As filed with the Securities and Exchange Commission on November 30, 1998
Registration File Nos. ________/811-
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
---------------------------------
LEGACY BUILDER VARIABLE LIFE SEPARATE ACCOUNT
---------------------------------------------
(Exact Name of Trust)
PFL LIFE INSURANCE COMPANY
--------------------------
(Name of Depositor)
4333 Edgewood Road, NE
Cedar Rapids, Iowa 52499
-------------------------------------------------------------
(Complete Address of Depositor's Principal Executive Offices)
Frank A. Camp, Esq.
Vice President and Division General Counsel
PFL Life Insurance Company
4333 Edgewood Road, NE
Cedar Rapids, Iowa 52499
------------------------------------------------
(Name and Complete Address of Agent for Service)
Copies to:
Frederick R. Bellamy, Esq.
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 the Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite amount of securities being
offered.
--------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or 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.
<PAGE>
Company
LOGO
P R O S P E C T U S
MAY 1, 1999
LEGACY BUILDER II(SM)
issued by
PFL Life Insurance Company
A MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
CONSIDER CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE OF THIS PROSPECTUS.
An investment in this Policy is not a
bank deposit. The Policy is not insured
or guaranteed by the Federal Deposit
Insurance Corporation or any other
THE SECURITIES AND EXCHANGE government agency.
COMMISSION HAS NOT APPROVED
OR DISAPPROVED THESE SECURITIES A prospectus for the Portfolios of the
OR PASSED UPON THE ADEQUACY
OF THIS PROSPECTUS. ANY [ ] AIM Variable Insurance Fund
REPRESENTATION TO THE CONTRARY [ ] MFS Variable Insurance Trust
IS A CRIMINAL OFFENSE. [ ] Dreyfus Stock Index Fund
[ ] Dreyfus Variable Investment Fund
[ ] Oppenheimer Variable Account Funds and
[ ] WRL Series Fund, Inc.
must accompany this prospectus. Please
read these documents before investing and
save them for future reference.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Glossary .............................................................. 1
Policy Summary ........................................................ 4
Risk Summary .......................................................... 10
Portfolio Annual Expense Table ........................................ 13
PFL and the Fixed Account ............................................. 14
PFL Life Insurance Company ........................................ 14
The Fixed Account Options ......................................... 14
The Standard Fixed Account .................................... 14
The Fixed Dollar Cost Averaging ("Fixed DCA") Account ......... 14
The Separate Account and the Portfolios ............................... 15
The Separate Account .............................................. 15
The Portfolios .................................................... 16
Addition, Deletion, or Substitution of Investments ................ 19
Your Right to Vote Portfolio Shares ............................... 19
The Policy ............................................................ 20
Purchasing a Policy ............................................... 20
When Insurance Coverage Takes Effect .............................. 20
Ownership Rights .................................................. 22
Changing the Owner ................................................ 22
Choosing the Beneficiary .......................................... 22
Changing the Beneficiary .......................................... 22
Assigning the Policy .............................................. 23
Canceling a Policy ................................................ 23
Premiums .............................................................. 23
Initial Premium ................................................... 23
Additional Premiums ............................................... 24
Allocating Premiums ............................................... 24
Policy Values ......................................................... 26
Cash Value ........................................................ 26
Net Surrender Value ............................................... 26
Subaccount Value .................................................. 26
Unit Value ........................................................ 27
Fixed Account Value ............................................... 27
Transfers ............................................................. 28
General ........................................................... 28
Standard Dollar Cost Averaging .................................... 29
Asset Rebalancing Program ......................................... 29
Standard Fixed Account Transfers .................................. 30
Charges and Deductions ................................................ 31
Premium Deductions ................................................ 31
Daily Charge ...................................................... 31
Monthly Deduction ................................................. 31
Cost of Insurance Charge ...................................... 33
Surrender Charge .................................................. 33
Transfer Charge ................................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Portfolio Expenses ......................................................... 34
Guaranteed Minimum Death Benefit Rider Charge .............................. 34
Death Benefit .................................................................. 34
Death Benefit Proceeds ..................................................... 34
Death Benefit .............................................................. 35
Effects of Partial Withdrawals on the Death Benefit ........................ 35
Guaranteed Minimum Death Benefit Rider ..................................... 36
Changing the Specified Amount .............................................. 36
Payment Options ............................................................ 36
Surrenders and Partial Withdrawals ............................................. 36
Surrenders ................................................................. 36
Partial Withdrawals ........................................................ 37
Loans .......................................................................... 38
General .................................................................... 38
Interest Rate Charged ...................................................... 38
Loan Reserve Interest Rate Credited ........................................ 39
Preferred Loans ............................................................ 39
Effect of Policy Loans ..................................................... 39
Policy Lapse ................................................................... 40
Lapse ...................................................................... 40
Federal Income Tax Considerations .............................................. 40
Tax Treatment of Policy Benefits ........................................... 41
Other Policy Information ....................................................... 43
Our Right to Contest the Policy ............................................ 43
Suicide Exclusion .......................................................... 43
Misstatement of Age or Gender .............................................. 43
Modifying the Policy ....................................................... 43
Payments We Make ........................................................... 44
Reports to Owners .......................................................... 44
Records .................................................................... 45
Policy Termination ......................................................... 45
Supplemental Benefits (Riders) ............................................. 45
Extended Maturity Date ................................................. 45
Accelerated Death Benefit .............................................. 45
Guaranteed Minimum Death Benefit ....................................... 45
Performance Data ............................................................... 46
Hypothetical illustrations based on adjusted historic Portfolio performance 46
Additional Information ......................................................... 53
Sale of the Policies ....................................................... 53
Legal Matters .............................................................. 53
Legal Proceedings .......................................................... 53
Year 2000 Matters .......................................................... 53
Financial Statements ....................................................... 55
Additional Information about PFL Life Insurance Company .................... 55
PFL's Executive Officers and Directors ..................................... 56
Additional Information about the Separate Account .......................... 57
Illustrations .................................................................. 57
Index to Financial Statements .................................................. 59
PFL Life Insurance Company ................................................. 59
</TABLE>
ii
<PAGE>
GLOSSARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
age The age of the person insured on his or her last birthday before the Policy
Date, plus the number of completed years since the Policy Date.
--------------------------------------------------------------------------------
beneficiary(ies) The person or persons you select to receive the death benefit from this policy.
You name primary beneficiary and any contingent beneficiaries.
--------------------------------------------------------------------------------
Cash Value The sum of your Policy's value in the subaccounts and the fixed account. If
there is a Policy loan outstanding, the Cash Value includes any amounts held
in the company's general account to secure the Policy loan.
--------------------------------------------------------------------------------
company (we, PFL Life Insurance Company ("PFL").
us, our)
--------------------------------------------------------------------------------
daily charge The amount we deduct each Valuation Date from assets in the subaccounts as
part of the calculation of the unit value for each subaccount.
--------------------------------------------------------------------------------
death benefit The amount we will pay to the beneficiary on the Insured's death. We will
proceeds reduce the death benefit proceeds by the amount of any outstanding loan
amount (including any interest you owe on the Policy loan(s)), and plus any
due and unpaid monthly deduction.
--------------------------------------------------------------------------------
fixed account A set of options to which you may allocate premiums and Cash Value. We
options guarantee that any amounts you allocate to the fixed account options will earn
interest at a declared rate. The fixed account options are the standard fixed
account and the Fixed Dollar Cost Averaging Account ("Fixed DCA Ac-
count").
--------------------------------------------------------------------------------
free look period The period during which you may return the Policy and receive a refund as
described in this prospectus. The length of the free look period varies by
state. The free look period is listed in the Policy.
--------------------------------------------------------------------------------
Funds Investment companies registered with the U.S. Securities and Exchange
Commission. The Policy allows you to invest in the Portfolios of the Funds
through our subaccounts.
--------------------------------------------------------------------------------
in force While coverage under the Policy is active and the Insured's life remains
insured.
--------------------------------------------------------------------------------
initial premium The amount you must pay before insurance coverage begins under this Policy.
The initial premium is shown on the schedule page of your Policy.
--------------------------------------------------------------------------------
Insured(s) The person or persons whose lives are insured by this Policy. Joint Insureds
must be spouses.
--------------------------------------------------------------------------------
Joint and Last A Policy that pays the death benefit to the beneficiary on the death of the
last-to-die of the two named Insureds.
--------------------------------------------------------------------------------
Survivor
Policy
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
lapse When life insurance coverage ends because you do not have enough Cash
Value in the Policy to pay the monthly deduction, the surrender charges and
any outstanding loan amount (including any interest you owe on the Policy
loan(s)), and you have not made a sufficient payment by the end of a grace
period. The Policy will not lapse if you have purchased the Guaranteed
Minimum Death Benefit rider and the rider is in effect.
-------------------------------------------------------------------------------
loan amount The total amount of all outstanding Policy loans, including both principal and
interest due.
-------------------------------------------------------------------------------
maturity date The Policy anniversary when the younger Insured reaches age 100 and life
insurance coverage under this Policy ends. You may continue coverage, at
your option, under the Policy's extended maturity date benefit provision.
-------------------------------------------------------------------------------
Monthiversary The same date each month as the Policy Date. If there is no Valuation Date in
the calendar month that coincides with the Policy Date, the Monthiversary is
the next Valuation Date.
-------------------------------------------------------------------------------
Monthly Policy The charge deducted from the Cash Value (less the loan amount) on each
Charge Monthiversary. .
-------------------------------------------------------------------------------
Net Surrender The amount we will pay you if you surrender the Policy while it is in force.
Value The Net Surrender Value on the date you surrender is equal to: the Cash
Value, minus any surrender charge, and minus any outstanding loan amount
(including any interest you owe on Policy loan(s)).
-------------------------------------------------------------------------------
Office Our administrative and service office is Financial Markets Division, Variable
Annuity Department, P.O. Box 3183, Cedar Rapids, Iowa 52406-3183 or 4333
Edgewood Road NE, Cedar Rapids, Iowa 52499-0001. Our phone number is
1-800-525-6205.
-------------------------------------------------------------------------------
Policy Date The date when our underwriting process is complete, full life insurance
coverage goes into effect, we issue the Policy, and we begin to deduct the
Monthly Policy Charge. The Policy Date is shown on the schedule page of
your Policy. It is also the date when, depending on your state of residence,
we allocate your premium (plus interest) either to the Reallocation Account or
to the subaccounts and fixed account options you selected on your applica-
tion. The free look period begins on the Policy Date. We measure Policy
months, years, and anniversaries from the Policy Date.
-------------------------------------------------------------------------------
premiums All payments you make under the Policy other than loan repayments.
-------------------------------------------------------------------------------
Reallocation The standard fixed account.
Account
-------------------------------------------------------------------------------
Reallocation The date shown on the schedule page of your Policy when we reallocate any
Date premium (plus interest) held in the Reallocation Account to the subaccounts
and fixed account options you selected on your application. We place your
premium in the Reallocation Account only if your state requires us to return
the full premium in the event you exercise your free look right. In all other
states, the Reallocation Date is the Policy Date.
-------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
separate The Legacy Builder Variable Life Separate Account. It is a separate invest-
account ment account that is divided into subaccounts. We established the separate
account to receive and invest premiums under the Policy and other variable
life insurance policies we may issue.
---------------------------------------------------------------------------------
Specified The death benefit we will pay under the Policy, as shown on the Policy
Amount schedule page, provided the Policy is in force and has not lapsed. The
Specified Amount varies by the Insured's age, gender and risk class. Any
partial withdrawal proportionately decreases the Specified Amount.
---------------------------------------------------------------------------------
subaccount A subdivision of the separate account that invests exclusively in shares of one
investment portfolio of the Fund.
---------------------------------------------------------------------------------
Surrender If, during the first 9 Policy years, you fully surrender the Policy, a Surrender
Charge Charge will be taken from the Cash Value.
---------------------------------------------------------------------------------
termination When the Insured's life (Surviving Insured under the Joint Policy) is no
longer insured under the Policy.
---------------------------------------------------------------------------------
Valuation Date Each day the New York Stock Exchange is open for trading, except days
when a subaccount's corresponding Portfolio does not value its shares.
---------------------------------------------------------------------------------
Valuation The period beginning at the end of one Valuation Date and continuing to the
Period end of the next Valuation Date.
---------------------------------------------------------------------------------
written notice The written notice you must sign and send us to request or exercise your
rights as owner under the Policy. To be complete, it must: (1) be in a form
we accept, (2) contain the information and documentation that we determine
in our sole discretion is necessary for us to take the action you request or for
you to exercise the right specified, and (3) be received at our Office.
---------------------------------------------------------------------------------
You, your (the The person entitled to exercise all rights as owner under the Policy.
owner)
---------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
POLICY SUMMARY
- --------------------------------------------------------------------------------
THE POLICY IN GENERAL The Legacy Builder II(SM) is a modified single premium
variable life insurance policy. You may buy it as individual or as joint and
last survivor life insurance.
The Policy is designed to be long-term in nature in order to provide
significant life insurance benefits for the Insured(s) named in the Policy.
You should consider the Policy in conjunction with other insurance you own.
The Policy is not suitable as a short-term savings vehicle.
/graphic omitted/
PREMIUMS
/bullet/ If the Insured qualifies for simplified underwriting, conditional
life insurance coverage begins as soon as you complete an
application and pay an initial premium of at least $20,000. Once we
determine that the Insured meets our underwriting requirements, full
insurance coverage begins and we will issue your Policy, and we will
begin to deduct monthly and daily insurance charges from your
premium. This date is the Policy Date. On that date, we will
allocate your premium (plus interest) to either the Reallocation
Account or to the subaccounts and fixed account options, depending
on the state in which you live.
/bullet/ If the Insured qualifies for simplified underwriting, the maximum
premium you can pay at the time of your application is:
-- $50,000 (for Ages 35-49)
-- $100,000 (for Ages 50-80)
Other limits apply for joint policies and policies with full
underwriting.
/bullet/ Once we issue your Policy, the FREE LOOK PERIOD begins. You may
return the Policy during this period and receive a refund. Depending
on your state of residence, we will place your premium (plus
interest) in the Reallocation Account during the free look period.
See p. .
/bullet/ We will accept additional premiums only in certain limited
circumstances.
/graphic omitted/
DEDUCTIONS FROM PREMIUM BEFORE WE PLACE IT
IN SUBACCOUNT AND/OR FIXED ACCOUNT OPTIONS
/bullet/ From the initial premium: NONE
/bullet/ From additional premiums: NONE
4
<PAGE>
/graphic omitted/
INVESTMENT OPTIONS
---------------------------------------------------------------------------
You may direct the money in your Policy to any of the subaccounts of the
separate account. THE MONEY YOU PLACE IN THE SUBACCOUNTS IS NOT
GUARANTEED. THE VALUE OF EACH SUBACCOUNT WILL INCREASE OR DECREASE,
DEPENDING ON INVESTMENT PERFORMANCE. YOU COULD LOSE SOME OR ALL OF YOUR
MONEY.
Each subaccount invests exclusively in one investment portfolio of a Fund.
The Portfolios available to you are:
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth & Income Fund
AIM V.I. Value Fund
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Money Market Portfolio
Dreyfus Small Company Stock
Portfolio
MFS VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Foreign & Colonial Emerging
Markets Equity Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Global Securities Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer High Income Fund
Oppenheimer Strategic Bond Fund
WRL SERIES FUND, INC.
WRL Emerging Growth Portfolio
WRL Global Portfolio
WRL Growth Portfolio
FIXED ACCOUNT OPTIONS
---------------------------------------------------------------------------
You may also direct the money in your Policy to the fixed account options.
Money you place in the standard fixed account option will earn interest at
current interest rates declared from time to time. The interest rate will
equal at least 3%.
At the time of purchase, you may place the entire initial premium in the
Fixed Dollar Cost Averaging (Fixed DCA) Account. Money you place in the
Fixed DCA Account will earn interest at an annual rate of at least 3%.
Money will be transferred out of the Fixed DCA Account in equal monthly
installments and placed in the subaccounts and standard fixed option of
your choice.
/graphic omitted/
5
<PAGE>
CASH VALUE
/bullet/ The sum of your Policy's value in the subaccounts and the fixed
account. If there is a loan outstanding, the Cash Value includes any
amounts held in the company's general account to secure the Policy
loan.
/bullet/ Cash Value varies from day to day, depending on the investment
experience of the subaccounts you choose, the interest credited to
the fixed account options, the charges deducted and any other Policy
transactions (such as transfers, withdrawals, and Policy loans).
/bullet/ Cash Value is the starting point for calculating important values
under the Policy, such as Net Surrender Value and the death benefit.
/bullet/ There is no guaranteed minimum Cash Value. The Policy may lapse if
you do not have sufficient Cash Value in the Policy to pay the
Monthly Policy Charge(s), the surrender charges and/or any
outstanding loan amount (including interest you owe on any Policy
loan(s)). The Policy will not lapse if you have purchased the
Guaranteed Minimum Death Benefit rider and the rider is in effect.
/graphic omitted/
TRANSFERS
/bullet/ You can transfer Cash Value among the subaccounts and the standard
fixed account. We reserve the right to charge a $10 transfer
processing fee for each transfer after the 12th transfer in a Policy
year.
/bullet/ Policy loans reduce the amount of Cash Value available for
transfers.
/bullet/ Dollar cost averaging and asset rebalancing programs are available.
/bullet/ Transfers from the standard fixed account may be made no later than
30 days after each Policy anniversary, and are limited to the
greater of:
/arrow/ 25% of the value in the standard fixed account OR
/arrow/ the amount transferred from the fixed account in the prior
Policy year.
/graphic omitted/
6
<PAGE>
CHARGES AND DEDUCTIONS
/bullet/ On the Policy Date and on each Monthiversary, we deduct the Monthly
Policy Charge from your Cash Value (reduced by the loan amount). The
Monthly Policy Charge pays for policy administrative expenses and
the cost of providing death benefits under the Policy. The Monthly
Policy Charge will vary with the gender of the Insured, the number
of Insureds, and the number of Policy Years you have owned the
Policy.
/bullet/ On each Valuation Date, we will deduct a Daily Charge from the unit
value of each subaccount, at an annual rate equal to 0.50%.
/bullet/ Each Portfolio assesses management fees and operating expenses from
the money you place with the Portfolio, at the rate shown in the
Portfolio Annual Expenses Table. See also the Fund prospectuses.
/bullet/ The company reserves the right to charge a maximum Monthly Cost of
Insurance Charge. See page . Currently, we do not assess a Cost of
Insurance Charge. A declining surrender charge of up to 9.75% of
each premium will apply to a full surrender or a lapse occurring
during the first 9 Policy years.
/bullet/ If you select the Guaranteed Minimum Death Benefit rider at
application, we will deduct .02% each month from your Cash Value on
each Monthiversary.
/graphic omitted/
LOANS
/bullet/ You may take a loan against the Policy for amounts up to 90% of the
Cash Value, less any surrender charges and any outstanding loan
amount.
/bullet/ We currently charge 6.0% interest annually, payable in arrears on
any outstanding loan amount; a lower rate applies to any preferred
loans.
/bullet/ We currently permit preferred loans to be taken anytime. Under this
provision, you may borrow an amount equal to the Cash Value less
total premiums paid, less any outstanding loan amount. We currently
charge a 3.0% preferred loan rate.
/bullet/ The amount borrowed is secured by a transfer of a portion of Cash
Value to a loan reserve account that is part of our general account.
You will earn 3.0% interest on amounts in the loan reserve account.
/bullet/ Federal income taxes and a penalty tax may apply to loans you make
against the Policy.
/bullet/ If you take a loan, we will terminate any Guaranteed Minimum Death
Benefit rider.
/graphic omitted/
7
<PAGE>
DEATH BENEFIT
/bullet/ So long as the Policy does not lapse, the death benefit is the
greater of:
/arrow/ a variable death benefit or
/arrow/ the current Specified Amount, on the date of death of the
Insured (last Insured to die, if a Joint Policy).
/bullet/ We will reduce the death benefit proceeds by the amount of any
outstanding loan amount (including any interest you owe on Policy
loan(s)), and any due and unpaid monthly deduction.
/bullet/ The variable death benefit is equal to the Cash Value multiplied by
the appropriate limitation percentage. See the table on page .
/bullet/ You may not decrease or increase the Specified Amount.
/bullet/ The death benefit should be income tax free to the beneficiary.
/bullet/ The death benefit is available in a lump sum or a variety of payout
options.
/bullet/ If you purchase the GUARANTEED MINIMUM DEATH BENEFIT RIDER and the
rider is in effect, then, if the Net Surrender Value on any
Monthiversary is not sufficient to cover the Monthly Policy Charge
on such day, then coverage will be provided as indicated below, and
no grace period will begin, provided no Policy loans have been taken
under the Policy.
If a death benefit is payable due to the provisions of this rider,
then the following minimum death benefit is applicable:
(1) Duringthe first fifteen Policy years, or before the Policy
anniversary next following the Insured's (younger Joint Insured,
if under a Joint Policy) 75th birthday, if sooner, the minimum
death benefit payable will be as described directly above.
(2) After the first fifteen Policy years, or on or after the Policy
anniversary next following the Insured's (younger Joint Insured,
if under a Joint Policy) 75th birthday, if sooner, the minimum
death benefit payable will be the initial premium, reduced by
any partial withdrawals. However, in no event will this minimum
death benefit ever be less than $1,000.
If you take a Policy loan, the Guaranteed Minimum Death Benefit
rider terminates and your Policy could lapse.
/bullet/ A partial withdrawal will reduce the Specified Amount by the amount
of the withdrawal times the ratio of the initial Specified Amount to
the initial premium.
/graphic omitted/
8
<PAGE>
PARTIAL WITHDRAWALS AND SURRENDERS
/bullet/ You can take one withdrawal of Cash Value every 12 months after the
first Policy year.
/bullet/ The amount of the withdrawal is limited to your Policy's earnings
which we compute as: the Cash Value, MINUS any outstanding Policy
loans, MINUS any interest you owe on Policy loans, and MINUS total
premiums paid.
/bullet/ There is no surrender charge on partial withdrawals.
/bullet/ A partial withdrawal reduces the current Specified Amount (the
minimum death benefit) by:
Amount of withdrawal X INITIAL SPECIFIED AMOUNT
initial premium
/bullet/ A partial withdrawal does not void a Guaranteed Minimum Death
Benefit rider, but it reduces the death benefit we would pay, as
described above. In no event will any partial withdrawal reduce the
minimum death benefit below $1,000.
/bullet/ Federal income taxes and a penalty tax may apply to partial
withdrawals and surrenders.
/bullet/ You may fully surrender the Policy at any time. You will receive the
Net Surrender Value (Cash Value, minus any surrender charges, minus
any Policy loans outstanding, and minus any interest you owe on
Policy loans).
9
<PAGE>
RISK SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT If you direct us to invest your Cash Value in
RISK one or more subaccounts, you will be subject to
the risk that investment performance will be
unfavorable and that the Cash Value of your Policy
will decrease. If you select the fixed account
options, you are credited with a declared rate of
interest, but you assume a risk that the rate may
decrease, although it will never be lower than a
guaranteed minimum annual effective rate of 3.0%.
Because charges continue to be deducted from Cash
Value, if investment results are suf- ficiently
unfavorable, the Net Surrender Value of your
Policy may fall to zero. In that case, if the
Guaranteed Minimum Death Benefit rider is not in
effect, the Policy will lapse without value and
insurance coverage will no longer be in effect,
unless you make an additional payment sufficient
to prevent a lapse. On the other hand, if
investment experience is sufficiently favorable
and you have kept the Policy in force for a
substantial time, you may be able to draw upon
Cash Value, through withdrawals and Policy loans.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RISK OF LAPSE If the Net Surrender Value of your Policy (that
is, the Cash Value, minus surrender charges and
minus outstanding loan amounts) is too low to pay
a Monthly Policy Charge, loan charges and rider
fees when due, and if the Guaranteed Minimum Death
Benefit rider is not in effect, the Policy will be
in default and a grace period will begin. There is
the risk that if withdrawals, loans and monthly
deductions reduce your Net Surrender Value to too
low an amount and/or if the investment experience
of your selected subaccounts is unfavorable, then
the Policy could lapse. In that case, you will
have a 61-day grace period to make a sufficient
payment. If a sufficient payment is not paid
before the grace period ends, your Policy will end
without value, insurance coverage will no longer
be in effect, and you will receive no benefits.
You may not reinstate this Policy after it has
lapsed.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX RISKS We expect that the Policy will be deemed a life
(INCOME TAX insurance contract under Federal tax law, so that
AND MEC) the death benefit paid to the beneficiary will not
be subject to Federal income tax. However, the
Policy may be treated as a modified endowment
contract ("MEC") under Federal tax laws. As a
result, partial withdrawals, surrenders and loans
under a Policy that is a MEC will be taxable as
ordinary income to the extent of its earnings in
the Policy. In addition, a 10% penalty tax may be
imposed on partial withdrawals, surrenders and
loans taken before you reach age 591/2. You should
consult a qualified tax advisor for assistance in
all tax matters involving your Policy.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LIMITS ON The Policy permits you to take only one partial
WITHDRAWALS withdrawal in any twelve month period, after the
first Policy year has been completed. The amount
you may withdraw is limited to earnings. We
calculate earnings as Cash Value, reduced by any
outstanding loan amount (including any interest
due on the Policy loans) and any premiums paid. A
partial withdrawal will reduce the Specified
Amount (and the minimum death benefits under the
Guaranteed Minimum Death Benefit rider) by: Amount
of withdrawal X initial Specified Amount initial
Premium This reduction may be significant.
