by Treasury Regulation (S) 1.817-5.
3.8 Fund represents and warrants that the Portfolios are currently
qualified as Regulated Investment Companies under Subchapter M of 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 promptly notify
Company upon having a reasonable basis for believing that a Portfolio has ceased
to so qualify or that it might not so qualify in the future.
3.9 Fund represents and warrants that each Portfolio's investment policies,
fees and expenses are and shall at all times remain in compliance with New York
law regarding separate accounts of domestic insurers and with any other
applicable state insurance laws of which it is aware, provided the Portfolios
shall have no obligation to conduct an independent investigation. Company shall
inform a
8
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Portfolio in writing if Company determines that such Portfolio is not in
compliance with applicable insurance laws, but this provision shall not be
construed to limit or qualify Fund's representation and warranty given in the
immediately preceding sentence. Fund further represents that its operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
3.10 ________ represents and warrants that it is and will be a member in
good standing of the National Association of Securities Dealers, Inc., ("NASD")
and is and will be registered as a broker-dealer with the SEC. ________
represents that is operations are and shall at all times remain in material
compliance with the laws of the State of Delaware to the extent required to
perform this Agreement.
3.11 ________ represents and warrants that it is and will remain duly
registered in all material respects under all applicable federal and state
securities laws and shall perform its obligations hereunder in compliance in all
material respects with any such applicable state and federal laws.
3.12 All parties hereto represent and warrant to each other that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of Fund in an amount
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not less than the amount required by the applicable rules of the NASD and the
federal securities laws. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company. All parties
hereto agree to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and each agrees to notify
promptly the other parties hereto in the event that such coverage no longer
applies.
4. Sales Material and Information
4.1 Company shall promptly inform ________ as to the status of all such
sales literature filings and shall promptly notify ________ of all approvals or
disapprovals of sales literature filings in the States. ________ and Fund shall
promptly provide Company with copies of any correspondence and reports of
inquiries, meetings and discussions concerning regulation of the Contracts and
any Owner complaints respecting the Contracts. Company shall promptly provide
Fund with copies of any Owner complaints respecting the Contracts.
4.2 Except with the written consent of Adviser, Fund or ________, as
appropriate, Company shall not make any material representations concerning the
Adviser, ________, or the Fund other than the information or representations
contained in: (a) a registration statement or prospectus for the Fund, as
amended or supplemented from time to time; (b) published reports or statements
of the Fund which are in the public
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domain or are approved by Fund; or (c) sales literature or other promotional
material of the Fund.
4.3 Except with the written consent of Company, Adviser, ________, or the
Fund shall not make any material representations concerning Company other than
the information or representations contained in: (a) a registration statement or
prospectus for the Contracts, as amended or supplemented from time to time; (b)
published reports or statements of the Contracts or the Account which are in the
public domain or are approved by Company; or (c) sales literature or other
promotional material of the Company.
4.4 No Party shall use any other Party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior written
consent of such Party.
4.5 Fund will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to Fund or its shares, (a) in draft form prior to the filing of such
document with the SEC or other regulatory authorities with reasonable time
allowed for Company to provide Fund with its comments and (b) in final form as
filed. If requested by Company, Fund shall provide such documentation (including
a final copy of the new
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prospectus of the Portfolios as set in type (including an 8 1/2 x 11 size camera
ready stat) at Fund's expense) and other assistance as is reasonably necessary
in order for Company once each year (or more frequently if the prospectus for
Company is amended) to have, at Company's expense, the prospectus for the
Contracts and Portfolios' prospectus printed together in one document.
4.6 Company will provide to Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters and all amendments to any of the above, that relate to the Fund and the
Contracts, (a) in draft form prior to the filing of such document with the SEC,
with reasonable time allowed for Fund to provide Company with its comments and
(b) in final form as filed.
4.7 For purposes of this Section 4, the phrase "sales literature or other
promotional material" shall be construed in accordance with all applicable
securities laws and regulations.
