<PAGE>
File Number 33-3233
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NUMBER 14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MINNESOTA LIFE VARIABLE LIFE ACCOUNT
(formerly Minnesota Mutual Variable Life Account)
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(Name of Trust)
Minnesota Life Insurance Company
(formerly The Minnesota Mutual Life Insurance Company)
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(Depositor)
400 Robert Street North, St. Paul, Minnesota 55101-2098
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(Depositor's Principal Executive Offices)
Dennis E. Prohofsky
Senior Vice President, General Counsel and Secretary
Minnesota Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101-2098
-------------------------------
(Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, N.W., Suite 405 West
Washington, D.C. 20007
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
---
on (date) pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(i) of Rule 485
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X on May 3, 1999 pursuant to paragraph (a)(i) of Rule 485
---
this post-effective amendment designates a new effective date for a
---
previously filed post-effective amendment
TITLE OF SECURITIES BEING REGISTERED:
Variable Adjustable Life Insurance Policies
<PAGE>
MINNESOTA LIFE
VARIABLE LIFE ACCOUNT
OF
MINNESOTA LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
1. Cover Page
2. Cover Page; General Descriptions, Minnesota Life Insurance
Company, Variable Life Account
3. Not Applicable
4. Distribution of Policies
5. General Descriptions, Variable Life Account
6. General Descriptions, Variable Life Account
7. Not Applicable
8. Not Applicable
9. Legal Proceedings
10. Summary; Detailed Information About the Variable Adjustable Life
Insurance Policy; Policy Charges; Voting Rights
11. Summary; Detailed Information About the Variable Adjustable Life
Insurance Policy; General Descriptions, Advantus Series Fund,
Inc.
12. Summary; Detailed Information About the Variable Adjustable Life
Insurance Policy; General Descriptions, Advantus Series Fund,
Inc.
13. Detailed Information About the Variable Adjustable Life Insurance
Policy; Policy Charges
14. Detailed Information About the Variable Adjustable Life Insurance
Policy, Adjustable Life Insurance; Applications and Policy Issue
15. Detailed Information About the Variable Adjustable Life Insurance
Policy, Policy Premiums
16. Not Applicable
17. Summary; Detailed Information About the Variable Adjustable Life
Insurance Policy
18. Advantus Series Fund, Inc. and Class 2 of the Templeton
Developing Markets Fund
19. Voting Rights
<PAGE>
20. Not Applicable
21. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. General Descriptions, Minnesota Life Insurance Company
26. Not Applicable
27. General Descriptions, Minnesota Life Insurance Company
28. Directors and Principal Officers of Minnesota Life
29. General Descriptions, Minnesota Life Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. General Descriptions, Minnesota Life Insurance Company
36. Not Applicable
37. Not Applicable
38. Distribution of Policies
39. Distribution of Policies
40. Not Applicable
41. Distribution of Policies
42. Not Applicable
43. Not Applicable
44. Detailed Information About the Variable Adjustable Life Insurance
Policy, Policy Values
45. Not Applicable
46. Detailed Information About the Variable Adjustable Life Insurance
Policy, Policy Loans, Surrender
47. Not Applicable
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48. Not Applicable
49. Not Applicable
50. General Descriptions, Variable Life Account
51. Summary; Detailed Information About the Variable Adjustable Life
Insurance Policy, Policy Charges
52. Summary; General Descriptions, Variable Life Account; Advantus
Series Fund, Inc.
53. Federal Tax Status
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
Prospectus
Variable Adjustable
Life Insurance
Policy
This prospectus describes a Variable Adjustable Life Insurance Policy issued
by Minnesota Life Insurance Company ("Minnesota Life"). It provides life
insurance protection for the life of the insured so long as scheduled premiums
are paid. Under some plans of insurance, the face amount of insurance may
decrease or terminate during the life of the insured.
The Policy may be adjusted, within described limits, as to face amount,
premium amount and the plan of insurance.
Variable Adjustable Life policy values may be invested in our separate account
called the Variable Life Account. Policy values may also be invested in a
general account option. The actual cash value of all Policies will vary with
the investment experience of these options.
The Variable Life Account invests its assets in shares of Advantus Series
Fund, Inc. and Class 2 of the Templeton Developing Markets Fund (the "Funds").
The Funds have seventeen Portfolios which are available to the Variable Life
Account. They are:
. Growth Portfolio . Value Stock Portfolio
. Bond Portfolio . Small Company Value Portfolio
. Money Market Portfolio . Global Bond Portfolio
. Asset Allocation Portfolio . Index 400 Mid-Cap Portfolio
. Mortgage Securities Portfolio . Macro-Cap Value Portfolio
. Index 500 Portfolio . Micro-Cap Growth Portfolio
. Capital Appreciation Portfolio . Real Estate Securities Portfolio
. International Stock Portfolio . Templeton Developing Markets Fund
. Small Company Growth Portfolio
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE FUNDS.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THE POLICIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC. NEITHER THE SEC
OR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Minnesota Life Insurance Company
400 Robert Street North
St. Paul, MN 55101-2098
Ph 651/665-3500
http:/www.minnesotamutual.com
Dated: May 3, 1999
[LOGO OF MINNESOTA LIFE APPEARS HERE]
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Summary................................................................... 1
Condensed Financial Information........................................... 8
General Descriptions
Minnesota Life Insurance Company........................................ 10
Variable Life Account................................................... 10
Advantus Series Fund, Inc............................................... 10
Templeton Variable Products Series Fund................................. 11
Additions, Deletions or Substitutions................................... 11
Selection of Sub-Accounts............................................... 12
The Guaranteed Principal Account........................................ 12
Detailed Information about the Variable Adjustable Life Insurance Policy
Adjustable Life Insurance............................................... 13
Policy Adjustments...................................................... 16
Applications and Policy Issue........................................... 20
Policy Premiums......................................................... 21
Policy Values........................................................... 24
Death Benefit Options................................................... 27
Policy Loans............................................................ 28
Surrender............................................................... 30
Free Look............................................................... 31
Conversion.............................................................. 31
Policy Charges.......................................................... 31
Other Policy Provisions................................................. 34
Additional Benefits..................................................... 36
Other Matters
Federal Tax Status...................................................... 38
Directors and Principal Officers of Minnesota Life...................... 41
Voting Rights........................................................... 42
Distribution of Policies................................................ 42
Legal Matters........................................................... 43
Legal Proceedings....................................................... 43
Year 2000 Computer Problem.............................................. 43
Experts................................................................. 43
Registration Statement.................................................. 43
Special Terms............................................................. 44
Financial Statements of Minnesota Life Variable Life Account.............. 45
Financial Statements of Minnesota Life Insurance Company.................. 60
Appendix I-Illustrations of Policy Values, Death Benefits and Premiums.... 84
Appendix II-Summary of Policy Charges..................................... 93
Appendix III-Illustration of Death Benefit Calculation.................... 98
Appendix IV-Policy Loan Example........................................... 99
Appendix V-Example of Sales Load Computation.............................. 100
Appendix VI-Average Annual Returns........................................ 101
Appendix VII-S&P 500 Performance History.................................. 102
Appendix VIII-Range of Returns............................................ 103
</TABLE>
<PAGE>
Summary
The following summary is designed to answer certain general questions
concerning the Policy and to give you a brief overview of the more significant
Policy features. This summary is not comprehensive.You should review the
information contained elsewhere in this prospectus. You should also refer to
the heading "Special Terms" for the definition of unfamiliar terms.
What is a Variable Adjustable Life Insurance Policy?
The Variable Adjustable Life Insurance Policy (the "Policy") described in
this prospectus combines traditional insurance provisions, flexible
administrative procedures and significant and useful market sensitive
investment features. First and foremost, the Policy provides a guaranteed death
benefit for the insured's lifetime so long as scheduled premiums are paid. In
this respect, the Policy is similar to conventional whole life insurance. In
addition, the Policy contains adjustment features which give you the
flexibility to tailor the Policy to your individual requirements at issue and
to adjust the Policy thereafter as your insurance needs change.
Throughout the life of the insured, policy values are invested at your
direction in the several portfolios of Advantus Series Fund, Inc., in Class 2
of the Templeton Developing Markets Fund (the "Funds") or in a Minnesota Life
general account option. Such investment enables you to obtain market rates of
return on your investment in the Policy in combination with guaranteed
insurance protection.
This prospectus describes two versions of the Variable Adjustable Life
Insurance Policy, "VAL '87" and "VAL '95".
What is the guaranteed death benefit?
We guarantee that the face amount of insurance shown on the policy
specification page will be paid on the death of the insured so long as you do
not have policy indebtedness and all scheduled premiums have been paid. Some
Policies will have a scheduled decrease in such guaranteed face amount at the
end of the initial policy protection period. In this case, the time
and amount of the decrease are also shown on the policy specification page. The
importance of the guarantee is that adverse investment performance may never
reduce your life insurance protection below the guaranteed amount. We impose a
charge of 1.5 percent of premiums for providing this guarantee.
What makes the Policy "Adjustable"?
The Policy is termed "Adjustable" because it allows you the flexibility to
custom-design your Policy at issue and thereafter to change or "adjust" your
Policy as your insurance needs change. The three components in designing your
Policy are the level of premiums you wish to pay, the level of death benefit
protection you need and the appropriate "plan" of insurance for you. You may
choose any two of the three components--premium, face amount and plan--and we
will calculate the third component.
Within very broad limits, including those designed to assure that the Policy
qualifies as life insurance for tax purposes, you may choose any level of
premium or death benefit that you wish. Based on the premium and initial face
amount you choose, we will calculate the tabular cash value which results from
using the guaranteed mortality and assumed rate of return in the Policy. The
pattern of tabular cash values and the resulting schedule of face amount and
premiums define the guaranteed plan of insurance.
The maximum plan of insurance available is one where the Policy becomes paid-
up after the payment of ten annual premiums. A paid-up Policy is one for which
no additional premiums are required to guarantee the face amount of insurance
for the entire life of the insured, provided there is no policy indebtedness.
Whole life plans may be suitable for individuals who wish to ensure lifetime
coverage, without any scheduled reduction in face amount as described below, by
the payment of relatively higher premiums and, in certain cases, for a lesser
period of time, or who wish to accumulate substantial cash values by utilizing
the investment features of the Policy.
1
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The minimum plan that we offer at original issue is a ten year protection
Policy. If the insured's age at original issue is over 55, the minimum plan of
protection will be less than ten years, as described in the table below:
<TABLE>
<CAPTION>
Minimum Plan
Issue Age (in years)
--------- ------------
<S> <C>
56 9
57 8
58 7
59 6
60 or greater 5
</TABLE>
A protection Policy is one which provides only a term plan of insurance,
namely one with a stated face amount and premium level, providing a guaranteed
face amount for a specified number of years, always less than for whole life.
Absent an adjustment to a new plan, at the end of the initial protection
period, there will be a scheduled reduction in the guaranteed face amount;
that face amount will have a whole life plan of insurance, based on continued
payment of your scheduled premiums. A protection plan requires the lowest
initial level of premiums and offers the most insurance protection with the
lowest investment element. The protection plan may be a suitable starting
point for young policy owners who have not reached their peak earning years
but who have substantial life insurance needs.
For any given face amount of insurance, you may select a plan that falls
anywhere between the minimum protection plan and the maximum ten premium
payment whole life plan. The higher the premium you pay, the greater will be
your cash value accumulation at any given time and therefore, for whole life
plans, the shorter the period during which you need to pay premiums before
your Policy becomes paid-up. For example, the table below shows the premium
required for various plans for a standard non-smoker risk, male, age 40 at
issue, insured with a $100,000 VAL '95 Policy.
<TABLE>
<CAPTION>
Annual
Plan of Insurance Premium
- ----------------- -------
<S> <C>
Minimum --10 year protection plan $ 428
30 year protection plan $ 939
Whole life plan $1,723
Life paid-up at age 70 $1,923
Maximum --10 year, limited payment,
whole life plan $3,833
</TABLE>
The flexibility described above with respect to designing your Policy to
suit your needs at issue continues throughout the time the Policy remains in
force by virtue of its adjustability features. As your insurance needs and
personal circumstances change over the years, you may change, subject to the
limitations described herein, the premium and face amount and thus the plan.
Some limitations do apply to policy adjustments, and these limitations are
more fully described in this prospectus. See the heading "Policy Adjustments"
in this prospectus on page 16. Any policy adjustment for a change in premium
must result in a change of the annual premium of at least $100 and any
adjustment to a Policy's face amount generally must result in a change of the
face amount of at least $5,000. Other than an automatic adjustment at the
point when the face amount is scheduled to decrease, an automatic adjustment
made under VAL '95 at the insured's age 70, or an adjustment to a zero or stop
premium, an adjusted Policy must provide a level face amount of insurance to
the next policy anniversary after the later of: (a) five years from the date
of adjustment; or (b) ten years from the date of policy issue. If the
insured's age at original issue is over 55, the adjusted Policy must provide a
level face amount of insurance to the next policy anniversary after the later
of: (a) five years from the date of adjustment; or (b) a certain number of
years from the date of policy issue, based on the table below:
<TABLE>
<CAPTION>
Issue Age Number of Years
--------- ---------------
<S> <C>
56 9
57 8
58 7
59 6
60 or greater 5
</TABLE>
What makes the Policy "Variable"?
The Policy is termed "Variable" because unlike traditional whole life and
universal life contracts which provide for accumulations of contract values at
fixed rates determined by the insurance company, Variable Adjustable Life
policy values may be invested in a separate account of ours called the
Minnesota Life Variable Life Account ("Variable Life Account"), the sub-
accounts of which invest in corresponding Portfolios of the Funds. Thus, your
policy values invested in these sub-accounts will reflect market rates of
return.
The actual cash value of the Policies, to the extent invested in sub-
accounts of the
2
<PAGE>
Variable Life Account, will vary with the investment experience of the sub-
accounts of the Variable Life Account. These have no guaranteed minimum actual
cash value. Therefore, you bear the risk that adverse investment performance
may depreciate your investment in the Policy. At the same time, the Policy
offers you the opportunity to have your actual cash value appreciate more
rapidly than it would under comparable fixed benefit contracts by virtue of
favorable investment performance. In addition, under some Policies, the death
benefit will also increase and decrease (but not below the guaranteed amount)
with investment experience.
Those seeking the traditional insurance protections of a guaranteed cash
value may allocate premiums to the guaranteed principal account. The guaranteed
principal account is a general account option with a guaranteed accumulation at
a fixed rate of interest. While it is more fully described in the Policy,
additional information on this option may be found under the heading "The
Guaranteed Principal Account" in this prospectus on page 12.
What variable investment options are available?
The Variable Life Account invests in seventeen Portfolios of the Funds. These
offer policy owners the opportunity to invest in stocks, bonds, mortgage
securities and money market instruments. Policy owners who wish to actively
manage the investment of their actual cash values may direct their funds to the
. Growth
. Bond
. Money Market
. Mortgage Securities
. Index 500
. Capital Appreciation
. International Stock
. Small Company Growth
. Value Stock
. Small Company Value
. Global Bond
. Index 400 Mid-Cap
. Macro-Cap Value
. Micro-Cap Growth
. Real Estate Securities Portfolios
. Templeton Developing Markets Fund Class 2
We also offer an Asset Allocation Portfolio, which is designed to offer
policy owners who do not wish to direct their investment the opportunity to
have the Funds' investment advisers make the decisions concerning what
percentages of the assets should be invested in stocks, bonds and money market
instruments at any given time.
The investment objectives and certain policies of these Portfolios of the
Advantus Series Fund are as follows:
The Growth Portfolio seeks the long-term accumulation of capital. Current
income, while a factor in portfolio selection, is a secondary objective. The
Growth Portfolio will invest primarily in common stocks and other equity
securities. Common stocks are more volatile than debt securities and involve
greater investment risk.
The Bond Portfolio seeks as high a level of long-term total rate of return
as is consistent with prudent investment risk. A secondary objective is to
seek preservation of capital. The Bond Portfolio will invest primarily in
long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.
The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the preservation of capital. The Money Market
Portfolio will invest in money market instruments and other debt securities
with maturities not exceeding one year. The return produced by these
securities will reflect fluctuations in short-term interest rates.
An investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
The Asset Allocation Portfolio seeks as high a level of long-term total
rate of return as is consistent with prudent investment risk. The Asset
Allocation Portfolio will invest in common stocks and other equity
securities, bonds and money market instruments. The Asset Allocation
Portfolio involves the risks inherent in stocks and debt securities of
varying maturities and the risk that the Portfolio may invest too much or too
little of its assets in each type of security at any particular time.
3
<PAGE>
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will follow a policy of investment primarily in
mortgage-related securities. Prices of mortgage-related securities will tend
to rise and fall inversely with the rise and fall of the general level of
interest rates.
The Index 500 Portfolio seeks investment results that correspond generally
to the price and yield performance of the common stocks included in the
Standard & Poor's Corporation 500 Composite Stock Price Index (the "Index").
It is designed to provide an economical and convenient means of maintaining a
broad position in the equity market as part of an overall investment
strategy. All common stocks, including those in the Index, involve greater
investment risk than debt securities. The fact that a stock has been included
in the Index affords no assurance against declines in the price or yield
performance of that stock.
The Capital Appreciation Portfolio seeks growth of capital. Investments
will be made based upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital growth. Because
of the market risks inherent in any equity investment, the selection of
securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value.
The International Stock Portfolio seeks long-term capital growth. In
pursuit of this objective the International Stock Portfolio will follow a
policy of investing in stocks issued by companies, large and small, and debt
obligations of companies and governments outside the United States. Current
income will be incidental to the objective of capital growth. The Portfolio
is designed for persons seeking international diversification. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are
in addition to the usual risks inherent in domestic investments.
The Small Company Growth Portfolio seeks long-term accumulation of capital.
In pursuit of this objective, the Small Company Growth Portfolio will follow
a policy of investing primarily in common and preferred stocks issued by
small companies, defined in the terms of either market capitalization or
gross revenues. Investments in small companies usually involve greater
investment risks than fixed income securities or corporate equity securities
generally. Small companies will typically have a market capitalization of
less than $1.5 billion or annual gross revenues of less than $1.5 billion.
The Value Stock Portfolio seeks long-term accumulation of capital. The
production of income through the holding of dividend paying stocks will be a
secondary objective of the Portfolio. The Value Stock Portfolio will invest
primarily in equity securities of companies which, in the opinion of the
Portfolio's investment adviser, have market values which appear low relative
to their underlying value or future earnings and growth potential.
The Small Company Value Portfolio seeks the long-term accumulation of
capital. The Portfolio will follow a policy of investing primarily in the
equity securities of small companies, defined in terms of market
capitalization and which appear to have market values which are low relative
to their underlying value or future earnings and growth potential. Dividend
income will be incidental to the investment objective for this Portfolio.
The Global Bond Portfolio seeks to maximize current income consistent with
protection of principal. The Portfolio pursues its objective by investing
primarily in issuers located anywhere in the world.
Prior to May 1, 1998, the Global Bond Portfolio was known as the
International Bond Portfolio and pursued its objective by investing primarily
in a managed portfolio of non-U.S. dollar debt securities issued by foreign
governments, companies and supranational entities. Effective May 1, 1998,
pursuant to a change in the investment practices of the Portfolio approved by
the Board of Directors, the Portfolio will seek to achieve its investment
objective by investing primarily in debt securities issued anywhere in the
world. The investment objective of the Portfolio remains unchanged.
The Index 400 Mid-Cap Portfolio seeks to provide investment results
4
<PAGE>
generally corresponding to the aggregate price and dividend performance of
publicly traded common stocks that comprise the Standard & Poor's 400 MidCap
Index. The Portfolio pursues its investment objective by investing primarily
in the 400 common stocks that comprise the Index, issued by medium sized
domestic companies with market capitalizations that generally range from $200
million to $5 billion. It is designed to provide an economical and convenient
means of maintaining a diversified portfolio in this equity security area as
part of an over-all investment strategy. The inclusion of a stock in the
Index in no way implies an opinion by Standard & Poor's as to its
attractiveness as an investment, nor is it a sponsor or in any way affiliated
with the Portfolio.
The Macro-Cap Value Portfolio seeks to provide high total return. It
pursues this objective by investing in equity securities that the sub-adviser
believes, through the use of dividend discount models, to be undervalued
relative to their long-term earnings power, creating a diversified portfolio
of equity securities which typically will have a price/earnings ratio and a
price to book ratio that reflects a value orientation. The Portfolio seeks to
enhance its total return relative to that of a universe of large-sized U.S.
companies.
The Micro-Cap Growth Portfolio seeks long-term capital appreciation. It
pursues its objective by investing primarily in equity securities of smaller
companies which the sub-adviser believes are in an early stage or
transitional point in their development and have demonstrated or have the
potential for above average revenue growth. It will invest primarily in
common stocks and stock equivalents of micro-cap companies, that is,
companies with a market capitalization of less than $300 million.
The Real Estate Securities Portfolio seeks above-average income and long-
term growth of capital. It will pursue its objective by investing primarily
in equity securities of companies in the real estate industry. The Portfolio
seeks to provide a yield in excess of the yield of the Standard & Poor's 500
Composite Index.
In addition to the investment in the Advantus Series Fund, the Variable Life
Account invests in the Templeton Developing Markets Fund, Class 2, a
diversified portfolio with two classes of shares of the Templeton Variable
Products Series Fund, a mutual fund of the series type.
The investment objectives and certain policies of the Templeton Developing
Markets Fund available under the Policy are as follows:
The Templeton Developing Markets Fund seeks long-term capital appreciation.
It pursues this objective by investing primarily in equity securities of
issuers in countries having developing markets. Countries generally
considered to have developing markets are all countries that are considered
to be developing or emerging countries by the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank)
or the International Finance Corporation, as well as countries that are
classified by the United Nations or otherwise regarded by their authorities
as developing.
There is no assurance that any Portfolio will meet its objectives. Additional
information concerning the investment objectives, policies and risks of the
Portfolios can be found in the current prospectuses for the Funds, which are
attached to this prospectus.
How do you allocate your net premiums?
In your initial policy application, you indicate how you want your net
premiums allocated among the guaranteed principal account and the sub-accounts
of the Variable Life Account. All future net premiums will be allocated in the
same proportion until you send us a written request to change the allocation.
Similarly, you may transfer amounts from one sub-account to another by sending
us a written request or by calling us.
What death benefit options are offered under the Policy?
The Policy provides two death benefit options: the Cash Option and the
Protection Option. Your choice will depend on whether you want favorable
investment experience of amounts invested in sub-accounts of the Variable Life
Account to be reflected in accelerated accumulations of actual cash value or in
enhanced life insurance coverage. If investment performance is less than that
assumed in the design of the Policy, the death benefit will still equal the
current face amount.