However, in no event will any withdrawal reduce
the minimum death benefit under the Guaranteed
Minimum Death Benefit rider below $1,000. Federal
income taxes and a tax penalty may apply to
partial withdrawals and surrenders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EFFECTS OF A Policy loan, whether or not repaid, will affect
POLICY LOANS Cash Value over time because we subtract the
amount of the loan from the subaccounts and fixed
account options as collateral. We then credit a
fixed interest rate of 3.0% to the loan
collateral. As a result, the loan collateral does
not participate in the investment results of the
subaccounts nor does it receive the current
interest rates credited to the fixed account
options. The longer the loan is outstand- ing, the
greater the effect is likely to be. Depending on
the investment results of the subaccounts and the
interest rates credited to the fixed account, the
effect could be favorable or unfavorable.
A Policy loan affects the death benefit because a
loan terminates a Guaranteed Minimum Death Benefit
rider. In addition, a Policy loan reduces the
death benefit proceeds and Net Surrender Value by
the amount of the outstanding loan, plus any
interest you owe on Policy loans.
A Policy loan could make it more likely that a
Policy would terminate. There is a risk if the
loan reduces your Net Surrender Value to too low
an amount and investment experience is
unfavorable, that the Policy will lapse, resulting
in adverse tax consequences. You will have a
61-day grace period to submit a sufficient payment
to avoid the Policy's termination without value
and the end of insurance coverage.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
COMPARISON Like fixed benefit life insurance, the Policy
WITH OTHER offers a death benefit and provides a Cash Value,
INSURANCE loan privileges and a value on surrender. However,
POLICIES the Policy differs from a fixed benefit policy
because it allows you to place your premium in
investment subaccounts. The amount and duration of
life insurance protection and of the Policy's Cash
Value will vary with the investment performance of
the assets you place in the subaccounts. In
addition, the Cash Value and Net Surrender Values
will always vary with the investment experience of
your selected subaccounts. As you consider
purchasing this Policy, keep in mind that it may
not be to your advantage to replace existing
insurance with the Policy.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ILLUSTRATIONS The hypothetical illustrations in this prospectus
or used in connection with the purchase of a
Policy are based on hypothetical rates of return.
These rates are not guaranteed, and are provided
only to illustrate how the Specified Amount,
Policy charges and hypothetical rates of return
affect death benefit levels, Cash Value and Net
Surrender Value of the Policy. We may also
illustrate Policy values based on the adjusted
historical performance of the Portfolios since the
Portfolios' inception, reduced by Policy and
subaccount charges. The hypothetical and adjusted
historic portfolio rates illustrated should not be
considered to represent past or future
performance. There is the risk that actual rates
of return may be higher or lower than those
illustrated, so that the values under your Policy
will be different from those in the illustrations.
</TABLE>
12
<PAGE>
PORTFOLIO ANNUAL EXPENSE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This table shows the fees and expenses charged by the Portfolios. More detail
concerning the Portfolio's fees and expenses is contained in the prospectuses
for the Funds.
ANNUAL PORTFOLIO OPERATING EXPENSES
(As a percentage of average Portfolio assets after fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER EXPENSES ANNUAL
PORTFOLIO FEES (AFTER REIMBURSEMENT) EXPENSES
<S> <C> <C> <C>
AIM V.I. Capital Appreciation (1) 0.63% 0.05% 0.68%
AIM V.I. Government Securities (1) 0.50% 0.37% 0.87%
AIM V.I. Growth & Income (1) 0.63% 0.06% 0.69%
AIM V.I. Value (1) 0.62% 0.08% 0.70%
Dreyfus Money Market 0.50% 0.12% 0.62%
Dreyfus Small Company Stock 0.75% 0.64% 1.39%
Dreyfus Stock Index 0.25% 0.05% 0.30%
MFS Emerging Growth (2) 0.75% 0.12% 0.87%
MFS Foreign & Colonial Emerging
Markets Equity (2) 1.25% 0.25% 1.50%
MFS Research (2) 0.75% 0.13% 0.88%
MFS Total Return (2) 0.75% 0.25% 1.00%
MFS Utilities (2) 0.75% 0.25% 1.00%
Oppenheimer Global Securities 0.70% 0.06% 0.76%
Oppenheimer Growth 0.73% 0.02% 0.75%
Oppenheimer Growth & Income 0.75% 0.08% 0.83%
Oppenheimer High Income 0.75% 0.07% 0.82%
Oppenheimer Strategic Bond 0.75% 0.08% 0.83%
WRL Emerging Growth (3) 0.80% 0.13% 0.93%
WRL Global (3) 0.80% 0.20% 1.00%
WRL Growth (3) 0.80% 0.07% 0.87%
</TABLE>
(1) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Portfolios
reimbursed AIM in an amount up to 0.25% of the average net asset value
of each Portfolio, for expenses incurred in providing, or assuring that
participating insurance companies provide, certain administrative
services. Currently, the fee only applies to the average net asset value
of each Portfolio in excess of the net asset value of each Portfolio as
calculated on April 30, 1998.
(2) Each MFS Portfolio has an expense offset arrangement that reduces each
Portfolio's custodian fee based upon the amount of cash maintained by
the Portfolio with its custodian and dividend disbursing agent, and may
enter into other such arrangements and directed brokerage arrangements
(which would also have the effect of reducing the Portfolio's expenses).
Any such fee reductions are not reflected under "Other Expenses." The
adviser for these Portfolios has agreed to bear expenses for each
Portfolio, subject to reimbursement by each Portfolio, such that each
Portfolio's "Other Expenses" shall not exceed 0.25% of the average daily
net assets of each Portfolio during the current fiscal year. Otherwise,
"Other Expenses" and "Total Portfolio Annual Expenses" for 1998 would
be: 0. % and 0. %, respectively, for MFS Total Return; 0. % and
0. %, respectively, for MFS Utilities; and 0. % and 0. %,
respectively, for MFS Foreign & Colonial Emerging Markets Equity.
13
<PAGE>
(3) Effective January 1, 1997, the WRL Series Fund, Inc. adopted a Plan of
Distribution ("Distribution Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 and pursuant to the Distribution Plan,
entered into a Distribution Agreement with InterSecurities, Inc.
("ISI"), principal underwriter for the WRL Series Fund, Inc. Under the
Distribution Plan, the WRL Series Fund, Inc., on behalf of its
Portfolios, is authorized to pay to various service providers, as direct
payment for expenses incurred in connection with the distribution of a
Portfolio's shares, up to a maximum rate of 0.15% (fifteen
one-hundredths of one percent) on an annualized basis of the average
daily net assets. This fee is measured and accrued daily and paid
monthly. ISI has determined that it will not seek payment by the WRL
Series Fund, Inc. of distribution expenses incurred with respect to any
Portfolio during the fiscal year ending December 31, 1999. We will
notify you in advance if ISI decides to seek reimbursement.
The purpose of the preceding Table is to assist the Owner in understanding
the various costs and expenses that a Owner will bear directly and indirectly.
The Table reflects charges and expenses of the Portfolios of the Funds for the
fiscal year ended December 31, 1998. Expenses of the Funds may be higher or
lower in the future. For more information on the charges described in this
Table, see the Funds' prospectuses which accompany this prospectus.
PFL AND THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PFL LIFE INSURANCE COMPANY
PFL Life Insurance Company is the insurance company issuing the Policy.
PFL was incorporated under Iowa law on April 19, 1961. PFL established the
separate account to support the investment options under this Policy and under
other variable life insurance policies we may issue. Our general account
supports the fixed account options under the Policy.
THE FIXED ACCOUNT OPTIONS
The fixed account is part of PFL's general account. We use general account
assets to support our insurance and annuity obligations other than those funded
by separate accounts. Subject to applicable law, PFL has sole discretion over
the investment of the fixed account's assets. PFL bears the full investment
risk for all amounts contributed to the fixed account. PFL guarantees that the
amounts allocated to the fixed account options will be credited interest daily
at a net effective interest rate of at least 3%. We will determine any interest
rate credited in excess of the guaranteed rate at our sole discretion.
THE STANDARD FIXED ACCOUNT. Money you place in the standard fixed account
option will earn interest compounded daily at a current interest rate in effect
at the time of your allocation. The interest rate is guaranteed never to be
less than 3% per year. We may declare current interest rates from time to time.
We may declare more than one interest rate for different money based upon the
date of allocation or transfer to the standard fixed account.
THE FIXED DOLLAR COST AVERAGING ("FIXED DCA") ACCOUNT. To be eligible for
dollar cost averaging, you must elect the Fixed DCA Account on your application
and put your
14
<PAGE>
entire initial premium in the Fixed DCA Account. Money you place in the Fixed
DCA Account will earn interest at rates we declare from time to time. Money
will be transferred out of the Fixed DCA Account in equal monthly installments
with the first transfer starting on the first Monthiversary after the
Reallocation Date. Interest accrued on the premiums will be transferred in the
last month of the Fixed DCA Account term. Money in the Fixed DCA Account may be
transferred entirely to other subaccounts or the standard fixed account after
one month.
There is no charge for participating in the Fixed DCA Account.
We reserve the right to stop offering the Fixed DCA Account at any time
for any reason. We may offer a higher 30-day interest rate guaranteed for one
month. If you exercise your free look right, the portion of the initial premium
held in the Fixed DCA Account will be credited with interest at the rate we
then credit to the standard fixed account.
<TABLE>
<CAPTION>
<S> <C>
FIXED DOLLAR COST /bullet/ we receive written notice from you instructing us to cancel
AVERAGING WILL END IF: the program,
/bullet/ you elect to participate in the Asset Rebalancing Program,
or
/bullet/ you elect to participate in any asset allocation service
provided by a third party.
</TABLE>
THE FIXED ACCOUNT OPTIONS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT
OPTIONS.
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SEPARATE ACCOUNT
The separate account is divided into subaccounts, each of which invests in
shares of a specific Portfolio of one of the following Funds:
/bullet/ AIM Variable Insurance Funds, Inc. (managed by A I M Advisors, Inc.)
/bullet/ Dreyfus Variable Investment Fund and Dreyfus Stock Index Fund
(managed by The Dreyfus Corporation)
/bullet/ MFS Variable Insurance Trust (managed by Massachusetts Financial
Services Company)
/bullet/ Oppenheimer Variable Account Funds (managed by Oppenheimer Funds,
Inc.)
/bullet/ WRL Series Fund, Inc. (managed by WRL Investment Management, Inc.)
The subaccounts buy and sell Portfolio shares at net asset value without any
sales charge. Any dividends and distributions from a Portfolio are reinvested
at net asset value in shares of that Portfolio.
15
<PAGE>
Income, gains, and losses credited to, or charged against, a subaccount of
the separate account reflect the subaccount's own investment experience and not
the investment experience of our other assets. The separate account's assets
may not be used to pay any of our liabilities other than those arising from the
Policies. If the separate account's assets exceed the required reserves and
other liabilities, we may transfer the excess to our general account.
The separate account may include other subaccounts that are not available
under the Policies and are not discussed in this prospectus. We may substitute
another subaccount, portfolio or insurance company separate account under the
Policies if, in our judgment, investment in a subaccount or portfolio would no
longer be possible or becomes inappropriate to the purposes of the Policies, or
if investment in another subaccount or insurance company separate account is in
the best interest of owners. No substitution shall take place without notice to
owners and prior approval of the Securities and Exchange Commission
(Commission) and insurance company regulators, to the extent required by the
1940 Act and applicable law.
THE PORTFOLIOS
The separate account invests in shares of certain Portfolios of the Funds.
Each of the Funds is a mutual fund that is registered with the Commission as an
open-end management investment company. Such registration does not involve
supervision of the management or investment practices or policies of the Funds
by the Commission.
Each Portfolio's assets are held separate from the assets of the other
Portfolios, and each Portfolio has investment objectives and policies that are
different from those of the other Portfolios. Thus, each Portfolio operates as
a separate investment fund, and the income or losses of one Portfolio generally
have no effect on the investment performance of any other Portfolio. Pending
any prior approval by a state insurance regulatory authority, certain
subaccounts and corresponding Portfolios may not be available to residents of
some states.
Each Portfolio's investment objective(s) and policies are summarized
below. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS STATED
OBJECTIVE(S). You can find more detailed information about the Portfolios,
including a description of risks, in the prospectuses for the Funds. You should
read the Funds' prospectuses carefully.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
- -------------- -----------------------------------------------------------------------
<S> <C> <C>
AIM V.I. /arrow/ Portfolio seeks capital appreciation through investments in common
CAPITAL stocks, with emphasis on medium-sized and smaller emerging growth
APPRECIATION companies.
AIM V.I. /arrow/ Portfolio seeks to achieve a high level of current income consistent
GOVERNMENT with reasonable concern for safety of principal by investing in debt
SECURITIES securities issued, guaranteed or otherwise backed by the United States
Government.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
- --------------- ---------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. /arrow/ Portfolio seeks growth of capital, with current income as a secondary
GROWTH & objective.
INCOME
AIM V.I. /arrow/ Portfolio seeks to achieve long-term growth of capital by investing
VALUE primarily in equity securities judged by AIM to be undervalued
relative to the current or projected earnings of the companies issuing
the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity markets
generally. Income is a secondary objective.
DREYFUS /arrow/ Portfolio seeks to provide as high a level of current income as is
MONEY MARKET consistent with the preservation of capital and the maintenance of
liquidity.
DREYFUS SMALL /arrow/ Portfolio seeks to provide investment results that are greater than the
COMPANY total return performance of publicly-traded common stocks in the
STOCK aggregate, as represented by the Russell 2500/registered trademark/ Index.
DREYFUS STOCK /arrow/ Portfolio seeks to provide investment results that correspond to the
INDEX price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index.
MFS /arrow/ Portfolio seeks to provide long-term growth of capital.
EMERGING
GROWTH
MFS FOREIGN /arrow/ Portfolio seeks capital appreciation.
& COLONIAL
EMERGING
MARKETS
EQUITY
MFS RESEARCH /arrow/ Portfolio seeks to provide long-term growth of capital and future
income.
MFS TOTAL /arrow/ Portfolio seeks to provide above-average income (compared to a
RETURN portfolio invested entirely in equity securities) consistent with the
prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MFS UTILITIES /arrow/ Portfolio seeks capital growth and current income (income above that
available from a portfolio invested entirely in equity securities).
OPPENHEIMER /arrow/ Portfolio seeks long-term capital appreciation by investing a
GLOBAL substantial portion of its assets in securities of foreign issuers,
SECURITIES "growth-type" companies, cyclical industries and special situations
which are considered to have appreciation possibilities, but which may
be considered to be speculative.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
- ---------------- ---------------------------------------------------------------------------
<S> <C> <C>
OPPENHEIMER /arrow/ Portfolio seeks to achieve capital appreciation by investing in
GROWTH securities of well-known established companies.
OPPENHEIMER /arrow/ Portfolio seeks a high total return (which includes growth in the value
GROWTH & of its shares as well as current income) from equity and debt
INCOME securities.
OPPENHEIMER /arrow/ Portfolio seeks a high level of current income from investment in high
HIGH INCOME yield fixed-income securities. The Portfolio's investments include
unrated securities or high risk securities in the lower rating categories,
commonly known as "junk bonds," which are subject to a greater risk
of loss of principal and nonpayment of interest than higher-rated
securities.
OPPENHEIMER /arrow/ Portfolio seeks a high level of current income principally derived from
STRATEGIC BOND interest on debt securities and seeks to enhance such income by
writing covered call options on debt securities.
WRL /arrow/ Portfolio seeks capital appreciation by investing primarily in common
EMERGING stocks of small and medium sized companies.
GROWTH
WRL GLOBAL /arrow/ Portfolio seeks long-term growth of capital in a manner consistent
with preservation of capital, primarily through investments in common
stocks of foreign and domestic issuers.
WRL GROWTH /arrow/ Portfolio seeks growth of capital by investing primarily in common
stocks listed on a national securities exchange or traded on NASDAQ.
</TABLE>
In addition to the separate account, shares of the Funds are also sold to
other separate accounts established by PFL or its affiliates to support
variable annuity contracts and variable life insurance policies. It is possible
that, in the future, it may become disadvantageous for variable life insurance
separate accounts and variable annuity separate accounts to invest in the Funds
simultaneously. Although neither PFL nor the Funds currently foresee any such
disadvantages, either to variable life insurance policyowners or to variable
annuity contract owners, each Fund's Board of Directors will monitor events in
order to identify any material conflicts between the interests of such variable
life insurance policyowners and variable annuity contract owners, and will
determine what action, if any, it should take. Such action could include the
sale of Fund shares by one or more of the separate accounts, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in Federal income tax laws, or (3)
differences in voting instructions between those given by variable life
insurance policyowners and those given by variable annuity contract owners.
If a Fund's Board of Directors were to conclude that separate funds should
be established for variable life insurance and variable annuity separate
accounts, PFL will bear the attendant expenses, but variable life insurance
policyowners and variable annuity contract owners would no longer have the
economies of scale resulting from a larger combined fund.
18
<PAGE>
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right to transfer separate account assets to another
separate account that we determine to be associated with the class of contracts
to which the Policy belongs. We also reserve the right, subject to compliance
with applicable law, to make additions to, deletions from, or substitutions for
the investments that are held by any subaccount or that any subaccount may
purchase. We will only make any such addition, deletion or substitution of
shares of another Portfolio of a Fund or of another open-end, registered
investment company, if the shares of a Portfolio are no longer available for
investment, or if in our judgement further investment in any Portfolio would
become inappropriate in view of the purposes of the separate account. We will
not add, delete or substitute any shares attributable to your interest in a
subaccount without notice to and prior approval of the Commission, to the
extent required by the 1940 Act or other applicable law. Nothing contained
herein shall prevent the separate account from purchasing other securities for
other Portfolios or classes of policies, or from permitting a conversion
between Portfolios or classes of policies on the basis of requests made by
Owners.
PFL also reserves the right to establish additional subaccounts of the
separate account, each of which would invest in a new Portfolio of a Fund, or
in shares of another investment company, with a specified investment objective.
We may establish new subaccounts when, in our sole discretion, marketing, tax
or investment conditions warrant. We will make any new subaccounts available to
existing Owners on a basis we determine. PFL may also eliminate one or more
subaccounts if, in our sole discretion, marketing, tax, or investment
conditions warrant.
In the event of any such substitution or change, PFL may make such changes
in this and other policies as may be necessary or appropriate to reflect such
substitution or change. If we deem it to be in the best interests of persons
having voting rights under the Policies, and when permitted by law, the
separate account may be (1) operated as a management company under the 1940
Act, (2) deregistered under the 1940 Act in the event such registration is no
longer required, (3) managed under the direction of a committee, or (4)
combined with one or more other separate accounts, or subaccounts.
PLEASE READ THE ATTACHED FUND PROSPECTUSES TO OBTAIN MORE COMPLETE INFORMATION
REGARDING THE PORTFOLIOS.
YOUR RIGHT TO VOTE PORTFOLIO SHARES
Even though we are the legal owner of the Portfolio shares held in the
subaccounts, and have the right to vote on all matters submitted to
shareholders of the Portfolios, we will vote our shares only as Policyowners
instruct, so long as such action is required by law.
Before a vote of a Portfolio's shareholders occurs, you will receive
voting materials from us. We will ask you to instruct us on how to vote and to
return your proxy to us in a timely manner. You will have the right to instruct
us on the number of Portfolio shares that corresponds to the amount of Cash
Value you have in that Portfolio (as of a date set by the Portfolio) divided by
$100.
19
<PAGE>
If we do not receive voting instructions on time from some Owners, we will
vote those shares in the same proportion as the timely voting instructions we
receive. Should Federal securities laws, regulations and interpretations
change, we may elect to vote Portfolio shares in our own right. If required by
state insurance officials, or if permitted under Federal regulation, we may
disregard certain owner voting instructions. If we ever disregard voting
instructions, we will send you a summary in the next annual report to
Policyowners advising you of the action and the reasons we took such action.
THE POLICY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASING A POLICY
To purchase a Policy, a prospective owner must submit a completed
application and an initial premium to us at our Office. You may also send the
application and initial premium to us through any licensed life insurance agent
who is also a registered representative of a broker-dealer having a selling
agreement with AFSG Securities Corporation, the principal underwriter for the
Policy. We determine the Specified Amount for a Policy based on the initial
premium paid and other characteristics of the proposed Insured(s), such as age,
gender and risk class. We base the minimum initial premium for your Policy on
the Guideline Single Premium established under Federal tax laws given the age,
gender, and risk class of the Insured. We currently require a minimum initial
premium of $20,000.
We use different underwriting standards (simplified, expanded) in relation
to the Policy. We can provide you with details as to these underwriting
standards when you apply for a Policy. We must receive evidence of insurability
that satisfies our underwriting standards before we will issue a Policy.
Generally, for simplified underwriting we will issue a Policy for Insured(s)
between the ages of 35 to 80 for a single life policy, and between the ages of
45 to 80 for a joint and survivor life policy. For expanded underwriting, we
will issue a Policy for Insured(s) between the ages of 18 to 34 and 81 to 90
for a single life policy, and between the ages of 81 to 90 for a joint and
survivor life policy. We reserve the right to reject an application for any
reason permitted by law.
WHEN INSURANCE COVERAGE TAKES EFFECT
Full insurance coverage under the Policy will take effect only if the
proposed Insured(s) is alive and in the same condition of health as described
in the application when the Policy is delivered to the Owner, and if the
initial premium is paid.
CONDITIONAL INSURANCE COVERAGE. If the Insured qualifies for simplified
underwriting, conditional insurance coverage begins as soon as you complete an
application and pay an initial premium of at least $20,000. If the Insured does
not qualify for simplified underwriting, conditional insurance coverage begins
on the date all medical tests and exams are completed. Conditional insurance
coverage is void if the check or draft sent to pay the initial premium is not
honored when we first present it for payment.
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE AMOUNT OF /bullet/ the Specified Amount applied for, or
CONDITIONAL INSURANCE /bullet/ $300,000
COVERAGE IS THE LESSER OF: reduced by all amounts payable under all other life insurance or
accidental death benefits that the Insured has in force or pending
with us.
</TABLE>
Conditional life insurance coverage is void if the application contains
any material misrepresentation. Benefits will also be denied if any proposed
insured commits suicide.
Conditional life insurance coverage terminates automatically, and without
notice, on the earliest of:
/bullet/ the date we notify you that the application is declined and the
initial premium is returned; or
/bullet/ the date we determine the Insured has satisfied our underwriting
requirements (the Policy Date); or
/bullet/ 10 days following our offer of insurance, on any person proposed,
under a different plan or at an increased premium or different
rate class; or
/bullet/ at the end of the fraction of a year which the payment bears to
the premium required to provide one month of insurance in the
amount as described above; or
/bullet/ 60 days from the beginning of conditional insurance coverage.
FULL INSURANCE COVERAGE. Once we determine that the Insured meets our
underwriting requirements, full insurance coverage begins, we issue the Policy,
and we begin to deduct monthly and daily insurance charges from your premium.
This date is the Policy Date. On the Policy Date, we will allocate your premium
(plus interest) to the subaccounts and fixed account options you elected on
your application, provided you live in a state that does not require a refund
of full premium during the free look period. If your state requires us to
return the full premium in the event you exercise your free look right, we will
place your premium (plus interest) in the Reallocation Account until the
Reallocation Date. See Reallocation Account, page .
21
<PAGE>
OWNERSHIP RIGHTS
The Policy belongs to the Owner named in the application. The Owner may
exercise all of the rights and options described in the Policy. The Owner is
the Insured unless the application specifies a different person as the Insured.
If the Owner dies before the Insured and no contingent owner is named, then
ownership of the Policy will pass to the Owner's estate. The Owner may exercise
certain rights described below.
<TABLE>
<CAPTION>
<S> <C>
CHANGING THE /bullet/ Change the Owner by providing written notice to
OWNER us at any time while the Insured is alive and
the Policy is in force.
/bullet/ Change is effective as of the date that the
written notice is signed.
/bullet/ Changing the Owner does not automatically change
the beneficiary.
/bullet/ Changing the Owner may have tax consequences.
/bullet/ We are not liable for payments we made before we
received the written notice.
CHOOSING THE /bullet/ The Owner designates the beneficiary (the person
BENEFICIARY to receive the death benefit when the Insured
dies) in the application.
/bullet/ If you designate more than one beneficiary, then
each beneficiary shares equally in any death
benefit proceeds unless the beneficiary
designation states otherwise.
/bullet/ If the beneficiary dies before the Insured, then
any contingent beneficiary becomes the
beneficiary.
/bullet/ If both the beneficiary and contingent
beneficiary die before the Insured, then the
death benefit will be paid to the Owner or the
Owner's estate upon the Insured's death.
CHANGING THE /bullet/ Change the beneficiary by providing us with a
BENEFICIARY written notice.
/bullet/ Change is effective as of the date the Owner
signs the written notice.
/bullet/ We are not liable for any payments we made before
we received the written notice.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ASSIGNING THE /bullet/ The Owner may assign Policy rights while the
POLICY Insured is alive.
/bullet/ The Owner retains any ownership rights that are
not assigned.
/bullet/ Assignee may not change the Owner or the
beneficiary, and may not elect or change an
optional method of payment. Any amount payable to
the assignee will be paid in a lump sum.
/bullet/ Claim under any assignment are subject to proof
of interest and the extent of the assignment.
