<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1998
REGISTRATION NO.
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 / /
EQUITRUST LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
EQUITRUST LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Principal Executive Office)
------------------------
STEPHEN M. MORAIN, ESQUIRE
5400 University Avenue
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
Securities being offered: Flexible Premium Variable Life Insurance Policies
------------------------
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item No. of Form
N-8B-2 Caption in Prospectus
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<C> <S>
1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. EquiTrust Life Insurance Company; The Variable Account
6. The Variable Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; The Variable Account; Investment Options; Charges and Deductions; Policy Benefits; Voting Rights;
General Provisions
11. Summary; Investment Options
12. Summary; Investment Options
13. Summary; Charges and Deductions; Investment Options
14. Summary; Premiums
15. Premiums
16. Premiums; Investment Options
17. Summary; Charges and Deductions; Policy Benefits; Investment Options
18. Investment Options; Premiums
19. General Provisions; Voting Rights
20. Not Applicable
21. Policy Benefits; General Provisions
22. Not Applicable
23. Safekeeping of the Variable Account's Assets
24. General Provisions
25. EquiTrust Life Insurance Company
26. Not Applicable
27. EquiTrust Life Insurance Company
28. Executive Officers and Directors of EquiTrust Life Insurance Company
29. EquiTrust Life Insurance Company; State Regulation and Ownership of the Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Distribution of the Policies
36. Not Required
37. Not Applicable
38. Summary; Distribution of the Policies
39. Summary; Distribution of the Policies
40. Not Applicable
41. EquiTrust Life Insurance Company; Distribution of the Policies
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Item No. of Form
N-8B-2 Caption in Prospectus
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<C> <S>
42. Not Applicable
43. Not Applicable
44. Premiums
45. Not Applicable
46. Policy Benefits
47. Investment Options
48. Not Applicable
49. Not Applicable
50. The Variable Account
51. Cover Page; Summary; Charges and Deductions; Policy Benefits; Premiums
52. Investment Options
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
</TABLE>
ii
<PAGE>
[Logo]
VARIABLE UNIVERSAL LIFE
July, 1998
Prospectus for:
Flexible Premium Variable
Life Insurance Policies
issued by
EquiTrust Life
Insurance Company
-------------------------------------------
Call Toll-Free
1-800-
(Des Moines)
<PAGE>
PROSPECTUS
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EquiTrust Life Variable Account
Flexible Premium Variable Life Insurance Policy
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This Prospectus describes a flexible premium variable life insurance policy (the
"Policy") issued by EquiTrust Life Insurance Company (the "Company"). This type
of life insurance is also commonly called variable universal life. The Policy is
designed to provide lifetime insurance protection to age 115. The Policy permits
the policyowner to vary premium payments and adjust the death proceeds payable
under the Policy. The Policy has been designed for maximum flexibility in
meeting changing insurance needs.
The minimum specified amount for which a Policy will be issued is normally
$50,000. The Policy provides for the payment of the death proceeds upon the
death of the insured and for a net surrender value or net accumulated value that
can be obtained upon surrender or partial withdrawal of the Policy. Death
proceeds may, and accumulated value will, vary with the investment experience of
EquiTrust Life Variable Account (the "Variable Account"). THE POLICYOWNER BEARS
THE ENTIRE INVESTMENT RISK; THERE IS NO GUARANTEED MINIMUM ACCUMULATED VALUE.
The Policy also provides for loans using the Policy as collateral. The Policy
will remain in force so long as net accumulated value or net surrender value is
sufficient to pay certain monthly charges imposed in connection with the Policy.
A policyowner may allocate net premiums under a Policy to one or more of the
subaccounts of the Variable Account. Each Subaccount invests exclusively in
shares of the corresponding Investment Options of EquiTrust Variable Insurance
Series Fund: ; ; or ; . The accompanying prospectus for
each Fund describes the investment objectives and attendant risks of each
Investment Option. [Information on additional Investment Options to be provided
by amendment.]
A policy owner may also allocate net premiums to the Declared Interest Option.
The Declared Interest Option is supported by the Company's General Account.
Accumulated value allocated to the Declared Interest Option is credited with
interest at a declared annual rate guaranteed to be at least 4.0%.
This Prospectus generally describes only the portion of the Policy involving the
Variable Account. For a brief summary of the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
A policy may be treated as a modified endowment contract depending upon the
amount of premiums paid in relation to the death benefit provided under such
Policy. If a contract is a modified endowment contract, any loan, partial
withdrawal, surrender and/or assignment of the policy could result in adverse
tax consequences and/or penalties. (See "FEDERAL TAX MATTERS.")
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium variable life insurance
policy.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR EACH
FUND'S INVESTMENT OPTIONS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
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Issued By
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
THE DATE OF THIS PROSPECTUS IS JULY, 1998.
<PAGE>
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TABLE OF CONTENTS
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PAGE
DEFINITIONS........................................................... 3
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SUMMARY OF THE POLICY................................................. 5
The Policy........................................ 5
The Variable Account.............................. 5
The Declared Interest Option...................... 5
Premiums.......................................... 5
Policy Benefits................................... 6
Charges........................................... 7
Distribution of the Policies...................... 8
Tax Treatment..................................... 8
Cancellation Privilege............................ 8
Illustrations..................................... 8
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EQUITRUST LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT............. 9
EquiTrust Life Insurance Company.................. 9
The Variable Account.............................. 9
Investment Options................................ 9
Addition, Deletion or Substitution of 12
Investments.......................................
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THE POLICY............................................................ 13
Purpose of the Policy............................. 13
Purchasing the Policy............................. 14
Premiums.......................................... 14
Policy Lapse and Reinstatement.................... 15
Examination of Policy (Cancellation Privilege).... 16
Special Transfer Privilege........................ 16
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POLICY BENEFITS....................................................... 17
Accumulated Value Benefits........................ 17
Transfers......................................... 19
Loan Benefits..................................... 19
Death Proceeds.................................... 21
Accelerated Payments of Death Proceeds............ 24
Benefits at Maturity.............................. 24
Payment Options................................... 25
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CHARGES AND DEDUCTIONS................................................ 26
Premium Expense Charge............................ 26
Monthly Deduction................................. 26
Transfer Charge................................... 28
Partial Withdrawal Fee............................ 28
Surrender Charge.................................. 28
Variable Account Charges.......................... 29
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THE DECLARED INTEREST OPTION.......................................... 29
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GENERAL PROVISIONS.................................................... 30
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DISTRIBUTION OF THE POLICIES.......................................... 33
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FEDERAL TAX MATTERS................................................... 33
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ADDITIONAL INFORMATION................................................ 37
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FINANCIAL STATEMENTS.................................................. 41
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APPENDIX A............................................................ A-1
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APPENDIX B............................................................ B-1
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The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE
TO AN INVESTMENT IN A MUTUAL FUND.
2
<PAGE>
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DEFINITIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ACCUMULATED VALUE............ The total amount invested under the Policy. It is the sum of the values of
the Policy in each subaccount of the Variable Account plus the value of the
Policy in the Declared Interest Option.
ATTAINED AGE................. The Insured's age on his or her last birthday on the Policy Date plus the
number of Policy Years since the Policy Date.
BENEFICIARY.................. The person or entity named by the Policyowner in the application or by
later designation to receive the death proceeds upon the death of the
Insured.
BUSINESS DAY................. Each day that the New York Stock Exchange is open for trading, except the
day after Thanksgiving, the Thursday before Christmas (in 1998) and any day
on which the Home Office is closed because of a weather-related or
comparable type of emergency and is unable to segregate orders and
redemption requests received on that day.
COMPANY...................... EquiTrust Life Insurance Company.
DECLARED INTEREST OPTION..... A part of the Company's General Account. Net Premiums may be allocated, and
Accumulated Value may be transferred, to the Declared Interest Option.
Accumulated Value in the Declared Interest Option is credited with interest
at a declared annual rate guaranteed to be at least 4.0%.
DUE PROOF OF DEATH........... Proof of death that is satisfactory to the Company. Such proof may consist
of the following if acceptable to the Company:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FUND......................... An open-end diversified management investment company in which the Variable
Account invests.
GENERAL ACCOUNT.............. The assets of the Company other than those allocated to the Variable
Account or any other separate account.
GRACE PERIOD................. The 61-day period beginning on the date the Company sends notice to the
Policyowner that Net Accumulated Value or Net Surrender Value is
insufficient to cover the monthly deduction.
HOME OFFICE.................. The principal offices of the Company at 5400 University Avenue, West Des
Moines, Iowa 50266.
INSURED...................... The person upon whose life the Policy is issued.
INVESTMENT OPTION............ A separate investment portfolio of a Fund.
ISSUE DATE................... The date which the Policy is issued and mailed to the Policyowner.
MATURITY DATE................ The Insured's Attained Age 115. It is the date on which the Policy
terminates and the Policy's Accumulated Value less Policy Debt becomes
payable to the Policyowner or the Policyowner's estate.
MONTHLY DEDUCTION DAY........ The same date in each month as the Policy Date. The monthly deduction is
made on the Business Day coinciding with or immediately following the
Monthly Deduction Day. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.")
NET ASSET VALUE.............. The total current value of each Subaccount's securities, cash, receivables
and other assets less liabilities.
NET ACCUMULATED VALUE........ The Accumulated Value of the Policy reduced by any outstanding Policy Debt
and increased by any unearned loan interest.
NET PREMIUM.................. The amount of premium remaining after the premium expense charge (see
"CHARGES AND DEDUCTIONS--Premium Expense Charge") has been deducted. This
amount will be allocated, according to the Policyowner's instructions,
among the Subaccounts of the Variable Account and the Declared Interest
Option.
NET SURRENDER VALUE.......... The Surrender Value minus any Policy Debt plus any unearned loan interest.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
PARTIAL WITHDRAWAL FEE....... A fee assessed at the time of any partial withdrawal, equal to the lesser
of $25 or 2% of the amount withdrawn.
POLICY....................... The flexible premium variable life insurance policy offered by the Company
and described in this Prospectus, which term includes the Policy described
in this Prospectus, the Policy application, any supplemental applications
and any endorsements.
POLICY ANNIVERSARY........... The same date in each year as the Policy Date.
POLICY DATE.................. The date set forth on the Policy data page which is used to determine
Policy Years, Policy Months and Policy Anniversaries. The Policy Date may,
but will not always, coincide with the effective date of insurance coverage
under the Policy. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT.................. The sum of all outstanding Policy Loans and any due and unpaid Policy Loan
interest.
POLICY LOAN.................. An amount borrowed by the Policyowner from the Company for which the Policy
serves as the sole security. Interest on Policy Loans is payable in advance
(for the remainder of the Policy Year) upon taking a Policy Loan and upon
each Policy Anniversary thereafter (for the following Policy Year) until
the Policy Loan is repaid.
POLICY MONTH................. A one-month period beginning on a Monthly Deduction Day and ending on the
day immediately preceding the next Monthly Deduction Day.
POLICYOWNER.................. The person who owns a Policy. The original Policyowner is named in the
application.
POLICY YEAR.................. A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
SPECIFIED AMOUNT............. The minimum death benefit payable under a Policy so long as the Policy
remains in force. The Specified Amount as of the Policy Date is set forth
on the data page in each Policy.
SUBACCOUNT................... A subdivision of the Variable Account which invests exclusively in shares
of a designated Investment Option of a Fund.
SURRENDER CHARGE............. A charge assessed at the time of any surrender during the first ten Policy
Years and for ten years following an increase in Specified Amount.
SURRENDER VALUE.............. The Accumulated Value minus the Surrender Charge.
TARGET PREMIUM............... A premium amount specified by the Company. It is used to calculate the
premium expense charge during time periods when the Company has declared a
premium expense charge less than the 7.0% guaranteed premium expense
charge. The Company may declare a lower percentage of premium expense
charge on premiums paid in excess of the Target Premium during a Policy
Year. It is also used to calculate compensation to registered
representatives.
UNIT VALUE................... The value determined by dividing each Subaccount's Net Asset Value by the
number of units outstanding at the time of calculation.
VALUATION PERIOD............. The period between the close of business (3:00 p.m. central time) on a
Business Day and the close of business on the next Business Day.
VARIABLE ACCOUNT............. EquiTrust Life Variable Account, a separate investment account established
by the Company to receive and invest the Net Premiums paid under the
Policies.
</TABLE>
4
<PAGE>
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SUMMARY OF THE POLICY
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE DESCRIPTION OF THE POLICY CONTAINED IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND
THAT THERE IS NO OUTSTANDING POLICY DEBT.
- --------------------------------------------------------------------------------
THE POLICY
Under the Policy, subject to certain limitations, the
Policyowner has flexibility in determining the frequency
and amount of premiums. (See "THE POLICY-- Premiums.")
The amount and/or duration of the life insurance coverage
and the Accumulated Value of the Policy is not guaranteed
and may increase or decrease, depending upon the
investment experience of the assets supporting the
Policy. Accordingly, the Policyowner bears the investment
risk of any depreciation of, but reaps the benefit of any
appreciation in, the value of the underlying assets. As
long as the Policy remains in force, the Policy will
provide for death proceeds payable to the Beneficiary
upon the Insured's death, the accumulation of Accumulated
Value, withdrawal and surrender options and policy loan
privileges. The minimum Specified Amount for which a
Policy will be issued is normally $50,000, although the
Company may in its discretion issue Policies with
Specified Amounts of less than $50,000.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
Net Premiums will first be allocated to the Declared
Interest Option as of the Issue Date. Once the Company
Receives a signed notice from the Policyowner that the
Policy has been received and accepted, the Accumulated
Value in the Declared Interest Option automatically will
be allocated, without charge, among the Subaccounts and
the Declared Interest Option in accordance with the
Policyowner's allocation instructions. Net Premiums
received after the Company receives the signed notice,
are allocated, in accordance with the instructions of the
Policyowner, to the Variable Account, the Declared
Interest Option, or both. (See "THE POLICY--
Premiums--ALLOCATIONS OF NET PREMIUMS.") The Variable
Account consists of fifteen Subaccounts: the Value Growth
Subaccount, the High Grade Bond Subaccount, the High
Yield Bond Subaccount, the Money Market Subaccount, the
Blue Chip Subaccount, the Subaccount, the
Subaccount, the Subaccount, the
Subaccount, the Subaccount, the
Subaccount, the Subaccount,
the Subaccount, the
Subaccount and the Subaccount. Each
Subaccount invests exclusively in shares of the
corresponding Investment Option.
Accumulated Value will, and death proceeds may, vary with
the investment experience of the Subaccounts, as well as
with the frequency and amount of premium payments, any
partial withdrawals and any charges imposed in connection
with the Policy. (See "POLICY BENEFITS--Accumulated Value
Benefits.")
- --------------------------------------------------------------------------------
THE DECLARED INTEREST
OPTION
As an alternative to the Variable Account, the
Policyowner may allocate or transfer all or a portion of
the Accumulated Value to the Declared Interest Option,
which guarantees a specified minimum rate of return. (See
"THE DECLARED INTEREST OPTION.")
- --------------------------------------------------------------------------------
PREMIUMS
The Company may require the Policyowner to pay an initial
premium that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS-- Premium Expense Charge"),
will be sufficient to pay the monthly deduction for the
first Policy Month. Each Policyowner will determine a
planned periodic premium schedule. The Policyowner is not
required to pay premiums in accordance with the planned
periodic premium schedule. (See "THE
POLICY--Premiums--PLANNED PERIODIC PREMIUMS.") The
schedule will provide for a premium payment of a level
amount at a fixed interval over a specified period of
time. Failure to pay premiums in accordance with the
schedule will not itself cause the Policy to lapse. (See
"THE POLICY--Policy Lapse and Reinstatement--LAPSE.")
Subject to certain restrictions, unscheduled premium
payments may also be made. (See "THE POLICY--
Premiums--UNSCHEDULED PREMIUMS.")
A Policy will lapse during the first three Policy Years
when Net Accumulated Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction, or after
three Policy Years when Net Surrender Value is
insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly
5
<PAGE>
Deduction"), and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and
Reinstatement--LAPSE"). With respect to premiums,
therefore, the Policy differs in two important ways from
a conventional life insurance policy. First, the failure
to pay a planned periodic premium will not in itself
automatically cause the Policy to lapse. Second, a Policy
can lapse even if planned periodic premiums or premiums
in other amounts have been paid.
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POLICY BENEFITS
ACCUMULATED VALUE BENEFITS. The Policy provides for a
Accumulated Value. The Accumulated Value will reflect
the amount and frequency of premium payments, the
investment experience of the chosen subaccounts of the
Variable Account, the interest earned on the Accumulated
Value in the Declared Interest Option, any Policy Loans,
any partial surrenders and the charges imposed in
connection with the Policy. The entire investment risk
for amounts allocated to the Variable Account is borne by
the Policyowner; the Company does not guarantee a minimum
Accumulated Value. (See "POLICY BENEFITS--Accumulated
Value Benefits--CALCULATION OF ACCUMULATED VALUE.")
The Policyowner may, at any time, surrender a Policy and
receive the Net Surrender Value. Subject to certain
limitations, the Policyowner may also obtain a partial
withdrawal of Net Accumulated Value (minimum $500) at any
time prior to the Maturity Date. Partial withdrawals will
reduce both the Accumulated Value and death proceeds
payable under the Policy. (See "POLICY
BENEFITS--Accumulated Value Benefits--SURRENDER AND
WITHDRAWAL PRIVILEGES.") A charge will be assessed upon
surrender or partial withdrawal. (See "CHARGES AND
DEDUCTIONS--Partial Withdrawal Fee, and --Surrender
Charge.")
TRANSFERS. A Policyowner may transfer amounts (minimum
$100) among the subaccounts of the Variable Account an
unlimited number of times in a Policy Year; however, only
one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account. The
first transfer in a Policy Year is free; subsequent
transfers in that Policy Year will be assessed a charge
of $25. The transfer charge, unless paid in cash, will be
deducted from the amount transferred. (See "POLICY
BENEFITS--Transfers.") A transfer from the Variable
Account to the Declared Interest Option requested in
connection with the exercise of the special transfer
privilege under the Policy (see "THE POLICY--Special
Transfer Privilege") will not be considered a transfer
for purposes of the one-transfer limit or the $25 charge.
POLICY LOANS. So long as a Policy is in force and has a
positive Net Surrender Value, the Policyowner may borrow
up to 90% of the Policy's Net Surrender Value as of the
end of the Valuation Period during which the request for
the Policy Loan is received at the Home Office, less any
previously outstanding Policy Debt. (See "POLICY
BENEFITS-- Loan Benefits.") A loan taken from, or secured
by, a Policy may have federal income tax consequences.
(See "FEDERAL TAX MATTERS--Policy Proceeds.")
DEATH PROCEEDS. The Policies provide for the payment of
death proceeds following receipt by the Company (at its
Home Office) of Due Proof of Death of the Insured. The
Policy contains two death benefit options. Under Option
A, the death benefit is the greater of the sum of the
Specified Amount and the Policy's Accumulated Value, or
the Accumulated Value multiplied by the specified amount
factor for the Insured's Attained Age, as set forth in
the Policy. Under Option B, the death benefit is the
greater of the Specified Amount, or the Accumulated Value
multiplied by the specified amount factor for the
Insured's Attained Age, as set forth in the Policy. For
this purpose, all calculations are made as of the end of
the Business Day coinciding with or immediately following
the date of death.
Under either death benefit option, so long as the Policy
remains in force, the death benefit will not be less than
the Specified Amount of the Policy on the date of death.
The death benefit may, however, exceed the Specified
Amount. The amount by which the death benefit exceeds the
Specified Amount depends upon the death benefit option
chosen and the Accumulated Value of the Policy. (See
"POLICY BENEFITS-- Death Proceeds.") To determine the
death proceeds, the death benefit will be reduced by any
outstanding Policy Debt and increased by any unearned
loan interest
6
<PAGE>
and any premiums paid after the date of death. The
proceeds may be paid in a lump sum or in accordance with
a payment option. (See "POLICY BENEFITS--Payment
Options.")
Anytime after the first Policy Year, the Policyowner may,
subject to certain restrictions, adjust the death benefit
payable under the Policy by increasing or decreasing the
Specified Amount. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN EXISTING COVERAGE.") In addition, the
Policyowner may, at any time, change the death benefit
option in effect. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN DEATH BENEFIT OPTION.")
BENEFITS AT MATURITY. If the Insured is alive and the
Policy is in force on the Maturity Date, the Policyowner
will be paid the Accumulated Value of the Policy as of
the end of the Business Day coinciding with or
immediately following the Maturity Date, reduced by any
outstanding Policy Debt.
- --------------------------------------------------------------------------------
CHARGES
PREMIUM EXPENSE CHARGE. The Net Premium equals the
premium paid less a premium expense charge. The premium
expense charge is 7.0% of each premium up to the Target
Premium (or 2% for each premium over the Target Premium)
and is used to compensate the Company for expenses
incurred in connection with the distribution of the
Policies and for premium taxes imposed by various states
and subdivisions thereof. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ACCUMULATED VALUE CHARGES. Accumulated Value will be
reduced each Policy Month on the Monthly Deduction Day
by a monthly deduction equal to the sum of a cost of
insurance charge, the cost of any additional insurance
benefits added by rider and a policy expense charge of
$5.00 per month (guaranteed not to exceed $7.00 per
month). In addition, during the first twelve Policy
Months and during the twelve Policy Months immediately
following an increase in Specified Amount, the monthly
deduction will include a first year monthly
administrative charge. This charge is $0.05 per $1,000 of
Specified Amount or increase in Specified Amount and is
guaranteed not to exceed $0.07 per $1,000 of Specified
Amount. Also, during the first twelve Policy Months, the
monthly deduction will include a first year monthly
expense charge of $5.00 per month (guaranteed not to
exceed $7.00 per month). The monthly deduction will vary
in amount from month to month. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.")
Upon partial withdrawal of a Policy, a fee of the lesser
of $25 or 2% of the amount withdrawn will be assessed. At
the time of surrender, a charge will apply during the
first ten Policy Years, as well as during the first ten
Policy Years following an increase in Specified Amount.
The surrender charge is an amount per $1,000 of Specified
Amount which varies by age, sex, underwriting category
and Policy Year. The surrender charge applicable to each
Policyowner will be listed in the Policy. (See "CHARGES
AND DEDUCTIONS--Partial Withdrawal Fee, and --Surrender
Charge.") During a Policy Year, a $25 charge may be
assessed for the second and subsequent transfers of
assets among the Subaccounts and between the Variable
Account and the Declared Interest Option. (See "CHARGES
AND DEDUCTIONS--Transfer Charge.")
CHARGES AGAINST THE VARIABLE ACCOUNT. A daily charge at
the rate of .0024548% of the average daily net assets of
each Subaccount will be imposed to compensate the Company
for certain mortality and expense risks incurred in
connection with the Policies. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges.") This corresponds
to an effective annual rate of 0.90%. (This charge is
guaranteed not to exceed .0028618% of the average daily
net assets of each Subaccount, which corresponds to an
effective annual rate of 1.05%.)
Currently, no charge is made to the Variable Account for
federal income taxes that may be attributable to the
Variable Account. The Company may, however, make such a
charge in the future.
INVESTMENT OPTION EXPENSES. In addition, because the
Variable Account purchases shares of the selected
Investment Options, the value of the net assets of the
Variable Account will reflect the investment advisory fee
and other expenses incurred by each
7
<PAGE>
Investment Option. The fees and expenses for 1997 were as
indicated in the table below. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges--INVESTMENT OPTION
EXPENSES.")
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
INVESTMENT OPTION FEE EXPENSES EXPENSES
- ------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Value Growth
High Grade Bond
High Yield Bond
Blue Chip
Money Market
Investment Option F
Investment Option G
Investment Option H
Investment Option I
Investment Option J
Investment Option K
Investment Option L
Investment Option M
Investment Option N
Investment Option O
</TABLE>
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE
POLICIES
The Policies will be distributed by registered
representatives of EquiTrust Marketing Services, Inc.
("EquiTrust Marketing"), a broker-dealer having a selling
agreement with EquiTrust Marketing or a broker-dealer
having a selling agreement with such broker-dealer.
EquiTrust Marketing (formerly FBL Marketing Services,
Inc.), a wholly-owned indirect subsidiary of FBL
Financial Group, Inc. is registered as a broker-dealer
with the Securities and Exchange Commission and is a
member of the National Association of Securities Dealers,
Inc.
- --------------------------------------------------------------------------------
TAX TREATMENT
If a Policy is issued on the basis of a standard premium
class, while there is some uncertainty, the Company
believes that the Policy should qualify as a life
insurance contract for federal income tax purposes. If a
Policy is issued on a substandard basis, it is not clear
whether or not the Policy would qualify as a life
insurance contract for federal income tax purposes.
Assuming that a Policy qualifies as a life insurance
contract for federal income tax purposes, the Accumulated
Value under a Policy should be subject to the same
federal income tax treatment as Accumulated value under a
conventional fixed-benefit Policy. Under existing tax
law, the Policyowner is not deemed to be in constructive
receipt of Accumulated Values under a Policy until there
is a distribution from the Policy. Like death benefits
payable under conventional life insurance policies, death
proceeds payable under a Policy should be completely
excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally will not be taxed on
these proceeds. (See "FEDERAL TAX MATTERS.")
- --------------------------------------------------------------------------------
CANCELLATION
PRIVILEGE
The Policyowner is granted a 20-day period following
receipt of the Policy in which to examine and return the
Policy. The Policyowner will receive the greater of
premiums paid or the Policy's Accumulated Value plus an
amount approximately equal to any charges which have been
deducted from premiums, Accumulated Value and the
Variable Account. (See "THE POLICY--Examination of Policy
(Cancellation Privilege).")
- --------------------------------------------------------------------------------
ILLUSTRATIONS
Sample projections of hypothetical Policy values are
included starting at page A-1 of this Prospectus. These
projections of hypothetical values may be helpful in
understanding the long-term effects of different levels
of investment performance, charges and deductions,
electing one or the other death benefit option and
generally in comparing this Policy to other life
insurance policies. NONETHELESS, THE ILLUSTRATIONS ARE
BASED ON HYPOTHETICAL INVESTMENT RATES OF RETURN AND ARE
NOT A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
Actual rates of return may be more or less than those
reflected in the illustrations and, therefore, actual
values will be different from those illustrated.
This Prospectus describes only those aspects of the
Policy that relate to the Variable Account, except where
Declared Interest Option matters are specifically
mentioned. For a brief summary of the aspects of the
Policy relating to the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
8
<PAGE>
- --------------------------------------------------------------------------------
EQUITRUST LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
EQUITRUST LIFE
INSURANCE COMPANY
The Company is a stock life insurance company which was
incorporated in the State of Iowa on June 3, 1966. The
Company is principally engaged in the offering of life
insurance policies and annuity contracts and is admitted
to do business in 38 states-- Alabama, Alaska, Arizona,
Arkansas, California, Colorado, Delaware, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Louisiana, Michigan, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Mexico, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, South Carolina,
South Dakota, Tennessee, Texas, Utah, Virginia,
Washington, Wisconsin and Wyoming. The principal offices
of the Company are at 5400 University Avenue, West Des
Moines, Iowa 50266.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
The Variable Account was established by the Company as a
separate account on January 6, 1998. The Variable Account
will receive and invest the Net Premiums paid under the
Policies. In addition, the Variable Account may receive
and invest net premiums for any other variable life
insurance policies issued in the future by the Company.
Although the assets in the Variable Account are the
property of the Company, the assets in the Variable
Account attributable to the Policies generally are not
chargeable with liabilities arising out of any other
business which the Company may conduct. The assets of the
Variable Account are available to cover the general
liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising
under the Policies and any other policies supported by
the Variable Account. The Company has the right to
transfer to the General Account any assets of the
Variable Account which are in excess of such reserves and
other policy liabilities.
The Variable Account currently is divided into fifteen
Subaccounts but may, in the future, include additional
subaccounts. Each Subaccount invests exclusively in
shares of a single corresponding Investment Option.
Income and realized and unrealized gains or losses from
the assets of each Subaccount are credited to or charged
against, that Subaccount without regard to income, gains
or losses from any other Subaccount.
The Variable Account has been registered as a unit
investment trust under the Investment Company Act of 1940
and meets the definition of a separate account under the
federal securities laws. Registration with the Securities
and Exchange Commission does not involve supervision of
the management or investment practices or policies of the
Variable Account or the Company by the Commission. The
Variable Account is also subject to the laws of the State
of Iowa which regulate the operations of insurance
companies domiciled in Iowa.
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS
The Variable Account invests in shares of the Investment
Options. The Investment Options currently include the
Value Growth Portfolio, High Grade Bond Portfolio, High
Yield Bond Portfolio, Money Market Portfolio and Blue
Chip Portfolio of EquiTrust Variable Insurance Series
Fund, the Portfolio,
Portfolio, Portfolio,
Portfolio and Portfolio of
and the Portfolio,
Portfolio, Portfolio,
Portfolio and Portfolio
of . The Variable Account may, in the
future, provide for additional investment options. Each
Investment Option has its own investment objectives and
the income and losses for each Investment Option will be
determined separately.
The investment objectives and policies of each Investment
Option are summarized below. There is no assurance that
any Investment Option will achieve its stated
9
<PAGE>
objectives. More detailed information, including a
description of risks, may be found in the prospectus for
each Investment Option, which must accompany or precede
this Prospectus and which should be read carefully and
retained for future reference.
EQUITRUST VARIABLE INSURANCE SERIES FUND
VALUE GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation. The Portfolio pursues
its objective by investing primarily in equity
securities of companies that the investment adviser
believes have a potential to earn a high return on
equity and/or in equity securities that the
investment adviser believes are undervalued by the
market place. Such equity securities may include
common stock, preferred stock and securities
convertible or exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
a high grade portfolio of debt securities. The
Portfolio will pursue this objective by investing
primarily in debt securities rated AAA, AA or A by
Standard & Poor's Corporation and/or Aaa, Aa or A by
Moody's Investors Service, Inc., and in securities
issued or guaranteed by the United States government
or its agencies or instrumentalities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a
primary objective, as high a level of current income
as is consistent with investment in a portfolio of
fixed-income securities rated in the lower categories
of established rating services. As a secondary
objective, the Portfolio seeks capital appreciation
when consistent with its primary objective. The
Portfolio pursues these objectives by investing
primarily in fixed-income securities rated Baa or
lower by Moody's Investors Service, Inc. and/or BBB
or lower by Standard & Poor's Corporation, or in
unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus
"PRINCIPAL RISK FACTORS--Special Considerations--High
Yield Bonds.")
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
current income consistent with liquidity and
stability of principal. The Portfolio will pursue
this objective by investing in high quality
short-term money market instruments. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
capital and income. The Portfolio pursues this
objective by investing primarily in common stocks of
well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular
stocks or industries, an investment in this Portfolio
may entail relatively greater risk of loss.