4.8 To the extent required by applicable law, including the administrative
requirements of regulatory authorities, or as mutually agreed between Company
and ________, Company reserves the right to modify any of the Contracts in any
respect whatsoever. Company reserves the right in its sole discretion to suspend
the sale of any of the Contracts, in
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whole or in part, or to accept or reject any application for the sale of a
Contract. Company agrees to notify the other Parties promptly upon the
occurrence of any event Company believes might necessitate a material
modification or suspension.
4.9 The Parties agree to review the arrangements set forth herein during
the last calendar quarter of each year for possible changes and will make their
personnel reasonably available for this purpose.
5. Fees and Expenses
5.1 Fund shall bear the cost of registration and qualification of Fund's
shares; preparation and filing of Fund's prospectus and registration statement,
proxy materials and reports including postage; preparation of all other
statements and notices relating to Fund required by any federal or state law;
payment of all applicable fees, including, without limitation, all fees due
under Rule 24f-2 relating to Fund; all taxes on the issuance or transfer of
Fund's shares.
5.2 Company shall see to it that the Contracts are registered under the
1933 Act, and that the Account is registered as a unit investment trust in
accordance with the 1940 Act. Company shall bear the expenses for the costs of
preparation and filing of Company's prospectus and registration statement with
respect to the Contracts; preparation of all other statements and notices
relating to the Account or the Contracts required by any federal or state
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law; expenses for the solicitation and sale of the Contracts, including all
costs of printing and distributing all copies of advertisements, prospectuses,
Statements of Additional Information, proxy materials, and reports to Owners or
potential purchasers of the Contracts as required by applicable state and
federal law; payment of all applicable fees, including, without limitation, all
fees due under Rule 24f-2 relating to the Contracts; all costs of drafting,
filing and obtaining approvals of the Contracts in the various states under
applicable insurance laws; filing of annual reports on form N-SAR, and all other
costs associated with ongoing compliance with all such laws and its obligations
hereunder.
6. Indemnification
6.1 Indemnification By Company
6.1(a) Company agrees to indemnify and hold harmless Fund, ________
and Adviser and each of their directors and officers, and each person, if any,
who controls any of them within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, and:
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(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the
Contracts or contained in the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
paragraph 6.1(a) shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to Company by or on behalf of Fund for use in the
registration statement or prospectus for the Contracts or in the
Contracts (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or persons under
its control, with respect to the sale or
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distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Fund or
any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance
upon information furnished to Fund by or on behalf of Company; or
(iv) arise out of, or as a result of, any failure by Company
or persons under its control to provide the services and furnish
the materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation and/or warranty made by Company or persons under
its control in this Agreement or arise out of or result from any
other material breach of this Agreement by Company or persons
under its control;
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as limited by and in accordance with the provisions of sections 6.1(b) and
6.1(c) hereof.
6.1(b) Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to Fund,
whichever is applicable, or to the extent of such Indemnified Party's
negligence.
6.1(c) Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Company of any such claim shall not
relieve Company from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, Company shall be entitled to
participate, at its own expense, in the defense of such action provided that it
gives written notice of such
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intention to the Indemnified Parties. Company also shall be entitled to assume
and to control the defense thereof. After notice from Company to such Party of
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and Company
will not be liable to such Party under this Agreement for any legal or other
expenses subsequently incurred by such Party independently in connection with
the defense thereof other than reasonable costs of investigation.
6.1(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of Fund shares or the Contracts or the operation of Fund.
6.2 Indemnification by ________
6.2(a) ________ agrees to indemnify and hold harmless Company and each of
its directors and officers and each person, if any, who controls Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of ________) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
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the registration statement or prospectus or sales literature of
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this section 6.2(a) shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to Fund by or on behalf of
Company for use in the registration statement or prospectus for
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of ________ or Fund or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares (it is understood
that the persons who are involved in the sale of distribution of
the Contracts are not under the control of ________, Adviser or
Fund); or
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(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon information furnished to Company by or
on behalf of Fund; or
(iv) arise out of, or as a result of, any failure by
________, Fund or persons under their control to provide the
services and furnish the materials contemplated under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by ________, Fund or persons
under their control in this Agreement or arise out of or result
from any other material breach of this Agreement by ________,
Fund or persons under their control;
as limited by and in accordance with the provisions of Sections 6.2(b) and
6.2(c) hereof.