/bullet/ We are not:
/arrow/ bound by any assignment unless we
receive a written notice of the
assignment
/arrow/ responsible for the validity of any
assignment
/arrow/ liable for any payment we made before we
received written notice of the assignment
/arrow/ any assignment which results in adverse
tax consequences to the Owner, Insured(s)
or beneficiary(ies)
</TABLE>
CANCELING A POLICY
You may cancel a Policy during the "free-look period" by returning it to
PFL at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499, or to the agent who
sold it. The free-look period expires 10 days after you receive the Policy. The
free-look period is longer if required by state law. If you decide to cancel
the Policy during the free-look period, we will treat the Policy as if it had
never been issued. Within seven calendar days after we receive the returned
Policy, we will refund an amount equal to the sum of:
/bullet/ the total amount of monthly deductions made and any other charges
imposed on amounts allocated to the subaccounts and the fixed
account options; PLUS
/bullet/ the value of amounts allocated to the subaccounts and the fixed
account options on the date we (or our agent) receive the
returned Policy.
If any state law prohibits the calculation above, we will refund the total
of all premiums paid for the Policy. See Allocating Premiums, p. .
PREMIUMS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INITIAL PREMIUM
The initial premium for a given Specified Amount depends on a number of
factors including the age, gender, and risk class of the proposed Insured(s).
For a given initial premium, we will specify the exact Specified Amount that
you must purchase. For joint and
23
<PAGE>
survivor life policies, we will provide the Specified Amount at the time of
application based upon the specific ages, gender, and risk classes of the
proposed Insureds.
We currently require a minimum initial premium of $20,000. The current
underwriting requirements and maximum initial premium amounts are set forth in
Appendix . We reserve the right to modify these requirements and premium
amounts at any time.
We will credit interest on your initial premium from the date we receive
payment. Interest will be credited at the current standard fixed account rate.
Interest is guaranteed to equal at least 3% annually.
TAX-FREE EXCHANGES (1035 EXCHANGES). We will accept as part of your
initial premium money from one contract that qualified for a tax-free exchange
under Section 1035 of the Internal Revenue Code. If you contemplate such an
exchange, you should consult a competent tax advisor to learn the potential tax
effects of such a transaction.
Subject to our underwriting requirements, we will permit you to make one
additional cash payment within three business days of our receipt of the
proceeds from the 1035 exchange before we determine your Policy's Specified
Amount.
ADDITIONAL PREMIUMS
You will have limited flexibility to add additional premiums to the Policy
since we require that the initial premium equal the maximum amount that can be
applied to the Policy at issue. In general, you may not pay any additional
premiums on the Policy for several years in order for the Policy to continue to
qualify as a life insurance contract as defined in Federal tax laws and
regulations. At the time the Policy allows for the payment of additional
premiums, we reserve the right to limit or refund any premium if:
/bullet/ the amount is below our current minimum additional premium
requirement; OR
/bullet/ the premium would increase the death benefit by more than the
amount of the premium; OR
/bullet/ accepting the premium would disqualify the Policy as a life
insurance contract as defined in Federal tax laws and
regulations.
You may pay premiums by any method we deem acceptable. We will treat any
payment you make as a loan repayment unless you clearly mark it as a premium.
ALLOCATING PREMIUMS
When you apply for a Policy, you must instruct us to allocate your premium
to one or more subaccounts of the separate account and to the fixed account
options according to the following rules:
/bullet/ allocation percentages must be in whole numbers;
/bullet/ you must put your entire initial premium in the Fixed DCA Account
at the time of your application;
/bullet/ if you select standard dollar cost averaging, you must put at
least $5,000 into the standard fixed account.
24
<PAGE>
You can change the allocation instructions for additional premiums without
charge at any time by providing us with written notification (or any other
notification we deem satisfactory). Any allocation change will be effective on
the date we record the change. We reserve the right to limit the number of
premium allocation changes.
Investment returns from amounts allocated to the subaccounts will vary
with the investment experience of these subaccounts and will be reduced by
Policy charges. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO
THE SUBACCOUNTS.
REALLOCATION ACCOUNT. If your state requires us to return your initial
premium in the event you exercise your free-look right, we will allocate the
initial premium (plus interest) on the Policy Date to the Reallocation Account.
While held in the Reallocation Account, your premium (plus interest) will earn
interest at the current rates for the standard fixed account. The premium will
remain in the Reallocation Account for the length of your state's free look
period plus five days.
The following chart shows by state the number of days from the Policy Date
that your premium (plus interest) will remain in the Reallocation Account.
STATES REQUIRING FULL REFUND OF PREMIUM
<TABLE>
<CAPTION>
TIME PREMIUM IS IN TIME PREMIUM IS
REALLOCATION IN REALLOCATION
STATE ACCOUNT STATE ACCOUNT
<S> <C> <C> <C>
CO # 20 days NC * # 15 days
CT 15 days ND 15 days
DC * 15 days NY 15 days
GA 15 days OK * 15 days
IL 15 days PA * 15 days
IN # 15 days SC * 15 days
MA # 15 days TX 15 days
MD # 15 days UT * 15 days
MI *# 15 days VT * 15 days
MN 15 days VA 15 days
MO * 15 days WV 15 days
</TABLE>
* The period is 50 days from the application date or 15 days from your
receipt of the Policy, whichever is later.
# If the Policy is a replacement, the period is 25 days.
In the states listed above, on the first Valuation Date on or after the
Reallocation Date, we will reallocate all cash value from the Reallocation
Account to the subaccounts and fixed account options you selected on the
application. If you requested either Fixed DCA or
25
<PAGE>
Standard Dollar Cost Averaging, we will reallocate the Cash Value to either the
Fixed DCA Account or standard fixed account, respectively on the Reallocation
Date.
In all other states, the Reallocation Date is the same as the Policy Date
and we will allocate your premium (plus interest) on the Policy Date to the
subaccounts and the fixed account options in accordance with the instructions
you gave us on your application.
POLICY VALUES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CASH VALUE
<TABLE>
<CAPTION>
<S> <C>
CASH VALUE /bullet/ serves as the starting point for calculating values
under a Policy
/bullet/ equals the sum of all values in each subaccount and the
fixed account options
/bullet/ is determined on the Policy Date and on each Valuation
Date
/bullet/ has no guaranteed minimum amount and may be more or
less than premiums paid
</TABLE>
NET SURRENDER VALUE
The Net Surrender Value is the amount we pay when you surrender your
Policy. We determine the Net Surrender Value at the end of the Valuation Period
when we receive your written surrender request.
<TABLE>
<CAPTION>
<S> <C>
NET SURRENDER /bullet/ the Cash Value as of such date; MINUS
VALUE ON ANY /bullet/ any surrender charge as of such date; MINUS
VALUATION DATE /bullet/ any outstanding Policy loan(s); MINUS
EQUALS: /bullet/ any interest you owe on any Policy loan(s).
</TABLE>
SUBACCOUNT VALUE
Each subaccount's value is the Cash Value in that subaccount. At the end
of any Valuation Period, the subaccount's value is equal to the number of units
that the Policy has in the subaccount, multiplied by the unit value of that
subaccount.
<TABLE>
<CAPTION>
<S> <C>
THE NUMBER OF /bullet/ the initial units purchased on the Policy Date; PLUS
UNITS IN ANY /bullet/ units purchased with additional premium(s); PLUS
SUBACCOUNT ON /bullet/ units purchased via transfers from another subaccount
ANY VALUATION or the fixed account; MINUS
DATE EQUALS: /bullet/ units redeemed to pay for monthly deductions; MINUS
/bullet/ units redeemed to pay for partial withdrawals; MINUS
/bullet/ units redeemed as part of a transfer to another
subaccount or the fixed account.
</TABLE>
26
<PAGE>
Every time you allocate or transfer money to or from a subaccount, we
convert that dollar amount into units. We determine the number of units we
credit to, or subtract from, your Policy by dividing the dollar amount by the
unit value for that subaccount at the end of the Valuation Period.
UNIT VALUE
We determine a unit value for each subaccount to reflect how investment
results affect the Policy values. Unit values will vary among subaccounts. The
unit value of each subaccount was originally established at $10 per unit. The
unit value may increase or decrease from one Valuation Period to the next.
<TABLE>
<CAPTION>
<S> <C>
THE UNIT VALUE /bullet/ the total value of the assets held in the
OF ANY subaccount, determined by multiplying the number
SUBACCOUNT AT of shares of the designated Portfolio owned by the
THE END OF A subaccount times the Portfolio's net asset value
VALUATION per share; MINUS
PERIOD /bullet/ a charge equal to the daily net assets of the
IS CALCULATED AS: subaccount multiplied by the daily equivalent of
the Daily Charge;MINUS
/bullet/ the accrued amount of reserve for any taxes or
other economic burden resulting from applying tax
laws that we determine to be properly attributable
to the subaccount; AND THE RESULT DIVIDED BY
/bullet/ the number of outstanding units in the subaccount.
</TABLE>
FIXED ACCOUNT VALUE
On the Policy Date, the fixed account value is equal to the premiums
allocated to the fixed account, less the portion of the first monthly deduction
taken from the fixed account.
<TABLE>
<CAPTION>
<S> <C>
THE FIXED ACCOUNT /bullet/ the premium(s) allocated to the fixed account; PLUS
VALUE AT THE END OF /bullet/ any amounts transferred to the fixed account; PLUS
ANY VALUATION /bullet/ interest credited to the fixed account; MINUS
PERIOD IS EQUAL TO: /bullet/ amounts charged to pay for monthly deductions; MINUS
/bullet/ amounts withdrawn from the fixed account; MINUS
/bullet/ amounts transferred from the fixed account to a
subaccount.
</TABLE>
27
<PAGE>
TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL
You may make transfers among the subaccounts or from the subaccounts to
the fixed account. We determine the amount you have available for transfers at
the end of the Valuation Period when we receive your transfer request. WE MAY
MODIFY OR REVOKE THE TRANSFER PRIVILEGE AT ANY TIME. The following features
apply to transfers under the Policy:
/checkmark/ You may make an unlimited number of transfers in a Policy
year.
/checkmark/ You may request transfers in writing (in a form we accept), or
by telephone.
/checkmark/ There is no minimum amount that must be transferred.
/checkmark/ There is no minimum amount that must remain in a subaccount
after a transfer.
/checkmark/ We reserve the right to deduct a $10 charge from the amount
transferred for the 13th and each additional transfer in a
Policy year.
/checkmark/ We consider all transfers made in any one day to be a single
transfer.
/checkmark/ Transfers resulting from loans, Standard and Fixed Dollar Cost
Averaging, Asset Rebalancing, and exercising exchange
privileges are not treated as transfers for the purpose of the
transfer charge.
Your Policy as applied for and issued, will automatically receive
telephone transfer privileges unless you provide other instructions. The
telephone transfer privileges allow you to give authority to the registered
representative or agent of record for your Policy to make telephone transfers
and to change the allocation of future payments among the subaccounts and the
fixed account on your behalf according to your instructions. To make a
telephone transfer, you may call 1-800-525-6205.
Please note the following regarding telephone transfers:
/arrow/ We are not liable for any loss, damage, cost or expense from
complying with telephone instructions we reasonably believe to be
authentic. You bear the risk of any such loss.
/arrow/ We will employ reasonable procedures to confirm that telephone
instructions are genuine.
/arrow/ Such procedures may include requiring forms of personal
identification prior to acting upon telephone instructions,
providing written confirmation of transactions to Owners, and/or
tape recording telephone instructions received from Owners.
/arrow/ If we do not employ reasonable confirmation procedures, we may be
liable for losses due to unauthorized or fraudulent instructions.
The corresponding portfolio of any subaccount determines its net asset
value per each share once daily, as of the close of the regular business
session of the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time), which coincides with the end of each Valuation Period. Therefore, we
will process any transfer request we receive after the close
28
<PAGE>
of the regular business session of the NYSE, on any day the NYSE is open, using
the net asset value for each share of the applicable Portfolio determined as of
the close of the next regular business session of the NYSE.
STANDARD DOLLAR COST AVERAGING
Dollar cost averaging is an investment strategy designed to reduce the
investment risks associated with market fluctuations. The strategy spreads the
allocation of your premium into the subaccounts over a period of time. This
allows you to potentially reduce the risk of investing most of your premium
into the subaccounts at a time when prices are high. The success of this
strategy is not assured and depends on market trends. You should carefully
consider your financial ability to continue the program over a long enough
period of time to purchase units when their value is low as well as when it is
high.
Under Standard Dollar Cost Averaging, we automatically transfer a set
dollar amount from the standard fixed account to one or more subaccounts that
you choose. We will make the transfers monthly as of the end of the Valuation
Date starting on the first Monthiversary after the Reallocation Date.
<TABLE>
<CAPTION>
<S> <C>
TO START DOLLAR COST /arrow/ you must request Standard Dollar Cost Averaging on your
AVERAGING: application
/arrow/ you must have at least $5,000 in the standard fixed
account
/arrow/ each transfer under dollar cost averaging must be at least
$500
</TABLE>
There is no charge for Standard Dollar Cost Averaging.
<TABLE>
<CAPTION>
<S> <C>
STANDARD DOLLAR COST /arrow/ we receive your request to cancel your participation;
AVERAGING WILL /arrow/ the value in the standard fixed account is depleted;
TERMINATE IF: /arrow/ you elect to participate in asset rebalancing program; OR
/arrow/ you elect to participate in any asset allocation services
provided by a third party.
</TABLE>
We may modify, suspend, or discontinue the Standard Dollar Cost Averaging
at any time.
ASSET REBALANCING PROGRAM
We also offer an Asset Rebalancing Program under which you may transfer
amounts periodically to maintain a particular percentage allocation among the
subaccounts. Cash Value allocated to each subaccount will grow or decline in
value at different rates. The asset rebalancing program automatically
reallocates the Cash Value in the subaccounts at the end of each period to
match your Policy's currently effective premium allocation schedule. Cash Value
in the standard fixed account, the Standard Dollar Cost Averaging program and
the Fixed DCA Account are not available for this program.
To participate in the Asset Rebalancing Program, you must complete an
asset rebalancing request form and submit it to us before the maturity date.
29
<PAGE>
You may elect asset rebalancing to occur on each quarterly, semi-annual or
annual anniversary of the Policy Date. You may modify your allocations
quarterly. Once we receive the asset rebalancing request form, we will effect
the initial rebalancing of Cash Value on the next such anniversary, in
accordance with the Policy's current premium allocation schedule. We will
credit the amounts transferred at the unit value next determined on the dates
the transfers are made. If a day on which rebalancing would ordinarily occur
falls on a day on which the NYSE is closed, rebalancing will occur on the next
day the NYSE is open. There is no charge for the Asset Rebalancing Program.
<TABLE>
<CAPTION>
<S> <C>
ASSET REBALANCING /arrow/ you elect to participate in the Fixed DCA Account;
WILL CEASE IF: /arrow/ you elect to participate in the Standard Dollar Cost
Averaging program;
/arrow/ we receive your request to discontinue participation;
/arrow/ you make a transfer to or from any subaccount other than
under a scheduled rebalancing; OR
/arrow/ you elect to participate in any asset allocation services
provided by a third party
</TABLE>
We may modify, suspend, or discontinue the Asset Rebalancing Program at
any time.
STANDARD FIXED ACCOUNT TRANSFERS
You may make one transfer per Policy year from the standard fixed account.
The transfer must be made no later than 30 days after your Policy anniversary.
You must send us a written notice so that we receive it no later than 30 days
after a Policy anniversary. We will make the transfer on the date we receive
the written notice. We reserve the right to limit the maximum amount you may
transfer to the greater of:
/arrow/ 25% of the amount in the standard fixed account, or
/arrow/ the amount transferred from the standard fixed account in the
immediately prior Policy Year (excluding transfers from the
Fixed DCA Account).
30
<PAGE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This section describes the charges and deductions that we make under the
Policy to compensate for: (1) the services and benefits we provide; (2) the
costs and expenses we incur; and (3) the risks we assume.
<TABLE>
<CAPTION>
<S> <C>
SERVICES AND /bullet/ the death benefit, cash and loan benefits under the Policy
BENEFITS WE /bullet/ investment options, including premium allocations
PROVIDE: /bullet/ administration of elective options
/bullet/ the distribution of reports to Owners
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
COSTS AND /bullet/ costs associated with processing and
EXPENSES WE INCUR: underwriting applications, issuing and
administering the Policy (including any
Policy riders)
/bullet/ overhead and other expenses for providing
services and benefits, sales and marketing
expenses
/bullet/ other costs of doing business, such as
collecting premiums, maintaining records,
processing claims, effecting transactions,
and paying Federal, state and local premium
and other taxes and fees
RISKS WE ASSUME: /bullet/ that the charges we deduct may be
insufficient to meet our actual claims
because Insureds die sooner than we
estimate
/bullet/ that the costs of providing the services and
benefits under the Policies may exceed the
charges we are allowed to deduct
</TABLE>
PREMIUM DEDUCTIONS
We deduct no charges from premiums before allocating the premiums to the
separate account and the fixed account options according to your instructions.
DAILY CHARGE
Each Valuation Date, we deduct a Daily Charge at the annual rate of 0.50%
from assets in the subaccounts as part of the calculation of the unit value for
each subaccount.
MONTHLY DEDUCTION
We deduct a monthly deduction from the Cash Value on the Policy Date and
on each Monthiversary (the same day of each succeeding month as the Policy
Date, or, if there is no comparable Valuation Date, the next Valuation Date).
We will deduct this charge from each account in accordance with the current
allocation instructions. If the value of any account is insufficient to pay
that account's portion of the monthly deduction, we will take the monthly
deduction on a pro rata basis from all accounts (I.E., in the same proportion
that the value in each subaccount and the fixed account bears to the total Cash
Value on the Monthiversary).
31
<PAGE>
The monthly deduction is equal to:
/arrow/ The Monthly Policy Charge based on the separate account's assets;
PLUS
/arrow/ The Monthly Policy Charge based on the fixed account's assets;
PLUS
/arrow/ The monthly Cost of Insurance charge for the Policy, if any; PLUS
/arrow/ The monthly charge for any benefits provided by riders attached to
the Policy (currently, only the Guaranteed Minimum Death Benefit
rider).
MONTHLY POLICY CHARGE. The Monthly Policy Charge, based on the separate
account's assets, is equal to: (1) the separate account monthly deduction
charge (see table below) divided by 12; multiplied by (2) the sum of the
subaccount values on the Monthiversary.
The Monthly Policy Charge, based on the fixed account's assets, is equal
to: (1) the fixed account monthly deduction charge (see table below) divided by
12; multiplied by (2) the fixed account value on the Monthiversary, minus any
outstanding Policy loan(s).
The Monthly Policy Charge for each Policy varies based on the Policy year,
gender, and whether the Policy is issued on a single life basis or a joint and
last survivor basis.
The Monthly Policy Charge and the Daily Charge for single life and joint
and survivor life Policies are as follows:
<TABLE>
<CAPTION>
SINGLE LIFE POLICY Male/Unisex Female
Policy Years Policy Years Policy Years Policy Years
1-10 11+ 1-10 11+
<S> <C> <C> <C> <C> <C>
Separate account Daily Charge
charges (from unit value) .50% .50% .50% .50%
(annualized rate)
Monthly
Deduction Charge
(as a % of separate
account assets) 2.00% 1.00% 1.85% .85%
Total 2.50% 1.50% 2.35% 1.35%
Fixed account Monthly
charges Deduction Charge
(annualized rate) (as a % of fixed
account assets) 2.00% 1.00% 1.85% .85%
Total 2.00% 1.00% 1.85% .85%
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
JOINT & SURVIVOR LIFE POLICY Policy Years 1-10 Policy Years 11+
<S> <C> <C> <C>
Separate account charges Daily Charge (from unit value) .50% .50%
(annualized rate)
Monthly Deduction Charge (as 1.50% .50%
a % of separate account assets)
Total 2.00% 1.00%
Fixed account charges Monthly Deduction Charge (as 1.50% .50%
(annualized rate) a % of fixed account assets)
Total 1.50% .50%
</TABLE>
COST OF INSURANCE CHARGE. We reserve the right to assess a monthly Cost of
Insurance Charge. The charge would depend on a number of variables (age,
gender, risk class) that would cause it to vary from Policy to Policy and from
Monthiversary to Monthiversary. If applicable, we would calculate the Cost of
Insurance Charge each month for the Specified Amount at issue. We do not
currently assess this charge, and we do not intend to assess this charge.
However, if we begin to assess this charge in the future, we will waive
surrender charges upon any surrender of the Policy. See Surrender Charge, p.
.
The guaranteed maximum monthly Cost of Insurance Rates are based on the
gender, age, plan of insurance, and risk class of the Insured(s). Any change in
the current rates will not exceed those shown in your Policy's Table of
Guaranteed Maximum Life Insurance Rates.
We currently place Insureds into standard (tobacco) and select
(non-tobacco) risk classes. The guaranteed rates are based on the 1980
Commissioners' Standard Ordinary Mortality Tables, Male or Female, Tobacco or
Non-Tobacco Mortality Rates ("1980 CSO Tables"). Cost of Insurance Rates for an
Insured in a non-tobacco class are less than or equal to rates for an Insured
of the same age and gender in a tobacco class.
The Policies are based on mortality tables that distinguish between men
and women. As a result, the Policy may pay different benefits to men and women
of the same age and risk class. We also offer Policies based on unisex
mortality tables if required by state law.
SURRENDER CHARGE
If you surrender your Policy during the first 9 years, we deduct a
surrender charge from your Cash Value and pay the remaining Cash Value to you.
The payment you receive is called the Net Surrender Value. We reduce the
surrender charge at older ages in compliance with state laws. We calculate the
surrender charge as a percentage of premium(s) paid based on the following
schedule:
33
<PAGE>
CONTINGENT CONTINGENT
SURRENDER SURRENDER
CHARGE (AS A CHARGE (AS A
PERCENTAGE OF PERCENTAGE OF
POLICY YEAR INITIAL PREMIUM) POLICY YEAR INITIAL PREMIUM)
1 9.75% 6 7%
2 9.50% 7 6%
3 9.25% 8 4%
4 9% 9 2%
5 8% 10 0%
If we begin to assess a Cost of Insurance Charge on Policies as noted
above, we will waive all future surrender charges.
TRANSFER CHARGE
The first 12 transfers during each Policy year are free. We currently
assess a transfer charge of $10 for the 13th and each additional transfer
during a Policy year. For the purposes of assessing the transfer charge, each
written request for transfers is considered to be one transfer, regardless of
the number of subaccounts affected by the transfer. We deduct the transfer
charge from the amount being transferred. Transfers due to loans, any dollar
cost averaging or asset rebalancing program do not count as transfers for the
purpose of assessing this charge.
PORTFOLIO EXPENSES
The value of the net assets of each subaccount reflects the investment
advisory fees and other expenses incurred by the corresponding Portfolio in
which the subaccount invests. See the Portfolio Annual Expenses Table in this
prospectus, and the Fund prospectuses for further information on these fees and
expenses.
GUARANTEED MINIMUM DEATH BENEFIT RIDER CHARGE
If you select the Guaranteed Minimum Death Benefit rider at application,
we will deduct .01% each month from your Cash Value on each Monthiversary.
DEATH BENEFIT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEATH BENEFIT PROCEEDS
As long as the Policy is in force, we will pay the death benefit proceeds
on an individual Policy once we receive satisfactory proof of the Insured's
death. For Policies issued on a joint and survivor basis, we will pay death
benefit proceeds on the death of the last Insured. We may require return of the
Policy. We will pay the death benefit proceeds to the primary beneficiary(ies)
or a contingent beneficiary. If the beneficiary dies before the Insured and
there is no contingent beneficiary, we will pay the death benefit proceeds to
the
34
<PAGE>
Owner or the Owner's estate. We will pay the death benefit proceeds in a lump
sum or under a payment option. See Payment Options.
<TABLE>
<CAPTION>
<S> <C>
DEATH BENEFIT /bullet/ the death benefit (described below); MINUS
PROCEEDS EQUAL: /bullet/ any past due monthly deductions if the Insured dies during
the grace period (see Policy Lapse and Reinstatement);
MINUS
/bullet/ any outstanding Policy loan on the date of death; MINUS
/bullet/ any interest you owe on Policy loan(s).
</TABLE>
If all or part of the death benefit proceeds are paid in one sum, we will
pay interest on this sum as required by applicable state law from the date we
receive due proof of the Insured's death to the date we make payment.
We may further adjust the amount of the death benefit proceeds under
certain circumstances. See Our Right to Contest the Policy; and Misstatement of
Age or Gender.
DEATH BENEFIT
The Policy provides a death benefit. The death benefit is determined as of
a date of death of the Insured (the last of Insureds to die, if a Joint
Policy).
THE DEATH BENEFIT /bullet/ available death benefit; or
IS THE GREATER OF: /bullet/ the current Specified Amount.
The variable death benefit is equal to the Cash Value on the date of death
multiplied by the applicable limitation percentage. The limitation percentage
is a percentage based on the age of the Insured at the beginning of each Policy
year. The following table indicates the applicable limitation percentages for
different ages:
AGE
(YOUNGER INSURED,
IF JOINT POLICY) LIMITATION PERCENTAGE
40 and under 250%
41 to 45 250% minus 7% for each age over age 40
46 to 50 215% minus 6% for each age over age 45
51 to 55 185% minus 7% for each age over age 50
56 to 60 150% minus 4% for each age over age 55
61 to 65 130% minus 2% for each age over age 60
66 to 70 120% minus 1% for each age over age 65
71 to 75 115% minus 2% for each age over age 70
76 to 90 105%
91 to 94 105% minus 1% for each age over age 90
95 and above 100%
EFFECTS OF PARTIAL WITHDRAWALS ON THE DEATH BENEFIT
A partial withdrawal will reduce the Specified Amount by an amount equal
to the amount of the partial withdrawal multiplied by the ratio of the initial
Specified Amount to the initial premium. For an example, see "Partial
Withdrawals," page___.