10
<PAGE>
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
PORTFOLIO.
11
<PAGE>
PORTFOLIO.
PORTFOLIO.
EquiTrust Variable Insurance Series Fund currently sells
shares only to the Variable Account and to separate
accounts of the Company supporting other variable life
insurance policies and variable annuity contracts.
EquiTrust Variable Insurance Series Fund may in the
future sell shares to other separate accounts of the
Company or its life insurance company affiliates
supporting other variable insurance products, or to
variable life insurance and variable annuity separate
accounts of insurance companies not affiliated with the
Company. The other Funds currently sell shares: (a) to
the Variable Account as well as to separate accounts of
insurance companies that may or may not be affiliated
with the Company or each other; and (b) to separate
accounts to serve as the underlying investment for both
variable insurance policies and variable annuity
contracts. The Company currently does not foresee any
disadvantages to Policyowners arising from the sale of
shares to support variable annuity contracts and variable
life insurance policies, or from shares sold to separate
accounts of insurance companies that may or may not be
affiliated with the Company. However, the Company intends
to monitor events in order to identify any material
irreconcilable conflicts that might possibly arise. In
that event, it would determine what action, if any,
should be taken in response to those events or conflicts.
In addition, if the Company believes that a Fund's
response to any of those events or conflicts
insufficiently protects Policyowners, it will take
appropriate action on its own, including withdrawing the
Variable Account's investment in that Fund. (See the Fund
prospectuses for more detail.)
Each Fund is registered with the Securities and Exchange
Commission as an open-end, diversified management
investment company. Such registration does not involve
supervision of the management or investment practices or
policies of the Fund by the Securities and Exchange
Commission.
[Additional information on Investment Options to be
provided by amendment.]
- --------------------------------------------------------------------------------
ADDITION, DELETION OR
SUBSTITUTION OF
INVESTMENTS
The Company reserves the right, subject to compliance
with applicable law, to make additions to, deletions from
or substitutions for the shares of the Investment Options
that are held by the Variable Account or that the
Variable Account may purchase. If the shares of an
Investment Option are no longer available for investment
or if, in its judgment, further investment in any
Investment Option should become inappropriate in view of
the purposes of the Variable Account, the Company
reserves the right to dispose of the shares of any
Investment Option and to substitute shares of another
Investment Option. The Company will not substitute any
shares attributable to a Policyowner's Accumulated Value
in the Variable Account without notice to and prior
approval of the Securities and Exchange Commission, to
the extent required by
12
<PAGE>
the Investment Company Act of 1940 or other applicable
law. Nothing contained in this Prospectus shall prevent
the Variable Account from purchasing other securities for
other series or classes of policies, or from permitting a
conversion between series or classes of policies on the
basis of requests made by Policyowners.
The Company also reserves the right to establish
additional subaccounts of the Variable Account, each of
which would invest in shares of a new Investment Option
with a specified investment objective. New subaccounts
may be established when, in the sole discretion of the
Company, marketing, tax or investment conditions warrant,
and any new subaccounts may be made available to existing
Policyowners on a basis to be determined by the Company.
Subject to obtaining any approvals or consents required
by applicable law, the assets of one or more Subaccounts
may be transferred to any other Subaccount(s), or one or
more Subaccounts may be eliminated or combined with any
other Subaccount(s) if, in the sole discretion of the
Company, marketing, tax or investment conditions warrant.
In the event of any such substitution or change, the
Company may, by appropriate endorsement, make such
changes in these and other policies as may be necessary
or appropriate to reflect such substitution or change. If
deemed by the Company to be in the best interests of
persons having voting rights under the Policies, the
Variable Account may be operated as a management company
under the Investment Company Act of 1940, may be
deregistered under that Act in the event such
registration is no longer required, or, subject to
obtaining any approvals or consents required by
applicable law, may be combined with other Company
separate accounts. To the extent permitted by applicable
law, the Company may also transfer the assets of the
Variable Account associated with the Policies to another
separate account. In addition, the Company may, when
permitted by law, restrict or eliminate any voting rights
of Policyowners or other persons who have voting rights
as to the Variable Account. (See "ADDITIONAL
INFORMATION--Voting Rights.")
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURPOSE OF THE POLICY
The Policy is designed to provide the Policyowner with
both lifetime insurance protection and significant
flexibility in connection with the amount and frequency
of premium payments and the level of death proceeds
payable under a Policy. Unlike conventional life
insurance, the Policyowner is not required to pay
scheduled premiums to keep a Policy in force, but may,
subject to certain limitations, vary the frequency and
amount of premium payments. Moreover, the Policy allows a
Policyowner to adjust the level of death proceeds payable
under a Policy, without having to purchase a new policy,
by increasing or decreasing the Specified Amount. Thus,
as insurance needs or financial conditions change, the
Policyowner has the flexibility to adjust death proceeds
and vary premium payments.
The Policy varies from conventional fixed-benefit life
insurance in a number of additional respects. Because the
death proceeds may, and the Accumulated Value will, vary
with the investment experience of the chosen Subaccounts,
the Policyowner bears the investment risk of any
depreciation of, but reaps the benefit of any
appreciation in, the value of the underlying assets. As a
result, whether or not a Policy continues in force may
depend in part upon the investment experience of the
chosen Subaccounts. The failure to pay a planned periodic
premium will not necessarily cause the Policy to lapse,
but the Policy could lapse even if planned periodic
premiums have been paid, depending upon the investment
experience of the Variable Account.
Life Insurance is not a short-term investment.
Prospective policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential. A prospective policyowner who already has life
insurance coverage should consider whether or not
changing or adding to existing coverage would be
advantageous. Generally, it is not advisable to purchase
another policy to replace an existing policy.
13
<PAGE>
- --------------------------------------------------------------------------------
PURCHASING THE POLICY
Before it will issue a Policy, the Company must receive a
completed application, including payment of the initial
premium, at its Home Office. A Policy ordinarily will be
issued only for Insureds who are 0 to 80 years of age at
their last birthday and who supply satisfactory evidence
of insurability to the Company. Acceptance is subject to
the Company's underwriting rules and the Company may, in
its sole discretion, reject any application or premium
for any reason. The minimum Specified Amount for which a
Policy will be issued is normally $50,000, although the
Company may, in its discretion, issue Policies with
Specified Amounts of less than $50,000.
The Policy Date will be the later of (i) the date of the
initial application, or (ii) if additional medical or
other information is required pursuant to the Company's
underwriting rules, the date all such additional
information is received by the Company at its Home
Office. The Policy Date may also be any other date
mutually agreed to by the Company and the Policyowner. If
the later of (i) and (ii) above is the 29th, 30th or 31st
of any month, the Policy Date will be the 28th of such
month. The Policy Date is the date used to determine
Policy Years, Policy Months and Policy Anniversaries. The
Policy Date may, but will not always, coincide with the
effective date of insurance coverage under the Policy.
The effective date of insurance coverage under the Policy
will be the later of (i) the Policy Date, (ii) if an
amendment to the initial application is required pursuant
to the Company's underwriting rules, the date the Insured
signs the last such amendment, or (iii) the date on which
the full initial premium is received by the Company at
its Home Office.
- --------------------------------------------------------------------------------
PREMIUMS
Subject to certain limitations, a Policyowner has
flexibility in determining the frequency and amount of
premiums.
PREMIUM FLEXIBILITY. Unlike conventional insurance
policies, the Policy frees the Policyowner from the
requirement that premiums be paid in accordance with a
rigid and inflexible premium schedule. The Company may
require the Policyowner to pay an initial premium that,
when reduced by the premium expense charge (see "CHARGES
AND DEDUCTIONS--Premium Expense Charge"), will be
sufficient to pay the monthly deduction for the first
Policy Month. Thereafter, subject to the minimum and
maximum premium limitations described below, a
Policyowner may also make unscheduled premium payments at
any time prior to the Maturity Date.
PLANNED PERIODIC PREMIUMS. Each Policyowner will
determine a planned periodic premium schedule that
provides for the payment of a level premium over a
specified period of time on a quarterly, semi-annual or
annual basis. The Company may, at its discretion, permit
planned periodic payments to be made on a monthly basis.
Periodic reminder notices ordinarily will be sent to the
Policyowner for each planned periodic premium. Depending
on the duration of the planned periodic premium schedule,
the timing of planned payments could affect the tax
status of the Policy. (See "FEDERAL TAX MATTERS.")
The Policyowner is not required to pay premiums in
accordance with the planned periodic premium schedule.
Furthermore, the Policyowner has considerable flexibility
to alter the amount, frequency and the time period over
which planned periodic premiums are paid; however, no
planned periodic payment may be less than $100 without
the Company's consent. Changes in the planned premium
schedule may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
The payment of a planned periodic premium will not
guarantee that the Policy remains in force. Instead, the
duration of the Policy depends upon the Policy's
Accumulated Value. Thus, even if planned periodic
premiums are paid by the Policyowner, the Policy will
nevertheless lapse if, during the first three Policy
Years, Net Accumulated Value or, after three Policy
Years, Net Surrender Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction") and a Grace
Period expires without a sufficient payment (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE").
14
<PAGE>
UNSCHEDULED PREMIUMS. Each unscheduled premium payment
must be at least $100; however, the Company may, in its
discretion, waive this minimum requirement. The Company
reserves the right to limit the number and amount of
unscheduled premium payments. An unscheduled premium
payment may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all
premiums paid, both planned periodic and unscheduled,
exceed the applicable maximum premium limitation imposed
by federal tax laws. Because the maximum premium
limitation is in part dependent upon the Specified Amount
for each Policy, changes in the Specified Amount may
affect this limitation. If at any time a premium is paid
which would result in total premiums exceeding the
applicable maximum premium limitation, the Company will
accept only that portion of the premium which will make
total premiums equal the maximum. Any part of the premium
in excess of that amount will be returned and no further
premiums will be accepted until allowed by the applicable
maximum premium limitation.
PAYMENT OF PREMIUMS. Payments made by the Policyowner
will be treated first as payment of any outstanding
Policy Debt unless the Policyowner indicates that the
payment should be treated otherwise. Where no indication
is made, any portion of a payment that exceeds the amount
of any outstanding Policy Debt will be treated as a
premium payment.
NET PREMIUMS. The Net Premium is the amount available
for investment. The Net Premium equals the premium paid
less the premium expense charge. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ALLOCATION OF NET PREMIUMS. In the application for a
Policy, the Policyowner can allocate Net Premiums or
portions thereof to the Subaccounts, to the Declared
Interest Option, or both. Notwithstanding the allocation
in the application, the Net Premiums will first be
allocated to the Declared Interest Option as of the Issue
Date. When the Company receives, at its Home Office, a
notice signed by the Policyowner that the Policy has been
received and accepted, the Policy's Accumulated Value in
the Declared Interest Option automatically will be
allocated, without charge, among the Subaccounts and the
Declared Interest Option in accordance with the
Policyowner's percentage allocation in the application.
The Policyowner does not waive his cancellation privilege
by sending the signed notice of receipt and acceptance of
the Policy to the Company (see "THE POLICY--Examination
of Policy (Cancellation Privilege)").
Net Premiums received after the date the Company receives
the signed notice will be allocated in accordance with
the Policyowner's percentage allocation in the
application or the most recent written instructions of
the Policyowner. The minimum percentage of each premium
that may be allocated to any subaccount of the Variable
Account or to the Declared Interest Option is 10%; no
fractional percentages will be permitted. The allocation
for future Net Premiums may be changed without charge, at
any time while the Policy is in force, by providing the
Company with written notice on a form acceptable to the
Company signed by the Policyowner. The change will take
effect on the date the written notice is received at the
Home Office and will have no effect on prior cash values.
- --------------------------------------------------------------------------------
POLICY LAPSE AND
REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the
failure to make a planned periodic premium payment will
not itself cause a Policy to lapse. Lapse will only occur
during the first three Policy Years when Net Accumulated
Value is insufficient on a Monthly Deduction Day to cover
the monthly deduction, or after three Policy Years when
Net Surrender Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction"), and a Grace
Period expires without a sufficient payment. Insurance
coverage will continue during the Grace Period, but the
Policy will be deemed to have no Accumulated Value for
purposes of Policy Loans and surrenders during such Grace
Period. The death
15
<PAGE>
proceeds payable during the Grace Period will equal the
amount of the death proceeds payable immediately prior to
the commencement of the Grace Period, reduced by any due
and unpaid monthly deductions.
To avoid lapse and termination of the Policy without
value, the Company must receive from the Policyowner
during the Grace Period a premium payment that, when
reduced by the premium expense charge (see "CHARGES AND
DEDUCTIONS-- Premium Expense Charge"), will be at least
equal to three times the monthly deduction due on the
Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS--Monthly Deduction").
A Grace Period of 61 days will commence on the date the
Company sends a notice of any insufficiency to the
Policyowner.
REINSTATEMENT. Prior to the Maturity Date, a lapsed
Policy may be reinstated at any time within five years
of the Monthly Deduction Day immediately preceding the
Grace Period which expired without payment of the
required premium. Reinstatement is effected by submitting
the following items to the Company:
1. A written application for reinstatement signed by the
Policyowner and the Insured;
2. Evidence of insurability satisfactory to the Company;
3. A premium that, after the deduction of the premium
expense charge, is at least sufficient to keep the
Policy in force for three months; and
4. An amount equal to the monthly cost of insurance for
the two Policy Months prior to lapse.
(State law may limit the premium to be paid on
reinstatement to an amount less than that described.) To
the extent that the first year monthly administrative
charge was not deducted for a total of twelve Policy
Months prior to lapse, such charge will continue to be
deducted following reinstatement of the Policy until such
charge has been assessed, both before and after the
lapse, for a total of 12 Policy Months. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.") The Company will not
reinstate a Policy surrendered for its Net Surrender
Value. The lapse of a Policy with loans outstanding may
have adverse tax consequences (see "FEDERAL TAX
MATTERS--Policy Proceeds").
The effective date of the reinstated Policy will be the
Monthly Deduction Day coinciding with or next following
the date the Company approves the application for
reinstatement.
- --------------------------------------------------------------------------------
EXAMINATION OF POLICY
(CANCELLATION
PRIVILEGE)
The Policyowner may cancel the Policy by delivering or
mailing written notice or sending a telegram to the
Company at its Home Office, and returning the Policy to
the Company at its Home Office before midnight of the
twentieth day after the Policyowner receives the Policy.
Notice given by mail and return of the Policy by mail are
effective on being postmarked, properly addressed and
postage prepaid.
With respect to all Policies, the Company will refund,
within seven days after receipt of satisfactory notice of
cancellation and the returned Policy at its Home Office,
the greater of premiums paid or the Policy's Accumulated
Value plus an amount approximately equal to any charges
which have been deducted from premiums, Accumulated Value
and the Variable Account.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER
PRIVILEGE
A Policyowner may, at any time prior to the Maturity Date
while the Policy is in force, convert the Policy to a
flexible premium fixed-benefit life insurance policy by
requesting that all of the Accumulated Value in the
Variable Account be transferred to the Declared Interest
Option. The Policyowner may exercise this special
transfer privilege once each Policy Year. Once a
Policyowner exercises the special transfer privilege, all
future premium payments automatically will be credited to
the Declared Interest Option, until such time as the
Policyowner requests a change in allocation. No charge
will be imposed for any transfers resulting from the
exercise of the special transfer privilege.
16
<PAGE>
- --------------------------------------------------------------------------------
POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain
benefits prior to the Maturity Date. Subject to certain
limitations, the Policyowner may at any time obtain all
or a portion of the Net Accumulated Value by surrendering
or taking a partial withdrawal from the Policy. (See
"POLICY BENEFITS--Accumulated Value Benefits--SURRENDER
AND WITHDRAWAL PRIVILEGES.") In addition, the Policyowner
has certain policy loan privileges under the Policies.
(See "POLICY BENEFITS--Loan Benefits--POLICY LOANS.") The
Policy also provides for the payment of death proceeds
upon the death of the Insured under one of two death
benefit options selected by the Policyowner (see "POLICY
BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS"), and
benefits upon the maturity of a Policy (see "POLICY
BENEFITS--Benefits at Maturity").
- --------------------------------------------------------------------------------
ACCUMULATED VALUE
BENEFITS
SURRENDER AND WITHDRAWAL PRIVILEGES. At any time prior
to the Maturity Date while the Policy is in force, a
Policyowner may surrender the Policy or make a partial
withdrawal by sending a written request to the Company at
its Home Office. A surrender charge will apply to any
surrender during the first ten Policy Years, as well as
during the first ten years following an increase in
Specified Amount. A $25 Partial Withdrawal Fee to cover
the cost of processing a withdrawal will be payable upon
each partial withdrawal. (See "CHARGES AND
DEDUCTIONS--Partial Withdrawal Fee, and --Surrender
Charge.") Surrender and withdrawal proceeds ordinarily
will be mailed to the Policyowner within seven days after
the Company receives a signed request for a surrender at
its Home Office, although payments may be postponed under
certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
SURRENDERS. The amount payable upon surrender of the
Policy is the Net Surrender Value at the end of the
Valuation Period during which the request is received.
This amount may be paid in a lump sum or under one of the
payment options specified in the Policy, as requested by
the Policyowner. (See "POLICY BENEFITS--Payment
Options.") Upon surrender, all insurance in force will
terminate. For a discussion of the tax consequences
associated with Surrenders, see "FEDERAL TAX MATTERS."
PARTIAL WITHDRAWALS. A Policyowner may obtain a portion
of the Policy's Net Accumulated Value. The amount
requested for partial withdrawal must be at least $500
and cannot exceed the lesser of (1) the Net Accumulated
Value less $500, or (2) 90% of the Net Accumulated Value.
The Partial Withdrawal Fee will be deducted from the
remaining Accumulated Value. The Policyowner may request
that the proceeds of a partial withdrawal be paid in a
lump sum or under one of the payment options specified in
the Policy. (See "POLICY BENEFITS--Payment Options.")
A partial withdrawal (together with the Partial
Withdrawal Fee) will be allocated among the Subaccounts
and the Declared Interest Option in accordance with the
written instructions of the Policyowner. If no such
instructions are received with the request for partial
withdrawal, the partial withdrawal will be allocated
among the Subaccounts and the Declared Interest Option in
the same proportion that the Accumulated Value in each of
the Subaccounts and the Accumulated Value in the Declared
Interest Option, reduced by any outstanding Policy Debt,
bears to the total Accumulated Value on the date the
request is received at the Home Office.
Partial withdrawals will affect both the Policy's
Accumulated Value and the death proceeds payable under
the Policy. The Policy's Accumulated Value will be
reduced by the amount of the partial withdrawal. If the
death benefit payable under either death benefit option
both before and after the partial withdrawal is equal to
the Accumulated Value multiplied by the specified amount
factor set forth in the Policy, a partial withdrawal will
result in a reduction in death proceeds equal to the
amount of the partial withdrawal, multiplied by the
specified amount factor then in effect. If the death
benefit is not so affected by the specified amount
factor, the reduction in death proceeds will be equal to
the partial withdrawal. (See "POLICY BENEFITS--Death
Proceeds.")
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<PAGE>
Partial withdrawals will reduce the Policy's Specified
Amount by the amount of Cash Value withdrawn if Option B
is in effect at the time of the withdrawal. If Option A
is in effect at the time of the withdrawal, there will be
no effect on Specified Amount. (See "POLICY
BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") The
Specified Amount remaining in force after a partial
withdrawal may not be less than the minimum Specified
Amount for the Policy in effect on the date of the
partial withdrawal, as published by the Company. As a
result, the Company will not process any partial
withdrawal that would reduce the Specified Amount below
this minimum. If increases in the Specified Amount
previously have occurred, a partial withdrawal will first
reduce the Specified Amount of the most recent increase,
then the next most recent increases successively, then
the coverage under the original application. Thus, a
partial withdrawal may either increase or decrease the
amount of the cost of insurance charge, depending upon
the particular circumstances. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.") For a
discussion of the tax consequences associated with
partial withdrawals, see "FEDERAL TAX MATTERS."
NET ACCUMULATED VALUE. Net Accumulated Value equals the
Policy's Accumulated Value reduced by any outstanding
Policy Debt and increased by any unearned loan interest.
CALCULATION OF ACCUMULATED VALUE. The Policy provides
for the accumulation of Accumulated Value. Accumulated
Value will be determined on each Business Day. A Policy's
Accumulated Value will reflect a number of factors,
including Net Premiums paid, partial withdrawals, Policy
Loans, charges assessed in connection with the Policy,
the interest earned on the Accumulated Value in the
Declared Interest Option and the investment performance
of the Subaccounts to which the Accumulated Value is
allocated. There is no guaranteed minimum Accumulated
Value. The Accumulated Value of the Policy is equal to
the sum of the Accumulated Values in each Subaccount,
plus the Accumulated Value in the Declared Interest
Option, including amounts transferred to the Declared
Interest Option to secure outstanding Policy Debt.
As of the Issue Date, the Policy's Accumulated Value
equals the initial Net Premium less the monthly deduction
made on the Policy Date.
On the Business Day coinciding with or immediately
following the date the Company receives notice that the
Policy has been received and accepted by the Policyowner,
the Policy's Accumulated Value (all of which is in the
Declared Interest Option) will be transferred
automatically among the Subaccounts and the Declared
Interest Option in accordance with such percentage
allocation instructions. At the end of each Valuation
Period thereafter, the Accumulated Value in a Subaccount
will equal:
(1) The total Subaccount units represented by the
accumulated value at the end of the preceding
valuation period, multiplied by the Subaccount's
unit value for the current valuation period; PLUS
(2) Any Net Premiums received during the current
Valuation Period which are allocated to the
Subaccount; PLUS
(3) All Accumulated Values transferred to the
Subaccount from the Declared Interest Option or
from another Subaccount during the current
Valuation Period; MINUS
(4) All Accumulated Values transferred from the
Subaccount to another Subaccount or to the
Declared Interest Option during the current
Valuation Period, including amounts transferred to
the Declared Interest Option to secure Policy
Debt; MINUS
(5) All partial withdrawals (and any portion of the
Partial Withdrawal Fee) deducted from the
Subaccount during the current Valuation Period;
MINUS
(6) The portion of any monthly deduction charged to
the Subaccount during the current Valuation Period
to cover the Policy Month following the Monthly
Deduction Day.
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<PAGE>
The Policy's total Accumulated Value in the Variable
Account equals the sum of the Policy's Accumulated Value
in each Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When Net
Premiums are allocated to, or other amounts are
transferred into, a Subaccount, a number of units are
purchased based on the Unit Value of the Subaccount as of
the end of the Valuation Period during which the transfer
is made. Likewise, when amounts are transferred out of a
Subaccount, units are redeemed on the same basis. On any
day, a Policy's Accumulated Value in a Subaccount is
equal to the number of units held in such Subaccount,
multiplied by the Unit Value of such Subaccount on that
date.
For each Subaccount, the Unit Value was initially set at
$10 when the Subaccount first purchased shares of the
designated Investment Option. The Unit Value for each
subsequent valuation period is calculated by dividing (a)
by (b) where:
(a) is (1) the Net Asset Value of the Subaccount at
the end of the preceding Valuation Period, plus
(2) the investment income and capital gains,
realized or unrealized, credited to the net assets
of that Subaccount during the Valuation Period for
which the Unit Value is being determined, minus
(3) the capital losses, realized or unrealized,
charged against those assets during the Valuation
Period, minus (4) any amount charged against the
Subaccount for taxes, or any amount set aside
during the Valuation Period by the Company as a
provision for taxes attributable to the operation
or maintenance of that Subaccount; and minus (5) a
charge equal to .0024548% of the average daily net
assets of the Subaccount for each day in the
Valuation Period. This corresponds to an effective
annual rate of 0.90% of the average daily net
assets of the Subaccount for mortality and expense
risks incurred in connection with the Policies.
(This charge is guaranteed not to exceed .0028618%
of the average daily net assets on each
Subaccount, which corresponds to an effective
annual rate of 1.05%.)
(b) is the number of units outstanding at the end of
the preceding Valuation Period.
The Unit Value for a Valuation Period applies for each
day in the period. The assets in the Variable Account
will be valued at their fair market value in accordance
with accepted accounting practices and applicable laws
and regulations.
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TRANSFERS
Policyowners may transfer amounts among the Subaccounts
an unlimited number of times in a Policy Year; however,
only one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account.
Transfers are made by written request to the Home Office
or, if the Policyowner has elected the "Telephone
Transfer Authorization" on the supplemental application,
by calling the Home Office toll-free at (800) .
The amount of the transfer must be at least $100 or the
total Accumulated Value in the Subaccount or in the
Declared Interest Option (reduced, in the case of the
Declared Interest Option, by any outstanding Policy
Debt), if less than $100. The Company may, at its
discretion, waive the $100 minimum requirement. The
transfer will be effective as of the end of the Valuation
Period during which the request is received at the Home
Office.
The first transfer in each Policy Year will be made
without charge; each time amounts are subsequently
transferred in that Policy Year, a transfer charge of $25
may be assessed. The transfer charge, unless paid in
cash, will be deducted from the amount transferred. Once
a Policy is issued, the amount of the transfer charge is
guaranteed for the life of the Policy. (See "CHARGES AND
DEDUCTIONS--Transfer Charge.")
For purposes of these limitations and charges, all
transfers effected on the same day will be considered a
single transfer.
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LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and
has a positive Net Surrender Value, a Policyowner may
borrow money from the Company at any time using the
Policy as the sole security for the Policy Loan. A loan
taken from, or secured by, a Policy may have federal
income tax consequences. (See "FEDERAL TAX MATTERS.")
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<PAGE>
The maximum amount that may be borrowed at any time is
90% of the Net Surrender Value as of the end of the
Valuation Period during which the request for the Policy
Loan is received at the Home Office. The Company's claim
for repayment of Policy Debt has priority over the claims
of any assignee or other person.
During any time that there is outstanding Policy Debt,
payments made by the Policyowner will be treated first as
payment of outstanding Policy Debt, unless the
Policyowner indicates that the payment should be treated
otherwise. Where no indication is made, any portion of a
payment that exceeds the amount of any outstanding Policy
Debt will be treated as a premium payment.
ALLOCATION OF POLICY LOAN. When a Policy Loan is made,
an amount equal to the Policy Loan will be segregated
within the Declared Interest Option as security for the
Policy Loan. If, immediately prior to the Policy Loan,
the Accumulated Value in the Declared Interest Option
less Policy Debt outstanding is less than the amount of
such Policy Loan, the difference will be transferred from
the subaccounts of the Variable Account, which have
Accumulated Value, in the same proportions that the
Policy's Accumulated Value in each Subaccount bears to
the Policy's total Accumulated Value in the Variable
Account. Accumulated Values will be determined as of the
end of the Valuation Period during which the request for
the Policy Loan is received at the Home Office.
Loan proceeds will normally be mailed to the Policyowner
within seven days after receipt of a written request.
Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as
security for Policy Debt will bear interest at an
effective annual rate set by the Company. (See "POLICY
BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
LOAN INTEREST CHARGED. The interest rate charged on
Policy Loans is not fixed. The maximum annual loan
interest rate will be no greater than the "Published
Monthly Average of the Composite Yield on Seasoned
Corporate Bonds" as published by Moody's Investors
Service, Inc. or any successor thereto for the calendar
month ending two months before the date on which the rate
is determined; or 5.5%. The Company may at any time elect
to change the interest rate. The Company will send notice
of any change in rate to the Policyowner. The new rate
will take effect on the Policy Anniversary coinciding
with or next following the date the rate is changed.
Interest is payable in advance at the time any Policy
Loan is made (for the remainder of the Policy Year) and
on each Policy Anniversary thereafter (for the entire
Policy Year) so long as there is Policy Debt outstanding.
Interest payable at the time a Policy Loan is made will
be subtracted from the loan proceeds. Thereafter,
interest not paid when due will be added to the existing
Policy Debt and bear interest at the same rate charged
for Policy Loans. The amount equal to unpaid interest
will be segregated within the Declared Interest Option in
the same manner that amounts for Policy Loans are
segregated within the Declared Interest Option. (See
"POLICY BENEFITS-- Loan Benefits--ALLOCATION OF POLICY
LOAN.")
Because interest is charged in advance, any interest that
has not been earned will be added to the death benefit
payable at the Insured's death and to the Accumulated
Value upon complete surrender, and will be credited to
the Accumulated Value in the Declared Interest Option
upon repayment of Policy Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred
from the Variable Account as security for Policy Debt
will no longer participate in the investment performance
of the Variable Account. All amounts held in the Declared
Interest Option as security for Policy Debt will be
credited with interest on each Monthly Deduction Day at
an effective annual rate equal to the greater of 4.0% or
the current effective loan interest rate minus no more
than 3.0%, as determined and declared by the Company. No
additional interest will be credited to these amounts.
The interest credited will
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<PAGE>
remain in the Declared Interest Option unless and until
transferred by the Policyowner to the Variable Account,
but will not be segregated within the Declared Interest
Option as security for Policy Debt.
From time to time, the Company may allow, by Company
practice, a loan spread of 0% on the gain in a Policy in
effect a minimum of ten years.
Even though Policy Debt may be repaid in whole or in part
at any time prior to the Maturity Date if the Policy is
still in force, Policy Loans will affect the Accumulated
Value of a Policy and may affect the death proceeds
payable. The effect could be favorable or unfavorable
depending upon whether the investment performance of the
Subaccount(s) from which the Accumulated Value was
transferred is less than or greater than the interest
rates actually credited to the Accumulated Value
segregated within the Declared Interest Option as
security for Policy Debt while Policy Debt is
outstanding. In comparison to a Policy under which no
Policy Loan was made, Accumulated Value will be lower
where such interest rates credited were less than the
investment performance of the Subaccount(s), but will be
greater where such interest rates were greater than the
performance of the Subaccount(s). In addition, death
proceeds will reflect a reduction of the death benefit by
any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid
Policy Loans and any due and unpaid policy loan
interest. Policy Debt is not included in Net Accumulated
Value and therefore Net Accumulated Value is reduced by
the amount of any Policy Debt. If, during the first three
Policy Years, Net Accumulated Value or, after three
Policy Years, Net Surrender Value is insufficient on a
Monthly Deduction Day to cover the monthly deduction (see
"Charges and Deductions--Monthly Deduction"), the Company
will notify the Policyowner. To avoid lapse and
termination of the Policy without value (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE"), the
Policyowner must, during the Grace Period, make a premium
payment that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS--Premium Expense Charge"),
will be at least equal to three times the monthly
deduction due on the Monthly Deduction Day immediately
preceding the Grace Period (see "CHARGES AND
DEDUCTIONS--Monthly Deduction"). Therefore the greater
the Policy Debt under a Policy, the more likely it would
be to lapse.