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6.2(b) ________ shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to Company
or the Account, whichever is applicable, or to the extent of such Indemnified
Party's negligence.
6.2(c) ________ shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified ________ in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify ________ of any such claim shall not
relieve ________ from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, ________ will be entitled to
participate, at its own expense, in the defense thereof provided that it gives
written notice of such intention to the Indemnified Parties. ________ also
shall be entitled to assume and to control the defense thereof. After
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notice from ________ to such Party of ________'s election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and ________ will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such Party independently in connection with the defense thereof other than
reasonable costs of investigation.
6.2(d) The Indemnified Parties will promptly notify ________ of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
6.3 Indemnification by Adviser
6.3(a) Adviser agrees to indemnify and hold harmless Company and each
of its directors and officers and each person, if any, who controls Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Fund or Adviser) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, and:
(i) arise out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of Fund
(or any amendment or
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supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this section
6.3(a) shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to Fund or Adviser by or on behalf of Company for use
in the registration statement or prospectus for Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of ________, Fund or Adviser
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares (it is understood
that the persons who are involved in the sale or distribution of
the Contracts are not under the control of ________, Adviser or
Fund);
23
<PAGE>
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon information furnished to Company by or
on behalf of Fund or Adviser;
(iv) arise out of, or as a result of, any failure by
________, Adviser, Fund or persons under their control to provide
the services and furnish the materials contemplated under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by ________, Fund, Adviser or
persons under their control in this Agreement or arise out of or
result from any other material breach of this Agreement by
________, Adviser, Fund or persons under their control;
24
<PAGE>
as limited by and in accordance with the provisions of Sections 6.3(b) and
6.3(c) hereof.
6.3(b) Adviser shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to Company
or the Account, whichever is applicable, or to the extent of such Indemnified
Party's negligence.
6.3(c) Adviser shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Fund or Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Fund or Adviser of
any such claim shall not relieve Adviser from any liability which it may have to
the Indemnified Party otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
Adviser will be entitled to participate, at its own expense, in the defense
thereof provided that it gives
25
<PAGE>
written notice of such intention to the Indemnified Parties. Adviser also shall
be entitled to assume and to control the defense thereof. After notice from
Adviser to such Party of Adviser's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
6.3(d) The Indemnified Parties will promptly notify Fund or Adviser of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
7. Potential Conflicts
7.1 The Directors will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretive letter, or any similar action by insurance,
tax or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
26
<PAGE>
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Directors shall promptly inform the Company
if they determine that an irreconcilable material conflict exists and the
implications thereof and, on an annual basis, shall provide Company with written
notification that the Directors are not aware of any conflict, if such is the
case.
7.2 The Company will report any potential or existing conflicts of which it
is aware to the Directors and, on an annual basis, shall provide Fund with
written notification that Company is not aware of any conflict, if such is the
case. The Company will assist the Directors in carrying out their
responsibilities under any applicable provisions of the federal securities laws
and/or any exemptive orders granted by the Securities & Exchange Commission
("Exemptive Order"), by providing the Directors with all information reasonably
necessary for the Directors to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Directors whenever
Owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Directors, or a majority of
its disinterested Directors, that a material irreconcilable conflict exists, the
Company shall, at its expense and to the extent reasonably practicable (as
27
<PAGE>
determined by a majority of disinterested Directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Owners and, as appropriate, segregating
the assets of any appropriate group that votes in favor of such segregation, or
offering to the affected Owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six (6) months after the Directors inform the Company in
writing that they have determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Directors. Until the end of the foregoing six (6) month
28
<PAGE>
period, ________ and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5 For purposes of Sections 7.3 through 7.5 of this Agreement, a majority
of the disinterested Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict. The Company shall not
be required by Section 7.3 to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Directors inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict.
