<PAGE>
As Filed With The Securities And Exchange Commission On July 29, 1997
REGISTRATION NO. 33-94212
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 1 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 3 (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
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):
[X] 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. Pursuant to paragraph (b)(2) of Rule 24f-2 of the
Investment Company Act of 1940, the Registrant need not file a Rule 24f-2 Notice
because it did not sell any securities pursuant to such declaration during the
fiscal year ended December 31, 1996.
<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
- -------
FORM N-4 PROSPECTUS CAPTION
- -------- ------------------
<S> <C>
1. Cover Page.................... Cover Page
2. Definitions................... GLOSSARY
3. Synopsis...................... HIGHLIGHTS; FEE TABLE
4. Condensed Financial
Information................... Condensed Financial Information
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;
Acacia Capital Corporation; Calvert
Group, Ltd.; The Dreyfus Responsibly
Invested Growth Fund, Inc.; 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 Prism
Annuity Statement of Additional
Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
<S> <C>
ITEM OF STATEMENT OF ADDITIONAL
- ------- -----------------------
FORM N-4 INFORMATION CAPTION
- -------- -------------------
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 PRISM 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 PRISM 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 five Portfolios sponsored by
Calvert Group, Ltd. ("Calvert") and one Portfolio offered by The Dreyfus
Socially Responsible Growth Fund, Inc. 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
annuity that provides for a Right to Cancel Period for a minimum 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 six
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 two open-end, diversified investment
companies):
.Calvert Responsibly Invested Capital Accumulation Portfolio
.Calvert Responsibly Invested Global Equity Portfolio
.Calvert Responsibly Invested Balanced Portfolio
.Calvert Responsibly Invested Money Market Portfolio
.Calvert Responsibly Invested Strategic Growth Portfolio
.Dreyfus Socially Responsible Growth Portfolio
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 from 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) and may be subject to a surrender charge of up to 7%. If you elect an
Annuity Payment Option, Annuity Payments may be received on a fixed and/or
variable basis. You also have significant flexibility in choosing the Annuity
Date on which Annuity Payments begin.
This Prospectus sets forth the information you should know before investing in
the Contract. It must be accompanied by the 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 July 31, 1997.
FM-1164 (NY)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GLOSSARY................................................................... 2
HIGHLIGHTS................................................................. 5
FEE TABLE.................................................................. 7
Condensed Financial Information............................................ 9
Financial Statements....................................................... 9
Performance Measures....................................................... 9
Additional Performance Measures............................................ 9
Yield and Effective Yield.................................................. 10
The Company and the Separate Account....................................... 11
Acacia Capital Corporation................................................. 11
Calvert Group, Ltd......................................................... 12
The Dreyfus Socially Responsible Growth Fund, Inc.......................... 12
The Portfolios............................................................. 12
CONTRACT FEATURES.......................................................... 13
Right to Cancel Period................................................... 13
Contract Application and Purchase Payments............................... 13
Purchasing by Wire....................................................... 14
Allocation of Purchase Payments.......................................... 14
Charges and Deductions................................................... 14
Accumulated Value........................................................ 16
Exchanges Among the Portfolios........................................... 16
Full and Partial Withdrawals............................................. 16
Systematic Withdrawal Option............................................. 17
Dollar Cost Averaging Option............................................. 17
IRS-Required Distributions............................................... 18
Minimum Balance Requirement.............................................. 18
Designation of an Annuitant's Beneficiary................................ 18
Death of Annuitant Prior to Annuity Date................................. 19
Annuity Date............................................................. 19
Lump Sum Payment Option.................................................. 19
Annuity Payment Options.................................................. 19
Deferment of Payment..................................................... 21
FEDERAL TAX CONSIDERATIONS................................................. 21
GENERAL INFORMATION........................................................ 26
</TABLE>
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.
2
<PAGE>
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 19), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 19), 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 19).
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.
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) Acacia Capital Corporation, a diversified, open-end
management investment company incorporated in Maryland and sponsored by
Calvert Group, Ltd., and (ii) The Dreyfus Socially Responsible Growth Fund,
Inc., an open-end, diversified management investment company incorporated
under Maryland law. The Separate Account invests in the Portfolios of the
Funds.
General Account - The account which contains all of our assets other than
those held in our separate accounts.
Net Purchase Payment - Any Purchase Payment less the Premium Tax, if any.
3
<PAGE>
Non-Qualified Contract - A Contract which does not qualify for favorable tax
treatment under the Internal Revenue Code of 1986, as amended (the "Code").
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 six Portfolios in the Providian PRISM Variable Annuity: the Calvert
Responsibly Invested Money Market Portfolio ("CRI Money Market"), the Calvert
Responsibly Invested Balanced Portfolio ("CRI Balanced"), the Calvert
Responsibly Invested Capital Accumulation Portfolio ("CRI Capital
Accumulation"), the Calvert Responsibly Invested Global Equity Portfolio ("CRI
Global Equity"), and the Calvert Responsibly Invested Strategic Growth
Portfolio ("CRI Strategic Growth") of Acacia Capital Corporation; and the
Dreyfus Socially Responsible Growth Portfolio ("Dreyfus Socially Responsible
Growth") of The Dreyfus Socially Responsible Growth Fund, Inc. (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); each additional Purchase Payment must be at
least $500 for Non-Qualified Contracts or $50 for Qualified Contracts.
Purchase Payments may be made at any time prior to the Annuity Date as long as
the Annuitant is living.
Qualified Contract - An annuity contract as defined under Sections 403(b) and
408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.
Separate Account - That portion of First Providian Life and Health Insurance
Company Separate Account C dedicated to the Contract. The Separate Account
consists of assets that are segregated by First Providian Life and Health
Insurance Company and, for Contract Owners, invested in the Portfolios of
Acacia Capital Corporation and The Dreyfus Socially Responsible Growth Fund,
Inc. 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 six Portfolios of the Funds.
Surrender Value - The Accumulated Value, less any applicable contingent
deferred sales load (i.e., surrender charge) and any Premium Taxes incurred
but not yet deducted.
Valuation Period - The relative performance of your Contract is measured by
the Accumulation Unit Value. This value is calculated each Valuation Period. A
Valuation Period is defined as the period of time between the close of
business on one Business Day and the close of business on the following
Business Day.
4
<PAGE>
HIGHLIGHTS
YOU CAN FIND DEFINITIONS OF IMPORTANT TERMS IN THE GLOSSARY (PAGE 2).
THE PROVIDIAN PRISM VARIABLE ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in five
Portfolios sponsored by Calvert Group, Ltd. and one Portfolio available
through The Dreyfus Socially Responsible Growth Fund, Inc. 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 deductible from gross income in the year such payments are
made, subject to certain statutory restrictions and limitations. (See "Federal
Tax Considerations," Page 21.)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among several Subaccounts of
the Separate Account. The Subaccounts in turn invest exclusively in five
Portfolios of Acacia Capital Corporation (the "Acacia Fund") and in one
Portfolio of The Dreyfus Socially Responsible Growth Fund, Inc. (the "Dreyfus
Fund") available as part of the Providian PRISM variable annuity. The Acacia
Fund offers five Portfolios: the CRI Money Market, CRI Balanced, CRI Capital
Accumulation, CRI Global Equity, and CRI Strategic Growth. The Dreyfus Fund
offers shares in Dreyfus Socially Responsible Growth. The assets of each
Portfolio are separate, and each Portfolio has distinct investment objectives
and policies as described in the corresponding Fund or Portfolio Prospectus.
........................................................................Page 12
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.
ANNUITANT'S BENEFICIARY
The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the
Annuity Date.
HOW TO INVEST
To invest in the Contract, please consult your adviser who will assist you in
completing the Contract application. You will need to select an Annuitant. The
Annuitant may not be older than age 75. The minimum initial Purchase Payment
is $5,000 for Non-Qualified Contracts, and $2,000 (or $50 monthly by payroll
deduction) for Qualified Contracts; subsequent Purchase Payments must be at
least $500 for Non-Qualified Contracts or $50 for Qualified Contracts. 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 13
5
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
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. 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
14
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 loads, fees and/or Premium Taxes that may have been subtracted from such
amount..................................................................Page 13
EXCHANGES
You may make unlimited Exchanges among the Portfolios, provided you maintain a
minimum balance of $250, except in cases where Purchase Payments are made by
monthly payroll deduction, in each Subaccount to which you have allocated a
portion of your Accumulated Value. No fee currently is imposed for such
Exchanges, however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year. Exchanges must not reduce the value of any
Subaccount below $250, except in cases where Purchase Payments are made by
monthly payroll deduction, or that remaining amount will be transferred to
your other Subaccounts.............................................Page 16
DEATH BENEFIT
If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive a Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value or the
Adjusted Death Benefit on the date we receive due proof of the Annuitant's
death. During the first six Contract Years, the Adjusted Death Benefit will be
the sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken. The Annuitant's Beneficiary
may elect to receive these proceeds as a lump sum or as Annuity Payments. If
the Annuitant dies on or after the Annuity Date, any unpaid payments certain
will be paid, generally to the Annuitant's Beneficiary, in accordance with the
Contract...........................................................Page 19
ANNUITY PAYMENT OPTIONS
In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your annuity. We provide you with a variety of options as it relates
to those payments. At your discretion, payments may be either fixed or
variable or both. Fixed payouts are guaranteed for a designated period or for
life (either single or joint). Variable payments will vary depending on the
performance of the underlying Portfolio or Portfolios selected..........Page 19
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.
6
<PAGE>
CHARGES AND DEDUCTIONS UNDER THE CONTRACT
The Contract has an annual mortality and expense risk charge of 1.25%. The
Contract has no front-end sales load, and Contract Owners may withdraw up to
10% of the Accumulated Value once per year without incurring a surrender
charge. However, additional withdrawals are subject to a surrender charge of
up to 7% during the first six Contract Years.
The Contract also includes administrative charges and policy fees which pay
for administering the Contract, and management, advisory and other fees, which
reflect the costs of the Funds..........................................Page 15
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.......................Page 16
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 14). The purpose of this table is to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as a
purchaser of the Contract. The fee table reflects all expenses for both the
Separate Account and the Portfolios. For a complete discussion of Contract
costs and expenses, see "Charges and Deductions," page 14.
CONTRACTOWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases........................................ None
Contingent Deferred Sales Load (surrender charge)...................... 7%*
Exchange Fees.......................................................... None
ANNUAL CONTRACT FEE.................................................... $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge...................................... 1.25%
Administrative Charge.................................................. .15%
----
Total Annual Separate Account Expenses................................. 1.40%
</TABLE>
*Up to 10% of the Accumulated Value as of the last Contract Anniversary (10%
of the initial Net Purchase Payment(s) during the first Contract Year) can
be withdrawn once per year or pursuant to a series of systematic
withdrawals, without a surrender charge (the "Penalty Free Amount").
Additional withdrawals in excess of the Penalty Free Amount in the first
Contract Year, are subject to a 7% charge on the portion of the withdrawal
that consists of Net Purchase Payments. The charge decreases 1% per year
until after the sixth Contract Year, after which time there is no surrender
charge. The total surrender charges assessed will not exceed 8.5% of the
Purchase Payments under the Contract.
7
<PAGE>
PORTFOLIO ANNUAL EXPENSES
Except as indicated, the figures below are based on expenses for fiscal year
1996. In certain cases as indicated, the figures set forth below have been
restated to reflect anticipated expenses for fiscal year 1997. (The figures
state expenses as a percentage of each Portfolio's average net assets after
fee waivers and/or expense reimbursements, if applicable.)
<TABLE>
<CAPTION>
MANAGEMENT
AND ADVISORY OTHER TOTAL PORTFOLIO
EXPENSES EXPENSES ANNUAL EXPENSES
------------ -------- ---------------
<S> <C> <C> <C>
Calvert Responsibly Invested Balanced
Portfolio*.............................. 0.71% 0.13% 0.84%
Calvert Responsibly Invested Capital
Accumulation Portfolio*................. 0.90% 0.46% 1.36%
Calvert Responsibly Invested Money Market
Portfolio*.............................. 0.50% 0.28% 0.78%
Calvert Responsibly Invested Global
Equity Portfolio*....................... 1.10% 0.52% 1.62%
Calvert Responsibly Invested Strategic
Growth Portfolio*....................... 1.71% 0.59% 2.30%
Dreyfus Socially Responsible Growth
Portfolio**............................. 0.72% 0.24% 0.96%
</TABLE>
*The figures above are based on expenses for fiscal year 1996, and have been
restated to reflect an increase in transfer agency expenses of 0.03% for
each Portfolio expected to be incurred in 1997. Management and Advisory
Expenses for CRI Balanced, CRI Capital Accumulation, and CRI Strategic
Growth includes a performance adjustment, which depending on performance,
could cause the fee to be as high as 0.85% or as low as 0.55% for CRI
Balanced, as high as 0.95% or as low as 0.85% for CRI Capital Accumulation,
and as high as 1.85% or as low as 1.55% for CRI Strategic Growth. "Other
Expenses" reflect an indirect fee. Net fund operating expenses after
reductions for fees paid indirectly (again, restated) would be 0.81% for
CRI Balanced, 1.03% for CRI Capital Accumulation, 0.65% for CRI Money
Market, 1.21% for CRI Global, and 1.84% for CRI Strategic Growth.