REPAYMENT OF POLICY DEBT. Policy Debt may be repaid in
whole or in part any time during the Insured's life and
before the Maturity Date so long as the Policy is in
force. Any Policy Debt not repaid is subtracted from the
death benefit payable at the Insured's death, from
Surrender Value upon surrender or from the maturity
benefit. Any payments made by a Policyowner will be
treated first as the repayment of any outstanding Policy
Debt, unless the Policyowner indicates otherwise. Upon
repayment of Policy Debt, the portion of the Accumulated
Value in the Declared Interest Option securing the repaid
portion of the Policy Debt will no longer be segregated
within the Declared Interest Option as security for
Policy Debt, but will remain in the Declared Interest
Option unless and until transferred to the Variable
Account by the Policyowner.
For a discussion of the tax consequences associated with
Policy Loans and lapses, see "FEDERAL TAX MATTERS."
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DEATH PROCEEDS
So long as the Policy remains in force, the Policy
provides for the payment of death proceeds upon the death
of the Insured. Proceeds will be paid to the primary
Beneficiary or a contingent Beneficiary. One or more
primary Beneficiaries or contingent Beneficiaries may be
named. If no Beneficiary survives the Insured, the death
proceeds will be paid to the Policyowner or his estate.
Death proceeds may be paid in a lump sum or under a
payment option. (See "POLICY BENEFITS--Payment Options.")
To determine the death proceeds, the death benefit will
be reduced by any outstanding Policy Debt and increased
by any unearned loan interest and any premiums paid after
the date of death. Proceeds will ordinarily be mailed
within seven days after receipt by the Company of Due
Proof of Death. Payment may, however, be postponed under
certain circumstances. (See "GENERAL PROVISIONS--
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<PAGE>
Postponement of Payments.") The Company pays interest on
those proceeds, at an annual rate of no less than 3.0% or
any rate required by law, from the date of death to the
date payment is made.
DEATH BENEFIT OPTIONS. Policyowners designate in the
initial application one of two death benefit options
offered under the Policy. The amount of the death benefit
payable under a Policy will depend upon the option in
effect at the time of the Insured's death. Under Option
A, the death benefit will be equal to the greater of (i)
the sum of the current Specified Amount and the
Accumulated Value, or (ii) the Accumulated Value
multiplied by the specified amount factor. Accumulated
Value will be determined as of the end of the Business
Day coinciding with or immediately following the date of
death. The specified amount factor is 2.50 for an Insured
Attained Age 40 or below on the date of death. For
Insureds with an Attained Age over 40 on the date of
death, the factor declines with age as shown in the
Specified Amount Factor Table in Appendix B. Accordingly,
under Option A, the death proceeds will always vary as
the Accumulated Value varies (but will never be less than
the Specified Amount). Policyowners who prefer to have
favorable investment performance and additional premiums
reflected in increased death benefits generally should
select Option A.
Under Option B, the death benefit will be equal to the
greater of the current Specified Amount or the
Accumulated Value (determined as of the end of the
Business Day coinciding with or immediately following the
date of death) multiplied by the specified amount factor.
The specified amount factor is the same as under Option
A. Accordingly, under Option B the death benefit will
remain level at the Specified Amount unless the
Accumulated Value multiplied by the specified amount
factor exceeds the current Specified Amount, in which
case the amount of the death benefit will vary as the
Accumulated Value varies. Policyowners who are satisfied
with the amount of their insurance coverage under the
Policy and who prefer to have favorable investment
performance and additional premiums reflected in higher
Accumulated Value, rather than increased death benefits,
generally should select Option B.
Examples illustrating Option A and Option B can be found
in Appendix B.
CHANGE IN DEATH BENEFIT OPTION. The death benefit option
in effect may be changed at any time by sending a
written request for the change to the Company at its Home
Office. The effective date of such a change will be the
Monthly Deduction Day coinciding with or immediately
following the date the change is approved by the Company.
A change in death benefit options may have federal income
tax consequences. (See "FEDERAL TAX MATTERS.")
If the death benefit option is changed from Option A to
Option B, the current Specified Amount will not change.
If the benefit option is changed from Option B to Option
A, the current Specified Amount will be reduced by an
amount equal to the Accumulated Value on the effective
date of the change. A change in the death benefit option
may not be made if it would result in a Specified Amount
which is less than the minimum Specified Amount in effect
on the effective date of the change or if after the
change the Policy would no longer qualify as life
insurance under federal tax law.
No charges will be imposed in connection with a change in
death benefit option; however, a change in death benefit
option will affect the cost of insurance charges. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in
force for one Policy Year, a Policyowner may adjust the
existing insurance coverage by increasing or decreasing
the Specified Amount. To make a change, the Policyowner
must send a written request to the Company at its Home
Office. Any change in the Specified Amount may affect the
cost of insurance rate and the net amount at risk, both
of which will affect a Policyowner's cost of insurance
charge. (See "CHARGES AND DEDUCTIONS-- Monthly
Deduction--COST OF INSURANCE RATE, and --NET AMOUNT AT
RISK.") If decreases in the Specified Amount cause the
premiums paid to exceed the maximum premium limitations
imposed by federal tax law (see "THE POLICY--Premiums--
22
<PAGE>
PREMIUM LIMITATIONS"), the decrease will be limited to
the extent necessary to meet these requirements. A change
in existing coverage may have federal income tax
consequences. (See "FEDERAL TAX MATTERS--Tax Treatment of
Policy Benefits.")
Any decrease in the Specified Amount will become
effective on the Monthly Deduction Day coinciding with or
immediately following the date the request is approved by
the Company. The decrease will first reduce the Specified
Amount provided by the most recent increase, then the
next most recent increases successively, then the
Specified Amount under the original application. The
Specified Amount following a decrease can never be less
than the minimum Specified Amount for the Policy in
effect on the date of the decrease. A Specified Amount
decrease will not reduce the Surrender Charge.
To apply for an increase, evidence of insurability
satisfactory to the Company must be provided. Any
approved increase will become effective on the Monthly
Deduction Day coinciding with or immediately following
the date the request is approved by the Company. An
increase will not become effective, however, if the
Policy's Accumulated Value on the effective date would
not be sufficient to cover the deduction for the
increased cost of the insurance for the next Policy
Month. A Specified Amount increase is subject to its own
Surrender Charge.
CHANGES IN INSURANCE PROTECTION. A Policyowner may
increase or decrease the pure insurance protection
provided by a Policy--the difference between the death
benefit and the Accumulated Value--in one of several ways
as insurance needs change. These ways include increasing
or decreasing the Specified Amount of insurance, changing
the level of premium payments and, to a lesser extent,
partially withdrawing Accumulated Value. Although the
consequences of each of these methods will depend upon
the individual circumstances, they may be summarized as
follows:
(a) A decrease in the Specified Amount will, subject
to the applicable specified amount factor
limitations (see "POLICY BENEFITS--Death
Proceeds-- DEATH BENEFIT OPTIONS"), decrease the
pure insurance protection and the cost of
insurance charges under the Policy without
generally reducing the Accumulated Value.
(b) An increase in the Specified Amount may increase
the amount of pure insurance protection, depending
on the amount of Accumulated Value and the
resultant applicable specified amount factor. If
the insurance protection is increased, the cost of
insurance charge generally will increase as well.
(c) If Option B is elected, an increased level of
premium payments will increase the Accumulated
Value and reduce the pure insurance protection,
until the Accumulated Value multiplied by the
applicable specified amount factor exceeds the
Specified Amount. Increased premiums should also
increase the amount of funds available to keep the
Policy in force.
(d) If Option B is elected, a reduced level of
premium payments generally will increase the
amount of pure insurance protection, depending on
the applicable specified amount factor. It also
will result in a reduced amount of Accumulated
Value and will increase the possibility that the
Policy will lapse.
(e) A partial withdrawal will reduce the death
benefit. (See "POLICY BENEFITS--Accumulated Value
Benefits--SURRENDER AND WITHDRAWAL PRIVILEGES.")
However, it only affects the amount of pure
insurance protection if the death benefit payable
is based on the specified amount factor, because
otherwise the decrease in the benefit is offset by
the amount of Accumulated Value withdrawn. The
primary use of a partial withdrawal is to withdraw
cash and reduce Accumulated Value.
In comparison, an increase in the death benefit due to
the operation of the specified amount factor occurs
automatically and is intended to help assure that the
Policy remains qualified as life insurance under federal
tax law. The calculation of the death benefit based upon
the specified amount factor occurs only when the
Accumulated
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<PAGE>
Value of a Policy reaches a certain proportion of the
Specified Amount (which may or may not occur). Additional
premium payments, favorable investment performance and
large initial premiums tend to increase the likelihood of
the specified amount factor becoming operational after
the first few Policy Years. Such increases will be
temporary, however, if the investment performance becomes
unfavorable and/or premium payments are stopped or
decreased.
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ACCELERATED PAYMENTS
OF DEATH PROCEEDS
In the event that the Insured becomes terminally ill (as
defined below), the Policyowner (if residing in a state
that has approved such an endorsement) may, by written
request and subject to the conditions stated below, have
the Company pay all or a portion of the accelerated death
benefit immediately to the Policyowner. If not attached
to the Policy beforehand, the Company will issue an
accelerated death benefit endorsement (the "Endorsement")
providing for this right.
For this purpose, an Insured is terminally ill when a
physician (as defined by the Endorsement) certifies that
he or she has a life expectancy of 12 months or less.
The accelerated death benefit is equal to the Policy's
death benefit as described on page 6, up to a maximum of
$250,000 (the $250,000 maximum applies in aggregate to
all policies issued by the Company on the Insured), less
an amount representing a discount for 12 months at the
interest rate charged for loans under the Policy. The
accelerated death benefit does not include the amount of
any death benefit payable under a rider that covers the
life of someone other than the Insured.
In the event that there is a loan outstanding under the
Policy on the date that the Policyowner requests a
payment under the Endorsement, the accelerated death
benefit is reduced by a portion of the outstanding loan
in the same proportion that the requested payment under
the Endorsement bears to the total death benefit under
the Policy. If the amount requested by the Policyowner to
be paid under the Endorsement is less than the total
death benefit under the Policy and the Specified Amount
of the Policy is equal to or greater than the minimum
Specified Amount, the Policy will remain in force with
all values and benefits under the Policy being reduced in
the same proportion that the new Policy benefit bears to
the Policy benefit before exercise of the Endorsement.
There are several other restrictions associated with the
Endorsement. These are: (1) the Endorsement is not valid
if the Policy is within five years of being matured, (2)
the consent of any irrevocable beneficiary or assignee is
required to exercise the Endorsement, (3) the Company
reserves the right, in its sole discretion, to require
the consent of the Insured or of any beneficiary,
assignee, spouse or other party of interest before
permitting the exercise of the Endorsement, (4) the
Company reserves the right to obtain the concurrence of a
second medical opinion as to whether any Insured is
terminally ill and (5) the Endorsement is not effective
where (a) the Insured or the Policyowner would be
otherwise required by law to use the Endorsement to meet
the claims of creditors, or (b) the Insured would be
otherwise required by any government agency to exercise
the Endorsement in order to apply for, obtain or keep a
government benefit or entitlement.
The Endorsement will terminate at the earlier of the end
of the grace period for which any premium is unpaid, upon
receipt in the Home Office of a written request from the
Policyowner to cancel the Endorsement or upon termination
of the Policy.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
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BENEFITS AT MATURITY
If the Insured is alive and the Policy is in force on the
Maturity Date, the Company will pay to the Policyowner
the Policy's Accumulated Value as of the end of the
Business
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<PAGE>
Day coinciding with or immediately following the Maturity
Date, reduced by any outstanding Policy Debt. (See
"POLICY BENEFITS--Loan Benefits--REPAYMENT OF POLICY
DEBT.") Benefits at maturity may be paid in a lump sum or
under a payment option. The Maturity Date is Attained Age
115.
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PAYMENT OPTIONS
Death proceeds and Accumulated Value paid at maturity, or
upon surrender or partial withdrawal of a Policy, may be
paid in whole or in part under a payment option. There
are currently five payment options available. Payments
may also be made under any new payment option available
at the time proceeds become payable. In addition,
proceeds may be paid in any other manner acceptable to
the Company. ]
An option may be designated in the application or by
notifying the Company in writing at its Home Office.
During the life of the Insured, the Policyowner may
select a payment option; in addition, during that time
the Policyowner may change a previously selected option
by sending written notice to the Company requesting the
cancellation of the prior option and the designation of a
new option. If the Policyowner has not chosen an option
prior to the Insured's death, the Beneficiary may choose
an option. The Beneficiary may change a payment option by
sending a written request to the Company, provided that a
prior option chosen by the Policyowner is not in effect.
If no option is chosen, the Company will pay the proceeds
of the Policy in one sum. The Company will also pay the
proceeds in one sum if, (i) the proceeds are less than
$2,000; (ii) periodic payments would be less than $20; or
(iii) the payee is an assignee, estate, trustee,
partnership, corporation or association.
Amounts paid under a payment option are paid pursuant to
a payment contract and will not depend upon the
investment performance of the Variable Account. Proceeds
applied under a payment option earn interest at a rate
guaranteed to be no less than 3.0% compounded yearly. The
Company may be crediting higher interest rates on the
effective date of the payment contract. The Company may,
but is not obligated to, declare additional interest to
be applied to such funds.
If a payee dies, any remaining payments will be paid to a
contingent payee. At the death of the last payee, the
commuted value of any remaining payments will be paid to
the last payee's estate. A payee may not withdraw funds
under a payment option unless the Company has agreed to
such withdrawal in the payment contract. The Company
reserves the right to defer a withdrawal for up to six
months and to refuse to allow partial withdrawals of less
than $250.
Payments under Options 2, 3, 4 or 5 will begin as of the
date of the Insured's death, on surrender or on the
Maturity Date. Payments under Option 1 will begin at the
end of the first interest period after the date proceeds
are otherwise payable.
OPTION 1--INTEREST INCOME. Periodic payments of
interest earned from the proceeds will be paid.
Payments can be annual, semi-annual, quarterly or
monthly, as selected by the payee, and will begin at
the end of the first period chosen. Proceeds left
under this plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly. The payee may withdraw all or part
of the proceeds at any time.
OPTION 2--INCOME FOR A FIXED TERM. Periodic payments
will be made for a fixed term not longer than 30
years. Payments can be annual, semi-annual, quarterly
or monthly. Guaranteed amounts payable under the plan
will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
OPTION 3--LIFE INCOME WITH TERM CERTAIN. Equal
periodic payments will be made for a guaranteed
minimum period elected. If the payee lives longer
than the minimum period, payments will continue for
his or her life. The minimum period can be 0, 5, 10,
15 or 20 years. Guaranteed amounts payable under this
plan will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
25
<PAGE>
OPTION 4--INCOME OF A FIXED AMOUNT. Equal periodic
payments of a definite amount will be paid. Payments
can be annual, semi-annual, quarterly or monthly. The
amount paid each period must be at least $20 for each
$1,000 of proceeds. Payments will continue until the
proceeds are exhausted. The last payment will equal
the amount of any unpaid proceeds. Unpaid proceeds
will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded
yearly.
OPTION 5--JOINT AND TWO-THIRDS SURVIVOR MONTHLY LIFE
INCOME. Equal monthly payments will be made for as
long as two payees live. The guaranteed amount
payable under this plan will earn interest at a
minimum rate of 3.0% compounded yearly. When one
payee dies, payments of two-thirds of the original
monthly payment will be made to the surviving payee.
Payments will stop when the surviving payee dies.
ALTERNATE PAYMENT OPTION. In lieu of one of the
above options, the accumulated value, net surrender
value or death benefit, as applicable, may be settled
under any other payment option made available by the
Company or requested and agreed to by the Company.
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges will be deducted in connection with the Policy to
compensate the Company for providing the insurance
benefits set forth in the Policy and any additional
benefits added by rider, for distributing and
administering the Policy, for applicable taxes and for
assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more
fully below.
- --------------------------------------------------------------------------------
PREMIUM EXPENSE
CHARGE
Prior to allocation of Net Premiums among the Subaccounts
and the Declared Interest Option, premiums paid will be
reduced by a premium expense charge. The premium less the
premium expense charge equals the Net Premium.
The premium expense charge is 7.0% of each premium up to
the Target Premium (or 2% for each premium over the
Target Premium) and is intended to compensate the Company
for expenses incurred in distributing the Policy,
including agent sales commissions, the cost of printing
prospectuses and sales literature, and advertising costs
and to compensate for the amount the Company considers
necessary to pay all taxes on premiums received by
insurance companies imposed by various states and
subdivisions thereof. Premium taxes charged by the
various states currently range from 1% to 3%.
The premium expense charge in any Policy Year is not
necessarily related to actual distribution expenses in
that year. Instead, the Company expects to incur the
majority of distribution expenses in the early Policy
Years and to recover any deficiency over the life of the
Policy and from the Company's general assets, including
amounts derived from the mortality and expense risk
charge.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION
Charges will be deducted monthly from the Accumulated
Value of each Policy ("monthly deduction") to compensate
the Company for the cost of insurance coverage and any
additional benefits added by rider (See "GENERAL
PROVISIONS-- Additional Insurance Benefits"), for
underwriting and start-up expenses in connection with
issuing a Policy and for certain administrative costs.
The monthly deduction will be deducted on the Policy Date
and on each Monthly Deduction Day. (If the Monthly
Deduction Day falls on Thanksgiving, the Friday following
Thanksgiving or the weekend following Thanksgiving, the
monthly deduction will be deducted on the preceding
Business Day.) It will be deducted from the Declared
Interest Option and each Subaccount in the same
proportion that the Policy's Net Accumulated Value in the
Declared Interest Option and the Policy's Accumulated
Value in each Subaccount bear to the total Net
Accumulated Value of the Policy. For purposes of making
deductions from the Declared Interest Option and the
Subaccounts, Accumulated Values will be determined as of
the end of the Business Day coinciding with or
immediately following the Monthly Deduction Day. (If the
Monthly Deduction Day falls on Thanksgiving, the Friday
following Thanksgiving or the weekend following
Thanksgiving, Accumulated Values will be determined as of
26
<PAGE>
the end of the preceding Business Day.) Because portions
of the monthly deduction, such as the cost of insurance,
can vary from month to month, the monthly deduction
itself will vary in amount from month to month.
The monthly deduction will be made on the Business Day
coinciding with or immediately following each Monthly
Deduction Day and will equal:
(a) the cost of insurance for the Policy; plus
(b) the cost of any optional insurance benefits added
by rider; plus
(c) the monthly policy expense charge.
During the first twelve Policy Months and during the
twelve Policy Months immediately following an increase in
Specified Amount, the monthly deduction will include a
first year monthly administrative charge.
COST OF INSURANCE. This charge is designed to compensate
the Company for the anticipated cost of paying death
proceeds to Beneficiaries of those Insureds who die prior
to the Maturity Date. The cost of insurance is determined
on a monthly basis, and is determined separately for the
initial Specified Amount and for any subsequent increases
in Specified Amount. The Company will determine the
monthly cost of insurance charge by dividing the
applicable cost of insurance rate, or rates, by 1,000 and
multiplying the result by the net amount at risk for each
Policy Month.
NET AMOUNT AT RISK. Under Option A the net amount at
risk for a Policy Month is equal to (a) divided by (b),
and under Option B the net amount at risk for a Policy
Month is equal to (a) divided by (b), minus (c), where:
(a) is the Specified Amount;
(b) is 1.0032737;(1) and
(c) is the Accumulated Value.
The Specified Amount and the Accumulated Value will be
determined as of the end of the Business Day coinciding
with or immediately following the Monthly Deduction Day.
The net amount at risk is determined separately for the
initial Specified Amount and any increases in Specified
Amount. In determining the net amount at risk for each
Specified Amount, the Accumulated Value will be first
considered a part of the initial Specified Amount. If the
Accumulated Value exceeds the initial Specified Amount,
it will be considered to be a part of any increase in the
Specified Amount in the same order as the increases
occurred.
COST OF INSURANCE RATE. The cost of insurance rate for
the initial Specified Amount will be based on the
Insured's sex, premium class and Attained Age. For any
increase in Specified Amount, the cost of insurance rate
will be based on the Insured's sex, premium class and age
at last birthday on the effective date of the increase.
Actual cost of insurance rates may change and will be
determined by the Company based on its expectations as to
future mortality experience. However, the actual cost of
insurance rates will never be greater than the guaranteed
maximum cost of insurance rates set forth in the Policy.
These guaranteed rates are based on the 1980
Commissioners' Standard Ordinary Non-Smoker and Smoker
Mortality Table. Current cost of insurance rates are
generally less than the guaranteed maximum rates. Any
change in the cost of insurance rates will apply to all
persons of the same age, sex and premium class whose
Policies have been in force the same length of time.
The cost of insurance rates generally increase as the
Insured's Attained Age increases. The premium class of an
Insured also will affect the cost of insurance rate. The
Company currently places Insureds into a standard premium
class or into premium classes involving a higher
mortality risk. In an otherwise identical Policy,
Insureds in the standard premium class will have a lower
cost of insurance rate than those in premium classes
involving higher mortality risk. The standard premium
class is also
- --------------
(1)Dividing by 1.0032737 reduces the net amount at risk, solely for the purposes
of computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4.0%.
27
<PAGE>
divided into two categories: tobacco and non-tobacco.
(The Company may offer preferred classes in addition to
the standard tobacco and non-tobacco classes.) Non-
tobacco-using Insureds will generally have a lower cost
of insurance rate than similarly situated Insureds who
use tobacco, and preferred Insureds will generally have a
lower cost of insurance rate than similarly situated
standard Insureds.
The cost of insurance rate is determined separately for
the initial Specified Amount and for the amount of any
increase in Specified Amount. In calculating the cost of
insurance charge, the rate for the premium class on the
Policy Date will be applied to the net amount at risk for
the initial Specified Amount; for each increase in
Specified Amount, the rate for the premium class
applicable to the increase will be used. However, if the
death benefit is calculated as the Cash Value times the
specified amount factor, the rate for the premium class
for the most recent increase that required evidence of
insurability will be used for the amount of death benefit
in excess of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction
will include charges for any additional benefits
provided by rider. (See "GENERAL PROVISIONS--Additional
Insurance Benefits.")
MONTHLY POLICY EXPENSE CHARGE. The Company has primary
responsibility for the administration of the Policy and
the Variable Account. Policy expenses include premium
billing and collection, recordkeeping, processing death
benefit claims, cash withdrawals, surrenders and Policy
changes, and reporting and overhead costs. As
reimbursement for policy expenses related to the
maintenance of each Policy and the Variable Account, the
Company assesses a monthly policy expense charge against
each Policy. This charge currently is $5.00 per Policy
Month and is guaranteed not to exceed $7 per Policy
Month.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. Monthly
administrative charges will be deducted from Accumulated
Value as part of the monthly deduction during the first
twelve Policy Months and during the twelve Policy Months
immediately following an increase in Specified Amount.
The charge will compensate the Company for first year
underwriting, processing and start-up expenses incurred
in connection with the Policy and the Variable Account.
These expenses include the cost of processing
applications, conducting medical examinations,
determining insurability and the Insured's premium class,
and establishing policy records. The first year monthly
administrative charge currently is $0.05 per $1,000 of
Specified Amount, or increase in Specified Amount and is
guaranteed not to exceed $0.07 per $1,000 of Specified
Amount.
FIRST YEAR MONTHLY EXPENSE CHARGE. A monthly expense
charge will be deducted from Accumulated Value as part
of the monthly deduction during the first twelve Policy
Months. This charge currently is $5 per Policy Month and
is guaranteed not to exceed $7 per Policy Month.
- --------------------------------------------------------------------------------
TRANSFER CHARGE
A transfer charge of $25 may be imposed for the second
and each subsequent transfer during a Policy Year to
compensate the Company for the costs in effectuating the
transfer. The transfer charge, unless paid in cash, will
be deducted from the amount transferred. Once a Policy is
issued, the amount of this charge is guaranteed for the
life of the Policy. The transfer charge will not be
imposed on transfers that occur as a result of Policy
Loans, the exercise of the special transfer privilege or
the initial allocation of Accumulated Value among the
Subaccounts and the Declared Interest Option following
acceptance of the Policy by the Policyowner.
Currently there is no charge for changing the net premium
allocation instructions.
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWAL
FEE
Upon partial withdrawal of a Policy, a fee of $25 will be
assessed to compensate the Company for costs incurred in
accomplishing the withdrawal. The fee will be deducted
from Accumulated Value.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
At the time of surrender, a Surrender Charge will apply
during the first ten Policy Years, as well as during the
first ten years following an increase in Specified
Amount. The Surrender Charge is an amount per $1,000 of
Specified Amount, declining to $0 in the eleventh year.
The Surrender Charge varies by age, sex, underwriting
category
28
<PAGE>
and Policy Year. The Surrender Charge is level within
each Policy Year. At the time of a requested decrease in
Specified Amount, the full original Surrender Charge
stays in place. The Surrender Charge may be waived after
the first Policy Year if the insured is terminally ill or
stays in a qualified nursing care center for 90 days.
At the time of a partial withdrawal, no Surrender Charge
applies.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT
CHARGES
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
daily mortality and expense risk charge from each
Subaccount at an effective annual rate of 0.90% of the
average daily net assets of the Subaccounts and is
guaranteed not to exceed 1.05% of the average daily net
assets of the Subaccounts.
The mortality risk assumed by the Company is that
Insureds may die sooner than anticipated and therefore,
the Company may pay an aggregate amount of life insurance
proceeds greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and
administering the Policies will exceed the amounts
realized from the administrative charges assessed against
the Policies.
FEDERAL TAXES. Currently no charge is made to the
Variable Account for federal income taxes that may be
attributable to the Variable Account. The Company may,
however, make such a charge in the future. Charges for
other taxes, if any, attributable to the Account may also
be made. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
INVESTMENT OPTION EXPENSES. The value of net assets of
the Variable Account will reflect the investment
advisory fee and other expenses incurred by each
Investment Option. The investment advisory fee and other
expenses applicable to each Investment Option are listed
in the "SUMMARY OF THE POLICY" and described in the
prospectus for each Fund's Investment Option.
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
Policyowners may allocate Net Premiums and transfer
Accumulated Value to the Declared Interest Option.
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE DECLARED INTEREST OPTION HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE
DECLARED INTEREST OPTION HAS NOT BEEN REGISTERED AS AN
INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940. ACCORDINGLY, NEITHER THE DECLARED INTEREST OPTION
NOR ANY INTERESTS THEREIN ARE SUBJECT TO THE PROVISIONS
OF THESE ACTS AND, AS A RESULT, THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE
DISCLOSURES IN THIS PROSPECTUS RELATING TO THE DECLARED
INTEREST OPTION. DISCLOSURES REGARDING THE DECLARED
INTEREST OPTION MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES
LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF
STATEMENTS MADE IN PROSPECTUSES.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
The Declared Interest Option is supported by the General
Account. The General Account consists of all assets owned
by the Company other than those in the Variable Account
and other separate accounts. Subject to applicable law,
the Company has sole discretion over the investment of
the assets of the General Account.
A Policyowner may elect to allocate Net Premiums to the
Declared Interest Option, the Variable Account, or both.
The Policyowner may also transfer Accumulated Value from
the Subaccounts to the Declared Interest Option, or from
the Declared Interest Option to the Subaccounts. The
allocation or transfer of funds to the Declared Interest
Option does not entitle a Policyowner to share in the
investment experience of the General Account. Instead,
the Company guarantees that Accumulated Value in the
Declared Interest Option will accrue interest at an
effective annual rate of at least 4.0%, independent of
the actual investment experience of the General Account.
29
<PAGE>
- --------------------------------------------------------------------------------
THE POLICY
This Prospectus describes a flexible premium variable
life insurance policy. This Prospectus is generally
intended to serve as a disclosure document for the
aspects of the Policy involving the Variable Account. For
complete details regarding the Declared Interest Option,
see the Policy itself.
- --------------------------------------------------------------------------------
DECLARED INTEREST
OPTION ACCUMULATED
VALUE
Net premiums allocated to the Declared Interest Option
are credited to the Policy. The Company bears the full
investment risk for these amounts. The Company guarantees
that interest credited to each Policyowner's Accumulated
Value in the Declared Interest Option will not be less
than an effective annual rate of 4.0%. The Company may,
in its sole discretion, credit a higher rate of interest,
although it is not obligated to credit interest in excess
of 4.0% per year, and might not do so. Any interest
credited on the Policy's Accumulated Value in the
Declared Interest Option in excess of the guaranteed rate
of 4.0% per year will be determined in the sole
discretion of the Company and may be changed at any time
by the Company, in its sole discretion. The Policyowner
assumes the risk that the interest credited may not
exceed the guaranteed minimum rate of 4.0% per year. The
interest credited to the Policy's Accumulated Value in
the Declared Interest Option that equals Policy Debt may
be greater than 4.0%, but will in no event be greater
than the current effective loan interest rate minus no
more than 3.0%. From time to time, the Company may allow,
by Company practice, a loan spread of 0% on the gain in a
Policy in effect a minimum of ten years. The Accumulated
Value in the Declared Interest Option will be calculated
no less frequently than each Monthly Deduction Day.
The Company guarantees that, at any time prior to the
Maturity Date, the Accumulated Value in the Declared
Interest Option will not be less than the amount of the
Net Premiums allocated or Accumulated Value transferred
to the Declared Interest Option, plus interest at the
rate of 4.0% per year, plus any excess interest which the
Company credits, less the sum of all policy charges
allocable to the Declared Interest Option and any amounts
deducted from the Declared Interest Option in connection
with partial withdrawals or transfers to the Variable
Account.
- --------------------------------------------------------------------------------
TRANSFERS, PARTIAL
WITHDRAWALS,
SURRENDERS AND POLICY
LOANS
Amounts may be transferred between the Subaccounts and
the Declared Interest Option. A transfer charge of $25
may be imposed in connection with the transfer unless
such transfer is the first transfer requested by the
Policyowner during such Policy Year. Unless paid in cash,
the transfer charge will be deducted from the amount
transferred. A Policyowner may make only one transfer
between the Variable Account and the Declared Interest
Option in each Policy Year. No more than 50% of the Net
Accumulated Value in the Declared Interest Option may be
transferred from the Declared Interest Option unless the
balance in the Declared Interest Option immediately after
the transfer will be less than $1,000. If the balance in
the Declared Interest Option after a transfer would be
less than $1,000, the full Net Accumulated Value in the
Declared Interest Option may be transferred. A
Policyowner may also make partial withdrawals, surrenders
and obtain Policy Loans from the Declared Interest Option
at any time prior to the Policy's Maturity Date.