7.6 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in any Exemptive Order) on terms and conditions materially different
from those contained in any Exemptive Order, then (a) the Fund and/or the
Company, as appropriate, shall take such steps as may be necessary to
29
<PAGE>
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such rules are applicable; and (b) Sections 7.1, 7.2, 7.3 and 7.4 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
8. Term and Termination
8.1 The initial term of this Agreement shall be from __________, 1996
through __________, 1999. Unless terminated upon thirty (30) days' prior written
notice to the other Party, this Agreement shall thereafter automatically renew
from year to year, provided that any Party may terminate this Agreement without
cause following the initial term upon six (6) days' advance written notice to
the other.
8.2 Notwithstanding any other provision of this Agreement, ________,
Adviser or the Fund may terminate this Agreement for cause on not less than
thirty (30) days' prior written notice to the Company, unless Company has cured
such cause within thirty (30) days of receiving such notice, for any material
breach by Company of any representation, warranty, covenant or obligation
hereunder.
8.3 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement for cause on not less than thirty (30) days' prior
written notice to ________, Adviser and Fund unless ________, Adviser or Fund,
as appropriate, has cured such cause within thirty (30) days of receiving such
notice, for any material breach by
30
<PAGE>
________, Adviser or Fund of any representation, warranty, covenant or
obligation hereunder.
8.4 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the ________ with
respect to any Portfolio based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet the requirements of the
Contracts.
8.5 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund, Adviser and the ________
with respect to any Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company.
8.6 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund, Adviser and the ________
with respect to any Portfolio in the event that such Portfolio ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify.
8.7 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund, Adviser and the ________
with respect to
31
<PAGE>
any Portfolio in the event that such Portfolio fails to meet the diversification
requirements specified in Paragraph 3.7.
8.8 Notwithstanding any other provision of this Agreement, Fund, Adviser or
________ may terminate this Agreement by written notice to the Company, if any
one or all shall determine, in their sole judgment, exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity.
8.9 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund, Adviser and ________, if
the Company shall determine, in its sole judgment, exercised in good faith, that
any of the Fund, Adviser or ________ has suffered a material adverse change in
its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity.
8.10 Notwithstanding any other provision of this Agreement, any Party may
terminate this Agreement for cause on not less than sixty (60) days' prior
written notice to all other Parties, unless any of the other Parties has cured
such cause within sixty (60) days of receiving such notice, for any one of the
following reasons:
(a) change in control of any Party or such Party's ultimate
controlling person; however, a
32
<PAGE>
change in the name of the Party will not constitute a change in
control;
(b) a material change in, or other material revision to the
Contracts or the prospectuses of Fund that describe the Portfolios,
which material change or revision is not acceptable to any of the
other Parties; or
(c) any action taken by federal or state regulatory authorities
of competent jurisdiction which, in the reasonable judgment of any of
the Parties, either (i) materially and adversely alters the terms,
advantages and/or benefits of the Contracts to current or prospective
purchasers; or (ii) materially or adversely alters the terms or
conditions of such Party's participation in the subject matter of this
Agreement.
8.11 Notwithstanding the termination of this Agreement, each Party shall
continue for so long as any Contracts remain outstanding to perform such of its
duties hereunder as are necessary to ensure the continued tax deferred status
thereof and the payment of benefits thereunder.
9. Notices
Any notice shall be deemed sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
33
<PAGE>
If to Fund:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
If to Adviser:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
If to ________:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
If to Company:
-------------------------------------
Providian Corporation
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40202
with a copy to:
Marketing Director
First Providian Life and Health Insurance Company
520 Columbia Drive
Johnson City, New York 13790
34
<PAGE>
10. Miscellaneous
10.1 The captions in this Agreement are included for convenience of
reference only and in no way affect the construction or effect of any provisions
hereof.
10.2 If any portion of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance and securities regulators) and shall permit such authorities
reasonable access to its books and records as required by applicable law in
connection with any investigation or inquiry relating to this Agreement.
10.5 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.
10.6 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
35
<PAGE>
10.7 Subject to the requirements of legal process and regulatory authority,
the Fund, Adviser and ________ shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by the Company hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the Company until such time as it may come into the public
domain.
10.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
10.9 In any dispute arising hereunder, each party waives its right to
demand a trial by jury and hereby consents to a bench trial of all such
disputes.
10.10 The terms of this Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of Kentucky; provided,
however, that all performances rendered hereunder shall be subject to compliance
with all applicable state and federal laws and regulations.