5
<PAGE>
The Cash Option provides a fixed death benefit equal to the guaranteed face
amount. Favorable investment returns, if any, will be reflected in increased
actual cash values which will, on whole life plans, shorten the premium paying
period. Only if and when the policy value exceeds the net single premium for
the then current face amount will the death benefit vary.
The Protection Option provides a variable death benefit from the issue date
as well as variable actual cash values. Favorable investment returns will be
reflected both in increased life insurance coverage and increased cash value
accumulations, although any increases in actual cash values under the
Protection Option will not be as great as under the Cash Option.
Do you have access to your policy values?
Yes. Your actual cash value is available to you during the insured's
lifetime. You may use the actual cash value to provide retirement income, as
collateral for a loan, to continue some insurance protection if you do not
wish to continue paying premiums or to obtain cash by surrendering your Policy
in full or in part.
You may also borrow up to 90 percent of your policy value as a policy loan.
Each alternative may be subject to conditions described in the Policy or in
this prospectus under the heading "Policy Values" on page 24 and certain
transactions may have tax consequences as described under the heading "Federal
Tax Status" on page 38.
What charges are associated with the Policy?
We assess certain charges from each premium payment, from policy values and
from the amounts held in the Variable Life Account. All of these charges,
which are largely designed to cover our expenses in providing insurance
protection and in distributing and administering the Policies, are fully
described under the heading "Policy Charges" in this prospectus on page 31.
Because of the significance of these charges in early policy years,
prospective purchasers should purchase a Policy only if they intend to and
have the financial capacity to keep it in force for a substantial period.
Against base premiums we deduct a basic sales load of 7 percent and we may
also deduct a first year sales load not to exceed 23 percent. We also deduct
from premiums an underwriting charge, a premium tax charge of 2.5 percent and
a face amount guarantee charge of 1.5 percent. Nonrepeating premiums are
currently subject only to the premium tax charge.
Against the actual cash value of a Policy we deduct an administration charge
of $60 per year, a transaction charge for each Policy adjustment and a cost of
insurance charge.
With VAL '87, a charge for sub-standard risks is deducted from the actual
cash value of a Policy. With VAL '95, a charge for sub-standard risks is
deducted from the premium.
Against the assets held in the Variable Life Account we assess a mortality
and expense risk charge which is deducted from the Variable Life Account
assets on each valuation date at an annual rate of .50 percent of the Variable
Life Account average daily net assets.
Advantus Capital Management, Inc. one of our subsidiaries, acts as the
investment adviser to Advantus Series Fund and also deducts from the Fund the
advisory fee of the fund manager and the fund expense for the portfolio
expense for each of VAL's portfolios. The respective advisory fee and fund
expense for each portfolio were as follows:
largely designed to cover our expenses in providing insurance protection and
in distributing and administering the Policies, are fully described under the
heading "Policy Charges" in this prospectus on page 31. Because of the
significance of these charges in early policy years, prospective purchasers
should purchase a Policy only if they intend to and have the financial
capacity to keep it in force for a substantial period.
Against base premiums we deduct a basic sales load of 7 percent and we may
also deduct a first year sales load not to exceed 23 percent. We also deduct
from premiums an underwriting charge, a premium tax charge of 2.5 percent and
a face amount guarantee charge of 1.5 percent. Nonrepeating premiums are
currently subject only to the premium tax charge.
Against the actual cash value of a Policy we deduct an administration charge
of $60 per year, a transaction charge for each Policy adjustment and a cost of
insurance charge.
With VAL '87, a charge for sub-standard risks is deducted from the actual
cash value of a Policy. With VAL '95, a charge for sub-standard risks is
deducted from the premium.
Against the assets held in the Variable Life Account we assess a mortality
and expense risk charge which is deducted from the Variable Life Account
assets on each valuation date at an annual rate of .50 percent of the Variable
Life Account average daily net assets.
Advantus Capital Management, Inc. one of our subsidiaries, acts as the
investment adviser to Advantus Series Fund and also deducts from the Fund the
advisory fee of the fund manager and the fund expense for the portfolio
expense for each of VAL's portfolios. The respective advisory fee and fund
expense for each portfolio were as follows:
<TABLE>
<CAPTION>
Advisory Fund
Portfolio Fee Expense
--------- -------- -------
<S> <C> <C>
Growth .50% .03%
Bond .50 .05
Money Market .50 .08
Asset Allocation .50 .03
Mortgage Securities .50 .07
Index 500 .40 .04
Capital Appreciation .75 .03
International Stock .70 .24
Small Company Growth .75 .04
Value Stock .75 .04
Small Company Value .75 .15
Global Bond .60 .53
Index 400 Mid-Cap .40 .15
Macro-Cap Value .70 .15
Micro-Cap Growth 1.10 .15
Real Estate Securities .75 .15
</TABLE>
6
<PAGE>
For more information about the Fund, see the prospectus of Advantus Series
Fund, Inc. which is attached to this prospectus.
The Templeton Developing Markets Fund pays its investment adviser management
fees at an annual rate of 1.25 percent of the Fund's average daily net assets,
and has other fund expenses of .66 percent. In addition, Class 2 of the
Templeton Developing Markets Fund has a Rule 12b-1 plan and may pay up to 0.25
percent annually of the average daily net assets for distribution. For more
information, see the Templeton Fund's prospectus.
Are the benefits under a Policy subject to Federal income tax?
With respect to a Policy issued on the basis of a standard premium class, we
believe that such a Policy should qualify as a life insurance contract for
Federal income tax purposes. With respect to a Policy issued on a sub-standard
basis, it is not clear whether or not such a Policy would qualify as a life
insurance contract for Federal tax purposes. Assuming that a Policy qualifies
as a life insurance contract for Federal income tax purposes, the benefits
under Policies described in this prospectus should receive the same tax
treatment under the Internal Revenue Code of 1986 as benefits under
traditional fixed benefit life insurance policies. Thus, death proceeds
payable under variable life insurance policies should be excludable from the
beneficiary's gross income for Federal income tax purposes. It is also
believed that you should not be in constructive receipt of the cash values of
your Policy until actual distribution. See the heading "Federal Tax Status" in
this prospectus on page 38.
It should be noted, however, that under recent legislation the tax treatment
described above relating to distributions is available only for policies not
described as "modified endowment contracts." Policies described as modified
endowment contracts are treated as life insurance with respect to the tax
treatment of death proceeds and the tax-free inside build-up of yearly cash
value increases. However, any amounts received by the owner, such as
dividends, cash withdrawals, loans and amounts received from partial or total
surrender of the contract will be subject to the same tax treatment as amounts
received under an annuity. Annuity tax treatment includes the ten percent
additional income tax imposed on the portion of any distribution that is
included in income, except where the distribution or loan is made on or after
the policy owner attains age 59 1/2, is attributable to the policy owner
becoming disabled, or is part of a series of substantially equal periodic
payments for the life of the policy owner or the joint lives of the policy
owner and beneficiary.
A determination as to whether a policy is a modified endowment contract and
subject to this special tax treatment will require an examination of the
premium paid in relation to the death benefit of the policy. A modified
endowment contract results if the cumulative premiums during the first seven
contract years exceed the sum of the net level premiums which would be paid
under a seven-pay life policy. In addition, a policy which is subject to a
material change will be treated as a new policy on the date that such a
material change takes effect. A determination must be made at that time to
test whether such a policy meets the seven-pay standard by taking into account
the previously existing cash surrender value.
How do you purchase a Policy?
To be eligible to purchase a Policy the insured must be no more than age 85,
satisfy our underwriting standards and the Policy must have a face amount of
at least $50,000. The procedure to purchase a Policy is to complete an
application, provide us with evidence of insurability satisfactory to us and
pay your first scheduled premium. See the heading "Applications and Policy
Issue" in this prospectus on page 20.
For a limited time after your application for the Policy and delivery of it,
you may return the Policy for a refund of all premium payments within the
terms of its "free look" provision. See the heading "Free Look" in this
prospectus on page 31.
Moreover, while the Policy is in force and the premiums fully paid and prior
to the death of the insured, you may convert it to any adjustable life policy
with a fixed death benefit and fixed cash values which we may then offer. On
conversion, the issue age and risk class of the insured shall be as stated in
this Policy. For VAL '95, this conversion privilege is only available during
the first 24 months from the original policy date, but comparable fixed
insurance coverage can be obtained after 24 months from the original policy
date by transferring all of the policy value to the guaranteed principal
account and thereafter allocating all premiums to that account.
7
<PAGE>
Condensed Financial Information
The financial statements of Minnesota Life Insurance Company and of
Minnesota Life Variable Life Account may be found elsewhere in this
prospectus.
The table below gives per unit information about the financial history of
each sub-account from the inception of each to December 31, 1998. This
information should be read in conjunction with the financial statements and
related notes of Minnesota Life Variable Life Account included in this
prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---------- ---------- ---------- ---------- ---------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Sub-Account:
Unit value at
beginning of year $2.59 $2.22 $1.79 $1.79 $1.72 $1.65 $1.23 $1.24 $0.99
Unit value at end
of year $3.43 $2.59 $2.22 $1.79 $1.79 $1.72 $1.65 $1.23 $1.24
Number of units
outstanding at end
of year 19,284,419 16,176,371 12,822,494 9,964,217 6,671,352 3,703,167 1,251,845 511,276 257,995
Bond Sub-Account:
Unit value at be-
ginning of year $1.99 $1.95 $1.63 $1.72 $1.57 $1.48 $1.26 $1.18 $1.06
Unit value at end
of year $2.17 $1.99 $1.95 $1.63 $1.72 $1.57 $1.48 $1.26 $1.18
Number of units
outstanding at end
of year 9,679,443 7,366,222 5,340,539 3,659,230 2,240,344 1,281,711 654,954 484,684 247,525
Money Market Sub-
Account:
Unit value at be-
ginning of year $1.58 $1.52 $1.45 $1.40 $1.37 $1.34 $1.27 $1.19 $1.10
Unit value at end
of year $1.66 $1.58 $1.52 $1.45 $1.40 $1.37 $1.34 $1.27 $1.19
Number of units
outstanding at end
of year 4,323,601 4,082,791 3,509,791 2,920,337 1,849,721 1,167,590 536,680 341,717 141,494
Asset Allocation
Sub-
Account:
Unit value at be-
ginning of year $2.50 $2.23 $1.79 $1.83 $1.73 $1.62 $1.26 $1.22 $1.02
Unit value at end
of year $2.96 $2.50 $2.23 $1.79 $1.83 $1.73 $1.62 $1.26 $1.22
Number of units
outstanding at end
of year 34,942,517 32,104,595 27,633,273 23,769,797 18,341,417 8,943,507 2,587,520 1,202,183 408,152
Mortgage Securities
Sub-Account:
Unit value at be-
ginning of year $2.13 $2.03 $1.73 $1.80 $1.66 $1.56 $1.35 $1.24 $1.10
Unit value at end
of year $2.31 $2.13 $2.03 $1.73 $1.80 $1.66 $1.56 $1.35 $1.24
Number of units
outstanding at end
of year 4,464,617 4,175,648 3,616,256 3,250,971 2,419,453 1,471,984 555,964 241,631 95,633
Index 500 Sub-Ac-
count:
Unit value at be-
ginning of year $2.93 $2.42 $1.78 $1.77 $1.62 $1.51 $1.17 $1.23 $0.95
Unit value at end
of year $3.86 $2.93 $2.42 $1.78 $1.77 $1.62 $1.51 $1.17 $1.23
Number of units
outstanding at end
of year 22,433,487 17,250,529 11,917,281 8,997,722 6,074,831 4,026,796 1,307,951 658,612 237,854
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---------- ---------- ---------- ---------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Sub-Account:
Unit value at begin-
ning of
year $3.00 $2.56 $2.10 $2.06 $1.87 $1.79 $1.27 $1.30 $0.95
Unit value at end of
year $3.82 $3.00 $2.56 $2.10 $2.06 $1.87 $1.79 $1.27 $1.30
Number of units out-
standing at end of
year 22,986,605 19,778,274 16,587,673 12,929,134 9,082,661 5,053,453 1,689,614 802,456 181,898
International Stock
Sub-Account:
Unit value at begin-
ning of
period $1.79 $1.50 $1.32 $1.33 $0.93 $1.00*
Unit value at end of
period $1.99 $1.79 $1.50 $1.32 $1.33 $0.93
Number of units out-
standing at end of pe-
riod 35,764,833 28,056,128 20,883,317 15,062,750 6,244,750 1,615,754
Small Company Growth
Sub-
Account:
Unit value at begin-
ning of
period $1.69 $1.59 $1.21 $1.15 $1.00**
Unit value at end of
period $1.81 $1.69 $1.59 $1.21 $1.15
Number of units out-
standing at end of pe-
riod 27,207,371 19,918,050 13,089,758 7,074,933 1,261,521
Value Stock Sub-Ac-
count:
Unit value at begin-
ning of
period $1.78 $1.37 $1.04 $1.00***
Unit value at end of
period $2.15 $1.78 $1.37 $1.04
Number of units out-
standing at end of pe-
riod 17,273,210 9,648,331 3,864,294 971,938
</TABLE>
* The information for the sub-account is shown for the period May 1, 1992 to
December 31, 1992. May 1, 1992 was the effective date of the 1933 Act
Registration.
** The information for the sub-account is shown for the period May 3, 1993 to
December 31, 1993. May 3, 1993 was the effective date of the 1933 Act
Registration.
*** The information for the sub-account is shown for the period May 2, 1994 to
December 31, 1994. May 2, 1994 was the effective date of the 1933 Act
Registration.
9
<PAGE>
General Descriptions
Minnesota Life Insurance Company
We are Minnesota Life Insurance Company ("Minnesota Life"), a life insurance
company organized under the laws of Minnesota. Minnesota Life was formerly
known as The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"), a
mutual life insurance company organized in 1880 under the laws of Minnesota.
On October 1, 1998, a plan of reorganization created a mutual insurance
holding company named Minnesota Mutual Companies, Inc. Minnesota Mutual
reorganized as a stock insurance company subsidiary of the new holding company
and took the new name Minnesota Life.
Our home office is at 400 Robert Street North, St. Paul, Minnesota 55101-
2098, telephone: (651) 665-3500. We are licensed to conduct life insurance
business in all states of the United States (except New York where we are an
authorized reinsurer), the District of Columbia, Canada, Puerto Rico and Guam.
Variable Life Account
A separate account, called the Minnesota Life Variable Life Account, was
established on October 21, 1985, by our Board of Trustees in accordance with
certain provisions of the Minnesota insurance law. The separate account is
registered as a "unit investment trust" with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940. Registration
under the Act does not signify that the SEC supervises the management, or the
investment practices or policies, of the Variable Life Account. The separate
account meets the definition of a "separate account" under the federal
securities laws.
We are the legal owner of the assets in the Variable Life Account. The
obligations to policy owners and beneficiaries arising under the Policies are
general corporate obligations of Minnesota Life and thus our general assets
back the Policies. The Minnesota law under which the Variable Life Account was
established provides that the assets of the Variable Life Account shall not be
chargeable with liabilities arising out of any other business which we may
conduct, but shall be held and applied exclusively to the benefit of the
holders of those variable life insurance policies for which the separate
account was established. The investment performance of the Variable Life
Account is entirely independent of both the investment performance of our
General Account and of any other separate account which we may have
established or may later establish.
The Variable Life Account currently has seventeen sub-accounts to which you
may allocate premiums. Each sub-account invests in shares of a corresponding
Portfolio of the Funds.
Advantus Series Fund, Inc.
The Variable Life Account currently invests in Advantus Series Fund, Inc., a
mutual fund of the series type. Prior to May 1, 1997, the name of the Fund was
"MIMLIC Series Fund, Inc." Advantus Series Fund is registered with the SEC as
a diversified, open-end management investment company. Such registration does
not signify that the SEC supervises the management, or the investment
practices or policies, of the Fund. The Fund issues its shares, continually
and without sales charge, only to us and certain of our separate accounts
including the Variable Life Account. Shares are sold and redeemed at net asset
value.
Advantus Series Fund's investment adviser is Advantus Capital Management,
Inc. ("Advantus Capital"). Advantus Capital is a wholly-owned subsidiary of
Minnesota Life.
While Advantus Capital acts as investment adviser to the Fund and its
Portfolios, it has obtained an order from the SEC permitting it to act as a
"manager of managers". Pursuant to the order, Advantus Capital may, for any
portfolio, select one or more sub-advisers and adopt or amend an investment
sub-advisory agreement without approval of the shareholders of the affected
portfolio. In accordance with the order, Advantus Capital has retained the
following sub-advisers:
. Winslow Capital Management, Inc. for the Capital Appreciation Portfolio,
. Templeton Investment Counsel, Inc. for the International Stock Portfolio,
. J.P. Morgan Investment Management Inc. for the Macro-Cap Value Portfolio,
. Wall Street Associates for the Micro-Cap Growth Portfolio, and
. Julius Baer Investment Management Inc. for the Global Bond Portfolio
10
<PAGE>
The Fund currently has nineteen investment Portfolios, sixteen of which are
available to the Variable Life Account. A series of the Fund's common stock is
issued for each Portfolio. The assets of each Portfolio are separate from the
others and each has different investment objectives and policies. Therefore,
each Portfolio operates as a separate investment fund and the investment
performance of one has no effect on the investment performance of any other
Portfolio.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of that Portfolio at net asset value.
For more information on the Fund and its Portfolios, see "Summary--What
investment options are available?" in this prospectus and the prospectus of
the Advantus Series Fund, Inc. which is attached to this prospectus.
Templeton Variable Products Series Fund
In addition to the investments in Advantus Series Fund, the Variable Life
Account invests in the Templeton Developing Markets Fund, Class 2, a
diversified portfolio of the Templeton Variable Products Series Fund, a mutual
fund of the series type.
Class 2 of the Templeton Developing Markets Fund pays 0.25 percent of the
average daily net assets annually under a distribution plan adopted under Rule
12b-1 of the Investment Company Act of 1940. Amounts paid under the 12b-1 plan
to us may be used for certain contract owner services or distribution
activities.
The investment adviser of Templeton Developing Markets Fund is Templeton
Asset Management Ltd., a Singapore corporation. It is an indirect wholly-owned
subsidiary of Franklin Resources, Inc. ("Franklin"). Through its subsidiaries,
Franklin is engaged in the financial services industry. The Templeton
organization has been investing globally since 1940 and, with its affiliates,
provides investment management and advisory services to a worldwide client
base. The investment adviser and its affiliates have offices worldwide.
Additions, Deletions or Substitutions
We reserve the right to add, combine or remove any sub-accounts of the
Variable Life Account when permitted by law. Each additional sub-account will
purchase shares in a new portfolio or mutual fund. Such sub-accounts may be
established when, in our sole discretion, marketing, tax, investment or other
conditions warrant such action. We will use similar considerations should
there be a determination to eliminate one or more of the sub-accounts of the
Variable Life Account. The addition of any investment option will be made
available to existing policy owners on such basis as may be determined by us.
We retain the right, subject to any applicable law, to make substitutions
with respect to the investments of the sub-accounts of the Variable Life
Account. If investment in a Fund Portfolio should no longer be possible or if
we determine it becomes inappropriate for Policies of this class, we may
substitute another mutual fund or portfolio for a sub-account. Substitution
may be made with respect to existing policy values and future premium
payments. A substitution may be made only with any necessary approval of the
SEC.
We reserve the right to transfer assets of the Variable Life Account as
determined by us to be associated with the Policies to another separate
account. A transfer of this kind may require the approvals of state regulatory
authorities and of the SEC.
We also reserve the right, when permitted by law, to de-register the
Variable Life Account under the Investment Company Act of 1940, to restrict or
eliminate any voting rights of the policy owners, and to combine the Variable
Life Account with one or more of our other separate accounts.
Shares of the Portfolios of the Funds are also sold to other of our separate
accounts, which are used to receive and invest premiums paid under our
variable annuity contracts and variable life insurance policies. It is
conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest
in the Funds simultaneously. Although neither we nor the Funds currently
foresee any such disadvantages either to variable life insurance policy owners
or to variable annuity contract owners, the Funds' Boards of Directors intend
to monitor events in order to identify any material conflicts between such
policy owners and contract owners and to determine what action, if any, should
be taken in response thereto.
11
<PAGE>
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:
. changes in state insurance laws
. changes in Federal income tax laws
. changes in the investment management of any of the Portfolios of the Funds,
or
. differences in voting instructions between those given by policy owners and
those given by contract owners.
Selection of Sub-Accounts
You must make a choice as to how your net premiums are allocated among the
various sub-accounts. In choosing, you should consider how willing you might
be to accept investment risks and the manner in which your other assets are
invested. The sub-accounts represent a broad range of investments available in
the marketplace.
The common stock sub-accounts differ depending on the types of stocks that
make up the account. The focus of each account varies by the size of company,
growth or value style, and U.S. versus international markets. Historically,
for investments held over relatively long periods, the investment performance
of common stocks has generally been superior to that of long-term or short-
term debt securities, even though common stocks have been subject to more
dramatic changes in value over short periods of time. Accordingly, the common
stock sub-accounts may be more desirable options for policy owners who are
willing to accept such short-term risks. These risks tend to be magnified in
the sub-accounts investing in more aggressive stocks, smaller company stocks
and international stocks. As an alternative to the actively managed sub-
accounts, index subaccounts are available which tend to sub- match the risks
and performance of those common stocks included in the underlying index.
On the other hand, the experience of the recent past has been sharply
divergent from the long-term historical record. Since 1980, short-term
interest rates were, for a time, at a historically high level and for some
period the prices of a diversified portfolio of equity securities were
declining during a period when the cost of living was rising. The value of
long-term bonds and mortgage securities has fallen and risen to a greater
extent than in the past. Some policy owners, who desire the greatest safety of
principal may prefer the money market sub-account, recognizing that the level
of short-term rates may change rather rapidly. Some policy owners may wish to
rely on Advantus Capital's judgment for an appropriate asset mix by choosing
the asset allocation sub-account.
The Guaranteed Principal Account
The guaranteed principal account is a general account option. You may
allocate net premiums and may transfer your actual cash value subject to
Policy limitations to the guaranteed principal account which is part of our
general account.
Because of exemptive and exclusionary provisions, interests in our general
account have not been registered under the Securities Act of 1933, and the
general account has not been registered as an investment company under the
Investment Company Act of 1940. Therefore, neither the guaranteed principal
account nor any interest therein are subject to the provisions of these Acts,
and we have been advised that the staff of the SEC does not review disclosures
relating to the guaranteed principal account. Disclosures regarding the
guaranteed principal account may, however, be subject to certain generally
applicable provisions of the Federal Securities Laws relating to the accuracy
and completeness of statements made in prospectuses.