35
<PAGE>
GUARANTEED MINIMUM DEATH BENEFIT RIDER
If you purchase the Guaranteed Minimum Death Benefit rider at the time you
apply for the Policy and the rider is in effect upon the Insured's (younger
Insured if a Joint Policy) date of death, we guarantee to provide a death
benefit as follows:
/arrow/ If the Net Surrender Value on any Monthiversary is not sufficient
to cover the Monthly Policy Charge on such day, then coverage will
be provided as indicated below, and no grace period will begin,
provided no Policy loans have been taken under the Policy;
/arrow/ If a death benefit is payable due to the provisions of this rider,
then the following minimum death benefit is applicable;
/arrow/ During the first fifteen Policy years, or before the Policy
anniversary next following the Insured's (younger Joint Insured,
if under a Joint Policy) 75th birthday, if sooner, the minimum
death benefit payable will be as described under Death Benefit,
page ;
/arrow/ After the first fifteen Policy years, or on or after the Policy
anniversary next following the Insured's (younger Joint Insured,
if under a Joint Policy) 75th birthday, if sooner, the minimum
death benefit payable will be the initial premium, reduced by any
partial withdrawals.
However, in no event will this minimum death benefit ever be less than $1,000.
CHANGING THE SPECIFIED AMOUNT
You may not increase or decrease the Specified Amount on your Policy.
However, a partial withdrawal will reduce the Specified Amount and the amount
payable under the Guaranteed Minimum Death Benefit rider. If you need a higher
Specified Amount, you must apply for a second policy.
PAYMENT OPTIONS
There are several ways of receiving proceeds under the death benefit and
surrender provisions of the Policy, other than in a lump sum. Information
concerning these settlement options is available on request. None of these
options vary with the investment performance of a separate account.
SURRENDERS AND PARTIAL WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SURRENDERS
You may make a written request to surrender your Policy for its Net
Surrender Value as calculated at the end of the Valuation Date on which we
receive your request. The
36
<PAGE>
Insured must be alive and the Policy must be in force when you make your
written request. A surrender is effective as of the date when we receive your
written request. You will incur a surrender charge if you surrender the Policy
during the first 9 Policy years. See Charges and Deductions. Once you surrender
your Policy, all coverage and other benefits under it cease and cannot be
reinstated. We will pay you the Net Surrender Value in a lump sum within seven
days unless you request other arrangements. A surrender may have tax
consequences. See Federal Tax Considerations.
PARTIAL WITHDRAWALS
After the first Policy year, you may request a partial withdrawal of a
portion of your Cash Value subject to certain conditions.
<TABLE>
<CAPTION>
<S> <C>
PARTIAL /arrow/ You must make your partial withdrawal request to us in
WITHDRAWAL writing.
CONDITIONS: /arrow/ Only one partial withdrawal is allowed during a
12-month period.
/arrow/ The most you can request is the excess of the Cash
Value MINUS total outstanding loans, MINUS any interest
you owe on the Policy loans, and MINUS total premiums
paid.
/arrow/ You can specify the subaccount(s) and the standard
fixed account from which to make the withdrawal,
otherwise we will deduct the amount from the separate
account and the fixed account in accordance with the
current allocation instruction.
/arrow/ We generally will pay a partial withdrawal request
within seven days following the Valuation Date we
receive the request. There is no charge for a partial
withdrawal.
</TABLE>
A partial withdrawal will reduce the Cash Value by the amount of the
partial withdrawal. A partial withdrawal will reduce the Specified Amount by an
amount equal to the amount of the partial withdrawal multiplied by the ratio of
the initial Specified Amount to the initial premium.
An example of a partial withdrawal's effect on the Specified Amount is
shown below. A partial withdrawal will also reduce the Guaranteed Minimum Death
Benefit by an amount equal to the amount of the partial withdrawal multiplied
by the ratio of the initial Specified Amount to the initial premium.
In no event will any withdrawal reduce the Specified Amount below $1,000.
Example: A Policy with a Specified Amount of $200,000 on a male standard
(age 35) has a Guideline Single Premium of $48,920. The ratio of the initial
Specified Amount to the initial premium is 4.09 (I.E., 200,000 divided by
48,920). If a $19,000 partial withdrawal is taken after the first Policy year,
the Specified Amount will be reduced by $77,710 (I.E., 4.09 multiplied by
$19,000).
37
<PAGE>
LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL
After the Policy Date as long as the Policy remains in force, you may
borrow money from us using the Policy as the only security for the loan. Taking
a loan will terminate the Guaranteed Minimum Death Benefit rider, if any. See
Guaranteed Minimum Death Benefit rider, page . A loan that is taken from, or
secured by, a Policy may have tax consequences. See Federal Tax Considerations.
<TABLE>
<CAPTION>
<S> <C>
POLICY LOANS ARE /bullet/ you must borrow at least $500
SUBJECT TO CERTAIN /bullet/ the maximum amount you may borrow is 90% of the Cash
CONDITIONS: Value, less any surrender charge and any outstanding loan
amount
</TABLE>
When you take a loan, we will withdraw an amount equal to the requested
loan from each of the subaccounts and the fixed account based on your current
premium allocation instructions (unless you specify otherwise). We will
transfer that amount to the loan reserve. The loan reserve is the portion of
the fixed account used as collateral for a Policy loan.
We normally pay the amount of the loan within seven days after we receive
a proper loan request. We may postpone payment of loans under certain
conditions. See Payments We Make.
You can repay a loan at any time while the Policy is in force. WE WILL
CONSIDER ANY PAYMENTS YOU MAKE ON THE POLICY AS LOAN REPAYMENTS UNLESS THE
PAYMENTS ARE CLEARLY SPECIFIED AS PREMIUMS.
At each Policy anniversary, we will compare the amount of the outstanding
loan to the amount in the loan reserve. We will also make this comparison any
time you repay all or part of the loan, or make a request to borrow an
additional amount. At each such time, if the amount of the outstanding loan
exceeds the amount in the loan reserve, we will withdraw the difference from
the subaccounts and the standard fixed account and transfer it to the loan
reserve, in the same manner as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan, we will withdraw the
difference from the loan reserve and transfer it to the subaccounts and the
standard fixed account in the same manner as current premiums are allocated. No
charge will be imposed for these transfers, and these transfers are NOT treated
as transfers in calculating the transfer charge. We reserve the right to
require the transfer to the fixed account if the loans were originally
transferred from the fixed account.
INTEREST RATE CHARGED
The annual interest rate you may pay on a Policy loan is 6.0% and is
payable in arrears on each Policy anniversary. Loan interest that is unpaid
when due will be added to the amount of the loan on each Policy anniversary and
will bear interest at the same rate.
38
<PAGE>
LOAN RESERVE INTEREST RATE CREDITED
We will credit the amount in the loan reserve with interest at an
effective annual rate of 3.0%. We may credit a higher rate, but we are not
obligated to do so.
PREFERRED LOANS
At any time after the Policy Date, you may borrow against the Policy up to
an amount that is equal to the Cash Value MINUS total premiums paid LESS any
withdrawals. Such a loan is called a preferred loan. We will charge interest on
a preferred loan at an annual rate of 3.0%, payable in arrears. Any existing
loan, other than a preferred loan, is not eligible for a preferred loan rate.
Amounts in the loan reserve securing preferred loans accrue interest at the
same 3.0% annual rate as other loans. Consult a tax advisor before taking a
preferred loan because such a loan may have adverse tax consequences. We
reserve the right to modify or discontinue the preferred loan feature.
EFFECT OF POLICY LOANS
A Policy loan affects the Policy, because we reduce the death benefit
proceeds and Net Surrender Value under the Policy by the amount of any
outstanding loan plus interest you owe on the loans. Repaying the loan causes
the death benefit proceeds and Net Surrender Value to increase by the amount of
the repayment. As long as a loan is outstanding, we hold an amount equal to the
loan in the loan reserve. This amount is not affected by the separate account's
investment performance and may not be credited with the interest rates accruing
on the fixed account options. Amounts transferred from the separate account to
the loan reserve will affect the value in the separate account because we
credit such amounts with an interest rate declared by us rather than a rate of
return reflecting the investment performance of the separate account. A Policy
loan will cause a Guaranteed Minimum Death Benefit rider to terminate.
There are risks involved in taking a Policy loan, a few of which include
the potential for a Policy to lapse if projected earnings, taking into account
outstanding loans, are not achieved. A Policy loan may also have possible
adverse tax consequences that could occur if a Policy lapses with loans
outstanding. See Risks, page .
We will notify you (and any assignee of record) if the sum of your loans
plus any interest you owe on the loans is more than the Net Surrender Value. If
you do not submit a sufficient payment within 61 days from the date of the
notice, your Policy may lapse.
We will accept policy exchanges under Section 1035 of the Internal Revenue
Code where the policy from another company has an outstanding policy loan of no
more than 40% of the policy's cash value transferred to our Policy. We intend
to treat these as preferred loan amounts.
39
<PAGE>
POLICY LAPSE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LAPSE
Your Policy may lapse (terminate without value) if the Net Surrender Value
on any Monthiversary is less than the monthly deductions due on that day. The
monthly deductions may exceed the Net Surrender Value if:
/bullet/ we begin to impose monthly Cost of Insurance Charges, OR
/bullet/ the sum of all outstanding Policy loans plus accrued loan
interest exceeds the Net Surrender Value.
If the Net Surrender Value is not enough to pay the monthly deductions, we
will mail a notice to your last known address and any assignee of record. The
notice will specify the minimum payment required and the final date by which we
must receive the payment to keep the Policy from lapsing. We generally require
that you make the payment within 61 days after the date of the notice. This
61-day period is called the GRACE PERIOD. If we do not receive the specified
minimum payment by the end of the grace period, all coverage under the Policy
will terminate without value.
You may not reinstate this Policy after it has lapsed.
If you purchase the Guaranteed Minimum Death Benefit rider, then no grace
period will begin (and the Policy will not lapse) if there have been no Policy
loans.
See Guaranteed Minimum Death Benefit rider, page___.
FEDERAL INCOME TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summary provides a general description of the Federal income
tax considerations associated with a Policy and does not purport to be complete
or to cover all situations. THIS DISCUSSION IS NOT INTENDED AS TAX ADVICE.
Please consult counsel or other qualified tax advisors for more complete
information. We base this discussion on our understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service (the "IRS"). Federal income tax laws and the current
interpretations by the IRS may change.
TAX STATUS OF THE POLICY. A Policy must satisfy certain requirements set
forth in the Internal Revenue Code (Code) in order to qualify as a life
insurance contract for Federal income tax purposes and to receive the tax
treatment normally accorded life insurance contracts under Federal tax law. The
manner in which these requirements are to be applied to certain innovative
features of the Policy are not directly addressed by the Code or the limited
guidance as to how these requirements are to be applied. Nevertheless, we
believe that a Policy should satisfy the applicable Code requirements. Because
of the absence of pertinent interpretations of the Code requirements, there is,
however, some uncertainty about
40
<PAGE>
the application of such requirements to the Policy, particularly in the case of
Policies insuring more than one person. If it is subsequently determined that a
Policy does not satisfy the applicable requirements, we may take appropriate
steps to bring the Policy into compliance with such requirements and we reserve
the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the separate account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the separate account assets. There is little guidance in this area, and some
features of the Policies, such as the your flexibility to allocate premiums and
Cash Values, have not been explicitly addressed in published rulings. While we
believe that the Policy does not give you investment control over separate
account assets, we reserve the right to modify the Policy as necessary to
prevent you from being treated as the owner of the separate account assets
supporting the Policy.
In addition, the Code requires that the investments of the separate
account be "adequately diversified" in order to treat the Policy as a life
insurance contract for Federal income tax purposes. We intend that the separate
account, through the portfolios, will satisfy these diversification
requirements.
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. We believe that the death benefit under a Policy should be
excludible from the beneficiary's gross income. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on your circumstances and the beneficiary's circumstances. A tax advisor
should be consulted on these consequences.
Generally, you will not be deemed to be in constructive receipt of the
Cash Value until there is a distribution. When distributions from a Policy
occur, or when loans are taken out from or secured by (E.G., by assignment), a
Policy, the tax consequences depend on whether the Policy is classified as a
"Modified Endowment Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance
contracts are classified as "Modified Endowment Contracts" ("MECs") and receive
less favorable tax treatment than other life insurance contracts. IN MOST
SITUATIONS, THE POLICIES WILL BE CLASSIFIED AS MECS. There are, however,
certain limited situations where a Policy may not be classified as a MEC. If
you do not want your Policy to be classified as a MEC, a tax advisor should be
consulted to determine the circumstances, if any, under which your Policy would
not be classified as a MEC.
41
<PAGE>
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as
MECs are subject to the following tax rules:
/bullet/ All distributions (that is, payouts from the Policy), including
distributions upon surrender and partial withdrawals, will be
treated as ordinary income subject to tax up to an amount equal
to the excess (if any) of the unloaned Cash Value (Net Surrender
Value for surrenders) immediately before the distribution plus
prior distributions over the Owner's total investment in the
Policy at that time. "Total investment in the Policy" means the
aggregate amount of any premiums or other considerations paid for
a Policy, plus any previously taxed distributions, minus any
credited dividends.
/bullet/ Loans taken from or secured by (E.G., by assignment) such a
Policy are treated as distributions and taxed accordingly.
/bullet/ A 10 percent additional income tax is imposed on the amount
included in income except where the distribution or loan is made
when you have attained age 591/2 or are disabled, or where the
distribution is part of a series of substantially equal periodic
payments for your life (or life expectancy) or the joint lives
(or joint life expectancies) of you the beneficiary.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS. Distributions from a Policy that is not a MEC are generally treated
first as a recovery of your investment in the Policy, and as taxable income
after the recovery of all investment in the Policy. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole
or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a MEC are not treated as
distributions.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a MEC are subject to the 10 percent additional tax.
DEDUCTIBILITY OF POLICY LOAN INTEREST. In general, interest you pay on a
loan from a Policy will not be deductible. Before taking out a Policy loan, you
should consult a tax advisor as to the tax consequences.
MULTIPLE POLICIES. All MECs that we issue (or that our affiliates issue)
to the same Owner during any calendar year are treated as one MEC for purposes
of determining the amount includible in the Owner's income when a taxable
distribution occurs.
BUSINESS USES OF THE POLICY. The Policy 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 and
business uses of the Policy may vary depending on the particular facts and
circumstances of each individual arrangement and business uses of the
42
<PAGE>
Policy. Therefore, if you are contemplating using the Policy in any arrangement
the value of which depends in part on its tax consequences, you should be sure
to consult a tax advisor as to tax attributes of the arrangement.
POSSIBLE TAX LAW CHANGES. While the likelihood of legislative changes is
uncertain, there is always a possibility that the tax treatment of the Policy
could change by legislation or otherwise. It is even possible that any
legislative change could be retroactive (effective prior to the date of the
change). Consult a tax advisor with respect to legislative developments and
their effect on the Policy.
OTHER POLICY INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OUR RIGHT TO CONTEST THE POLICY
In issuing this Policy, we rely on all statements made by or for the
Insured in the application or in a supplemental application. Therefore, if you
make any material misrepresentation of a fact in the application (or any
supplemental application), then we may contest the Policy's validity or may
resist a claim under the Policy.
In the absence of fraud, we cannot bring any legal action to contest the
validity of the Policy after the Policy has been in force during the Insured's
lifetime for two years from the Policy Date.
SUICIDE EXCLUSION
If the Insured (either Insured if a Joint Policy) commits suicide, while
sane or insane, within two years of the Policy Date, the Policy will terminate
and our liability is limited to an amount equal to the premiums paid, less any
loans and less any partial withdrawals paid. We will pay this amount to the
beneficiary in one sum.
MISSTATEMENT OF AGE OR GENDER
If the age or gender of the Insured (either Insured if a Joint Policy) was
stated incorrectly in the application or any supplemental application, the
death benefit will be adjusted based on what the initial premium would have
purchased based on the Insured(s) correct age and gender.
MODIFYING THE POLICY
Only our President or Secretary may modify this Policy or waive any of our
rights or requirements under this Policy. Any modification or waiver must be in
writing. No agent may bind us by making any promise not contained in this
Policy.
43
<PAGE>
Upon notice to the Owner, we may modify the Policy to:
/arrow/ conform the Policy, our operations, or the separate account's
operations to the requirements of any law (or regulation issued
by a government agency) to which the Policy, our company or the
separate account is subject;
/arrow/ assure continued qualification of the Policy as a life insurance
contract under the Federal tax laws; or
/arrow/ reflect a change in the separate account's operation.
If we modify the Policy, we will make appropriate endorsements to the
Policy. If any provision of the Policy conflicts with the laws of a
jurisdiction that govern the Policy, we will amend the provision to conform
with such laws.
PAYMENTS WE MAKE
We usually pay the amounts of any surrender, partial withdrawal, death
benefit proceeds, or settlement options within seven business days after we
receive all applicable written notices and/or due proofs of death. However, we
can postpone such payments if:
/bullet/ the NYSE is closed, other than customary weekend and holiday
closing, or trading on the NYSE is restricted as determined by
the Commission; OR
/bullet/ the Commission permits, by an order, the postponement for the
protection of Owners; OR
/bullet/ the Commission determines that an emergency exists that would
make the disposal of securities held in the separate account or
the determination of their value not reasonably practicable.
If you have submitted a recent check or draft, we have the right to defer
payment of surrenders, partial withdrawals, death benefit proceeds, or payments
under a settlement option until such check or draft has been honored.
REPORTS TO OWNERS
At least once each year, or more often as required by law, we will mail to
Owners at their last known address a report showing the following information
as of the end of the report period:
<TABLE>
<CAPTION>
<S> <C>
/CHECK MARK/ the current Cash Value /CHECK MARK/ any activity since the last report
/CHECK MARK/ the current Net Surrender Value /CHECK MARK/ projected values
/CHECK MARK/ the current death benefit /CHECK MARK/ investment experience of each subaccount
/CHECK MARK/ any outstanding loans /CHECK MARK/ any other information required by law
</TABLE>
You may request additional copies of reports, but we may charge a fee for
such additional copies. In addition, we will send written confirmations of any
premium payments
44
<PAGE>
and other financial transactions you request. We also will send copies of the
annual and semi-annual report to shareholders for each Portfolio in which you
are indirectly invested.
RECORDS
We will maintain all records relating to the separate account and the
fixed account.
POLICY TERMINATION
Your Policy will terminate on the earliest of:
<TABLE>
<CAPTION>
<S> <C>
/bullet/ the maturity date /bullet/ the end of the grace period
/bullet/ the date the Insured dies (or the /bullet/ the date the Policy is
last of the Joint Insureds dies) surrendered
</TABLE>
SUPPLEMENTAL BENEFITS (RIDERS)
The following supplemental benefits (riders) are available and may be
added to a Policy. Monthly charges for these are deducted from Cash Value as
part of the Monthly Policy Charge. The riders available with the Policies
provide fixed benefits that do not vary with the investment experience of the
separate account.
EXTENDED MATURITY DATE. You may request that we extend the Policy's
maturity date (when the Insured (younger Insured, if a Joint Policy) is 100
years old) to the next Policy anniversary. Your request must be in writing and
we must receive it at least 90 days before the scheduled maturity date. If you
want to extend the maturity date beyond the next Policy anniversary, you must
submit an additional written request within 90 days before that Policy
anniversary. Interest on any outstanding loan will continue to accrue during
the period for which the maturity date is extended. All benefits and charges
will continue as set forth in the Policy. Charges and cost of insurance rates
for ages 99 and above will be those in effect at age 99. The tax consequences
of extending the Policy's maturity date beyond age 100 are unclear. A tax
advisor should be consulted before extending the Policy's maturity date.
ACCELERATED DEATH BENEFIT. This rider allows us to pay the death benefit
once we receive satisfactory proof that the Insured has incurred a condition
resulting from illness which a medical doctor has determined will reduce life
expectancy to one year or less.
GUARANTEED MINIMUM DEATH BENEFIT. This rider is described in the Death
Benefit Section. See page .
45
<PAGE>
PERFORMANCE DATA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We are a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
HYPOTHETICAL ILLUSTRATIONS BASED ON ADJUSTED HISTORIC PORTFOLIO PERFORMANCE
In order to demonstrate how the actual investment experience of the
Portfolios could have affected the death benefit, Cash Value and Net Surrender
Value of the Policy, we will provide hypothetical illustrations using the
actual investment experience of each Portfolio since its inception. THESE
HYPOTHETICAL ILLUSTRATIONS ARE DESIGNED TO SHOW THE PERFORMANCE THAT COULD HAVE
RESULTED IF THE POLICY HAD BEEN IN EXISTENCE DURING THE PERIOD ILLUSTRATED.
The values we illustrate for death benefit, Cash Value and Net Surrender
Value take into account all charges and deductions from the Policy, the
separate account and the Portfolios.
In preparing the illustrations, we have deducted the Monthly Policy Charge
and the Daily Charge as if the Policy had been in existence. We have assumed
for purposes of deducting the Monthly Policy Charge that the actual historic
rate of return in each calendar year was uniformly earned throughout that year.
The actual performance of the Portfolios, however, varied each day and that
could have affected the charges deducted and the performance illustrated.
For each Portfolio, the illustrations below show an initial premium of
$100,000 and a Specified Amount of $174,000 for a male age 65, non-tobacco
select risk class.
46
<PAGE>
The following example shows how the hypothetical net return of the AIM V.I.
Capital Appreciation Fund would have affected benefits for a Policy dated
January 1, 1999. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AIM V.I. CAPITAL APPRECIATION FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the AIM V.I.
Government Securities Fund would have affected benefits for a Policy dated
January 1, 1999. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AIM VI GOVERNMENT SECURITIES FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the AIM V.I.
Growth & Income Fund would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
AIM V.I. GROWTH & INCOME FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
47
<PAGE>
The following example shows how the hypothetical net return of the AIM V.I.
Value Fund would have affected benefits for a Policy dated January 1, 1999.
This example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
AIM V.I. VALUE FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the Dreyfus
Stock Index Fund would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
DREYFUS STOCK INDEX FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the Dreyfus
Money Market Portfolio would have affected benefits for a Policy dated January
1, 1999. This example assumes that the Net Premiums and related Cash Values
were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
DREYFUS MONEY MARKET PORTFOLIO
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
48
<PAGE>
The following example shows how the hypothetical net return of the Dreyfus
Small Company Stock Portfolio would have affected benefits for a Policy dated
January 1, 1999. This example assumes that the Net Premiums and related Cash
Values were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
DREYFUS SMALL COMPANY STOCK PORTFOLIO
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the MFS Emerging
Growth Seires would have affected benefits for a Policy dated January 1, 1999.
This example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
MFS EMERGING GROWTH SERIES
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the MFS Foreign
& Colonial Emerging Markets Equity Series would have affected benefits for a
Policy dated January 1, 1999. This example assumes that the Net Premiums and
related Cash Values were in the subaccount for the entire period and that the
values were determined on the first Valuation Date following January 1st of
each year.
MFS FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
49
<PAGE>
The following example shows how the hypothetical net return of the MFS Research
Series would have affected benefits for a Policy dated January 1, 1999. This
example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
MFS RESEARCH SERIES
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the MFS Total
Return Series would have affected benefits for a Policy dated January 1, 1999.
This example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
MFS TOTAL RETURN SERIES
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the MFS
Utilities Series would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
MFS UTILITIES SERIES
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
50
<PAGE>
The following example shows how the hypothetical net return of the Oppenheimer
Global Securities Fund would have affected benefits for a Policy dated January
1, 1999. This example assumes that the Net Premiums and related Cash Values
were in the subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
OPPENHEIMER GLOBAL SECURITIES FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the Oppenheimer
Growth Fund would have affected benefits for a Policy dated January 1, 1999.
This example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
OPPENHEIMER GROWTH FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the Oppenheimer
Growth & Income Fund would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
OPPENHEIMER GROWTH & INCOME FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
51
<PAGE>
The following example shows how the hypothetical net return of the Oppenheimer
High Income Fund would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
OPPENHEIMER HIGH INCOME FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the Oppenheimer
Strategic Bond Fund would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
OPPENHEIMER STRATEGIC BOND FUND
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the WRL Emerging
Growth Portfolio would have affected benefits for a Policy dated January 1,
1999. This example assumes that the Net Premiums and related Cash Values were
in the subaccount for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
WRL EMERGING GROWTH PORTFOLIO
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
52
<PAGE>
The following example shows how the hypothetical net return of the WRL Growth
Portfolio would have affected benefits for a Policy dated January 1, 1999. This
example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
WRL GROWTH PORTFOLIO
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
The following example shows how the hypothetical net return of the WRL Global
Portfolio would have affected benefits for a Policy dated January 1, 1999. This
example assumes that the Net Premiums and related Cash Values were in the
subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
WRL GLOBAL PORTFOLIO
Male Issue Age 65, $100,000 Single Premium
($174,000 Specified Amount, Non-Tobacco Select Risk)
Death Benefit Option A
Both Current and Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
CASH VALUE NET SURRENDER VALUE
------------------------ -----------------------
CURRENT GUARANTEED CURRENT GUARANTEED
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Policy Anniversary on January 1 of 1999 $ $ $ $
</TABLE>
Please see Appendix A for full illustrations based on hypothetical rates
of return.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALE OF THE POLICIES
The Policy will be sold by individuals who are licensed as our life
insurance agents and who are also registered representatives of broker-dealers
having written sales agreements for the Policy with AFSG Securities Corporation
(AFSG), the principal underwriter of the Policy. AFSG is located at 4425 North
River Blvd., NE, Cedar Rapids, Iowa 52402, is registered with the 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 PFL agents or other registered representatives will be
approximately 7% of the initial premium. In addition, certain production,
persistency and managerial bonuses may be paid.