10.11 Notwithstanding any termination of this Agreement, Fund shall, at the
option of the Company, continue to make available additional shares of the
Portfolios pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
36
<PAGE>
(hereinafter referred to as "Existing Contracts"). Specifically, the owners of
the Existing Contracts shall be permitted to reallocate investments in the
Portfolios, redeem investments in the Portfolios and/or invest in the Portfolios
upon the making of additional purchase payments under the Existing contracts.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first set forth above.
COMPANY:
FIRST PROVIDAN LIFE AND HEALTH INSURANCE
COMPANY
By:
----------------------------------
FUND:
--------------------------------------
By:
----------------------------------
:
----
--------------------------------------
By:
----------------------------------
FUND ADVISER:
--------------------------------------
By:
----------------------------------
37
<PAGE>
SCHEDULE 1.1
VA Small Value Portfolio
VA Large Value Portfolio
VA International Value Portfolio
VA International Small Portfolio
VA Short-Term Fixed Portfolio
VA Global Bond Portfolio
<PAGE>
EXHIBIT 8(b)
ADVISOR'S EDGE
MARKETING AGREEMENT
Between
_______________________
And
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
<PAGE>
TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
1 Sales of the Contract......... 1
2 Representations and Warranties 3
3 Contracts, Sales Material
and Information............... 5
4 Indemnification............... 7
5 Term and Termination.......... 14
6 Notices....................... 15
7 Miscellaneous................. 16
<PAGE>
THIS AGREEMENT, made and entered into this _____ day of ______, 1996, by
and between First Providian Life and Health Insurance Company ("Company"), on
its own behalf and on behalf of First Providian Life and Health Insurance
Company Separate Account C, a segregated asset account of the Company
("Account"), and ____________________ ("_________") (collectively, "Parties").
Company and ________ intending to be legally bound, hereby agree as
follows:
1. Sales of the Contracts
----------------------
1.1 Company and ________ hereby agree to perform the duties and assume the
responsibilities set forth herein in connection with the offering of certain
mutually agreed upon variable annuity contracts ("Contracts") in substantially
the forms appearing at Schedule 1.1 hereto. Company shall establish and maintain
subdivisions of the Account as required by law to perform Company's obligations
under the Contracts, including the obligation to establish a subdivision for
each portfolio offered by ____________________________________ ("Fund") and
accepted by Company for investment under the Contract.
1.2 ________ will assist, or through one or more independent contractors
will have assistance provided to, Company in developing a marketing program for
the Contracts. Either ________ or its independent contractors will be available
at reasonable times to assist Company and investment advisors whose clients
purchase the Contracts in understanding the Fund and its investment strategies
and to provide information
<PAGE>
regarding the Fund. ________' assistance will not involve the handling of
monies and/or securities of the Contracts.
1.3 Neither ________ nor any of its affiliates or independent contractors
shall have any authority as the Company's agent or otherwise to, and ________
shall not (a) make any promise or incur any debt on behalf of Company; (b) hold
itself out as an employee of Company; (c) misrepresent, add, alter, waive,
discharge, or omit any material provision(s) of the Contracts or the then
current prospectuses for the Contracts or confirmation statements or any other
Company materials; (d) engage in exchanges of Contracts for other deferred
annuity contracts; (e) pay or allow to be paid to any owner of a Contract
("Owner") or potential purchaser any rebate or other inducement not specified in
the Contracts; (f) give or offer to give any specific advice or opinion
regarding any specific tax or estate planning result for any individual or
entity in connection with the purchase of any Contract; or (g) take any other
action beyond the scope of the authority granted under this Agreement.
1.4 Except as required by law or regulation, ________ and the Company each
agree that all information communicated to it by the other, including, without
limitation, the names and addresses of Owners, shall be received in strict
confidence, shall be used by the recipient party only for the purposes of this
Agreement or the Participation Agreement of even date herewith among Fund,
________, ______________________________ and Company and that no such
information shall be disclosed by the recipient party, its agents or employees
without the prior written consent of the other party; provided, however, that
this Paragraph 1.4 shall not prohibit persistency programs with respect to the
Contracts.