This prospectus describes a Variable Adjustable Life insurance policy and is
generally intended to serve as a disclosure document only for the aspects of
the Policy relating to the sub-accounts of the Variable Life Account. For
complete details regarding the guaranteed principal account, please see the
Variable Adjustable Life Policy.
General Account Description Our general account consists of all assets owned
by us other than those in the Variable Life Account and any other separate
accounts which we may establish. The guaranteed principal account is that
portion of our general assets which is attributable to this Policy and
policies of this class, exclusive of policy loans. The description is for
accounting purposes only and does not represent a division of the general
account assets for the specific benefit of contracts of this class.
Allocations to the guaranteed principal account become part of our general
assets and are used to support insurance and annuity obligations. Subject to
applicable law, we have sole discretion over
12
<PAGE>
the investment of assets of the general account. Policy owners do not share in
the actual investment experience of the assets in the general account.
You may allocate or transfer a portion or all of the net premiums to
accumulate at a fixed rate of interest in the guaranteed principal account. We
guarantee such amounts as to principal and a minimum rate of interest.
Transfers from the guaranteed principal account to the sub-accounts of the
Variable Life Account are subject to certain limitations with respect to timing
and amount.
General Account Value We bear the full investment risk for amounts allocated to
the guaranteed principal account and guarantees that interest credited to each
policy owner's actual cash value in the guaranteed principal account will not
be less than an annual rate of 4 percent without regard to the actual
investment experience of the general account. Consequently, if a policy owner
allocates all net premiums only to the guaranteed principal account, and if all
scheduled premiums are paid when due, there is no policy adjustment, and we
deduct the maximum cost of insurance charges and all other charges as set forth
in this Policy, then the actual cash value will be at least equal to the
tabular cash value of the Policy.
We may, at our sole discretion, credit a higher rate of interest, "excess
interest," although we are not obligated to credit interest in excess of 4
percent per year, and may not do so. Any interest credited on the Policy's
actual cash value in the guaranteed principal account in excess of the
guaranteed minimum rate per year will be determined at our sole discretion. You
assume the risk that interest credited may not exceed the guaranteed minimum
rate.
Even if excess interest is credited to your actual cash value in the
guaranteed principal account, we will not credit excess interest to that
portion of the policy value which is in the
loan account in the general account. However,
such loan account will be credited interest at a rate which is not less than
the policy loan interest rate minus 2 percent per annum.
Detailed Information about the
Variable Adjustable Life Insurance Policy
Adjustable Life Insurance
This Policy is similar to our conventional life insurance product known as
"adjustable life". This Policy, like conventional adjustable life insurance,
permits you to determine the amount of life insurance protection you need and
the amount of money you can afford to pay. Based on your selection of any two
of the three components of a Policy--face amount, premium and plan--we will
then calculate the third. Thus, adjustable life allows you the flexibility to
custom-design a Policy to meet your needs. Theoretically, each Policy can be
unique because of the different combinations of age, amount of life insurance
protection and premium. In addition, adjustable life is designed to adapt to
your changing needs and objectives by allowing you to change your Policy after
issue. The face amount and premium level, and thus the plan of insurance, may
be adjusted by you, subject to the limitations described herein, so long as the
Policy remains in force.
Flexibility at Issue The Policy offered by this prospectus provides the same
type of flexibility found in conventional adjustable life. Subject to certain
minimums, maximums and our underwriting standards, you may choose any level of
premium or face amount that you wish. This flexibility results in a broad range
of plans of insurance. Generally speaking, a plan of insurance, when used with
respect to the Policy, refers to the level of cash value accumulation assumed
in the design of the Policy and, for whole life plans, the period of coverage
during which you will have to pay premiums.
Whole life insurance plans provide life insurance in an amount at least equal
to the initial face amount at the death of the insured whenever that occurs.
Premiums may be payable for a specified number of years or for the life of the
insured. Whole life insurance plans assume an eventual tabular cash value
accumulation, at or before the insured's age 100, equal to the net single
premium required for that face amount of
13
<PAGE>
insurance. The net single premium for a whole life insurance plan is the
amount of money that is necessary, at the insured's attained age, to pay for
all future guaranteed cost of insurance charges for the entire lifetime of the
insured without the payment of additional premium. This determination assumes
that the current face amount of the Policy will be constant and that the
Policy will perform at its assumed rate of return.
Protection insurance plans provide life insurance in an amount at least
equal to the initial face amount for a specified period. Protection plans of
insurance assume the exhaustion of the tabular cash value at the end of the
initial protection period, except for the cash value associated with a
residual amount of insurance coverage at the end of the initial protection
period. Under this Policy, after that initial protection period, there is
insurance coverage in a reduced amount on the life of the insured.
The "greater" your plan of insurance, the larger the policy values you may
expect to be available for investment in the Fund Portfolios, and, for whole
life plans of insurance, the shorter the period of time during which you will
have to pay premiums. Under the Policy, the highest premium amount permitted
at the time of issue, or the maximum plan of insurance, for a specific face
amount is one which will provide a fully paid-up Policy after the payment of
ten annual premium payments. A Policy becomes paid-up when its policy value is
such that no further premiums are required to provide the face amount of
insurance until the death of the insured, provided there is no policy
indebtedness.
Examples of whole life plans include Policies which become paid-up upon the
payment of a designated number of annual premiums, such as ten pay life or
twenty pay life, or Policies which become paid-up at a designated age of the
insured, such as paid-up at 65. If you select a premium level for a specific
face amount which would cause the Policy to become paid-up at other than a
policy anniversary, you will be required to pay scheduled premiums until the
policy anniversary immediately following the date the Policy is scheduled to
become paid-up. The Policy will be issued with a scheduled increase in face
amount to reflect the fact that the scheduled premiums were in excess of the
premiums required to have a paid-up Policy for the initial face amount of
coverage.
If you select a premium amount which is less than the premium required for a
whole life plan of insurance or, in other words, if you select a protection
plan of insurance, premiums will be payable for the life of the insured or to
age 100, but the guaranteed face amount of insurance provided by the Policy
will not be level during the life of the insured. The initial face amount will
be in effect until the Policy's tabular cash value, i.e., the cash value which
is assumed in designing the Policy and which would be guaranteed in a
conventional fixed-benefit policy, is exhausted. At that time a lower amount
of insurance will become effective. This is called the scheduled reduction in
face amount. The reduced face amount is calculated on the basis of the
continued payment of the scheduled premiums and a whole life plan of
insurance. The result is that the Policy, on issue, will have an initial
guaranteed death benefit extending to a stated date; after that date, a lower
death benefit is guaranteed for the life of the insured.
At the time of the scheduled reduction in face amount, we will adjust your
Policy as described in the policy adjustment section of this prospectus. If
the policy value (the actual cash value plus the amount of any loan) is
greater than the tabular cash value, the adjustment will result in either a
smaller reduction in the face amount or a scheduled reduction in face amount
occurring at a later date.
For example, if a standard risk VAL '95 Policy were issued with a face
amount of $100,000 and an annual premium of $926, the plan of insurance for a
male non-smoker insured age 45 at issue would be full coverage until age 65,
at which time the face amount would be reduced to $14,701 guaranteed for the
whole of life. If we assume a hypothetical gross annual investment return of 8
percent, the Cash Option death benefit, current mortality charges, no loans,
and no policy adjustments, the policy value of the Policy at age 65 would be
$15,841. Based on
14
<PAGE>
this policy value, a whole life plan, and the continued payment of the $926
premium, the face amount would be reduced to $42,115 guaranteed thereafter for
the whole of life.
The table below shows the policy values and death benefits for the Policy
described in the above example, if the scheduled reduction is allowed to
occur, which is twenty years after issue.
Scheduled Reduction
<TABLE>
<CAPTION>
Guaranteed
Policy Death Minimum
Value Benefit Death
Policy Attained Annual End of Beginning Benefit at
Year Age Premium Year of Year Issue
- ------ -------- ------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
5 50 $926 $ 2,080 $100,000 $100,000
10 55 926 5,879 100,000 100,000
15 60 926 10,683 100,000 100,000
20 65 926 15,841 100,000 100,000
21 66 926 17,501 42,115 14,701
22 67 926 19,272 42,115 14,701
23 68 926 21,167 42,115 14,701
24 69 926 23,202 42,115 14,701
25 70 926 25,394 42,115 14,701
</TABLE>
Alternately, for the VAL '95 Policy above we will make a policy adjustment
effective the same date as the scheduled reduction to maintain the $100,000
face amount and the $926 premium. The new guaranteed plan of insurance would
be full coverage until age 74, at which time the face amount would be reduced
to not less than $8,982, again with the face amount guaranteed for the whole
of life.
The following table shows the policy values and death benefits when a policy
adjustment to maintain the initial face amount is automatically done after
twenty years.
Policy Adjustment
<TABLE>
<CAPTION>
Guaranteed
Policy Death Minimum
Value Benefit Death
Policy Attained Annual End of Beginning Benefit
Year Age Premium Year of Year Adjustment
- ------ -------- ------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
5 50 $926 $ 2,080 $100,000 $100,000
10 55 926 5,879 100,000 100,000
15 60 926 10,683 100,000 100,000
20 65 926 15,841 100,000 100,000
21 66 926 16,842 100,000 100,000
22 67 926 17,831 100,000 100,000
23 68 926 18,810 100,000 100,000
24 69 926 19,775 100,000 100,000
25 70 926 20,730 100,000 100,000
</TABLE>
The lowest annual base premium allowed for any plan of insurance is $300.
Subject to this limitation, the lowest premium you may choose for any specific
amount of life insurance protection is a premium which will provide a level
death benefit for a period which shall be the longer of ten years from the
policy issue date or five years from the date of a policy adjustment. If the
insured's age at original issue is over age 55, the minimum plan of protection
will be less than ten years, as described in the table below:
<TABLE>
<CAPTION>
Minimum Plan
Issue Age (in years)
- ------------- ------------
<S> <C>
56 9
57 8
58 7
59 6
60 or greater 5
</TABLE>
15
<PAGE>
This is the minimum plan of insurance for any given face amount. The minimum
initial face amount on a Policy is $50,000.
Policy Adjustments
Adjustable life insurance policies allow an owner to change the premium,
face amount or the plan of insurance of the Policy after it is issued. Subject
to the limitations described more fully below, you can at any time change the
face amount of your Policy or your scheduled premium. A change in scheduled
premium or face amount will usually result in a change in the plan of
insurance. Depending upon the change you request, the premium paying period
may be lengthened or shortened for whole life plans or the plan may be
converted from a whole life plan to a protection type plan which provides for
a scheduled reduction in face amount at a future date. For Policies having a
protection type plan, a change in face amount or premium may convert the
Policy to a whole life plan by eliminating the scheduled decrease in face
amount or it may change the time at which the decrease is scheduled to occur.
Changes in premium, face amount or the plan of insurance are referred to as
policy adjustments. They may be made singly or in combination with one
another. There are also four other types of policy adjustments:
(1) a partial surrender of a Policy's cash value;
(2) an adjustment so that there are no further scheduled base premiums;
(3) an automatic adjustment at the point when the face amount is scheduled to
decrease; and
(4) an automatic adjustment made under VAL '95 at the policy anniversary
nearest the insured's age 70.
When a Policy is adjusted, we compute a new plan of insurance, face amount
or premium amount, if any. If a partial surrender of actual cash value is
made, the Policy will be automatically adjusted to a new face amount which
will be equal to the old face amount less the amount of the partial surrender,
unless a different face amount is requested or required to satisfy the
restrictions on adjustability described below. An adjustment providing for no
further scheduled base premium payments, regardless of whether the Policy is
paid-up, is also referred to as a "stop premium" mode and is described under
the caption "Avoiding Lapse" on page 23 of this prospectus. At the point when
the face amount is scheduled to decrease, an adjustment may be made to
maintain the current face amount and premium of the Policy, as described on
page 18. Certain adjustments may cause a Policy to become a modified endowment
contract. See "Federal Tax Status" for a description of the federal tax
treatment of modified endowment contracts.
In computing either a new face amount or new plan of insurance as a result
of an adjustment, we will make the calculation on the basis of the higher of
the Policy's "policy value" or its "tabular cash value" at the time of the
change. The "policy value" is the actual cash value of the Policy plus the
amount of any policy loan, while the "tabular cash value" is what the actual
cash value of the Policy would have been if all scheduled premiums were paid
annually on the premium due date, there were no policy adjustments or policy
loans, any percentage increase in the actual cash value matched the Policy's
assumed rate of return, the net investment experience of the sub-accounts
selected by the owner or the interest credited to the guaranteed principal
account matched the policy's assumed rate of return, the maximum cost of
insurance charges were deducted once at the end of the policy year and other
charges provided for in the Policy were deducted. See, for a further
description of these values, the section "Policy Values" in this prospectus on
page 24. If the policy value is higher than the tabular cash value, a policy
adjustment will translate the excess value into enhanced insurance coverage,
as either a higher face amount or an improved plan of insurance. If the policy
value is less than the tabular cash value, use of the tabular cash value
ensures that the Policy's guarantee of a minimum death benefit is not impaired
by the adjustment.
Any adjustment will result in a redetermination of a Policy's tabular cash
value. After adjustment, the tabular cash value shall be equal to the greater
of the policy value or the tabular cash value prior to that adjustment, plus
any nonrepeating premium paid at the time of the adjustment and minus the
amount of any partial surrender made at the time of the adjustment.
16
<PAGE>
On adjustment, you may request a new Policy face amount. In the absence of
instructions to the contrary, we will calculate the face amount after
adjustment depending on the Policy's death benefit option, the type of
adjustment, and whether the Policy is a VAL '95 or a VAL '87. With both VAL
'87 and VAL '95, if the Policy has the Cash Option death benefit the new face
amount will be equal to the face amount of the Policy less the amount of any
partial surrender made as part of the adjustment. With a VAL '87 Policy with
the Protection Option death benefit and with the Amended VAL '95 Protection
Option after age 70, the face amount after adjustment shall be equal to the
death benefit provided by the Policy immediately prior to the adjustment less
the amount of any partial surrender made as part of the adjustment. With a VAL
'95 Policy with the Protection Option death benefit before age 70, the face
amount after adjustment will be equal to the face amount of the Policy
immediately prior to the adjustment.
To illustrate the operation of an adjustment, consider a standard risk VAL
'95 Policy issued with a face amount of $100,000 and an annual premium of $926
to a male non-smoker insured age 45. If we assume a hypothetical gross annual
investment return of 8 percent, the Protection Option death benefit, current
mortality charges, no loans, and no policy adjustments, the policy value of
the Policy at age 50 would be $2,065 and the Policy's tabular cash value would
be $1,680. Assume the owner requests a policy adjustment to increase the
scheduled premium to $1,500, but does not specify the face amount. As
described above, we compare the policy value less the charge on adjustment to
the tabular cash value to determine the policy value to be used in the plan of
insurance calculation. In this example, the policy value (less the charge on
adjustment) is greater than the tabular cash value, so the policy value is
used. The tabular cash value is then set equal to the policy value. The policy
adjustment would therefore result in a face amount of $100,000, a scheduled
premium of $1,500, and a plan of insurance of full coverage until age 74, at
which time the face amount would be scheduled to reduce to $14,952.
The table below shows the tabular cash values, policy values and death
benefits for the first ten years of the example described.
<TABLE>
<CAPTION>
End of Year
Policy Attained Annual Tabular End of Year Beginning of Year
Year Age Premium Cash Value Policy Value Death Benefit
- ------ -------- ------- ----------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
1 46 $ 926 $ 0 $ 13 $100,000
2 47 926 437 474 100,013
3 48 926 865 943 100,474
4 49 926 1,280 1,473 100,943
5 50 926 1,680 2,065 101,473
6 51 1,500 2,842 2,914 102,065
7 52 1,500 3,766 4,026 102,914
8 53 1,500 4,684 5,255 104,026
9 54 1,500 5,591 6,592 105,255
10 55 1,500 6,477 8,032 106,592
</TABLE>
All of these changes may be accomplished under a single Policy. There is no
need to surrender the Policy or purchase a new one simply because of a change
in your insurance needs. Whenever adjustments are made, new policy information
pages will be provided. These pages state the new face amount, scheduled
premium, plan of insurance, attained age and tabular cash value.
Nonrepeating Premiums The Policy also allows a policy owner to pay a premium
called a nonrepeating premium. This payment of premium is in addition to the
scheduled premium payments called for by the terms of the Policy. While the
payment of a nonrepeating premium does not cause an adjustment to the Policy,
any such payment will be reflected in the tabular cash value of the Policy at
issue or upon any later adjustment. The payment of a nonrepeating premium will
increase the policy values you have available for investment in the Fund. With
VAL '95, we may impose additional restrictions or refuse to permit
nonrepeating premiums in our discretion.
Restrictions on Adjustments Adjustments can be made on any monthly anniversary
of
17
<PAGE>
the policy date. You may request a policy adjustment by completing an
application for adjustment. Adjustments will not apply to any
additional benefit agreements which are attached to your Policy. Any
adjustment will be effective on the date that it is approved by us and
recorded at our home office.
An adjustment must satisfy certain limitations on premiums, face amount and
plan. Other limitations on adjustments and combinations of adjustments may
also apply. The current limits on adjustments are those described here. We
reserve the right to change these limitations from time to time.
(1) An adjustment may not result in more than a paid-up whole life plan for
the then current face amount.
(2) After age 85, increases in face amount requiring evidence of insurability
will not be allowed.
(3) Any adjustment for a change of premium must result in a change of the
annual premium of at least $100. Currently, we will waive this limitation
for changes in premium which are the result of a face amount change under
the Cost of Living Agreement.
(4) Any adjustment involving an increase in premium may not result in a whole
life plan of insurance requiring the payment of premiums for less than ten
years or to age 100, if less.
(5) Any Policy adjustment, other than a change to a stop premium, must result
in a Policy with an annual base premium of at least $300.
(6) Any adjustment for a change of the face amount must result in a change of
the face amount of at least $5,000, except for face amount changes which
are the result of a Cost of Living Agreement change, a partial surrender
under the Policy or face amount changes which are required to satisfy
limitations pertaining to plans of insurance.
(7) After adjustment, other than an automatic adjustment at the point when the
face amount is scheduled to decrease, an automatic adjustment made under
VAL '95 at the insured's age 70, or adjustment to stop premium, the Policy
must provide a level face amount of insurance to the next policy
anniversary after the later of: (a) five years from the date of
adjustment; or (b) ten years from the date of issue. If the insured's age
at original issue is over age 55, the minimum plan of protection will be
less than ten years from the policy issue date, as described on page 15.
(8) An automatic adjustment at the point when the face amount is scheduled to
decrease or an adjustment to stop premium requires that a Policy have an
actual cash value at the time of the adjustment as would be sufficient to
keep the Policy in force until the next policy anniversary.
Example As an example of the operation of the plan limitation on policy
adjustment, assume a minimum plan VAL '95 Policy issued to a standard non-
smoker risk male at age 40 with a level face amount of $100,000 for a period
of ten years (until age 50) on a protection type plan for an annual premium of
$428. Assume also that the Policy has a policy value equal at all times to its
tabular cash value. If at the end of five years (at age 45) the policy owner
wished to decrease the premium so as to reduce the period before a scheduled
reduction in face amount took place from age 50 to age 49, the adjustment
would not be allowed because a face amount decrease at age 49 would be only
four years from the date of the policy adjustment, and nine years from the
date of issue. On the other hand, if the owner wished to postpone a scheduled
reduction in face amount until age 65 by increasing the premium of the Policy
to $835 for the same initial face amount, the adjustment would be permitted
because the face amount decrease would occur 25 years from the original issue
date and 20 years from the date of adjustment, both periods of time which are
within the policy adjustment limitations on plans of insurance.
The plan limitations apply for each type of adjustment. Consider a situation
similar to the one above except that the Policy has an initial face amount of
$200,000. In that case the annual premium for a minimum plan of ten years
(before the scheduled reduction in face amount) would be $800. If the policy
owner wished to make a partial surrender of $500 at the end of five years, the
surrender would not be permitted without either an increase in premium or a
further reduction in face amount, since the annual premium of $800 would
support the adjusted face amount of $199,500 for only two more years from the
point of adjustment. This resulting plan would be less
18
<PAGE>
than the minimum plan of five years. If the owner elected to increase the
premium in order to maintain the new face amount of $199,500, the new premium
would have to be sufficient to continue the new face amount for an additional
five years from the policy adjustment date.
Similarly, if the owner requested a reduction in face amount below $199,500
in order to satisfy the limitations pertaining to plans of insurance, the new
face amount would have to continue for an additional five years, which is ten
years from the date the Policy was issued. As indicated, a face amount change
made for the purpose of bringing an adjustment into compliance with the plan
limitation will not be subject to the usual minimum face amount change
requirement of $5,000. A partial surrender may often require a reduction in
face amount by more than the amount of the surrender in order to satisfy plan
limitations.
Proof of Insurability We require proof of insurability for all adjustments
resulting in an increase in face amount, except for increases made pursuant to
an additional benefit agreement. In addition, except for partial surrenders to
pay substandard risk premiums, we require proof of insurability for partial
surrenders where, at the request of the policy owner, no reduction is made in
the Policy's death benefit. Decreases in face amount or premium and increases
in premium not resulting in any increase in death benefit do not require
evidence of insurability. With VAL '87, the payment of a nonrepeating premium
will require evidence of insurability when the Protection Option death benefit
option is in effect or if the Policy is paid-up at the time of payment. With
VAL '95, we may require evidence of insurability when a nonrepeating premium
is paid if the death benefit of your Policy increases as a result of the
payment of a nonrepeating premium.
Charges in Connection with Policy Adjustments In connection with a policy
adjustment, we will make a special $25 charge to cover the administrative
costs associated with processing the adjustment. If, however, the only policy
adjustment is a partial surrender, the transaction charge shall be the lesser
of $25 or 2 percent of the amount surrendered. In addition, because of the
underwriting and selling expenses anticipated for any change resulting in an
increase in premium, we will assess a new first year sales load on any
increase in premium on adjustment. We will also assess an underwriting charge
on any increase in face amount requiring evidence of insurability. See, for a
further description of these charges, the section "Policy Charges" in this
prospectus on page 31. Limiting the first year sales load and underwriting
charge to the
increased premium or face amount is in substance the equivalent of issuing a
new Policy for the increase. A policy adjustment will always be more favorable
than the purchase of a second Policy for the increased amount since there is
no duplication of administrative charges.