53
<PAGE>
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to the Policy under the Federal securities laws.
All matters of Iowa law pertaining to the Policy have been passed upon by Frank
A. Camp, Vice President and Division General Counsel, PFL Life Insurance
Company.
LEGAL PROCEEDINGS
Like other life insurance companies, we are involved in lawsuits. We are
not aware of any class action lawsuits naming us as a defendant or involving
the separate account. In some lawsuits involving other insurers, substantial
damages have been sought and/or material settlement payments have been made. We
believe that there are no pending or threatened lawsuits that will adversely
impact us or the separate account.
YEAR 2000 MATTERS
We have in place a Year 2000 Assessment and Planning Project (the "Plan")
to review and analyze existing hardware and software systems, and voice and
data communications systems, to determine if they are Year 2000 compatible. The
Plan provides for a management process which ensures that when a particular
system, or software application, is determined to be "non-complaint," the
proper steps are in place to either remedy the "non-compliance" or cease using
the particular system or software. The Plan also requires the Chief Information
Officer to report to the Board of Directors on a regular and routine basis the
status of efforts under the Plan. We also have engaged the services of a
third-party provider that specializes in Year 2000 issues.
The Plan has four specific objectives:
/bullet/ develop an inventory of all applications
/bullet/ evaluate those applications to determine the most prudent manner
to move them to Year 2000 compliance, if necessary;
/bullet/ estimate budgets, resources and schedules for moving the
applications to Year 2000 compliance; and
/bullet/ define testing and deployment requirements to successfully manage
the changes of any codes.
As of the date of this prospectus, we have identified and made available
what we believe are the appropriate resources of hardware, people and dollars,
including engaging outside third parties, to ensure that the Plan will be
completed.
Resolving the Year 2000 computer problem is complex and multifaceted. We
cannot know conclusively whether a response plan is successful until the Year
2000 arrives (or an earlier date if the systems or equipment address Year 2000
data prior to the Year 2000). Even with the appropriate and diligent pursuit of
a well-conceived response plan, including testing procedures, there is no
certainty that any company will achieve complete success. Also, the actions (or
failure to act) of third parties beyond our knowledge or control may affect our
ability to function unaffected to and through the Year 2000. See the
Portfolios' prospectuses for information on their preparation for Year 2000.
54
<PAGE>
FINANCIAL STATEMENTS
This prospectus does not include financial statements of the separate
account because, as of the date of this prospectus, the separate account had
not yet commenced operations, had no assets, and had incurred no liabilities.
Our financial statements appear on the following pages. Our financial
statements should be distinguished from the separate account's financial
statements and you should consider our financial statements only as bearing
upon our ability to meet our obligations under the Policies.
ADDITIONAL INFORMATION ABOUT PFL LIFE INSURANCE COMPANY
PFL is a stock life insurance company that is a wholly-owned indirect
subsidiary of AEGON USA, Inc. AEGON USA, Inc. is a wholly-owned indirect
subsidiary of AEGON nv, a Netherlands corporation that is a publicly traded
international insurance group. PFL's home office is located at 4333 Edgewood
Road NE, Cedar Rapids, Iowa 52499.
PFL was incorporated in 1961 under Iowa law and is subject to regulation
by the Iowa Commissioner of Insurance. PFL is engaged in the business of
issuing life insurance policies and annuity contracts, and is licensed to do
business in the District of Columbia, Guam and all states except New York. PFL
submits annual statements on its operations and finances to insurance officials
in all states and jurisdictions in which it does business. PFL has filed the
Policy described in this prospectus with insurance officials in those
jurisdictions in which the Policy is sold.
PFL intends to reinsure a portion of the risks assumed under the Policies.
55
<PAGE>
PFL'S EXECUTIVE OFFICERS AND DIRECTORS
PFL is governed by a board of directors. The following table sets forth
the name, address and principal occupation during the past five years of each
of PFL's executive officers and directors.
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
AND POSITION WITH PFL DURING PAST 5 YEARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
William L. Busler* Director, Chairman of the Board, and President
Director, Chairman of the
Board, and President
- ---------------------------------------------------------------------------------------------------------------
Larry N. Norman* Director, Executive Vice President
Director, Executive Vice President
- ---------------------------------------------------------------------------------------------------------------
Patrick S. Baird* Executive Vice President (1995-present), Chief Operating Officer
Director, Senior Vice (1996-present), Chief Financial Officer (1992-1995), Vice President and
President, and Chief Chief Tax Officer (1984-1995) of AEGON USA.
Operating Officer
- ---------------------------------------------------------------------------------------------------------------
Douglas C. Kolsrud* Director, Senior Vice President, Chief Investment Officer and
Director, Senior Vice Corporate Actuary
President, Chief Investment
Officer and Corporate Actuary
- ---------------------------------------------------------------------------------------------------------------
Craig D. Vermie Director, Vice President, Secretary and General Counsel
Director, Vice President,
Secretary and General Counsel
<FN>
* Located at PFL Life Insurance Company, 4333 Edgewood Road, NE, Cedar Rapids,
IA 52449.
</FN>
</TABLE>
The following table gives the name, address and principal occupation during the
past five years of the senior officers of PFL (other than officers listed above
as directors).
SENIOR OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
AND POSITION WITH PFL DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------
<S> <C>
Robert J. Kontz Vice President and Corporate Controller
Vice President and Corporate
Controller
- ----------------------------------------------------------------------------------------
Brenda K. Clancy Vice President, Treasurer and Chief Financial Officer
Vice President, Treasurer and
Chief Financial Officer
- ----------------------------------------------------------------------------------------
<FN>
* Located at PFL Life Insurance Company, 4333 Edgewood Road, NE, Cedar Rapids,
IA 52449.
</FN>
</TABLE>
56
<PAGE>
PFL holds the assets of the separate account physically segregated and
apart from the general account. PFL maintains records of all purchases and sale
of Portfolio shares by each of the subaccounts. A blanket bond issued to AEGON
U.S. Holding Corporation ("AEGON U.S.") in the amount of $5 million (subject to
a $1 million deductible), covering all of the employees of AEGON U.S. and its
affiliates, including PFL. A Stockbrokers Blanket Bond, issued to AEGON U.S.A.
Securities, Inc. providing fidelity coverage, covers the activities of
registered representatives of AFSG to a limit of $12 million.
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT
PFL established the separate account as a separate investment account
under Iowa law in 1998. PFL owns the assets in the separate account and is
obligated to pay all benefits under the Policies. The separate account may be
used to support other variable life insurance policies of PFL. The separate
account is registered with the Commission as an unit investment trust under the
Investment Company Act of 1940 and qualifies as a "separate account" within the
meaning of the Federal securities laws.
ILLUSTRATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following illustrations show how certain values under a sample Policy
would change with different rates of fictional investment performance over an
extended period of time. In particular, the illustrations show how the Death
Benefit, Cash Value, and Net Surrender Value under a Policy covering a male
Insured of age 65 on the Policy Date, would change over time if the single
premium was paid and the return on the assets in the subaccounts were a uniform
gross annual rate (before any expenses) of 0%, 6% or 12%. The tables also show
how the Policy would operate if the premium accumulated at 5% interest. The
values under the Policy will be different from those shown even if the returns
averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout
the years shown.
THE HYPOTHETICAL INVESTMENT RETURNS ARE PROVIDED ONLY TO ILLUSTRATE THE
MECHANICS OF A HYPOTHETICAL POLICY AND DO NOT REPRESENT PAST OR FUTURE
INVESTMENT RATES OF RETURN. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return. The actual
return on your Cash Value will depend on factors such as the amounts you
allocate to particular Portfolios, the amounts deducted for the Policy's
monthly and daily charges, the Portfolios' expense ratios, your Policy loan and
withdrawal history, and rates of inflation.
The illustrations assume that the assets in the Portfolios are subject to
an annual expense ratio of 0.__% of the average daily net assets. This annual
expense ratio is based on the average of the expense ratios of each of the
Portfolios for the last fiscal year and take into account current expense
reimbursement arrangements. For information on Portfolio expenses, see the
Funds' prospectuses.
57
<PAGE>
The illustrations also reflect the Monthly Policy Charge and the Daily
Charge for the hypothetical Insured. Separate illustrations on each of the
following pages reflect our current Cost of Insurance Charges and the higher
guaranteed maximum cost of insurance that we may have the contractual right to
charge. The illustrations assume that no Policy loans have been taken and
assume no charges for Federal or state taxes or charges for supplemental
benefits.
After deducting Portfolio expenses, the illustrated gross annual
investment rates of return of 0%, 6% and 12% would correspond to approximate
net annual rates for the separate account of -1.45%, 4.55% and 10.55%,
respectively.
[THE ILLUSTRATIONS ARE BASED ON PFL'S GENDER DISTINCT RATES FOR
NON-TOBACCO USERS. UPON REQUEST, PFL WILL FURNISH A COMPARABLE ILLUSTRATION
BASED UPON THE PROPOSED INSURED'S INDIVIDUAL CIRCUMSTANCES. SUCH ILLUSTRATIONS
MAY ASSUME DIFFERENT HYPOTHETICAL RATES OF RETURN THAN THOSE ILLUSTRATED IN THE
FOLLOWING ILLUSTRATIONS.]
58
<PAGE>
Index to Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PFL LIFE INSURANCE COMPANY
Report of Independent Auditors dated February__, 1999.
Statutory-Basis Balance sheets at December 31, 1998 and 1997.
Statutory-Basis Statements of Operations for the years ended December 31, 1998,
1997 and 1996.
Statutory-Basis Statements of Changes in Capital and Surplus for the years
ended December 31, 1998, 1997, and 1996.
Statutory-Basis Statements of Cash Flows for the years ended December 31, 1998,
1997, and 1996.
Notes to Statutory-Basis Financial Statements
Statutory-Basis Financial Statement Schedules
59
<PAGE>
PART II.
OTHER INFORMATION
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.
REPRESENTATION PURSUANT TO SECTION 26(E) (2) (A)
PFL Life Insurance Company ("PFL Life") hereby represents that the fees
and charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by PFL Life.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") 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.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The Prospectus, consisting of 58 pages
The undertaking to file reports
Representation Pursuant to Section 26(e) (2) (A)
The statement with respect to indemnification
The Rule 484 undertaking
The signatures
Written consent of the following persons:
(a) Richard R. Greer, Actuary
(b) Frank A. Camp, Esq.
(c) Sutherland Asbill & Brennan LLP
(d) Ernst & Young LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of the Board of Directors of PFL Life establishing
the Separate Account
II-1
<PAGE>
(2) Not Applicable
(3) Distribution of Policies:
(a) Form of Principal Underwriting Agreement (4)
(b) Form of Broker-Dealer Supervision and Sales Agreement
by and between AFSG Securities Corporation and the
Broker-Dealer (4)
(4) Not Applicable
(5) Specimen Flexible Premium Variable Life Insurance Policy
(a) Individual Policy Form (VL20)
(b) Joint Policy Form (JL20)
(6) (a) Certificate of Incorporation of PFL Life (2)
(b) By-Laws of PFL Life (2)
(7) Not Applicable
(8) Participation Agreements:
(a) Among MFS Variable Insurance Trust and PFL Life and
Massachusetts Financial Services Company
(b) Among AIM Variable Insurance Funds, Inc., PFL Life and AFSG
Securities Corporation (4)
(c) Among PFL Life and Dreyfus Variable Investment Fund (4)
(d) Amendment to Participation Agreement Among PFL Life and
Dreyfus Variable Investment Fund
(e) Amendment to Participation Agreement Among Oppenheimer
Variable Account Funds, Oppenheimerfunds, Inc. and PFL Life
(f) Among Oppenheimer Variable Account Funds, Oppenheimerfunds,
Inc. and PFL Life (4)
(g) Among WRL Series Fund, Inc. and PFL Life and Amendments
thereto (3)
(h) Among Variable Insurance Product Funds and Variable
Insurance Products Fund II, Fidelity Distributors
Corporation, and PFL Life, and amendments thereto (5)
(9) Not Applicable
(10) Application for Flexible Premium Variable Life Insurance Policy
(6)
(11) Memorandum describing issuance, transfer and redemption
procedures (6)
2. See Exhibit 1.A.
3. Opinion of Counsel as to the legality of the securities being registered
(6)
4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I
5. Not Applicable
6. Opinion and consent of Richard R. Greer as to actuarial matters pertaining
to the securities being registered (6)
7. Consent of Frank A. Camp, Esq. (6)
8. Consent of Sutherland Asbill & Brennan LLP (6)
9. Consent of Ernst & Young LLP (6)
10. Powers of Attorney
- ----------------------------------------
(1) This exhibit was previously filed on Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 33-92226) filed on July 10,
1998 and hereby is incorporated by reference.
II-2
<PAGE>
(2) This exhibit was previously filed on Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-3 (File No. 333-36297) filed on February
27, 1998 and is hereby incorporated by reference.
(3) This exhibit was previously filed on Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-26209) filed on April 29,
1998 and is hereby incorporated by reference.
(4) This exhibit was previously filed on Post-Effective Amendment No. 4 to the
Registration Statement on Form N-4 (File 333-7509) filed on April 30, 1998
and is hereby incorporated by reference.
(5) This exhibit was previously filed on Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File 333-7509) filed on December 6,
1996 and is hereby incorporated by reference.
(6) To be filed by Amendment.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Legacy Builder Variable Life Separate Account, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in Cedar
Rapids, Iowa on the 27th day of November, 1998.
(Seal) LEGACY BUILDER VARIABLE LIFE
SEPARATE ACCOUNT
PFL LIFE INSURANCE COMPANY
Depositor
/s/ WILLIAM L. BUSLER
---------------------
William L. Busler
President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
TITLE DATE
----- ----
/s/ PATRICK S. BAIRD Director November 27, 1998
- ----------------------------
Patrick S. Baird
/s/ CRAIG D. VERMIE Director November 27, 1998
- ----------------------------
Craig D. Vermie
/s/ WILLIAM L. BUSLER Director November 27, 1998
- ---------------------------- (Principal Executive
William L. Busler Officer)
/s/ LARRY N. NORMAN Director November 27, 1998
- ----------------------------
Larry N. Norman
/s/ DOUGLAS C. KOLSRUD Director November 27, 1998
- ----------------------------
Douglas C. Kolsrud
/s/ ROBERT J. KONTZ Corporate Controller November 27, 1998
- ----------------------------
Robert J. Kontz*
/s/ BRENDA K. CLANCY Treasurer November 27, 1998
- ----------------------------
Brenda K. Clancy
* Principal Accounting Officer
<PAGE>
Exhibit Index
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
- ------- -----------
1.A.(1) Resolutions of the Board of Directors of PFL Life
establishing the Separate Account
1.A.(5)(a) Individual Specimen Flexible Variable Life Insurance Policy
1.A.(5)(b) Joint Specimen Flexible Variable Life Insurance Policy
1.A.(8)(a) Participation Agreement Among MFS Variable Insurance Funds,
Inc., PFL Life and Massachusetts Financial Services Company
1.A.(8)(d) Amendment to Participation Agreement Among PFL Life and
Dreyfus Variable Investment Fund
1.A.(8)(e) Amendment to Participation Agreement Among Oppenheimer
Variable Account Funds, Oppenheimerfunds, Inc. and PFL Life
10 Powers of Attorney
EXHIBIT 99.BdRES
Exhibit 1.A.(1)
Resolutions of the Board of Directors of PFL Life
Establishing the Separate Account
<PAGE>
WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF
PFL LIFE INSURANCE COMPANY
NOVEMBER 20, 1998
The undersigned, being all of the Directors of PFL Life Insurance Company, an
Iowa corporation (hereafter referred to as the "Company"), acting as authorized
in Section 490.821 of the Iowa Business Corporation Act and Article II, Section
8, of the Company's Bylaws, HEREBY ADOPT, unanimously, the following resolutions
by Written Consent and authorize the actions therein to be taken by the Company
upon the filing of the Written Consent in the Minute Book of the Company:
RESOLVED, that PFL Life Insurance Company (the "Company"), pursuant to the
applicable provisions of the Iowa Insurance Laws, hereby establishes a new
separate account designated "LEGACY BUILDER VARIABLE LIFE SEPARATE
ACCOUNT" (hereinafter the "Account") for the following purposes, and,
subject to such conditions as hereafter set forth, said use, purposes and
conditions to be in full compliance with Iowa Insurance Laws and all rules
and regulations of the Iowa Insurance Department;
FURTHER RESOLVED, that the Account shall be established for the purpose of
providing for the issuance by the Company of such variable life insurance
policies (the "Policies") as the President or a Vice President may
designate for such purpose, and shall constitute a separate account into
which allocated amounts paid to the Company are applied under the terms of
such Policies; and
FURTHER RESOLVED, that the income, gains and losses, realized or
unrealized, from assets allocated to the Account shall, in accordance with
the Policies, be credited to or charged against such Account, without
regard to other income, gains or losses of the Company; and
FURTHER RESOLVED, that the Account may be divided into two or more
subaccounts, and that the income, gains and loses, realized and
unrealized, from assets allocated to a subaccount may, in accordance with
the Policies, be credited to or charged against such subaccount, without
regard to income, gains or losses of any other subaccount or of the
Company.
FURTHER RESOLVED, that the fundamental investment policy of the Account
shall be to invest or reinvest the assets of the Account as may be
specified in the respective Policies and without regard to any
requirements or limitations prescribed by Iowa Insurance Laws governing
the investments of life insurance companies; and
FURTHER RESOLVED, that the President, or each Vice President, be, and
hereby is, authorized to deposit such amount in the Account or in each
investment division thereof as may be necessary or appropriate to
facilitate the commencement of the Account's operations; and
FURTHER RESOLVED, that the President, or each Vice President, be, and
hereby is, authorized to transfer funds from time to time between the
Company's general account and the Account in order to establish the
Account or to support the operation of the Policies with respect to the
Account as deemed necessary or appropriate and consistent with the terms
of the Policies; and
FURTHER RESOLVED, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as they may require, be, and they hereby are,
authorized and directed to take all action necessary in connection with
the offering of said Policies for sale and the
<PAGE>
operation of the Account, as the officers of the Company shall deem
necessary or appropriate; and
FURTHER RESOLVED, that the Company be authorized and directed to obtain
any required approvals with respect to the establishment of the Account
and marketing of the Policies from the Commissioner of Insurance of Iowa
and any other statutory or regulatory approvals required by the Company as
an Iowa corporation; and
FURTHER RESOLVED, that the appropriate officers of the Company be, and
they hereby are, authorized on behalf of the Account, the Policies and the
Company to take any and all action they may deem necessary or advisable in
order to sell the Policies, including any registrations, filings, and
qualifications of the Company, its officers, agents and employees or the
Policies, and to register and/or obtain approval of the Policies under the
insurance laws of any of the states or the securities laws of the United
States of America or other jurisdictions, and in connection therewith to
prepare, execute, deliver, and file all such applications, reports,
covenants, resolutions, requests for exemptions, registration statements,
consent 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
said officers or counsel of the Company may deem necessary or desirable
(including entering into whatever agreements may be necessary) in order to
maintain such registrations, filings or qualifications for as long as the
said officers or counsel deem it to be in the best interests of the
Account, the Policies and the Company; and
FURTHER RESOLVED, that the President, the Vice President and the Secretary
of the Company be, and they hereby are, each authorized in the name and on
behalf of the Account and the Company to execute and file irrevocable
written consents on behalf of the Account and of the Company to be sued in
such states wherein such consents to service of process may be required
under the insurance laws therein in connection with said registrations,
filings or qualification of the Policies and to appoint the appropriate
state official or such other person as may be allowed by said insurance
laws, agent of the Account and of the Company for the purpose of receiving
and accepting process; and
FURTHER RESOLVED, that the President of the Company is hereby authorized
to execute such agreement or agreements as deemed necessary and
appropriate in connection with the establishment, operation and
maintenance of the Account and the design, issuance, and administration of
the Policies; and
FURTHER RESOLVED, that the appropriate officers of the Company are hereby
authorized to execute whatever agreement or agreements may be necessary or
appropriate to enable the Account to make investments appropriate to the
Account in support of the Policies; and
FURTHER RESOLVED, that the appropriate officers of the Company, and each
of them, are hereby authorized to execute and deliver all such documents
and papers and to do or cause to be done all such acts and things as they
may deem necessary or desirable to carry out the foregoing resolutions and
the intent and purposes thereof; and
FURTHER RESOLVED, that the term "appropriate officers", as used herein,
shall include all of the elected and appointed officers of the Company,
either severally or individually, subject to any applicable resolutions of
the Board of Directors dealing with signing authority for the Company.
This Written Consent may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Written Consent.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Written Consent of the
Board of Directors of PFL Life Insurance Company as of the date first
hereinabove set forth.
- ----------------------------------- ------------------------------------
Patrick S. Baird Craig D. Vermie
- ----------------------------------- ------------------------------------
William L. Busler Larry N. Norman
- -----------------------------------
Douglas C. Kolsrud
EXHIBIT 99.A7
Exhibit 1.A.(5)(a)
Individual Specimen Flexible Premium Variable Life Insurance Policy
<PAGE>
================================================================================
PFL LIFE INSURANCE COMPANY Home Office:
(A STOCK COMPANY) 4333 Edgewood Road, N.E. - Cedar Rapids, Iowa 52499
(319) 398-8511
================================================================================
IN THIS POLICY the Primary Insured is named on the Policy Schedule page. The
Primary Insured will be referred to as YOU or YOUR. PFL Life Insurance Company
will be referred to as WE, OUR or US.
IF YOU DIE before the Maturity Date and while this Policy is In Force, WE WILL
PAY the Death Benefit Proceeds to the Beneficiary upon receipt of due proof,
satisfactory to Us, of Your death. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL
INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS
IN THE SEPARATE ACCOUNT.
IF YOU ARE ALIVE on the Maturity Date and this Policy is In Force, WE WILL PAY
the Net Surrender Value as of the Maturity Date. CASH VALUES WILL INCREASE OR
DECREASE IN ACCORDANCE WITH THE POLICY VALUE PROVISIONS AND THE INVESTMENT
EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CASH VALUES ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
THE PROVISIONS on the following pages are part of this Policy.
IN WITNESS WHEREOF, We have signed this Policy at Our Office in Cedar Rapids,
Iowa as of the Policy Date.
/s/ CRAIG S. VERMIE /s/ WILLIAM L. BUSLER
------------------- ---------------------
Secretary President
================================================================================
RIGHT TO EXAMINE POLICY
The Owner may cancel this Policy by returning it to Us at 4333 Edgewood Road,
N.W., Cedar Rapids, Iowa 52499 or to the representative through whom it was
purchased within 10 days after receipt. If the Policy is returned within this
period, it will be void from the beginning and a refund will be made to the
Owner. The refund will equal the sum of:
1. The difference between the Initial Premium paid and the amount allocated to
any Accounts under the Policy; plus
2. The total amount of monthly deductions made and any other charges imposed
on amounts allocated to the Accounts; plus
3. The value of amounts allocated to the Accounts on the date We or Our agent
receive the returned Policy.
If state law prohibits the calculation above, the refund will be the total of
all premiums paid for this Policy.
================================================================================
Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
<PAGE>
================================================================================
POLICY GUIDE
================================================================================
POLICY SCHEDULE.................... 3 DEATH BENEFIT PROVISIONS............. 9
Death Benefit...................... 9
TABLE OF SURRENDER CHARGES......... 3 Specified Amount................... 9
Limitation Percentage.............. 10
TABLE OF GUARANTEED RATES.......... 4 Death Benefit Proceeds............. 10
DEFINITIONS........................ 5 PREMIUM PROVISIONS................... 10
Accounts......................... 5 Payment............................ 10
Age.............................. 5 Premiums........................... 10
Anniversary...................... 5 Grace Period....................... 11
Beneficiary...................... 5
SEPARATE ACCOUNT PROVISIONS.......... 11
Death Benefit Proceeds........... 5 The Separate Account............... 11
Fixed Account.................... 5 Subaccounts........................ 11
In Force......................... 5 Transfers.......................... 12
Initial Premium.................. 5 Addition, Deletion or Substitution
Loan Reserve..................... 5 of Investments..................... 12
Change of Investment Objective..... 12
Maturity Date.................... 5 Unit Value......................... 13
Monthiversary.................... 5
Net Surrender Value.............. 5
Office........................... 6 POLICY VALUE PROVISIONS.............. 13
Allocation of Premiums............. 13
Policy Date...................... 6 Monthly Deductions................. 14
Reallocation Date................ 6 Monthly Policy Charge.............. 14
SEC.............................. 6 Monthly Cost of Insurance.......... 14
Separate Account................. 6 Monthly Cost of Insurance Rates.... 14
Series Fund(s)................... 6 Subaccount Value................... 15
Subaccount....................... 6 Fixed Account Value................ 15
Termination...................... 6 Cash Value......................... 15
Valuation Date................... 6 Surrender.......................... 16
Valuation Period................. 6 Net Surrender Value................ 16
Written Notice................... 6 Surrender Charge................... 16
Withdrawals........................ 16
Continuation of Insurance.......... 17
GENERAL PROVISIONS................. 7 Insufficient Value................. 17
The Policy....................... 7 Basis of Computations.............. 17
Ownership........................ 7 Policy Loans....................... 17
Beneficiary...................... 7
Assignment....................... 7
Incontestability................. 7
Suicide.......................... 8
Issue Age and Sex................ 8
Periodic Report.................. 8
Termination...................... 8
Policy Payment................... 8
Optional Methods of Settlement... 8
Payments and Transfers........... 8
Extended Maturity Date........... 9
Conversion Rights................ 9
Protection of Proceeds........... 9
Page 2
<PAGE>
PFL LIFE INSURANCE COMPANY
CEDAR RAPIDS, IOWA
POLICY SCHEDULE
- --------------------------------------------------------------------------------
PRIMARY INSURED: John Doe
ISSUE AGE AND SEX: 35 - MALE POLICY NUMBER: 01-12345678
SPECIFIED AMOUNT: $204,416 POLICY DATE: December 01, 1998
INITIAL PREMIUM: $50,000 REALLOCATION DATE: December 16, 1998
MATURITY DATE: December 01, 2063 REALLOCATION ACCOUNT: Fixed Account
RATE CLASS: Standard
SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUN T: Legacy Builder Variable Life Separate Account
ASSET BASED CHARGES POLICY YEARS
(Expressed as an Annual Percentage) 1-10 11 +
------- --------
SEPARATE ACCOUNT CHARGES
Daily Charge: .50% .50%
Monthly Deduction Charge: 2.00% 1.00%
FIXED ACCOUNT CHARGES
Monthly Deduction Charge: 2.00% 1.00%
DEFERRED SURRENDER CHARGES: Surrender Charges are the percentage shown
below times the Initial Premium.