Management and Advisory expenses for CRI Capital Accumulation, CRI
Strategic Growth, and CRI Global, include an administrative service fee of
0.10%, 0.20% and 0.10%, respectively, paid to Advisor's affiliate.
**In 1996, the advisor for the Dreyfus Socially Responsible Growth Portfolio
waived fees and/or reimbursed expenses; if it had not done so, the 1996
expenses would have been 0.75% for Management and Advisory Expenses, 0.24%
for Other Expenses and 0.99% for Total Portfolio Annual Expenses.
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.
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------- ------- ------- -------
<S> <C> <C> <C> <C>
Calvert Responsibly Invested Money Market
Portfolio............................... $ 86.91 $118.24 $152.23 $267.45
Calvert Responsibly Invested Balanced
Portfolio............................... 87.51 120.05 155.27 273.52
Calvert Responsibly Invested Capital
Accumulation Portfolio.................. 92.71 135.66 181.17 324.54
Calvert Responsibly Invested Global
Equity Portfolio........................ 95.30 143.37 193.86 348.99
Calvert Responsibly Invested Strategic
Growth Portfolio........................ 102.03 163.24 226.24 409.72
Dreyfus Socially Responsible Growth
Portfolio............................... 88.72 123.68 161.31 285.55
</TABLE>
The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) you do not surrender your Contract or you annuitize at the end
of each period.
<TABLE>
<CAPTION>
3 10
1 YEAR YEARS 5 YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
Calvert Responsibly Invested Money Market
Portfolio................................. $23.91 $73.51 $125.56 $267.45
Calvert Responsibly Invested Balanced
Portfolio................................. 24.51 75.32 128.59 273.52
Calvert Responsibly Invested Capital
Accumulation Portfolio.................... 29.71 90.87 154.42 324.54
Calvert Responsibly Invested Global Equity
Portfolio................................. 32.30 98.55 167.08 348.99
Calvert Responsibly Invested Strategic
Growth Portfolio.......................... 39.03 118.35 199.38 409.72
Dreyfus Socially Responsible Growth
Portfolio.................................. 25.72 78.93 134.61 285.55
</TABLE>
The Annual Contract Fee is reflected in these examples as a percentage equal
to the total amount of fees collected during a calendar year divided by the
estimated total average net assets of the Portfolios during the same calendar
8
<PAGE>
year. The fee is assumed to remain the same in each year of the above periods.
(With respect to partial year periods, if any, in the examples, the Annual
Contract Fee is pro-rated to reflect only the applicable portion of the
partial year period.) The Annual Contract Fee will be deducted on each
Contract Anniversary and upon surrender, on a pro rata basis, from each
Subaccount. The Company may deduct Premium Taxes, if any, as they are incurred
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.
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1996 through December 31, 1996)
<TABLE>
<CAPTION>
CRI CRI CRI CRI DREYFUS
MONEY CRI CAPITAL GLOBAL STRATEGIC SOCIALLY
MARKET BALANCED ACCUM. EQUITY GROWTH RESPONSIBLE
------ -------- ------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
12/31/96............... 10.000 10.000 10.000 10.000 10.000 10.000
Number of units
outstanding as of:
12/31/96............... 0 0 0 0 0 0
</TABLE>
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 end of the most recent fiscal year, the Subaccounts
of the Separate Account which invest in the Portfolios offered by the
Providian PRISM Variable Annuity had not commenced operations with respect to
the Portfolios, and consequently had no assets or liabilities.
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the CRI Money Market Subaccount, the yield of the other
Subaccounts, and the total return of all Subaccounts may appear in reports and
promotional literature to current or prospective Contract Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission (the "SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of all applicable sales loads
(including the contingent deferred sales load), the Annual Contract Fee and
all other Portfolio, Separate Account and Contract level charges except
Premium Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE
ANNUAL TOTAL RETURN
The Company may show actual Total Return (i.e., the percentage change in the
value of an Accumulation Unit) for one or more Subaccounts with respect to one
or more periods. The Company may also show actual Average Annual Total Return
(i.e., the average annual change in Accumulation Unit Values) with respect to
one or more periods. For one year, the actual Total Return and the actual
Average Annual Total Return are effective annual rates of return and are
equal. For periods greater than one year, the actual Average Annual Total
Return is the effective annual
9
<PAGE>
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" above), the actual Total Return and actual Average Annual Total
Return also reflect these expenses. These percentages do not reflect the
Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect to one or more non-standardized base periods commencing at the
beginning of a calendar year. Total Return YTD figures reflect the percentage
change in actual Accumulation Unit Values during the relevant period. These
percentages reflect a deduction for the Separate Account and Portfolio
expenses, but do not include the Annual Contract Fee, any sales loads or
Premium Taxes (if any), which if included would reduce the percentages
reported by the Company.
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods
commencing at the beginning of a calendar year (or date of inception, if
during the relevant year) and ending at the end of such calendar year. One
Year Return figures reflect the percentage change in actual Accumulation Unit
Values during the relevant period. These percentages reflect a deduction for
the Separate Account and Portfolio expenses, but do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included
would reduce the percentage reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. These returns do not include
the Annual Contract fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the
effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
YIELD AND EFFECTIVE YIELD
The Company may also show yield and effective yield figures for the Subaccount
investing in shares of CRI Money Market. "Yield" refers to the income
generated by an investment in CRI Money Market over a seven-day period, which
is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in CRI Money Market is assumed to be reinvested. Therefore the
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. These figures do not reflect
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than CRI Money Market
for which the Company advertises yield, the Company shall furnish a yield
quotation referring to the Portfolio computed in the following manner: the net
investment income per Accumulation Unit earned during a recent one month
period is divided by the Accumulation Unit Value on the last day of the
period.
10
<PAGE>
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 offering
life insurance, annuity contracts, and accident and health insurance and is
admitted to do business in 10 states and the District of Columbia. As of
December 31, 1996, the Company had assets of approximately $324 million. The
Company is a wholly owned subsidiary of AEGON International N.V., which
conducts substantially all of its operations through subsidiary companies
engaged in the insurance business or in providing non-insurance financial
services. All of the stock of AEGON International N.V. is owned by AEGON N.V.
of the Netherlands. AEGON N.V., a holding company, conducts its business
through subsidiary companies engaged primarily in the insurance business.
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 six 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.
ACACIA CAPITAL CORPORATION
Acacia Capital Corporation is incorporated in Maryland and is an open-end
management investment company registered under the 1940 Act. This Fund
consists of several investment portfolios, including the Portfolios available
as part of the Providian PRISM Variable Annuity which are designed to provide
opportunities for investing in enterprises that make a significant
contribution to society through their products and services and the way they
do business.
11
<PAGE>
CALVERT GROUP, LTD.
Calvert Group, Ltd. is the sponsor of the Acacia Capital Corporation Fund and
is a subsidiary of Acacia Mutual Life Insurance Company of Washington, D.C.
Calvert Group, Ltd. is one of the largest investment management firms in the
Washington, D.C. area. As of December 31, 1996, Calvert Group, Ltd. managed
and administered assets in excess of $5.2 billion and more than 200,000
shareholder and depositor accounts.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company, of the type commonly referred to
as a mutual fund, that is intended to serve as a funding vehicle for variable
annuity contracts and variable life insurance policies to be offered by the
separate accounts of various life insurance companies. This Fund was
incorporated under Maryland law on July 20, 1992, and commenced operations on
October 7, 1993. The Dreyfus Corporation serves as this Fund's investment
adviser. NCM Capital Management Group, Inc. serves as this Fund's investment
sub-adviser and provides day-to-day management of this Fund's assets.
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.
THE CALVERT RESPONSIBLY INVESTED MONEY MARKET PORTFOLIO ("CRI MONEY MARKET")
This Portfolio seeks to provide the highest level of current income consistent
with liquidity, safety and security of capital, by investing in money market
instruments, including repurchase agreements with recognized securities
dealers and banks secured by such instruments, selected in accordance with the
Portfolio's investment and social criteria. CRI Money Market attempts to
maintain, but cannot assure, a constant net asset value of $1.00 per share.
THE CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO ("CRI BALANCED")
CRI Balanced seeks to achieve a total return above the rate of inflation
through an actively managed portfolio of stocks, bonds and money market
instruments selected with a concern for the investment and social impact of
each investment. Prior to May 1, 1995, the CRI Balanced Portfolio was called
the CRI Managed Growth Portfolio. Effective February 28, 1996, the former CRI
Bond Portfolio was merged into the CRI Balanced Portfolio.
THE CALVERT RESPONSIBLY INVESTED CAPITAL ACCUMULATION PORTFOLIO ("CRI CAPITAL
ACCUMULATION")
CRI Capital Accumulation seeks to provide long-term capital appreciation by
investing primarily in a nondiversified portfolio of the equity securities of
small- to mid-sized companies that are undervalued but which demonstrate a
potential for growth. The Portfolio will rely on its proprietary research to
identify stocks that may have been overlooked by analysts, investors, and the
media, and which generally have a market value of between $100 million and $5
billion, but which may be larger or smaller as deemed appropriate. Effective
February 28, 1996, the former CRI Equity Portfolio was merged into the CRI
Capital Accumulation Portfolio.
THE CALVERT RESPONSIBLY INVESTED GLOBAL EQUITY PORTFOLIO ("CRI GLOBAL EQUITY")
CRI Global Equity seeks to provide long-term growth of capital by investing
primarily in the common stocks and other equity securities of companies around
the world. Investments are generally broadly diversified by industry as well
as by region. The Portfolio will invest in U.S. and international concerns
with significant financial potential and which are believed to have the most
positive impact on our global society.
THE CALVERT RESPONSIBLY INVESTED STRATEGIC GROWTH PORTFOLIO ("CRI STRATEGIC
GROWTH")
CRI Strategic Growth seeks maximum long-term growth primarily through
investment in equity securities of companies that have little or no debt, high
relative strength and substantial management ownership. This Portfolio invests
primarily in common stocks or securities convertible into common stocks. CRI
Strategic Growth considers issuers of all sizes, industries, and geographic
markets, and does not seek interest income or dividends. The Portfolio invests
primarily in
12
<PAGE>
common stocks traded in the U.S. securities markets, including American
Depository Receipts (ADRs). While this Portfolio does not presently invest in
foreign securities, it may do so in the future.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ("DREYFUS SOCIALLY
RESPONSIBLE GROWTH")
Dreyfus Socially Responsible Growth seeks to provide capital growth through
equity investment in companies that, in the opinion of management, not only
meet traditional investment standards but which also show evidence that they
conduct their business in a manner that contributes to the enhancement of the
quality of life in America. Current income is secondary to this primary goal.
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 Prospectus for each Fund. THE FUNDS' OR
PORTFOLIOS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company as well as other
insurance companies or to a person or plan, including a pension or retirement
plan receiving favorable tax treatment under the Code, that qualifies to
purchase shares of the Funds under Section 817(h) of the Code. Although we
believe it is unlikely, a material conflict could arise among the interests of
the Separate Account and one or more of the other participating separate
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 as described below and in the
Contract. The Company reserves the right to make any modification to conform
the Contract to, or give the Contract Owner the benefit of, any federal or
state statute or any rule or regulation of the United States Treasury
Department.
RIGHT TO CANCEL PERIOD
A Right to Cancel Period exists for 10 days after you receive the Contract (20
days for replacement) plus a 5 day grace period to allow for mail delivery.
You may cancel the Contract during the Right to Cancel Period by returning the
Contract to our Administrative Offices, 520 Columbia Drive, Johnson City, New
York 13790, or to the agent from whom you purchased the Contract or mailing it
to us at P.O. Box 1950, Binghamton, New York 13902. Upon cancellation, the
Contract is treated as void from the Contract Date and when we receive the
Contract, we will return the Accumulated Value of your Purchase Payment(s)
invested in the Portfolios plus any loads, fees and/or Premium Taxes that may
have been subtracted from such amount.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should send your completed application
and your initial Purchase Payment to the address indicated on your
application, or to such other location as the Company may from time to time
designate. If you wish to make personal delivery by hand or courier to the
Company of your completed application and initial Purchase Payment (rather
than through the mail), you must do so at our Administrative Offices, 520
Columbia Drive, Johnson City, NY 13790. Your initial Purchase Payment for a
Non-Qualified Contract must be equal to or greater than the $5,000 minimum
investment requirement. The initial Purchase Payment for a Qualified Contract
must be equal to or greater than $2,000 (or you may establish a payment
schedule of $50 a month by payroll deduction).
The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within two Business Days after acceptance of the
application and the initial Purchase Payment. Acceptance is subject to the
application being received in good order, and the Company reserves the right
to reject any application or initial Purchase Payment.
13
<PAGE>
If the initial Purchase Payment cannot be credited because the application is
incomplete, we will contact the applicant, explain the reason for the delay
and will refund the initial Purchase Payment within five Business Days, unless
the applicant instructs us to retain the initial Purchase Payment and credit
it as soon as the necessary requirements are fulfilled.