19
<PAGE>
The chart below illustrates the kinds of changes that may be made as a
policy adjustment and the effect of each.
<TABLE>
<CAPTION>
IF YOU MAKE THIS IT WILL DO THIS:
KIND OF
ADJUSTMENT,
- -------------------------------------------------------------------------------------
If you . . .
<S> <C> <C>
Decrease the current then: a scheduled decrease
face amount.......... while the premium remains in the current face amount,
or the same................... if any, will take place at
Retain the current an increased age of the
face amount.......... while the premium increases insured; a scheduled
decrease in the face amount
will be eliminated; or the
premium paying period will
be shortened.
- -------------------------------------------------------------------------------------
If you . . .
Increase the current then: a scheduled decrease
face amount.......... with no increase in premium in the current face amount,
or if any, will take place at
Retain the current a decreased age of the
face amount.......... while the premium insured; a scheduled
or decreases.................. decrease in the face amount
Make a partial will occur; or the premium
surrender............ while the premium and face paying period will be
amount remain the same..... lengthened.
- -------------------------------------------------------------------------------------
If you . . .
Stop base premium.... while the face amount then: a scheduled decrease
remains the same........... in the current face amount, if
any, will take place at a
decreased age of the insured
and no insurance will be
provided after the decrease;
or, a scheduled decrease in the
face amount will occur.
However, for VAL '95, you must
continue to pay the charge for
a sub-standard risk, or your
Policy will lapse.
- -------------------------------------------------------------------------------------
</TABLE>
You may request a description of the effect of other types or combinations
of adjustments from us.
Applications and Policy Issue
Persons wishing to purchase a Policy must send a completed application to us
at our home office. The minimum face amount we will issue on a Policy is
$50,000 and we require an annual base premium on each Policy of at least $300.
The minimum plan of insurance at policy issue is a protection plan which has a
level death benefit for a period of ten years. If the insured's age at
original issue is over age 55, the minimum plan of protection will be less
than ten years from the Policy issue date, as described on page 15. The Policy
must be issued on an insured
20
<PAGE>
no more than age 85. Before issuing any Policy, we require evidence of
insurability satisfactory to us, which in some cases will require a medical
examination. Persons who satisfy the underwriting requirements are offered the
most favorable premium rates, while a higher premium is charged to persons
with a greater mortality risk. Acceptance of an application is subject to our
underwriting rules and we reserve the right to reject an application for any
reason.
If we accept an application, accompanied by a check for all or at least one-
twelfth of the annual premium, the policy date will be the issue date, which
is the date the decision to accept the application and issue the Policy is
made. The policy date will be used to determine subsequent policy
anniversaries and premium due dates.
If we accept an application not accompanied by a check for the initial
premium, a Policy will be issued with a policy date which is 15 days after the
issue date. The 15 day period has been determined to be the normal time during
which delivery of the Policy to the policy owner is expected to occur. We or
our agent must receive the initial premium within 60 days after the issue
date. No life insurance coverage is provided until the initial premium is
paid. If the initial premium is paid after the policy date (and the policy
date is not changed as described below), you will have paid for insurance
coverage during a period when no coverage was in force. Therefore, in such
circumstance you should consider requesting a current policy date, i.e., the
date on which our home office receives the premium. You will be sent updated
policy pages to reflect the change in policy date. This request should be made
at or prior to the time you pay the initial premium.
In certain circumstances it may be to your advantage to have the policy date
be the same as the issue date in order to preserve an issue age on which
premium rates are based. In that case, all premiums due between the issue date
and the date of delivery of the Policy must be paid on delivery.
When the Policy is issued, the face amount, premium, tabular cash values and
a listing of any supplemental agreements are stated on the policy information
pages of the policy form, page 1.
Policy Premiums
The Policies have a level premium throughout the life of the insured or
until the Policy becomes paid-up. We guarantee that we will not increase the
amount of premiums for a Policy in force. Subject to the limitations discussed
under the heading "Restrictions on Adjustments" in this prospectus on page 17,
you may choose to adjust the Policy at any time and alter the amount of future
premiums.
The amount of premium required for a Policy will depend on the Policy's
initial face amount, the plan of insurance, the insured's age at issue, sex,
risk classification, smoking status and the additional benefits associated
with the Policy.
The first premium is due as of the policy date and must be paid on or before
the date your Policy is delivered. Between the date we receive an initial
premium for the Policy, either a full first premium or a partial premium, and
the date insurance coverage commences under the Policy, the life of the
insured may be covered under the terms of a conditional insurance agreement.
All scheduled premiums after the first premium are payable on or before the
date they are due and must be mailed to us at our home office. In some cases,
you may elect to have premiums paid under our automatic payment plan through
pre-authorized transfers from a bank checking account or such other account as
may be approved by your bank.
Scheduled premiums on the Policy are payable during the insured's lifetime
on an annual, semi-annual or quarterly basis on the due dates set forth in the
Policy. You may also pay scheduled premiums monthly if you make arrangements
for payments through an automatic payment plan established through your bank
or if you meet the requirements to establish a payroll deduction plan through
your employer. A scheduled premium may be paid no earlier than twenty days
prior to the date that it is due. For premiums paid after the due date, see
the paragraph following the heading "Lapse" in this section of the prospectus.
In addition to scheduled premiums, you may pay a nonrepeating premium. The
maximum nonrepeating premium we will accept is the amount sufficient to change
your Policy to a paid-up whole life policy for the then current face amount.
The minimum nonrepeating premium is $500.
21
<PAGE>
We will bill annually, semi-annually or quarterly for nonrepeating premiums
if a Policy has a base annual premium of at least $2,400 and if each
nonrepeating premium is at least $250. You may also arrange for monthly
payments through an automatic payment plan established through your bank; in
this situation, your base annual premium must be at least $2,400 and each
nonrepeating premium must be at least $200.
With VAL '95 we may impose additional restrictions or refuse to permit
nonrepeating premiums in our discretion.
The payment of a nonrepeating premium may have Federal income tax
consequences. See the heading "Federal Tax Status" in this prospectus on page
38.
With VAL '87, charges for additional benefits are deducted from premiums to
calculate base premiums. From base premiums we deduct charges assessed against
premiums and nonrepeating premiums, to calculate net premiums. With VAL '95,
charges for additional benefits and for sub-standard risks are deducted from
premiums to calculate base premiums. From base premiums we deduct charges
assessed against premiums and nonrepeating premiums to calculate net premiums.
Net premiums, namely premiums after the deduction of the charges assessed
against premiums and nonrepeating premiums, are allocated to the guaranteed
principal account or sub-accounts of the Variable Life Account which, in turn,
invest in Fund shares.
You make your selection on your application for the Policy. You may change
your allocation instructions for future premiums by giving us a written
request. The allocation to the guaranteed principal account or to any sub-
account of the Variable Life Account must be at least 10 percent of the net
premium. We reserve the right to delay the allocation of net premiums to named
sub-accounts for a period of 30 days after Policy issue or an adjustment. If
we exercise this right, net premiums will be allocated to the Money Market
sub-account until the end of that period. This right, which has not been
implemented to date, will be exercised by us only when we believe economic
conditions make such an allocation necessary to reduce market risk during the
free look period.
We reserve the right to restrict the all ocation of premiums to the
guaranteed principal account. If we do so, no more than 50 percent of the net
premium may be allocated to the guaranteed principal account. Currently, we do
not exercise such a restriction, and this restriction is not applicable when
you are allocating all of your premiums to the guaranteed principal account as
a conversion privilege.
Paid-Up Policies A Policy is paid-up when no additional premiums are required
to provide the face amount of insurance for the life of the insured. We may or
may not accept additional premiums. When a Policy becomes paid-up, the policy
value will then equal or exceed the net single premium needed to purchase an
amount of insurance equal to the face amount of the Policy at the insured's
then attained age. However, its actual cash value will continue to vary daily
to reflect the investment experience of the Variable Life Account and any
interest credited as a result of a policy loan. Once a Policy becomes paid-up,
it will always retain its paid-up status regardless of any subsequent decrease
in its policy value. However, on a paid-up Policy with indebtedness, where the
actual cash value decreases to zero, a loan repayment may be required to keep
the Policy in force. See the discussion in this prospectus under the heading
"Policy Loans," below.
We will make a determination on each policy anniversary as to whether a
Policy is paid-up. When a Policy becomes paid-up, we will send you a notice.
Lapse Your Policy may lapse in one of two ways: (1) if a scheduled premium is
not paid; or (2) if there is no actual cash value when there is a policy loan.
As a scheduled premium policy, your Policy will lapse if a premium is not
paid on or before the date it is due or within the 31-day grace period
provided by the Policy. You may pay that premium during the 31-day period
immediately following the premium due date. Your premium payment, however,
must be received in our home office within the 31-day grace period. The
insured's life will continue to be insured during this 31-day period.
With VAL '95, if a Policy covers an insured in a sub-standard risk class,
the portion of the scheduled premium equal to the charge for such risk will
continue to be payable notwithstanding the adjustment to a stop premium mode.
As with any scheduled premium, failure to pay the premium for the sub-standard
risk within the grace period provided will cause the Policy to lapse.
22
<PAGE>
If scheduled premiums are paid on or before the dates they are due or within
the grace period, absent any policy loans, the Policy will remain in force
even if the investment results of the sub-accounts have been so unfavorable
that the actual cash value has decreased to zero. However, should the actual
cash value decrease to zero while there is an outstanding policy loan the
Policy will lapse, even if the Policy was paid-up and all scheduled premiums
had been paid.
If the Policy lapses because not all scheduled premiums have been paid or if
a Policy with a policy loan has no actual cash value, we will send you a
notice of default that will indicate the payment required to keep the Policy
in force on a premium paying basis. If the payment is not received within 31
days after the date of mailing the notice of default, the Policy will
terminate or the nonforfeiture benefits will apply. For more information on
lapse, see "Avoiding Lapse" below.
If at the time of any lapse a Policy has a surrender value, that is, an
amount remaining after subtracting from the actual cash value all unpaid
policy charges, we will use it to purchase extended term insurance. The
extended term benefit is a fixed life insurance benefit calculated on the 1980
Commissioners Standard Ordinary Mortality Tables with 4 percent interest. As
an alternative to the extended term insurance, you may have the surrender
value paid to you in a single sum payment, thereby terminating the Policy.
Unless you request a single sum payment of your surrender value within 62 days
of the date of the first unpaid premium, we will apply it to purchase extended
term insurance on the insured's life.
We determine the duration of the extended term benefit by applying the
surrender value of your Policy as of the end of the grace period as a net
single premium to buy fixed benefit term insurance. The extended term benefit
is not provided through the Variable Life Account and the death benefit will
not vary during the extended term insurance period. The amount of this
insurance will be equal to the face amount of your Policy, less the amount of
any policy loans at the date of lapse. During the extended term period a
Policy has a surrender value equal to the reserve for the insurance coverage
for the remaining extended term period. At the end of the extended term period
all insurance provided by your Policy will terminate and the Policy will have
no further value.
You may arrange for automatic premium loans to keep the Policy in force in
the event that a scheduled premium payment is not made. For more information
on this option, please see the heading "Policy Loans" in this prospectus on
page 28.
Reinstatement At any time within three years from the date of lapse you may
ask us to restore your Policy to a premium paying status unless the Policy
terminated because the surrender value has been paid or the period of extended
insurance has expired. We will require:
(1) your written request to reinstate the Policy;
(2) that you submit to us at our home office during the insured's lifetime
evidence satisfactory to us of the insured's insurability so that we may
have time to act on the evidence during the insured's lifetime; and
(3) at our option a premium payment which is equal to all overdue premiums
with interest at a rate not to exceed 6 percent per annum compounded
annually and any policy loan in effect at the end of the grace period
following the date of default with interest at a rate not exceeding 8
percent per annum compounded annually. At the present time we do not
require the payment of all overdue premiums, or the payment of interest on
reinstated loans.
After a lapse and reinstatement, the reinstated Policy may be adjusted. The
standard minimum requirements for adjustments will continue to apply, as
described under the section "Restrictions on Adjustments" in this prospectus
on page 17.
Avoiding Lapse If your Policy has sufficient loan value, you can avoid a lapse
due to the failure to pay a scheduled premium by arranging for an automatic
premium loan. The effect of a policy loan on policy values and the
restrictions applicable thereto are described under the caption "Policy Loans"
on page 28 of this prospectus. An automatic premium loan is particularly
advantageous for a policy owner who contemplates early repayment of the amount
loaned, since it permits the policy owner to restore policy values without
additional sales and
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underwriting charges. Automatic premium loans for the long term are generally
not advantageous.
You may also avoid a lapse due to the failure to pay a scheduled premium by
adjusting your Policy to a stop premium mode. We will use the greater of your
policy value or tabular cash value to determine a new plan of insurance based
on the greater of the then current face amount or death benefit of the Policy
and the assumption that no further premiums will be paid. The new plan may be
a term or protection plan, but unlike other term plans there will be no
reduced face amount of coverage at the time the tabular cash value is
scheduled to expire because no further premiums will be payable. If at that
time the Policy has a surrender value, we will use it to purchase extended
term coverage or we will pay it to you in a single sum thereby terminating the
Policy.
The insurance coverage resulting from an adjustment to a stop premium mode
is similar to the coverage available under the extended term option in that
under both, the coverage is available only for a limited period of time. The
arrangements are, however, fundamentally different. Extended term coverage is
a fixed benefit with fixed cash values providing a longer guaranteed period of
coverage than the same amount applied as a stop premium. The stop premium mode
provides variable insurance with an actual cash value and, under the
Protection Option, a death benefit that will vary to reflect any investment
experience of selected sub-accounts and the deduction of smaller cost of
insurance charges than the maximum charges derived from the 1980 CSO mortality
tables. Because the actual cash value continues to exist, policy charges
assessed to the actual cash value will continue to be made while the Policy is
on stop premium. Moreover with VAL '95, if a Policy covers an insured in a
sub-standard risk class, the portion of the scheduled premium equal to the
charge for such risk will continue to be payable.
There are also other differences which should be considered. In general, if
you contemplate resuming premium payments at a future date, the stop premium
mode may be more desirable in that you may resume premium payments at any time
without evidence of insurability, while the reinstatement option available
during the extended term period requires proof of insurability and must be
exercised within three years following the date of lapse.
If you do not contemplate resuming premium payments, your choice between
permitting your Policy to lapse and adjusting it to a stop premium mode should
depend on, first, whether the surrender value of your Policy at that time
exceeds its tabular cash value and, second, whether you expect your Policy's
policy value to exceed its tabular cash value in the future. If at the time of
possible lapse your Policy's surrender value is less than its tabular cash
value, you should consider adjusting to a stop premium mode because the period
of insurance coverage will be based on the higher tabular cash value while the
period of extended term coverage upon lapse would be computed on the basis of
the lower surrender value. If the two values are the same, the period of
guaranteed coverage under the extended term option will be longer than under
the stop premium mode. Thus, you should be sure that the benefit of using the
higher tabular cash value is not offset by the shorter period of guaranteed
insurance coverage usually resulting from the stop premium mode.
On the other hand, if the surrender value of your Policy exceeds its tabular
cash value, you should evaluate the benefit of a guaranteed longer period of
insurance coverage under the extended term option against the possibility of
longer coverage under the stop premium mode. With the stop premium mode there
may be an available policy value at the end of the plan which could be used to
continue the face amount of the Policy to a later time than provided under the
extended term option. In considering this possibility, you should keep in mind
that a Policy with the Cash Option death benefit is more likely to have a
higher policy value than a comparable Policy with the Protection Option death
benefit.
Policy Values
The Policy has an actual cash value which varies with the investment
experience of the guaranteed principal account and the sub-accounts of the
Variable Life Account. Depending upon the death benefit selected, the death
benefit may also vary although it will never be less than the then current
face amount. Net premiums, namely premiums after the deduction of all charges,
will be
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allocated to the guaranteed principal account or sub-accounts of the Variable
Life Account selected by you on your application for the Policy.
The value of the Policy's interest in the guaranteed principal account and
the sub-accounts of the Variable Life Account is known as its actual cash
value. It is determined separately for your guaranteed principal account
actual cash value and for your separate account actual cash value. The
separate account actual cash value will include all sub-accounts of the
Variable Life Account. Unlike a traditional fixed benefit life insurance
policy, a Policy's actual cash value cannot be determined in advance, even if
scheduled premiums are made when required, because the separate account actual
cash value varies daily with the investment performance of the sub-accounts of
the Variable Life Account in which the Policy participates. Even if you
continue to pay scheduled premiums when due, the separate account actual cash
value of a Policy could decline to zero because of unfavorable investment
experience and the assessment of charges. Upon request, we will tell you the
actual cash value of your Policy. We will also send you a report each year on
the policy anniversary advising you of your Policy's actual and tabular cash
values, the face amount and the death benefit as of the date of the report. It
will also summarize Policy transactions during the year. It will be as of a
date within two months of its mailing.
The guaranteed principal account actual cash value is the sum of all net
premium payments allocated to the guaranteed principal account. This amount
will be increased by any interest, dividends, loan repayments, policy loan
interest credits and transfers into the guaranteed principal account. This
amount will be reduced by any policy loans, unpaid policy loan interest,
partial surrenders, transfers into the sub-accounts of the Variable Life
Account and charges assessed against your guaranteed principal account actual
cash value. Interest is credited on the guaranteed principal account actual
cash value of your Policy. Interest is credited daily at a rate of not less
than 4 percent per year, compounded annually. We guarantee this minimum rate
for the life of the Policy without regard to the actual experience of the
general account. As conditions permit, we will credit additional amounts of
interest to the guaranteed principal account actual cash value. Your
guaranteed principal account actual cash value is guaranteed by us. It cannot
be reduced by any investment experience of the general account.
We determine each portion of a Policy's separate account actual cash value
separately. The separate account actual cash value is not guaranteed. We
determine the separate account actual cash value by multiplying the current
number of sub-account units credited to a Policy by the current sub-account
unit value. A unit is a measure of your Policy's interest in a sub-account.
The number of units credited with respect to each net premium payment is
determined by dividing the portion of the net premium payment allocated to
each sub-account by the then current unit value for that sub-account. The
number of units so credited is determined as of the end of the valuation
period during which we receive your premium at our home office.
Once determined, the number of units credited to your Policy will not be
affected by changes in the unit value. However, the number will be increased
by the allocation of subsequent net premiums, nonrepeating premiums,
dividends, loan repayments, loan interest credits and transfers to that sub-
account. The number of units of each sub-account credited to your Policy will
be decreased by policy charges to the sub-account, policy loans and loan
interest, transfers from that sub-account and partial surrenders from that
sub-account. Such number of sub-account units will decrease to zero on a
policy surrender, the purchase of extended term insurance or termination.
The unit value of a sub-account will be determined on each valuation date.
The amount of any increase or decrease will depend on the net investment
experience of that sub-account. The value of a unit for each sub-account was
originally set at $1.00 on the first valuation date. For any subsequent
valuation date, its value is equal to its value on the preceding valuation
date multiplied by the net investment factor for that sub-account for the
valuation period ending on the subsequent valuation date.
The net investment factor for a valuation period is: the gross investment
rate for such valuation period, less a deduction for the
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mortality and expense risk charge under this Policy which is assessed at an
annual rate of .50 percent against the average daily net assets of each sub-
account of the Variable Life Account. The gross investment rate is equal to:
(1) the net asset value per share of a Fund share held in the sub-account of
the Variable Life Account determined at the end of the current valuation
period; plus
(2) the per share amount of any dividend or capital gain distributions by the
Funds if the "ex-dividend" date occurs during the current valuation period;
with the sum divided by
(3) the net asset value per share of that Fund share held in the sub-account
determined at the end of the preceding valuation period.
We determine the value of the units in each sub-account on each day on which
the Portfolios of the Funds are valued. The net asset value of the Funds'
shares is computed once daily, and, in the case of the Money Market Portfolio,
after the declaration of the daily dividend, as of the primary closing time for
business on the New York Stock Exchange (as of the date hereof the primary
close of trading is 3:00 p.m. (Central Time), but this time may be changed) on
each day, Monday through Friday, except
(1) days on which changes in the value of the Funds' portfolio securities will
not materially affect the current net asset value of the Funds' shares,
(2) days during which no Funds' shares are tendered for redemption and no order
to purchase or sell the Funds' shares is received by the Funds and
(3) customary national business holidays on which the New York Stock Exchange
is closed for trading.
Although the actual cash value for each Policy is determinable on a daily
basis, we update our records to reflect that value on each monthly anniversary.
We also make policy value determinations on the date of the insured's death and
on a policy adjustment, surrender, and lapse. When the policy value is
determined, we will assess and update to the date of the transaction those
charges made against your actual cash value, namely the administration charge
of $60 per year and the cost of insurance charge (and, for VAL '87 any charge
for sub-standard risks). Increases or decreases in policy values will not be
uniform for all Policies but will be affected by policy transaction activity,
cost of insurance charges, (charges for sub-standard risks for VAL '87) and the
existence of policy loans.
To illustrate the operation of the Policy under various assumptions, we have
prepared several tables, along with additional explanatory text, that may be of
assistance. For these tables, please see Appendix I, "Illustrations of Policy
Values, Death Benefits and Premiums," found on page 84 of this prospectus. For
additional materials and tables, including values after policy charges, please
see Appendix II, Summary of Policy Charges, found on page 93 of this
prospectus.
Transfers The Policy allows for transfers of the actual cash value between the
guaranteed principal account and the Variable Life Account or among the sub-
accounts of the Variable Life Account. You may request a transfer at any time
while the Policy remains in force or you may arrange in advance for systematic
transfers: transfers of specified dollar or unit value amounts to be made
periodically among the sub-accounts and the guaranteed principal account. The
amount to be transferred to or from a sub-account or the guaranteed principal
account must be at least $250. If the balance is less than $250, the entire
actual cash value attributable to that sub-account or the guaranteed principal
account must be transferred. If a transfer would reduce the actual cash value
in the sub-account from which the transfer is to be made to less than $250, we
reserve the right to include that remaining sub-account actual cash value in
the amount transferred. We will make the transfer on the basis of sub-account
unit values as of the end of the valuation period during which your written or
telephone request is received at our home office. A transfer is subject to a
transaction charge, not to exceed $10, for each transfer of actual cash value
among the sub-accounts and the guaranteed principal account. Currently, there
is a charge only for non-systematic transfers in excess of four per year. None
of these requirements will apply when you are transferring all of the policy
value to the guaranteed principal account as a conversion privilege.