-----------------------------------------------
SURRENDER SURRENDER
POLICY YEAR CHARGE POLICY YEAR CHARGE
-----------------------------------------------
At Issue 9.75%
1 9.75% 6 7.00%
2 9.50% 7 6.00%
3 9.25% 8 4.00%
4 9.00% 9 2.00%
5 8.00% 10+ 0.00%
-----------------------------------------------
Page 3
<PAGE>
PFL LIFE INSURANCE COMPANY
CEDAR RAPIDS, IOWA
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
- ------------------------------------------------------------------------------
POLICY NUMBER: 01-12345678
Guaranteed Rate Basis for the Initial Specified Amount on Primary Insured
Commissioners 1980 Standard Ordinary Tobacco User and Non Tobacco User
Mortality Table Male Lives
Tobacco User Classification
Annual Cost of Insurance Rates Per $1,000
(The monthly cost of insurance calculations will use
one-twelfth of these rates.)
--------------------------------------------------------------------
ATTAINED AGE ANNUAL RATE ATTAINED AGE ANNUAL RATE
--------------------------------------------------------------------
35 2.63 36 2.81
37 3.04 38 3.30
39 3.60 40 3.94
41 4.34 42 4.75
43 5.22 44 5.71
45 6.27 46 6.83
47 7.44 48 8.08
49 8.80 50 9.56
51 10.44 52 11.42
53 12.54 54 13.80
55 15.14 56 16.59
57 18.09 58 19.69
59 21.35 60 23.19
61 25.26 62 27.59
63 30.23 64 33.14
65 36.29 66 39.57
67 43.01 68 46.55
69 50.32 70 54.48
71 59.09 72 64.33
73 70.32 74 76.66
75 83.77 76 91.10
77 98.52 78 105.91
79 113.49 80 121.59
81 130.41 82 140.20
83 151.03 84 162.49
85 174.20 86 185.78
87 197.06 88 209.37
89 221.52 90 233.69
91 246.12 92 259.33
93 276.30 94 298.15
95 329.96 96 384.55
97 480.20 98 657.98
99 1000.00
--------------------------------------------------------------------
Page 4
<PAGE>
DEFINITIONS
================================================================================
ACCOUNTS Allocation options including the Fixed Account and the
Subaccounts of the Separate Account.
AGE Issue Age refers to the Age on the Insured's last
birthday prior to the Policy Date. Attained Age refers to
the Issue Age plus the number of completed policy years.
ANNIVERSARY The same day and month as the Policy Date for each
succeeding year the Policy remains In Force.
BENEFICIARY The person or persons specified by the Owner to receive
the Death Benefit Proceeds.
DEATH BENEFIT The amount payable upon Your death in accordance with the
PROCEEDS Death Benefit Provisions.
FIXED ACCOUNT Allocation option(s) other than the Separate Account.
IN FORCE Condition under which the coverage is active and the
Insured's life remains insured.
INITIAL PREMIUM The amount which must be paid before coverage begins. The
amount is shown on the Policy Schedule page.
LOAN RESERVE A portion of the Fixed Account used as collateral
for any policy loan.
MATURITY DATE The date when coverage under the Policy will
terminate if the Primary Insured is living and the Policy
is In Force, unless extended in accordance with the
Extended Maturity Date provision.
MONTHIVERSARY The day of each month coinciding with the Policy Date. If
there is no day in a calendar month which coincides with
the Policy Date, the Monthiversary will be the first day
of the next month.
NET SURRENDER The amount payable upon surrender in accordance with the
VALUE Policy Value Provisions of this Policy.
Page 5
<PAGE>
OFFICE Refers to Our administrative office located in Cedar
Rapids, Iowa.
POLICY DATE The date coverage is effective and monthly deductions
commence under the Policy. Policy months, years and
anniversaries are measured from the Policy Date, as shown
on the Policy Schedule page.
REALLOCATION The date on which any premiums are reallocated from the
DATE Reallocation Account to the Accounts elected by the
Owner on the application. The Reallocation Date is shown
on the Policy Schedule page.
SEC The United States Securities and Exchange Commission.
SEPARATE A separate investment account shown on the Policy
ACCOUNT Schedule page which is composed of several subaccounts
established to receive and invest premiums under the
Policy.
SERIES FUND(S) Designated mutual fund(s) from which each Subaccount of
the Separate Account will buy shares.
SUBACCOUNT A sub-division of the Separate Account. Each Subaccount
invests exclusively in the shares of a specified Series
Fund portfolio.
TERMINATION Condition when the Insured's life is no longer insured
under the coverage provided.
VALUATION DATE Any day We are required by law to value the assets of the
Separate Account.
VALUATION The period commencing at the end of one Valuation Date
PERIOD and continuing to the end of the next succeeding
Valuation Date.
WRITTEN NOTICE Written Notice means a notice by the Owner to Us
requesting or exercising a right of the Owner as provided
in the Policy provision of the General Provisions. In
order for a notice to be considered a Written Notice, it
must: be in writing, signed by the Owner; be in a form
acceptable to Us; and contain the information and
documentation, as determined in Our sole discretion,
necessary for Us to take the action requested, or for the
Owner to exercise the right specified. A Written Notice
will not be considered complete until all necessary
supporting documentation required or requested by Us has
been received by Us at Our administrative Office.
Page 6
<PAGE>
GENERAL PROVISIONS
================================================================================
THE POLICY This Policy is issued in consideration of the attached
application and payment of the Initial Premium. This
Policy and the attached application constitute the
entire contract. All statements in these applications,
in the absence of fraud, will be deemed representations
and not warranties. No statement can be used to void
this Policy or be used in defense of a claim unless it
is contained in the written application. No policy
provision can be waived or changed except by
endorsement. Such endorsement must be signed by Our
President or Secretary.
OWNERSHIP This Policy belongs to the Owner. The Owner, as named in
the application or as subsequently changed, may exercise
all rights under this Policy during Your lifetime
including the right to transfer ownership. If the Owner
should die during Your lifetime, ownership of this Policy
will pass to the Owner's estate if no contingent owner is
named.
We will not be bound by any change in the ownership
designation unless it is made by Written Notice. The
change will be effective on the date the Written Notice
is accepted by Us. If We request, this Policy must be
returned to Our administrative Office for endorsement.
BENEFICIARY The Beneficiary, as named in the application or
subsequently changed, will receive the benefits payable
at Your death. If the Beneficiary dies before You, the
Contingent Beneficiary, if named, becomes the
Beneficiary. If no Beneficiary or Contingent Beneficiary
survives You, the benefits payable upon Your death will
be paid to the Owner or the Owner's estate.
We will not be bound by any change in the Beneficiary
designation unless it is made by Written Notice. The
change will be effective on the date the Written Notice
was signed; however, no change will apply to any payment
We made before the Written Notice is received. If We
request, this Policy must be returned to Our Office for
endorsement.
ASSIGNMENT This Policy may be assigned. We will not be bound by any
assignment unless made by Written Notice. The assignment
will be effective on the date the Written Notice is
received at Our Office and accepted by Us. We assume no
responsibility for the validity of any assignment.
INCONTESTABILITY This Policy shall be incontestable after it has been In
Force, while You are still alive, for two years from the
Policy Date.
Page 7
<PAGE>
SUICIDE If You die by suicide, while sane or insane, within two
years from the Policy Date, this Policy shall terminate
and Our total liability, including all Riders attached to
this Policy, will be limited to the total premiums paid,
less any loans and prior withdrawals, during such period.
ISSUE AGE If Your date of birth or sex is not correctly stated, the
AND SEX death benefit will be adjusted based on what the Initial
Premium would have purchased based on Your correct date
of birth and sex.
PERIODIC REPORT We will send a periodic report to the Owner at least once
each policy year. The periodic report will show:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The current Cash Value; 4. Any current policy loans;
2. The current Net Surrender 5. Activity since the last
Value; report.
3. The current death benefit;
</TABLE>
Additional activity within each Subaccount showing
investment experience will also be provided. The periodic
report provided nearest the end of the calendar year will
show projected values for the following year.
TERMINATION This Policy will terminate on the earliest of:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The Maturity Date; 3. The end of the grace period;
2. The date of Your death; 4. The date of surrender.
</TABLE>
POLICY PAYMENT All proceeds to be paid upon Termination will be paid in
one sum unless an optional method of settlement is
elected. Instead of a single amount, the payee may elect
to receive the proceeds under the terms of the next
provision.
OPTIONAL METHODS OF At the time that any proceeds are due in a single
SETTLEMENT payment, if requested in writing, We will inform the
payee of all other forms of settlement including
annuities, with or without life contingencies. Interest
will be at an annual rate that We decide, but not less
than the rate required required by law.
PAYMENTS AND All payments and transfers from the Subaccounts will be
TRANSFERS processed as provided in this Policy unless one of the
following situations exists:
1. The New York Stock Exchange is closed; or
2. The SEC requires that trading be restricted or
declares an emergency; or
3. The SEC allows Us to defer payments to protect Our
policyowners.
We reserve the right to defer the payment of any Fixed
Account values for the period permitted by law, but not
for more than six months.
Page 8
<PAGE>
EXTENDED MATURITY The Owner may request that the Maturity Date shown on
DATE the Policy Schedule page be extended. The request must
be in writing and received by Us at least 90 days, but
no more than 180 days, prior to the scheduled Maturity
Date. The Owner must request that the Maturity Date be
extended each Policy Anniversary following the Maturity
Date as shown on the Policy Schedule page. Any Riders In
Force on the scheduled Maturity Date will terminate on
that date and will not be extended. Interest on any
outstanding policy loan will continue to accrue during
the period for which the Maturity Date is extended.
If the Maturity Date is extended, on each Valuation Date
the Specified Amount will be adjusted to equal the Cash
Value and the Limitation Percentage will be 100%. No
additional Premium payments will be permitted except if
required to prevent lapse of this Policy. Future monthly
deductions will be waived.
CONVERSION At any time upon written request within the first two
RIGHTS policy years, the Owner may elect to transfer all
Subaccount values to the Fixed Account without a
transfer charge.
PROTECTION OF Unless the Owner directs by filing Written Notice, no
PROCEEDS Beneficiary may assign any payments under this Policy
before the same are due. To the extent permitted by law,
no payments under this Policy will be subject to the
claims of creditors of any Beneficiary.
DEATH BENEFIT PROVISIONS
================================================================================
DEATH BENEFIT The death benefit is the greater of:
1. the Specified Amount; or
2. the Limitation Percentage times the Cash Value of this
Policy on the date of Your death.
SPECIFIED AMOUNT The Specified Amount is as shown on the Policy Schedule
page, adjusted for any withdrawals as provided in the
Withdrawal Provision of the Policy Value Provisions.
Page 9
<PAGE>
LIMITATION The Limitation Percentage is a percentage based on Your
PERCENTAGE Attained Age at the beginning of the policy year equal
to:
------------------------------------------------------
ATTAINED AGE LIMITATION PERCENTAGE
------------------------------------------------------
40 and under 250%
41 through 45 250% minus 7% for each Age over Age 40
46 through 50 215% minus 6% for each Age over Age 45
51 through 55 185% minus 7% for each Age over Age 50
56 through 60 150% minus 4% for each Age over Age 55
61 through 65 130% minus 2% for each Age over Age 60
66 through 70 120% minus 1% for each Age over Age 65
71 through 75 115% minus 2% for each Age over Age 70
76 through 90 105%
91 through 94 105% minus 1% for each Age over Age 90
95 and over 100%
DEATH BENEFIT The Death Benefit Proceeds is the amount payable by Us
PROCEEDS under this Policy upon Your death, provided this Policy
has not terminated prior to Your death. Except as
provided in the Suicide section of the General
Provisions, the Death Benefit Proceeds will be equal to:
1. The death benefit; minus
2. Any monthly deductions due during the grace period;
minus
3. Any outstanding policy loan; minus
4. Any accrued policy loan interest.
PREMIUM PROVISIONS
================================================================================
PAYMENT The Initial Premium shown on the Policy Schedule page
must be paid on or before the Policy Date.
PREMIUMS While this Policy is In Force, additional premiums may be
paid at any time prior to the Maturity Date shown on the
Policy Schedule page. We reserve the right to limit or
refund any premium if:
1. The amount is below Our current minimum payment
requirement; or
2. The premium would increase the death benefit by more
than the amount of the premium; or
3. The premium would disqualify this Policy as a life
insurance contract as defined by the United States
Internal Revenue Code and applicable regulations.
Page 10
<PAGE>
GRACE PERIOD If the Net Surrender Value on any Monthiversary is not
sufficient to cover the monthly deductions on such day,
We will mail a notice to the last known address of the
Owner and any assignee of record. A grace period of 61
days after the mailing date of the notice will be
allowed for the payment. The notice will specify the
minimum payment and the final date on which such payment
must be received by Us to keep the Policy In Force. The
Policy will remain In Force during the grace period. If
the amount due is not received by Us within the grace
period, all coverage under the Policy will terminate
without value at the end of the grace period.
SEPARATE ACCOUNT PROVISIONS
================================================================================
THE SEPARATE The variable benefits under this Policy are provided
ACCOUNT through the Separate Account as shown on the Policy
Schedule page. The assets of the Separate Account are
Our property. Assets equal to the reserve and other
contractual liabilities under all policies issued in
connection with the Separate Account will not be charged
with liabilities arising out of any other business We
may conduct. If the assets of the Separate Account
exceed the liabilities arising under the policies
supported by the Separate Account, then the excess may
be used to cover the liabilities of Our general account.
The assets of the Separate Account shall be valued as
often as any policy benefits vary, but at least monthly.
SUBACCOUNTS The Separate Account has various Subaccounts with
different investment objectives. We reserve the right to
add or remove any Subaccount of the Separate Account.
Income, if any, and any gains or losses, realized or
unrealized, from assets in each Subaccount are credited
to, or charged against, the amount allocated to that
Subaccount without regard to income, gains, or losses in
other Subaccounts. Any amount charged against the
investment base for federal or state income taxes will
be deducted from that Subaccount. The assets of each
Subaccount are invested in shares of a corresponding
Series Fund portfolio. The value of a portfolio share is
based on the value of the assets of the portfolio
determined at the end of each Valuation Period in
accordance with applicable law.
Page 11
<PAGE>
TRANSFERS The Owner may transfer all or a portion of this Policy's
value in each Subaccount to other Subaccounts or the
Fixed Account. We reserve the right to charge a $10 fee
for each transfer in excess of twelve per policy year.
This charge will be deducted from the funds transferred.
A request for a transfer must be made in a form
satisfactory to Us. The transfer will ordinarily take
effect on the first Valuation Date on or following the
date the request is received at Our Office.
ADDITION, DELETION OR We reserve the right to transfer assets of the Separate
SUBSTITUTION Account, which We determine to be associated with the
OF INVESTMENTS class of contracts to which this Policy belongs, to
another Separate Account. If this type of transfer is
made, the term "Separate Account", as used in this
Policy, shall then mean the Separate Account to which
the assets were transferred. We also reserve the right
to add, delete, or substitute investments held by any
Subaccount.
We reserve the right, when permitted by law, to:
1. Deregister the Separate Account under the Investment
Company Act of 1940;
2. Manage the Separate Account under the direction of a
committee at any time;
3. Restrict or eliminate any voting privileges of owners
or other persons who have voting privileges as to the
Separate Account;
4. Combine the Separate Account or any Subaccount(s) with
one or more other Separate Accounts or Subaccounts;
5. Operate the Separate Account as a management
investment company;
6. Establish additional Subaccounts to invest in either a
new series of the Series Fund, or in shares of another
diversified, open-end registered investment company;
and
7. Fund additional classes of variable life insurance
contracts through the Separate Account.
CHANGE OF We reserve the right to change the investment objective
INVESTMENT OBJECTIVE of a Subaccount. If required by law or regulation, an
investment objective of the Separate Account, or of a
Series Fund portfolio designated for a Subaccount, will
not be materially changed unless a statement of the
change is filed with and approved by the appropriate
insurance official of the state of Our domicile or
deemed approved in accordance with such law or
regulation. If required, approval of or change of any
investment objective will be filed with the Insurance
Department of the state where this Policy is delivered.
Page 12
<PAGE>
UNIT VALUE Some of the policy values fluctuate with the investment
results of the Subaccounts. In order to determine how
investment results affect the policy values, a unit
value is determined for each Subaccount. The unit value
of each Subaccount was originally established at $10 per
unit. The unit value may increase or decrease from one
Valuation Period to the next. Unit values also will vary
between Subaccounts. The unit value of any Subaccount at
the end of a Valuation Period is the result of:
1. The total value of the assets held in the Subaccount.
This value is determined by multiplying the number of
shares of the designated Series Fund portfolio owned
by the Subaccount times the net asset value per share;
minus
2. A charge equal to the daily net assets of the
Sub-Account multiplied by the daily equivalent of the
Daily Charge. The maximum annual factor for the Daily
Charge is shown on the Policy Schedule page; minus
3. The accrued amount of reserve for any taxes or other
economic burden resulting from the application of tax
laws that are determined by Us to be properly
attributable to the Subaccount; and the result divided
by
4. The number of outstanding units in the Subaccount.
The use of the unit value in determining contract values
is described in the Policy Value Provisions.
POLICY VALUE PROVISIONS
================================================================================
ALLOCATION OF The premium will be allocated to the Accounts on the
PREMIUM first Valuation Date on or following the date the
premium is received at Our Office; except any premium or
portion of premium received prior to the Policy Date
will be allocated on the first Valuation Date on or
following the Policy Date. Any premium received prior to
the Reallocation Date will be allocated to the
Reallocation Account. On the first Valuation Date on or
following the Reallocation Date, the values in the
Reallocation Account will be transferred in accordance
with the Owner's current premium allocation
instructions.
We reserve the right to limit any allocation to any
Account to no less than 1%. No fractional percentages may
be permitted. The allocation may be changed by the Owner.
The request for change of allocations must be in a form
satisfactory to Us. The allocation change will be
effective on the date the request for change is recorded
by Us.
Page 13
<PAGE>
MONTHLY On the Policy Date and on each Monthiversary thereafter,
DEDUCTIONS a monthly deduction for this Policy will be made from the
Policy's Cash Value in an amount equal to the sum of the
following:
1. The Monthly Policy Charge based on the assets of the
Separate Account; plus
2. The Monthly Policy Charge based upon the assets of the
Fixed Account; plus
3. The Monthly Cost of Insurance Charge for this Policy,
if any; plus
4. The Monthly Charge for benefits provided by Riders
attached to this Policy, if any.
Deductions will be withdrawn from each Account in
accordance with the Owner's current premium allocation.
If the value of any Account is insufficient to pay its
part of the monthly deduction, the monthly deduction will
be taken on a pro rata basis from all Accounts.
MONTHLY POLICY The Monthly Policy Charge applicable to the Separate
CHARGE Account is equal to:
1. The Separate Account Monthly Deduction Charge divided
by 12; multiplied by
2. The sum of the Subaccount Values on the Valuation Date
of each monthly deduction.
The Monthly Policy Charge applicable to the Fixed Account
is equal to:
1. The Fixed Account Monthly Deduction Charge divided by
12; multiplied by
2. The Fixed Account value on the Valuation Date of each
monthly deduction, minus any outstanding loans.
The Separate Account and Fixed Account Monthly Deduction
Charges are shown on the Policy Schedule page.
MONTHLY COST OF We reserve the right to impose a maximum Monthly Cost of
INSURANCE Insurance Charge. This charge may not exceed the death
benefit minus the Cash Value, and the difference
multiplied by the appropriate monthly cost of insurance
rate.
Currently we do not impose this charge. Should this
charge be imposed in the future, all future Deferred
Surrender Charges will be waived.
MONTHLY COST OF The Guaranteed Maximum Monthly cost of insurance rates
INSURANCE RATES are based on the sex, Attained Age, plan of insurance and
rating class of the person(s) insured. Any change in the
current cost of insurance rates will not exceed those
shown in the Table of Guaranteed Maximum Life Insurance
Rates.
Page 14
<PAGE>
SUBACCOUNT At the end of any Valuation Period, the Subaccount value
VALUE is equal to the number of units that the Policy has in
the Subaccount, multiplied by the unit value of that
Subaccount.
The number of units that the Policy has in each
Subaccount is equal to:
1. The initial units purchased on the Policy Date; plus
2. Units purchased as a result of any additional
premiums; plus
3. Units purchased through transfers from another
Account; minus
4. Those units that are redeemed to pay for monthly
deductions as they are due; minus
5. Any units that are redeemed to pay for cash
withdrawals; minus
6. Any units that are redeemed as part of a transfer to
another Account.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed Account
VALUE value is equal to:
1. The premiums allocated to the Fixed Account; plus
2. Any amounts transferred from a Subaccount to the Fixed
Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts charged to pay for monthly deductions as
they are due; minus
5. Any amounts withdrawn from the Fixed Account to pay
for cash with-drawals; minus
6. Any amounts transferred from the Fixed Account to a
Subaccount.
Interest on the Fixed Account will be compounded daily at
a minimum guaranteed effective annual interest rate of 3%
per year. We may declare from time to time various higher
current interest rates. Each payment or transfer to the
Fixed Account will be credited with the current interest
rate at the time of payment or transfer. In declaring any
higher rates to be applied to any Fixed Account values,
We may include an expense charge of up to 1% per year,
however, in no event will any net effective annual
interest rate be less than 3%.
On transfers from the Fixed Account to a Subaccount, We
reserve the right to impose the following limitations:
1. Written Notice be received by Us within 30 days after
an Anniversary.
2. The transfer will take place on the date We receive
such Written Notice.
3. The maximum amount that may be transferred is the
greater of (a) 25% of the amount in the Fixed Account;
or (b) the amount transferred in the prior policy year
from the Fixed Account.
We further reserve the right to defer payment of any
amounts from the Fixed Account for no longer than six
months after We receive such Written Notice.
CASH VALUE At the end of any Valuation Period, the Cash Value of the
Policy is equal to the sum of the Subaccount values plus
the Fixed Account value.
Page 15
<PAGE>
SURRENDER While this Policy is In Force, the Owner may surrender
this Policy for the Net Surrender Value. Payment will
usually be made within seven days of Written Notice,
subject to the Policy Payment section of the General
Provisions.
NET SURRENDER The Net Surrender Value is the amount payable upon
VALUE surrender of this Policy. The Net Surrender Value as of
any date is equal to:
1. the Cash Value as of such date; minus
2. any Surrender Charge as of such date; minus
3. any outstanding policy loan; minus
4. any accrued loan interest.
SURRENDER During the first 9 policy years, a Surrender Charge will
CHARGE be incurred upon surrender of this Policy. This charge
will be based upon the Deferred Surrender Charges shown
on the Policy Schedule page.
WITHDRAWALS Cash withdrawals may be made any time after the first
policy year and while this Policy is In Force. Only one
withdrawal is allowed during any 12 month period.
The maximum amount of withdrawal is:
1. the Cash Value as of the date of withdrawal; minus
2. the total premium paid; minus
3. any outstanding policy loans plus accrued loan
interest.
When a withdrawal is made, the Cash Value will be
reduced by the amount of the withdrawal. The Specified
Amount will also be reduced by an amount equal to:
1. the initial Specified Amount; divided by
2. the Initial Premium; times
3. the amount of the withdrawal.
In no event will any withdrawal reduce the Specified
Amount below $1,000.
The Accounts from which the withdrawal will be made may
be specified in the Written Notice. If no Account is
specified, the withdrawal amount will be withdrawn from
each Account in accordance with the Owner's current
allocation instructions. Payment will usually be made
within seven days of Written Notice, subject to the
Policy Payment section of the General Provisions of this
Policy.