Transfers, partial withdrawals and surrenders from, and
payments of Policy Loans allocated to, the Declared
Interest Option may be delayed for up to six months.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The Policy is issued in consideration of the statements
in the application and the payment of the initial
premium. The Policy, the application, and any
supplemental applications and endorsements make up the
entire contract. In the absence of fraud, the statements
made in an application or supplemental application will
be treated as representations and not as warranties. No
statement will void the Policy or be used in defense of a
claim unless contained in the application or any
supplemental application.
- --------------------------------------------------------------------------------
INCONTESTABILITY
The Policy is incontestable, except for fraudulent
statements made in the application or supplemental
applications, after it has been in force during the
lifetime of the
30
<PAGE>
Insured for two years from the Policy Date or date of
reinstatement. Any increase in Specified Amount will be
incontestable only after it has been in force during the
lifetime of the Insured for two years from the effective
date of the increase.
- --------------------------------------------------------------------------------
CHANGE OF PROVISIONS
The Company reserves the right to change the Policy, in
the event of future changes in the federal tax law, to
the extent required to maintain the Policy's
qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can
change any part of the Policy except the Policyowner and
the President, a Vice President, the Secretary or an
Assistant Secretary of the Company. Both must agree to
any change and such change must be in writing. No agent
may change the Policy or waive any of its provisions.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE
OR SEX
If the Insured's age or sex was misstated in the
application, each benefit and any amount to be paid under
the Policy will be adjusted to reflect the correct age
and sex.
- --------------------------------------------------------------------------------
SUICIDE EXCLUSION
If the Policy is in force and the Insured commits
suicide, while sane or insane, within one year from the
Policy Date, life insurance proceeds payable under the
Policy will be limited to all premiums paid, reduced by
any outstanding Policy Debt and any partial withdrawals,
and increased by any unearned loan interest. If the
Policy is in force and the Insured commits suicide, while
sane or insane, within one year from the effective date
of any increase in Specified Amount, any increase in the
death benefit resulting from the requested increase in
specified amount will not be paid. Instead, the Company
will refund to the Policyowner an amount equal to the
total cost of insurance applied to the increase.
- --------------------------------------------------------------------------------
ANNUAL REPORT
At least once each year, an annual report will be sent to
each Policyowner. The report will show the current death
benefit, the Accumulated Value in each Subaccount and in
the Declared Interest Option, outstanding Policy Debt and
premiums paid, partial withdrawals made and charges
assessed since the last report. The report will also
include any other information required by state law or
regulation. Further, the Company will send the
Policyowner the reports required by the Investment
Company Act of 1940.
- --------------------------------------------------------------------------------
NON-PARTICIPATION
The Policy does not participate in the Company's profits
or surplus earnings. No dividends are payable.
- --------------------------------------------------------------------------------
OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute
ownership and control over assets, including the assets
of the Variable Account.
- --------------------------------------------------------------------------------
WRITTEN NOTICE
Any written notice should be sent to the Company at its
Home Office. The notice should include the policy number
and the Insured's full name. Any notice sent by the
Company to a Policyowner will be sent to the address
shown in the application unless an appropriate address
change form has been filed with the Company.
- --------------------------------------------------------------------------------
POSTPONEMENT OF
PAYMENTS
The Company will usually mail the proceeds of complete
surrenders, partial withdrawals and Policy Loans within
seven days after the Policyowner's signed request is
received at the Home Office. The Company will usually
mail death proceeds within seven days after receipt of
Due Proof of Death and maturity benefits within seven
days of the Maturity Date. However, payment of any amount
upon surrender or partial withdrawal, payment of any
Policy Loan, and payment of death proceeds or benefits at
maturity may be postponed whenever:
a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading
on the New York Stock Exchange is restricted as
determined by the Securities and Exchange
Commission;
b) the Securities and Exchange Commission by order
permits postponement for the protection of
Policyowners; or
c) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of
which disposal of the securities is not reasonably
practicable or it is not reasonably practicable to
determine the value of the net assets of the
Variable Account.
31
<PAGE>
Transfers may also be postponed under these
circumstances.
Payments under the Policy which are derived from any
amount paid to the Company by check or draft may be
postponed until such time as the Company is satisfied
that the check or draft has cleared the bank upon which
it is drawn.
- --------------------------------------------------------------------------------
CONTINUANCE OF
INSURANCE
The insurance under a Policy will continue until the
earlier of:
a) the end of the Grace Period following the Monthly
Deduction Day on which the Net Accumulated Value
during the first three Policy Years, or Net
Surrender Value after three Policy Years, is less
than the monthly deduction for the following
Policy Month;
b) the date the Policyowner surrenders the Policy
for its entire Net Accumulated Value;
c) the death of the Insured; or
d) the Maturity Date.
Any rider to a Policy will terminate on the date
specified in the rider.
- --------------------------------------------------------------------------------
OWNERSHIP
The Policy belongs to the Policyowner. The original
Policyowner is the person named as owner in the
application. Ownership of the Policy may change according
to the ownership option selected as part of the original
application or by a subsequent endorsement to the Policy.
During the Insured's lifetime, all rights granted by the
Policy belong to the Policyowner, except as otherwise
provided for in the Policy.
Special ownership rules may apply if the Insured is under
legal age (as defined by state law in the state in which
the Policy is delivered) on the Policy Date.
The Policyowner may assign the Policy as collateral
security. The Company assumes no responsibility for the
validity or effect of any collateral assignment of the
Policy. No assignment will bind the Company unless in
writing and until received by the Company at its Home
Office. The assignment is subject to any payment or
action taken by the Company before it received the
assignment at the Home Office.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The primary Beneficiaries and contingent Beneficiaries
are designated by the Policyowner in the application. If
changed, the primary Beneficiary or contingent
Beneficiary is as shown in the latest change filed with
the Company. One or more primary or contingent
Beneficiaries may be named in the application. In such
case, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless
requested otherwise by the Policyowner.
Unless a payment option is chosen, the proceeds payable
at the Insured's death will be paid in a lump sum to the
primary Beneficiary. If the primary Beneficiary dies
before the Insured, the proceeds will be paid to the
contingent Beneficiary. If no Beneficiary survives the
Insured, the proceeds will be paid to the Policyowner or
the Policyowner's estate.
- --------------------------------------------------------------------------------
CHANGING THE
POLICYOWNER OR
BENEFICIARY
During the Insured's life, the Policyowner and the
Beneficiary may be changed. To make a change, written
request must be sent to the Company at its Home Office.
The request and the change must be in a form satisfactory
to the Company and must actually be received and recorded
by the Company. The change will take effect as of the
date the request is signed by the Policyowner. The change
will be subject to any payment made before the change is
recorded by the Company. The Company may require return
of the Policy for endorsement.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE
Subject to certain requirements, one or more of the
following additional insurance
BENEFITS
benefits may be added to a Policy by rider: (i) Cost of
Living Increase; (ii) Waiver of Charges; (iii) Other
Adult Universal Life Insurance; (iv) Children's Term
Insurance and (v) Guaranteed Insurability Option. The
cost of any additional insurance benefits will be
deducted as part of the monthly deduction. (See "CHARGES
AND DEDUCTIONS--Monthly Deduction.") Detailed information
concerning available riders may be obtained from the
agent selling the Policy.
32
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition
to being licensed as life insurance agents for the
Company, are registered representatives of the principal
underwriter of the Policies, EquiTrust Marketing, a
broker-dealer having a selling agreement with EquiTrust
marketing or a broker-dealer having a selling agreement
with such broker-dealer. EquiTrust Marketing (formerly
FBL Marketing Services, Inc.), a corporation organized on
May 7, 1970, under the laws of the State of Delaware, is
registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association
of Securities Dealers, Inc.
The maximum sales commission payable to broker-dealers
will be 115% of premiums up to the first-year Target
Premium and 3% of excess premiums in the first year and
renewal premium. These commissions (and other
distribution expenses, such as production incentive
bonuses, agent's insurance and pensions benefits, agency
management compensation and bonuses and expense
allowances) are paid by the Company. They do not result
in any additional charges against the Policy that are not
described above under "CHARGES AND DEDUCTIONS."
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
The following discussion is general and is not intended
as tax advice. Any person concerned about these tax
considerations should consult a competent tax adviser.
This discussion is based on the Company's understanding
of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of
continuation of these current laws and interpretations,
and various changes have been proposed that would alter
these laws in ways that would have significant adverse
impacts. It should be further understood that the
following discussion is not exhaustive and does not
purport to be complete or to cover all situations and
that special rules not described in this Prospectus may
be applicable in certain situations. Moreover, no attempt
has been made to consider any applicable state or other
tax laws.
- --------------------------------------------------------------------------------
TAX STATUS OF THE
POLICY
Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code") includes a definition of a life
insurance contract for federal tax purposes. The
Secretary of the Treasury (the "Treasury") is authorized
to prescribe regulations interpreting and implementing
section 7702 and has issued proposed regulations on
certain aspects of section 7702. If a Policy were
determined not to be a life insurance contract for
purposes of section 7702, such Policy would not provide
most of the tax advantages normally provided by a life
insurance policy.
With respect to a Policy issued exclusively on the basis
of a standard premium class, while there is some
uncertainty due to the limited guidance on section 7702,
the Company believes that in light of the proposed
regulations such a Policy should meet the section 7702
definition of a life insurance contract. However, with
respect to a Policy issued in whole or in part on a
substandard basis (i.e., a premium class involving higher
than standard mortality risk), it is not clear whether or
not such a Policy would satisfy section 7702,
particularly if the Policyowner pays the full amount of
premiums permitted under the Policy. If it is
subsequently determined that a Policy does not satisfy
section 7702, the Company will take whatever steps are
appropriate and necessary to attempt to cause such a
Policy to comply with section 7702, including possibly
refunding any premiums paid that exceed the limitations
allowable under section 7702 (together with interest or
other earnings on any such premiums refunded as required
by law). For these reasons, the Company reserves the
right to modify the Policy as necessary to attempt to
qualify it as a life insurance contract under section
7702.
Section 817(h) of the Code authorizes the Treasury to set
standards by regulation or otherwise for the investments
of the Account to be "adequately diversified" in order
33
<PAGE>
for the Policy to be treated as a life insurance contract
for federal tax purposes. The Variable Account, through
each Fund, intends to comply with the diversification
requirements prescribed in Regulations section 1.817-5,
which affect how each Fund's assets may be invested.
Although the investment adviser of EquiTrust Variable
Insurance Series Fund is an affiliate of the Company, the
Company does not have control over the Fund or its
investments. Nonetheless, the Company believes that each
Investment Option in which the Variable Account owns
shares will be operated in compliance with the
requirements prescribed by the Treasury.
In certain circumstances, owners of variable life
insurance contracts may be considered the owners, for
federal income tax purposes, of the assets of the
separate account used to support their contracts. In
those circumstances, income and gains from the separate
account assets would be includable in the variable
contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be
considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment
control over the assets. The Treasury Department also
announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do
not provide guidance concerning the circumstances in
which investor control of the investments of a segregated
asset account may cause the investor (I.E., the
Policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by
way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular
subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but
different in certain respects from, those described by
the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For
example, a Policyowner has additional flexibility in
allocating premium payments and policy values. These
differences could result in a Policyowner being treated
as the owner of a pro rata portion of the assets of the
Variable Account. In addition, the Company does not know
what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore
reserves the right to modify the Policy as necessary to
attempt to prevent a Policyowner from being considered
the owner of a pro rata share of the assets of the
Variable Account.
The following discussion assumes that the Policy will
qualify as a life insurance contract for federal income
tax purposes.
- --------------------------------------------------------------------------------
TAX TREATMENT OF
POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and
cash value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the
gross income of the Beneficiary under section 101(a)(l)
of the Code.
A change in a Policy's Specified Amount, the payment of
an unscheduled premium, a Policy loan, a partial
withdrawal, a surrender, a lapse with outstanding
indebtedness, a change in death benefit options, the
exchange of a Policy for a fixed-benefit policy (see "THE
POLICY--Special Transfer Privilege") and the assignment
of a Policy or the exercise of the right to change
Policyowners (see "GENERAL PROVISIONS-- Changing the
Policyowner or Beneficiary") may have tax consequences
depending upon the circumstances. In addition, federal
estate and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Policy
proceeds depend upon the circumstances of each
Policyowner or Beneficiary. A competent tax adviser
should be consulted for further information.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the
34
<PAGE>
beneficiary is the insured under the Policy. However, the
Policyowner should consult a qualified tax adviser about
the consequences of adding this Endorsement to a Policy
or requesting an accelerated death benefit payment under
this Endorsement.
The Company further believes that an exchange of a
fixed-benefit policy issued by the Company for a Policy
as provided under "THE POLICY--Exchange Privilege"
generally should be treated as a non-taxable exchange of
life insurance policies within the meaning of section
1035 of the Code. However, in certain circumstances, the
exchanging owner may receive a cash distribution that
might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the
extent a fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). An exchanging owner should
consult a tax adviser as to whether an exchange of a
fixed-benefit policy for the Policy will have tax
consequences to such owner.
The Policies may be used in various arrangements,
including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if it is
contemplated that a Policy may be used in any arrangement
the value of which depends in part on its tax
consequences, a qualified tax adviser should be consulted
regarding the tax attributes of the particular
arrangement.
Generally, the Policyowner will not be deemed to be in
constructive receipt of the cash value, including
increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from,
and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "modified endowment
contract."
Whether a Policy is or is not a modified endowment
contract, upon a complete surrender or lapse of a Policy,
or when benefits are paid at such Policy's maturity date,
if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to
tax.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as
a modified endowment contract depending upon the amount
of premiums paid in relation to the death benefit
provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment
contract are extremely complex. In general, however, a
Policy will be a modified endowment contract if the
accumulated premiums paid at any time during the first
seven policy years exceeds the sum of the net level
premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In
addition, if a Policy is "materially changed," it may
cause such Policy to be treated as a modified endowment
contract. The material change rules for determining
whether a Policy is a modified endowment contract are
also extremely complex. In general, however, the
determination whether a Policy will be a modified
endowment contract after a material change generally
depends upon the relationship among the death benefit at
the time of such change, the cash value at the time of
such change and the additional premiums paid in the seven
policy years starting with the date on which the material
change occurs.
Due to the Policy's flexibility, classification of a
Policy as a modified endowment contract will depend upon
the circumstances of each Policy. Accordingly, a
prospective Policyowner should contact a competent tax
adviser before purchasing a Policy to determine the
circumstances under which the Policy would be a modified
endowment contract. In addition, a Policyowner should
contact a competent tax adviser before paying any
unscheduled premiums or changing the planned premium
35
<PAGE>
schedule or making any other change to, including an
exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified
endowment contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Policies classified as modified
endowment contracts are subject to the following tax
rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a
Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the cash
value immediately before the distribution over the
investment in the Policy (described below) at such time.
Second, loans taken from, or secured by, such a Policy
are treated as distributions from such a Policy and taxed
accordingly. In this regard, the Internal Revenue Service
could take the position that capitalized interest on such
loans are to be treated as a taxable distribution. Third,
a 10 percent additional tax is imposed on the portion of
any distribution from, or loan taken from or secured by,
such a Policy that is included in income except where the
distribution or loan is made on or after the Policyowner
attains age 59 1/2, is attributable to the Policyowner's
becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or
life expectancy) of the Policyowner or the joint lives
(or joint life expectancies) of the Policyowner and the
Policyowner's Beneficiary.
If a Policy becomes a modified endowment contract after
it is issued, distributions made during the policy year
in which it becomes a modified endowment contract,
distributions in any subsequent policy year and
distributions within two years before the Policy becomes
a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution
from a Policy that is not a modified endowment contract
could later become taxable as a distribution from a
modified endowment contract.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Distributions from a Policy that is
not classified as a modified endowment contract are
generally treated as first recovering the investment in
the policy (described below) and then, only after the
return of all such investment in the policy, as
distributing taxable income. An exception to this general
rule occurs in the case of a partial withdrawal, a
decrease in the Specified Amount, or any other change
that reduces benefits under the Policy in the first 15
years after the Policy is issued and that results in a
cash distribution to the Policyowner in order for the
Policy to continue complying with the section 7702
definitional limits. In that case, such distribution will
be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed
in section 7702.
Loans from, or secured by, a Policy that is not a
modified endowment contract are not treated as
distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions
upon surrender or lapse) nor loans from, or secured by, a
Policy that is not a modified endowment contract are
subject to the 10 percent additional tax.
POLICY LOAN INTEREST. Interest paid on any loan under a
Policy may not be deductible. Therefore, a Policyowner
should consult a competent tax adviser before deducting
any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the policy means
(i) the aggregate amount of any premiums or other
consideration paid for a Policy, minus (ii) the aggregate
amount received under the Policy which is excluded from
the gross income of the Policyowner (except that the
amount of any loan from, or secured by, a Policy that is
a modified endowment contract, to the extent such amount
is excluded from gross income, will be disregarded), plus
(iii) the amount of any loan from, or secured by, a
Policy that is a modified endowment contract to the
extent that such amount is included in the gross income
of the Policyowner.
36
<PAGE>
MULTIPLE POLICIES. All modified endowment contracts that
are issued by the Company (or its affiliates) to the
same Policyowner during any calendar year are treated as
one modified endowment contract for purposes of
determining the amount includable in gross income under
section 72(e).
- --------------------------------------------------------------------------------
TAXATION OF THE
COMPANY
At the present time, the Company makes no charge to the
Variable Account, or to the Policy for any Federal, state
or local taxes (other than state premium taxes) that it
incurs that may be attributable to such Account or to the
Policies. The Company, however, reserves the right in the
future to make a charge for any such tax or other
economic burden resulting from the application of the tax
laws that it determines to be properly attributable to
the Variable Account or to the Policies.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED
BENEFIT PLANS
The Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an
employer's deferred compensation plan could not, under
Title VII of the Civil Rights Act of 1964, vary between
men and women on the basis of sex. In addition,
legislative, regulatory or decisional authority of some
states may prohibit use of sex-distinct mortality tables
under certain circumstances. The Policy described in this
Prospectus contains guaranteed cost of insurance rates
and guaranteed purchase rates for certain payment options
that distinguish between men and women. Accordingly,
employers and employee organizations should consider, in
consultation with legal counsel, the impact of NORRIS,
and Title VII generally, on any employment-related
insurance or benefit program for which a Policy may be
purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE
VARIABLE ACCOUNT'S
ASSETS
The Company holds the assets of the Variable Account. The
assets are kept physically segregated and held separate
and apart from the General Account. The Company maintains
records of all purchases and redemptions of shares by
each Investment Option for each corresponding Subaccount.
Additional protection for the assets of the Variable
Account is afforded by a blanket fidelity bond issued by
Chubb Insurance Group in the amount of $5,000,000
covering all the officers and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS
To the extent required by law, the Company will vote the
Fund shares held in the Variable Account at regular and
special shareholder meetings of the Funds in accordance
with instructions received from persons having voting
interests in the corresponding Subaccounts. If, however,
the Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present
interpretation thereof should change, and, as a result,
the Company determines that it is permitted to vote the
Fund shares in its own right, it may elect to do so.
The number of votes which a Policyowner has the right to
instruct are calculated separately for each Subaccount
and are determined by dividing a Policy's Accumulated
Value in a Subaccount by the net asset value per share of
the corresponding Investment Option in which the
Subaccount invests. Fractional shares will be counted.
The number of votes of the Investment Option which the
Policyowner has the right to instruct will be determined
as of the date coincident with the date established by
that Investment Option for determining shareholders
eligible to vote at such meeting of the Fund. Voting
instructions will be solicited by written communications
prior to such meeting in accordance with procedures
established by each Fund. Each person having a voting
interest in a Subaccount will receive proxy materials,
reports and other materials relating to the appropriate
Investment Option.
The Company will vote Fund shares attributable to
Policies as to which no timely instructions are received
(as well as any Fund shares held in the Variable Account
which are not attributable to Policies) in proportion to
the voting instructions which are received with respect
to all Policies participating in each Investment Option.
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 on a matter.
37
<PAGE>
Fund shares may also be held by separate accounts of
other affiliated and unaffiliated insurance companies.
The Company expects that those shares will be voted in
accordance with instructions of the owners of insurance
policies and contracts issued by those other insurance
companies. Voting instructions given by owners of other
insurance policies will dilute the effect of voting
instructions of Policyowners.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when
required by state insurance regulatory authorities,
disregard voting instructions if the instructions require
that the shares be voted so as to cause a change in the
sub-classification or investment objective of an
Investment Option or to approve or disapprove an
investment advisory contract for an Investment Option. In
addition, the Company itself may disregard voting
instructions in favor of changes initiated by a
Policyowner in the investment policy or the investment
adviser of an Investment Option if the Company reasonably
disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to
state law or prohibited by state regulatory authorities,
or the Company determined that the change would have an
adverse effect on the General Account in that the
proposed investment policy for an Investment Option may
result in overly speculative or unsound investments. In
the event the Company does disregard voting instructions,
a summary of that action and the reasons for such action
will be included in the next annual report to
Policyowners.
- --------------------------------------------------------------------------------
STATE REGULATION AND
OWNERSHIP OF THE
COMPANY
The Company, a stock life insurance company organized
under the laws of Iowa, is subject to regulation by the
Iowa Insurance Department. An annual statement is filed
with the Iowa Insurance Department on or before March lst
of each year covering the operations and reporting on the
financial condition of the Company as of December 31st of
the preceding year. Periodically, the Iowa Insurance
Department examines the liabilities and reserves of the
Company and the Variable Account and certifies their
adequacy, and a full examination of operations is
conducted periodically by the National Association of
Insurance Commissioners.
In addition, the Company is subject to the insurance laws
and regulations of other states within which it is
licensed or may become licensed to operate. Generally,
the insurance department of any other state applies the
laws of the state of domicile in determining permissible
investments.
One hundred percent of the outstanding voting shares of
the Company are owned by Farm Bureau Life Insurance
Company which is 100% owned by FBL Financial Group, Inc.
At December 31, 1997, 66.36% of the outstanding voting
shares of FBL Financial Group, Inc. was owned by Iowa
Farm Bureau Federation.
Iowa Farm Bureau Federation is an Iowa not-for-profit
corporation, the members of which are county Farm Bureau
organizations and their individual members. Iowa Farm
Bureau Federation is primarily engaged, through various
divisions and subsidiaries, in the formulation, analysis
and promotion of programs (at local, state, national and
international levels) that are designed to foster the
educational, social and economic advancement of its
members. The principal offices of Iowa Farm Bureau
Federation are at 5400 University Avenue, West Des
Moines, Iowa 50266.
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
38
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND
DIRECTORS OF
EQUITRUST LIFE
<TABLE>
<CAPTION>
INSURANCE COMPANY
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Edward M. Wiederstein, Farmer; Chairman and Director, FBL Financial
President and Director Group, Inc.; President and Director, Iowa Farm
Bureau Federation, FBL Insurance Brokerage, Inc.,
Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services,
Inc., Universal Assurors Life Insurance Company
and Farm Bureau Agricultural Business Corporation;
Director, Multi-Pig Corporation, Western
Agricultural Insurance Company, Western Ag
Insurance Agency, Inc., Western Farm Bureau Life
Insurance Company and American Ag Insurance
Company
Richard D. Harris, Senior Vice Senior Vice President and Secretary- Treasurer,
President, Farm Bureau Mutual Insurance Company, FBL
Secretary-Treasurer and Insurance Brokerage, Inc., Universal Assurors Life
Director Insurance Company, Utah Farm Bureau Insurance
Company, Western Farm Bureau Life Insurance
Company, FBL Financial Services, Inc. and FBL
Financial Group, Inc.; Senior Vice President and
Assistant Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain, Senior Vice Senior Vice President and General Counsel, FBL
President, General Counsel Financial Group, Inc.
and Director
Thomas R. Gibson, Chief Chief Executive Officer, FBL Financial Group, Inc.
Executive Officer and
Director
William J. Oddy, Chief Chief Operating Officer, FBL Financial Group, Inc.
Operating Officer and
Director
Timothy J. Hoffman, Vice Vice President, Chief Property/Casualty Officer,
President and Director FBL Financial Group, Inc.
James W. Noyce, Chief Chief Financial Officer, FBL Financial Group, Inc.
Financial Officer and
Director
Barbara J. Moore, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
JoAnn W. Rumelhart, Vice Vice President-Life Operations, FBL Financial
President-Life Operations Group, Inc.
Monte R. Roumpf, Vice Vice President-Corporate Administration, FBL
President Financial Group, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
39
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
- ------------------------------ --------------------------------------------------
<S> <C>
Lynn E. Wilson, Vice Vice President-Life Sales, FBL Financial Group,
President- Inc.
Life Sales
F. Walter Tomenga, Vice Vice President-Corporate Affairs and Marketing
President Services, FBL Financial Group, Inc.
Robert L. Tatge, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
Lou Ann Sandburg, Vice Vice President, Investments, FBL Financial Group,
President, Investments Inc.
Thomas E. Burlingame, Vice Vice President-Associate General Counsel, FBL
President-Associate General Financial Group, Inc.
Counsel
Kathryn Coleson Horner, Accounting Vice President, FBL Financial Group,
Accounting Vice President Inc.
Dennis M. Marker, Investment Investment Vice President, Administration, FBL
Vice President, Financial Group, Inc.
Administration
Paul Grinvalds, Financial Financial Planning Vice President, Appointed
Planning Vice President Actuary, FBL Financial Group, Inc.
James P. Brannen, Tax and Tax and Investment Accounting Vice President, FBL
Investment Accounting Vice Financial Group, Inc.
President
Ronald J. Palmer, Agency Agency Services Vice President, FBL Financial
Services Vice President Group, Inc.
Christopher G. Daniels, Life Life Product Development and Pricing Vice
Product Development and President, FBL Financial Group, Inc.
Pricing Vice President
James M. Mincks, Human Human Resources Vice President, FBL Financial
Resources Vice President Group, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
40
<PAGE>
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP of Washington, D.C. has
provided advice on certain legal matters relating to
federal securities laws applicable to the issuance of the
flexible premium variable life insurance policy described
in this Prospectus. All matters of Iowa law pertaining to
the Policy, including the validity of the Policy and the
Company's right to issue the Policy under Iowa Insurance
Law, have been passed upon by Stephen M. Morain, Senior
Vice President and General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable
Account is a party or to which the assets of the Variable
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 Variable Account.
- --------------------------------------------------------------------------------
EXPERTS
The statutory-basis financial statements of the Company
at December 31, 1997 and 1996 and for the years then
ended, appearing herein, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and are
included in reliance upon such report given upon the
authority of such firm as experts in accounting and
auditing.
Actuarial matters included in this Prospectus have been
examined by Christopher G. Daniels, FSA, MAAA, Life
Product Development and Pricing Vice President, as stated
in the opinion filed as an exhibit to the registration
statement.
[Financial statements to be provided by amendment.]
- --------------------------------------------------------------------------------
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 Policy
offered hereby. This Prospectus does not contain all the
information set forth in the registration statement and
the amendments and exhibits to the registration
statement, to all of which reference is made for further
information concerning the Variable Account, the Company
and the Policy offered hereby. Statements contained in
this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such
instruments as filed.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The statutory-basis balance sheets of the Company at
December 31, 1997 and 1996 and the related
statutory-basis statements of income, changes in
stockholders' equity and cash flows for the years then
ended, appearing herein, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein.
It is anticipated that the Variable Account will commence
operations in 1998; accordingly, no financial statements
currently exist for the Variable Account.
[Financial statements to be provided by amendment.]
41
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF
DEATH BENEFITS AND
ACCUMULATED VALUES
The following tables illustrate how the death benefits,
Accumulated Values and Surrender Values of a Policy may
vary over an extended period of time at certain ages,
assuming hypothetical gross rates of investment return
for the Investment Options equivalent to constant gross
annual rates of 0%, 6% and 12%. The hypothetical rates of
investment return are for purposes of illustration only
and should not be deemed a representation of past or
future rates of investment return. Actual rates of return
for a particular Policy may be more or less than the
hypothetical investment rates of return and will depend
on a number of factors including the investment
allocations made by a Policyowner. Also, values would be
different from those shown if the gross annual investment
returns averaged 0%, 6% and 12% over a period of years
but fluctuated above and below those averages for
individual Policy Years.
The amounts shown are as of the end of each Policy Year.
The tables assume that the assets in the Investment
Options are subject to an annual expense ratio of %
of the average daily net assets. This annual expense
ratio is based on the average of the expense ratios of
each of the Investment Options available under the Policy
for the last fiscal year and take into account current
expense reimbursement arrangements. The fees and expenses
of each Investment Option vary, and in 1997 the total
fees and expenses ranged from an annual rate of % to
an annual rate of % of average daily net assets. For
information on Investment Option expenses, see the
prospectuses for the Investment Options.
The tables reflect deduction of the premium expense
charge, the monthly Policy expenses charge, the
first-year monthly administrative charge, the first-year
monthly expense charge, the daily charge for the
Company's assumption of morality and expense risks, and
cost of insurance charges for the hypothetical Insured.
The current charges and the higher guaranteed maximum
charges the Company may charge are reflected in separate
tables on each of the following pages.
Applying the current charges and the average Investment
Option fees and expenses of % of average net assets,
the gross annual rates of investment return of 0%, 6% and
12% would produce net annual rates of return of %,
% and %, respectively, during the ten Policy
Years, and %, % and %, respectively, after
that.
The hypothetical values shown in the tables do not
reflect any charges for federal income taxes against the
Variable Account since the Company is not currently
making such charges. However, such charges may be made in
the future and, in that event, the gross annual
investment rate of return would have to exceed 0%, 6% or
12% by an amount sufficient to cover tax charges in order
to produce the death benefits and Accumulated Values
illustrated. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
The tables illustrate the Policy values that would result
based upon the hypothetical investment rates of return if
premiums are paid as indicated, if all Net Premiums are
allocated to the Variable Account and if no Policy Loans
have been made. The tables are also based on the
assumptions that the Policyowner has not requested an
increase or decrease in Specified Amount, and that no
partial withdrawals or transfers have been made.
For comparative purposes, the second column of each table
shows the amount to which the premiums would accumulate
if an amount equal to those premiums were invested to
earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable
illustration based upon the proposed insured's age, sex
and premium class, the Specified Amount or premium
requested, and the proposed frequency of premium
payments.
[Additional Investment Options and Illustrations to be
provided by amendment.]