Additional Purchase Payments may be made at any time prior to the Annuity
Date, as long as the Annuitant is living. Any additional Purchase Payments
must be for at least $500 for Non-Qualified Contracts, or $50 for Qualified
Contracts. If additional Purchase Payments are received prior to the close of
the New York Stock Exchange (generally 4:00 P.M. Eastern time) they will be
credited to the Accumulated Value at the close of business that same day.
Additional Purchase Payments received after the close of the New York Stock
Exchange are processed the next Business Day.
Total Purchase Payments may not exceed $1,000,000 without our prior approval.
The Company reserves the right to refuse to issue this Contract in cases
involving an exchange for another Contract. In cases where a Contract Owner or
former Contract Owner requests the Company to reverse a surrender or
withdrawal transaction, whether full or partial, the Company reserves the
right to refuse such requests or to grant such requests on the condition that
the Contract's Accumulated Value be adjusted to reflect appropriate investment
results, administrative costs, or loss of interest during the relevant period.
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at 1-800-
250-1828.
ALLOCATION OF PURCHASE PAYMENTS
You specify in the Contract application how your Net Purchase Payments will be
allocated. You may allocate each Net Purchase Payment to one or more of the
Portfolios as long as such portions are whole number percentages provided that
no Portfolio may contain a balance less than $250, 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 by sending us the appropriate Company
form or by complying with other designated Company procedures.
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your Portfolios immediately upon our receipt thereof, IN WHICH
CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD.
CHARGES AND DEDUCTIONS
No sales load is deducted from Purchase Payments and up to 10% of the
Accumulated Value as of the last Contract Anniversary (10% of the initial Net
Purchase Payment during the first Contract Year) can be withdrawn once per
year, or pursuant to a series of systematic withdrawals, without a surrender
charge (the "Penalty Free Amount"). Additional withdrawals in excess of the
Penalty Free Amount are subject to a surrender charge according to the
following schedule on the portion of such withdrawal that consists of Net
Purchase Payments:
<TABLE>
<CAPTION>
SURRENDER
CONTRACT YEAR CHARGE
------------- ---------
<S> <C>
1.......................................... 7%
2.......................................... 6%
3.......................................... 5%
4.......................................... 4%
5.......................................... 3%
6.......................................... 2%
7.......................................... 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. There will be no surrender charge assessed on the
death of the Annuitant or after the sixth Contract Year.
14
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contract. The annual charge is assessed daily based on the net
asset value of the Separate Account. The annual mortality and expense risk
charge is 1.25% of the net asset value of the Separate Account.
We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on
us. Conversely, if the charge proves more than sufficient, any excess will be
added to the Company surplus and will be used for any lawful purpose,
including any shortfall on the costs of distributing the Contract.
The mortality risk borne by us under the Contract, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.
The expense risk borne by us under the Contract is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.
ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE
An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is
assessed per Contract, not per Portfolio chosen. The Annual Contract Fee will
be deducted on each Contract Anniversary and upon surrender, on a pro rata
basis, from each Subaccount. These deductions represent reimbursement for the
costs expected to be incurred over the life of the Contract for issuing and
maintaining each Contract and the Separate Account.
EXCHANGES
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
less than $250, except in cases where Purchase Payments are made by monthly
payroll deduction. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of 12 per Contract Year.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The contingent deferred sales load or other administrative charges or fees may
be reduced for sales of Contracts to a trustee, employer or similar entity
representing a group where the Company determines that such sales result in
savings of sales and/or administrative expenses. In addition, directors,
officers and bona fide full-time employees (and their spouses and minor
children) of the Company, its ultimate parent company, AEGON N.V., and certain
of their affiliates, and the Calvert Group, Ltd., its wholly-owned affiliates
and certain sales representatives for the Contract are permitted to purchase
Contracts with substantial reduction of the contingent deferred sales load or
other administrative charges or fees or with a waiver or modification of
certain minimum or maximum purchase and transaction amounts or balance
requirements. Contracts so purchased are for investment purposes only and may
not be resold except to the Company.
In no event will reduction or elimination of the contingent deferred sales
loads or other fees or charges or waiver or modification of transaction or
balance requirements be permitted where such reduction, elimination, waiver or
modification will be unfairly discriminatory to any person. Additional
information about reductions in charges is contained in the Statement of
Additional Information.
TAXES
Under present laws, the Company will not incur New York state or local taxes.
If there is a change in state or local tax laws, charges for such taxes may be
made. The Company does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contract. (See "Federal
15
<PAGE>
Tax Considerations," page 21.) 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 Contract, the Accumulated Value of the Contract would be
correspondingly adjusted by any provision of charge for such taxes.
PORTFOLIO EXPENSES
The value of the assets in the Separate Account reflects 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 the Funds' Prospectuses and
Statements of Additional Information.
ACCUMULATED VALUE
At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the Accumulated
Value from the previous Business Day increased by: (i) any additional Net
Purchase Payments received by the Company and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s); and
reduced by: (i) any decrease in the Accumulated Value due to investment
results of the selected Portfolio(s), (ii) a daily charge to cover the
mortality and expense risks assumed by the Company, (iii) any charge to cover
the cost of administering the Contract, (iv) any partial withdrawals, and (v)
any charges for any Exchanges made after the first twelve in any Contract
Year.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds. Requests for Exchanges, received by mail or by
telephone, prior to the close of the New York Stock Exchange (generally 4:00
P.M. Eastern time) are processed at the close of business that same day.
Requests received after the close of the New York Stock Exchange are processed
the next Business Day. If you experience difficulty in making a telephone
Exchange your Exchange request may be made by regular or express mail. It will
be processed on the date received.
To take advantage of the privilege of initiating transactions by telephone,
you must first elect the privilege by completing the appropriate section of
the application or by completing a separate telephone authorization form at a
later date. To take advantage of the privilege of authorizing a third party to
initiate transactions by telephone, you must first complete a third party
authorization form.
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, the Funds nor
Calvert Group Ltd. 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
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$500. The amount available for full or partial withdrawal is the Surrender
Value at the end of the Valuation Period during which the written request for
withdrawal is received. The Surrender Value is an amount equal to the
Accumulated Value, less any applicable contingent deferred sales load (i.e.,
surrender charge), and any Premium Taxes incurred but not yet deducted. The
withdrawal amount may be paid in a lump sum to you, or if elected, all or any
part may be paid out under an Annuity Payment Option. (See "Annuity Payment
Options," page 19.)
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 21.)
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 10% 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 21.)
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 discontinue the Systematic Withdrawal
Option at any time by notifying us in writing at least 30 days prior to your
next scheduled withdrawal date.
A surrender charge will apply when withdrawals in any of the first six
Contract Years exceed 10% of that year's beginning Accumulated Value. (See
"Charges and Deductions," page 14.) Like any other partial withdrawal, each
Systematic Withdrawal is subject to taxes on earnings. If the Contract Owner
has not provided the Company with a written election not to have federal
income taxes withheld, the Company must by law withhold 10% from the taxable
portion of the Systematic 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 21.) You
may wish to consult a tax adviser regarding any tax consequences that might
result prior to electing the Systematic Withdrawal Option.
We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days written notice. We also reserve the right to charge a fee for
such service.
DOLLAR COST AVERAGING OPTION
If you have at least $5,000 of Accumulated Value in the CRI Money Market, you
may choose to have a specified dollar amount transferred from this Portfolio
to other Portfolios in the Separate Account on a monthly basis. The main
objective of Dollar Cost Averaging is to shield your investment from short
term price fluctuations. Since the same dollar amount is transferred to other
Portfolios each month, more units are purchased in a Portfolio if the value
per unit is low and less units are purchased if the value per unit is high.
Therefore, a lower average cost per unit may be achieved over the long term.
This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.
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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 CRI Money Market when elected, divided by 12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the proportions
you specify on the appropriate Company form, or, if none are specified, in
accordance with your original investment allocation. If, on any transfer date,
the Accumulated Value is equal to or less than the amount you have elected to
have transferred, the entire amount will be transferred and the option will
end. You may change the transfer amount once each Contract Year, or cancel
this option by sending the appropriate Company form to our Administrative
Offices which must be received at least seven days before the next transfer
date.
IRS-REQUIRED DISTRIBUTIONS
Prior to the Annuity Date, if you or, if applicable, a Joint Owner dies before
the entire interest in the Contract is distributed, the value of the Contract
must be distributed to the Owner's Designated Beneficiary (unless the Contract
Owner was also the Annuitant--in which case the Annuitant's Beneficiary is
entitled to the Death Benefit) as described in this section so that the
Contract qualifies as an annuity under the Code. If the death occurs on or
after the Annuity Date, the remaining portions of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of death. If the death occurs before the Annuity Date, the
entire interest in the Contract will be distributed within five years after
date of death or be paid under an Annuity Payment Option under which payments
will begin within one year of the Contract Owner's death and will be made for
the life of the Owner's Designated Beneficiary or for a period not extending
beyond the life expectancy of that beneficiary. The Owner's Designated
Beneficiary is the person to whom ownership of the Contract passes by reason
of death.
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 $250, 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;
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(d) Unless otherwise provided, if an Annuitant's Beneficiary dies at the
same time as the Annuitant, the proceeds will be paid as though the
Annuitant's Beneficiary had died first. Unless otherwise provided, if
an Annuitant's Beneficiary dies within 15 days after the Annuitant's
death and before the Company receives due proof of the Annuitant's
death, proceeds will be paid as though the Annuitant's Beneficiary had
died first.
If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's
named beneficiary(ies) when due. If no Annuitant's Beneficiary survives the
Annuitant, the right to any amount payable will pass to the Contract Owner. If
the Contract Owner is the Annuitant, this right will pass to his or her
estate. If a Life Annuity with Period Certain option was elected, and if the
Annuitant dies on or after the Annuity Date, any unpaid payments certain will
be paid to the Annuitant's Beneficiary or your designated Payee.
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and
is payable upon receipt of due Proof of Death of the Annuitant as well as
proof that the Annuitant died prior to the Annuity Date. Upon receipt of this
proof, the Death Benefit will be paid within seven days, or as soon thereafter
as the Company has sufficient information about the Annuitant's Beneficiary to
make the payment. The Annuitant's Beneficiary may receive the amount payable
in a lump sum cash benefit or under one of the Annuity Payment Options.
The Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive due Proof of Death; or
(2) The Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit will be the
sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken.
ANNUITY DATE
You may specify an Annuity Date in the application, which can be no later than
the first day of the month after the Annuitant's 85th birthday, without the
Company's prior approval. The Annuity Date is the date that Annuity Payments
are scheduled to commence under the Contract unless the Contract has been
surrendered or an amount has been paid as proceeds to the designated
Annuitant's Beneficiary prior to that date.
You may advance or defer the Annuity Date. However, the Annuity Date may not
be advanced to a date prior to 30 days after the date of receipt of a written
request or, without the Company's prior approval, deferred to a date beyond
the first day of the month after the Annuitant's 85th birthday. The Annuity
Date may only be changed by written request during the Annuitant's lifetime
and must be made at least 30 days before the then-scheduled Annuity Date. The
Annuity Date and Annuity Payment Options available for Qualified Contracts may
also be controlled by endorsements, the plan or applicable law.
LUMP SUM PAYMENT OPTION
You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated
Value, less any applicable deferred sales load (i.e., surrender charge) and
any Premium Taxes incurred but not yet deducted.
ANNUITY PAYMENT OPTIONS
All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This
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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.
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.
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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 adviser regarding the tax consequences of purchasing a Contract.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's understanding of the
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of the federal income tax
laws, the Treasury regulations or the current interpretations by the Internal
Revenue Service. We reserve the right to make uniform changes in the Contract
to the extent necessary to continue to qualify the Contract as an annuity. For
a discussion of federal income taxes as they relate to the Funds, please see
the accompanying Prospectuses for the Funds.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Contracts Owned by Non-Natural Persons" and "Diversification
Standards," page 23.)
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. Partial withdrawals are generally
taken out of earnings first and then Purchase Payments.
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.
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Generally, the entire amount distributed from a Qualified Contract is taxable
to the Contract Owner. In the case of Qualified Contracts with after tax
contributions, the Contract Owner is entitled to exclude the portion of each
withdrawal or annuity payment constituting a return of after tax contributions.
Once all of your after tax contributions have been returned to you on a non-
taxable basis, subsequent withdrawals or annuity payments are fully taxable as
ordinary income. Since the Company has no knowledge of the amount of after tax
contributions you have made, you will need to make this computation in the
preparation of your federal income tax return.
Withholding of federal income taxes on all distributions is required unless the
recipient elects not to have any amounts withheld and properly notifies the
Company of that election. In certain situations, taxes will be withheld on
distributions to non-resident aliens at a 30% flat rate unless an exemption
from withholding applies under an applicable tax treaty.
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); (vii) allocable
to the investment in the Contract prior to August 14, 1982; or (viii) 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 penalty tax that would have been
imposed but for item (iii) above, plus interest for the deferral period. The
foregoing rule applies if the modification takes place (a) before the close of
the period that is five years from the date of the first payment and after the
taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59 1/2.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not a separate entity from the
Company and its operations form a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of the Separate
Account are reinvested and taken into account in determining the Accumulated
Value. Under existing federal income tax law, the Separate Account's investment
income, including realized net capital gains, is not taxed to the Company. The
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).