2
<PAGE>
1.5 To the extent required by applicable law, including the administrative
requirements of regulatory authorities, or as mutually agreed between Company
and ________, Company reserves the right to modify any of the Contracts in any
respect whatsoever. Company reserves the right in its sole discretion to suspend
the sale of any of the Contracts, in whole or in part, or to accept or reject
any application for the sale of a Contract. Company agrees to notify ________
upon the occurrence of any event Company believes might necessitate a material
modification or suspension. Company and ________ further agree to provide prompt
notice to each other of any communications received from any regulatory
authority with respect to the sale of the Contracts.
1.6 ________ and Company agree that the Contracts will only be accepted
from agents with whom the Company has executed a General Agent Contract.
________ reserves the right to reject contracts submitted by agents whom
________ has determined to be market timers.
2. Representations and Warranties
2.1 Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under the laws of New York and that it has and will
maintain the capacity to issue all Contracts that may be sold; and that it is
properly licensed, qualified and in good standing to sell the Contracts in New
York.
2.2 Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act").
3
<PAGE>
2.3 Company represents and warrants that it has or will have registered the
Account as a unit investment trust in accordance with the provisions of the
Investment Company Act of 1940 (the "1940 Act") to serve as a segregated
investment account for the Contracts.
2.4 Company represents that the Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will maintain such treatment and that it will
notify ________ promptly upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5 ________ represents and warrants that it is lawfully established and
validly existing under the laws of the State of Delaware.
2.6 ________ does not charge any fees or expenses in connection with its
obligations under this Agreement.
2.7 ________ represents and warrants that it is and will be a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD")
and is and will be registered as a broker-dealer with the Securities and
Exchange Commission ("SEC"). ________ further represents that it and any
independent contractor acting on behalf of ________ under this Agreement will
perform its obligations hereunder in accordance with all applicable state and
federal laws and regulations, including without limitation the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act and state insurance laws of
which it is aware, provided ________ shall have no obligation to conduct an
independent investigation, or of which Company has made it aware by providing
________ with written advice.
4
<PAGE>
2.8 ________ represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws.
3. Contracts, Sales Material and Information
3.1 Company shall file the Contracts in New York and use its best efforts
to secure approval for sale of the Contracts in New York, and Company further
agrees to maintain such approvals.
3.2 In the event Company and ________ agree that ________ will prepare
sales literature or other promotional material for the Contracts pursuant to
Section 3.4 below, all such sales material prepared by ________ will be filed by
Company with the appropriate state regulatory authorities as required in New
York and Company will use its best efforts to effect prompt review of such
material in New York and to provide ________ with such assistance as ________
may reasonably require in order to develop sales literature in compliance with
the laws and regulations of New York. Company shall be responsible for filing
all such material in compliance with the federal securities law and the rules of
the NASD.
3.3 Company shall promptly inform ________ as to the status of all such
sales literature filings and shall promptly notify ________ of all approvals or
disapprovals of sales literature filings in New York. Except for internal
correspondence, inquiries, meetings and discussions, ________ shall promptly
provide Company with copies of correspondence and written reports of inquiries,
meetings and discussions concerning the Contracts and Owner complaints
respecting the Contracts.
3.4 ________ shall not, unless otherwise agreed to by Company, create any
sales literature or other promotional material for the Contracts. In the event
Company
5
<PAGE>
and ________ agree that ________ will prepare sales literature or other
promotional material for the Contracts, ________ shall furnish to company each
piece of such literature or material at the earliest practical stage of its
development, and Company commits to comment upon, approve or disapprove all
proposed advertising within five (5) business days of receipt from ________. No
such material shall be used if Company reasonably objects to such use after
receipt of such material. Each Party agrees to cooperate with the other to
facilitate the other's ongoing efforts to comply with all applicable laws and
regulations.
3.5 Except with Company's consent, ________ shall not give any material
information or make any material representations on behalf of Company or
concerning Company, the Account, or the Contracts other than the information or
representations contained in: (a) a registration statement or prospectus for the
Contracts, as amended or supplemented from time to time; (b) published reports
for the Account which are in the public domain or approved by Company for
distribution to Contract Owners; or (c) sales literature or other promotional
material approved by Company.