A-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option A,
a Policy with a Specified Amount of $50,000 will
generally provide a death benefit of $50,000 plus
Accumulated Value. Thus, for example, a Policy with a
Accumulated Value of $5,000 will have a death benefit of
$55,000 ($50,000 + $5,000); a Accumulated Value of
$10,000 will provide a death benefit of $60,000 ($50,000
+ $10,000). The death benefit, however, must be at least
2.50 multiplied by the Accumulated Value. As a result, if
the Accumulated Value of the Policy exceeds $33,333, the
death benefit will be greater than the Specified Amount
plus Accumulated Value. Each additional dollar of
Accumulated Value above $33,333 will increase the death
benefit by $2.50. A Policy with a Specified Amount of
$50,000 and a Accumulated Value of $40,000 will provide a
death benefit of $100,000 ($40,000 x 2.50); a Accumulated
Value of $60,000 will provide a death benefit of $150,000
($60,000 x 2.50).
Similarly, any time Accumulated Value exceeds $33,333,
each dollar taken out of Accumulated Value will reduce
the death benefit by $2.50. If, for example, the
Accumulated Value is reduced from $40,000 to $35,000
because of partial withdrawals, charges, or negative
investment performance, the death benefit will be reduced
from $100,000 to $87,500. If at any time, however,
Accumulated Value multiplied by the specified amount
factor is less than the Specified Amount plus the
Accumulated Value, then the death benefit will be the
current Specified Amount plus Accumulated Value of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than under 40), the specified amount factor would
be 1.85. The amount of the death benefit would be the sum
of the Accumulated Value plus $50,000 unless the
Accumulated Value exceeded $58,824 (rather than $33,333),
and each dollar then added to or taken from the
Accumulated Value would change the death benefit by $1.85
(rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option B,
a Policy with a $50,000 Specified Amount will generally
pay $50,000 in death benefits. However, because the death
benefit must be equal to or be greater than 2.50
multiplied by the Accumulated Value, any time the
Accumulated Value of the Policy exceeds $20,000, the
death benefit will exceed the $50,000 Specified Amount.
Each additional dollar added to Accumulated Value above
$20,000 will increase the death benefit by $2.50. A
Policy with a $50,000 Specified Amount and a Accumulated
Value of $30,000 will provide death proceeds of $75,000
($30,000 x 2.50); a Accumulated Value of $40,000 will
provide a death benefit of $100,000 ($40,000 x 2.50); a
Accumulated Value of $50,000 will provide a death benefit
of $125,000 ($50,000 x 2.50).
Similarly, so long as Accumulated Value exceeds $20,000,
each dollar taken out of Accumulated Value will reduce
the death benefit by $2.50. If, for example, the
Accumulated Value is reduced from $25,000 to $20,000
because of partial withdrawals, charges, or negative
investment performance, the death benefit will be reduced
from $62,500 to $50,000. If at any time, however, the
Accumulated Value multiplied by the specified amount
factor is less than the Specified Amount, the death
benefit will equal the current Specified Amount of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than between 0 and 40), the specified amount
factor would be 1.85. The death proceeds would not exceed
the $50,000 Specified Amount unless the Accumulated Value
exceeded approximately $27,028 (rather than $20,000), and
each dollar then added to or taken from the Accumulated
Value would change the life insurance proceeds by $1.85
(rather than $2.50).
B-1
<PAGE>
<TABLE>
<CAPTION>
SPECIFIED AMOUNT FACTOR TABLE
- -----------------------------------------------------
ATTAINED AGE SPECIFIED AMOUNT FACTOR
- ------------------------ ---------------------------
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 to 114 1.01
115 1.00
</TABLE>
B-2
<PAGE>
EQUITRUST LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Representations Pursuant to Section 26(e)(2)A
The Company represents that the aggregate charges under the Contracts are
reasonable in relation to the services rendered, the expenses to be incurred and
the risks assumed by the Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Section 26(a)(2)(A)
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire
Messrs. Sutherland, Asbill & Brennan, L.L.P.
Ernst & Young LLP, Independent Auditors
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing
Vice President
The following exhibits:
<TABLE>
<S> <C> <C>
1.A. 1. * Certified Resolution of the Board of Directors of the Company establishing the Variable
Account.
2. None.
3. (a) Form of Principal Underwriting Agreement
(b)(I) Forms of Career Agent's Contract.
(ii) Forms of Financed Career Agent's Contract.
(c) Commission schedules. (See Exhibits 3(b)(I) and 3(b)(ii) above.)
4. None.
5. * (a) Form of Policy
(b) State variation of Form of Policy.
(c) Form of Application.
6. * (a) Articles of Incorporation of the Company.
* (b) By-Laws of the Company.
7. None.
8. None.
9. Form of Participation Agreement.
10. Form of Application (see Exhibit 1.A.(5)(c) above.)
2. * Opinion and Consent of Stephen M. Morain
3. None.
4. Not applicable.
5. Not applicable.
6. *Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing Vice
President.
7. (a) Consent of Ernst & Young LLP.
*(b) Consent of Messrs. Sutherland, Asbill & Brennan, LLP
8. Memorandum describing the Company's conversion procedure (included in Exhibit 9 hereto).
9. Memorandum describing the Company's issuance, transfer and redemption procedures for the Policy.
10. *Powers of Attorney
</TABLE>
- ------------------------
* Attached as an exhibit.
[Remaining exhibits to be filed by amendment]
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
EquiTrust Life Variable Account, has duly caused this registration statement
to be signed on its behalf by the undersigned thereunto duly authorized in
the City of West Des Moines, State of Iowa, on the 6th day of January, 1998.
EquiTrust Life Insurance Company
EquiTrust Life Variable Account
By: /s/Edward M. Wiederstein
-----------------------------------
Edward M. Wiederstein
President
EquiTrust Life Insurance Company
Attest:
Richard D. Harris
Senior Vice President & Secretary-
Treasurer
EquiTrust Life Insurance Company
Pursuant to the Requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the dates set forth below.
Signature Title Date
- --------- ----- ----
/s/Edward M. Wiederstein
- ------------------------
Edward M. Wiederstein President and Director January 6, 1998
[Principal Executive
Officer]
/s/Richard D. Harris
- ------------------------
Richard D. Harris Senior Vice President and January 6, 1998
Secretary Treasurer
[Principal Financial
Officer]
/s/James W. Noyce
- ------------------------
James W. Noyce Chief Financial Officer January 6, 1998
[Principal Accounting
Officer]
/s/ Thomas R. Gibson
- ------------------------
Thomas R. Gibson Director January 6, 1998
/s/ Timothy J. Hoffman
- ------------------------
Timothy J. Hoffman Director January 6, 1998
/s/ Stephen M. Morain
- ------------------------
Stephen M. Morain Director January 6, 1998
/s/ William J. Oddy
- ------------------------
William J. Oddy Director January 6, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, EquiTrust Life
Variable Account, has duly caused this registration statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of West Des
Moines, State of Iowa, on the 6th day of January, 1998.
EquiTrust Life Variable Account
(Registrant)
By: EquiTrust Life Insurance Company
(Depositor)
By: /s/Edward M. Wiederstein
-----------------------------------
Edward M. Wiederstein
President
EquiTrust Life Insurance Company
* By /s/Stephen M. Morain Attorney-In-Fact, pursuant to Power of Attorney.
--------------------
Stephen M. Morain
<PAGE>
RESOLUTIONS ADOPTED BY
THE BOARD OF DIRECTORS OF
EQUITRUST LIFE INSURANCE COMPANY
January 6, 1998
RESOLVED, that the Board of Directors of EquiTrust Life Insurance Company (the
"Company"), hereby establishes a separate account, pursuant to the provisions of
Section 508A.1 of the Insurance Laws of the State of Iowa, designated Farm
Bureau Life Variable Account (hereinafter the "Variable Account"), for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and
FURTHER RESOLVED, that the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable life insurance
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and
FURTHER RESOLVED, that the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other variable life insurance
policies issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and
FURTHER RESOLVED, that the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated
among the Subaccounts in accordance with instructions received from owners of
the Policies; and
FURTHER RESOLVED, that the Executive Committee be, and hereby is, authorized
to add or remove any Subaccount of the Variable Account or add or remove any
mutual fund portfolio as may hereafter be deemed necessary or appropriate; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and
1
<PAGE>
FURTHER RESOLVED, that the Executive Committee be, and it hereby is,
authorized to invest such amount or amounts of the Company's cash in the
Variable Account or in any Subaccount thereof or in any mutual fund portfolio
as may be deemed necessary or appropriate to facilitate the commencement of
the Variable Account's and/ or the mutual fund portfolio's operations and/or
to meet any minimum capital requirements under the Investment Company Act of
1940, as amended (the "1940 Act"); and
FURTHER RESOLVED, that the Chief Executive Officer, Chief Operating Officer, and
Chief Financial Officer (hereafter, the "empowered officers") and each of them,
with full power to act without the others, be, and they hereby are, severally
authorized to transfer cash from time to time from the Company's general account
to the Variable Account, or from the Variable Account to the general account, as
deemed necessary or appropriate and consistent with the terms of the Policies;
and
FURTHER RESOLVED, that the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full
power to act without the others, with such assistance from the Company's
independent certified public accountants, legal counsel and independent
consultants or others as they may require, be, and they hereby are, severally
authorized and directed to take all action necessary to: (a) register the
Variable Account as a unit investment trust under the 1940 Act; (b) register
the Policies under the Securities Act of 1933 (the "1933 Act"); and (c) take
all other actions that are necessary in connection with the offering of the
Policies for sale and the operation of the Variable Account in order to
comply with the 1940 Act, the 1933 Act, the Securities Exchange Act of 1934
and other applicable Federal laws, including the filing of any registration
statements, any undertakings, no-action requests, consents, applications for
exemptions from the 1940 Act or other applicable federal laws, and any
amendments to the foregoing as the empowered officers of the Company shall
deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized to prepare, execute and
cause to be filed with the Securities and Exchange Commission on behalf of the
Variable Account, and by the Company as sponsor and depositor, a Notification of
Registration on Form N-8A, a registration statement on Form N-8B-2, and a
registration statement on Form S-6 registering the Variable Account under the
1940 Act and registering the Policies under the 1933 Act, and any and all
amendments to the foregoing on behalf of the Variable Account and the Company
and on behalf of and as attorneys-in-fact for the empowered officers and/ or any
other officer of the Company; and
FURTHER RESOLVED, that Stephen M. Morain, Senior Vice President and General
Counsel (and any successor to such position), is duly appointed as agent for
service under any such registration statement, duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto; and
2
<PAGE>
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all such action that each
of them may deem necessary or advisable in order to offer and sell the Policies,
including any registrations, filings and qualifications both of the Company, its
officers, agents and employees, and of the Policies, under the insurance and
securities laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute, deliver and file
all such applications, requests, undertakings, reports, covenants, resolutions,
applications for exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which such officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as the officers or legal counsel deem it to be in the best interests of the
Variable Account and the Company; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company: (a) to execute and
file irrevocable written consents on the part of the Variable Account and of the
Company to be used in such states wherein such consents to service of process
may be required under the insurance or securities laws therein in connection
with the registration or qualification of the Policies; and (b) to appoint the
appropriate state official, or such other person as may be allowed by insurance
or securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of the
Policies with respect to securities owned by the Variable Account; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (a) with a qualified
entity under which such entity will be appointed principal underwriter and
distributor for the Policies, (b) with one or more qualified entities to provide
administrative services in connection with the establishment and maintenance
3
<PAGE>
of the Variable Account and the administration of the Policies, and (c) with the
designated mutual fund portfolios and/ or the principal underwriter and
distributor of such mutual fund portfolios for the purchase and redemption of
portfolio shares; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Suitability for its officers, employees, and agents with respect to
the suitability of the Policies for applicants:
1. No recommendation shall be made to an applicant to purchase a Policy,
and no Policy shall be issued, in the absence of reasonable grounds to
believe that the purchase of the Policy is suitable for the applicant
on the basis of information furnished after reasonable inquiry of the
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other information
known to the Company or to the agent making the recommendation;
2. A good faith, reasonable inquiry shall be made as to the facts and
circumstances concerning a prospective Policy owner's insurance and
financial needs and no recommendation shall be made that the
prospective Policy owner purchase a Policy when such a purchase is not
reasonable consistent with the information that is known or reasonably
should be known to the Company or its agents. In making such
recommendation, factors which may be considered are: age, earnings,
marital status, number and age of dependents, the value of savings or
other assets, and current life insurance program.
Additionally, the Company's agents, as registered representatives, will be
subject to supervision by a registered broker-dealer with respect to suitability
and other sales practices under the NASD Conduct Rules of NASD Regulation, Inc;
and
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Conduct for itself and its officers, directors, and employees
(each, an "Employee) with respect to the purchase or sale of investments of the
Variable Account:
No Employee shall:
1. Employ any device, scheme or artifice to defraud the Variable Account
or the owners of the Policies;
2. Make any untrue statement of a material fact with respect to the
investments of the Variable Account or omit to state a material fact
necessary in order to make
4
<PAGE>
the statements made, in light of the circumstances in which they were
made, not misleading;
3. Engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Variable Account or the
owners of the Policies;
4. Engage in any manipulative practice with respect to the Variable
Account or the owners of the Policies;
5. Sell to, or purchase from the Variable Account any securities or other
property, except as permitted under applicable laws, rules,
regulations, order, or other interpretation of any government, agency,
or self-regulatory organization.
6. Purchase or allow to be purchased for the Variable Account any
securities of which the Company or an affiliated company is the
issuer, except as permitted under applicable laws, rules, regulations,
order, or other interpretation of any government, agency, or
self-regulatory organization.
7. Accept any compensation other than regular salary or wages from the
Company or an affiliated company for the sale or purchase of
investment securities to or from the Variable Account except as
permitted under applicable laws, rules, regulations, orders, or other
interpretations of any government, agency or self-regulatory
organization;
8. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliated company participates with the
Variable Account in any transaction in which the Company or an
affiliated company obtains an advantage in the price or quality of
the item purchased, the service received or in the cost of such
service, and the Variable Account or the owners of the Policies are
disadvantaged in any of these respects by the same transaction; or
9. Borrow money or securities from the Variable Account other than under
a Policy loan provision.
FURTHER RESOLVED, that the Company shall require any third party providing
administrative services to the Variable Account to adopt Standards of Conduct
encompassing the standards set forth above.
5
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT THE INSURED'S DEATH PRIOR TO THE MATURITY DATE.
FLEXIBLE PREMIUMS PAYABLE FOR THE INSURED'S LIFE OR UNTIL THE MATURITY DATE. THE
AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY VARY UNDER
THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT PROVISIONS. THE CASH VALUE IN THE
VARIABLE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT ACCOUNT AND MAY
INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. THE
VARIABLE FEATURES OF THIS POLICY ARE DESCRIBED ON PAGES 13 THROUGH 15.
Farm Bureau Life Insurance Company will pay the benefits of this policy subject
to all of its terms.
RIGHT TO EXAMINE POLICY
The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the Farm
Bureau Life Insurance Company, 5400 University Avenue, West Des Moines, Iowa
50266-5997 and by returning the policy or contract before midnight of the
twentieth day after the date you receive the policy. Notice given by mail and
return of the policy or contract by mail are effective on being postmarked,
properly addressed and postage prepaid. Farm Bureau Life will refund within
seven days after it receives notice of cancellation and the returned policy an
amount equal to the greater of the premiums paid or the sum of:
a) the accumulated value of the policy on the date the policy is received at
our home office;
b) any premium expense charges which were deducted from premiums;
c) monthly deductions made on the policy date and any monthly deduction day;
and
d) amounts approximating daily charges against the variable account.
Signed for and on behalf of Farm Bureau Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa 50266-5997, effective as
of the date of issue of this policy.
/s/ Edward M. Wiederstein /s/ Richard D. Harris
President Secretary
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266-5997
[LOGO]
<PAGE>
This policy is a legal contract between the owner and Farm Bureau Life Insurance
Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
POLICY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3
Insured; Insuring Age; Sex; Policy Number; Policy Date; Owner(s); Date of Issue;
Death Benefit Option; Maturity Date; Specified Amount at Issue; Schedule of
Forms and Premiums; Schedule of Current Charges; Schedule of Current Surrender
Charges.
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1000. . . . . Page 6
SPECIFIED AMOUNT FACTORS . . . . . . . . . . . . . . . . . . . . . . . Page 7
SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . Page 8
1.1 You or Your; 1.2 Age; 1.3 Net Accumulated Value; 1.4 Age; 1.5 Attained Age;
1.6 Business Day; 1.7 Declared Interest Option; 1.8 Eligible for Waiver of
Surrender Charge; 1.9 Fund; 1.10 General Account; 1.11 Home Office; 1.12 Monthly
Deduction Day; 1.13 Net Premium; 1.14 Partial Withdrawal Fee; 1.15 Policy
Anniversary; 1.16 Policy Date; 1.17 Policy Year; 1.18 Premium Expense Charge
1.19 Qualified Physician; 1.20 Qualified Nursing Care Center; 1.21 SEC; 1.22
Surrender Charge; 1.23 Surrender Value; 1.24 Net Surrender Value; 1.25 Valuation
Period; 1.26 Variable Account; 1.27 We, Our, Us or the Company.
SECTION 2 - THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . Page 9
2.1 Death Proceeds 2.2 Death Benefit Options; 2.3 Contract; 2.4 Modification;
2.5 Incontestable Clause; 2.6 Misstatement of Age or Sex; 2.7 Suicide; 2.8
Return of Policy and Policy Settlement; 2.9 Maturity Proceeds; 2.10 Termination;
2-11 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES. . . . . . . . . . . . . . . . Page 11
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary; 3.4
Assignment.
SECTION 4 - PREMIUMS AND REINSTATEMENT . . . . . . . . . . . . . . . . Page 11
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Grace Period; 4.4 Reinstatement;
4.5 Unscheduled Premiums; 4.6 Premium Limitations; 4.7 Premium Application; 4.8
Allocation of Premium.
SECTION 5 - POLICY CHANGE. . . . . . . . . . . . . . . . . . . . . . . Page 12
5.1 Change of Specified Amount; 5.2 Specified Amount Decrease; 5.3 Specified
Amount Increase; 5.4 Change of Death Benefit Option; 5.5 Life Insurance
Qualification.
SECTION 6 - VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . Page 13
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers; 6.5
Special Transfer Privilege.
SECTION 7 - ACCUMULATED VALUE BENEFITS . . . . . . . . . . . . . . . . Page 15
7.1 Accumulated Value Determination; 7.2 Net Accumulated Value Determination;
7.3 Surrender Value; 7.4 Net Surrender Value; 7.5 Variable Accumulated Value;
7.6 Account Units; 7.7 Unit Value; 7.8 Declared Interest Option Accumulated
Value; 7.9 Declared Interest Option Interest; 7.10 Monthly Deduction; 7.11 Cost
of Insurance; 7.12 Cost of Insurance Rate; 7.13 Basis of Values; 7.14 Surrender;
7.15 Waiver of Surrender Charge; 7.16 Partial Withdrawal; 7.17 Use of Payment
Option; 7.18 Delay of Payment; 7.19 Continuance of Insurance; 7.20 Annual
Report.
SECTION 8 - POLICY LOANS . . . . . . . . . . . . . . . . . . . . . . . Page 19
8.1 Cash Loan; 8.2 Loan Value; 8.3 Loan Interest; 8.4 Loan Allocation; 8.5 Loan
Repayment.
SECTION 9 - PAYMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . Page 20
9.1 Choice of Options; 9.2 Payment Options; 9.3 Interest and Mortality; 9.4
Requirements; 9.5 Effective Date; 9.6 Death of Payee; 9.7 Withdrawal of
Proceeds; 9.8 Claims of Creditors.
PAYMENT OPTION TABLES . . . . . . . . . . . . . . . . . . . . . . . . Page 22
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 22 of this policy.
<PAGE>
POLICY DATA
Insured [John Doe]
Insuring Age [35]
Sex [Male]
Policy Number [23456789]
Policy Date [07-01-1998]
Owner(s) [John Doe]
Date of Issue [07-01-1998]
Death Benefit Option [Option A]
Maturity Date [07-01-2078]
Specified Amount at Issue [$1,000,000.00]
Reserve Interest Rate [4.00]
Summary of Current Specified Amount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Description Specified Amount Effective Date Premium Class
[AT ISSUE $1,000,000.00 07-01-1998 NON-TOBACCO]
(will show if rated)
Schedule of Forms and Premiums
<CAPTION>
<S> <C> <C> <C> <C>
Current
Original Target
Form No. Description Amount or No. of Units Effective Date Premium
[434-114(06-98) Non-Par Flexible $100,000,000.00 07-01-1998 $XXX.XX]
Premium Variable Life
[434-085(06-98) Living Benefit
</TABLE>
3
<PAGE>
POLICY DATA
Schedule of Current Charges
Premium Expense Charge [7% of each premium up to Target Premium]
[2% of each premium over Target Premium]
Policy Expense Charge [$5.00 per month]
First Year Administrative Charge [$5.00 per month, plus
(applies to the first 12 monthly $0.05 per $1,000 of specified amount]
deductions following issue and
the first 12 months following
any increase in specified amount)
Partial Withdrawal Fee [$25 per withdrawal]
Transfer Charge [$25 per transfer]
Mortality and Expense Risk [0.0024548% of the variable cash value per
Charge day (equivalent to 0.90% per year)]
Monthly Deduction Day [20th of each month]
Policy Loan Interest Rate Adjustable Loan Rate (as described
in Section 8.3 of your policy)
SCHEDULE OF INVESTMENT OPTIONS
General Account The general assets of Farm Bureau Life Insurance
Company
Separate Account(s) [Farm Bureau Life Variable Account II]
Subaccounts Fund
[A Subaccount Investment Option A
B Subaccount Investment Option B
C Subaccount Investment Option C
D Subaccount Investment Option D
E Subaccount Investment Option E
F Subaccount Investment Option F
G Subaccount Investment Option G
H Subaccount Investment Option H
I Subaccount Investment Option I
J Subaccount Investment Option J
K Subaccount Investment Option K
L Subaccount Investment Option L
M Subaccount Investment Option M
N Subaccount Investment Option N
O Subaccount Investment Option 0]
Net premiums will be allocated to the subaccounts or the declared interest
option in accordance with the net premium allocation percentages shown in the
application or in the most recent written instructions of the owner. For a full
description of the Separate Account and the designated subaccounts, please refer
to the current prospectus.
Form Number 434-114(06-98)
Policy Number 12345678
4
<PAGE>
POLICY DATA
Schedule of Current Surrender Charges
SURRENDER DATE SURRENDER CHARGE
[January 1, 1998-December 31, 1998 $XXXXX
January 1, 1999-December 31, 1999 $XXXXX
January 1, 2000-December 31, 2000 $XXXXX
January 1, 2001-December 21, 2001 $XXXXX
January 1, 2002-December 21, 2002 $XXXXX
January 1, 2003-December 21, 2003 $XXXXX
January 1, 2004-December 21, 2004 $XXXXX
January 1, 2005-December 21, 2005 $XXXXX
January 1, 2006 December 21, 2006 $XXXXX
January 1, 2007-December 21, 2007 $XXXXX
January 1, 2008-December 21, 2008 $00.00]
Form Number 434-114(06-98)
Policy Number 12345678
5
<PAGE>
POLICY DATA
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES
PER $1,000 FOR TOBACCO AND NON-TOBACCO RATE CLASSES
Tobacco Non-Tobacco
------- -----------
Attained Male Female Male Female
Age Rate Rate Rate Rate
0 0.08584 0.07000
1 0.08584 0.07000
2 0.08251 0.06667
3 0.08084 0.06500
4 0.07751 0.06417
5 0.07334 0.06250
6 0.06917 0.06084
7 0.06500 0.05917
8 0.06250 0.05834
9 0.06167 0.05750
10 0.06250 0.05667
11 0.06750 0.05834
12 0.07667 0.06084
13 0.08917 0.06417
14 0.10334 0.06834
15 0.11335 0.07167
16 0.12335 0.07501
17 0.13085 0.07751
18 0.18420 0.09251 0.13585 0.08001
19 0.19004 0.09501 0.13919 0.08251
20 0.19337 0.09751 0.14002 0.08417
21 0.19337 0.09918 0.13835 0.08584
22 0.19004 0.10168 0.13585 0.08667
23 0.18670 0.10418 0.13252 0.08834
24 0.18170 0.10668 0.12918 0.09001
25 0.17586 0.10918 0.12502 0.09168
26 0.17253 0.11335 0.12252 0.09418
27 0.17086 0.11668 0.12085 0.09584
28 0.17086 0.12085 0.12001 0.09834
29 0.17336 0.12585 0.12001 0.10168
30 0.17753 0.13168 0.12085 0.10418
31 0.18337 0.13669 0.12335 0.10751
32 0.19087 0.14252 0.12668 0.11085
33 0.20087 0.15002 0.13168 0.11501
34 0.21255 0.15836 0.13752 0.12001
35 0.22672 0.16753 0.14419 0.12585
36 0.24339 0.18170 0.15169 0.13418
37 0.26424 0.19837 0.16169 0.14419
38 0.28758 0.21755 0.17253 0.15502
39 0.31427 0.23839 0.18420 0.16669
40 0.34512 0.26340 0.19837 0.18087
41 0.37848 0.29008 0.21338 0.19587
42 0.41517 0.31677 0.22922 0.21088
43 0.45521 0.34345 0.24673 0.22588
44 0.49942 0.37014 0.26590 0.24089
45 0.54613 0.39849 0.28758 0.25757
46 0.59452 0.42768 0.31093 0.27508
47 0.64709 0.45771 0.33595 0.29425
48 0.70383 0.49024 0.36347 0.31427
49 0.76559 0.52611 0.39349 0.33678
50 0.83403 0.56449 0.42768 0.36180
51 0.91166 0.60537 0.46688 0.38932
52 0.99933 0.65209 0.51193 0.42101
53 1.09871 0.70383 0.56365 0.45604
54 1.20729 0.75641 0.62122 0.49191
55 1.32342 0.81066 0.68547 0.53028
56 1.44626 0.86408 0.75557 0.56866
57 1.57581 0.91417 0.82985 0.60620
58 1.71209 0.96343 0.91250 0.64375
59 1.85845 1.01603 1.00518 0.68630
60 2.02158 1.07866 1.10873 0.73638
61 2.20569 1.15717 1.22400 0.79814
62 2.41331 1.25825 1.35684 0.87493
63 2.64531 1.38107 1.50727 0.96927
64 2.89921 1.51813 1.67447 1.07532
65 3.16834 1.66276 1.85761 1.18975
66 3.45020 1.80994 2.05588 1.30838
67 3.74229 1.95214 2.26847 1.42954
68 4.04883 2.09605 2.49957 1.55491
69 4.38161 2.25256 2.75591 1.69453
70 4.74911 2.43759 3.04592 1.85845
71 5.16235 2.67212 3.37720 2.05839
72 5.62985 2.95957 3.75992 2.30363
73 6.14841 3.30170 4.19334 2.59756
74 6.71732 3.69191 4.67004 2.93610
75 7.32578 4.11856 5.18003 3.31428
76 7.94851 4.57248 5.71919 3.72382
77 8.57456 5.04701 6.28340 4.16309
78 9.20818 5.54895 6.87612 4.63892
79 9.87149 6.09610 7.51607 5.16656
80 10.58674 6.70972 8.22375 5.76724
81 11.37459 7.40696 9.01810 6.45895
82 12.24906 8.20087 9.91569 7.25729
83 13.19603 9.11907 10.91280 8.15937
84 14.18421 10.11631 11.99040 9.15556
85 15.18033 11.17773 13.12418 10.23537
86 16.16034 12.29517 14.29994 11.39164
87 17.16810 13.45788 15.49991 12.62319
88 18.22020 14.67216 16.71910 13.93142
89 19.26842 15.93752 17.97489 15.32721
90 20.32834 17.34402 19.28574 16.82248
91 21.43307 18.86254 20.68243 18.45266
92 22.71710 20.55222 22.21791 20.28063
93 24.36888 22.54368 24.04369 22.43826
94 26.62992 25.22305 26.50346 25.22305
95 30.20740 29.24956 30.20740 29.24956
96 36.35803 35.72205 36.35803 35.72205
97 47.21180 46.86829 47.21180 46.86829
98 66.20701 66.09429 66.20701 66.09249
99-114 90.90909 90.90909 90.90909 90.90909
6
<PAGE>
POLICY DATA
SPECIFIED AMOUNT FACTORS
Attained Attained Attained
Age At Date Age At Date Age At Date
of Death Factor of Death Factor of Death Factor
0-40 2.50 59 1.34 78 1.05
41 2.43 60 1.30 79 1.05
42 2.36 61 1.28 80 1.05
43 2.29 62 1.26 81 1.05
44 2.22 63 1.24 82 1.05
45 2.15 64 1.22 83 1.05
46 2.09 65 1.20 84 1.05
47 2.03 66 1.19 85 1.05
48 1.97 67 1.18 86 1.05
49 1.91 68 1.17 87 1.05
50 1.85 69 1.16 88 1.05
51 1.78 70 1.15 89 1.05
52 1.71 71 1.13 90 1.05
53 1.64 72 1.11 91 1.04
54 1.57 73 1.09 92 1.03
55 1.50 74 1.07 93 1.02
56 1.46 75 1.05 94 1.01
57 1.42 76 1.05 95-114 1.01
58 1.38 77 1.05 115 1.00
7
<PAGE>
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured.
1.2 ACCUMULATED VALUE
means the policy's accumulated value which is calculated as:
a) the variable accumulated value, which is defined in section 7.5; plus
b) the declared interest option accumulated value which is defined in
section 7.8.
1.3 NET ACCUMULATED VALUE
means the policy's net accumulated value which is calculated as:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
1.4 AGE
means age at the last birthday.
1.5 ATTAINED AGE means your age at issue plus the number of policy years
since the policy date.
1.6 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.
1.7 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.
1.8 ELIGIBLE FOR WAIVER OF SURRENDER CHARGE
means the insured:
a) is diagnosed by a Qualified Physician as having a terminal illness. A
terminal illness is any disease or medical condition which the Qualified
Physician expects will result in death within one year; or
b) stays in a Qualified Nursing Care Center for 90 days.
1.9 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.
1.10 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.
1.11 HOME OFFICE
means Farm Bureau Life Insurance Company at 5400 University Avenue, West Des
Moines, Iowa, 50266-5997.
1.12 MONTHLY DEDUCTION DAY
means the same date in each month as the policy date. The charges for this
policy are deducted on the business day on or next following the monthly
deduction day.
1.13 NET PREMIUM
means the amount of premium remaining after the premium expense charge has been
deducted. This amount will be allocated among the subaccounts of the variable
account and the declared interest option according to the allocations shown on
the policy data page or the most recent instructions received from the owner.
1.14 PARTIAL WITHDRAWAL FEE
means a fee of $25 that is applied at the time of any partial withdrawal.
1.15 POLICY ANNIVERSARY
means the same date in each year as the policy date.
1.16 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and any policy anniversaries.