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If the Contract Owner is not an individual, the death of the "primary
Annuitant" (as defined under the Code) is treated as the death of the Contract
Owner. The primary Annuitant is the individual who is of primary importance in
affecting the timing or the amount of payout under a Contract. In addition,
when the Contract Owner is not an individual, a change in the primary
Annuitant is treated as the death of the Contract Owner. Finally, in the case
of joint Contract Owners, the distribution will be required at the death of
the first of the Contract Owners.
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger tax on the gain in
the Contract to the Contract Owner at the time of such transfer. The
investment in the Contract of the transferee will be increased by any amount
included in the Contract Owner's income. This provision, however, does not
apply to those transfers between spouses or incident to a divorce which are
governed by Code Section 1041(a).
CONTRACTS OWNED BY NON-NATURAL PERSONS
Where the Contract is held by a non-natural person (for example, a
corporation), the Contract is generally not treated as an annuity contract for
federal income tax purposes, and the income on that Contract (generally the
increase in the net Accumulated Value less the payments) is includible in
taxable income each year. The rule does not apply where the non-natural person
is only a nominal owner such as a trust or other entity acting as an agent for
a natural person. 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, as defined under Section 72(u)(4) of the Code.
ASSIGNMENTS
A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating such
a transfer or assignment of a Contract should contact a tax adviser with
respect to the potential tax effects of such a transaction.
MULTIPLE CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent of
the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of Code
Section 72(e) through the serial purchase of annuity contracts or otherwise.
In addition, there may be other situations in which the Treasury Department
may conclude that it would be appropriate to aggregate two or more Contracts
purchased by the same Contract Owner. The aggregation rules do not apply to
immediate annuities as defined under Section 72(u)(4) of the Code.
Accordingly, a Contract Owner should consult a tax adviser before purchasing
more than one Contract or other annuity contracts.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, the Separate Account will be
required to diversify its investments. The Regulations generally require that
on the last day of each quarter of a calendar year, no more than 55% of the
value of the Separate Account is represented by any one investment, no more
than 70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is represented by
any four investments. A "look-through" rule applies that suggests that each
Subaccount of the Separate Account will be tested for compliance with the
percentage limitations by looking through to the assets of the Portfolios in
which each such division invests. All securities of the same issuer are
treated as a single investment. Each government agency or instrumentality will
be treated as a separate issuer for purposes of those limitations.
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In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or ruling are issued, the
Contract may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contract, as necessary,
to prevent the Contract Owner from being considered the owner of assets of the
Separate Account.
We intend to comply with the Regulations to assure that the Contract continues
to be treated as annuity contracts for federal income tax purposes.
403(B) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by
public school systems and certain tax-exempt organizations (Code Section
501(c)(3) organizations) for their employees under Section 403(b) of the Code;
except, as discussed below and subject to any conditions in an employer's
plan, a Contract used in connection with a Section 403(b) Plan offers the same
benefits and is subject to the same charges described in this Prospectus.
Under 403(b) Contracts, the Contract Owner and the Annuitant must be the same
person. 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 and your Contract must have 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 during the one-year period ending on the
day before the current loan is made, over the outstanding balance of loans on
the date of the current loan. 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 repaid in substantially level
payments, not less frequently than quarterly, over a five year term except for
certain loans for the purchase of a principal residence. If the loan interest
rate is adjusted, future payments will be adjusted so that the outstanding
loan balance is amortized in equal quarterly installments over the remaining
term. The remainder of each repayment will be credited to the individual
account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted
by law. The loan payment may be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. When a loan is made, unless you instruct us
to the
24
<PAGE>
contrary, 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 or if the Contract Owner dies with an
outstanding loan balance, the outstanding loan balance and accrued interest
will be deducted from the Surrender Value or the Death Benefit, respectively.
If an Annuity Payment Option is elected while there is an outstanding loan
balance, the outstanding loan balance and accrued interest will be deducted
from the Accumulated Value.
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 21.)
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 21.)
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.
25
<PAGE>
GENERAL INFORMATION
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio of the Funds, or of
another registered, open-end management investment company, if the shares of
the Portfolios are no longer available for investment, or, if in the Company's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Separate Account. To the extent required by the 1940 Act,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
New Portfolios may be established at the discretion of the Company. Any new
Portfolio will be made available to existing Contract Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Portfolios if marketing, tax, investment or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the 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 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 the Funds 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 of the Separate Account. 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 Funds. Voting
instructions will be solicited by written communication prior to such meeting
in accordance with procedures established by the Funds.
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 Contracts and the Company's right to issue such Contracts have been
passed upon by Kimberly A. Scouller, Esquire, on behalf of the Company.
26
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TABLE OF CONTENTS FOR THE PROVIDIAN PRISM VARIABLE ANNUITY
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
Money Market Subaccount Yields.......................................... 5
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 6
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return.................................................... 6
Non-Standardized Total Return Year-to-Date.............................. 6
Non-Standardized One Year Return........................................ 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 7
Individualized Computer Generated Illustrations......................... 8
PERFORMANCE COMPARISONS................................................... 8
SAFEKEEPING OF ACCOUNT ASSETS............................................. 10
THE COMPANY............................................................... 10
STATE REGULATION.......................................................... 10
RECORDS AND REPORTS....................................................... 11
DISTRIBUTION OF THE CONTRACTS............................................. 11
LEGAL PROCEEDINGS......................................................... 11
OTHER INFORMATION......................................................... 11
FINANCIAL STATEMENTS...................................................... 11
Audited Financial Statements............................................ 11
</TABLE>
27
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PROVIDIAN PRISM 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 Prism variable annuity contracts (the
"Contracts" and each a "Contract", respectively) offered by First Providian Life
and Health Insurance Company (the "Company"). You may obtain a copy of the
Prospectus dated July 31, 1997, 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.
July 31, 1997
TABLE OF CONTENTS PAGE
- ----------------- ----
THE CONTRACT ............................................................. 2
Computation of 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
Money Market Subaccount Yields .......................................... 5
30-Day Yield for Non-Money Market Subaccounts ........................... 5
Standardized Average Annual Total Return for Subaccounts ................ 5
ADDITIONAL PERFORMANCE MEASURES .......................................... 6
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return .................................................... 6
Non-Standardized Total Return Year-to-Date .............................. 6
Non-Standardized One Year Return ........................................ 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return ............................... 7
Individualized Computer Generated Illustrations ......................... 8
PERFORMANCE COMPARISONS .................................................. 8
SAFEKEEPING OF ACCOUNT ASSETS ............................................ 10
THE COMPANY .............................................................. 10
STATE REGULATION ......................................................... 10
RECORDS AND REPORTS ...................................................... 11
DISTRIBUTION OF THE CONTRACT ............................................. 11
LEGAL PROCEEDINGS ........................................................ 11
OTHER INFORMATION ........................................................ 11
FINANCIAL STATEMENTS ..................................................... 11
Audited Financial Statements........................................... 11
<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 Annuity Income Payments
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the Accumulated
Value (or the portion of the Accumulated Value used to provide variable
payments) is applied under the Annuity Tables contained in your Contract
corresponding to the Annuity Payment Option elected by the Contract Owner and
based on an assumed interest rate of 4%. This will produce a dollar amount which
is the first monthly payment. The Company may, at the time annuity income
payments are computed, offer more favorable rates in lieu of the guaranteed
rates specified in the Annuity Tables.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit Value
for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) = the Annuity Unit Value for the immediately preceding Business Day;
(b) = the Net Investment Factor for the day;
(c) = the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in
determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) = any increase or decrease in the value of the Subaccount due to
investment results;
(b) = a daily charge for the mortality and expense risks assumed by the
Company corresponding to an annual rate of 1.25%;
(c) = a daily charge for the cost of administering the contract
corresponding to an annual charge of .15% of the value of the
Subaccount, plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.
-2-
<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. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee 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 Subaccount.
Exceptions to Charges and to Transaction or Balance Requirements
The Company may reduce any applicable sales loads and reduce administrative
charges or other deductions from Purchase Payments in certain situations where
the Company expects to realize significant economies of scale with respect to
the sales of Contracts. This is possible because sales costs do not increase in
proportion to the dollar amount of the Contracts sold. For example, the per-
dollar transaction cost for a sale of a Contract equal to $5,000 is generally
much higher than the per-dollar cost for a sale of 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, AEGON N.V., and certain of their affiliates and certain sales
representatives for the Contract. The Company may also grant waivers or
modifications of certain minimum or maximum purchase and transaction amounts or
balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
GENERAL MATTERS
Non-Participating
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of the Company.
Misstatement of Age or Sex
The Company may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, the
Company will change the Annuity Benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced, the
Company will (1) in the case of underpayment, pay the full amount due with the
next payment; (2) in the case of overpayment, deduct the amount due from one or
more future payments.
-3-
<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 CRI Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.
-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.)
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the CRI Money Market Subaccount will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of Subaccount expenses accrued
over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
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.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
-5-
<PAGE>
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 10 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.
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentage reported by the Company.
-6-
<PAGE>
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios (calculated beginning from the
end of the year of inception for each Portfolio) and may assume the Contract was
in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. However, they do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which if
included would reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the
effective annual rate of return that would have produced the ending Accumulated
Value of the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in the Portfolios based on monthly reinvestment of dividends over a specific
period of time.
-7-
<PAGE>
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 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:
-8-
<PAGE>
. 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.
. 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.
-9-
<PAGE>
. DOW JONES UTILITY INDEX, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
. THE CONSUMER PRICE INDEX, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Assets are
kept physically segregated and held separate and apart from the Company's
General Account assets. The General Account contains all of the assets of the
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 in PLH and
61%, 15%, and 20% interests in PLH, respectively, are held by Commonwealth Life
Insurance Company, Peoples Security Life Insurance Company, and Capital Liberty,
L.P. Commonwealth Life Insurance Company and Peoples Security Life Insurance
Company are each wholly owned by Capital General Development Corporation, which
in turn is wholly owned by Providian Corporation. A 3% interest in Capital
Liberty, L.P. is owned by Providian Corporation, which is the general partner,
and 78% and 19% interests, respectively, are held by two limited partners,
Commonwealth Life Insurance Company and Peoples Security Life Insurance Company.
Providian Corporation is a wholly owned subsidiary of AEGON International N.V.
AEGON International N.V. is a wholly owned subsidiary of AEGON N.V.
Vereniging AEGON (a Netherlands membership association) has a 53% interest in
AEGON N.V.
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 31st of the
preceding calendar year. Periodically, the New York Superintendent of Insurance
examines the financial condition of the Company, including the liabilities and
reserves of the Separate Account.
In addition, the Company is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain
contract rights and provisions depends on state approval and/or filing and
review processes. Where required by state law or regulation, the Contracts will
be modified accordingly.
-10-
<PAGE>
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
the Company or by its Administrator. As presently required by the Investment
Company Act of 1940 and regulations promulgated thereunder, the Company will
mail to all Contract Owners at their last known address of record, at least
semi-annually, reports containing such information as may be required under that
Act or by any other applicable law or regulation.
DISTRIBUTION OF THE CONTRACTS
Providian Securities Corporation ("PSC"), the principal underwriter of the
Contracts, is a wholly owned subsidiary of Providian Financial Services, Inc.,
which is a wholly owned subsidiary of Providian Corporation. PSC is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. Commissions
and expense allowance payments not to exceed, in the aggregate, 6.75% of
Purchase Payments may be paid to entities which sell the Contracts. Additional
payments may be made for other services not directly related to the sale of the
Contracts.
The Contracts are offered to the public through brokers licensed under the
federal securities laws and New York State insurance laws that have entered into
agreements with PSC. The offering of the Contracts is continuous and PSC does
not anticipate discontinuing the offering of the Contracts. However, PSC does
reserve the right to discontinue the offering of the Contracts.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. The Company is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
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, 1996 and 1995, 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
end of the most recent fiscal year, the Subaccounts of the Separate Account,
which invest in the Portfolios offered by the Providian Prism Variable Annuity,
had not commenced operations and consequently had no assets or liabilities with
respect thereto.
-11-
<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 or liabilities and
therefore, no financial statements are presented with respect
to the Separate Account.
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./2/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./2/
(4) (a) Form of variable annuity contract./2/
(5) (a) Form of Application./2/
(6) (a) Amended and Restated Charter of First Providian/2/
(b) By-Laws of First Providian as amended February 28,
1995./2/
(7) Not Applicable.
(8) (a) Participation Agreement between First Providian Life
and Health Insurance Company and The Dreyfus Socially
Responsible Growth Fund, Inc. dated November 15,
1996./1/
(b) Participation Agreement among Calvert Group, Ltd.;
Calvert Distributors, Inc.; Acacia Capital Corporation
and First Providian dated November 11, 1996./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.
/2/Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94212.
<PAGE>
Item 25. Directors and Officers of the Depositor
Principal business address is 520 Columbia Drive, Johnson City, New York
13790.