Your instructions for transfer may be made in writing or you, or a person
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authorized by you, may make such changes by telephone. To do so, you may call
us at 1-800-277-9244 between the hours of 8:00 a.m. and 4:30 p.m., Central
time, our regular business hours. Policy owners may also submit their requests
for transfer, surrender or other transactions to us by facsimile (FAX)
transmission. Our FAX number is (651) 665-4194.
Transfers made pursuant to a telephone call are subject to the same
conditions and procedures as would apply to written transfer requests. During
periods of marked economic or market changes, policy owners may experience
difficulty in implementing a telephone transfer due to a heavy volume of
telephone calls. In such a circumstance, policy owners should consider
submitting a written transfer request while continuing to attempt a telephone
redemption. We reserve the right to restrict the frequency of, or otherwise
modify, condition, terminate or impose charges upon, telephone transfer
privileges. For more information on telephone transfers, contact us.
While for some policy owners we have used a form to pre-authorize telephone
transactions, we now make this service automatically available to all policy
owners. We will employ reasonable procedures to satisfy ourselves that
instructions received from policy owners are genuine and, to the extent that
we do not, we may be liable for any losses due to unauthorized or fraudulent
instructions. We require policy owners to identify themselves in those
telephone conversations through policy numbers, social security numbers and
such other information as we may deem to be reasonable. We record telephone
transfer instruction conversations and we provide the policy owners with a
written confirmation of the telephone transfer.
The maximum amount of actual cash value to be transferred out of the
guaranteed principal account to the sub-accounts of the Variable Life Account
may be limited to 20 percent of the guaranteed principal account balance.
Transfers to or from the guaranteed principal account may be limited to one
such transfer per policy year. Neither of these restrictions will apply when
you are
transferring all of the policy value to the guaranteed principal account as a
conversion privilege.
Transfers from the guaranteed principal account must be made by a written or
telephone request. It must be received by us or postmarked in the 30-day
period before or after the last day of the policy year. Written requests for
transfers which meet these conditions will be effective after we approve and
record them at our home office. Currently, we do not impose such restrictions.
In the case of a transfer, the charge is assessed against the amount
transferred.
Death Benefit Options
The death benefit provided by the Policy depends upon the death benefit
option you choose. You may choose one of two available death benefit options--
the Cash Option or the Protection Option. If you fail to make an election, the
Cash Option will be in effect. The scheduled premium for a Policy is the same
no matter which death benefit option you choose. At no time will the death
benefit be less than the larger of the then current face amount or the amount
of insurance that could be purchased using the policy value as a net single
premium.
Cash Option Under the Cash Option, the death benefit will be the current face
amount at the time of the insured's death. The death benefit will not vary
unless the policy value exceeds the net single premium for the then current
face amount. At that time, the death benefit will be the greater of the face
amount of the Policy or the amount of insurance which could be purchased at
the date of the insured's death by using the policy value as a net single
premium.
Protection Option The death benefit provided by the Protection Option will
vary with the investment experience of the allocation options you select, any
interest credited as a result of a policy loan and the extent to which we
assess lower insurance charges than those maximums derived from the 1980
Commissioners Standard Ordinary Mortality Tables.
With VAL '87, the amount of the death benefit is equal to the current face
amount or, if the policy value is greater than the tabular cash value at the
date of the insured's death, the current face amount plus an additional amount
of insurance which could be purchased by using that difference between values
as a net single premium.
Before the policy anniversary nearest the insured's age 70, and with both
VAL '95 and
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the Amended VAL '95 Protection Option, if you have chosen that Option, the
amount of the death benefit is equal to the policy value, plus the larger of:
(a) the then current face amount; and
(b) the amount of insurance which could be purchased using the policy value as
a net single premium.
At the policy anniversary nearest the insured's age 70, we will
automatically adjust the face amount of your Policy to equal the death benefit
immediately preceding the adjustment. The Protection Option of VAL '95 is only
available until the policy anniversary nearest the insured's age 70; at that
time we will convert the death benefit option to the Cash Option. With the
Amended VAL '95 Protection Option, after the policy anniversary nearest the
insured's age 70, the amount of the death benefit is equal to the current face
amount or, if the policy value is greater than the tabular cash value at the
date of the insured's death, the current face amount plus an additional amount
of insurance which could be purchased by using that difference between values
as a net single premium.
Choosing the Death Benefit Option The different death benefit options meet
different needs and objectives. If you are satisfied with the amount of your
insurance coverage and wish to have any favorable investment results reflected
to the maximum extent in increasing actual cash values, you should choose the
Cash Option. The Protection Option results primarily in an increased death
benefit. In addition, there are other distinctions between the two options
which may influence your selection. In the event of a superior investment
performance, the Cash Option will result in a Policy becoming paid-up more
rapidly than the Protection Option. This is because of larger cost of
insurance charges under the Protection Option resulting from the additional
amount of death benefit provided under that option. But under the Cash Option,
favorable investment experience does not increase the death benefit unless the
policy value exceeds the net single premium for the then current face amount,
and the beneficiary will not benefit from any larger actual cash value which
exists at the time of the insured's death because of the favorable investment
experience.
You may elect to have the death benefit option changed while the Policy is
in force by filing a written request with us at our home office. We may
require that you provide us with satisfactory evidence of the insured's
insurability before we make a change to the Protection Option. The change will
take effect when we approve and record it in our home office. A change in
death benefit option may have Federal income tax consequences. See the heading
"Federal Tax Status" in this prospectus on page 38.
For an illustration of the calculation of the death benefit under the Policy
options, please see Appendix III, "Illustration of Death Benefit Calculation,"
on page 98 of this prospectus.
Policy Loans
You may borrow from us using only your Policy as the security for the loan.
The total amount of your loan may not exceed 90 percent of your policy value.
A loan taken from, or secured by a Policy, may have Federal income tax
consequences. See the heading "Federal Tax Status" in this prospectus on page
38.
The policy value is the actual cash value of your Policy plus any policy
loan. Any policy loan paid to you in cash must be in an amount of at least
$100. Policy loans in smaller amounts are allowed under the automatic premium
loan provision. We will deduct interest on the loan in arrears. At your
request, we will send you a loan request form for your signature. You may also
obtain a policy loan by calling us at 1-800-277-9244 between the hours of 8:00
a.m. and 4:30 p.m., Central time, our regular business hours. Should you make
a telephone call to us you will be asked, for security purposes, for your
personal identification and policy number. The Policy will be the only
security required for your loan. We will determine your policy value as of the
date we receive your written request at our home office.
When you take a loan, we will reduce the actual cash value. It will be
reduced by the amount you borrow and any unpaid interest. Unless you direct us
otherwise, we will take the policy loan from your guaranteed principal account
actual cash value and separate account actual cash value in the same
proportion that those values bear to each other and, as to the actual cash
value in the separate account, from each sub-account in the proportion that
the actual cash value in such sub-account bears to your actual cash
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value in all of the sub-accounts. The number of units to be cancelled will be
based upon the value of the units as of the end of the valuation period during
which we receive your loan request at our home office. This amount shall be
transferred to the loan account. The loan account continues to be part of the
Policy in the general account. A policy loan has no immediate effect on policy
value since at the time of the loan the policy value is the sum of your actual
cash value and any policy loan.
The actual cash value of your Policy may decrease between premium due dates.
If your Policy has indebtedness and no actual cash value, the Policy will
lapse. In this event, to keep your Policy in force, you will have to make a
loan repayment. We will give you notice of our intent to terminate the Policy
and the loan repayment required to keep it in force. The time for repayment
will be within 31 days after our mailing of the notice.
Policy Loan Interest The interest rate on a policy loan will not be more than
the rate shown on page 1 of your Policy. The interest rate charged on a policy
loan will not be more than that permitted in the state in which the Policy is
delivered.
Policy loan interest is due:
. on the date of the death of the insured
. on a policy adjustment, surrender, lapse, a policy loan transaction
. on each policy anniversary.
If you do not pay the interest on your loan in cash, your policy loan will
be increased and your actual cash value will be reduced by the amount of the
unpaid interest. The new loan will be subject to the same rate of interest as
the loan in effect.
We will also credit interest to your Policy when there is a policy loan.
Interest credits on a policy loan shall be at a rate which is not less than
your policy loan interest rate minus 2 percent per annum. We allocate policy
loan interest credits to your actual cash value as of the date of the death of
the insured, on a policy adjustment, surrender, lapse, a policy loan
transaction and on each policy anniversary. We allocate interest credits to
the guaranteed principal account and separate account following your
instructions to us. We will use your instructions for the allocation of net
premiums. In the absence of such instructions, we will allocate interest
credits to the guaranteed principal account actual cash value and separate
account actual cash value in the same proportion that those values bear to
each other and, as to the actual cash value in the separate account, to each
sub-account in the proportion that the actual cash value in such sub-account
bears to your actual cash value in all of the sub-accounts.
Currently, the loan account credits interest, as described above, at a rate
which is not less than your policy loan interest rate minus 2 percent per
annum. However, depending on the insured's age and the period of time that the
Policy has been in force, we may credit the Policy with interest at a more
favorable rate. Under our current procedures, if all the conditions are met we
will credit your loan at a rate which is equal to the policy loan rate minus
.75 percent per annum. The conditions which must be met have to do with your
age and the duration of the Policy. The insured's age must be greater than or
equal to age 55 as of the last policy anniversary. The duration of the Policy,
which is the number of years during which the Policy has been in force, must
be greater than or equal to 10. The duration includes any period a previous
policy was in effect if that previous policy was exchanged for this Policy.
Policy loans may also be used as automatic premium loans to keep your Policy
in force. If you asked for this service in your application, or if you write
us and ask for this service after your Policy has been issued, we will make
automatic premium loans. You can also write to us at any time and tell us you
do not want this service. If you have this service and you have not paid the
premium that is due before the end of the grace period, we will make a policy
loan to pay the premium. Interest on such a policy loan is charged from the
date the premium was due. However, in order for an automatic premium loan to
occur, the amount available for a loan must be enough to pay at least a
quarterly premium. If the loan value is not enough to pay at least a quarterly
premium, your Policy will lapse.
Policy Loan Repayments If your Policy is in force, your loan can be repaid in
part or in full at any time before the insured's death. Your loan may also be
repaid within 60 days after the date of the insured's death, if we have not
paid any of the benefits under the Policy. Any loan repayment must be at least
$100 unless the balance due is less than
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$100. When implemented, we will waive this minimum loan repayment provision
for loan repayments made under our automatic payment plan where loan
repayments are in an amount of at least $25.
We allocate loan repayments to the guaranteed principal account until all
loans from the guaranteed principal account have been repaid. Thereafter we
allocate loan repayments to the guaranteed principal account or the sub-
accounts of the Variable Life Account as you direct. In the absence of your
instructions, we will allocate loan repayments to the guaranteed principal
account actual cash value and separate account actual cash value in the same
proportion that those values bear to each other and, as to the actual cash
value in the separate account, to each sub-account in the proportion that the
actual cash value in such sub-account bears to your actual cash value in all
of the sub-accounts.
Loan repayments reduce your loan account by the amount of the loan
repayment.
A policy loan, whether or not it is repaid, will have a permanent effect on
the policy value because the investment results of the sub-accounts will apply
only to the amount remaining in the sub-accounts. The effect could be either
positive or negative. If net investment results of the sub-accounts are
greater than the amount being credited on the loan, the policy value will not
increase as rapidly as it would have if no loan had been made. If investment
results of the sub-accounts are less than the amount being credited on the
loan, the policy value will be greater than if no loan had been made. For an
example of the effect of a policy loan on a Policy and its death benefit,
please see Appendix IV, "Policy Loan Example," in this prospectus on page 99.
Surrender
You may request a surrender or partial surrender of your Policy at any time
while the insured is living. On surrender, the surrender value of the Policy
is the actual cash value minus unpaid policy charges which are assessed
against actual cash value. We determine the surrender value as of the end of
the valuation period during which we receive your surrender request at our
home office. You may surrender the Policy by sending us the Policy and a
written request for its surrender. You may request that the surrender value be
paid to you in cash or, as an alternative, you may request that the surrender
value be applied on a settlement option or to provide extended protection
insurance on the life of the insured.
We also permit a partial surrender of the actual cash value of the Policy in
any amount of $500 or more. However, we will not permit a partial surrender,
if immediately thereafter the partial surrender would reduce the actual cash
value to an amount which is less than 10 percent of the policy value
immediately after the partial surrender. If a Policy is not paid-up, the death
benefit of the Policy will be reduced by the amount of the partial surrender.
If the Policy is paid-up, the death benefit will be reduced so as to retain
the same ratio between the policy value and the death benefit of the Policy as
existed prior to the partial surrender. With any partial surrender, we will
adjust the Policy to reflect the new face amount and actual cash value and,
unless otherwise instructed, the existing level of premium payments.
We are currently waiving these restrictions requiring a minimum amount for a
partial surrender where a partial withdrawal from a Policy, which is on stop
premium, is being used to pay premiums for sub-standard risks or premiums on
any benefits and riders issued as part of the Policy. Transaction fees
otherwise applicable to such a partial withdrawal are also waived.
On a partial surrender, you may tell us which Variable Life Account sub-
accounts from which a partial surrender is to be taken or whether it is to be
taken in whole or in part from the guaranteed principal account. If you do
not, we will deduct partial surrenders from your guaranteed principal account
actual cash value and separate account actual cash value in the same
proportion that those values bear to each other and, as to the actual cash
value in the separate account, from each sub-account in the proportion that
the actual cash value in such sub-account bears to your actual cash value in
all of the sub-accounts. We will tell you, on request, what amounts are
available for a partial surrender under your Policy.
We will pay a surrender or partial surrender as soon as possible, but not
later than seven days after our receipt of your written request for surrender.
However, an exception to this is that if any portion of the actual cash value
to be surrendered is attributable to a premium or nonrepeating
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premium payment made by non-guaranteed funds such as a personal check, we will
delay mailing that portion of the surrender proceeds until we have reasonable
assurance that the payment has cleared and that good payment has been
collected. The amount you receive on surrender may be more or less than the
total premiums paid to your Policy.
Free Look
It is important to us that you are satisfied with this Policy after it is
issued. If you are not satisfied with it, you may return the Policy to us or
your agent by the later of:
(1) ten days after you receive it;
(2) 45 days after you have signed the application; or
(3) ten days after we mail to you a notice of your right of withdrawal.
If you return the Policy, you will receive within seven days of the date we
receive your notice of cancellation a full refund of the premiums you have
paid.
If the Policy is adjusted, as described under the heading "Policy
Adjustments" in this prospectus on page 16, and if the adjustment results in
an increased premium, you will again have a right to examine the Policy and
you may return the Policy within the time periods stated in the immediately
preceding paragraph. If you return the Policy, the requested premium
adjustment will be cancelled. You will receive a refund of the additional
premiums paid within seven days of the date we receive your notice of
cancellation for that adjustment.
Conversion
So long as your Policy is in force and all scheduled premiums have been duly
paid, you may convert the Policy to an adjustable life policy, with a fixed
death benefit and cash values, which we may then offer. This right is in
addition to your right to make described policy adjustments. For VAL '95, this
conversion privilege is only available during the first 24 months from the
original policy date, but comparable fixed insurance coverage can be obtained
after 24 months from the original policy date by transferring all of the
policy value to the guaranteed principal account and thereafter allocating all
premiums to that account.
The converted Policy shall have the same face amount as is currently
provided by your Policy and premiums based upon the same issue age and risk
classification of the insured as stated in your Policy. The premiums and
actual cash values provided by the converted Policy may be different as a
result of an equitable adjustment made to reflect any variances in the
premiums and cash values under the Policy and the new Policy.
Policy Charges
Premium Charges Premium charges vary depending on whether the premium is a
scheduled premium or a nonrepeating premium. Generally, the word "premium"
when used in this prospectus means a scheduled premium only. With VAL '87,
charges for sub-standard risks are assessed against the actual cash values.
With VAL '95, charges for sub-standard risks are deducted from the premium, to
calculate the base premium. Charges for sub-standard risks include both table
ratings and cash extra charges. With both VAL '87 and VAL '95, charges for
additional benefits are deducted from the premium to calculate the base
premium.
From base premiums we deduct a sales load, an underwriting charge, a premium
tax charge and a face amount guarantee charge. The base premium excludes any
charge deducted from the premium to provide for any additional benefits
provided by rider and, in the case of VAL '95, any charge deducted for sub-
standard risks.
(1) The sales load consists of a deduction from each premium of 7 percent and
it may also include a first year sales load deduction not to exceed 23
percent. The first year sales load will apply only to base premiums,
scheduled to be paid in the 12 month period following the policy date, or
any policy adjustment involving an increase in base premium or any policy
adjustment occurring during a period when a first year sales load is being
assessed. It will also apply only to that portion of an annual base
premium necessary for an original issue whole life plan of insurance. In
other words, for base premiums greater than this whole life premium, the
amount of the base premium in excess of such whole life base premium will
be subject only to the 7 percent basic sales load.
Only adjustments that involve an increase in base premium will result in
additional first year sales load being
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assessed on that increase in premium. If any adjustment occurs during a
period when a first year sales load is being collected and the adjustment
results in an increase in base premium, an additional first year sales load,
not to exceed 23 percent of the increase in base premium, will be added to
the uncollected portion of the first year sales load that was being
collected prior to the adjustment. This total amount of first year sales
load will then be collected during the 12 month period following the
adjustment.
If any adjustment occurs during the 12 month period when a first year
sales load is being collected and the adjustment does not result in an
increase in base premium, the first year sales load percentage not to exceed
23 percent, that was in effect prior to the adjustment is multiplied by the
base premium in effect after the adjustment; this number is then multiplied
by a fraction equal to the number of months remaining in the previous 12
month period divided by 12. This amount of first year sales load will then
be collected during the 12 month period following the adjustment.
All of the sales load charges are designed to average not more than 9
percent of the base premiums (in the case of a VAL '87 Policy, the base
premium less any charge for sub-standard risks) over the lesser of: the life
expectancy of the insured at policy issue or adjustment; or 15 years from
the policy issue or adjustment; or the premium paying period. Compliance
with the 9 percent ceiling will be achieved by reducing the amount of the
first year sales load, if necessary. For examples of how we compute sales
load charges, see the heading "Examples of Sales Load Computations" in this
prospectus on page 34.
The sales load is designed to compensate us for distribution expenses
incurred with respect to the Policies. The amount of the sales load in any
policy year cannot be specifically related to sales expenses for that year.
To the extent that sales expenses are not recovered from the sales load, we
will recover them from our other assets or surplus including profits from
mortality and expense risk charges.
(2) The underwriting charge currently is an amount not to exceed $5 per $1,000
of face amount of insurance. This amount may vary by the age of the
insured and the premium level for a given amount of insurance. This charge
is made ratably from premiums scheduled to be made during the first policy
year and during the twelve months following certain policy adjustments.
The underwriting charge is designed to compensate us for the
administrative costs associated with issuance or adjustment of the
Policies, including the cost of processing applications, conducting
medical exams, classifying risks, determining insurability and risk class
and establishing policy records. This charge is not guaranteed, so that on
a policy adjustment the then current underwriting charge will apply to any
increase in face amount which requires new evidence of insurability. In
the event of a policy adjustment which results in a face amount increase
and no premium, you must then remit the then current underwriting charge
to us prior to the effective date of the adjustment or we will assess the
charge against your actual cash value as a transaction charge on
adjustment.
(3) The premium tax charge of 2.5 percent is deducted from each base premium.
This charge is designed to cover the aggregate premium taxes we pay to
state and local governments for this class of policies. We do not
guarantee this charge, and it may be increased in the future, but only as
necessary to cover our premium tax expenses.
(4) The face amount guarantee charge of 1.5 percent is deducted from each base
premium. This charge is designed to compensate us for our guarantee that
the death benefit will always be at least equal to the current face amount
in effect at the time of death regardless of the investment performance of
the sub-accounts in which net premiums have been invested. The face amount
of a Policy at issue or adjustment and the appropriate premium therefor
reflect a "tabular cash value" (defined on page 17 above) based upon an
assumed annual
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rate of return of 4 percent. If the policy value is less than the tabular
cash value at the time of death, it will not be sufficient to support the
face amount of the Policy under the actuarial assumptions made in designing
the Policy. The face amount guarantee is a guarantee that the face amount
will be available as a death benefit notwithstanding the failure of the
Policy to perform in accordance with the assumptions made in its design.
Thus, even if the policy value should be less than the amount needed to pay
the deductions to be made from the actual cash value on the next monthly
policy anniversary, see discussion below, the Policy's guaranteed death
benefit will remain in effect and the Policy will remain in force. We
guarantee not to increase this charge.
Carges Taken Fromh
Premium
Plus, in the
- --------------- First Year
---------------
7.00% Sales Additional
Load Sales Load (up
1.50% Face to 23%)
Amount Underwriting
Guarantee Charge (up to
2.50% Premium $5/$1000 of
Tax Insurance
- --------------- Coverage)
11.00% Total
Nonrepeating Premiums Nonrepeating premiums are currently subject to the 2.5
percent premium tax charge but not to a sales load charge. We do not assess a
face amount guarantee charge or underwriting charge against nonrepeating
premiums.
Actual Cash Value Charges In addition to deductions from premiums and
nonrepeating premiums, we assess from the actual cash value of a Policy an
administration charge, certain transaction charges and the cost of insurance
charge, (and in the case of a VAL '87 Policy, any charge for sub-standard
risks). These charges are as follows:
(1) The administration charge is designed to cover certain of our
administrative expenses, including those attributable to the records
maintained for your Policy. The administration charge is $60 for each
policy year.
(2) The transaction charges are for expenses associated with processing
transactions. There is a charge of $25 for each policy adjustment.
If the only policy adjustment is a partial surrender, the transaction
charge shall be the lesser of $25 or 2 percent of the amount surrendered.
We also reserve the right to make a charge, not to exceed $10, for each
transfer of actual cash value among the guaranteed principal account and
the sub-accounts of the Variable Life Account. Currently there is a $10
charge only for non-systematic transfers in excess of four per year.
(3) The cost of insurance charge compensates us for providing the death
benefit under a Policy. The charge is calculated by multiplying the net
amount at risk under your Policy by a rate which varies with the insured's
age, sex, risk class, the level of scheduled premiums for a given amount
of insurance, duration of the Policy and the smoking habits of the
insured. The rate is guaranteed not to exceed the maximum charges for
mortality derived from the 1980 Commissioners Standard Ordinary Mortality
Tables. The net amount at risk is the death benefit under your Policy less
your policy value. Where circumstances require, we will base our rates on
"unisex," rather than sex-based, mortality tables.