Page 16
<PAGE>
CONTINUATION OF Subject to the Grace Period section of the Premium
INSURANCE Provisions, insurance coverage under this Policy will be
continued In Force until the Net Surrender Value is
insufficient to cover the monthly deductions. This
provision shall not continue this Policy beyond the
Maturity Date shown on the Policy Schedule page.
INSUFFICIENT If the Net Surrender Value on any Monthiversary is not
VALUE sufficient to cover the monthly deductions then due,
this Policy shall terminate subject to the Grace Period
section of the Premium Provisions.
BASIS OF Policy values and reserves are at least equal to those
COMPUTATIONS required by law. A detailed statement of the method of
computation of values and reserves has been filed with
the insurance department of the state in which this
Policy was delivered.
POLICY LOANS During the continuance of this Policy, the Owner can
borrow against this Policy an amount which is not greater
than 90% of the Cash Value, minus:
1. any Surrender Charge as of such date; minus
2. any outstanding policy loans; minus
3. any accrued policy loan interest.
The amount of any policy loan may be limited to no less
than $500, except as noted below.
When a loan is made, an amount equal to the loan will be
withdrawn from the Accounts and transferred to the loan
reserve. The loan reserve is a portion of the Fixed
Account used as collateral for any policy loan. The Owner
may specify the Account or Accounts from which the
withdrawal will be made. If no Account is specified, the
withdrawal will be made from each Account in accordance
with the Owner's current premium allocation instructions.
The loan date is the date We process a loan request.
Payment will usually be made within seven days of the
date We receive proper loan request, subject to the
Policy Payment section of the General Provisions of this
Policy. This Policy will be the sole security for the
loan.
While this Policy is In Force, any loan may be repaid.
Interest on any loan will be at the maximum policy loan
rate of 6% payable in arrears. We reserve the right to
charge a lower loan rate on all or a portion of any loan.
Interest is due at each Anniversary. Interest not paid
when due will be added to the loan on each Anniversary.
Page 17
<PAGE>
At each Anniversary, We will compare the amount of the
outstanding loan to the amount in the loan reserve. We
will also make this comparison anytime the Owner repays
all or part of the loan. At each such time, if the amount
of the outstanding loan exceeds the amount in the loan
reserve, We will withdraw the difference from the
Accounts and transfer it to the loan reserve, in the same
fashion as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan, We
will withdraw the difference from the loan reserve and
transfer it to the Accounts in accordance with the
Owner's current allocation instructions. However, We
reserve the right to require the transfer to the Fixed
Account if such loans were originally transferred from
the Fixed Account.
Page 18
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PFL LIFE INSURANCE COMPANY
Home Office:
4333 Edgewood Road, N.W.
Cedar Rapids, Iowa 52499
- --------------------------------------------------------------------------------
Modified Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Insured Prior to Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
EXHIBIT 99.A7-1
Exhibit 1.A.(5)(b)
Joint Speciment Flexible Premium Variable Life Insurance Policy
<PAGE>
================================================================================
PFL LIFE INSURANCE COMPANY Home Office:
(A STOCK COMPANY) 4333 Edgewood Road, N.E. - Cedar Rapids, Iowa 52499
(319) 398-8511
================================================================================
IN THIS POLICY, PFL Life Insurance Company will be referred to as WE, OUR or US.
WE WILL pay the Death Benefit Proceeds to the Beneficiary upon the death of the
Surviving Insured when We receive proof that both Joint Insureds died while this
Policy is In Force. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL INCREASE OR
DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE
SEPARATE ACCOUNT.
WE WILL pay the Net Surrender Value to the Owner if at least one of the Joint
Insureds is alive on the Maturity Date and while this Policy is In Force. CASH
VALUES WILL INCREASE OR DECREASE IN ACCORDANCE WITH THE POLICY VALUE PROVISIONS
AND THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS IN THE SEPARATE ACCOUNT. CASH
VALUES ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE PROVISIONS on the following pages are part of this Policy.
IN WITNESS WHEREOF, We have signed this Policy at Our Office in Cedar Rapids,
Iowa as of the Policy Date.
/s/ CRAIG S. VERMIE /s/ WILLIAM L. BUSLER
Secretary President
================================================================================
RIGHT TO EXAMINE POLICY
The Owners may cancel this Policy by returning it to Us at 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499 or to the representative through whom it was
purchased within 10 days after receipt. If the Policy is returned within this
period, it will be void from the beginning and a refund will be made to the
Owners. The refund will equal the sum of:
1. The difference between the Single Premium paid and the amount allocated to
any Accounts under the Policy; plus
2. The total amount of monthly deductions made and any other charges imposed on
amounts allocated to the Accounts; plus
3. The value of amounts allocated to the Accounts on the date We or Our agent
receive the returned Policy.
If state law prohibits the calculation above, the refund will be the total of
all premiums paid for this Policy.
================================================================================
Joint Survivorship Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Surviving Insured Prior to
Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
<PAGE>
================================================================================
POLICY GUIDE
================================================================================
POLICY SCHEDULE.................... 3 PREMIUM PROVISIONS................... 11
TABLE OF SURRENDER CHARGES......... 3 Payment............................ 11
TABLE OF GUARANTEED RATES.......... 4 Premiums........................... 11
DEFINITIONS........................ 5 Grace Period....................... 11
Accounts......................... 5 SEPARATE ACCOUNT PROVISIONS.......... 11
Age.............................. 5 The Separate Account............... 11
Anniversary...................... 5 Subaccounts........................ 12
Beneficiary...................... 5 Transfers.......................... 12
Death Benefit Proceeds........... 5 Addition, Deletion or Substitution
Fixed Account.................... 5 of Investments.................... 12
In Force......................... 5 Change of Investment Objective..... 13
Initial Premium.................. 5 Unit Value......................... 13
Joint Insureds................... 5 POLICY VALUE PROVISIONS.............. 13
Loan Reserve..................... 5 Allocation of Premium.............. 13
Maturity Date.................... 5 Monthly Deductions................. 14
Monthiversary.................... 6 Monthly Policy Charge.............. 14
Net Surrender Value.............. 6 Monthly Cost of Insurance.......... 14
Office........................... 6 Monthly Cost of Insurance Rates.... 15
Policy Date...................... 6 Subaccount Value................... 15
Reallocation Date................ 6 Fixed Account Value................ 15
SEC.............................. 6 Cash Value......................... 16
Separate Account................. 6 Surrender.......................... 16
Series Fund(s)................... 6 Net Surrender Value................ 16
Subaccount....................... 6 Surrender Charge................... 16
Surviving Insured................ 6 Withdrawals........................ 16
Termination...................... 6 Continuation of Insurance.......... 17
Valuation Date................... 6 Insufficient Value................. 17
Valuation Period................. 7 Basis of Computations.............. 17
Written Notice................... 7 Policy Loans....................... 17
GENERAL PROVISIONS................. 7 POLICY SPLIT OPTION................ 18
The Policy....................... 7 Split Option....................... 18
Ownership........................ 7 Specified Amount................... 19
Beneficiary...................... 7 Cash Value......................... 19
Assignment....................... 8 Issue Limits and Premium Rate
Classification..................... 19
Incontestability................. 8 Premiums........................... 19
Suicide.......................... 8 Policy Date........................ 19
Issue Age and Sex................ 8 Owner/Beneficiary.................. 19
Periodic Report.................. 8
Termination...................... 8
Policy Payment................... 9
Optional Methods of Settlement... 9
Payments and Transfers........... 9
Extended Maturity Date........... 9
Conversion Rights................ 9
Protection of Proceeds........... 9
DEATH BENEFIT PROVISIONS........... 10
Death Benefit.................... 10
Specified Amount................. 10
Limitation Percentage............ 10
Death Benefit Proceeds........... 10
Page 2
<PAGE>
PFL LIFE INSURANCE COMPANY
CEDAR RAPIDS, IOWA
POLICY SCHEDULE
================================================================================
JOINT INSUREDS: John Doe
Jane Doe
POLICY NUMBER: 01-23456789 POLICY DATE: December 01, 1998
SPECIFIED AMOUNT: $243,440 REALLOCATION DATE: December 16, 1998
INITIAL PREMIUM: $50,000 MATURITY DATE: December 01, 2053
REALLOCATION ACCOUNT: Fixed Account
SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT: Legacy Builder Variable Life Separate Account
ASSET BASED CHARGES POLICY YEARS
(Expressed as an Annual Percentage) 1-10 11 +
------- --------
SEPARATE ACCOUNT CHARGES
Daily Charge: .50% .50%
Monthly Deduction Charge: 1.50% .50%
FIXED ACCOUNT CHARGES
Monthly Deduction Charge: 1.50% .50%
DEFERRED SURRENDER CHARGES: Surrender Charges are the percentage shown
below times the Initial Premium.
<TABLE>
<CAPTION>
----------------------------------------------
SURRENDER SURRENDER
POLICY YEAR CHARGE POLICY YEAR CHARGE
----------------------------------------------
<S> <C> <C> <C> <C>
At Issue 9.75%
1 9.75% 6 7.00%
2 9.50% 7 6.00%
3 9.25% 8 4.00%
4 9.00% 9 2.00%
5 8.00% 10+ 0.00%
----------------------------------------------
</TABLE>
Page 3
<PAGE>
PFL LIFE INSURANCE COMPANY
CEDAR RAPIDS, IOWA
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
================================================================================
POLICY NUMBER: 01-23456789
Guaranteed Rate Basis for Initial Specified Amount on Joint Insureds
Commissioners 1980 Standard Ordinary Tobacco User and Non-Tobacco User
Mortality Table
John Doe: Male Issue Age 45, Standard, Tobacco User Classification
Jane Doe: Female Issue Age 45, Standard, Tobacco User Classification
Annual Cost of Insurance Rates Per $1,000
(The monthly cost of insurance calculations will use
one-twelfth of these rates.)
--------------------------------------------------------------------
POLICY YEAR ANNUAL RATE POLICY YEAR ANNUAL RATE
--------------------------------------------------------------------
1 0.031 2 0.103
3 0.191 4 0.298
5 0.426 6 0.580
7 0.764 8 0.987
9 1.256 10 1.572
11 1.941 12 2.362
13 2.834 14 3.361
15 3.957 16 4.649
17 5.471 18 6.462
19 7.650 20 9.035
21 10.605 22 12.346
23 14.226 24 16.272
25 18.552 26 21.170
27 24.282 28 27.978
29 32.314 30 37.300
31 42.872 32 48.913
33 55.335 34 62.166
35 69.569 36 77.756
37 86.921 38 97.215
39 108.829 40 121.323
41 134.456 42 148.060
43 162.130 44 176.728
45 191.696 46 207.860
47 225.060 48 244.153
49 266.749 50 296.863
51 341.982 52 414.444
53 537.477 54 744.016
55 1000.00
-------------------------------------------------------------------
Page 4
<PAGE>
DEFINITIONS
================================================================================
ACCOUNTS Allocation options including the Fixed Account and the
Subaccounts of the Separate Account.
AGE Issue Age refers to the Age on each Joint Insured's last
birthday prior to the Policy Date. Attained Age refers to
the Issue Age plus the number of completed policy years.
ANNIVERSARY The same day and month as the Policy Date for each
succeeding year the Policy remains In Force.
BENEFICIARY The person or persons specified by the Owner to receive
the Death Benefit Proceeds.
DEATH BENEFIT The amount payable upon the death of the Surviving
PROCEEDS Insured in accordance with the Death Benefit Provisions.
FIXED ACCOUNT Allocation option(s) other than the Separate Account.
IN FORCE Condition under which the coverage is active and the
Surviving Insured's life remains insured.
INITIAL PREMIUM The amount which must be paid before coverage begins. The
amount is shown on the Policy Schedule page.
JOINT INSUREDS The persons whose lives are insured under this Policy, as
shown on the Policy Schedule pages.
LOAN RESERVE A portion of the Fixed Account used as collateral for any
policy loan.
MATURITY DATE The date when coverage under the Policy will terminate if
either Joint Insured is living and the Policy is In
Force, unless extended in accordance with the Extended
Maturity Date provision.
Page 5
<PAGE>
MONTHIVERSARY The day of each month coinciding with the Policy Date. If
there is no day in a calendar month which coincides with
the Policy Date, the Monthiversary will be the first day
of the next month.
NET SURRENDER The amount payable upon surrender in accordance with the
VALUE Policy Value Provisions of this Policy.
OFFICE Refers to Our administrative office located in Cedar
Rapids, Iowa.
POLICY DATE The date coverage is effective and monthly deductions
commence under the Policy. Policy months, years and
anniversaries are measured from the Policy Date, as shown
on the Policy Schedule page.
REALLOCATION The date on which any premiums are reallocated from the
DATE Reallocation Account to the Accounts elected by the Owner
on the application. The Reallocation Account is shown on
the Policy Schedule page.
SEC The United States Securities and Exchange Commission.
SEPARATE A separate investment account shown on the Policy
ACCOUNT Schedule page which is composed of several subaccounts
established to receive and invest premiums under the
Policy.
SERIES FUND(S) Designated mutual fund(s) from which each Subaccount of
the Separate Account will buy shares.
SUBACCOUNT A sub-division of the Separate Account. Each Subaccount
invests exclusively in the shares of a specified Series
Fund portfolio.
SURVIVING INSURED The Joint Insured who remains alive after the other Joint
Insured has died.
TERMINATION Condition under which the insurance coverage is no longer
In Force under this Policy.
VALUATION DATE Any day We are required by law to value the assets of the
Separate Account.
Page 6
<PAGE>
VALUATION The period commencing at the end of one Valuation Date
PERIOD and continuing to the end of the next succeeding
Valuation Date.
WRITTEN NOTICE Written Notice means a notice by the Owners to Us
requesting or exercising a right of the Owners as
provided in the Policy provision of the General
Provisions. In order for a notice to be considered a
Written Notice, it must: be in writing, signed by the
Owners; be in a form acceptable to Us; and contain the
information and documentation, as determined in Our sole
discretion, necessary for Us to take the action
requested, or for the Owners to exercise the right
specified. A Written Notice will not be considered
complete until all necessary supporting documentation
required or requested by Us has been received by Us at
Our Administrative Office.
GENERAL PROVISIONS
================================================================================
THE POLICY This Policy is issued in consideration of the attached
application and payment of the Initial Premium. This
Policy and the attached application constitute the entire
contract. All statements in these applications, in the
absence of fraud, will be deemed representations and not
warranties. No statement can be used to void this Policy
or be used in defense of a claim unless it is contained
in the written application. No policy provision can be
waived or changed except by endorsement. Such endorsement
must be signed by Our President or Secretary.
OWNERSHIP This Policy belongs to the Owner. The Owner, as named in
the application or as subsequently changed, may exercise
all rights under this Policy while either or both of the
Joint Insureds is living. If two Owners are named, this
Policy will be owned jointly and the consent of each
Owner will be required to exercise ownership rights under
this Policy.
We will not be bound by any change in the ownership
designation unless it is made by Written Notice. The
change will be effective on the date the Written Notice
is accepted by Us. If We request, this Policy must be
returned to Our Administrative Office for endorsement.
BENEFICIARY The Beneficiary, as named in the application or
subsequently changed, will receive the benefits payable
upon the death of the Surviving Insured. If the
Beneficiary dies before the Surviving Insured, the
Contingent Beneficiary, if named, becomes the
Beneficiary. If no Beneficiary or Contingent Beneficiary
survives the Surviving Insured, the benefits payable at
the Surviving Insured's death will be paid to the Owner
or the Owner's estate.
Page 7
<PAGE>
We will not be bound by any change in the Beneficiary
designation unless it is made by Written Notice. The
change will be effective on the date the Written Notice
was signed; however, no change will apply to any payment
We made before the Written Notice is received. If We
request, this Policy must be returned to Our Office for
endorsement.
ASSIGNMENT This Policy may be assigned. We will not be bound by any
assignment unless made by Written Notice. The assignment
will be effective on the date the Written Notice is
received at Our Office and accepted by Us. We assume no
responsibility for the validity of any assignment.
INCONTESTABILITY This Policy shall be incontestable after it has been In
Force, while either Joint Insured is still alive, for two
years from the Policy Date.
SUICIDE If either Joint Insured dies by suicide, while sane or
insane, within two years from the Policy Date, this
Policy shall terminate and Our total liability, including
all Riders attached to this Policy, will be limited to
the total premiums paid, less any loans and prior
withdrawals, during such period.
ISSUE AGE If either Joint Insured's date of birth or sex is not
AND SEX correctly stated, the death benefit will be adjusted
based on what the Initial Premium would have purchased
based on the correct date of birth and sex.
PERIODIC REPORT We will send a periodic report to the Owner at least once
each policy year. The periodic report will show:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The current Cash Value; 4. Any current policy loans;
2. The current Net Surrender 5. Activity since the last
Value; report.
3. The current death benefit;
</TABLE>
Additional activity within each Subaccount showing
investment experience will also be provided. The periodic
report provided nearest to the end of the calendar year
will show projected values for the following year.
TERMINATION This Policy will terminate on the earliest of:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The Maturity Date; 3. The end of the grace period;
2. The date of the Surviving 4. The date of surrender.
Insured's death;
</TABLE>
Page 8
<PAGE>
POLICY PAYMENT All proceeds to be paid upon Termination will be paid in
one sum unless an optional method of settlement is
elected. Instead of a single amount, the payee may elect
to receive the proceeds under the terms of the next
provision.
OPTIONAL METHODS OF At the time that any proceeds are due in a single
SETTLEMENT payment, if requested in writing, We will inform the
payee of all other forms of a settlement including
annutiies, with or without life contingencies. Interest
will be at an annual rate that We decide, but not less
than the rate required by law.
PAYMENTS AND All payments and transfers from the Subaccounts will be
TRANSFERS processed as provided in this Policy unless one of the
following situations exists:
1. The New York Stock Exchange is closed; or
2. The SEC requires that trading be restricted or
declares an emergency; or
3. The SEC allows Us to defer payments to protect Our
policyowners.
We reserve the right to defer the payment of any Fixed
Account values for the period permitted by law, but not
for more than six months.
EXTENDED MATURITY The Owners may request that the Maturity Date shown on
DATE the Policy Schedule page be extended. The request must be
in writing and received by Us at least 90 days, but no
more than 180 days, prior to the scheduled Maturity Date.
The Owner must request that the Maturity Date be extended
each Policy Anniversary following the Maturity Date as
shown on the Policy Schedule page. Any Riders In Force on
the scheduled Maturity Date will terminate on that date
and will not be extended. Interest on any outstanding
policy loan will continue to accrue during the period for
which the Maturity Date is extended.
If the Maturity Date is extended on each Valuation Date,
the Specified Amount will be adjusted to equal the Cash
Value, and the Limitation Percentage will be 100%. No
additional Premium payments will be permitted except if
required to prevent lapse of this Policy. Future monthly
deductions will be waived.
CONVERSION At any time upon written request within the first two
RIGHTS policy years, the Owner may elect to transfer all
Subaccount values to the Fixed Account without a transfer
charge.
PROTECTION OF Unless the Owner direct by filing Written Notice, no
PROCEEDS Beneficiary may assign any payments under this Policy
before the same are due. To the extent permitted by law,
no payments under this Policy will be subject to the
claims of creditors of any Beneficiary.
Page 9
<PAGE>
DEATH BENEFIT PROVISIONS
================================================================================
DEATH BENEFIT The death benefit is the greater of:
1. the Specified Amount; or
2. the Limitation Percentage times the Cash Value of this
Policy on the date of the Surviving Insured's death.
SPECIFIED AMOUNT The Specified Amount is as shown on the Policy Schedule
page, adjusted for any withdrawals as provided in the
Withdrawal Provision of the Policy Value Provisions.
LIMITATION The Limitation Percentage is a percentage based on the
PERCENTAGE Attained Age of the younger Joint Insured at the
beginning of the policy year equal to:
------------------------------------------------------
ATTAINED AGE LIMITATION PERCENTAGE
------------------------------------------------------
40 and under 250%
41 through 45 250% minus 7% for each Age over Age 40
46 through 50 215% minus 6% for each Age over Age 45
51 through 55 185% minus 7% for each Age over Age 50
56 through 60 150% minus 4% for each Age over Age 55
61 through 65 130% minus 2% for each Age over Age 60
66 through 70 120% minus 1% for each Age over Age 65
71 through 75 115% minus 2% for each Age over Age 70
76 through 90 105%
91 through 94 105% minus 1% for each Age over Age 90
95 and over 100%
DEATH BENEFIT The Death Benefit Proceeds is the amount payable by Us
PROCEEDS under this Policy provided this Policy has not terminated
prior to the Surviving Insured's death. Except as
provided in the Suicide section of the General
Provisions, the Death Benefit Proceeds will be equal to:
1. The death benefit; minus
2. Any monthly deductions due during the grace period;
minus
3. Any outstanding policy loan; minus
4. Any accrued loan interest.
Page 10
<PAGE>
PREMIUM PROVISIONS
================================================================================
PAYMENT The Initial Premium shown on the Policy Schedule page
must be paid on or before the Policy Date.
PREMIUMS While this Policy is In Force, additional premiums may be
paid at any time prior to the Maturity Date shown on the
Policy Schedule page. We reserve the right to limit or
refund any premium if:
1. The amount is below Our current minimum payment
requirement; or
2. The premium would increase the death benefit by more
than the amount of the premium; or
3. The premium would disqualify this Policy as a life
insurance contract as defined by the United States
Internal Revenue Code and applicable regulations.
GRACE PERIOD If the Net Surrender Value on any Monthiversary is not
sufficient to cover the monthly deductions on such day,
We will mail a notice to the last known address of the
Owners and any assignee of record. A grace period of 61
days after the mailing date of the notice will be allowed
for the payment. The notice will specify the minimum
payment and the final date on which such payment must be
received by Us to keep the Policy In Force. The Policy
will remain In Force during the grace period. If the
amount due is not received by Us within the grace period,
all coverage under the Policy will terminate without
value at the end of the grace period.
SEPARATE ACCOUNT PROVISIONS
================================================================================
THE SEPARATE The variable benefits under this Policy are provided
ACCOUNT through the Separate Account as shown on the Policy
Schedule page. The assets of the Separate Account are Our
property. Assets equal to the reserve and other
contractual liabilities under all policies issued in
connection with the Separate Account will not be charged
with liabilities arising out of any other business We may
conduct. If the assets of the Separate Account exceed the
liabilities arising under the policies supported by the
Separate Account, then the excess may be used to cover
the liabilities of Our general account. The assets of the
Separate Account shall be valued as often as any policy
benefits vary, but at least monthly.
Page 11
<PAGE>
SUBACCOUNTS The Separate Account has various Subaccounts with
different investment objectives. We reserve the right to
add or remove any Subaccount of the Separate Account.
Income, if any, and any gains or losses, realized or
unrealized, from assets in each Subaccount are credited
to, or charged against, the amount allocated to that
Subaccount without regard to income, gains, or losses in
other Subaccounts. Any amount charged against the
investment base for federal or state income taxes will be
deducted from that Subaccount. The assets of each
Subaccount are invested in shares of a corresponding
Series Fund portfolio. The value of a portfolio share is
based on the value of the assets of the portfolio
determined at the end of each Valuation Period in
accordance with applicable law.
TRANSFERS The Owner may transfer all or a portion of this Policy's
value in each Subaccount to other Subaccounts or the
Fixed Account. We reserve the right to charge a $10 fee
for each transfer in excess of twelve per policy year.
This charge will be deducted from the funds transferred.
A request for a transfer must be made in a form
satisfactory to Us. The transfer will ordinarily take
effect on the first Valuation Date on or following the
date the request is received at Our Office.
ADDITION, DELETION OR We reserve the right to transfer assets of the Separate
SUBSTITUTION Account, which We determine to be associated with the
OF INVESTMENTS class of contracts to which this Policy belongs, to
another Separate Account. If this type of transfer is
made, the term "Separate Account", as used in this
Policy, shall then mean the Separate Account to which the
assets were transferred. We also reserve the right to
add, delete, or substitute investments held by any
Subaccount.
We reserve the right, when permitted by law, to:
1. Deregister the Separate Account under the Investment
Company Act of 1940;
2. Manage the Separate Account under the direction of a
committee at any time;
3. Restrict or eliminate any voting privileges of Owners
or other persons who have voting privileges as to the
Separate Account;
4. Combine the Separate Account or any Subaccount(s) with
one or more other Separate Accounts or Subaccounts;
5. Operate the Separate Account as a management
investment company;
6. Establish additional Subaccounts to invest in either a
new series of the Series Fund, or in shares of another
diversified, open-end registered investment company;
and
7. Fund additional classes of variable life insurance
contracts through the Separate Account.
Page 12
<PAGE>
CHANGE OF We reserve the right to change the investment objective
INVESTMENT OBJECTIVE of a Subaccount. If required by law or regulation, an
investment objective of the Separate Account, or of a
Series Fund portfolio designated for a Subaccount, will
not be materially changed unless a statement of the
change is filed with and approved by the appropriate
insurance official of the state of Our domicile or deemed
approved in accordance with such law or regulation. If
required, approval of or change of any investment
objective will be filed with the Insurance Department of
the state where this Policy is delivered.
UNIT VALUE Some of the policy values fluctuate with the investment
results of the Subaccounts. In order to determine how
investment results affect the policy values, a unit value
is determined for each Subaccount. The unit value of each
Subaccount was originally established at $10 per unit.