Chairman of the Board & President David J. Miller
Senior Vice President Martin Renninger
Senior Vice President Carol E. Ballentine
Vice President Brian Alford
Vice President Nathan C. Anguiano
Vice President Edward A. Biemer
Vice President Thomas P. Bowie
Senior Vice President, Treasurer &
Senior Financial Officer Dennis E. Brady
Vice President Gregory J. Garvin
Vice President Carolyn M. Johnson
Vice President/Underwriting William J. Kline
Vice President & Secretary Susan E. Martin
Vice President Kevin P. McGlynn
Vice President Thomas B. Nesspor
Vice President G. Eric O'Brien
Vice President Daniel H. Odum
Vice President and Actuary John C. Prestwood, Jr.
Vice President Nancy B. Schuckert
Vice President Joseph D. Strenk
Assistant Vice President Geralyn Barbato
Assistant Vice President &
Qualified Actuary Michael A. Cioffi
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President Patricia A. Lukacs
Assistant Vice President and
Consumer Services Officer Rosalie M. Smith
Assistant Controller Paul J. Lukacs
Assistant Controller Joseph C. Noone
Second Vice President Cindy L. Chanley
Second Vice President George E. Claiborne, Jr.
Second Vice President Michele Coan
Second Vice President Karen H. Fleming
Second Vice President Michael F. Lane
Second Vice President Robin Morgan
Second Vice President Frank J. Rosa
Second Vice President/Investments Terri L. Allen
Second Vice President/Investments Kirk W. Buese
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 Frederick B. Howard
<PAGE>
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments Mark E. Lamb
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Jon L. Skaggs
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
Jeffrey H. Goldberger Martin Renninger
Susan E. Martin Rosalie M. Smith
Kevin McGlynn John C. Prestwood, Jr.
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,
which is indirectly wholly owned by AEGON N.V. 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>
Jurisdication of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Monumental General Administrators, Maryland 100% Monumental General Provides management srvcs.
Inc. Insurance Group, Inc. to unaffiliated third party
administrator
Executive Management and Consultant Maryland 100% Monumental General Provides actuarial consulting
Services, Inc. Administrators, Inc. services
Monumental General Mass Marketing, Inc. Maryland 100% Monumental General Marketing arm for sale of
Insurance Group, Inc. mass marketed insurance
coverages
Diversified Investment Advisors, Inc. Delaware 100% AUSA Holding Co. Registered investment advisor
Diversified Investors Securities Corp. Delaware 100% Diversified Investment Broker-Dealer
Advsiors, Inc.
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
American Forum For Fiscal Fitness, Inc. Iowa 100% AUSA Holding Co. Marketing
Supplemental Ins. Division, Inc. Tennessee 100% AUSA Holding Co. Insurance
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
AEGON USA Investment Management, Inc. Iowa 100% AUSA Holding Co. Investment advisor
AEGON USA Realty Advisors, Inc. Iowa 100% AUSA Holding Co. Provides real estate
administrative and real
estate investment services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
Quantra Software Corporation Delaware 100% Quantra Corporation Manufacture and sell mortgage
loan and security management
software
Landauer Realty Advisors, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
AEGON USA Realty Management, Inc. Iowa 100% AEGON USA Real estate management
Realty Advisors, Inc.
USP Real Estate Investment Trust Iowa 21.89% First AUSA Life Real estate investment trust
Ins. Co.
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment trust
3.77% Bankers United Life
Assurance Company
3.38% Life Investors Co.
of America
1.97% AEGON USA Realty
Advisors, Inc.
.18% First AUSA Life Ins. Co.
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
Investors Warranty of America, Inc. Iowa 100% AUSA Holding Co. Provider of automobile
extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
AUSA Institutional Marketing Group, Inc. Minnesota 100% AUSA Holding Co. Insurance agency
AEGON Asset Management Services, Inc. Delaware 100% AUSA Holding Co. Registered investment advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
ISI Insurance Agency, Inc. California 100% Intersecurities, Inc. Insurance agency
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdication of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency, Inc. Insurance Agency
of Massachusetts, Inc.
Associated Mariner Financial Michigan 100% Intersecurities, Inc. Holding co./management
Group, Inc. - Holding company services
Mariner Financial Services, Inc. Michigan 100% Associated Mariner Broker/Dealer
Financial Group, Inc.
Mariner Planning Corporation Michigan 100% Mariner Financial Financial planning
Services, Inc.
Associated Mariner Agency, Inc. Michigan 100% Associated Mariner Insurance agency
Financial Group, Inc.
Mariner Agency of Hawaii, Inc. Hawaii 100% Associated Mariner Insurance agency
Agency, Inc.
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Associated Mariner Agency New Mexico 100% Associated Mariner Insurance agency
New Mexico, Inc. Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mariner Mortgage origination
Financial Group, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.
IDEX II Series Fund Massachusetts Various Mutual fund
IDEX Fund Massachusetts Various Mutual fund
IDEX Fund 3 Massachusetts Various Mutual fund
First AUSA Life Insurance Co. Maryland 100% AEGON USA, Inc. Insurance holding company
AUSA Life Insurance Co. Inc. New York 100% First AUSA Life Insurance
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Co. Ohio 100% First AUSA Life Ins. Co. Insurance
of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Management, Inc. Florida 100% Western Reserve Life Registered investment advisor
Assurance Co. of Ohio
Monumental Life Insurance Co. Maryland 100% First AUSA Life Ins. Co. Insurance
Monumental General Casualty Co. Maryland 100% Monumental Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% Monumental Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% Monumental Life Insurance
Insurance Company
The Whitestone Corporation Maryland 100% Monumental Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Providian Corporation Delaware 100% AEGON International N.V. Holding company
Providian Series Trust Massachusetts Various Mutual fund
Providian Agency Group, Inc. Kentucky 100% Providian Corp. Provider of services to ins. cos.
Benefit Plans, Inc. Delaware 100% Providian Corp. TPA for Peoples Security Life
Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdication of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
Providian Assignment Corp. Kentucky 100% Providian Corp. Administrator of structured
settlements
Providian Financial Services, Pennsylvania 100% Providian Corp. Financial services
Inc.
Providian Securities Corporation Pennsylvania 100% Providian Financial Broker-Dealer
Services, Inc.
Wannalancit Corp. Massachusetts 100% Providian Corp. Real estate holding company
Providian Investment Delaware 100% Providian Corp. Registered investment advisor
Advisors, Inc.
Providian Capital Delaware 100% Providian Corp. Provider of investment,
Management, Inc. marketing and admin. services
to ins. cos.
Providian Capital Management Delaware 100% Providian Capital Real estate and mortgage
Real Estate Services, Inc. Management, Inc. holding company
Capital Real Estate Delaware 100% Providian Corp. Furniture and equipment lessor
Development Corporation
Capital General Development Delaware 100% Providian Corp. Holding company
Corporation
Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation
Agency Holding I, Inc. Delaware 100% Commonwealth Life Investment subsidiary
Insurance Company
Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc. Investment subsidiary
Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Special purpose subsidiary
Insurance Company
Camden Asset Management L.P. California 51% Commonwealth Life Investment entity
Insurance Company
Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation
Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company
Agency Holding II, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company
Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc. Investment subsidiary
Agency Holding III, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company
Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc. Investment subsidiary
JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company
Capital Security Life Ins. Co. North Carolina 100% Capital General Insurance company
Development Corporation
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block Corporation Delaware 100% Providian Corp. Real estate holdings
Capital Broadway Corporation Kentucky 100% Providian Corp. Real estate holdings
Southlife, Inc. Tennessee 100% Providian Corp. Investment subsidiary
Providian Insurance Agency, Inc. Pennsylvania 100% Providian Corp. Provider of management
support services
National Home Life Corporation Pennsylvania 100% Providian Insurance Special-purpose subsidiary
Agency, Inc.
Compass Rose Development Pennsylvania 100% Providian Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Association Consultants, Inc. Illinois 100% Providian Insurance TPA license-holder
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Providian Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Providian Insurance Administator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Providian Insurance Special-purpose subsidiary
Agency, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdication of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
Financial Planning Services, Inc. Dist. Columbia 100% Providian Insurance Special-purpose subsidiary
Agency, Inc.
Providian Auto and Home Missouri 100% Providian Corp. Insurance company
Insurance Company
Academy Insurance Group, Inc. Delaware 100% Providian Auto and Holding company
Home Insurance Company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
AMPAC, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt. services
Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
Unicom Administrative Germany 100%Unicom Administrative Provider of admin. servcies
Services, GmbH Services, Inc.
Providian Property and Casualty Kentucky 100% Providian Auto and Insurance company
Insurance Company Home Insurance Company
Providian Fire Insurance Co. Kentucky 100% Providian Property Insurance company
and Casualty Insurance Co.
Capital Liberty, L.P. Delaware 78% Commonwealth Life Holding Company
Insurance Company
19% Peoples Security Life
Insurance Company
3% Providian Corp.
Providian LLC Turks & 100% Providian Corp. Special-purpose subsidiary
Caicos Islands
Providian Life and Health Missouri 4% Providian Corp. Insurance company
Insurance Company 15% Peoples Security Life
Insurance Company
20% Capital Liberty, L.P.
61% Commonwealth Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Providian Life and Insurance company
Health Insurance Company
Providian Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
First Providian Life and New York 100% Veterans Life Ins. Co. Insurance Company
Health Insurance Company
</TABLE>
Item 27. Number of Contract Owners
As of June 30, 1997, there were two Contract Owners.
Item 28. Indemnification.
Item 28 is incorporated by reference from Pre-Effective Amendment No. 1 to
the Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94212.
<PAGE>
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
---- ----------------
Lorri E. Mehaffy President and Director
Harvey E. Willis Vice President and Secretary
Kimberly A. Scouller Vice President and Chief Compliance
Officer
Michael F. Lane Vice President
Debra C. Cubero Vice President
Gregory J. Garvin Vice President
Larry N. Norman Vice President and Director
Anne M. Spaes Vice President
<PAGE>
Sarah J. Strange Vice President
Michael G. Ayers Controller and Treasurer
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.
(d) First Providian Life and Health Insurance Company represents that the
fees and charges deducted under the contract described in this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by First
Providian Life and Health Insurance Company.
<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 25th day of July, 1997.
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 25, 1997
- --------------------------- and President
David J. Miller
Dennis E. Brady* Director, Senior Vice President, July 25, 1997
- --------------------------- Treasurer and Senior Financial
Dennis E. Brady Officer
(Chief Accounting Officer)
Susan E. Martin* Director, Vice President and July 25, 1997
- --------------------------- Secretary
Susan E. Martin
I. Donald Britton* Director July 25, 1997
- ---------------------------
I. Donald Britton
Patricia A. Collins* Director July 25, 1997
- ---------------------------
Patricia A. Collins
Jeffrey H. Goldberger* Director July 25, 1997
- ---------------------------
Jeffrey H. Goldberger
Brian H. Perry* Director July 25, 1997
- ---------------------------
Brian H. Perry
Martin Renninger* Director and Senior Vice July 25, 1997
- --------------------------- President
Martin Renninger
Rosalie M. Smith* Director, Vice President and July 25, 1997
- --------------------------- Consumer Services Officer
Rosalie M. Smith
Thomas B. Nesspor* Director and Vice President July 25, 1997
- ---------------------------
Thomas B. Nesspor
Kevin P. McGlynn* Director and Vice President July 25, 1997
- ---------------------------
Kevin P. McGlynn
John C. Prestwood Jr.* Director, Vice President July 25, 1997
- --------------------------- and Actuary
John C. Prestwood Jr.
</TABLE>
* By: /s/ R. Michael Slaven
----------------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
SEPARATE ACCOUNT C
PROVIDIAN PRISM VARIABLE ANNUITY
INDEX TO EXHIBITS
EXHIBIT 8(a) Participation Agreement between First Providian Life
and Health Insurance Company and The Dreyfus Socially
Responsible Growth Fund, Inc. dated November 15, 1996.
EXHIBIT 8(b) Participation Agreement among Calvert Group, Ltd.;
Calvert Distributors, Inc.; Acacia Capital Corporation
and First Providian Life and Health Insurance Company
dated November 11, 1996
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<PAGE>
Exhibit 8(a)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into as of this 15th day of November, 1996, between
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY ("Insurance Company"), a life
insurance company organized under the laws of the State of New York, and THE
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. ("Fund"), a Maryland corporation.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates net asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the Fund as an
underlying investment medium. Individuals who participate under a group
Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a Contract with a
Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of the Fund, as defined by the
Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an agreement
with the Fund for the purpose of making Fund shares available to serve as
the underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE>
1.11 "Separate Account" shall mean First Providian Life and Health Insurance
Company Separate Account C or designated subaccounts thereof, a separate
account established by Insurance Company in accordance with the laws of the
State of New York.
1.12 "Software Program" shall mean the software program used by the Fund for
providing Fund and account balance information including net asset value
per share. Such Program may include the Lion System. In situations where
the Lion System or any other Software Program used by the Fund is not
available, such information may be provided by telephone. The Lion System
shall be provided to Insurance Company at no charge.
1.13 "Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates which invest in the Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it
has legally and validly established the Separate Account pursuant to the
laws of the State of New York for the purpose of offering to the public
certain individual variable annuity contracts; (c) it has registered the
Separate Account as a unit investment trust under the Act to serve as the
segregated investment account for the Contracts; and (d) each Separate
Account is eligible to invest in shares of the Fund without such investment
disqualifying the Fund as an investment medium for insurance company
separate accounts supporting variable annuity contracts or variable life
insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state
laws; and (c) the sale of the Contracts shall comply in all material
respects with state insurance law requirements. Insurance Company agrees to
inform the Fund promptly of any investment restrictions imposed by state
insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be credited to
or charged
-2-
<PAGE>
against such Separate Account without regard to other income, gains or
losses from assets allocated to any other accounts of Insurance Company.