1.17 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.
1.18 PREMIUM EXPENSE CHARGE
means the premium expense charge shown on the policy data page. This amount may
go up or down, but is guaranteed to never exceed 7 percent.
8
<PAGE>
1.19 QUALIFIED PHYSICIAN:
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the insured, or a member of
the immediate family of either you or the insured.
1.20 QUALIFIED NURSING CARE CENTER:
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
a) Skilled Nursing Center - means a center:
i) That provides skilled nursing care supervised by a licensed
physician;
ii) That provides 24-hour nursing care by, or supervised by, an
R.N.; and
iii) That keeps daily medical record of each patient.
b) Intermediate Care Center - means a center:
i) That provides 24-hour nursing care by, or supervised by an R.N.
or an L.P.N.; and
II) That keeps a daily medical record of each patient.
c) Hospital - means a center:
i) That operates for the care and treatment of sick or injured
persons as inpatients;
ii) That provides 24-hour nursing care by, or supervised by, an R.N.;
iii) That is supervised by a staff of licensed physicians; and
iv) That has medical, diagnostic, and major surgery capabilities or
access to such capabilities.
Qualified Nursing Care Center does not include:
a) Drug or alcohol treatment centers;
b) Home for the aged or mentally ill, community living centers, or places that
primarily provide domiciliary, residency or retirement care;
c) Places owned or operated by a member of the annuitant's immediate family.
1.21 SEC
means the Securities and Exchange Commission, a U.S. government agency.
1.22 SURRENDER CHARGE
means a fee that is applied at the time of a surrender. The surrender charge
will be the amount shown on the policy data page.
A specified amount increase has its own surrender charge period which begins on
the date of the increase. If a specified amount increase is made, the surrender
charges will be a composite of all charges which apply for each year.
1.23 SURRENDER VALUE
means the policy's surrender value which is calculated as:
a) the accumulated value; minus
b) the surrender charge.
1.24 NET SURRENDER VALUE
means the policy's net surrender value which is calculated as:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
1.25 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.
1.26 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit
investment trust registered with the SEC under the Investment Company Act of
1940.
1.27 WE, OUR, US OR THE COMPANY
means the Farm Bureau Life Insurance Company.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH PROCEEDS
We will pay the death proceeds to the beneficiary:
a) within seven days after receipt by us of due proof of your death;
b) if the policy is in force on the date of your death; and
c) subject to the terms and conditions of this policy.
The death proceeds will be the sum of:
a) the death benefit; and
b) any premiums paid after the date of death; and
c) any unearned policy loan interest on the date of death;
less:
a) any policy loan; and
9
<PAGE>
b) any policy loan interest due;
plus any interest credited on this amount from the date of death to the date
of payment, the rate to be set by us but not less than 3% per year or any
rate required by law.
2.2 DEATH BENEFIT OPTIONS
The death benefit option in effect for this policy is shown on the policy
data page and is one of the following:
Option A -- The death benefit will be the greater of a) or b) where:
a) is the sum of the specified amount shown on the policy data page and the
accumulated value; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your attained age.
Option B -- The death benefit will be the greater of a) or b) where:
a) is the specified amount shown on the policy data page; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your attained age.
All values are determined as of the end of the business day on or next following
the date of death.
2.3 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) this basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.
We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.4 MODIFICATION
No one can change any part of this policy except the owner and one of our
officers. Both must agree to a change, and it must be in writing. No agent may
change this policy or waive any of its provisions.
2.5 INCONTESTABLE CLAUSE
We will not contest payment of the death benefit for any reason other than fraud
after this policy has been in force during your lifetime for two years from the
date of issue shown on the policy data page.
Any requested increase in the specified amount will be incontestable only after
such increase has been in force during your lifetime for two years from the
effective date of such increase.
2.6 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.
2.7 SUICIDE
If, within one year of the policy date, you die by suicide, whether sane or
insane, our liability is limited to the premium paid plus any unearned loan
interest at the date of death, less any policy loan, any loan interest due and
any partial withdrawals.
Any increase in death benefits resulting from a requested increase in specified
amount will not be paid if the insured dies by suicide, while sane or insane,
within one year of the date of such increase. Instead, we will return to the
owner an amount equal to the cost of insurance for such increase in specified
amount.
2.8 RETURN OF POLICY AND POLICY SETTLEMENT
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c) surrender; d) assignment; e) change
of owner or beneficiary; f) election; or g) exercise of any policy privilege.
We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.
2.9 MATURITY PROCEEDS
If you are living on the maturity date and this policy is in force, we will pay
the proceeds to the owner. Such proceeds will be:
a) the accumulated value; less
b) any policy loan.
The maturity date will be your attained age 115.
10
<PAGE>
All values are determined as of the end of the business day on or next following
the maturity date.
2.10 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) you die;
c) the policy matures;
d) the policy is surrendered; or
e) the grace period ends without payment of the premium.
2.11 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The original owner of this policy is shown on the policy data page. Ownership of
the policy may change according to the provisions indicated in the original
application or by a subsequent endorsement to the policy.
3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
interests of any beneficiary in a class who dies before you will pass to any
survivors of the class, unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds only if no primary
beneficiary survives. If no beneficiary survives you, we will pay the proceeds
to the owner or the owner's estate.
In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.
3.3 CHANGE OF OWNER OR BENEFICIARY
While you live, a change of owner or beneficiary can be made at any time,
subject to the following rules:
a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
c) the form must be sent to our home office and recorded by us; and
d) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.
3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.
We will not be responsible for the validity of an assignment.
- --------------------------------------------------------------------------------
SECTION 4 - PREMIUMS AND REINSTATEMENT
- --------------------------------------------------------------------------------
4.1 PREMIUM PAYMENT
Premium payments are flexible as to both timing and amount. Each premium is to
be paid at our home office.
4.2 PAYMENT FREQUENCY
The first premium is due on or prior to the policy date. We will send periodic
reminder notices to the owner upon request. The minimum amount for which such
notice will be sent will be $100. A reminder notice may be sent for different
periods, which may be 12, 6, 3 or 1 month intervals. The reminder notice period
may be changed upon request.
4.3 GRACE PERIOD
A grace period of 61 days will be allowed for payment of a premium that, when
reduced by the premium expense charge, is at least equal to three times the
monthly deduction charge due on such date. The grace period applies:
a) During the first three policy years, if the net accumulated value is not
large enough on any monthly deduction day to cover the monthly deduction
due; and
b) During the first three policy years, if you have taken out a policy loan
and during this period, the net surrender value is not large enough to
cover the monthly deduction due; and
c) During subsequent years, if the net surrender value is not large enough on
any monthly deduction day to cover the monthly deduction due.
The grace period begins on the date we send the owner of record written notice
of the required
11
<PAGE>
payment. Such premium shall be due on such monthly deduction day and if not
received by us within the grace period, all coverage under this policy will
terminate without value at the end of the 61-day period. If a claim by
death during the grace period becomes payable under the policy, any due and
unpaid monthly deductions will be deducted from the proceeds.
4.4 REINSTATEMENT
Prior to the maturity date, a lapsed policy which has not been surrendered for
its accumulated value may be reinstated at any time within 5 years of the
monthly deduction day immediately preceding the grace period which expired
without payment of the required premium, subject to the following rules:
a) You and the owner must send a written request to us.
b) You must provide proof of your good health and insurability satisfactory to
us.
c) A premium sufficient to keep the policy in force for three months must be
paid.
d) The owner must pay a charge equal to the cost of insurance for the coverage
provided during the 61-day grace period which was in effect prior to the
termination of this policy.
e) The effective date of the reinstated policy will be the monthly deduction
day on or next following the date we approve reinstatement.
4.5 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $100 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $100 minimum
requirements. The Company reserves the right to limit the number and amount of
unscheduled premium payments.
4.6 PREMIUM LIMITATIONS
The company reserves the right to limit the number and amount of premium
payments in order to maintain this policy's qualifications under federal tax
law. We will refund any portion of a premium payment that would cause the policy
to lose such qualification.
4.7 PREMIUM APPLICATION
While any policy loan is outstanding, unless the owner requests otherwise,
premium payments will be applied as a payment to reduce the outstanding balance
of the loan, When such loan has been repaid, the balance of any premium payment
remaining after payment of the loan, plus any subsequent payments, will be
allocated as described in the following provision.
4.8 ALLOCATION OF PREMIUM
The owner will determine the percentage of net premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the net premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the net premium. A fractional percent may not be chosen.
Net premiums will initially be allocated to the declared interest option. When
we receive a notice signed by the owner that the policy has been received and
accepted, we will transfer part or all of the accumulated value in the declared
interest option to the subaccounts in accordance with the net premium allocation
percentages shown in the application. For any premium received after we receive
the signed form, the net premium will be allocated in accordance with the net
premium allocation percentages shown in the application or the most recent
written instructions of the owner.
The owner may change the allocation for future net premiums at any time, subject
to the following rules:
a) the policy must be in force;
b) there must be a net accumulated value;
c) the change must be in writing on a form acceptable to us;
d) the form must be signed by the owner; and
e) the change will take effect on the business day on or next following the
date we receive the signed form at our home office.
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SECTION 5 - POLICY CHANGE
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5.1 CHANGE OF SPECIFIED AMOUNT
The owner may change the specified amount at any time after the policy has been
in effect for one policy year, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) It must be signed by the owner.
c) The change will take effect on the monthly deduction day coinciding with or
next following the date the request is approved by us.
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d) We will issue a new the policy data page for any change in specified
amount.
5.2 SPECIFIED AMOUNT DECREASE
Any decrease in specified amount will reduce such amount in the following order:
a) the specified amount provided by the most recent increase will be reduced;
then
b) the next most recent increases will be reduced in succession; and
c) the initial specified amount will be reduced last.
A specified amount decrease will not reduce the surrender charge.
The total specified amount which remains in force after a requested decrease may
not be less than the minimum specified amount in effect for the policy on the
date of decrease, as published by us.
5.3 SPECIFIED AMOUNT INCREASE
In addition to the rules for change in specified amount, an increase in
specified amount is subject to the following:
a) proof of insurability acceptable to us; and
b) payment of the first month's cost of insurance or sufficient accumulated
value for deduction of such cost of insurance.
5.4 CHANGE OF DEATH BENEFIT OPTION
The owner may request to change the death benefit option. The change will take
effect on the monthly deduction day coinciding with or next following the date
we approve the request.
If Option A is changed to Option B, the current specified amount will not
change.
If Option B is changed to Option A, the current specified amount will be reduced
by an amount equal to the accumulated value on the effective date of the change.
5.5 LIFE INSURANCE QUALIFICATION
If following a requested change of specified amount or a change of death benefit
option, this policy would no longer qualify as life insurance under federal tax
law, we will limit the change to an amount that would maintain such
qualification. The Company reserves the right to change the policy, in the event
of future changes in the federal tax law, to the extent required to maintain the
policy's qualification as life insurance under federal tax law.
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SECTION 6 - VARIABLE ACCOUNT
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6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.
That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.
While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be changed without the
approval of the Insurance Commissioner of the State of Iowa. The approval
process is on file with the insurance commissioner of the state in which this
policy was delivered.
We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy, shall then mean the variable account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction of a committee;
c) restrict or eliminate any voting rights of
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owners, or other persons who have voting rights as to the variable account;
and
d) combine the variable account with other separate accounts.
6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
the policy data page. Subject to obtaining any approvals or consents required by
applicable law, we reserve the right to eliminate or combine any subaccounts and
the right to transfer the assets of one or more subaccounts to any other
subaccount. We also reserve the right to add new subaccounts and make such
subaccounts available to any class or series of policies as we deem appropriate.
Each new subaccount would invest in a new investment option of the Fund, or in
shares of another investment company. The owner will determine the percentage of
net premium that will be allocated to each subaccount in accordance with the
allocation of premium provision.
6.3 FUND INVESTMENT OPTIONS
The fund has several investment options each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Net premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
to which net premiums have been allocated through the subaccounts.
We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for
the shares of a fund investment option that are held by the variable account
or that the account may purchase.
We also reserve the right to dispose of the shares of a investment option of the
fund listed on the policy data page and to substitute shares of another
investment option of such fund or another mutual fund investment option, if:
a) the shares of the investment option are no longer available for investment;
or
b) if in our judgment further investment in the investment option should
become inappropriate in view of the purposes of the variable account.
In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.
6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and the declared
interest option, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our Home Office.
d) The owner may transfer amounts among the subaccounts of the variable
account an unlimited number of times in a policy year.
e) The owner may transfer amounts between the declared interest option and the
variable account only once in a policy year.
f) The first transfer in each policy year will be made without a transfer
charge. Thereafter, each time amounts are transferred a transfer charge
will be imposed. This transfer charge is shown on the policy data page.
g) The accumulated value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. Unless paid in
cash, the transfer charge will be deducted on a pro rata basis from the
declared interest option and/or the subaccounts to which the transfer is
made.
h) The owner must transfer at least:
(1) a total of $100; or
(2) the total accumulated value in the subaccount or the total accumulated
value in the declared interest option less any policy loan, if the
total amount transferred is less than $100.
The following additional rules apply to transfers from the declared interest
option:
a) The accumulated value in the declared interest option after a transfer from
such option must at
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least equal the amount of all policy loans.
b) No more than 50% of the net accumulated value in the declared interest
option may be transferred unless the balance in the declared interest
option after the transfer, would be less than $1,000. If the balance in
the declared interest option would fall below $1,000, the full net
accumulated value in the declared interest option may be transferred.
6.5 SPECIAL TRANSFER PRIVILEGE
The owner may transfer, at any time, all of the amounts in the subaccounts to
the declared interest option. This policy will then become one in which the
benefits do not vary with the investment performance of the variable account.
The owner must tell us this special transfer privilege is being exercised. We
will then waive the transfer charge. The owner may exercise this special
transfer privilege once per policy year.
If the owner exercises this special transfer privilege, we will automatically
credit all future premium payments to the declared interest option until the
owner requests a change in the allocation. At the time of the transfer, there is
no effect on the policy's death benefit, accumulated value, specified amount, or
net amount at risk, or on your premium class or attained age.
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SECTION 7 - ACCUMULATED VALUE
BENEFITS
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7.1 ACCUMULATED VALUE DETERMINATION
The accumulated value in the policy is equal to:
a) the variable accumulated value; plus
b) the declared interest option accumulated value.
7.2 NET ACCUMULATED VALUE DETERMINATION
The net accumulated value of this policy will be:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
7.3 SURRENDER VALUE
The surrender value of this policy will be:
a) the accumulated value; minus
b) the surrender charge.
7.4 NET SURRENDER VALUE
The net surrender value of this policy will be:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
7.5 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive notice that the
owner has received and accepted the policy, the variable accumulated value is
the total amount of net premium, if any, credited to the subaccounts of the
variable account, minus the monthly deduction applicable to those subaccounts if
the net premium is allocated on a monthly deduction day. After such date, the
policy's variable accumulated value is equal to the sum of the policy's
accumulated value in each subaccount. The accumulated value in a subaccount is
equal to a) multiplied by b) where:
a) is the current number of account units; and
b) is the current unit value.
The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.
7.6 ACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to account units. The number of account units for a
transaction is found by dividing the dollar amount of the transaction by the
current unit value.
The number of account units for a subaccount
increases when:
a) net premiums are credited to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited to that subaccount.
The number of account units for a subaccount
decreases when:
a) the owner takes out a policy loan from that subaccount;
b) the owner makes a surrender or partial withdrawal from that subaccount;
c) we take a portion of the monthly deduction from that subaccount; or
d) transfers are made from that subaccount to the declared interest option or
other subaccounts.
7.7 UNIT VALUE
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The unit value for each subaccount was set initially at $10.00 when the
subaccounts first purchased fund shares. The unit value for each subsequent
valuation period is calculated by dividing a) by b), where:
a) is:
(1) the net asset value of the net assets of the subaccount at the end of
the preceding valuation period; plus
(2) the investment income and capital gains, realized or unrealized,
credited to the net assets of that subaccount during the valuation
period for which the unit value is being determined; minus
(3) the capital losses, realized or unrealized, charged against those net
assets during the valuation period; minus
(4) any amount charged against the subaccount for taxes, or any amount set
aside during the valuation period by the Company as a provision for
taxes attributable to the operation or maintenance of that subaccount;
minus
(5) the mortality and expense risk charge shown on the policy data page.
This charge may go up or down but will never exceed 0.0028618% of the
daily net assets in that subaccount for each day in the valuation
period. The maximum charge corresponds to a charge of 1.05% per year
of the average daily net assets of the subaccount for mortality and
expense risks.
b) is the number of units outstanding at the end of the preceding valuation
period.
The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
7.8 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the policy date is the net
premium credited to the declared interest option as of that date minus the
monthly deduction applicable to the declared interest option for the first
policy month.
After the policy date, the declared interest option accumulated value is
computed as a) + b) + c) + d) - e) -f), where:
a) is the declared interest option value on the preceding monthly deduction
day plus any interest from the preceding monthly deduction day to the date
of calculation;
b) is the total of net premiums credited to the declared interest option since
the preceding monthly deduction day, plus interest from the date premiums
are credited to the date of calculation;
c) is the total of the transfers from the variable account to the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of calculation;
d) is the total amount transferred from the variable account to the declared
interest option to secure policy loans since the preceding monthly
deduction day, plus interest from the date of transfer to the date of
calculation;
e) is the total of the transfers to the variable account from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of the calculation; and
f) is the total of surrenders or partial withdrawals from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of surrender to the date of calculation.
If the date of calculation is a monthly deduction day, we also reduce the
declared interest option accumulated value by the applicable monthly deduction
for the policy month following the monthly deduction day.
7.9 DECLARED INTEREST OPTION INTEREST
The minimum interest rate applied to the declared interest option accumulated
value is an effective rate of 4.00% per year. Interest in excess of the minimum
rate may be applied. The amount of the excess interest and the manner in which
it is determined will be set by us.
The interest credited on the portion of the declared interest option accumulated
value which equals any policy loan will be equal to the greater of 4.00% or:
a) the current effective loan interest rate; minus
b) no more than 3.00%.
Interest will be credited to the declared interest
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option accumulated value on each monthly deduction day.
7.10 MONTHLY DEDUCTION
The monthly deduction is a charge made each monthly deduction day from the
declared interest option accumulated value and the variable accumulated value on
a proportionate basis as of the close of business on the monthly deduction day.
For the purpose of determining the proportion of the deduction, the declared
interest option accumulated value is reduced by the amount of any policy loans.
We make the deduction from each subaccount of the variable account based on each
subaccount's proportional percentage of the variable accumulated value.
The monthly deduction for a policy month will be computed as a) plus b) plus c)
plus d) plus e), where:
a) is the cost of insurance as described in the cost of insurance provision;
b) is the charge for all additional benefit riders attached to this policy;
c) is the monthly policy expense charge shown on the policy data page. This
amount may go up or down, but is guaranteed never to exceed $7; and
d) is the first year monthly per $1,000 charge shown on the policy data page.
This charge may go up or down, but is guaranteed not to exceed $0.07 per
$1,000.
This charge will be deducted for 12 months following issue of this
policy and during the 12 months following the effective date of an
increase in the specified amount. Should this policy lapse and later be
reinstated, to the extent that the monthly per $1,000 charge was not
deducted for a total of twelve policy months prior to lapse, the charges
will continue to be deducted following reinstatement of the policy until
such charge has been assessed, both before and after the lapse, for a
total of 12 policy months.
e) is the first year monthly policy expense charge shown on the policy data
page. This amount may go up or down, but is guaranteed never to exceed $7
per month.
7.11 COST OF INSURANCE
If the owner chooses death benefit option B, the cost of insurance is computed
as a) multiplied by the result of b) minus c). If death benefit option A is
chosen, the cost of insurance is computed as a) multiplied by b). In either
case:
a) is the cost of insurance rate as described in the cost of insurance rate
provisions, divided by 1000;
b) is the specified amount as described in the death benefit provisions as of
the close of business on the monthly deduction day, divided by 1.0032737;
and
c) is the accumulated value as of the close of business on the monthly
deduction day.
The cost of insurance is determined separately for the initial specified amount
and any increases made later. If the premium class for the initial specified
amount is different from that of any increases, the accumulated value will first
be considered a part of the initial specified amount. If the accumulated value
as of the close of business on the monthly deduction day exceeds the initial
specified amount, it will be considered to be a part of any increase in the
specified amount in the same order as the increases occurred.
7.12 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate for the initial specified amount is based on your sex, premium
class and attained age. For any increase in the specified amount, age will
be determined from your age as of your last birthdate on the effective date
of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in your premium
class.
d) The monthly guaranteed rates shown on the policy data page are based on the
1980 Commissioners' Standard Ordinary Smoker and Nonsmoker Mortality Table.
The monthly rate will never be more than the rates shown on the policy data
page.
7.13 BASIS OF VALUES
All reserves for the policy are based on the Commissioners' 1980 Standard
Ordinary Smoker and Non-Smoker Mortality Table with interest at the rate shown
on the policy data page.
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered. We have filed a detailed
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statement of the way these values are determined with the insurance department
in that state. It shows the figures and methods used.
7.14 SURRENDER
While you live and prior to the maturity date, the owner may surrender the
policy subject to the following rules:
a) The request must be in writing to us.
b) The amount of any such surrender may be paid in cash or we will apply
part or all of it under a payment option.
c) We have the right to defer payment of a surrender from the declared
interest option for up to 6 months.
d) A surrender charge may apply. If the surrender charge is not paid in
cash, such charge will be deducted from the amount surrendered.
e) Upon surrender, all insurance in force will terminate.
7.15 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the insured becomes eligible for waiver of the surrender charge.
The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request on our form signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve
the right to seek a second medical opinion or have an examination
performed at our expense by a physician we choose.
e) The insured must become eligible for waiver of surrender charge after
the first policy year ends.
7.16 PARTIAL WITHDRAWAL
While you live and prior to the maturity date, the owner may obtain a partial
withdrawal of the net accumulated value, subject to the following rules:
a) The amount of any partial withdrawal must be at least $500 and may not
exceed the lesser of:
(1) the net accumulated value less $500; or
(2) 90% of the net accumulated value.
b) The death benefit will be reduced as a result of any partial withdrawal.
c) At the time of the partial withdrawal, if the death benefit option in
effect is:
(1) Option A: there will be no effect on the specified amount.
(2) Option B: the specified amount will be reduced by the amount of
accumulated value surrendered.
d) The specified amount remaining in force after a partial withdrawal may not
be less than the minimum specified amount for the policy in effect on the
date of the partial withdrawal, as published by the Company.
e) The accumulated value will be reduced by the amount of any partial
withdrawal and any partial withdrawal fee. The owner may tell us how to
allocate a partial withdrawal among the subaccounts and the declared
interest option. If the owner does not so instruct, we will allocate
the partial withdrawal among the subaccounts and the declared interest
option in the same proportion that the accumulated value in each of the
subaccounts and the accumulated value of the declared interest option
reduced by any outstanding policy loans bears to the total accumulated
value reduced by any outstanding policy loans on the date we receive
the request.
7.17 USE OF PAYMENT OPTION
If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the surrender charge will be determined by adding the fixed number of years
for which payment will be made to the Surrender Date shown on the Policy
Data Page.
7.18 DELAY OF PAYMENT
Proceeds from surrenders, partial withdrawals, and policy loans will usually
be mailed to the owner within seven days after the owner's signed request is
received in our home office. We will usually mail any death claim proceeds
within seven days after we receive due proof of death. We will usually mail
the maturity proceeds within seven days after the maturity date. We have the
right to delay any payment whenever:
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a) the New York Stock Exchange is closed other than on customary weekend and a
holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by
the SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities; or
e) it is not reasonably possible to determine the value of the net assets of
the variable account.
We have the right to defer payment which is derived from any amount paid to
us by check or draft until we are satisfied the check or draft has been paid
by the bank on which it is drawn.
We also have the right to delay making a surrender, partial withdrawal, or
policy loan from the declared interest option for up to six months from the
date we receive the owner's request.
7.19 CONTINUANCE OF INSURANCE
The insurance under this policy will continue until the earlier of:
a) the end of any grace period during which a required premium payment is
not made;
b) the date the owner surrenders this policy for its entire net accumulated
value;
c) the date of your death; or
d) the date the policy matures.
This provision will not continue the policy beyond the maturity date or continue
any rider beyond its termination date as specified in the rider.
7.20 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current accumulated value including the value in each subaccount and
the declared interest option;
c) any partial withdrawals since the last report;
d) any policy loans; and
c) the current death benefit.
An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.
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SECTION 8 - POLICY LOANS
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8.1 CASH LOAN
The owner may obtain a cash loan at any time on the sole security of this
policy, if:
a) the policy is in force;
b) there is a net surrender value.
We have the right to delay making a policy loan from the declared interest
option for up to six months from the date we receive the owner's request.
8.2 LOAN VALUE
The total of all loans may not exceed 90% of the net surrender value as of the
date of the most recent loan. For any loan that is made we will deduct interest
in advance on the requested loan to the next policy anniversary.
8.3 LOAN INTEREST
The loan interest rate is an annual rate. We may change this rate at the
beginning of each policy year. The annual loan interest is to be paid in advance
on each policy anniversary. Interest not paid when due will be added to the loan
and will bear interest at the same rate. Any change in the interest rate will
apply to any existing or new policy loans on this policy.
The maximum annual loan interest rate will be the higher of:
a) The Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds as published by Moody's Investors Service, Inc. or any successor
thereto, for the calendar month ending two months before the date on which
the rate is determined; or
b) 5.50%; but it will never exceed the usury rate, if applicable.
If the Monthly Average is no longer published, we will use a substantially
similar average which will be substituted by the insurance supervisory official
of the state in which this policy was delivered.
We will not make a change of less than 0.5% in this policy's loan interest rate.
We will inform you of the loan interest rate at the time a loan is made. Notice
of any loan interest rate change on existing loans will be made in advance of
the policy anniversary on which the change becomes effective.
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8.4 LOAN ALLOCATION
When the owner takes out a policy loan, an amount equal to the loan will be
segregated within the declared interest option as security for the loan. Amounts
held as security for the loan will first be allocated to the accumulated value
in the declared interest option. If the accumulated value in the declared
interest option less any existing policy loan is not sufficient to cover the
amount of the policy loan, the balance necessary will be transferred from the
subaccounts on a proportional basis. This transfer is not treated as a transfer
for the purpose of the transfer charge or the limit of one transfer in a policy
year.
A transfer will also be made from the subaccounts on a proportional basis for
any due and unpaid loan interest if the accumulated value in the declared
interest option is not sufficient to cover such interest.
8.5 LOAN REPAYMENT
All or part of any policy loan may be repaid at any time while the policy is
still in force. Loan amounts repaid will be allocated to the declared interest
option. The portion of the accumulated value in the declared interest option
securing the repaid portion of the loan will no longer be segregated within the
declared interest option as security for the loan, but will remain in the
declared interest option until transferred to the subaccounts by the owner.
Any outstanding policy loans will be deducted from the proceeds at death,
maturity or surrender.
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SECTION 9 - PAYMENT OF PROCEEDS
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9.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After your death, the beneficiary may choose an option if the owner had
not done so before your death. If no payment option is chosen, we will pay the
proceeds of this policy in one sum. We may also fulfill our obligation under
this policy by paying the proceeds in one sum if:
a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee,
partnership, corporation, or association.
9.2 PAYMENT OPTIONS
The choice of payment options are:
1) INTEREST INCOME -- The proceeds will be left with us to earn interest.
The interest will be paid every 1, 3, 6 or 12 months as the payee
chooses. The rate of interest will be determined by us. The payee may
withdraw all or part of the proceeds at any time.
2) INCOME FOR FIXED TERM -- The proceeds will be paid out in equal
installments for a fixed term of years.
3) LIFE INCOME WITH TERM CERTAIN -- The proceeds will be paid out in
equal installments for as long as the payee lives, but for not less
than a term certain. The owner or payee may choose one of the terms
certain shown in the payment option tables.
4) INCOME FOR FIXED AMOUNT -- The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until
all proceeds plus interest have been paid out.
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME -- The proceeds
will be paid out in equal monthly installments for as long as two
joint payees live. When one payee dies, installments of two-thirds of
the first installment will be paid to the surviving payee. Payments
will stop when the surviving payee dies.
The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.
9.3 INTEREST AND MORTALITY
Proceeds applied under a payment option no longer earn interest at the rate
applied to the declared interest option or participate in the investment
experience of the variable account. The minimum interest rate used in computing
any payment option is 3% per year. Higher interest rates may be used on the
effective date of the payment contract. We may at any time declare additional
interest on these funds. The amount of additional interest and how it is
determined will be set by us.
The mortality table which is used for options 3) and 5) is the "1983 Table a"
individual annuity mortality table.
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9.4 REQUIREMENTS
For the owner to choose or change a payment option:
a) this contract must be in force;
b) the request must be in writing to us at our
home office; and
c) any prior option must be canceled.
After your death, and before this contract is settled, for a beneficiary to
choose or change a payment option:
a) a prior option by the owner cannot be in effect,
b) the request must be in writing to us at our
home office; and
c) any prior option must be canceled.
9.5 EFFECTIVE DATE
If a payment option has been chosen by the owner, it is effective on the date
the proceeds of this policy are due. If a beneficiary chooses a payment option,
it is effective on the date of election. The first payment under options 2, 3,
4, or 5 is due on the effective date. The first payment under payment option 1
is due at the end of the period chosen.
9.6 DEATH OF PAYEE
If a payee dies, any remaining payments will be paid to a contingent payee. If
no payee survives, we will pay the commuted value of any remaining payments to
the last payee's estate.
9.7 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.
9.8 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors
to the maximum extent allowed by law.