We assess administration and cost of insurance charges (and for a VAL '87
Policy, sub-standard risk charges, if any,) against your actual cash value on
the monthly policy anniversary. In addition, we assess such charges on the
occurrence of the death of the insured, policy surrender, lapse or a policy
adjustment.
We assess transaction charges against your actual cash value at the time of
a policy adjustment or when a transfer is made. In the case of a transfer, the
charge is assessed against the amount transferred.
We assess charges against your guaranteed principal account actual cash
value and separate account actual cash value in the same proportion that those
values bear to each other and, as to the actual cash value in the separate
account, from each sub-account in the proportion that the actual cash value in
such sub-account bears to your actual cash value in all of the sub-accounts.
Charges Taken from Actual Cash Value
. Administration Charge ($60/year)
. Cost of Insurance Charge
.If Applicable: Transaction Charge and Charge for Sub-Standard Risks
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Separate Account Charges We assess a mortality and expense risk charge
directly against the assets held in the Variable Life Account. The mortality
and expense risk charge compensates us for assuming the risks that cost of
insurance charges will be insufficient to cover actual mortality experience
and that the other charges will not cover our expenses in connection with the
Policy. We deduct the mortality and expense risk charge from Variable Life
Account assets on each valuation date at an annual rate of .50 percent of the
average daily net assets of the Variable Life Account.
We reserve the right to charge or make provision for any taxes payable by us
with respect to the Variable Life Account or the Policies by a charge or
adjustment to such assets. No such charge or provision is made at the present
time.
Charges Taken from Separate Account
. .50% Mortality and Expense Risk Charge
Examples of Sales Load Computations
As noted previously, all sales load charges are designed to average not more
than 9 percent of base premiums (in the case of a VAL '87 Policy, the base
premium less any charge for sub-standard risks) over the lesser of: the life
expectancy of the insured at policy issue or adjustment, or 15 years from the
policy issue or adjustment; or the premium paying period. A number of examples
of sales load computations are included in Appendix V, Example of Sales Load
Computation, in this prospectus on page 100.
It should be noted from the above that the sales load charges are designed
to be spread over time and they assume a continuation of the Policy. Early
adjustment of the Policy to lower premium levels or early surrender of policy
values will have the effect of increasing the portion of premium payments used
for sales load charges. In addition, because a first year sales load is
applied to increases in premium, a pattern of increases and decreases in
premiums should be avoided.
Policies Issued in Exchange We will waive or modify certain charges assessed
against base premiums as described above in situations where our existing life
insurance policy owners wish to exchange their policies for the Policies
described herein. Those policy owners may do so, subject to their application
for this Policy and our approval of the exchange. Under certain circumstances,
we will require evidence of insurability for an exchange. A $150
administrative charge is currently required for the exchange.
In those situations where a Policy is issued in exchange for a current
policy issued by us, we will not assess any charges, except for the
administrative charge, to the existing cash values at the time they are
transferred to the Policy. Subsequent premium payments, absent adjustment and
unless the exchanged policy was not in force for at least one year, will not
be subject to a first year sales load or underwriting charge (unless evidence
of insurability has been required for the exchange) at the established face
amount and the level of premiums of the exchanged policy. All other charges
will apply to the Policy and premiums paid under it thereafter.
Other Policy Provisions
Beneficiary When we receive proof satisfactory to us of the insured's death,
we will pay the death proceeds of a Policy to the beneficiary or beneficiaries
named in the application for the Policy unless the owner has changed the
beneficiary. In that event, we will pay the death proceeds to the beneficiary
named in the last change of beneficiary request as provided below.
If a beneficiary dies before the insured, that beneficiary's interest in the
Policy ends with that beneficiary's death. Only those beneficiaries who
survive the insured will be eligible to share in the death proceeds. If no
beneficiary survives the insured we will pay the death proceeds of this Policy
to the owner, if living, otherwise to the owner's estate, or, if the owner is
a corporation, to it or its successor.
You may change the beneficiary designated to receive the proceeds. If you
have reserved the right to change the beneficiary, you can file a written
request with us to change the beneficiary. If you have not reserved the right
to change the beneficiary, the written consent of the irrevocable beneficiary
will be required.
Your written request will not be effective until it is recorded in our home
office. After it has been so recorded, it will take effect as of the date you
signed the request. However, if the insured dies before the request has been
so recorded, the request will not be effective as to those death proceeds we
have paid
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before your request was recorded in our home office records.
Payment of Proceeds The amount payable as death proceeds upon the insured's
death will be the death benefit provided by the Policy, plus any additional
insurance on the insured's life provided by an additional benefit agreement,
if any, minus any policy charges and minus any policy loans. In addition, if
the Cash Option death benefit is in effect at the insured's death, we will pay
to the beneficiary any part of a paid premium that covers the period from the
end of the policy month in which the insured died to the date to which
premiums are paid. Normally, we will pay any policy proceeds within seven days
after our receipt of all the documents required for such a payment. Other than
the death proceeds, which are determined as of the date of death of the
insured, we will determine the amount of payment as of the end of the
valuation period during which a request is received at our home office.
We reserve the right to defer policy payments, including policy loans, for
up to six months from the date of your request, if such payments are based
upon policy values which do not depend on the investment performance of the
Variable Life Account. In that case, if we postpone a payment other than a
policy loan payment for more than 31 days, we will pay you interest at 3
percent per annum (4 percent for a VAL '87 Policy) for the period beyond that
time that payment is postponed. For payments based on policy values which do
depend on the investment performance of the Variable Life Account, we may
defer payment only:
(1) for any period during which the New York Stock Exchange is closed for
trading (except for normal holiday closing); or
(2) when the SEC has determined that a state of emergency exists which may
make such payment impractical.
Settlement Options The proceeds of a Policy will be payable if the Policy is
surrendered, or we receive proof satisfactory to us of the insured's death.
These events must occur while the Policy is in force. We will pay the proceeds
at our home office and in a single sum unless a settlement option has been
selected. We will deduct any indebtedness and unpaid charges from the
proceeds. Proof of any claim under this Policy must be submitted in writing to
our home office.
We will pay interest on single sum death proceeds from the date of the
insured's death until the date of payment. Interest will be at an annual rate
determined by us, but never less than 3 percent (4 percent for VAL '87).
The proceeds of a Policy may be paid in other than a single sum and you may,
during the lifetime of the insured, request that we pay the proceeds under one
of the Policy's settlement options. We may also use any other method of
payment that is agreeable between you and us. A settlement option may be
selected only if the payments are to be made to a natural person in that
person's own right.
Each settlement option is payable in fixed amounts as described below. The
payments do not vary with the investment performance of the Variable Life
Account.
Option 1--Interest Payments
This is an annuity based upon the payment of interest on the proceeds at
such times and for a period that is agreeable to you and us. Withdrawals of
proceeds may be made in amounts of at least $500. At the end of the period,
any remaining proceeds will be paid in either a single sum or under any other
method we approve.
Option 2--Payments for a Specified Period
This is an annuity payable for a specified number of years. The amount of
guaranteed payments for each $1,000 of proceeds applied is as shown in the
Policy. Monthly payments for periods not shown and current rates are available
from us at your request.
Option 3--Life Income
This is an annuity payable monthly during the lifetime of the person who is
to receive the income and terminating with the last monthly payment
immediately preceding that person's death. We may require proof of the age and
sex of the annuitant. The amount of guaranteed payments for each $1,000 of
proceeds applied is as shown in the Policy. Monthly payments for ages not
shown and current rates are available from us at your request. It would be
possible under this option for the annuitant to receive only one annuity
payment if death occurred prior to the due date of the second annuity payment,
two if death occurred before the due date of the third annuity payment, etc.
Option 4--Payments of a Specified Amount
This is an annuity payable in a specified amount until the proceeds and
interest are fully paid.
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If you request a settlement option, you will be asked to sign an agreement
covering the election which will state the terms and conditions of the
payments. Unless you elect otherwise, a beneficiary may select a settlement
option after the insured's death.
The minimum amount of interest we will pay under any settlement option is 3
percent per annum (4 percent for a VAL '87 Policy). Additional interest
earnings, if any, on deposits under a settlement option will be payable as
determined by us.
Assignment The Policy may be assigned. The assignment must be in writing and
filed at our home office. We assume no responsibility for the validity or
effect of any assignment of the Policy or of any interest in it. Any proceeds
which become payable to an assignee will be payable in a single sum. Any claim
made by an assignee will be subject to proof of the assignee's interest and the
extent of the assignment.
Misstatement of Age If the insured's age has been misstated, we will adjust the
amount of proceeds payable under the Policy to reflect cost of insurance
charges based upon the insured's correct age.
Incontestability After a Policy has been in force during the insured's lifetime
for two years from the original policy date, we may not contest the Policy,
except for fraud or for nonpayment of premium. However, if there has been a
face amount increase for which we required evidence of insurability, we may
contest that increase for two years with respect to information provided at
that time, during the lifetime of the insured, from the effective date of the
increase.
Suicide If the insured, whether sane or insane, dies by suicide, within two
years of the original policy date, our liability will be limited to an amount
equal to the premiums paid for the Policy. If there has been a face amount
increase for which we required evidence of insurability, and if the insured
dies by suicide within two years from the effective date of the increase, our
liability with respect to the increase will be limited to an amount equal to
the premiums paid for such increase.
Dividends The Policies are participating policies. Each year we will determine
if this class of Policies and your Policy will share in our divisible surplus.
We call your share of this participation a dividend. We do not anticipate that
dividends will be declared with respect to these Policies.
Dividends, if received, may be added to your actual cash value or, if you so
elect, they may be paid in cash.
We will allocate any dividend applied to actual cash value to the guaranteed
principal account or to the sub-accounts of the separate account in accordance
with your instructions for new premiums. In the absence of instruction, we will
allocate dividends to the guaranteed principal account actual cash value and
separate account actual cash value in the same proportion that those actual
cash values bear to each other and, as to the actual cash value in the separate
account, to each sub-account in the proportion that the actual cash value in
such sub-account bears to your actual cash value in all of the sub-accounts.
Reports At least once each year we will send you a report. This report will
include the actual cash value, the tabular cash value, the face amount and the
variable death benefit as of the date of the report. It will also show the
premiums paid during the policy year, policy loan activity and the policy
value. We will send the report to you without cost. The report will be as of a
date within two months of its mailing.
Additional Benefits
Additional Benefits When a Policy is issued, you may be able to obtain
additional policy benefits. Subject to underwriting approval, we will provide
these benefits by a rider to the Policy, which may require the payment of
additional premium.
Waiver of Premium Agreement The Waiver of Premium Agreement requires an
additional premium and provides for the payment of policy premium in the event
of the insured's disability. We provide waiver of premium coverage on most
Policies, unless you elect not to have it.
Policy Enhancement Agreement and Cost of Living Agreement Both the Policy
Enhancement Agreement and the Cost of Living Agreement provide for increases in
the face amount, without evidence of insurability and help you maintain the
purchasing power of the protection provided by the Policy. The Policy
Enhancement Agreement requires an additional premium, but none is required for
the Cost of Living Agreement. Your Policy may not contain both of these
agreements.
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The Policy Enhancement Agreement provides for an increase in the face amount
on each policy anniversary. The face amount will be increased by a specified
percent, between 3 percent and 10 percent, which you choose when you apply for
this benefit; the base premium will also be increased by the same percent. If
you reject an increase, the agreement will terminate.
Unless you choose the Policy Enhancement Agreement, we will issue most
Policies with a Cost of Living Agreement. The Cost of Living Agreement
provides for a face amount increase equal to the percentage increase in the
consumer price index during the previous three years, provided that you have
not made a face amount adjustment during that time. Unless we agree otherwise,
the cost of living increase may not exceed 20 percent of the Policy's face
amount before the increase or $100,000. The increase in premiums and face
amount is treated as a policy adjustment. Prior to the effective date of the
increased coverage we will notify you of the offered increase in face amount
and the required premium increase for the new face amount. You may elect to
accept the increase in face amount and premium. If you fail to accept the cost
of living face amount increase, no further increases will generally be offered
when the insured is over the age of 21.
Face Amount Increase Agreement The Face Amount Increase Agreement also
provides for increases in the face amount, without evidence of insurability.
The agreement requires an additional premium and allows increases for Policies
issued between an insured's age 0 and 37.
Survivorship Life Agreement The Survivorship Life Agreement requires an
additional premium and allows you to purchase a specified amount of additional
insurance, without evidence of insurability, at the death of another person
previously designated by you. This right extends for a period of 90 days after
the death of that other person. Typically, the person you designate will also
purchase a similar right to buy additional life insurance in the event of your
death. In the event you and the previously designated life die simultaneously,
we will pay your beneficiary one-half of the specified amount of this
agreement in addition to the death benefit due on your Policy.
Family Term Rider The Family Term Rider requires an additional premium and
provides a fixed amount of protection insurance on children of an insured.
Exchange of Insurance Agreement The Exchange of Insurance requires no
additional premium and allows for the transfer of existing insurance coverage
to another insured within a business setting.
Accelerated Benefits Agreement The Accelerated Benefits Agreement is issued
without additional premium on all Policies issued to individual insureds. It
allows you to receive a significant portion of your Policy's death benefit,
which for this purpose is essentially defined as the face amount less any
policy loan, while the insured is still living. Subject to certain conditions,
you may apply to receive a loan in excess of the Policy's maximum loan amount
if the insured develops a terminal condition due to sickness or injury. The
maximum accelerated benefit we will pay is the lesser of $1,000,000 or 75
percent of the death benefit. The minimum accelerated benefit we will pay is
$10,000.
The accelerated benefit will be treated as a loan, apart from the policy
loan provisions described elsewhere. Amounts received as a loan under the
Accelerated Benefit Agreement will be charged interest. Once the accelerated
benefit is paid, the interest rate will not change. Upon the death of the
insured, we will deduct the accrued loan balance prior to the payment of the
Policy's proceeds. A receipt of amounts under the agreement may be taxable.
You should seek assistance from your tax adviser.
Short Term Agreement The Short Term Agreement requires an additional premium
and provides temporary protection insurance, on a fixed death benefit basis
only, issued for a period of time less than a year. It is issued to provide
temporary life insurance coverage until the later issue date of the insured's
Policy. It may be used in situations where specific policy dating is required,
yet insurance coverage is needed immediately. The Short Term Agreement
terminates on the policy issue date of the Policy.
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Other Matters
Federal Tax Status
The discussion of federal taxes is general in nature and is not intended as
tax advice. Each person concerned should consult a tax adviser. This discussion
is based on our understanding of federal income tax laws as they are currently
interpreted. We have not considered any applicable state or other tax laws. No
representation is made regarding the likelihood of continuation of current
income tax laws or the current interpretations of the Internal Revenue Service
(the "IRS").
We are taxed as a "life insurance company" under the Internal Revenue Code
(the "Code"). The operations of the Variable Life Account form a part of, and
are taxed with, our other business activities. Currently, we pay no federal
income tax on income dividends received by the Variable Life Account or on
capital gains arising from the Variable Life Account's activities. The Variable
Life Account is not taxed as a "regulated investment company" under the Code
and it does not anticipate any change in that tax status.
Under Section 7702 of the Code, life insurance contracts such as the Policies
will be treated as life insurance if certain tests are met. There is limited
guidance on how these tests are to be applied. However, the IRS has issued
proposed regulations that would specify what will be considered reasonable
mortality charges under Section 7702. In light of these proposed regulations
and the other available guidance on the application of the tests under Section
7702, we generally believe that a Policy issued on a standard risk should meet
the statutory definition of a life insurance contract under Section 7702.
However, it remains unclear whether a substandard risk Policy will meet the
statutory life insurance contract definition.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Variable Life Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Variable Life Account, through
the Funds, intends to comply with the diversification requirements prescribed
in Regulations Section 1.817-5, which affect how the Funds' assets may be
invested. Although the investment adviser of Advantus Series Fund is an
affiliate of Minnesota Life, we do not have control over the Funds or their
investments. Nonetheless, we believe that each Portfolio of the Funds in which
the Variable Life Account owns shares will be operated in compliance with the
requirements prescribed by the Treasury.
In certain circumstances, owners of variable life policies may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their policies. In those circumstances, income and
gains from the separate account assets would be includible in the variable life
policy owner's gross income. The IRS has stated in published rulings that a
variable policy owner will be considered the owner of separate account assets
if the policy owner possesses incidents of ownership in those assets, such as
the ability to exercise the investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance
would be issued by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular subaccounts without
being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the owner of a Policy has the choice of more sub-accounts in which to
allocate net purchase payments and policy values, and may be able to transfer
among sub-accounts more frequently than in such rulings. These differences
could result in a policy owner being treated as the owner of
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the assets of the Variable Life Account. In addition, we do not know what
standards, if any, will be set forth in the regulations or rulings which the
Treasury Department has stated it expects to issue. We therefore reserve the
right to modify the Policy as necessary to attempt to prevent a policy owner
from being considered the owner of a pro rata share of the assets of the
Variable Life Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
On the death of the insured, we believe that the death benefit provided by
the Policies will be excludable from the gross income of the beneficiary under
Section 101(a) of the Code. If you receive an accelerated benefit, that
benefit may be taxable and you should seek assistance from a tax adviser.
You are not currently taxed on any part of your interest until you actually
receive cash from the Policy. However, taxability may also be determined by
your contributions to the Policy and prior Policy activity.
Depending on the circumstances, the exchange of a Policy, the receipt of a
Policy in an exchange, a change in the Policy's death benefit option (e.g., a
change from Cash Option to Protection Option), a policy loan, a partial
surrender, a surrender, a change in ownership, a change of insured, an
adjustment of the face amount, or an assignment of the Policy may have federal
income tax consequences. If you are considering any such transactions, you
should consult a tax adviser before effecting the transaction.
We also believe that policy loans will be treated as indebtedness and will
not be currently taxable as income to you. However, whether a modified
endowment contract or not, the interest paid on policy loans will generally
not be tax deductible.
A surrender or partial surrender of the actual cash values of a Policy may
have tax consequences. On surrender, you will not be taxed on values received
except to the extent that they exceed the gross premiums paid under the
Policy. An exception to this general rule occurs in the case of a partial
withdrawal, a decrease in the face amount, or any other change that reduces
benefits under the Policy in the first 15 years after the Policy is issued and
that results in a cash distribution to you in order for the Policy to continue
complying with the Section 7702 definitional limits. In that case, such
distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Premiums for additional benefits are not used in the calculation for computing
the tax on actual cash values. Finally, upon a complete surrender or lapse of
a Policy or when benefits are paid at a Policy's maturity date, if the amount
received plus the amount of indebtedness exceeds the total investment in the
Policy, the excess will generally be treated as ordinary income, subject to
tax.
It should be noted, however, that under the Code the tax treatment described
above is not available for policies characterized as modified endowment
contracts. In general, policies with a high premium in relation to the death
benefit may be considered modified endowment contracts. The Code requires that
the cumulative premiums paid on a life insurance policy during the first seven
contract years not exceed the sum of the net level premiums which would be
paid under a 7-pay life policy. If those cumulative premiums exceed the 7-pay
life premiums, the policy is a modified endowment contract.
Modified endowment contracts would still be treated as life insurance with
respect to the tax treatment of death proceeds and to the extent that the
inside build-up of cash value would not be taxed on a yearly basis. However,
any amounts you received, such as dividends, cash withdrawals, loans and
amounts received from partial or total surrender of the contract would be
subject to the same tax treatment as the same amounts received under an
annuity. This annuity tax treatment includes the 10 percent additional income
tax which would be imposed on the portion of any distribution that is included
in income except where the distribution or loan is made on or after the date
you attain age 59 1/2, or is attributable to your becoming disabled, or as
part of a series of substantially equal periodic payments for your life or the
joint lives of you and your beneficiary.
The modified endowment contract provisions of the Code apply to all policies
entered into on or after June 21, 1988. It should be noted, in addition, that
a policy which is subject to a "material change" shall
39
<PAGE>
be treated as newly entered into on the date on which such material change
takes effect. Appropriate adjustment shall be made in determining whether such
a policy meets the 7-pay test by taking into account the previously existing
cash surrender value. The addition of the guaranteed principal account to an
outstanding Policy may have Federal income tax implications, e.g., whether the
addition of such account causes a "material change." While certain adjustments
described herein may result in a material change, the law provides that any
cost of living increase described in the regulations and based upon an
established broad-based index will not be treated as a material change if any
increase is funded ratably over the remaining period during which premiums are
required to be paid under the policy. To date, no regulations under this
provision have been issued.
If a Policy becomes a modified endowment contract, distributions that occur
during the policy year it becomes a modified endowment contract and any
subsequent policy year will be taxed as distributions from a modified
endowment contract. Distributions from a Policy within two years before it
becomes a modified endowment contract will be taxed in this manner. This means
that a distribution made from a Policy that is not a modified endowment
contract could later become taxable as a distribution from a modified
endowment contract.
Due to the Policy's flexibility, classification of a Policy as a modified
endowment contract will depend upon the circumstances of each Policy.
Accordingly, a prospective policy owner should contact a tax adviser before
purchasing a policy to determine the circumstances under which the Policy
would be a modified endowment contract. You should also contact a tax adviser
before paying any nonrepeating premiums or making any other change to,
including an exchange of, a Policy to determine whether such premium or change
would cause the Policy (or the new Policy in the case of an exchange) to be
treated as a modified endowment contract.
Under the Code, all modified endowment contracts, issued by us (or an
affiliated company) to the same policy owner during any calendar year will be
treated as one modified endowment contract for purposes of determining the
amount includable in gross income under Section 72(e) of the Code. Additional
rules may be promulgated under this provision to prevent avoidance of its
effects through serial contracts or otherwise. A life insurance policy
received in exchange for a modified endowment contract will also be treated as
a modified endowment contract.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend upon the
circumstances of each policy owner or beneficiary. A tax adviser should be
consulted for further information.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of such Policies in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a tax
adviser regarding the tax attributes of the particular arrangement. Moreover,
in recent years, Congress has adopted new rules relating to corporate owned
life insurance. Any business contemplating the purchase of a new life
insurance contract or a change in an existing contract should consult a tax
adviser.
It should be understood that the foregoing description of the federal income
tax consequences under the Policies is not exhaustive and that special rules
are provided with respect to situations not discussed. Statutory changes in
the Code, with varying effective dates, and regulations adopted thereunder may
also alter the tax consequences of specific factual situations. Due to the
complexity of the applicable laws, a person contemplating the purchase of a
variable life insurance policy or exercising elections under such a policy
should consult a tax adviser.
At the present time, we make no charge to the Variable Life Account for any
Federal, state or local taxes that we incur that may be attributable to such
Account or to the Policies. We, however, reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax laws that we determine to be properly attributable to
the Variable Life Account or the Policies.