Insurance Company represents and warrants that the assets of the Separate
Account are and will be kept separate from Insurance Company's General
Account and any other separate accounts Insurance Company may have, and
will not be charged with liabilities from any business that Insurance
Company may conduct or the liabilities of any companies affiliated with
Insurance Company.
2.4 Fund represents that it is registered with the Commission under the Act as
an open-end, diversified management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents
and/or exemptions required for Fund to operate and offer its shares as an
underlying investment medium for Participating Companies.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify Insurance Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be, treated as life insurance policies or
annuity contracts, whichever is appropriate, under applicable provisions of
the Code, and that it will make every effort to maintain such treatment and
that it will notify the Fund and Dreyfus immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future. Insurance
Company agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of the Code,
will identify such Contract as a modified endowment contract (or policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Fund shares available to other
Participating Companies and contractholders.
-3-
<PAGE>
2.9 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than that required by Rule 17g-1
under the Act. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the coverage required to be maintained
by the Fund. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in Fund shares.
3.2 Fund agrees to make its shares available for purchase at the then
applicable net asset value per share by Insurance Company and the Separate
Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell its shares to
any person, or suspend or terminate the offering of its shares if such
action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board, acting in good faith and in
light of its fiduciary duties under federal and any applicable state laws,
necessary and in the best interests of the Fund's shareholders.
3.3 Fund agrees that its shares will be sold only to Participating Companies
and their separate accounts and to the general accounts of those
Participating Companies and their affiliates. No shares of the Fund will be
sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information available on a
-4-
<PAGE>
per-share to insurance Company by 6:00 p.m. Eastern Time on each Business
Day by facsimile or other electronic means as agreed upon by both parties.
Any material errors in the calculation of net asset value, dividend and
capital gain information shall be reported immediately upon discovery to
Insurance Company. Non-material errors will be corrected in the next
Business Day's net asset value per share.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account unit
values for the day. Using this unit value, Insurance Company will process
the day's Separate Account transactions received by it by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m.
Eastern time) to determine the net dollar amount of Fund shares which will
be purchased or redeemed at that day's closing net asset value per share.
The net purchase or redemption orders will be transmitted to the Fund by
Insurance Company by 11:00 a.m. Eastern Time on the Business Day next
following Insurance Company's receipt of that information. Subject to
Sections 3.6 and 3.8, all purchase and redemption orders for Insurance
Company's General Accounts shall be effected at the net asset value per
share next calculated after receipt of the order by the Fund or its
Transfer Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for the
Separate Account. Fund will execute orders at the applicable net asset
value per share determined as of the close of trading on the day of receipt
of such orders by Insurance Company acting as agent ("effective trade
date"), provided that the Fund receives notice of such orders by 11:00 a.m.
Eastern Time on the next following Business Day and, if such orders request
the purchase of Fund shares, the conditions specified in Section 3.8, as
applicable, are satisfied. A redemption or purchase request that does not
satisfy the conditions specified above and in Section 3.8, as applicable,
will be effected at the net asset value computed for Fund shares on the
Business Day immediately preceding the next following Business Day upon
which such conditions have been satisfied.
3.7 Insurance Company will make its best efforts to notify Fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Fund shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
initiate such
-5-
<PAGE>
wire by 2:30 p.m. Eastern Time on the Business Day the Fund receives the
notice of the order pursuant to Section 3.5. Fund will execute such orders
at the applicable net asset value per share determined as of the close of
trading on the effective trade date if Fund receives payment in Federal
Funds by 12:00 midnight Eastern Time on the Business Day the Fund receives
the notice of the order pursuant to Section 3.5. Fund will use its best
efforts to transmit to Insurance Company the proceeds of all redemption
orders placed by Insurance Company by the close of business on the next
Business Day following the effective trade date by wire transfer. Should
Fund need to extend the settlement on a trade, it will immediately contact
Insurance Company to discuss such extension. The above notwithstanding, if
Insurance Company's order requests the redemption of Fund shares valued at
or greater than $1 million dollars and such redemption would require the
Fund to dispose of portfolio securities or otherwise incur additional
costs, the Fund will wire such amount to Insurance Company within seven
calendar days of the order and will immediately notify Insurance Company of
such delay.
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm by facsimile or other agreed upon electronic means each
purchase or redemption order made by Insurance Company. Transfer of Fund
shares will be by book entry only. No share certificates will be issued to
Insurance Company. Insurance Company will record shares ordered from Fund
in an appropriate title for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate, by facsimile or
other agreed upon electronic means, to Insurance Company the amount of
dividend and capital gain, if any, per share of the Fund. All dividends and
capital gains shall be automatically reinvested in additional shares of the
Fund at the applicable net asset value per share on the payable date. Fund
shall, on the day after the payable date or, if not a Business Day, on the
first Business Day thereafter, notify Insurance Company of the number of
shares so issued.
-6-
<PAGE>
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th)
Business Day of the following month and at year-end shall provide an annual
statement providing year-end information.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to
each Contractholder and Participant.
4.3 Fund will provide to Insurance Company at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Fund or its shares, contemporaneously with the filing of
such document with the Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Contracts or the Separate Account; contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs including but not limited
to management fees, administrative expenses and legal and regulatory costs,
will be made in the determination of the Fund's daily net asset value per
share so as to accumulate to an annual charge at the rate set forth in the
Fund's Prospectus. Excluded from the expense limitation described herein
shall be brokerage commissions and transaction fees and extraordinary
expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of the Fund or expenses
-7-
<PAGE>
relating to the distribution of its shares. Insurance Company shall pay the
following expenses or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or marketing
materials for prospective Insurance Company Contractholders and
Participants as Dreyfus and Insurance Company shall agree from time to
time.
b. Distribution expenses of any Fund materials or marketing materials for
prospective Insurance Company Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing materials for
Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
Insurance Company.
ARTICLE VI
CONFLICTS
6.1 Insurance Company agrees to report any potential or existing conflicts
promptly to the Board, and in particular whenever contract voting
instructions are disregarded, and recognizes that it will be responsible
for assisting the Board in carrying out its responsibilities under such
application. Insurance Company agrees to carry out such responsibilities
with a view to the interests of existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that Insurance
Company is responsible for causing or creating said conflict, Insurance
Company shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but
shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the Fund
and reinvesting such assets in a different investment medium, or
submitting the question of whether such segregation should be
implemented to a vote of all affected Contractholders and, as
appropriate, segregating the assets of any Contractholders that vote
in favor of such segregation,
-8-
<PAGE>
or offering to the affected Contractholders the option or making such
a change; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote
by all Contractholders having an interest in the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund and no charge or penalty will be imposed
as a result of such withdrawal.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to bear the expense of establishing a new funding medium
for any Contract. Insurance Company shall not be required by this Article
to establish a new funding medium for any Contract if an offer to do so has
been declined by vote of a majority of the Contractholders materially
adversely affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act or
failure to act by Insurance Company pursuant to this Article VI shall
relieve Insurance Company of its obligations under, or otherwise affect the
operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, reports to shareholders and other
communications to shareholders in such quantity as Insurance Company shall
reasonably require for distributing to Contractholders or Participants; and
Fund shall provide Insurance Company with five (5) Business Days notice of
the existence of such materials prior to their receipt by Insurance
Company.
-9-
<PAGE>
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
(b) vote the Fund shares in accordance with instructions received from
Contractholders or Participants; and
Insurance Company agrees at all times to vote its General Account shares in
the same proportion as Fund shares for which instructions have been
received from Contractholders or Participants. Insurance Company further
agrees to be responsible for assuring that voting Fund shares for the
Separate Account is conducted in a manner consistent with the Fund's
current exemptive relief.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add to or delete the Fund from
the current investment media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance Company
with the following documents, in quantities as Insurance Company may
reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which shall
have the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company shall
make reasonable efforts to market the Contracts and shall comply with all
applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to the
Fund, each piece of sales literature or
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<PAGE>
other promotional material in which the Fund, its investment adviser or the
administrator is named, at least six (6) Business Days prior to its use. No
such material shall be used unless the Fund approves such material. Such
approval (if given) must be in writing and shall be presumed not given if
not received within ten Business Days after receipt of such material. The
Fund shall use all reasonable efforts to respond within ten days of
receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus, as
may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the Fund's sales literature or other promotional material in
which Insurance Company or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Insurance Company approves such material. Such approval (if given) must be
in writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Insurance Company shall use
all reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give any
information or make any representations on behalf of Insurance Company or
concerning Insurance Company, the Separate Account, or the Contracts other
than the information or representations contained in a registration
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the Separate
Account which are in the public domain or approved by Insurance Company for
distribution to Contractholders or Participants, or in sales literature or
other promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters,
form
-11-
<PAGE>
letters, seminar texts, or reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
or other communications distributed or made generally available to some or
all agents or employees, registration statements, prospectuses, statements
of additional information, shareholder reports and proxy materials, and any
other material constituting sales literature or advertising under National
Association of Securities Dealers, Inc. rules, the Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, Dreyfus,
any sub-investment adviser of the Fund, and their affiliates, and each of
their directors, officers, employees, agents and each person, if any, who
controls or is associated with any of the foregoing entities or persons
within the meaning of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of Section 9.1), against any and all losses, claims, damages
or liabilities joint or several (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amounts paid
in settlement of, any action, suit or proceeding or any claim asserted) for
which the Indemnified Parties may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect to thereof) (i) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in information furnished by Insurance Company for use in the registration
statement or Prospectus or sales literature or advertisements of the Fund
or with respect to the Separate Account or Contracts, or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) arise out of or as a result of
conduct, statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisements of the Fund) of Insurance Company or its agents, with
respect to the sale and distribution of Contracts for which Fund shares are
an underlying investment; (iii) arise out of the wrongful conduct of
Insurance Company or persons under its control with respect to the sale or
distribution of the Contracts or Fund shares; (iv) arise out of Insurance
Company's incorrect calculation and/or untimely reporting of net purchase
or redemption orders; or (v) arise out of any breach by Insurance Company
of a material term of this Agreement or as a result of any failure by
Insurance Company to provide the services and furnish the materials or to
make any payments
-12-
<PAGE>
provided for in this Agreement. Insurance Company will reimburse any
Indemnified Party in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that with
respect to clauses (i) and (ii) above Insurance Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission
or alleged omission made in such registration statement, prospectus, sales
literature, or advertisement in conformity with written information
furnished to Insurance Company by the Fund specifically for use therein.
This indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company and each
of its directors, officers, employees, agents and each person, if any, who
controls Insurance Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Insurance Company or any
such director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) (1) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or Prospectus or
sales literature or advertisements of the Fund; (2) arise out of or are
based upon the omission to state in the registration statement or
Prospectus or sales literature or advertisements of the Fund any material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (3) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement or Prospectus or sales literature or advertisements
with respect to the Separate Account or the Contracts and such statements
were based on information provided to Insurance Company by the Fund; and
the Fund will reimburse any legal or other expenses reasonably incurred by
Insurance Company or any such director, officer, employee, agent or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Fund
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such Registration
Statement, Prospectus, sales literature or advertisements in conformity
with written information furnished to the Fund by Insurance Company
specifically for use therein. This indemnity agreement will be in addition
to any liability which the Fund may otherwise have.
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<PAGE>
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance Company
may incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate of the Fund; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate; provided that the Fund shall have no obligation to
indemnify and hold harmless Insurance Company if the incorrect calculation
or incorrect or untimely reporting was the result of incorrect information
furnished by Insurance Company or information furnished untimely by
Insurance Company or otherwise as a result of or relating to a breach of
this Agreement by Insurance Company.