The unit value may increase or decrease from one
Valuation Period to the next. Unit values also will vary
between Subaccounts. The unit value of any Subaccount at
the end of a Valuation Period is the result of:
1. The total value of the assets held in the Subaccount.
This value is determined by multiplying the number of
shares of the designated Series Fund portfolio owned
by the Subaccount times the net asset value per share;
minus
2. A charge equal to the daily net assets of the
Sub-Account multiplied by the daily equivalent of the
Daily Charge. The maximum annual factor for the Daily
Charge is shown on the Policy Schedule page; minus
3. The accrued amount of reserve for any taxes or other
economic burden resulting from the application of tax
laws that are determined by Us to be properly
attributable to the Subaccount; and the result divided
by
4. The number of outstanding units in the Subaccount.
The use of the unit value in determining contract values
is described in the Policy Value Provisions.
POLICY VALUE PROVISIONS
================================================================================
ALLOCATION OF The premium will be allocated to the Accounts on the
PREMIUM first Valuation Date on or following the date the premium
is received at Our Office; except any premium or portion
of premium received prior to the Policy Date will be
allocated on the first Valuation Date on or following the
Policy Date. Any premium received prior to the
Reallocation Date will be allocated to the Reallocation
Account. On the first Valuation Date on or following the
Reallocation Date, the values in the Reallocation Account
will be transferred in accordance with the Owners'
current premium allocation instructions.
Page 13
<PAGE>
We reserve the right to limit any allocation to any
Account to no less than 1%. No fractional percentages may
be permitted. The allocation may be changed by the
Owners. The request for change of allocations must be in
a form satisfactory to Us. The allocation change will be
effective on the date the request for change is recorded
by Us.
MONTHLY On the Policy Date and on each Monthiversary thereafter,
DEDUCTIONS a monthly deduction for this Policy will be made from the
Policy's Cash Value in an amount equal to the sum of the
following:
1. The Monthly Policy Charge based on the assets of the
Separate Account; plus
2. The Monthly Policy Charge based upon the assets of the
Fixed Account; plus
3. The Monthly Cost of Insurance Charge for this Policy,
if any; plus
4. The Monthly Charge for benefits provided by Riders
attached to this Policy, if any.
Deductions will be withdrawn from each Account in
accordance with the Owners' current premium allocation.
If the value of any Account is insufficient to pay its
part of the monthly deduction, the monthly deduction will
be taken on a pro rata basis from all Accounts.
MONTHLY POLICY The Monthly Policy Charge applicable to the Separate
CHARGE Account is equal to:
1. The Separate Account Monthly Deduction Charge divided
by 12; multiplied by
2. The sum of the Subaccount Values on the Valuation Date
of each monthly deduction.
The Monthly Policy Charge applicable to the Fixed Account
is equal to:
1. The Fixed Account Monthly Deduction Charge divided by
12; multiplied by
2. The Fixed Account value on the Valuation Date of each
monthly deduction, minus any outstanding loans.
The Separate Account and Fixed Account Monthly Deduction
Charges are shown on the Policy Schedule page.
MONTHLY COST OF We reserve the right to impose a maximum Monthly Cost of
INSURANCE Insurance Charge. This charge may not exceed the death
benefit minus the Cash Value, and the difference
multiplied by the appropriate monthly cost of insurance
rate.
Currently we do not impose this charge. Should this
charge be imposed in the future, all future Deferred
Surrender Charges will be waived.
Page 14
<PAGE>
MONTHLY COST OF The Guaranteed Maximum Monthly cost of insurance rates
INSURANCE RATES are based on the sex, Attained Age, plan of insurance and
rating class of the person(s) insured. Any change in the
current cost of insurance rates will not exceed those
shown in the Table of Guaranteed Maximum Life Insurance
Rates.
SUBACCOUNT At the end of any Valuation Period, the Subaccount value
VALUE is equal to the number of units that the Policy has in
the Subaccount, multiplied by the unit value of that
Subaccount.
The number of units that the Policy has in each
Subaccount is equal to:
1. The initial units purchased on the Policy Date; plus
2. Units purchased as a result of any additional
premiums; plus
3. Units purchased through transfers from another
Account; minus
4. Those units that are redeemed to pay for monthly
deductions as they are due; minus
5. Any units that are redeemed to pay for cash
withdrawals; minus
6. Any units that are redeemed as part of a transfer to
another Account.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed Account
VALUE value is equal to:
1. The premiums allocated to the Fixed Account; plus
2. Any amounts transferred from a Subaccount to the Fixed
Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts charged to pay for monthly deductions as
they are due; minus
5. Any amounts withdrawn from the Fixed Account to pay
for cash with-drawals; minus
6. Any amounts transferred from the Fixed Account to a
Subaccount.
Interest on the Fixed Account will be compounded daily at
a minimum guaranteed effective annual interest rate of 3%
per year. We may declare from time to time various higher
current interest rates. Each payment or transfer to the
Fixed Account will be credited with the current interest
rate at the time of payment or transfer. In declaring any
higher rates to be applied to any Fixed Account values,
We may include an expense charge of up to 1% per year,
however, in no event will any net effective annual
interest rate be less than 3%.
On transfers from the Fixed Account to a Subaccount, We
reserve the right to impose the following limitations:
1. Written Notice be received by Us within 30 days after
an Anniversary.
2. The transfer will take place on the date We receive
such Written Notice.
3. The maximum amount that may be transferred is the
greater of (a) 25% of the amount in the Fixed Account;
or (b) the amount transferred in the prior policy year
from the Fixed Account.
Page 15
<PAGE>
We further reserve the right to defer payment of any
amounts from the Fixed Account for no longer than six
months after We receive such Written Notice.
CASH VALUE At the end of any Valuation Period, the Cash Value of the
Policy is equal to the sum of the Subaccount values plus
the Fixed Account value.
SURRENDER While this Policy is In Force, the Owners may surrender
this Policy for the Net Surrender Value. Payment will
usually be made within seven days of Written Notice,
subject to the Policy Payment section of the General
Provisions.
NET SURRENDER The Net Surrender Value is the amount payable upon
VALUE surrender of this Policy. The Net Surrender Value as of
any date is equal to:
1. the Cash Value as of such date; minus
2. any Surrender Charge as of such date; minus
3. any outstanding policy loan; minus
4. any accrued loan interest.
SURRENDER During the first 9 policy years, a Surrender Charge will
CHARGE be incurred upon surrender of this Policy. This charge
will be based upon the Deferred Surrender Charges shown
on the Policy Schedule page.
WITHDRAWALS Cash withdrawals may be made any time after the first
policy year and while this Policy is In Force. Only one
withdrawal is allowed during any 12 month period. The
maximum amount of withdrawal is:
1. the Cash Value as of the date of withdrawal; minus
2. the total premium paid; minus
3. any outstanding policy loans plus accrued loan
interest.
When a withdrawal is made, the Cash Value will be reduced
by the amount of the withdrawal. The Specified Amount
will also be reduced by an amount equal to:
1. the initial Specified Amount; divided by
2. the Initial Premium; times
3. the amount of the withdrawal.
In no event will any withdrawal reduce the Specified
Amount below $1,000.
Page 16
<PAGE>
The Accounts from which the withdrawal will be made may
be specified in the Written Notice. If no Account is
specified, the withdrawal amount will be withdrawn from
each Account in accordance with the Owners' current
allocation instructions. Payment will usually be made
within seven days of Written Notice, subject to the
Policy Payment section of the General Provisions of this
Policy.
CONTINUATION OF Subject to the Grace Period section of the Premium
INSURANCE Provisions, insurance coverage under this Policy will be
continued In Force until the Net Surrender Value is
insufficient to cover the monthly deductions. This
provision shall not continue this Policy beyond the
Maturity Date shown on the Policy Schedule page.
INSUFFICIENT If the Net Surrender Value on any Monthiversary is not
VALUE sufficient to cover the monthly deductions then due, this
Policy shall terminate subject to the Grace Period
section of the Premium Provisions.
BASIS OF Policy values and reserves are at least equal to those
COMPUTATIONS required by law. A detailed statement of the method of
computation of values and reserves has been filed with
the insurance department of the state in which this
Policy was delivered.
POLICY LOANS During the continuance of this Policy, the Owners can
borrow against this Policy an amount which is not greater
than 90% of the Cash Value, minus:
1. any Surrender Charge as of such date; minus
2. any outstanding policy loan; minus
3. any accrued policy loan interest.
The amount of any policy loan may be limited to no less
than $500, except as noted below.
When a loan is made, an amount equal to the loan will be
withdrawn from the Accounts and transferred to the loan
reserve. The loan reserve is a portion of the Fixed
Account used as collateral for any policy loan. The
Owners may specify the Account or Accounts from which the
withdrawal will be made. If no Account is specified, the
withdrawal will be made from each Account in accordance
with the Owners' current allocation instructions.
While this Policy is In Force, any loan may be repaid.
Interest on any loan will be at the maximum policy loan
rate of 6% payable in arrears. We reserve the right to
charge a lower loan rate on all or a portion of any loan.
Interest is due at each Anniversary. Interest not paid
when due will be added to the loan on each Anniversary.
Page 17
<PAGE>
At each Anniversary, We will compare the amount of the
outstanding loan to the amount in the loan reserve. We
will also make this comparison anytime the Owners repay
all or part of the loan. At each such time, if the amount
of the outstanding loan exceeds the amount in the loan
reserve, We will withdraw the difference from the
Accounts and transfer it to the loan reserve, in the same
fashion as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan, We
will withdraw the difference from the loan reserve and
transfer it to the Accounts in accordance with the
Owners' current allocation instructions. However, We
reserve the right to require the transfer to the Fixed
Account if such loans were originally transferred from
the Fixed Account.
POLICY SPLIT OPTION
==============================================================================
SPLIT OPTION Subject to our evidence of insurability requirements, the
Owners may request to split this Policy, not including
any Riders, and purchase two permanent individual fixed
account life insurance policies offered by Us at the time
of the request, one on the life of each Joint Insured.
The Owners may request this Split Option by notifying Us
at Our Office in writing within 90 days following either:
1. The later of the enactment or the effective date of a
change in the federal estate tax laws that would
reduce or eliminate the unlimited marital deduction;
or
2. The date of entry of a final decree of divorce with
respect to the Joint Insureds; or
3. Written confirmation of a dissolution of a business
partnership of which the partners are the Joint
Insureds.
If more than one person owns this Policy, each Owner must
agree to the split.
SPECIFIED AMOUNT The initial Specified Amount for each new policy cannot
be greater than 50% of this Policy's Specified Amount,
not including the face amount of any Riders.
CASH VALUE Cash value and indebtedness under this Policy will be
allocated equally to each of the new policies. If one
Joint Insured does not meet our insurability
requirements, We will pay the Owner one half of this
Policy's Net Surrender Value and issue only the policy
covering that Joint Insured who meets our insurability
requirements; or, the Owner may elect to keep this Policy
In Force on both Joint Insureds and no new policies will
be issued.
Page 18
<PAGE>
ISSUE LIMITS AND The new policies will be subject to our minimum and
PREMIUM RATE maximum specified amounts and issue ages for the plan of
CLASSIFICATION insurance selected.
If one of the Joint Insureds is older than the new
policy's maximum Issue Age at the time the Split Option
is requested, Our approval must be obtained to exercise
this Split Option.
PREMIUMS The premiums for the new policies wil be based on each
Joint Insured's Attained Age and premium rate class as
determined by current evidence of insurability. Premiums
are payable as of the policy dates for each new policy.
POLICY DATE The policy date for each new policy will be the
Monthiversary following notification to Us to execute
this Split Option.
OWNER/BENEFICIARY The Owner and Beneficiary for the new policies will be
those named in this Policy, unless otherwise specified.
Page 19
<PAGE>
PFL LIFE INSURANCE COMPANY
Home Office:
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Joint Survivorship Modified Single Premium Variable Life Insurance Policy
Death Benefit Proceeds Payable at Death of Surviving Insured Prior to
Maturity Date
Net Surrender Value Payable at Maturity Date
Non-Participating - No Dividends
Some Benefits Reflect Investment Results
EXHIBIT 99.A4
Exhibit 1.A.(8)(a)
Participation Agreement Among MFS Variable Insurance Funds, Inc.,
PFL Life and Massachusetts Financial Services Company
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
PFL LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 24 day of November 1997, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), PFL LIFE INSURANCE COMPANY, an IOWA STOCK LIFE INSURANCE COMPANY (the
"Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as
a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, AEGON USA SECURITIES, INC., the underwriter for the individual
variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; PROVIDED
that the Trust receives notice of such orders by 9:30 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such net
asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts, or
suspend or terminate the offering of the Shares if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws, necessary in the best
interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to
each Portfolio and shall transmit one net payment for all of the
Portfolios in accordance with Section 1.6 hereof.
-2-
<PAGE>
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon
as reasonably practical after the net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. New York time. In the event that the Trust is
unable to meet the 6:30 p.m. time stated herein, it shall provide
additional time for the Company to place orders for the purchase and
redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect share
net asset value information, the Trust shall make an adjustment to the
number of shares purchased or redeemed for the Accounts to reflect the
correct net asset value per share. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gains
information shall be reported promptly upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies,
and that it will maintain such registration for so long as any Policies
are outstanding. The Company shall amend the registration statements under
the 1933 Act for the Policies and the registration statements under the
1940 Act for the Accounts from time to time as required in order to effect
the continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment
or annuity contracts under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), that it will maintain such
treatment and that it will notify the Trust or MFS immediately upon having
a reasonable basis for believing that the Policies have ceased to be so
treated or that they might not be so treated in the future.
-3-
<PAGE>
2.3. The Company represents and warrants that AEGON USA SECURITIES, INC.
(and its assignees), the underwriter for the individual variable annuity
and the variable life policies, is a member in good standing of the NASD
and is a registered broker-dealer with the SEC. The Company represents and
warrants that the Company and AEGON USA SECURITIES, INC. (and its
assignees) will sell and distribute such policies in accordance in all
material respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The
Trust shall amend the registration statement for its Shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify
the Shares for sale in accordance with the laws of the various states only
if and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Trust and MFS represent that the Trust and the Underwriter will sell
and distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of
The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request
so that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the
SEC has granted exemptive relief to permit mixed and shared funding (the
"Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to existing
Policy owners whose Policies are funded by such Shares. The Trust or its
designee shall provide the Company, at the Company's expense, with as many
copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of Policies.
If requested by the Company in lieu thereof, the Trust or its designee
shall provide such documentation (including a "camera ready" copy of the
new prospectus as set in type or, at the request of the Company, as a
diskette in the form sent to the financial printer) and other assistance
as is reasonably necessary in order for the parties hereto once each year
(or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Policies and the prospectus for
the Shares printed together in one document; the expenses of such printing
to be apportioned between (a) the Company and (b) the Trust or its
designee in proportion to the number of pages of the Policy and Shares'
prospectuses, taking account of other relevant factors affecting the
expense of printing, such as covers, columns, graphs and charts; the Trust
or its designee to bear the cost of printing the Shares' prospectus
-4-
<PAGE>
portion of such document for distribution to owners of existing Policies
funded by the Shares and the Company to bear the expenses of printing the
portion of such document relating to the Accounts; PROVIDED, however, that
the Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus in
a "camera ready" or diskette format, the Trust shall be responsible for
providing the prospectus in the format in which it or MFS is accustomed to
formatting prospectuses and shall bear the expense of providing the
prospectus in such format (E.G., typesetting expenses), and the Company
shall bear the expense of adjusting or changing the format to conform with
any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require for
distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for
which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with or
oppose or interfere with the solicitation of proxies for the Shares held
for such Policy owners. The Company reserves the right to vote shares held
in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding Shares calculates
voting privileges in the manner required by the Mixed and Shared Funding
Exemptive Order. The Trust and MFS will notify the Company of any changes
of interpretations or amendments to the Mixed and Shared Funding Exemptive
Order.
-5-
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the
registration statement, prospectus or statement of additional information
for the Shares, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust, MFS
or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS
or any of their affiliates which is intended for use only by brokers or
agents selling the Policies (I.E., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such
broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such
use within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4.
is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to
the Policies, or to the Trust or its Shares, prior to or contemporaneously
with the filing of such document with the SEC or other regulatory
authorities. The Company and the Trust shall also each promptly inform the
other of the results of any examination by the SEC (or other regulatory
authorities) that relates to the Policies, the Trust or its Shares, and
the party that was the subject of the examination shall provide the other
party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
-6-
<PAGE>
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly
any change resulting in change to the registration statement or prospectus
or statement of additional information for any Account. The Trust and MFS
will cooperate with the Company so as to enable the Company to solicit
proxies from Policy owners or to make changes to its prospectus, statement
of additional information or registration statement, in an orderly manner.
The Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures,
or other public media), and sales literature (such as brochures,
circulars, reprints or excerpts or any other advertisement, sales
literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials or
communications distributed or made generally available to some or all
agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any
required exemptive orders or regulatory approvals, the Trust may make
payments to the Company or to the underwriter for the Policies if and in
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expenses initially paid by one party
but allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing annual
individual account statements for Policy owners as required by state
insurance laws.
5.4. MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Policy owners of
shares of the Portfolios of the Trust, equal to 0.20% per annum of the
aggregate net assets of the Trust attributable to such Policy owners. In
no event shall such fee be paid by the Trust, its shareholders or by the
Policy holders.
-7-
<PAGE>
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is
aware to the Board including, but not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions
are disregarded. The Company also agrees that, if a material
irreconcilable conflict arises, it will at its own cost remedy such
conflict up to and including (a) withdrawing the assets allocable to some
or all of the Accounts from the Trust or any Portfolio and reinvesting
such assets in a different investment medium, including (but not limited
to) another Portfolio of the Trust, or submitting to a vote of all
affected contract owners whether to withdraw assets from the Trust or any
Portfolio and reinvesting such assets in a different investment medium
and, as appropriate, segregating the assets attributable to any
appropriate group of contract owners that votes in favor of such
segregation, or offering to any of the affected contract owners the option
of segregating the assets attributable to their contracts or policies, and
(b) establishing a new registered management investment company and
segregating the assets underlying the Policies, unless a majority of
Policy owners materially adversely affected by the conflict have voted to
decline the offer to establish a new registered management investment
company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any
material irreconcilable conflict. In the event that the Board determines
that any proposed action does not adequately remedy any material
irreconcilable conflict, the Company will withdraw from investment in the
Trust each of the Accounts designated by the disinterested trustees and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; PROVIDED, HOWEVER, that
such withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
-8-
<PAGE>
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those contained
in the Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or
the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or expenses (including reasonable
counsel fees) to which any Indemnified Party may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the
Policies (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading PROVIDED that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reasonable reliance upon and in conformity with
information furnished to the Company or its designee by or on
behalf of the Trust or MFS for use in the registration
statement, prospectus or statement of additional information
for the Policies or in the Policies or sales literature or
other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies
or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust not supplied by the Company or its designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Trust by or on behalf of the Company; or
-9-
<PAGE>
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents
or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement
therein not misleading, PROVIDED that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reasonable reliance upon and in conformity with
information furnished to the Trust, MFS, the Underwriter or
their respective designees by or on behalf of the Company for
use in the registration statement, prospectus or statement of
additional information for the Trust or in sales literature or
other promotional material for the Trust (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies not supplied by the Trust, MFS, the
Underwriter or any of their respective designees or persons
under their respective control and on which any such entity
has reasonably relied) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of
the Trust, MFS or the Underwriter; or
-10-
<PAGE>
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company
hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and
covenants; (ii) the failure by the Company or any Participating Insurance
Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account
under applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or (iii)
the failure by the Company or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts
(with respect to which any Portfolio serves as an underlying funding
vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under
this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than under this section. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party.
After notice from the indemnifying party of its intention to assume the
defense of an action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
-11-
<PAGE>
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive
any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the SEC may grant and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
-12-
<PAGE>
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying investment
media. The Company will give thirty (30) days' prior written
notice to the Trust of the Date of any proposed vote or other
action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is
the subject of material adverse publicity, and such material
adverse change or material adverse publicity will have a
material adverse impact upon their business operations; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity, and
such material adverse change or material adverse publicity
will have a material adverse impact upon their business or
operations; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional
purchase payments under the Existing Policies.
-13-
<PAGE>
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
PFL LIFE INSURANCE COMPANY
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Facsimile No.: (319) 297-8290
Attn: Financial Markets Division, Legal Department
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or utilize
such names and addresses and other confidential information without the
express written consent of the affected party until such time as it may
come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
-14-
<PAGE>
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
-15-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
PFL LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ WILLIAM L. BUSLER
----------------------------------
Title: President
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
By: /s/ AL KEITH BRODKIN
----------------------------------
A. Keith Brodkin
Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ ARNOLD D. SCOTT
----------------------------------
Arnold D. Scott
Senior Executive Vice President
-16-
<PAGE>
As of ______________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
================================================================================================
<S> <C> <C>
PFL Retirement Builder PFL Life Insurance Company MFS Emerging Growth Series
Variable Annuity Account Policy Form MFS Research Series
March 29, 1996 No. AV288-101-95-796 MFS Total Return Series
(including successor forms, MFS Utilities Series
addenda and endorsements - may
vary by state)
under marketing names:
"Retirement Income Builder
Variable Annuity"
"First Union First Choice
Variable Annuity"
(or successor marketing names)
- ------------------------------------------------------------------------------------------------
</TABLE>
-17-
EXHIBIT 99.A4-1
Exhibit 1.A.(8)(d)
Amendment to Participation Agreement Among PFL Life and
Dreyfus Variable Investment Fund
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
The Participation Agreement, dated as of April 15, 1997, between DREYFUS
VARIABLE INVESTMENT FUND, THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.,
DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND), and
PFL LIFE INSURANCE COMPANY (the "Agreement") is hereby amended as follows:
Exhibit A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"EXHIBIT A
LIST OF PARTICIPATING FUNDS
Dreyfus Variable Investment Fund
/bullet/ Small Cap Portfolio
/bullet/ Quality Bond Portfolio
/bullet/ Capital Appreciation Portfolio
/bullet/ Growth and Income Portfolio
/bullet/ Disciplined Stock Portfolio
/bullet/ Small Company Stock Portfolio
/bullet/ Money Market Portfolio
Dreyfus Stock Index Fund"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: June 26, 1998
DREYFUS VARIABLE INVESTMENT FUND THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By: /s/ ELBA VASQUEZ By: /s/ ELBA VASQUEZ
------------------------------- -----------------------------
Name: Elba Vasquez Name: Elba Vasquez
----------------------------- -----------------------------
Title: V.P. & Assistant Secretary Title: V.P. & Assistant Secretary
---------------------------- ----------------------------
DREYFUS LIFE AND ANNUITY INDEX FUND, PFL LIFE INSURANCE COMPANY
INC. (d/b/a DREYFUS STOCK INDEX FUND)
By: /s/ ELBA VASQUEZ By: /s/ WILLIAM L. BUSLER
------------------------------- -------------------------------
Name: Elba Vasquez Name: William L. Busler
----------------------------- -----------------------------
Title: V.P. & Assistant Secretary Title: President
---------------------------- ----------------------------
EXHIBIT 99.A4-2
Exhibit 1.A.(8)(e)
Amendment to Participation Agreement Among Oppenheimer Variable
Account Funds, Oppenheimerfunds, Inc. and PFL Life
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
The Participation Agreement, dated as of December 15, 1997, by and among
OPPENHEIMER VARIABLE ACCOUNT FUNDS, OPPENHEIMERFUNDS, INC., and PFL LIFE
INSURANCE COMPANY (the "Agreement") is hereby amended as follows:
Schedule 3 of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SCHEDULE 3
Portfolios of Oppenheimer Variable Account Funds:
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Global Securities Fund
Oppenheimer High Income Fund"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: June ___, 1998
OPPENHEIMER VARIABLE ACCOUNT OPPENHEIMERFUNDS, INC.
FUNDS
By: /s/ ANDREW J. DONOHUE By: /s/ ANDREW J. DONOHUE
-------------------------------- ------------------------------
Name: Andrew J. Donohue Name: Andrew J. Donohue
------------------------------ ------------------------------
Title: Vice President and Secretary Title: Executive Vice President and
----------------------------- General Counsel
----------------------------
PFL LIFE INSURANCE COMPANY
By: /s/ WILLIAM L. BUSLER
--------------------------------
Name: William L. Busler
------------------------------
Title: President
-----------------------------
EXHIBIT 99.16
Exhibit 10
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that PATRICK S. BAIRD, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ PATRICK S. BAIRD
--------------------
Patrick S. Baird
Senior Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that CRAIG D. VERMIE, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ CRAIG D. VERMIE
-------------------
Craig D. Vermie
Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that WILLIAM L. BUSLER, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ WILLIAM L. BUSLER
---------------------
William L. Busler
President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that LARRY N. NORMAN, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ LARRY N. NORMAN
-------------------
Larry N. Norman
Executive Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that DOUGLAS C. KOLSRUD, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ DOUGLAS C. KOLSRUD
----------------------
Douglas C. Kolsrud
Senior Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that ROBERT J. KONTZ, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
/s/ ROBERT J. KONTZ
-------------------
Robert J. Kontz
Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
LEGACY BUILDER II
Know all men by these presents that BRENDA K. CLANCY, whose signature appears
below, constitutes and appoints Brenda K. Clancy and Craig D. Vermie, and each
of them, her attorneys-in-fact, each with the power of substitution, for her in
any and all capacities, to sign any registration statements and amendments
thereto for the Legacy Builder II, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or her substitute, may do or cause to be done by virtue
hereof.
/s/ BRENDA K. CLANCY
--------------------
Brenda K. Clancy
Vice President
PFL Life Insurance Company
NOVEMBER 27, 1998
Date