40
<PAGE>
Directors and Principal Management Officers of Minnesota Life
<TABLE>
<CAPTION>
Directors Principal Occupation
--------- --------------------
<C> <S>
Giulio Agostini Senior Vice President, Finance and Administrative
Services, 3M, St. Paul, Minnesota
Anthony L. Andersen Chair-Board of Directors, H. B. Fuller Company, St.
Paul, Minnesota (Adhesive Products) since June 1995,
prior thereto for more than five years President and
Chief Executive Officer, H. B. Fuller Company
Leslie S. Biller Vice Chairman and Chief Operating Officer, Wells
Fargo & Company, San Francisco, California (Banking)
John F. Grundhofer President, Chairman and Chief Executive Officer,
U.S. Bancorp, Minneapolis, Minnesota (Banking)
David S. Kidwell, Ph.D. Dean and Professor of Finance, The Curtis L. Carlson
School of Management, University of Minnesota,
Minneapolis, Minnesota
Reatha C. King, Ph.D. President and Executive Director, General Mills
Foundation, Minneapolis, Minnesota
William B. Lawson, Sr. Chairman and Chief Executive Officer, Lawson
Software, Minneapolis, Minnesota
Thomas E. Rohricht Of Counsel, Doherty, Rumble & Butler Professional
Association, St. Paul, Minnesota (Attorneys)
Robert L. Senkler Chairman of the Board, President and Chief Executive
Officer, Minnesota Life Insurance Company since
August 1995; prior thereto for more than five years
Vice President and Actuary, Minnesota Life Insurance
Company
Michael E. Shannon Chairman, Chief Financial and Administrative
Officer, Ecolab Inc., St. Paul, Minnesota (Develops
and Markets Cleaning and Sanitizing Products)
Frederick T. Weyerhaeuser Retired since April 1998, prior thereto Chairman and
Treasurer, Clearwater Investment Trust since May
1996, prior thereto for more than five years
Chairman, Clearwater Management Company, St. Paul,
Minnesota (Financial Management)
</TABLE>
Principal Officers (other than Directors)
<TABLE>
<CAPTION>
Name Position
---- --------
<C> <S>
John F. Bruder Senior Vice President
Keith M. Campbell Senior Vice President
Robert E. Hunstad Executive Vice President
James E. Johnson Senior Vice President and Actuary
Dennis E. Prohofsky Senior Vice President, General Counsel and Secretary
</TABLE>
<TABLE>
<CAPTION>
Name Position
---- --------
<C> <S>
Gregory S. Strong Senior Vice President and Chief Financial Officer
Terrence M. Sullivan Senior Vice President
Randy F. Wallake Senior Vice President
William N. Westhoff Senior Vice President and Treasurer
</TABLE>
41
<PAGE>
All Directors who are not also officers of Minnesota Life have had the
principal occupation (or employers) shown for at least five years. All
officers of Minnesota Life have been employed by us for at least five years
with the exception of Mr. Westhoff. Mr. Westhoff has been employed by
Minnesota Life since April 1998. Prior thereto, Mr. Westhoff was employed by
American Express Financial Corporation, Minneapolis, Minnesota, from August
1994 to October 1997 as Senior Vice President, Global Investments and from
November 1989 to July 1994 as Senior Vice President, Fixed Income Management.
Voting Rights
We will vote the Fund shares held in the various sub-accounts of the
Variable Life Account at regular and special shareholder meetings of the Funds
in accordance with your instructions. If, however, the 1940 Act or any
regulation thereunder should change and we determine that it is permissible to
vote the Fund shares in our own right, we may elect to do so. The number of
votes as to which you have the right to instruct will be determined by
dividing your Policy's actual cash value in a sub-account by the net asset
value per share of the corresponding Fund portfolio. Fractional shares will be
counted. The number of votes as to which you have the right to instruct will
be determined as of the date coincident with the date established by the Funds
for determining shareholders eligible to vote at the meeting of the Funds.
Voting instructions will be solicited in writing prior to such meeting in
accordance with procedures established by the Funds. We will vote Fund shares
held by the Variable Life Account as to which no instructions are received in
proportion to the voting instructions which are received from policy owners
with respect to all Policies participating in the Variable Life Account. Each
policy owner having a voting interest will receive proxy material, reports and
other material relating to the Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that shares be voted so as to
cause a change in subclassification or investment policies of the Funds or
approve or disapprove an investment advisory contract of the Funds. In
addition, we may disregard voting instructions in favor of changes in the
investment policies or the investment advisers of the Funds if we reasonably
disapprove of such changes. A change would be disapproved only
. if the proposed change is contrary to state law or disapproved by state
regulatory authorities on a determination that the change would be
detrimental to the interests of policy owners or
. if we determined that the change would be inconsistent with the investment
objectives of the Funds or would result in the purchase of securities for
the Funds which vary from the general quality and nature of investments and
investment techniques utilized by other separate accounts created by us or
any of our affiliates which have similar investment objectives.
In the event that we disregard voting instructions, a summary of that action
and the reason for such action will be included in your next semi-annual
report.
Distribution of Policies
The Policies will be sold by our state licensed life insurance agents who
are also registered representatives of Ascend Financial Services, Inc.
("Ascend Financial") or of other broker-dealers who have entered into selling
agreements with Ascend Financial. Ascend Financial acts as principal
underwriter for the Policies. Ascend Financial is a wholly-owned subsidiary of
Advantus Capital Management, Inc., which in turn is a wholly-owned subsidiary
of Minnesota Life.
Ascend Financial, whose address is 400 Robert Street North, St. Paul,
Minnesota 55101-2098, is a registered broker-dealer under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The Policies are sold in the states where their sale is lawful.
The insurance underwriting and the determination of a proposed insured's risk
classification and whether to accept or reject an application for a Policy is
done in accordance with our rules and standards.
Commissions to registered representatives on the sale of Policies include:
up to 50 percent of gross premium in the first policy year; up to 6 percent of
the gross premium in policy years two through ten; up to 2 percent in policy
years thereafter; and 0 percent of nonrepeating premiums. This description of
commissions shows the maximum amount of commissions payable under the Variable
Adjustable Life Insurance Policy for plans of insurance described as
42
<PAGE>
protection and whole life insurance plans. The commissions payable on premiums
received for plans described as greater than whole life plans will differ from
the percentages shown above, as a first year commission will be paid only on
such amounts as we may classify as a first year premium, based upon a whole
life premium per $1,000 of face amount and a Policy face amount of $100,000.
On premiums received in excess of that amount we will pay commissions at a
rate of 4 percent.
In addition, Ascend Financial or will pay, based uniformly on the sales of
insurance policies by registered representatives, credits which allow
registered representatives (Agents) who are responsible for sales of the
Policies to attend conventions and other meetings sponsored by us or our
affiliates for the purpose of promoting the sale of insurance and/or
investment products offered by us and our affiliates. Such credits may cover
the registered representatives' transportation, hotel accommodations, meals,
registration fees and the like. We may also pay registered representatives
additional amounts based upon their production and the persistency of life
insurance and annuity business placed with us.
Legal Matters
Legal matters in connection with federal securities laws applicable to the
issue and sale of the Variable Adjustable Life Policies have been passed upon
by Jones & Blouch L.L.P., 1025 Thomas Jefferson Street, N.W., Washington, D.C.
20007. All other legal matters, including the right to issue such Policies
under Minnesota law and applicable regulations thereunder, have been passed
upon by Donald F. Gruber, Esquire, 400 Robert Street North, St. Paul,
Minnesota 55101.
Legal Proceedings
As an insurance company, we are ordinarily involved in litigation. We are of
the opinion that such litigation is not material with respect to the Policies
or the Variable Life Account.
Year 2000 Computer Problems
The services we provide to the Separate Account and our policy owners depend
on the smooth functioning of our computer systems. Many computer software
systems in use today cannot distinguish the year 2000 from the year 1990
because of the way that dates are encoded, stored and calculated. That failure
could have a negative impact on our ability and that of Advantus Capital to
provide services to policy owners. We have been actively working on necessary
changes to our computer systems to deal with the year 2000. Although there can
be no assurance of complete success, we believe that we will be able to
resolve these issues on a timely basis and that there will be no material
adverse impact on our ability to provide services to the Separate Account.
In addition, our operations could be impacted by our service providers' or
suppliers' year 2000 efforts. We have undertaken an initiative to assess the
efforts of organizations where there is a significant business relationship;
however there is no assurance that we will not be affected by year 2000
problems of other organizations.
Experts
Our financial statements and those of the Variable Life Account included in
this prospectus have been audited by KPMG Peat Marwick LLP, independent
auditors, 4200 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota
55402, whose reports thereon appears elsewhere herein, and have been so
included in reliance upon the report of KPMG Peat Marwick LLP and upon the
authority of said firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Jaymes
G. Hubbell, F.S.A., Second Vice President and Actuary of Minnesota Life, as
stated in his opinion filed as an exhibit to the Registration Statement.
Registration Statement
We have filed with the Securities and Exchange Commission a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the registration statement and amendments thereto and the
exhibits filed as a part thereof, to all of which reference is hereby made for
further information concerning the Variable Life Account, Minnesota Life, and
the Policies. Statements contained in this prospectus as to the contents of
Policies and other legal instruments are summaries, and reference is made to
such instruments as filed.
43
<PAGE>
Special Terms
As used in this prospectus, the following terms have the indicated meanings:
Actual Cash Value: the value of your Variable Life Account and guaranteed
principal account interest under a Policy. It is composed of a Policy's
interest in the guaranteed principal account and in one or more sub-accounts
of the Variable Life Account. The interest in each is valued separately. For
each Variable Life Account sub-account, the value is determined by multiplying
the current number of sub-account units credited to a Policy by the current
sub-account unit value. Actual cash value does not include the loan account.
Base Premium: the premium less any amount deducted from the premium for
additional benefits and, for VAL '95, for sub-standard risks.
Code: the Internal Revenue Code of 1986, as amended.
Funds: the mutual funds or separate investment portfolios within series
mutual funds which we have designated as an eligible investment for the
Variable Life Account, currently, Advantus Series Fund, Inc., its Portfolios
and the Templeton Developing Markets Fund, Class 2.
General Account: all of our assets other than those in the Variable Life
Account or in other separate accounts established by us.
Guaranteed Principal Account: the portion of the general account of
Minnesota Life which is attributable to Policies of this class, exclusive of
policy loans. It is not a separate account or a division of the general
account.
Loan Account: the portion of the general account attributable to policy
loans under Policies of this type. The loan account balance is the sum of all
outstanding loans under this Policy.
Net Single Premium: the amount of money necessary, at the insured's attained
age, to pay for all future guaranteed cost of insurance charges for the entire
lifetime of the insured, or for the coverage period in the case of extended
term insurance, without the payment of additional premium. This determination
shall assume that the current face amount of the Policy will remain constant
and that the Policy will perform at its assumed rate of return.
Nonrepeating Premium: a payment made to this Policy in addition to its
scheduled payments.
Policy Owner: the owner of a Policy.
Policy Value: the actual cash value of a Policy plus any policy loan.
Policy Year: a period of one year beginning with the policy date or a policy
anniversary.
Premium: a scheduled payment required for this Policy.
Unit: an accounting device used to determine the interest of a Policy in the
sub-accounts of the Variable Life Account.
Valuation Date: each date on which a Fund Portfolio is valued.
Valuation Period: the period between successive valuation dates measured
from the time of one determination to the next.
Variable Life Account: a separate investment account called the Minnesota
Life Variable Life Account, where the investment experience of its assets is
kept separate from our other assets.
We, Our, Us: Minnesota Life Insurance Company.
You, Your: the policy owner.
44
<PAGE>
Appendix I
Illustrations of Policy Values, Death Benefits and Premiums
The Appendix I illustrations beginning on page 85, are provided for a non-
smoking male age 40. The illustrations show the projected actual cash values,
death benefits and premiums for the various scenarios. The plan of insurance
for each illustration is a whole life plan, each with an initial face amount of
$250,000. Both death benefit options--the Cash Option and the Protection
Option--are shown. We show all illustrations based on both guaranteed maximum
and current mortality charges. Finally illustrations for both VAL '87 and VAL
'95 are included.
Guaranteed maximum cost of insurance charges will vary by age, sex, risk
class, and policy form. We use the male, female and unisex 1980 Commissioners
Standard Ordinary Mortality Tables ("1980 CSO"), as appropriate. The unisex
tables are used in circumstances where legal considerations require the
elimination of sex-based distinctions in the calculation of mortality costs.
Our maximum cost of insurance charges are based on an assumption of mortality
not greater than the mortality rates reflected in 1980 CSO Tables.
In most cases we intend to impose cost of insurance charges which are
substantially lower than the maximum charges determined as described above. In
addition to the factors governing maximum cost of insurance charges, actual
charges will vary depending on the level of scheduled premiums for a given
amount of insurance, the duration of the Policy and the smoking habits of the
insured. We illustrate current cost of insurance charges since they represent
our current practices with respect to mortality charges for this class of
Policies. Accordingly, the illustrations based upon the guaranteed maximum
mortality charges are provided primarily to show, by comparison with the other
tables, the consequences of our charging less than the full 1980 CSO based
charges.
The illustrations show how actual cash values and death benefits would vary
over time if the return on the assets held in the Variable Life Account equaled
a gross annual rate after tax, of 0 percent, 6 percent and 12 percent. The
actual cash values and death benefits would be different from those shown if
the returns averaged 0 percent, 6 percent and 12 percent but fluctuated over
the life of the Policy. The illustrations assume scheduled premiums are paid
when due.
The amounts shown for the hypothetical actual cash value and death benefit as
of each policy year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because a daily investment management fee assessed against the net assets of
the Funds and a daily mortality and expense risk charge assessed against the
net assets of the Variable Life Account are deducted from the gross return. The
mortality and expense risk charge reflected in the illustrations are at an
annual rate of .50 percent. The investment management fee illustrated is .
percent and represents an average of the annual fee charged for all portfolios
of the Funds. In addition to the deduction for the investment management fee,
the illustrations also reflect a deduction for those Fund costs and expenses
borne by the Funds. Fund expenses illustrated are . percent, representing an
average of the 1998 expense ratios of the portfolios of the Funds. Therefore,
gross annual rates of return of 0 percent, 6 percent and 12 percent correspond
to approximate net annual rates of return of percent, percent and
percent.
The tables reflect the fact that no charges for federal, state or local
income taxes are currently made against the Variable Life Account. If such a
charge is made in the future, it will take a higher gross rate of return to
produce after-tax returns of 0 percent, 6 percent and 12 percent than it does
now.
Upon request, we will furnish a comparable illustration based upon a proposed
insured's age, sex and risk classification, and on the face amount, premium,
plan of insurance and gross annual rate of return requested. It should be
remembered that actual illustrations may be materially different from those
illustrated, depending upon the proposed insured's actual situation. For
example, illustrations for females, smokers or individuals who are rated sub-
standard will differ materially in premium amount and illustrated values, even
though the proposed insured may be the same age as the proposed insured in our
sample illustration.
84
<PAGE>
Variable Adjustable Life Insurance
VAL '95
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- --- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 900 $250,000 $ 975 $250,000 $ 1,050 $250,000
2 42 4,205 3,939 250,000 4,279 250,000 4,628 250,000
3 43 4,205 6,902 250,000 7,702 250,000 8,553 250,000
4 44 4,205 9,784 250,000 11,243 250,000 12,857 250,000
5 45 4,205 12,588 250,000 14,911 250,000 17,582 250,000
6 46 4,205 15,306 250,000 18,704 250,000 22,769 250,000
7 47 4,205 17,938 250,000 22,631 250,000 28,475 250,000
8 48 4,205 20,598 250,000 26,820 250,000 34,889 250,000
9 49 4,205 23,305 250,000 31,297 250,000 42,095 250,000
10 50 4,205 26,030 250,000 36,051 250,000 50,157 250,000
15 55 4,205 39,422 250,000 63,969 250,000 106,567 250,000
20 60 4,205 51,091 250,000 99,065 250,000 202,522 365,451
25 65 4,205 59,169 250,000 142,498 250,000 358,532 571,777
30 70 4,205 62,136 250,000 197,358 292,710 608,937 866,375
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3) Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
85
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '95
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- --- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 900 $250,000 $ 975 $250,000 $ 1,050 $250,000
2 42 4,205 3,939 250,000 4,279 250,000 4,628 250,000
3 43 4,205 6,902 250,000 7,702 250,000 8,553 250,000
4 44 4,205 9,784 250,000 11,243 250,000 12,857 250,000
5 45 4,205 12,588 250,000 14,911 250,000 17,582 250,000
6 46 4,205 15,306 250,000 18,704 250,000 22,769 250,000
7 47 4,205 17,935 250,000 22,626 250,000 28,466 250,000
8 48 4,205 20,475 250,000 26,681 250,000 34,728 250,000
9 49 4,205 22,922 250,000 30,873 250,000 41,618 250,000
10 50 4,205 25,271 250,000 35,204 250,000 49,201 250,000
15 55 4,205 35,273 250,000 58,979 250,000 100,494 250,000
20 60 4,205 41,268 250,000 86,260 250,000 184,663 335,593
25 65 4,205 41,075 250,000 117,363 250,000 314,574 505,780
30 70 4,205 29,787 250,000 153,105 250,000 509,990 733,045
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3) Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
86
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '95
DEATH BENEFIT OPTION--PROTECTION OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- --- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 897 $250,000 $ 972 $250,000 $ 1,047 $ 250,000
2 42 4,205 3,925 250,897 4,264 250,972 4,613 251,047
3 43 4,205 6,869 253,925 7,665 254,264 8,512 254,613
4 44 4,205 9,723 256,869 11,172 257,665 12,773 258,512
5 45 4,205 12,487 259,723 14,789 261,172 17,435 262,773
6 46 4,205 15,154 262,487 18,513 264,789 22,529 267,435
7 47 4,205 17,749 265,154 22,388 268,513 28,165 272,529
8 48 4,205 20,399 267,749 26,545 272,388 34,512 278,165
9 49 4,205 23,081 270,399 30,969 276,545 41,620 284,512
10 50 4,205 25,769 273,081 35,647 280,969 49,544 291,620
15 55 4,205 38,763 286,258 62,747 306,827 104,306 340,995
20 60 4,205 49,458 297,626 95,492 338,558 194,773 526,391
25 65 4,205 55,342 304,692 132,402 374,797 332,598 836,081
30 70 4,205 54,254 305,039 172,170 422,741 529,853 1,250,254
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
87
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '95
DEATH BENEFIT OPTION--PROTECTION OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- --- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 897 $250,000 $ 972 $250,000 $ 1,047 $250,000
2 42 4,205 3,925 250,897 4,264 250,972 4,613 251,047
3 43 4,205 6,869 253,925 7,665 254,264 8,512 254,613
4 44 4,205 9,723 256,869 11,172 257,665 12,773 258,512
5 45 4,205 12,487 259,723 14,789 261,172 17,435 262,773
6 46 4,205 15,154 262,487 18,513 264,789 22,529 267,435
7 47 4,205 17,719 265,154 22,343 268,513 28,096 272,529
8 48 4,205 20,180 267,719 26,278 272,343 34,183 278,096
9 49 4,205 22,533 270,180 30,320 276,278 40,838 284,183
10 50 4,205 24,769 272,533 34,462 280,320 48,112 290,838
15 55 4,205 33,854 282,367 56,420 301,909 95,865 334,585
20 60 4,205 38,029 287,681 79,036 324,569 168,808 461,710
25 65 4,205 34,676 286,167 99,122 345,591 268,420 685,690
30 70 4,205 18,858 273,282 109,791 358,838 385,168 931,822
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3) Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
88
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '87
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,641.31 INITIAL SCHEDULED PREMIUM(2)
USING CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- --- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,641 $ 1,010 $250,000 $ 1,097 $250,000 $ 1,185 $250,000
2 42 4,641 4,238 250,000 4,616 250,000 5,005 250,000
3 43 4,641 7,370 250,000 8,245 250,000 9,180 250,000
4 44 4,641 10,399 250,000 11,984 250,000 13,740 250,000
5 45 4,641 13,328 250,000 15,840 250,000 18,734 250,000
6 46 4,641 16,317 250,000 19,983 250,000 24,378 250,000
7 47 4,641 19,396 250,000 24,460 250,000 30,777 250,000
8 48 4,641 22,520 250,000 29,244 250,000 37,971 250,000
9 49 4,641 25,665 250,000 34,324 250,000 46,023 250,000
10 50 4,641 28,809 250,000 39,696 250,000 55,011 250,000
15 55 4,641 44,115 250,000 71,093 250,000 117,632 250,000
20 60 4,641 57,586 250,000 110,675 250,000 224,285 389,336
25 65 4,641 67,530 250,000 160,415 258,508 397,839 616,731
30 70 4,641 72,622 250,000 222,686 324,168 677,091 945,157
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,320.66 semi-annually, $1,160.33 quarterly, or $386.78 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
89
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '87
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,641.31 INITIAL SCHEDULED PREMIUM(2)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
--- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,641 $ 1,010 $250,000 $ 1,097 $250,000 $ 1,185 $250,000
2 42 4,641 4,238 250,000 4,616 250,000 5,005 250,000
3 43 4,641 7,370 250,000 8,245 250,000 9,180 250,000
4 44 4,641 10,399 250,000 11,984 250,000 13,740 250,000
5 45 4,641 13,326 250,000 15,837 250,000 18,731 250,000
6 46 4,641 16,144 250,000 19,804 250,000 24,192 250,000
7 47 4,641 18,855 250,000 23,892 250,000 30,180 250,000
8 48 4,641 21,454 250,000 28,102 250,000 36,751 250,000
9 49 4,641 23,940 250,000 32,441 250,000 43,971 250,000
10 50 4,641 26,306 250,000 36,909 250,000 51,910 250,000
15 55 4,641 35,984 250,000 61,157 250,000 105,568 250,000
20 60 4,641 40,862 250,000 88,565 250,000 193,463 338,610
25 65 4,641 38,723 250,000 119,778 250,000 327,946 513,300
30 70 4,641 24,158 250,000 156,058 250,000 528,852 746,851
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,320.66 semi-annually, $1,160.33 quarterly, or $386.78 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
90
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '87
DEATH BENEFIT OPTION--PROTECTION OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,641.31 INITIAL SCHEDULED PREMIUM(2)
USING CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
--- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,641 $ 1,009 $250,000 $ 1,096 $250,000 $ 1,184 $250,000
2 42 4,641 4,238 250,000 4,614 250,083 5,000 250,374
3 43 4,641 7,369 250,000 8,241 250,236 9,164 251,482
4 44 4,641 10,399 250,000 11,976 250,458 13,703 253,341
5 45 4,641 13,328 250,000 15,828 250,746 18,667 255,975
6 46 4,641 16,317 250,000 19,970 251,109 24,295 259,443
7 47 4,641 19,395 250,000 24,442 252,044 30,663 264,353
8 48 4,641 22,520 250,000 29,218 253,598 37,805 270,767
9 49 4,641 25,665 250,000 34,284 255,638 45,778 278,632
10 50 4,641 28,808 250,000 39,635 258,080 54,649 287,944
15 55 4,641 44,115 250,000 70,727 275,179 115,724 358,258
20 60 4,641 57,586 250,000 109,157 299,407 221,141 383,754
25 65 4,641 67,530 250,000 156,149 251,428 392,686 608,644
30 70 4,641 72,622 250,000 217,437 316,363 668,713 933,376
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,320.66 semi-annually, $1,160.33 quarterly, or $386.78 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
91
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '87
DEATH BENEFIT OPTION--PROTECTION OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,641.31 INITIAL SCHEDULED PREMIUM(2)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 6% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (4.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
--- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,641 $ 1,009 $250,000 $ 1,096 $250,000 $ 1,184 $250,000
2 42 4,641 4,238 250,000 4,614 250,083 5,000 250,374
3 43 4,641 7,369 250,000 8,241 250,236 9,164 251,482
4 44 4,641 10,399 250,000 11,976 250,458 13,703 253,341
5 45 4,641 13,325 250,000 15,824 250,746 18,654 255,975
6 46 4,641 16,144 250,000 19,783 251,099 24,051 259,405
7 47 4,641 18,854 250,000 23,860 251,514 29,938 263,660
8 48 4,641 21,454 250,000 28,055 251,990 36,358 268,767
9 49 4,641 23,940 250,000 32,374 252,525 43,362 274,757
10 50 4,641 26,306 250,000 36,814 253,116 50,998 281,667
15 55 4,641 35,984 250,000 60,759 256,882 100,585 331,432
20 60 4,641 40,862 250,000 87,258 261,873 181,530 317,184
25 65 4,641 38,723 250,000 116,073 267,923 309,518 484,022
30 70 4,641 24,157 250,000 146,219 274,883 500,761 706,813
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,320.66 semi-annually, $1,160.33 quarterly, or $386.78 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
92
<PAGE>
Appendix II
Summary of Policy Charges
What sets cash value life insurance apart from other types of savings and
investment vehicles? It is the only product creating immediate and substantial
dollars in the form of a death benefit plus offering an accumulation component.