9.4 Promptly after receipt by an indemnified party under this Article of notice
of the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. The
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Article IX, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a
result of the failure to give such notice. In case any such action is
brought against any indemnified party, and if notified the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party, and
to the extent that the indemnifying party has given notice to such effect
to the indemnified party and is performing its obligations under this
Article, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall
not be liable
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<PAGE>
for any settlement of any proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and any sub-
investment adviser of the Fund harmless against any tax liability incurred
by the Fund under Section 851 of the Code arising from purchases or
redemptions by Insurance Company's General Accounts or the account of its
affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty as to the Fund at the option
of the terminating party:
a. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;
b. At the option of Insurance Company, if Fund shares are not reasonably
available to meet the requirements of the Contracts as determined by
Insurance Company. Prompt notice of election to terminate shall be
furnished by Insurance Company, said termination to be effective ten
days after receipt of notice unless the Fund makes available a
sufficient number of shares to meet the requirements of the Contracts
within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund by the Commission, National Association
of Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in Insurance
Company's reasonable judgment, materially impair the Fund's ability to
meet and perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by Insurance
Company with said termination to be effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal proceedings
against Insurance Company by the
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<PAGE>
Commission, National Association of Securities Dealers or any
insurance regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in the Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and perform
Insurance Company's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by the Fund with said
termination to be effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its sole
judgment reasonably exercised in good faith, that Insurance Company
has suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity is likely to
have a material adverse impact upon the business and operation of the
Fund or Dreyfus, the Fund shall notify Insurance Company in writing of
such determination and its intent to terminate this Agreement, and
after considering the actions taken by Insurance Company and any other
changes in circumstances since the giving of such notice, such
determination of the Fund shall continue to apply on the sixtieth
(60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between the Fund
and Dreyfus or its successors unless Insurance Company specifically
approves the selection of a new Fund investment adviser. The Fund
shall promptly furnish notice of such termination to Insurance
Company;
g. In the event the Fund's shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use
of such shares as the underlying investment medium of Contracts issued
or to be issued by Insurance Company. Termination shall be effective
immediately upon such occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
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<PAGE>
i. At the option of the Fund if the Contracts cease to qualify as annuity
contracts or life insurance policies, as applicable, under the Code,
of if the Fund reasonably believes that the Contracts may fail to so
qualify;
j. At the option of either party to this Agreement, upon another party's
breath of any material provisions of this Agreement;
k. At the option of the Fund, if the Contracts are not registered, issued
or sold in accordance with applicable federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this Agreement.
Any termination of this Agreement shall not affect the operation of Article
IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, the Fund and Dreyfus may, at the option of the Fund, continue to
make available additional Fund shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Dreyfus so elects to make additional
Fund shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. In the event of a termination of this
Agreement pursuant to Section 10.2 hereof, the Fund and Dreyfus, as
promptly as is practicable under the circumstances, shall notify Insurance
Company whether Dreyfus and the Fund will continue to make Fund shares
available after such termination. If Fund shares continue to be made
available after such termination, the provisions of this Agreement shall
remain in effect and thereafter either Fund or Insurance Company may
terminate the Agreement, as so continued pursuant to this Section 10.3,
upon prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by the
Fund, need not be for more than six months.
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<PAGE>
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by agreement
in writing between Insurance Company and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
Insurance Company: First Providian Life and Health
Insurance Company
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
Attn: Bill Tomlin
with copies to: Marketing Director
First Providian Life and Health
Insurance Company
520 Columbia Drive
Johnson City, New York 13790
Fund: The Dreyfus Socially Responsible Growth Fund, Inc
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue, 6th Floor West
New York, New York 10166
Attn: Eric B. Fischman, Esq.
with copies to: The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any Director, officer or
shareholder of the Fund individually.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
By: /s/ Jeffrey P. Lammers
-----------------------------------
Its: Senior Vice President
-----------------------------------
Attest: /s/ Melody L. Hulse
-------------------
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
/s/ Eric Fischman
-----------------------------------------
Eric B. Fischman
Vice President and Assistant Secretary
Attest: /s/ Margaret M. Parker
----------------------
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<PAGE>
EXHIBIT 8(b)
PARTICIPATION AGREEMENT
Among
CALVERT GROUP, LTD.,
CALVERT DISTRIBUTORS, INC.,
ACACIA CAPITAL CORPORATION
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.... 3
3 Representations and Warranties.... 4
4 Contracts, Sales Material and
Information...................... 9
5 Fees and Expenses................. 12
6 Indemnification................... 13
7 Potential Conflicts............... 22
8 Term and Termination.............. 26
9 Notices........................... 29
10 Miscellaneous..................... 29
</TABLE>
<PAGE>
THIS PARTICIPATION AGREEMENT is made and entered into as of the close of
business as of the 11th day of November, 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"), Calvert Group, Ltd.
("Sponsor"), Acacia Capital Corporation ("Fund") and Calvert Distributors, Inc.
("Underwriter") (collectively, "Parties").
For good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, Company, Sponsor, Underwriter and Fund intending to be
legally bound, hereby agree as follows:
1. Sales of Fund Shares
1.1 Fund shares shall be sold on behalf of the Fund by Underwriter and
purchased by Company for Account for the appropriate subaccount thereof at the
net asset value next computed after receipt by Fund or its designee of each
order of Account or its designee, in accordance with the procedures contained in
Exhibit A hereto, and the provisions of this Agreement, the then current
prospectuses of Fund and the variable annuity contracts that use Fund as an
underlying investment medium (the "Contracts"), and the Contracts. Company may
purchase Fund shares for its own account subject to (a) receipt of prior written
approval by Sponsor; and (b) such purchases being in accordance with the then
current prospectuses of Fund and the Contracts. Orders or payments
<PAGE>
for shares purchased will be sent by the Company promptly to Fund and will be
made payable in a manner acceptable to Company which has been reasonably
established from time to time by Fund for receipt of such payments.
1.2 Fund will redeem the shares when requested by the Company in
accordance with the procedures contained in Exhibit A. Fund may make payment in
the manner established from time to time by 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 particular
portfolio of Fund ("Portfolio") to any person, or suspend or terminate the
offering of shares of Fund if such action is required by law or by regulatory
authorities having jurisdiction.
1.3 Company agrees to purchase and redeem the shares of Fund in accordance
with the provisions of this Agreement, of the Contracts and of the then current
prospectuses for the Contracts and Fund. Except as necessary to implement
transactions initiated by purchasers of Contracts ("Owners"), or as otherwise
permitted or required by state and/or federal laws or regulations, Company shall
not redeem Fund 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 Company or Account. Shares of the Fund
ordered from
2
<PAGE>
Underwriter will be recorded in the appropriate book entry titles for Account.
1.5 Fund shall furnish prompt notice followed by written confirmation to
Company or its delegates of any income, dividends or capital gain distributions
payable on the Fund's 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, provided that Company continues to receive
in cash any mortality and expense charges which are due to Company. Fund shall
promptly 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, dividends, and capital gains
payable per share (if any) for Fund available to Company or its delegates by
6:00 p.m. Louisville (Eastern Standard) time on each business day of Fund. The
form of communication of this information should be written or sent
electronically.
2. Proxy Solicitations and Voting
2.1 Except as may be required by applicable law, Sponsor and Fund agree
that the terms on which Fund shares are offered to Account will not be
materially altered without the prior written consent of Company, which consent
will not be unreasonably withheld, during any period in which Fund shares are
held by Account.
3
<PAGE>
2.2 The Company shall:
(i) solicit voting instructions from Owners;
(ii) vote Fund shares in accordance with instructions received
from Owners; and
(iii) vote Fund shares for which no instructions have been received as
certified in writing by Sponsor, as well as shares attributable
to it, in the same proportion as Fund shares for which
instructions have been received from Owners,
so long as and to the extent that the Securities and Exchange Commission (the
"SEC") continues to interpret the 1940 Act to require pass-through voting
privileges for various contract owners.
2.3 Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders. Further, Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to 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 the laws of New York and that it has
legally and validly established Account prior to any issuance or sale thereof as
a segregated asset account under the laws of New York and that Company has and
will maintain the capacity to issue all
4
<PAGE>
Contracts that may be sold; and that it is properly licensed, qualified and in
good standing to sell the Contracts in all the jurisdictions in which Parties
agree that the Contracts are to be offered or sold.
3.2 Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933, as amended (the "1933 Act").
3.3 Company represents and warrants that it has registered 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.
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 use its best efforts to maintain such
treatment and that it will notify Underwriter 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 Sponsor, Underwriter and Fund represent and warrant that Fund is
lawfully established and validly existing under the laws of the State of
Maryland and that Fund complies and will comply in all material respects with
the 1940 Act.
3.6 Sponsor, Fund and Underwriter represent and warrant that Fund shares
sold pursuant to this Agreement are registered under the 1933 Act and duly
authorized for
5
<PAGE>
issuance; that Fund shall amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares; that Fund and Underwriter 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 and Underwriter shall register and
qualify the shares for sale in accordance with the laws of the various states to
the extent required by all applicable federal and state laws.
3.7 Sponsor and Fund represent and warrant that Fund will invest money
from the Contracts 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, Account and each Portfolio will comply with all
applicable diversification standards, including, without limitation, Section
817(h) of the Code as amended from time to time and with all applicable
regulations promulgated thereunder. Fund agrees to provide Company a statement
of each Portfolio's assets as soon as practicable and in any event within 14
days after the end of each calendar quarter, and a statement certifying the
Fund's compliance during that fiscal quarter with the diversification
requirements and qualification as a regulated investment company. In the event
of a breach of this Section 3.7, Fund will take all reasonable steps (a) to
notify
6
<PAGE>
Company of such breach and (b) to adequately diversify the Fund so as to
achieve compliance with the grace period afforded by Treasury Regulation
1.817-5.
3.8 Sponsor and Fund represent and warrant that Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will 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 it has ceased to so qualify or that it might
not so qualify in the future.
3.9 Sponsor and Fund represent and warrant that Fund'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 Company has made them aware in writing
at the date hereof. 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 Sponsor and Underwriter represent and warrant that Underwriter is and
will be a member in good standing of the National Association of Securities
Dealers Inc., (the "NASD"), and is and will be registered as a broker-dealer
with the SEC. Underwriter further represents that it will sell and distribute
Fund shares in accordance with all applicable state and federal laws and
regulations, including without limitation the 1933 Act, the Securities Exchange
Act
7
<PAGE>
of 1934 (the "1934 Act"), the 1940 Act, and state insurance laws. Underwriter
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.
3.11 Sponsor and Underwriter represent and warrant that each of them are
and will remain duly registered and licensed in all material respects under all
applicable federal and state securities and insurance laws and shall perform its
obligations hereunder in compliance in all material respects with any applicable
state and federal laws.
3.12 All parties hereto represent and warrant to each other that all of
their directors, officers, employees, and 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 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.
8
<PAGE>
4. Contracts, Sales Material and Information
4.1 Company shall file the Contracts in all jurisdictions in which it is
licensed (the "States") and use its best efforts to secure approval for sale of
the Contracts in the States, and Company further agrees to maintain such
approvals. It is understood that each party hereto shall make every reasonable
effort to make the Contracts available in all applicable states as soon as
practical.
4.2 All sales material prepared by the Company's marketing representative
("Marketer") (currently, Talbott Financial Distributors) will be filed by
Company with the appropriate state regulatory authorities as required in the
States and Company will use its best efforts to effect prompt review of such
material in the States and to provide Marketer with such assistance as Marketer
may reasonably require in order to develop sales literature in compliance with
the laws and regulations of the States.
4.3 Company shall promptly inform Underwriter as to the status of all
sales literature filings and shall promptly notify Underwriter of all approvals
or disapprovals of sales literature filings in the States. Sponsor, Underwriter
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 which any of them
receives.
9
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4.4 Underwriter shall furnish to Company each piece of sales literature or
other promotional material in which Company is named at the earliest practical
stage of its development. Company commits to comment, approve or disapprove of
all proposed advertising within five (5) business days of being requested to do
so by Underwriter. All Parties agree to cooperate with the others to facilitate
each other's ongoing efforts to comply with all applicable laws and regulations.
4.5 Except with Company's prior written approval, Underwriter, Fund or
Sponsor shall not give any material information or make any material
representations on behalf of Company or concerning Company, 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 Account which are in
the public domain or are approved by Company for distribution to Contract
Owners; or (c) sales literature or other promotional material approved by
Company.
4.6 Except to the extent required by applicable law, no Party shall use
any other Party's names, logos, trademarks or service marks, whether registered
or unregistered, without the prior consent of such Party.
4.7 Underwriter, Fund or Sponsor will provide to Company at least one
complete copy of all registration statements, prospectuses, Statements of
Additional
10
<PAGE>
Information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials involving Company or the
Contracts, 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 with the SEC, the NASD and other
regulatory authorities.
4.8 Company will provide to Sponsor and Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters and all amendments to any of the above, that relate to the Contracts,
(a) in draft form prior to the filing of such document with the SEC, with
reasonable time allowed for Sponsor to provide Company with its comments and (b)
in final form as filed. If requested by Sponsor in lieu thereof, Company shall
provide such documentation (including a final copy of the new prospectus) and
other assistance as is reasonably necessary in order for Sponsor once each year
(or more frequently if the prospectus for Company is amended) to have the
prospectus for the Contracts and Fund's prospectus printed together in one
document.
11
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4.9 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.
4.10 To the extent required by applicable law, including the administrative
requirements of regulatory authorities, or as mutually agreed between Company
and Underwriter, 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, to accept or
reject any application for the sale of a Contract, or to add additional funds to
the Contract. Company agrees to notify the other Parties promptly upon the
occurrence of any event Company believes might necessitate a material
modification of the Contracts or suspension of Contract sales.
4.11 Parties agree to review the Contracts and Fund 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 or Sponsor 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, Underwriter or Sponsor required
by any federal or state law; payment of all
12
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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 on the
Fund's records; and all market losses associated with redemption of Fund shares
during the Contracts' "free look" period.