21
<PAGE>
Payment Option Tables
(Per $1,000 of proceeds)
- --------------------------------------------------------------------------------
Option 2 - Income for Fixed Term
Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Number of
Years Annual Monthly
- --------- ----------- ------------
5 211.99 17.91
10 113.82 9.61
15 81.33 6.87
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Guaranteed Settlement Option 5
Joint and Two-thirds to Survivor Monthly Life Income
Monthly Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Female Age
Male
Age 55 60 62 65 70
- ------ -----------------------------------------------------------------------
60 4.44 4.71 4.82 5.01 5.34
62 4.53 4.81 4.93 5.13 5.50
65 4.65 4.97 5.11 5.33 5.75
70 4.88 5.24 5.41 5.68 6.20
75 5.11 5.52 5.71 6.04 6.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GURANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 PROCEEDS
- --------------------------------------------------------------------------------
MALE FEMALE
- --------------------------------------------------------------------------------
YEARS CERTAIN YEARS CERTAIN
Age 0 5 10 15 20 0 5 10 15 20
- --- ------------------------------------ -------------------------------------
55 $4.70 4.68 4.62 4.53 4.39 4.25 4.25 4.22 4.18 4.11
56 4.80 4.78 4.72 4.61 4.45 4.34 4.33 4.30 4.25 4.17
57 4.91 4.89 4.82 4.69 4.51 4.42 4.41 4.38 4.32 4.23
58 5.03 5.00 4.92 4.78 4.58 4.52 4.50 4.47 4.40 4.30
59 5.15 5.12 5.03 4.87 4.64 4.61 4.60 4.56 4.48 4.37
60 5.28 5.25 5.14 4.96 4.71 4.72 4.70 4.66 4.57 4.44
- --- ------------------------------------ -------------------------------------
61 5.42 5.39 5.26 5.06 4.78 4.83 4.81 4.76 4.66 4.51
62 5.57 5.53 5.39 5.16 4.84 4.95 4.93 4.86 4.75 4.58
63 5.74 5.69 5.52 5.26 4.90 5.07 5.05 4.98 4.85 4.65
64 5.91 5.85 5.66 5.36 4.96 5.21 5.18 5.10 4.95 4.72
65 6.10 6.03 5.81 5.46 5.02 5.35 5.32 5.22 5.05 4.79
- --- ------------------------------------ -------------------------------------
66 6.29 6.21 5.96 5.56 5.08 5.51 5.47 5.36 5.16 4.86
67 6.50 6.41 6.11 5.66 5.13 5.67 5.63 5.50 5.26 4.93
68 6.73 6.62 6.28 5.76 5.18 5.85 5.80 5.65 5.37 5.00
69 6.97 6.84 6.44 5.86 5.23 6.04 5.98 5.80 5.49 5.06
70 7.23 7.07 6.61 5.96 5.27 6.25 6.18 5.96 5.60 5.12
- --- ------------------------------------ -------------------------------------
71 7.51 7.32 6.78 6.05 5.31 6.47 6.39 6.14 5.71 5.18
72 7.80 7.58 6.96 6.14 5.34 6.71 6.62 6.31 5.83 5.23
73 8.12 7.85 7.14 6.23 5.37 6.97 6.86 6.50 5.94 5.28
74 8.45 8.14 7.32 6.31 5.40 7.26 7.12 6.69 6.04 5.32
75 8.82 8.44 7.49 6.38 5.42 7.56 7.39 6.89 6.14 5.35
- --------------------------------------------------------------------------------
22
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
If you have any questions concerning this policy or if anyone
suggests that you change or replace this policy, please contact
your Farm Bureau Life agent or our home office. (515-225-5400)
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE [LOGO]
WEST DES MOINES, IOWA 50266-5997 FARM BUREAU
FINANCIAL SERVICES
- --------------------------------------------------------------------------------
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
WAIVER OF CHARGES RIDER
This rider is part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on the policy data page of the policy.
1.3 TOTAL DISABILITY
means continuous total disability caused by injury or sickness which:
a) starts after the effective date of this rider and while this rider is in
force;
b) starts before the policy anniversary on which you are age 65 while this
rider is in force; and
c) prevents you from engaging in the substantial and material duties of an
occupation:
i) For the first 24 months of such total disability, occupation means
your occupation at the time such total disability began.
ii) After 24 months of such total disability, occupation means any gainful
occupation for which you are reasonably fitted by education, training
or experience.
To be considered disabled you must be under the care of a physician and
receiving appropriate treatment. You will not be considered totally disabled
for any period during which you are engaged in any occupation for wage or
profit or for any period that you are not under the care of a physician.
1.4 WAITING PERIOD
means the number of days at the beginning of a period of total disability before
benefit payments begin.
1.5 COMPLICATIONS OF PREGNANCY
mean conditions whose diagnoses are distinct from normal pregnancy but are
adversely affected by pregnancy or are caused by pregnancy. These include,
but are not limited to acute nephritis, cardiac decompensation, toxemia,
eclampsia, non-elective abortion, caesarean section and ectopic pregnancy
which is terminated.
Complications of pregnancy do not include false labor, occasional spotting, rest
prescribed by a doctor, morning sickness, pre-eclampsia, or similar conditions
which make a pregnancy difficult but do not constitute a medically distinct
pregnancy complication. Elective induced abortion is also not a complication of
pregnancy.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DISABILITY BENEFIT
We will waive the payment of monthly deductions under the policy during your
continuous total disability:
a) if the policy and this rider are in force on the date you become totally
disabled with all monthly deductions are paid;
b) upon receipt by us of due proof of your total disability;
c) after a 90 day period; and
d) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNTS TO BE WAIVED
The waiting period begins on the date that you become totally disabled.
Monthly deductions falling due after the waiting period will be waived during
the insured's continuous total disability. After the waiting period is
satisfied, monthly deductions that were due and paid during the waiting
period will be refunded. Monthly deductions are waived until total disability
ends. If a monthly deduction is in default, benefits will be allowed if:
a) your total disability began before the due date or during the grace period
of the monthly deduction in default;
b) notice of claim was given within one year after such due date; and
<PAGE>
c) the first monthly deduction in default is paid with interest not to exceed
6% per year if your total disability began during the grace period of such
monthly deduction.
2.3 CLAIM PROCEDURES
Before any monthly deduction is waived, written notice of claim and proof of
total disability must be received by us:
a) while you live;
b) while your total disability continues; and
c) no later than one year after this rider terminates.
Waiver of any monthly deduction will be subject to the following rules:
a) We may require a medical examination by a physician of our choice, at our
expense.
b) If you fail to give us notice and proof of your total disability on time,
your rights to benefits will not be impaired if you prove you complied as
soon as reasonably possible.
2.4 PROOF OF CONTINUING DISABILITY
You must furnish proof, as often as we request, that your total disability
continues. We may require a medical examination by a physician of our choice,
at our expense, as part of such proof.
2.5 RISKS NOT ASSUMED
No monthly deduction will be waived if your disability results from:
a) suicide or any attempt at suicide, whether sane or insane, or any
intentionally self-inflicted injury;
b) war or any act of war, whether declared or undeclared;
c) committing or trying to commit a felonious act;
d) service while a member of any armed forces; or
e) pregnancy or childbirth except complications of pregnancy.
2.6 TERMINATION
All rights and benefits under this rider will terminate on the earliest of:
a) the policy anniversary on which you are age 65 (but this will not affect a
claim which began before such date);
b) the owner requests that the policy or this rider be cancelled;
c) the grace period specified in the policy ends without payment of the
monthly deductions, except as provided in the amounts to be waived
provision;
d) the continuation of the policy in force under a cash value option; or
e) conversion, expiry, maturity or termination of the policy.
2.7 POLICY PROVISIONS APPLY
The incontestable clause and cash value benefits provision of the policy, if
any, will not apply to this rider. All other provisions of the policy not in
conflict with this rider will apply to this rider. In the event of a conflict
between the provisions of the policy and this rider, the provisions of this
rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND
REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The table of percentages of monthly deductions for this rider as shown herein
are to be deducted on the same dates, in the same manner, and under the same
conditions as monthly deductions for the policy to which this rider is attached.
Monthly deductions for this rider are due until this rider terminates. The
monthly deductions for this rider are based on your attained age at the
beginning of each policy year. Any monthly deductions deducted after
termination, as provided in this rider, will not continue this rider in force
and will be refunded. The table on the following page shows the monthly
deduction as a percentage of the cost of insurance and charges for all
additional benefit riders attached to this policy
3.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edward M. Wiederstein
President
<PAGE>
TABLE OF PERCENTAGES OF
MONTHLY DEDUCTIONS FOR WAIVER OF CHARGES
FOR STANDARD RATE CLASS
(APPLIES ONLY IF WAIVER OF CHARGES RIDER IS ATTACHED TO THE POLICY.
FOR SUBSTANDARD CLASSES TAKE RATING ON POLICY DATA PAGE TIMES THE PREMIUM
OBTAINED BY USING PERCENTAGES BELOW.)
<TABLE>
<CAPTION>
Male Male Female Female Male Male Female Female
Non- Non- Non- Non-
Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco
Age Rate Rate Rate Rate Age Rate Rate Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 4.6% 6.1% 9.3% 12.6% 42 6.5% 8.9% 11.3% 15.4%
19 4.6 6.1 9.3 12.6 43 6.9 9.3 11.5 15.6
20 4.6 6.1 9.3 12.6 44 7.2 9.7 11.8 16.1
21 4.6 6.1 9.3 12.6 45 7.5 10.1 12.2 16.6
22 4.6 6.1 9.3 12.6 46 7.8 10.5 12.6 17.0
23 4.6 6.1 9.3 12.6 47 8.1 10.9 12.9 17.6
24 4.6 6.1 9.3 12.6 48 8.4 11.3 13.3 18.1
25 4.6 6.1 9.3 12.6 49 8.7 11.8 13.7 18.6
26 4.8 6.5 9.3 12.6 50 9.1 12.2 14.1 19.2
27 4.8 6.5 9.3 12.8 51 9.4 12.7 14.6 19.8
28 4.8 6.5 9.5 13.0 52 9.8 13.2 15.0 20.4
29 4.8 6.5 9.5 13.0 53 10.2 13.8 15.5 21.0
30 4.8 6.5 9.8 13.2 54 10.6 14.3 15.9 21.6
31 5.0 6.7 9.8 13.2 55 11.0 14.9 16.4 22.2
32 5.0 6.7 9.8 13.2 56 11.5 15.5 16.9 22.9
33 5.2 6.9 10.2 13.7 57 11.9 16.1 17.4 23.6
34 5.2 7.2 10.2 13.7 58 12.4 16.7 17.9 24.3
35 5.4 7.4 10.2 13.7 59 12.9 17.4 18.5 25.0
36 5.4 7.4 10.2 13.9 60 13.4 18.1 19.0 25.8
37 5.6 7.6 10.2 13.9 61 14.0 18.8 19.6 26.6
38 5.6 7.6 10.4 14.1 62 14.5 19.6 20.2 27.4
39 6.1 8.0 10.6 14.3 63 15.1 20.4 20.8 28.2
40 6.1 8.0 10.8 14.5 64 15.7 21.2 21.4 29.0
41 6.1 8.5 11.1 14.7
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
LIVING BENEFIT RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 POLICY BENEFIT
means the amount of death benefits we would pay to your beneficiaries upon your
death if this endorsement were not a part of the policy. It includes:
a) the death benefit of the policy;
b) any insurance provided by paid-up additions;
c) the amount of any one-year term insurance purchased with dividends; and
d) the face amount of any term insurance riders which cover you and are
attached to the policy.
It does not include the amount of any accidental death benefit rider that may be
attached to the policy or any death benefit from any rider that covers another
person or another family member.
1.3 LIVING BENEFIT
means the portion of the policy benefit we will pay the owner under this
endorsement if we receive proof that the insured is eligible for such benefit.
1.4 TERMINALLY ILL
means having a life expectancy of 12 months or less as certified by a physician.
1.5 PHYSICIAN
means a licensed medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the owner, or a member of
the immediate family of either you or the owner.
- --------------------------------------------------------------------------------
SECTION 2 - GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.1 LIVING BENEFIT PAYMENT
We will pay a living benefit in a lump sum to the owner if you are terminally
ill. We may make payments other than as a lump sum in any manner requested by
the owner and agreed to by us, except an option involving life contingencies.
2.2 AMOUNT OF LIVING BENEFIT
The maximum amount you may request for a living benefit is the lessor of:
a) the policy benefit; or
b) $250,000.
The $250,000 maximum will be applied in sum to all the policies under which you
are insured with us.
The amount requested for the living benefit will be adjusted as follows:
a) A 12 month discount will be applied which reflects the early payment of
amounts held under your policy. The discount will be based on the policy's
loan interest rate. If a loan interest rate provision is not included in
your policy, the discount will be based on an annual interest rate of 7.40%
in advance. The policy's loan interest rate will be multiplied by the
benefit amount to determine the amount of discount.
b) If there is an existing policy loan on your policy on the date you request
a living benefit, the living benefit payment will be reduced. The purpose
of this reduction is to repay a portion of the policy loan. The deduction
will be computed as follows:
Amount of Reduction = Existing Policy Loan X Requested Portion Of Policy Benefit
----------------------------------------------------------
Policy Benefit
The actual amount of living benefit paid to the owner will be equal to the
requested amount minus the 12 month discount and the reduction for existing
policy loans. This is the living benefit payment.
<PAGE>
If the requested amount of living benefit is less than the policy benefit, the
policy will remain in force. To remain in force, the face amount of the policy
after the living benefit has been paid must be greater than or equal to the
minimum issue limits for the plan of insurance on the date of the living benefit
request. The premiums due under the policy, all remaining values and policy
benefits will be reduced proportionately.
2.3 BENEFIT CONDITIONS
Payment of the living benefit is subject to the following rules:
a) We must receive a written request on our form signed by you and the owner.
b) The policy must be in force other than as extended term insurance.
c) The policy or an eligible term rider must not be within five years of
expiration or endowment at the time a living benefit is requested.
d) The living benefit is not available for any last
survivor life insurance policy.
e) If there is an irrevocable beneficiary or assignee, they must consent in
writing to payment of the benefit.
f) We reserve the right to require you or any beneficiary, a spouse, assignee,
or any other party in interest to consent to the payment of the living
benefit if, in our discretion, such agreement is needed to protect our
interests.
g) Your policy is not eligible for this benefit if:
i) you or the owner are required by law to use this endorsement to meet
the claims of creditors, whether in bankruptcy or otherwise; or
ii) you are required by a government agency to use this endorsement to
apply for, obtain, or keep a government benefit or entitlement.
h) You must provide proof that you meet conditions under the living benefit
provision, including an attending physician's statement and any other proof
we may require. We reserve the right to seek a second medical opinion or
have you examined at our expense by a physician we choose.
2.4 TERMINATION
All rights and benefits under this endorsement will end when any one of the
following events occurs:
a) the owner requests that the policy or this rider be cancelled;
b) the grace period ends without payment of the premium; or
c) conversion, expiry, maturity or termination of the policy.
2.5 POLICY PROVISIONS APPLY
The policy is modified to add the provisions of this rider. All provisions of
the policy not in conflict with this rider will apply to this rider. In the
event of a conflict between the provisions of the policy and this rider, the
provisions of the rider will prevail.
/s/ Edward M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
LIVING BENEFIT RIDER
DISCLOSURE STATEMENT
1. This Living Benefit Rider is NOT a long term care policy. The amount this
rider pays may not be enough to cover nursing home or other bills. The
owner may use the money received from this rider for any purpose.
2. Benefits payable under this rider MAY be taxable. We make no
representations concerning any potential tax consequences of this
endorsement. You should consult your personal tax adviser.
3. This rider MAY affect Medicaid eligibility. If you use the endorsement
benefit, you MAY be required to spend all of the available funds to become
eligible for Medicaid or other government assistance programs.
4. Payment of the accelerated benefit will be allowed if you are determined to
have a terminal illness. This means you have a life expectancy of 12 months
or less as certified by a physician.
5. The maximum amount you may request for an accelerated benefit is the lesser
of the policy benefit, or $250,000. The $250,000 maximum will be applied in
sum to all the policies under which you are insured with us.
6. The amount requested for the accelerated benefit will be reduced by a 12
month discount which reflects the early payment of amounts held under your
policy. The discount will be based on the policy's loan interest rate, or
7.4% for policies not having a loan provision. There will be no other
administrative charge.
7. The amount requested will also be reduced if there is an existing policy
loan on your policy on the date you request an accelerated benefit. The
purpose of this reduction is to repay a portion of the policy loan.
8. Payment of the accelerated benefit may decrease or eliminate the death
benefit your beneficiary will receive by the amount of the accelerated
benefit requested. If a portion of the policy remains in force following
payment of the accelerated benefit, the premiums due under the policy, all
remaining values and policy benefits, including any policy loans will be
reduced proportionately.
- ---------------------------------- ----------------------------
Policyowner's Signature Agent's Signature
- ---------------------------------- ----------------------------
Date Date
First copy - Home Office Second Copy - Owner/Insured
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
COST OF LIVING INCREASE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 -DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on policy data page.
1.3 CONSUMER PRICE INDEX
means the Consumer Price Index For All Urban Consumers, U.S. City Average, All
Items (CPI) as published by the U.S. Department of Labor.
1.4 CPI FACTOR
The CPI Factor is calculated as follows:
(a)-(b) where:
-------
(b)
a) is the CPI 6 months prior to the increase date;
and
b) is the CPI 42 months prior to the increase date.
We reserve the right to use some other similar measurement if the U.S.
Department of Labor changes or stops publishing the CPI.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 INCREASE BENEFIT
The specified amount on your life will increase automatically every third policy
anniversary without proof of insurability. Such increase will be subject to the
following rules:
a) The policy and this rider must be in force with all needed monthly
deductions paid.
b) The increase will take place every third policy anniversary after the
policy date. Such anniversary will be the effective date of the increase.
c) The increase amount will be the lessor of:
i) the initial specified amount plus any prior increases under this rider
multiplied by the CPI Factor;
ii) 20% of the initial specified amount; or
iii) $25,000.
d) The minimum increase amount is $2,000
e) The total amount of all increases under this rider will be the lessor of:
i) four times the initial specified amount on this policy; or
ii) $200,000.
f) The cost of insurance rate for the increase will be based on your sex,
attained age and rate class at the time of increase.
g) We will send the owner a new policy data policy data page showing the new
specified amount following an increase.
h) Any increase will be subject to per $1,000 charges shown in the policy.
i) The increase will not be allowed if your mortality class is other than
standard.
2.2 REJECTION OF INCREASE
We will mail you a new policy data page on the effective date of any increase.
Acceptance is automatic. You may reject the cost of living increase by notice to
us and return of the new policy data page within 30 days of the increase date.
2.3 TERMINATION
All rights and benefits under this rider will terminate when any of the
following occur:
a) any automatic cost of living increase is rejected;
b) the later of:
<PAGE>
i) the policy anniversary on which you are age 65; or
ii) the 10th policy anniversary;
c) the owner requests that the policy or this rider be canceled;
d) the grace period specified in the policy ends without payment of the
monthly deductions; or
e) conversion, expiry, maturity or termination of the policy.
2.4 POLICY PROVISIONS APPLY
All provisions of the policy not in conflict with this rider will apply to this
rider. In the event of a conflict between the provisions of the policy and this
rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The monthly deduction for this rider will be deducted on the same dates, in the
same manner and under the same conditions as the monthly deductions for the
policy to which this rider is attached. Monthly deductions for this rider are
due until the rider terminates. Any monthly deductions deducted after
termination, as provided in this rider, will not continue this rider in force
and will be refunded.
The current monthly deduction rates for this rider will be determined by us. If
we change the rates, we will change them for everyone in your premium class. The
current monthly deduction rates for this rider will never be more than 6% of the
guaranteed maximum monthly insurance rates shown on the policy data page.
3.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edmund M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
GUARANTEED INSURABILITY OPTION RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on page 3 of the policy.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 OPTION BENEFIT
The owner may increase the specified amount of insurance on your life without
proof of insurability on each of the option dates, if the policy and this rider
are in force with all needed monthly deductions paid.
Such purchase is subject to the following rules:
a) The owner must send us a written request, on our form and pay the monthly
deductions on or before the option date.
b) The policy date of the increase will be the option date.
c) In no event will the increase in specified amount become effective unless
you are living on the option date.
d) The increase in specified amount will not exceed the basic amount of this
rider.
e) Each Option will expire if not used on or before its option date. The
expiration will not affect future options.
f) The monthly deductions for the increased amount will be based on your sex,
attained ago and rate class on the option date.
g) The increased amount will be subject to the same exceptions, exclusions and
restrictions, if any, as this policy.
h) The increased amount will not be effective unless the net cash value on the
option date is sufficient to pay monthly deductions for the policy plus the
increased amount.
i) We will send the owner a new policy data page 3 showing the new specified
amount following exercise of an option.
j) The increased amount will be subject to the first year per $1,000 charges
shown in the policy.
2.2 AMOUNT OF THIS RIDER
The amount of this rider is shown on page 3 of the policy.
2.3 OPTION DATES
Option dates will be the policy anniversaries on which your age is 22, 25, 28,
31, 34, 37 and 40. Use of the advance purchase option will cancel the next
unused option.
2.4 ADVANCE PURCHASE OPTION
If the policy and this rider are in force with all needed deductions paid, the
owner may make immediate use of the next unused option within 60 days of the
following:
a) your marriage;
b) the birth of each living child to you during your lifetime; or
c) upon your legal adoption of a child.
Use of the advance purchase option is subject to the same rules which apply to
any other option benefit plus the following:
a) The next option date will be cancelled.
b) In the event of a multiple birth, the specified amount of the new policy
may be increased to an amount equal to the amount of this rider times the
number of live children born.
c) You must send us proof of such marriage, birth or adoption.
<PAGE>
d) The increased amount under this option will not be effective unless the net
cash value on the effective date of such increase is sufficient to pay
monthly deductions for the policy plus the amount of the increase resulting
from the exercise of this option.
e) The effective date of the increase will be the monthly deduction day
coinciding with or next following the date the signed request was received
in the Home Office.
If you die without using an advance purchase option during the 60 days it is
available, a death benefit will be paid equal to the amount that would have been
paid had the owner exercised such option.
2.5 TERMINATION
All rights and benefits under this rider will terminate on the earliest of:
a) the policy anniversary on which you are age 40;
b) you die;
c) the owner requests that the policy or rider be cancelled;
d) the grace period specified in the policy ends without payment of the
monthly deductions;
e) the continuation of the policy in force under a cash value option; or
f) conversion, expiry, maturity or termination of the policy.
2.6 POLICY PROVISIONS APPLY
All provisions of the policy not in conflict with this rider will apply to this
rider. In the event of a conflict between the provisions of the policy and this
rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider as shown herein are to be deducted on the
same dates, in the same manner, and under the same conditions as the monthly
deductions for the policy to which this rider is attached. Monthly deductions
for this rider are due until this rider terminates. Any monthly deductions
deducted after termination, as provided in this rider, will not continue this
rider in force and will be refunded.
The monthly deductions for this rider are based on your attained age at the
beginning of each policy year. The table on the following page shows the monthly
deduction per $1,000 of rider amount based on your attained age at the beginning
of each policy year.
3.2 REINSTATEMENT
This rider my be reinstated along with the policy subject to the requirements of
the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edmund M. Wiederstein
President
<PAGE>
TABLE OF GUARANTEED INSURABILITY OPTION
MONTHLY DEDUCTION RATES PER $1,000
FOR STANDARD CLASS
Attained Male Female Attained Male Female
Age Rate Rate Age Rate Rate
0 .01 .01 20 .06 .04
1 .02 .02 21 .06 .04
2 .02 .02 22 .06 .04
3 .02 .02 23 .07 .05
4 .02 .02 24 .07 .05
5 .02 .02 25 .07 .06
6 .02 .02 26 .08 .06
7 .03 .02 27 .08 .06
8 .03 .02 28 .08 .06
9 .03 .02 29 .08 .07
10 .03 .02 30 .08 .07
11 .03 .02 31 .08 .07
12 .03 .02 32 .09 .07
13 .04 .02 33 .09 .08
14 .04 .03 34 .09 .08
15 .04 .03 35 .09 .08
16 .04 .03 36 .09 .09
17 .04 .03 37 .10 .10
18 .05 .03 38 .12 .12
19 .05 .03 39 .14 .13
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
CHILDREN'S TERM LIFE INSURANCE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 COVERED CHILD
means your child, your stepchild or your legally adopted child, who:
a) is named in the application for this rider and who is less than age 18 on
the date of such application; or
b) after the date of such application, is born to you or legally adopted by
you before such child is age 18.
1.3 EFFECTIVE DATE
means the date shown for this rider on the policy data page.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH BENEFIT
We will pay the amount of this rider to the beneficiary of this rider.
a) within two months after receipt by us of due proof of a covered child's
death;
b) if a covered child dies:
i) after such covered child is 7 days old; and
ii) before such covered child's 23rd birthday;
c) if the policy and this rider are in force on the date of a covered child's
death with all needed monthly deductions paid; and
d) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNT OF THIS RIDER
The amount of term insurance under this rider is shown on the policy data page.
2.3 DEATH BENEFIT CHANGES
The owner may change the amount of this rider at any time after the first policy
year subject to the following rules:
a) The change must be in writing in a form acceptable to us.
b) It must be signed by the owner.
c) The form must be sent to us and, if proof of insurability is required, such
proof must be acceptable to us.
d) We will issue a new policy data page for any change in amount of this
rider.
Any decrease will be effective on the monthly deduction day coinciding with or
next following our receipt of the request. Any reduction will be in the
following order:
a) against the most recent increase in insurance;
b) against the next most recent increases reduced in succession;
c) against the initial amount.
In no event will the current amount of this rider be more than the specified
amount of the policy. Any decrease is also subject to a minimum amount remaining
of $10,000.
Any increase will require proof of insurability. An approved increase will have
an effective date as shown on the new policy data page.
2.4 INCONTESTABLE CLAUSE
We will not contest payment of this rider for any reason other than fraud after
this rider has been in force during such covered child's lifetime for two years
from the effective date.
We will not contest payment of any increases in the amount of this rider for any
reason other than fraud after the increases have been in force during such
covered child's lifetime for two years from the effective date of each increase.
2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the monthly deduction actually made would
have bought at the correct age or sex.
<PAGE>
2.6 SUICIDE
If, within one year of the effective date, a covered child dies by suicide,
whether sane or insane, our liability is limited to the monthly deductions paid
for this rider.
Any increase in death benefits resulting from an increase in the amount of this
rider will not be paid if a covered child dies from suicide, while sane or
insane, within one year of the date of such increase. Instead, we will return an
amount equal to the cost of insurance for such increase in the amount of this
rider.
2.7 TERMINATION
All rights and benefits under this rider will end when any one of the following
events occurs:
a) the owner requests that the policy or rider be cancelled or fully
converted;
b) the grace period specified in the policy ends without payment of the
monthly deductions; or
c) conversion, expiry, maturity or termination of the policy.
2.8 POLICY PROVISIONS APPLY
The cash value and policy loan provisions of the policy, if any, will not apply
to this rider. All other provisions not in conflict with this rider will apply
to this rider. In the event of a conflict between the provisions of the policy
and this rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARY
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The owner of the policy will be the owner of this rider.
3.2 BENEFICIARY
Beneficiaries for this rider are as named in the application, unless changed by
the owner. The rider's beneficiaries may be different from the policy's
beneficiaries.
- --------------------------------------------------------------------------------
SECTION 4 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
4.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider are to be paid on the same dates, in the
same manner, and under the same conditions as the monthly deductions for
the policy to which this rider is attached. Monthly deductions for this rider
are due until this rider terminates. The monthly deduction for this rider will
be $0.25 per $1,000 of coverage under this rider.
4.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of good health and insurability satisfactory to us
for each covered child who would be insured under this rider upon such
reinstatement.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
- --------------------------------------------------------------------------------
SECTION 5 - CONVERSION
- --------------------------------------------------------------------------------
5.1 CONVERSION PRIVILEGE
The owner may convert coverage under this rider to a new policy on any covered
child without proof of insurability if the policy and this rider are in force
with all needed monthly deductions paid. Application for conversion must be made
during such child's conversion period and before termination of this policy and
rider.
5.2 CONVERSION PERIOD
The conversion period for each covered child expires on the earlier of:
a) such covered child's 23rd birthday; or
b) 60 days after your death.
5.3 CONVERSION REQUIREMENTS
Such conversion is subject to the following rules:
a) The owner must send us a written request, on our form.
b) The owner must pay the first premium on the new policy.
c) The policy date of the new policy will be the date of termination of the
covered child's coverage under this rider.
d) In no event will the new policy become effective, unless such covered child
is living on the policy date of the new policy.
e) The face amount of the new policy may not exceed the face amount of this
rider in effect on the date of the request.
f) The new policy must comply with our published rules in effect on the date
of issue of the new policy.
<PAGE>
g) The premium for the new policy will be our rate for such covered child's
age on the policy date of the new policy for the same premium class as this
rider.
h) The new policy will be subject to the same exceptions, exclusions and
restrictions, if any, as this rider.
i) The new policy may be any form of single-life permanent life insurance
policy then being offered by us.
j) Our consent and proof of such covered child's insurability are required to
add any other benefit riders to the new policy, including the waiver of
charges rider.
/s/ Edward M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
OTHER ADULT UNIVERSAL LIFE INSURANCE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 COVERED ADULT
means the person whose life is insured under this rider and who is age 18 or
older.
1.3 AGE
means age at the last birthday.
1.4 ATTAINED AGE
means the covered adult's age on the effective date plus the number of policy
years since the effective date.
1.5 EFFECTIVE DATE
means the effective date of this rider shown on the policy data page.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH BENEFIT
We will pay the amount of this rider to the beneficiary of this rider:
a) within two months after receipt by us of due proof of the covered adult's
death;
b) if the policy and this rider are in force on the date of the covered
adult's death with all needed monthly deductions paid; and
c) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNT OF THIS RIDER
The amount of insurance under this rider is shown on the policy data page.
2.3 DEATH BENEFIT CHANGES
The owner may change the amount of this rider at any time after the first policy
year subject to the following rules:
a) The change must be in writing in a form acceptable to us.
b) It must be signed by the owner.
c) The form must be sent to us and, if proof of insurability is required, such
proof must be acceptable to us.
d) We will issue a new policy data page for any change in the amount of this
rider.
Any decrease will be effective on the monthly deduction day coinciding with or
next following our receipt of the request. Any reduction will be in the
following order:
a) against the most recent increase in insurance;
b) against the next most recent increases reduced in succession;
c) against the initial amount.
In no event will the current amount of this rider be more than the specified
amount of the policy. Any decrease is also subject to a minimum amount remaining
of $50,000.
Any increase will require proof of insurability. An approved increase will have
an effective date as shown on the new policy data page.
2.4 INCONTESTABLE CLAUSE
We will not contest payment of this rider for any reason other than fraud after
this rider has been in force during the covered adult's lifetime for two years
from the effective date of this rider.
We will not contest payment of any increases in the amount of this rider for any
reason other than fraud after the increases have been in force during the
covered adult's lifetime for two years from the effective date of each increase.
2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated
<PAGE>
age or sex. In such an event, benefits will be the amount the monthly deductions
actually paid would have bought at the correct age or sex.
2.6 SUICIDE
If, within one year of the effective date, the covered adult dies by suicide,
whether sane or insane, our liability is limited to the monthly deductions paid
for this rider.
Any increase in death benefits resulting from an increase in the amount of this
rider will not be paid if a covered adult dies from suicide, while sane or
insane, within one year of the date of such increase. Instead, we will return an
amount equal to the cost of insurance for such increase in the amount of this
rider.