3.6 No Party shall use the other Party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior written
consent of such Party.
3.7 ________ will provide to Company at least one complete copy of all
requests for no action letters, and all amendments thereto that relate to the
Company, the Account or the Contracts, (a) in draft form prior to the filing of
such document with the SEC or other regulatory authorities with reasonable time
allowed for Company to provide ________ with its comments, and (b) in final form
as filed.
6
<PAGE>
3.8 Company will provide to ________ at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters and all amendments to any of the above, that relate to the Contracts,
(a) in draft form prior to the filing of such document with the SEC, with
reasonable time allowed for ________ to provide Company with its comments and
(b) in final form as filed.
3.9 For purposes of this Section 3, the phrase "sales literature or other
promotional material" shall be construed in accordance with all applicable
securities laws and regulations.
3.10 The Parties agree to review the Contracts during the last calendar
quarter of each year for possible changes and will make their personnel
reasonably available for this purpose.
4. Indemnification
4.1 Indemnification By Company
4.1(a) Company agrees to indemnify and hold harmless ________ and its
directors and officers, and each person, if any, who controls it within the
meaning of Section 15 of the 1933 Act (the "Indemnified Party" for purposes of
this Section 4.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Company) or
litigation (including legal and other expenses), to which the Indemnified Party
may become subject under any statute, regulation, at common law or otherwise,
and:
7
<PAGE>
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the
Contracts or contained in the Contracts or any sales literature
for the Fund created by Company or agents of the company (or any
amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this section 4.1(a) shall not apply as to the Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with written
information furnished to Company or agents of Company by or on
behalf of ________ for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts; or
8
<PAGE>
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or persons under
its control, with respect to the sale or distribution of the
Contracts; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement or prospectus covering the Fund, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance
upon written information furnished to ________ by or on behalf of
Company; or
(iv) arise out of, or as a result of, any failure by Company
or persons under its control to provide the services and furnish
the materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation and/or warranty made by Company or persons under
its control in this Agreement or arise out of or result from any
other material breach of this Agreement by Company or persons
under its control; or
(vi) arise out of or are based upon noncompliance by
________ or its independent contractors with applicable state
9
<PAGE>
insurance laws in connection with ________' obligations under
this Agreement unless ________ was aware of such law or Company
made ________ aware of such law by providing ________ with
written advice;
as limited by and in accordance with the provisions of sections 4.1(b) and
4.1(c) hereof.
4.1(b) Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which the Indemnified Party would otherwise by subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Company, the Account or the Contracts, whichever is applicable, or to the
extent of such Indemnified Party's negligence.
4.1(c) Company shall not be liable under this indemnification provision
with respect to any claim made against the Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Company of any such claim shall not
relieve Company from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Party, Company shall be entitled to
participate, at its own expense, in the defense of such action provided that it
gives written notice of such intention to the Indemnified Parties. Company also
shall be
10
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entitled to assume and to control the defense thereof. After notice
from Company to such Party of Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Company will not be liable to such Party under this
Agreement for any legal or other expenses subsequently incurred by such Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
4.1(d) The Indemnified Party will promptly notify Company of the
commencement of any litigation or proceedings against it in connection with the
issuance or sale of the Contracts or the subject matter of this Agreement.
4.2 Indemnification by ________
4.2(a) ________ agrees to indemnify and hold harmless Company and
each of its directors and officers and each person, if any, who controls Company
within the meaning of Section 15 of the 1933 Act (the "Indemnified Party" for
purposes of this Section 4.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
________) or litigation (including legal and other expenses) to which the
Indemnified Party may become subject under any statute, at common law or
otherwise, and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature for the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or
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<PAGE>
necessary to make the statements therein not
misleading, provided that this section 4.2(a) shall not apply as
to the Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to ________ by or
on behalf of Company for use in the registration statement or
prospectus for the Fund (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts;
or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of ________ or persons under
its control, with respect to the sale or distribution of the
Contracts (it is understood that the persons who are involved in
the sale or distribution of the contracts are not under the
control of ________); or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon written information furnished to
Company by or on behalf of ________; or
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(iv) arise out of, or as a result of, any failure by
________ or persons under its control to provide the services and
furnish the materials contemplated under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by ________ or persons under
its control in this Agreement or arise out of or result from any
other material breach of this Agreement by ________ or persons
under its control;
as limited by and in accordance with the provisions of Sections 4.2(b) and
4.2(c) hereof.