5.2 Company represents and warrants that Contracts are registered under
the 1933 Act, and that 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 Account or the Contracts required by any federal or state 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, Sponsor
and Underwriter and each of their directors, officers, employees and agents, and
each person, if any, who controls any of them within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified
13
<PAGE>
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), and expenses (including reasonable legal fees and
litigation and other expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities and expenses:
(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 sales literature (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 written
information furnished to Company by or on behalf of Fund,
Underwriter or Sponsor for use in the registration statement
14
<PAGE>
or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or persons under
its control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature 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 Fund, Sponsor or
Underwriter 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
15
<PAGE>
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;
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 expenses 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, 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
16
<PAGE>
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. Company also shall be entitled to assume and to control the defense
thereof. After notice from Company to such Indemnified 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 Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified 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 Sponsor, Underwriter and Fund
6.2(a) Sponsor, Underwriter and Fund agree to indemnify and hold
harmless Company and each of its directors, officers, employees and agents and
each person, if any, who controls Company within the meaning of Section 15 of
17
<PAGE>
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 Underwriter), and
expenses (including reasonable legal fees and litigation and other expenses) to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
and expenses:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of 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 written information furnished to Sponsor,
Underwriter or Fund by or on behalf of Company for use in the
registration statement or prospectus for
18
<PAGE>
Fund or in Fund 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 Underwriter, Fund or
Sponsor or persons under their control, with respect to the sale
or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon written information furnished to
Company by or on behalf of Fund, Underwriter or Sponsor; or (iv)
arise out of, or as a result of, any failure by Underwriter, Fund
or Sponsor or persons under their control to provide the services
and furnish the materials
19
<PAGE>
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 Underwriter, Fund, Sponsor
or persons under their control in this Agreement or arise out of
or result from any other material breach of this Agreement by
Underwriter, Fund, Sponsor or persons under their control;
as limited by and in accordance with the provisions of Sections 6.2(b) and
6.2(c) hereof. This indemnification provision is in addition to any liability
which Sponsor, Underwriter or Fund may otherwise have.
6.2(b) Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or expenses
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, 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 to the extent of such Indemnified Party's negligence.
6.2(c) Sponsor and Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such
20
<PAGE>
Indemnified Party shall have notified Sponsor, Underwriter or Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Sponsor,
Underwriter or Fund of any such claim shall not relieve Sponsor, Underwriter or
Fund 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, Sponsor and Underwriter will be
entitled to participate, at its own expense, in the defense thereof. Sponsor and
Underwriter also shall be entitled to assume and to control the defense thereof.
After notice from Sponsor or Underwriter to such Party of Sponsor's or
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
Sponsor or Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
6.2(d) The Indemnified Parties will promptly notify Sponsor, Underwriter
or Fund of the commencement of any litigation or proceedings against them in
connection with the
21
<PAGE>
issuance or sale of the Contracts or the operation of Account.
7. Potential Conflicts
7.1 The Directors will monitor Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the contract owners
of all separate accounts investing in Fund, including such conflict of interest
with any other separate account of any other insurance company 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 investments of Fund are being
managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing Fund; or (f) a decision
by Company to disregard the voting instructions of Owners. The Directors shall
promptly inform Company, in writing, if they determine that an irreconcilable
material conflict exists and the implications thereof.
22
<PAGE>
7.2 Company will promptly notify the Directors, in writing, of any
potential or existing material irreconcilable conflicts of interest, as
described in Section 7.1 above, of which it is aware. 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 SEC
("Exemptive Order"), by providing the Directors, in a timely manner, with all
information reasonably necessary for the Directors to consider any issues
raised. This includes, but is not limited to, an obligation by 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
disinterested Directors, that a material irreconcilable conflict exists, as
described in Section 7.1 above, Company shall, at its own expense take whatever
steps are necessary to remedy or eliminate the irreconcilable material conflict,
up to and including, but not limited to: (1) withdrawing the assets allocable to
some or all of the separate accounts from Fund and reinvesting such assets in a
different investment medium, including (but not limited to) another fund managed
by Sponsor, 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 particular group that votes in favor of such segregation, or
offering to the affected Owners the option of
23
<PAGE>
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
7.4 (a) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Company conflicts with the
majority of other state regulators, then Company will withdraw the affected
Account's investment in Fund and terminate this Agreement with respect to such
Account within the period of time permitted by such decision, but in no event
later than six months after the Directors inform Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested Directors. Until the end of the foregoing
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund to the
extent such actions do not violate applicable law.
(b) If a material irreconcilable conflict arises because of Company's
decision to disregard Owner voting instructions and that decision represents a
minority position or would preclude a majority vote, Company may be required, at
the Fund's election, to withdraw the Account's investment in the Fund. No charge
or penalty will be imposed against the Account as a result of such withdrawal.
24
<PAGE>
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. In no event will Fund,
Sponsor or Underwriter be required to establish a new funding medium for any of
the Contracts. 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 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 Company will withdraw
Account's investment in the Fund and terminate this Agreement as quickly as may
be required to comply with applicable law, but in no event later than six (6)
months after the Directors inform 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 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Fund's Exemptive Order) on terms and conditions materially
different from those contained in the Fund's Exemptive Order, then (a) the Fund
and/or the Company, as appropriate, shall take such steps as may be
25
<PAGE>
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable; and (b) Sections 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 the close of business
November 15, 1996 through November 14, 1999. Unless terminated by a Party upon
thirty (30) days' written notice to the other Party prior to November 14, 1999,
this Agreement shall thereafter automatically renew from year to year, provided
that either Party may terminate this Agreement without cause following the
initial term upon six months' advance written notice to the other.
8.2 Notwithstanding any other provision of this Agreement, Underwriter,
Sponsor or Fund may terminate this Agreement for cause for any material breach
by Company of any representation, warranty, covenant or obligation hereunder 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.
8.3 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement for cause for any material breach by Underwriter or
Fund of any representation, warranty, covenant or obligation hereunder on not
less than thirty (30) days' prior written notice to
26
<PAGE>
Underwriter and Fund unless Underwriter or Fund has cured such cause within
thirty (30) days of receiving such notice.
8.4 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by reasonable advance written notice to Fund and
Underwriter with respect to Fund based upon Company's determination that shares
of Fund 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 Fund and Underwriter with respect
to Fund in the event any of Fund'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 Company.
8.6 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to Fund and Underwriter with respect
to Fund in the event that Fund 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 Fund and Underwriter with respect
to Fund in the
27
<PAGE>
event that Fund fails to meet the diversification requirements specified in
Paragraph 3.7.
8.8 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to Fund and Underwriter, if Company
shall determine, in its sole judgment exercised in good faith, that either Fund
or Underwriter has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity.
8.9 Notwithstanding any other provision of this Agreement, Company, Fund,
Sponsor or Underwriter may terminate this Agreement upon the assignment of this
Agreement unless such assignment is made with the written consent of each other
Party.
8.10 Notwithstanding any other provision of this Agreement, either Party
may terminate this Agreement immediately and without cause if the other Party
becomes insolvent, bankrupt or suffers some other financial impairment which
materially adversely affects such other Party's performance under 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, except to the extent
proscribed by law, the SEC or other regulatory body.
28
<PAGE>
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.
If to Underwriter, Fund or Sponsor:
William Tartikoff
Calvert Group, Ltd.
4550 Montgomery Avenue
10th Floor, North
Bethesda, Maryland 20814
If to Company:
Jeffrey P. Lammers
Providian Corporation
400 West Market Street
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
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.
29
<PAGE>
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 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.
10.7 Subject to the requirements of legal process and regulatory authority,
the Fund and Underwriter 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
30
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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 the Commonwealth 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 This Agreement, including any Schedules and Exhibits hereto,
represents the entire agreement among the parties hereto on the subject matter
hereof and supersedes all prior discussions, agreements and understandings of
every kind and nature between them. No modification of this Agreement shall be
effective unless in writing and signed by the parties hereto.
10.12 Sections 1, 2, 3, 4.1, 4.5, 4.6, 4.7, 4.8, 4.10, 6, 7, and 9 hereof
shall survive termination of this Agreement for Contracts in force at the time
the termination becomes effective, except that the further sale of Fund shares
shall not be required to the extent such sales are proscribed by law, the SEC or
other regulatory body.
31
<PAGE>
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 PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
By: /s/ Gregory J. Garvin
-----------------------
Fund:
ACACIA CAPITAL CORPORATION
By: /s/ William M. Tartikoff
--------------------------
Underwriter:
CALVERT DISTRIBUTORS, INC.
By: /s/ William M. Tartikoff
--------------------------
Sponsor:
CALVERT GROUP, LTD.
By: /s/ William M. Tartikoff
--------------------------
32
<PAGE>
EXHIBIT "A"
1. Price Errors.
------------
(a) In the event adjustments are required to correct any error in the
computation of the net asset value of Fund shares or dividends or capital gains
distributions, Fund or Sponsor shall promptly notify Company after discovering
the need for any adjustments to Account. Notification shall be written or via
direct or indirect systems access. Any such letter shall be written on Fund or
Sponsor letterhead and must state for each day for which an error occurred the
incorrect price, the correct price, and, to the extent communicated to the
Fund's shareholder, the reason for the price change. Fund and Sponsor agree
that Company may send this writing, or derivation thereof (so long as such
derivation is approved in advance by Fund or Sponsor, which approval shall not
be unreasonably withheld) to Owners that are affected by the price change.
(b) If a Separate Account subaccount received amounts in excess of the
amounts to which it otherwise would have been entitled prior to an adjustment
for an error, Company, when requested by Fund or Sponsor, will make a good faith
attempt to collect such excess amounts from the accounts of the Owners. In no
event, however, shall Company be liable to Fund or Sponsor for any such amounts.
(c) If an adjustment is to be made in accordance with subsection 1(a)
above to correct an error which has caused a Separate Account subaccount to
receive an amount less than that to which it is entitled, Fund and/or Sponsor
shall make all necessary adjustments (within the parameters specified in
subsection 1(a)) to the number of shares owned in such Separate Account
subaccount and, to the extent of any underpayment, distribute to Company the
amount of such underpayment for credit to the accounts of the Owners.
2. Purchase and Redemption Orders. On each Business Day, the Company shall
aggregate and calculate the net purchase and redemption orders for each Separate
Account subaccount for
<PAGE>
shares of the Fund that it received prior to 4:00 p.m., Eastern time, (i.e., the
close of trading) and communicate to Fund or Sponsor by facsimile (or by such
other means as the parties hereto may agree to in writing), the net aggregate
purchase or redemption order (if any) for each applicable Separate Account
subaccount for such Business Day. (Such Business Day is sometimes referred to
herein as the "Trade Date.") The Separate Account subaccount will communicate
such orders to Fund prior to 11:00 a.m., Eastern time, on the next business day
following the Trade Date. All trades communicated to Fund or Sponsor by the
foregoing deadlines shall be treated by Fund or Sponsor as if they were received
by them prior to 4:00 p.m., Eastern time, on the Trade Date. Dividends and
capital gains distributions shall be reinvested in additional shares the next
business day following the distribution date. Fund or Sponsor will confirm to
the Company in writing by 2:00 p.m. on the Trade Date the share and dollar
purchase and redemption orders processed that day, as well as the ending share
balance.
3. Settlement of Transactions.
--------------------------
(a) Purchases. Company will use its best efforts to transmit the
purchase price of each purchase order to Fund or Sponsor in accordance with
written instructions provided by Fund or Sponsor to the Trustee for the Fund by
wire transfer initiated prior to 2:30 p.m. Eastern time, on the next business
day following the Trade Date. Should Company need to extend the purchase on a
trade, it will immediately contact Fund or Sponsor to discuss the extension.
(b) Redemptions. Fund or Sponsor will use its best efforts to
transmit to Company the proceeds of all redemption orders placed by Company by
12:00 p.m., Eastern time, on the Business Day following the Trade Date by wire
transfer on such Business Day. Should Fund or Sponsor need to extend the
settlement on a trade, it will immediately contact Company to discuss the
extension. Sponsor agrees that if it fails to wire the proceeds to Company
within the time period required by the 1940 Act, it will indemnify and hold
harmless Company from any liabilities, costs and damages it may suffer as a
result of such failure.
<PAGE>
Redemption wires should be sent to:
Bankers Trust Company
New York, New York
ABA # 021001033 Credit to Providian Corp.
For Further Credit to Account
Number 00-154-974
Fax supplements should be sent to:
AIG Financial Department
(502)560-2390
ATTN: Robin Hayes
<PAGE>
EXHIBIT 9(a)
[LOGO FOR PROVIDIAN]
Providian Corporation
400 West Market Street
Post Office Box 32830
Louisville, Kentucky 40232
502 560-2000
July 24, 1997
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
Post-Effective Amendment No. 1 (the "Amendment") to the Registration Statement
on Form N-4, File No. 33-94212 (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
attribute to the Annuity Contract generally are not chargeable with
liabilities arising out of any other business which First Providian Life
and Health Insurance 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 and 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 28, 1997
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 Post-Effective Amendment No. 1 to the
Registration Statement (File No. 33-94212) 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: /s/ Jorden Burt Berenson & Johnson L.L.P.
-----------------------------------------
<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 25, 1997, with respect to the statutory-basis
financial statements of First Providian Life and Health Insurance Company in
Post-Effective Amendment No. 1 to the Registration Statement (Form N-4 No.
33-94212) and related Prospectus of First Providian Life and Health Insurance
Company Separate Account C - Prism.
/s/Ernst & Young LLP
Louisville, Kentucky
July 23, 1997