2.7 TERMINATION
All rights and benefits under this rider will end when any one of the following
events occurs:
a) the earlier of the policy anniversary on which you are age 115 or the
policy anniversary on which the covered adult is age 115;
b) the covered adult dies;
c) the owner requests that the policy or rider be cancelled or fully
converted;
d) the grace period specified in the policy ends without payment of the
monthly deductions; or
e) conversion, expiry, maturity or termination of the policy.
2.8 POLICY PROVISIONS APPLY
The accumulated value benefits and policy loan provisions of the policy, if any,
will not apply to this rider. All other provisions not in conflict with this
rider will apply to this rider. In the event of a conflict between the
provisions of the policy and this rider, the provisions of this rider will
prevail.
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARY
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The owner of the policy will be the owner of this rider.
3.2 BENEFICIARY
Beneficiaries for this rider are as named in the application, unless changed by
the owner. The rider's beneficiaries may be different from the policy's
beneficiaries.
- --------------------------------------------------------------------------------
SECTION 4 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
4.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider are to be paid on the same dates, in
the same manner, and under the same conditions as the monthly deductions for
the policy to which this rider is attached. Monthly deductions for this rider
are due until the rider terminates. The monthly deduction for this rider is
computed as the sum of a) plus b), where:
a) is the cost of insurance rate (as defined in section 4.2) multiplied by the
amount of the rider; and
b) is the monthly per $1,000 charge from the policy data page, multiplied by
the current amount or the amount of any increase in the amount of this
rider. This charge applies only during the first policy year or during the
12 months following an increase in the amount of this rider.
4.2 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate is based on the covered adult's sex, rate class and attained age.
For any increase in the specified amount, the attained age will be the
covered adult's age on the effective date of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in a rate class.
d) The monthly guaranteed rates shown in the policy are based on the 1980
Commissioner's Standard Ordinary Mortality Table, Age Last Birthday. The
monthly rate will never be more than these rates.
4.3 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
<PAGE>
a) You must provide proof of good health and insurability satisfactory to us
for the covered adult who would be insured under this rider upon such
reinstatement.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
- --------------------------------------------------------------------------------
SECTION 6 - CONVERSION
- --------------------------------------------------------------------------------
6.1 CONVERSION PRIVILEGE
The owner may convert this rider to a new policy on the covered adult without
proof of insurability if the policy and this rider are in force with all needed
monthly deductions paid. Application for conversion must be made before
termination of the policy and rider and before the covered adult's 75th
birthday, or within 60 days after your death.
6.2 CONVERSION REQUIREMENTS
Such conversion is subject to the following rules:
a) The owner must send us a written request, on our form.
b) The owner must pay the first premium on the new policy.
c) The policy date of the new policy will be the date of termination of
this rider.
d) In no event will the new policy become effective, unless the covered
adult is living on the policy date of the new policy.
e) The face amount of the new policy may not exceed the face amount of
this rider in effect on the date of the request.
f) The new policy must comply with our published rules in effect on the
date of issue of the new policy.
g) The premium for the new policy will be our rate for the covered
adult's age on the policy date of the new policy for the same premium
class as this rider.
h) The new policy will be subject to the same exceptions, exclusions and
restrictions, if any, as this rider.
i) The new policy may be any form of single-life permanent life insurance
policy then being offered by us.
j) Our consent and proof of the covered adult's insurability are required
to add any other benefit riders to the new policy, including the
waiver of charges rider.
/s/ Edward M. Wiederstein
President
<PAGE>
CERTIFICATE OF APPROVAL
ATTORNEY GENERAL
Pursuant to provisions of the Iowa Code, the undersigned approves the
Articles of Amendment (adopted December 31, 1997) to the Articles of
Incorporation for Continental Western Life Insurance Company and finds them
in conformance with the laws of the United States and with the laws and
Constitution of the State of Iowa.
THOMAS J. MILLER
Attorney General of Iowa
12-31-97 /s/ Scott M. Galenbeck
- -------- -----------------------
Date By: SCOTT M. GALENBECK
Assistant Attorney General
CERTIFICATE OF APPROVAL
COMMISSIONER OF INSURANCE
Pursuant to provisions of the Iowa Code, the undersigned approves the
Articles of Amendment (adopted December 31, 1997) to the Articles of
Incorporation for Continental Western Life Insurance Company.
THERESE M. VAUGHAN
Commissioner of Insurance
12-31-97 /s/ Robert L. Howe
- -------- -----------------------
Date By: ROBERT L. HOWE
Deputy Commissioner of Insurance
<PAGE>
ARTICLES OF AMENDMENT
0F
CONTINENTAL WESTERN LIFE INSURANCE COMPANY
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 1006 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following amendment to the corporation's
Articles of Incorporation.
1. The name of the corporation is Continental Western Life Insurance Company.
2. The text of the amendment to the Articles of Incorporation affected
hereby is as follows:
Article I of the Articles of Incorporation is hereby amended by deleting
it in its entirety and substituting the following in lieu thereof:
ARTICLE I
NAME AND ADDRESS OF COMPANY
---------------------------
The name of the Corporation is EquiTrust Life Insurance Company and
its principal place of business is 5400 University Avenue, West Des Moines,
Iowa 50266.
ARTICLE IX of the Articles of Incorporation is hereby amended by
deleting it in its entirety and substituting the following in lieu thereof:
ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The address of the registered office of the Corporation is 5400
University Avenue, West Des Moines, Iowa 50266, and the name of its
registered agent at such address is Stephen M. Morain, General Counsel.
3. The date of adoption of this amendment was December 31, 1997.
4. The amendment was approved by the shareholders. The designation, number
of outstanding shares, number of votes entitled to be cast by each voting
group entitled
<PAGE>
to vote separately on the amendment, and the number of votes of each
voting group indisputably represented at the meeting is as follows:
VOTES VOTES
DESIGNATION SHARES ENTITLED REPRESENTED
OF GROUP OUTSTANDING TO BE CAST AT MEETING
------------ ------------ ----------- -----------
Common Stock 2,000 2,000 2,000
5. The total number of votes cast for and against the amendment was as follows:
VOTES VOTES
FOR AGAINST
----- -------
2,000 0
6. The number of votes cast for the amendment was sufficient for approval.
7. The effective date and time of this document is the 31st day of December,
1997 at 11:30 a.m.
CONTINENTAL WESTERN LIFE
INSURANCE COMPANY
Dated: December 31, 1997 By: /s/ Richard D. Harris
--------------------------------
Richard D. Harris, Senior Vice
President and Secretary-Treasurer
2
<PAGE>
- ------------------------------------------------------------------------------
STATE OF IOWA
INSURANCE DIVISION
CERTIFICATE OF SIMILARITY
I, THERESE M. VAUGHAN, COMMISSIONER OF INSURANCE DO HEREBY CERTIFY THAT
I AM THE OFFICIAL CHARGED WITH THE GENERAL CONTROL, SUPERVISION AND DIRECTION
OF ALL INSURANCE BUSINESS TRANSACTED IN THE STATE OF IOWA, AND CHARGED WITH
THE EXECUTION OF THE LAWS RELATING TO INSURANCE IN SAID JURISDICTION. AS SUCH
OFFICIAL, I AM CUSTODIAN OF THE RECORDS PERTAINING TO THE INSURANCE DIVISION
OF IOWA. I FURTHER CERTIFY THAT THE ATTACHED INSTRUMENT IS A TRUE AND CORRECT
COPY OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
CONTINENTAL WESTERN LIFE INSURANCE COMPANY
FILED OCTOBER 3, 1994
AS THE SAME APPEARS OF RECORD IN THIS DIVISION.
IN WITNESS WHEREOF, I HAVE
HEREUNTO SET MY HAND AND CAUSED
MY OFFICIAL SEAL TO BE AFFIXED
AT THE CITY OF DES MOINES THIS
24TH DAY OF NOVEMBER, A.D. 1997.
/s/ THERESE M. VAUGHAN
--------------------------------
COMMISSIONER OF INSURANCE
- ------------------------------------------------------------------------------
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CONTINENTAL WESTERN LIFE INSURANCE COMPANY
Article I
NAME AND ADDRESS OF COMPANY
----------------------------
The name of the Corporation is Continental Western Life Insurance Company and
its principal place of business is Continental Plaza, 1601 - 74th Street,
West Des Moines, Iowa 50265.
Article II
DURATION
--------
The period of its duration is perpetual.
Article III
PURPOSE
-------
The purpose for which this Corporation is organized is to engage in any
lawful activity within the purposes for which insurance corporations may be
organized under the provisions of Chapters 490 and 508 and any predecessor
statutes of the Iowa Code.
Article IV
CAPITALIZATION
--------------
The aggregate number of shares which the Corporation has authority to issue
is 2,500, par value $1,500 per share.
Article V
DIRECTORS
---------
The governing body of the Corporation is the Board of Directors, elected
annually by the shareholders. The number of Directors is required to be at
least five, the maximum to be fixed by the By-laws. The Directors need not
own shares of the Corporation. Their terms and the manner of their election
shall be as provided in the By-laws. The Board of Directors may make and
amend the By-laws of the Corporation.
Article VI
STOCK PLAN
----------
The Corporation shall operate on the Stock Plan.
<PAGE>
Article VII
INDEMNITY
---------
Any Director, Officer or Employee of the Corporation who is made a party to
any civil or criminal action by reason of his position with the Corporation
may be indemnified by the Corporation to the extent permitted by law.
Article VIII
FISCAL YEAR
-----------
The Corporation's fiscal year shall begin on January 1 of each year and end
on December 31 of each year.
Article IX
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The address of the registered office of the Corporation is Continental Plaza,
1601 - 74th Street, West Des Moines, Iowa, 50265, and the name of its
registered agent at such address is Valerie Davenport.
Article X
AMENDMENT
---------
These Articles may be amended at any meeting of shareholders by the
affirmative note of a majority of the shareholders present, in person or by
proxy.
These restated Articles of Incorporation were approved to be effective August
21, 1994 by the shareholders of Continental Western Life Insurance Company on
August 21, 1994, and supersede the Corporation's Original Articles of
Incorporation and all amendments thereto.
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation are
executed on behalf of Continental Western Life Insurance Company.
Dated this 21st day of August, 1994.
By: /s/ Ken L. Evason
--------------------------------
Ken L. Evason, President
By: /s/ Guy R. Montag
--------------------------------
Guy R. Montag, Secretary
<PAGE>
CERTIFICATE RELATING TO ATTACHED
BYLAWS OF
CONTINENTAL WESTERN LIFE INSURANCE COMPANY
I, Guy R. Montag, hereby certify that I am the Secretary of Continental
Western Life Insurance Company ("Continental Western Life"), an Iowa
corporation, and further confirm that the attached Bylaws of Continental Western
Life are complete and correct. I also affirm that the same have not been
modified, amended or rescinded, but remain in full force and effect on the date
hereof.
IN WITNESS WHEREOF, I have executed and delivered this Certificate this
30th day of December, 1997.
By: /s/ Guy R. Montag
-------------------------
Guy R. Montag
Secretary
(SEAL)
<PAGE>
BY-LAWS
OF
CONTINENTAL WESTERN LIFE INSURANCE COMPANY
(an Iowa corporation)
Amended Through August 21, 1994
ARTICLE I. OFFICES
1.01. PRINCIPAL AND BUSINESS OFFICES. The corporation may have such
principal and other business offices, either within or without the State of
Iowa, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. REGISTERED OFFICE. The registered office of the corporation
required by the Iowa Business Corporation Act to be maintained in the State of
Iowa may be, but need not be, identical with the principal office in the State
of Iowa, and the address of the registered office may be changed from time to
time by the Board of Directors. The business office of the registered agent of
the corporation shall be identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on such date as may be fixed by or under the authority of the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting.
2.02. SPECIAL MEETING. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman, the President, or the Board of Directors or by the person
designated in the written request of the holders of not less than one-tenth of
all shares of the corporation entitled to vote at the meeting.
2.03. PLACE OF MEETING. The Board of Directors may designate any place,
either within or without the State of Iowa, as the place of meeting for any
annual meeting or for any special meeting. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Iowa, as the place for the holding of such
meeting. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal business office of the
corporation in the State of Iowa or such other suitable place in the county of
such principal office as may be designated by the person calling such meeting,
but any meeting may be adjourned to reconvene at any place designated by vote of
a majority of the shares represented thereat.
2.04. NOTICE OF MEETING. Written notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called shall be delivered not less than three (3) days
(unless a longer period is required by law) nor more than ten days before the
date of the meeting, either personally or by mail, by or at the
1
<PAGE>
direction of the Chairman, the President, or the Secretary, or other officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at their
address as it appears on the stock record books of the corporation, with postage
thereon prepaid.
2.05. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in the case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the close of business on the date on
which notice of the meeting is mailed or on the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall be applied
to any adjournment thereof except where the determination has been made through
the closing of the stock transfer books and the stated period of closing has
expired.
2.06. VOTING RECORDS. The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such record or transfer books or to
vote at any meeting of shareholders. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at such meeting.
2.07. QUORUM. Except as otherwise expressly required by law, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders
unless the vote of a greater number is required by law. Though less than a
quorum of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
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2.08. CONDUCT OF MEETINGS. The Chairman, and in his or her absence, the
President, or a Vice-President in the order provided under Section 4.07, and in
their absence, any person chosen by the shareholders present shall call the
meeting of the shareholders to order and shall act as chairman of the meeting,
and the Secretary of the corporation shall act as secretary of all meetings of
the shareholders, but, in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09. PROXIES. At all meetings of shareholders, a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his duly authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. Unless
otherwise provided in the proxy, a proxy may be revoked at any time before it is
voted, either by written notice filed with the Secretary or the acting Secretary
of the meeting or by oral notice given by the shareholder or the presiding
officer during the meeting. The presence of a shareholder who has filed his or
her proxy shall not of itself constitute a revocation. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy. The Board of Directors shall have the power and authority to make
rules establishing presumptions as to the validity and sufficiency of proxies.
2.10. VOTING OF SHARES. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders.
2.11 VOTING OF SHARES BY CERTAIN HOLDERS.
(a) OTHER CORPORATIONS. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the President of
such corporation or any other officer appointed by such President. A proxy
executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority of this act,
in the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, of the designation of some other person by the
Board of Directors or the by-laws of such other corporation.
(b) LEGAL REPRESENTATIVES AND FIDUCIARIES. Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver,
or assignee for creditors may be voted by them, either in person or by proxy,
without a transfer of such shares into their name, provided that there is filed
with the Secretary before or at the time of meeting proper evidence of their
incumbency and the number of shares held. Shares standing in the name of a
fiduciary may be voted by them, either in person or by proxy. A proxy executed
by a fiduciary, shall be conclusive evidence of the signer's authority to act,
in the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
(c) PLEDGES. A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) TREASURY STOCK AND SUBSIDIARIES. Neither treasury shares, nor shares
held by another corporation if a majority of the shares entitled to vote for the
election of directors of such
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other corporation is held by this corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares entitled to vote,
but shares of its own issue held by this corporation in a fiduciary capacity, or
held by such other corporation in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote.
2.12. WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice whatever is
required to be given to any shareholder of the corporation under the articles of
incorporation or by-laws or any provision of law, a waiver thereof in writing,
signed at any time, whether before or after the time of the meeting, by the
shareholder entitled to such notice, shall be deemed equivalent to the giving of
such notice; provided that such waiver in respect to any matter of which notice
is required under any provision of the Iowa Business Corporation Act shall
contain the same information as would have been required to be included in such
notice, except the time and place of meeting.
2.13. UNANIMOUS CONSENT WITHOUT MEETING. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
3.01. GENERAL POWERS AND NUMBER. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation shall be no less than five (5) and no more than sixteen (16).
3.02. TENURE AND QUALIFICATIONS. Each director shall hold office until
the next annual meeting of shareholders and until their successor shall have
been elected, or until their prior death, resignation or removal. A director
may be removed from office by affirmative vote for the election of such
director, taken at a meeting of shareholders called for that purpose. A
director may resign at any time by filing their written resignation with the
Secretary of the corporation. Except as may be otherwise required by applicable
law, directors need not be residents of the State of Iowa or shareholders of the
corporation.
3.03. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice that this by-law as soon as practical after
the annual meeting of shareholders, and each adjourned session thereof. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Iowa, for the holding of regular meetings without other
notice than such resolution.
3.04. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman, President, or Secretary or any
two directors. The Chairman, President or Secretary calling any special meeting
of the Board of Directors may fix any place, either within or without the State
of Iowa, as the place for holding any special meeting of the Board of Directors
called by them, and if no other place is fixed, the place of the meeting shall
be the principal business office of the corporation in the State of Iowa.
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3.05. NOTICE; WAIVER. Notice of each meeting of the Board of Directors
(unless otherwise provided in or pursuant to Section 3.03) shall be given by
written notice delivered personally or mailed or given by telegram to each
director at their business address or at such other address as such director
shall have designated in writing filed with the Secretary. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company. Whenever any notice whatever is required to be given to
any director of the corporation under the articles of incorporation or by-laws
or any provision of law, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the director entitled to such
notice, shall be deemed equivalent to the giving of such notice. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects thereat to the transaction
of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
3.06. QUORUM. Except as otherwise provided by law or these by-laws, a
majority of the number of directors as provided in Section 3.01 shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, but a majority of the directors present (though less than such
quorum) may adjourn the meeting from time to time without further notice.
3.07. MANNER OF ACTING. The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or these
by-laws.
3.08. CONDUCT OF MEETINGS. The Chairman, and in his or her absence, the
President, shall call meetings of the Board of Directors to order and shall act
as chairman of the meeting. The Secretary of the corporation shall act as
secretary of all meetings of the Board of Directors, but in the absence of the
Secretary, the presiding officer may appoint any Assistant Secretary or any
director or other person present to act as secretary of the meeting.
A board meeting may be conducted by:
a) A conference among directors using any means of communication through
which the directors may simultaneously hear each other during the conference
constitutes a board meeting, if the same notice is given of the conference as
would be required by the by-laws for a meeting, and if the number of directors
participating in the conference would be sufficient to constitute a quorum at a
meeting. Participation in a meeting by that means constitutes presence in
person at the meeting; or
b) Any means of communication through which the director, other directors
so participating, and all directors physically present at the meeting may
simultaneously hear such other during the meeting. Participation in a meeting
by that means constitutes presence in person at the meeting.
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3.09. VACANCIES. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of directors then in office, though less than a quorum of the Board of
Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
3.10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he or she is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his or her dissent shall be
entered in the minutes of the meeting or unless he or she shall file his or her
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
3.11. COMMITTEES. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors as provided in Section
3.01 may designate one or more committees elected by the Board of Directors,
which to the extent provided in said resolution as initially adopted, and as
thereafter supplemented or amended by further resolution adopted by a like vote,
and subject to Section 490.825 of the Iowa Business Corporation Act, shall have
and may exercise, when the Board of Directors is not in session, the powers of
the Board of Directors in the management of the business and affairs of the
corporation, except action in respect to dividends to shareholders, election of
the principal officers or the filling of vacancies in the Board of Directors or
committees created pursuant to this section. The Board of Directors may elect
one or more of its members as alternate members of any such committee who may
take the place of any absent member or members at any meeting of such committee,
upon request by the Chairman or President or upon request by the chairman of
such meeting. Each such committee shall fix its own rules governing the conduct
of its activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
3.12. UNANIMOUS CONSENT WITHOUT MEETING. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors then in office.
ARTICLE IV. OFFICERS
4.01. NUMBER. The principal officers of the corporation shall be a
Chairman, a President, one or more Vice-Presidents, one or more of which may be
designated Executive or Senior Vice Presidents, a Secretary and a Treasurer,
each of whom shall be elected or appointed by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the Board of Directors. Any two or more offices may be held by
the same person, except the offices of President and Secretary and the offices
of President and Vice-President.
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4.02. ELECTION AND TERM OF OFFICE. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until his or her successor has been duly elected
or until his or her prior death, resignation or removal.
4.03. REMOVAL. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04. VACANCIES. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
4.05. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, when
present, preside at all meetings of the shareholders and of the Board of
Directors. He or she shall have such power and duties as may be from time to
time prescribed by the by-laws or by resolution of the Board of Directors.
4.06. PRESIDENT. The President shall be the principal operating officer
of the corporation subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation. He or she shall have authority subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the discretion of the President. He or she shall
have authority to sign, execute and acknowledge, on behalf of the corporation,
all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and
all other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by law
or the Board of Directors, he or she may authorize any Vice-President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his place and stead. In general he or she shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time. The President
shall be a member of the Board of Directors.
4.07. THE VICE-PRESIDENTS. In the absence of the President or in the
event of his or her death, inability or refusal to act, or in the event for any
reason it shall be impractical for the President to act personally, the
Vice-President (or in the event there be more than one Vice-President, the
Vice-Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice-President
may sign, with the Secretary or Assistant Secretary, certificates for shares of
the corporation; and shall perform such other duties and have such authority as
from time to time may be delegated or assigned to them by the President or by
the Board of Directors.
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The execution of any instrument of the corporation by any Vice-President shall
be conclusive evidence, as to third parties, of their authority to act in stead
of the President.
4.08. THE SECRETARY. The Secretary shall: (a) keep the minutes of the
meetings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d)
keep or arrange for the keeping of a register of the post office address of
each shareholder which shall be furnished to the Secretary by such
shareholder; (e) sign with the President, or a Vice-President, certificates
for shares of the corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the corporation; and (g) in general perform
all duties incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
to him or her by the President or by the Board of Directors.
4.09. THE TREASURER. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Section 5.04, and (c) in general perform all of the
duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to him or her by the President or by the Board of Directors. If required by the
Board of Directors, the Treasurer shall give a bond for the faithful discharge
of his or her duties in such sum and with such surety or sureties as the Board
of Directors shall determine.
4.10. ADDITIONAL OFFICERS. The Board of Directors may appoint Assistant
Treasurers, Assistant Secretaries and such other officers and agents as it may
deem appropriate, and such other officers and agents shall hold their offices
for such terms and shall exercise such powers and perform such duties as may be
determined from time to time by the Board of Directors, the Chairman or the
President. The Board of Directors from time to time may delegate to any officer
or agent the power to appoint subordinate officers or agents and to prescribe
their respective rights, terms of office, authorities and duties.
4.11. SALARIES. The salaries of the principal officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that they are also a director
of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS:
SPECIAL CORPORATE ACTS
5.01. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of or on behalf of the corporation, and such
authorization may be general or confined to specific instances. In
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the absence of other designation, all deeds, mortgages and instruments of
assignment or pledge made by the corporation shall be executed in the name of
the corporation by the Chairman, the President or one of the Vice-Presidents
and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer; the Secretary or an Assistant Secretary, when necessary or
required, shall affix the corporate seal thereto; and when so executed no
other party to such instrument or any third party shall be required to make
any inquiry into the authority of the signing officer or officers.
5.02. LOANS. No indebtedness for borrowed money shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
5.03. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject always
to the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders by the Chairman,
the President or any Vice-President of this corporation who may be present,
and (b) whenever, in the judgment of the Chairman or the President, or in the
absence of any Vice-President, it is desirable for this corporation to
execute a proxy or written consent in respect to any shares or other
securities issued by any other corporation and owned by this corporation, such
proxy or consent shall be executed in the name of this corporation by the
Chairman, President or one of the Vice-Presidents of this corporation,
without necessity of any authorization by the Board of Directors, affixation
of corporate seal, countersignature or attestation by another officer. Any
person or persons designated in the manner above stated as the proxy or
proxies of this corporation shall have full right, power and authority to
vote the shares or other securities issued by such other corporation and
owned by this corporation the same as such shares or other securities might
be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01. CERTIFICATES OF SHARES. Certificates representing shares of the
corporation shall be in such form, consistent with Section 490.625 of the Iowa
Business Corporation Act, as shall be determined by the Board of Directors.
Such certificates shall be signed by the President or a Vice-President and by
the Secretary or an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the
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corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 6.06.
6.02. FACSIMILE SIGNATURES AND SEAL. The seal of the corporation on any
certificates for shares may be a facsimile. The signatures of the President or
Vice-President and the Secretary or Assistant Secretary upon a certificate may
be facsimiles if the certificate is manually signed on behalf of a transfer
agent, or a registrar, other than the corporation itself or an employee of the
corporation.
6.03. SIGNATURE BY FORMER OFFICERS. In case any officer who has signed or
whose facsimile signature has been placed upon any certificate for shares, shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he or she were such officer
at the date of its issue.
6.04. TRANSFER OF SHARES. Prior to due presentment of a certificate for
shares for registration of transfer the corporation may treat the registered
owner of such shares as the person exclusively entitled to vote, to receive
notification and otherwise to have and exercise all the rights and power of an
owner. Where a certificate for shares is presented to the corporation with a
request to register for transfer, the corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the corporation had no duty to inquire into adverse claims
or has discharged any such duty. The corporation may require reasonable
assurance that said endorsements are genuine and effective and in compliance
with such other regulations as may be prescribed by or under the authority of
the Board of Directors.
6.05. RESTRICTIONS ON TRANSFER. The face or reverse side of each
certificate representing shares shall bear conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.06. LOST, DESTROYED OR STOLEN CERTIFICATES. Where the owner claims
that his or her certificates for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) files with the corporation a sufficient
indemnity bond, and (c) satisfies such other reasonable requirements as may be
prescribed by or under the authority of the Board of Directors.
6.07. CONSIDERATION FOR SHARES. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for consideration less than the par value thereof. The consideration to be paid
for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
corporation. When payment of the consideration for which shares are to be
issued has been received by the corporation, such shares shall be deemed to be
fully paid and nonassessable by the corporation. No certificates shall be
issued for any share until such share is fully paid.
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6.08. STOCK REGULATIONS. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Iowa as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
corporation.
ARTICLE VII. SEAL
7.01. CORPORATE SEAL. The Board of Directors shall provide a corporate
seal which shall be circular in form and shall have inscribed thereon the name
of the corporation and the state of incorporation or "Corporate Seal."
ARTICLE VIII. AMENDMENTS
8.01. BY SHAREHOLDERS. These by-laws may be altered, amended or repealed
and new by-laws may be adopted by the shareholders by affirmative vote of not
less than a majority of the shares present or represented at any annual or
special meeting of the shareholders at which a quorum is in attendance.
8.02. BY DIRECTORS. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no by-law adopted by the shareholders shall be
amended or repealed by the Board of Directors if the by-law so adopted so
provides.
8.03. IMPLIED AMENDMENTS. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
by-laws so that the by-laws would be consistent with such action, shall be given
the same effect as though the by-laws had been temporarily amended or suspended
so far, but only so far as is necessary to permit the specific action so taken
or authorized.
ARTICLE IX. INDEMNIFICATION
9.01. GENERAL INDEMNIFICATION. Each director, officer and employee,
and former director, officer and employee shall be indemnified to the extent
permitted by law against any and all personal liability for damages and
expenses reasonably incurred in connection with any action, suit, proceeding
or claim or liability, civil, criminal or administrative, to which such
person may be a party by reason of the lawful discharge of his or her past or
present duties on behalf of the Company, or any of the Company's Employee
Benefit plans. The Company shall defend each such person in all actions,
suits or proceedings which may arise. This right of indemnification shall
not be exclusive of any other rights to which the person may be entitled by
law or agreement, and shall be in addition to any liability coverage
purchased by the Company. It shall take effect after such coverage, if any,
is exhausted.
No such indemnification shall be made with respect to any matter as to
which the person shall have been finally adjudged to be liable for gross
negligence or misconduct in the performance of his or her duty to the Company.
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Exhibit 2
[LOGO]
[LETTERHEAD]
January 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen,
With reference to the Registration Statement on Form S-6 filed by EquiTrust Life
Insurance Company ("Company") and its EquiTrust Life Variable Account with the
Securities and Exchange Commission covering certain variable universal life
insurance policies, I have examined such documents and such law as I considered
necessary and appropriate, and on the basis of such examinations, it is my
opinion that:
(1) Company is duly organized and validly existing under the laws of the
State of Iowa.
(2) The variable universal life policies, when issued as contemplated by
the said Form S-6 Registration Statement will constitute legal,
validly issued and binding obligations of EquiTrust Life Insurance
Company.
I hereby consent to the filing of this opinion as an exhibit to the said Form
S-6 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration
Statement. In giving this consent, I am not admitting that I am in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
Very truly yours,
/s/ Stephen M. Morian
Stephen M. Morian
Senior Vice President
& General Counsel
<PAGE>
[LOGO]
[LETTERHEAD]
January 30, 1998
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by EquiTrust Life
Insurance Company of a flexible premium variable life insurance policy
("Policy:) under the Securities Act of 1933, as amended. This prospectus
included in this Initial Filing to the Registration Statement on Form S-6
describes the Policy. I have provided actuarial advice concerning the
preparation of the policy form described in the Registration Statement, and I am
familiar with the Registration Statement and exhibits thereto.
It is my professional opinion that:
(1) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is consistent
with the provisions of the Policy.
(2) The fees and charges deducted under the Policy, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.
I hereby consent to the use of this opinion as an exhibit to the Initial Filing
to the Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus.
Sincerely,
/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MAAA
Life Product Development and Pricing Vice
President
EquiTrust Life Insurance Company
<PAGE>
Exhibit 7.(b)
[Letterhead of Sutherland, Asbill & Brennan LLP]
February 4, 1998
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the registration statement on
Form S-6 for EquiTrust Life Variable Account. In giving this consent, we do
not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
-------------------------------
Stephen E. Roth, Esq.
<PAGE>
POWER OF ATTORNEY
The undersigned directors of EquiTrust Life Insurance Company, an Iowa
corporation (the "Company"), hereby constitute and appoint Edward M.
Wiederstein, and Stephen M. Morain, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance policies or annuity
contracts: registration statements on any form or forms under the Securities Act
of 1933 and under the Investment Company Act of 1940, and any and all amendments
and supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and him or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto set his or her hand on the date
set forth below.
NAME DATE
- ---- ----
/s/ Thomas R. Gibson January 6, 1998
- ----------------------------------- ---------------
Thomas R. Gibson
/s/ Richard D. Harris January 6, 1998
- ----------------------------------- ---------------
Richard D. Harris
/s/ Timothy J. Hoffman January 6, 1998
- ----------------------------------- ---------------
Timothy J. Hoffman
/s/ Stephen M. Morain January 6, 1998
- ----------------------------------- ---------------
Stephen M. Morain
/s/ James W. Noyce January 6, 1998
- ----------------------------------- ---------------
James W. Noyce
/s/ William J. Oddy January 6, 1998
- ----------------------------------- ---------------
William J. Oddy
/s/ Edward M. Wiederstein January 6, 1998
- ----------------------------------- ---------------
Edward M. Wiederstein