4.2(b) ________ shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which the Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement, or to
the extent of such Indemnified Party's negligence.
4.2(c) ________ shall not be liable under this indemnification provision
with respect to any claim made against the Indemnified Party unless such
Indemnified Party shall have notified ________ in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify ________ of any such claim shall not
relieve ________ from any liability which it may have to the
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Indemnified Party otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, ________
will be entitled to participate, at its own expense, in the defense thereof
provided that it gives written notice of such intention to the Indemnified
Parties. ________ also shall be entitled to assume and to control the defense
thereof. After notice from ________ to such Party of ________'s election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and ________ will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such Party independently in connection with the defense
thereof other than reasonable costs of investigation.
4.2(d) The Indemnified Party will promptly notify ________ of the
commencement of any litigation or proceedings against it in connection with the
issuance or sale of the Contracts or the subject matter of this Agreement.
5. Term and Termination
5.1 The initial term of this Agreement shall be from _________, 1996
through ____________, 1999. This Agreement shall thereafter automatically renew
from year to year, provided that either Party may terminate this Agreement
without cause upon sixty (60) days' advance written notice to the other.
5.2 Notwithstanding any other provision of this Agreement, ________ may
terminate this Agreement for cause on not less than thirty (30) days' prior
written notice to the Company, unless Company has cured such cause within thirty
(30) days of receiving such notice, for any material breach by Company of any
representation, warranty, covenant or obligation hereunder.
14
<PAGE>
5.3 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement for cause on not less than thirty (30) days' prior
written notice to ________, unless ________ has cured such cause within thirty
(30) days of receiving such notice, for any material breach by ________ of any
representation, warranty, covenant or obligation under the Contracts or
hereunder.
5.4 This Agreement shall automatically terminate at such time as there are
no subdivisions of the Account funding the Contracts that are invested in the
Fund.
5.5 Notwithstanding the termination of this Agreement, each Party shall
continue for so long as any Contracts remain outstanding to perform such of its
duties hereunder as are necessary to ensure the continued tax deferred status
thereof and the payment of benefits thereunder.
6. Notices
Any notice shall be deemed sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to ________:
________________
_____________________________
_____________________________
_____________________________
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If to Company:
__________________
Providian Corporation
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40202
With a copy to:
First Providian Life and Health Insurance Company
520 Columbia Drive
Johnson City, New York 13790
Attention: Marketing Director
7. Miscellaneous
7.1 The captions in this Agreement are included for convenience of
reference only and in no way affect the construction or effect of any provisions
hereof.
7.2 If any portion of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
7.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
7.4 Each Party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance and securities regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement.
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7.5 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.
7.6 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
7.7 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of the other party
hereto.
7.8 In any dispute arising hereunder, each party waives its right to
demand a trial by jury and hereby consents to a bench trial of all such
disputes.
7.9 The terms of this Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of Kentucky; provided,
however, that all performances rendered hereunder shall be subject to compliance
with all applicable state and federal laws and regulations.
7.10 Sections 1.2 (excluding the first sentence), 1.3, 1.4, 1.5, 2, 3.6,
3.7, 3.8, 3.9, 4, 5.5, 6 and 7 hereof shall survive termination of this
Agreement
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first set forth above.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
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<PAGE>
__________________________
By: ______________________________
Name: ______________________________
Title: ______________________________
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<PAGE>
EXHIBIT 9(a)
[LETTERHEAD FOR PROVIDIAN]
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. 33-94204 (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. 33-94204) 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:
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<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.
33-94204) and related Prospectus of First Providian Life and Health Insurance
Company Separate Account C - Advisor's Edge.
/s/Ernst & Young LLP
Louisville, Kentucky
July 18, 1996