This is unlike other vehicles that can only create dollars over time as
contributions are made.
All life insurance policies have basically the same charges, although the
charges may be taken in different ways or at different points in time. VAL has
two distinct ways to recover expenses from a standard policy:
I. Charges taken from the base premium:
As we receive premium contributions each year, we take a certain percentage
to partially cover expenses. A sales load is taken to pay commissions to the
agent. Two charges are also taken as a percentage of the premium to cover the
state premium tax and provide a guaranteed death benefit.
Also, in the first year of any life insurance policy, two things are
different than in ongoing years: a larger commission is paid, and the policy
must be underwritten. To begin to cover these costs, an additional sales load
and an underwriting charge are taken from the premium in just the first year.
These two charges may be assessed on future increases in premium and face
amount adjustments.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Charges taken from premium: Plus, in the first year:
----------------------------------------------------------------------------------------
<S> <C>
7.00% Sales load Additional sales load (up to 23%)
Underwriting charge (up to $5/$1,000 of
1.50% Face amount guarantee insurance coverage)
2.50% State premium tax
-----------------------
11.00% Total
----------------------------------------------------------------------------------------
</TABLE>
II. Charges taken from the actual cash value:
After the above charges are taken from the premium, the remaining amount is
the net premium. The net premium is then invested in the guaranteed principal
account and/or in the portfolios of the Funds you have selected which is
referred to as the Variable Life Account. For a VAL insurance policy, the value
in the Variable Life Account is determined by the number or units in each of
your portfolios and their current value.
There are two sets of charges that affect your actual cash value. One set is
a direct charge and the other set is an indirect charge. The direct set is the
cost of insurance and an administration charge which is taken from the policy
actual cash value on a monthly basis. (Refer to Table A.) The cost of insurance
charge goes to cover the risk of death while the administration charge covers
the cost of maintaining each policy. Transaction charges are also taken from
the actual cash value as transactions occur.
Table A
--------------------------------------------------------------
Direct charges taken from actual cash value:
--------------------------------------------------------------
. Administration charge ($60/year)
. Cost of insurance charge
. If applicable: Transaction Charges
--------------------------------------------------------------
In addition to the charges described above, there are additional charges for
sub-standard risk policies. These charges are taken directly from the premium
in the case of VAL '95 policies and as charges against the policy value on VAL
'87 policies.
93
<PAGE>
The indirect set of charges include the Mortality and Expense Risk charge
taken from the Variable Life Account plus the Advisory Fee and Fund Expense
taken from the Funds. The Mortality and Expense Risk charge protects the
insurance company from the risk that total policy charges may not be adequate
to cover actual company expenses. The Fund charges cover the advisory fee of
the fund manager and portfolio expense for each of VAL's portfolios.
For illustration purposes, we use an average of the actual Mortality and
Expense Risk Charge, Advisory Fee and Fund Expense which is percent. These
are listed for each portfolio in Table B.
Your actual cash value is determined daily, net of the charges associated
with the portfolios you have selected, so they do not appear as a direct
expense. This is reflected illustratively by an assumed net rate of return.
Consider this example: assumed gross rate of 9.00 percent--Average of actual
expenses total in Table B of percent = assumed net rate of return of
percent.
Table B -- Indirect Charges
Actual Variable Life Separate Account Expenses and Fund Fees
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Mortality Other
and Expense Advisory Fund
Portfolio Name Risk Fee + Expenses = Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advantus Series Fund, Inc.
Growth....................... 0.50% 0.50% + 0.03% = 1.03%
Bond......................... 0.50% 0.50% + 0.05% = 1.05%
Money Market................. 0.50% 0.50% + 0.08% = 1.08%
Asset Allocation............. 0.50% 0.50% + 0.03% = 1.03%
Mortgage Securities.......... 0.50% 0.50% + 0.07% = 1.07%
Index 500.................... 0.50% 0.40% + 0.04% = 0.94%
Capital Appreciation......... 0.50% 0.75% + 0.03% = 1.28%
International Stock.......... 0.50% 0.70% + 0.24% = 1.44%
Small Company Growth......... 0.50% 0.75% + 0.04% = 1.29%
Value Stock.................. 0.50% 0.75% + 0.04% = 1.29%
Small Company Value.......... 0.50% 0.75% + 0.15% = 1.40%
Global Bond.................. 0.50% 0.60% + 0.53% = 1.63%
Index 400 Mid-Cap............ 0.50% 0.40% + 0.15% = 1.05%
Macro-Cap Value.............. 0.50% 0.70% + 0.15% = 1.35%
Micro-Cap Growth............. 0.50% 1.10% + 0.15% = 1.75%
Real Estate Securities....... 0.50% 0.75% + 0.15% = 1.40%
Templeton Variable Product
Series:
Developing Markets Fund Class
2........................... 0.50% 1.25% + 0.66% = 2.41%
Average.................... 0.50% 0.67% + 0.15% = 1.32%
----------------------------------------------------------------------------
</TABLE>
94
<PAGE>
[Flow Chart Appears Here]
YOUR VAL PREMIUM AT WORK
------------------------
- ------------------------------
- ------------------------------
Variable Adjustable Life
--------------------------
. Male, Age 40, Non-smoker
. $250,000 Insurance Benefit
. Cash Death Benefit Option
- ------------------------------
- ------------------------------
+ Net Rate X Actual Cash Value
- --------------------------------------
9.00% Gross Rate
- -1.32% Charges from Variable Life
- ------ Account & Series Fund
7.68% Net Rate
- --------------------------------------
- - Charges from Actual Cash Value
- ------------------------------
Administration Fee
Cost of Insurance Charge
- ------------------------------
= VAL Policy Values
Year 1 Year 2 Year 3 Year 4
$4,205 $4,205 $4,205 $4,205
Charges Charges Charges Charges
From From From
Premium Premium Premium
From
Net Net Net
Premium Premium Premium
Premium
Net
Premium
To Actual Cash Value
$1.012 $4,452 $8,121 $12,030
[_] Charges taken annually from the$4,205 premium: sales load (7%), premium tax
(2.5%) and death benefit guarantee (1.5%).
Charges taken from the $4,205 premium in the first year only: sales load
(23%) and underwriting charge (up to $5 per $1,000).
+ Net Rate reflect the Mortality & Expense Risk Charge of 0.50% is taken from
the Variable Life Account with the Advisory Fee and Fund Expenses taken from
the Funds. This rate is for illustrative purposes and is not an indication
of future results.
- - Administrative fee is $60 a year. Cost of insurance charge is the cost of
providing the death benefit which varies based on age, gender, health,
premium level and duration.
95
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '95
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 9% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (7.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
--- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 900 $250,000 $ 1,012 $250,000 $ 1,050 $250,000
2 42 4,205 3,939 250,000 4,452 250,000 4,628 250,000
3 43 4,205 6,902 250,000 8,121 250,000 8,553 250,000
4 44 4,205 9,784 250,000 12,030 250,000 12,857 250,000
5 45 4,205 12,588 250,000 16,201 250,000 17,582 250,000
6 46 4,205 15,306 250,000 20,647 250,000 22,769 250,000
7 47 4,205 17,938 250,000 25,394 250,000 28,475 250,000
8 48 4,205 20,598 250,000 30,595 250,000 34,889 250,000
9 49 4,205 23,305 250,000 36,293 250,000 42,095 250,000
10 50 4,205 26,030 250,000 42,505 250,000 50,157 250,000
15 55 4,205 39,422 250,000 82,342 250,000 106,567 250,000
20 60 4,205 51,091 250,000 141,158 259,496 202,522 365,451
25 65 4,205 59,169 250,000 226,245 368,344 358,532 571,777
30 70 4,205 62,136 250,000 344,887 501,710 608,937 866,375
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 9%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
96
<PAGE>
Variable Adjustable Life Insurance (continued)
VAL '95
DEATH BENEFIT OPTION--CASH OPTION
MALE ISSUE AGE 40 FOR NON-SMOKERS
INITIAL DEATH BENEFIT--$250,000(1)
$4,205.30 INITIAL SCHEDULED PREMIUM(2)
USING MAXIMUM CONTRACTUAL MORTALITY CHARGES
<TABLE>
<CAPTION>
-ASSUMING HYPOTHETICAL INVESTMENT RETURNS OF-
0% GROSS(3) 9% GROSS(3) 12% GROSS(3)
INITIAL (-1.36% NET) (7.64% NET) (10.64% NET)
POL ATT BASE POLICY DEATH POLICY DEATH POLICY DEATH
YR AGE PREMIUM VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
--- --- ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $4,205 $ 900 $250,000 $ 1,012 $250,000 $ 1,050 $250,000
2 42 4,205 3,939 250,000 4,452 250,000 4,628 250,000
3 43 4,205 6,902 250,000 8,121 250,000 8,553 250,000
4 44 4,205 9,784 250,000 12,030 250,000 12,857 250,000
5 45 4,205 12,588 250,000 16,201 250,000 17,582 250,000
6 46 4,205 15,306 250,000 20,647 250,000 22,769 250,000
7 47 4,205 17,935 250,000 25,388 250,000 28,466 250,000
8 48 4,205 20,475 250,000 30,445 250,000 34,728 250,000
9 49 4,205 22,922 250,000 35,844 250,000 41,618 250,000
10 50 4,205 25,271 250,000 41,606 250,000 49,201 250,000
15 55 4,205 35,273 250,000 76,846 250,000 100,494 250,000
20 60 4,205 41,268 250,000 126,230 250,000 184,663 335,593
25 65 4,205 41,075 250,000 195,938 321,231 314,574 505,780
30 70 4,205 29,787 250,000 286,691 420,881 509,990 733,045
</TABLE>
(1) The initial death benefit is guaranteed to age 100.
(2) If premiums are paid more frequently than annually, the payments would be
$2,102.65 semi-annually, $1,051.33 quarterly, or $350.45 monthly. The death
benefits and policy values would be slightly different for a policy with
more frequent premium payments.
(3)Assumes no policy loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, AND PREVAILING INTEREST RATES. THE
DEATH BENEFITS AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 9%, AND 12% OVER A PERIOD OF
YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY MINNESOTA LIFE OR THE FUNDS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
97
<PAGE>
Appendix III
Illustration of Death Benefit Calculation
As an example of the calculation of the death benefit under the Policy,
assume a Policy and an insured with the following characteristics: The insured
is a male, age 40 at Policy issue, and a non-smoker. The Variable Adjustable
Life Insurance Policy has a face amount of $250,000, with a level face amount
and premiums for the life of the insured and the Protection Option has been
chosen as the form of the death benefit. Further, assume that 100 percent of
net premiums are invested in the Variable Life Account sub-accounts, that the
gross investment rate in the Variable Life Account was 12 percent each year and
that Minnesota Life deducted current mortality charges. This situation is shown
in Appendix I, "Illustrations of Policy Values, Death Benefits and Premiums,"
on page 84 of this prospectus.
Now, further assume that the insured dies at age 50, after the Policy has
been in force for a period of ten years and during which time all of the
premiums have been paid. No policy loans or withdrawals have been made under
the Policy.
Given these assumptions, the policy value of a VAL '95 Policy (the actual
cash value plus any policy loan) on the date of the insured's death--composed
of the Policy's interest in one or more of the sub-accounts of the Variable
Life Account--is equal to $49,544. Under the Protection Option the death
benefit will be $299,544.
Given these assumptions, the policy value of a VAL '87 Policy (the actual
cash value plus any policy loan) on the date of the insured's death--composed
of the Policy's interest in one or more of the sub-accounts of the Variable
Life Account--is equal to $54,649. Under the Protection Option the death
benefit will be $298,741.
The total proceeds payable under either Policy would be adjusted to include
any additional insurance provided by an additional benefit agreement and the
amount payable would be reduced by any unpaid policy charges or any policy
loan.
As an alternative, consider the same example, except that the owner elected
the Cash Option death benefit. This situation is shown in Appendix I,
"Illustrations of Policy Values, Death Benefits and Premiums," on page 84 of
this prospectus.
The death benefit under the Cash Option does not vary from the Policy's face
amount until the Policy becomes paid-up. In this example, again assuming timely
payment of premiums, no withdrawals and no policy loan activity, the policy
value on the date of the insured's death would be $50,157 in the case of a VAL
'95 Policy and $55,011 for a VAL '87 Policy. These are higher values than those
under the Protection Option, reflecting lower mortality costs charged to the
Policy because of the level death benefit. Here, the death benefit is the
current face amount or $250,000.
In determining the total proceeds payable under the Policy, the same
adjustments are made to the death benefit as described under the Protection
Option. However, under the Cash Option any premium paid beyond the end of the
policy month in which the insured died is also included as part of the Policy
proceeds.
98
<PAGE>
Appendix IV
Policy Loan Example
As an example of the effect of a policy loan upon the Policy and upon the
death benefit, assume a VAL '95 Policy and an insured with the following
characteristics: The insured is a male, age 40 at Policy issue, and a non-
smoker. The Variable Adjustable Life Insurance Policy has a face amount of
$250,000, with a level face amount and premiums for the life of the insured and
the Protection Option has been chosen as the form of the death benefit.
Further, assume that 100 percent of net premiums are invested in the sub-
accounts of the Variable Life Account, that the gross investment rate in the
Variable Life Account was 12 percent each year and that Minnesota Life deducted
current mortality charges. This situation is shown in Appendix I,
"Illustrations of Policy Values, Death Benefits and Premiums," on page 84 of
this prospectus.
Now assume that the insured, who is also the owner of the Policy, takes a
policy loan in the amount of $5,000 at the end of the fourth policy year and
after all premiums have been paid for that year.
When a loan is taken, the actual cash value invested in the Variable Life
Account is reduced by the amount borrowed and any unpaid interest. The amount
is then transferred to the loan account. Interest is charged on the policy loan
as described in the Policy, but for purposes of this example, assume a policy
loan interest rate of 8 percent per annum. Interest is also credited to a
Policy when there is a policy loan. Interest credits on a policy loan are at a
rate which is not less than the policy loan interest rate less 2 percent per
annum. The interest credit in this example would then be 6 percent.
The following table shows the effect on the year five values, namely those
values at the end of that year, if a policy loan of $5,000 is made at the end
of the fourth year.
<TABLE>
<CAPTION>
Policy Value
With Loan Without Loan
- --------- ------------
<S> <C>
$17,203 $17,435
------- -------
</TABLE>
<TABLE>
<CAPTION>
End of Year
Total Death Benefit
With Loan Without Loan
--------- ------------
<S> <C>
$267,203 $267,435
-------- --------
</TABLE>
Note that the difference in policy values here represents the difference
between the actual Policy performance in the sub-accounts of the Variable Life
Account and the interest credited on the principal amount of the policy loan.
If interest credited on a policy loan exceeds the Policy performance, then a
Policy with a loan will have a greater value than a Policy with no loan
activity. Where Policy performance exceeds the interest credited on a policy
loan, the resulting policy value will be lower than it would have been if the
loan were not made.
Now consider an identical situation to that above except that the owner has
elected the Cash Option death benefit. The following table shows the effect on
the same year five values if a policy loan of $5,000 is made at the end of the
fourth year.
<TABLE>
<CAPTION>
Policy Value
With Loan Without Loan
- --------- ------------
<S> <C>
$17,349 $17,582
------- -------
</TABLE>
<TABLE>
<CAPTION>
End of Year
Total Death Benefit
With Loan Without Loan
--------- ------------
<S> <C>
$250,000 $250,000
</TABLE>
The values above under the "With Loan" headings are policy values, which is
the actual cash value of a Policy plus any policy loan. If the owner were to
surrender the Policy at the end of the fifth year, he would receive only the
actual cash value in the sub-accounts of the Variable Life Account.
Similarly, if the insured were to die at the end of the fifth year we would
pay out the death benefit listed under the "With Loan" heading less the amount
of the policy loan.
99
<PAGE>
Appendix V
Example of Sales Load Computation
As an example of the method we use to compute sales load, assume a protection
type plan where the annual base premium is $1,000 and where the premium paying
period, prior to any reduction in face amount, is 20 years. The insured is a
male, age 35 with a life expectancy of 38 years. As premiums are paid in each
year, we will assess a basic sales load of 7 percent or $70 in each year. Also,
as premiums are paid in the first year, we will assess a first year sales load
of 23 percent or $230. Therefore, in the first year the sales load charges will
total $300 or 30 percent ($300 / $1,000), and over the 15 year period from
policy issue sales load charges will total $1,280 or 8.54 percent ($1,280 /
$15,000).
Compliance with the 9 percent limitation will be achieved by reducing the
first year sales load, if necessary. For example, consider a Policy with a
protection type plan where the annual base premium is $1,000 and where the
premium paying period prior to any reduction in face amount is 20 years.
Further assume that the insured is a male, age 72 at issue, with a life
expectancy of 9 years. In this case, the first year sales load must be reduced
so that the total sales load will not exceed 9 percent over the life expectancy
of the insured. As premiums are paid in each year we will assess the basic
sales load of 7 percent, or $70, but the first year sales load applicable to
premiums paid in the first year will be reduced from 23 percent to 18 percent,
or $180. Therefore, in the first year the sales load charges will total $250 or
25 percent ($250 / $1,000), and over the period of the insured's life
expectancy sales load charges will total $810 or 9 percent ($810 / $9,000).
As an example of the method we use to assess sales load when an adjustment
occurs during a period in which a first year sales load is being collected,
consider a Policy where an adjustment is made after one-half of the first
annual premium is paid. Assume that the premium is $1,000 annually as in the
example above and further assume that the premiums are being paid on a monthly
basis, $83.33 per month. As premiums are paid in each year we will assess a
basic sales load of 7 percent of premiums received or $70 in that year. A first
year sales load, taken in addition to the basic sales load, would also be
assessed in a total amount of $230. Now assume an adjustment is made, after the
payment of six monthly premiums, and that the premium is increased from $1,000
to $1,200. Both before and after the adjustment we will continue to assess a
basic sales load of 7 percent of the premiums received. However, since only
one-half of the first year sales load of $230 has been collected, a first year
sales load of $115 remains to be collected. The $200 increase in premium will
also be assessed a first year sales load of 23 percent, or $46. Both are added
together and will be collected in the 12 months following the adjustment.
Therefore, after the adjustment of the premium to a $1,200 amount, and assuming
that premiums continue to be paid on a monthly basis, each monthly premium of
$100 will be subjected to a total sales load amount of $20.42, consisting of $7
of basic sales load, and $13.42 of first year sales load.
100
<PAGE>
Appendix VI
Average Annual Returns
Twenty-Year Holding Periods
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Type 1957 1962 1967 1972 1977 1982 1987 1992 1997 1998
- ----- ------ ------ ------ ------ ----- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury 0.912 1.496 2.378 3.387 4.439 6.513 7.444 7.700 7.289 7.171
Inflation 3.454 2.978 1.866 2.350 3.984 6.010 6.314 6.214 4.886 4.527
Bonds 2.516 2.484 2.011 2.948 3.988 4.471 7.885 9.541 10.288 10.857
Stocks 12.976 15.251 14.628 11.674 8.119 8.295 9.269 11.334 16.646 17.747
</TABLE>
Ending periods from 1957-1998
Source: Stocks, Bonds, Bills and Inflation (SBBI), Analyzer Software, Ibbotson
Associates, Inc., Chicago, All rights reserved.
The above information contains the average annual rate of return over twenty-
year holding periods for common stocks (S&P 500), high grade corporate bonds,
30-day U.S. Treasury bills, and inflation (example: 1938-1957, 1943-1962,
etc.). These average rates assume reinvestment of capital gains, dividends and
interest. This is a retrospective view of performance and should in no way be
construed as a projection of future trends.
This graph shows that even though stock investments tend to be more volatile
in short time intervals historically, they have generated rates of return that
have consistently been higher than inflation. Bonds and U.S. Treasury bills
have not always kept up with inflation. The figures do not take into account
the charges associated with a Variable Adjustable Life policy, but do indicate
the potential gain of holding the assets illustrated.
Some additional statistics on the performance of stocks in relation to high
grade, long-term corporate bonds and U.S. Treasury bills over the 54 twenty-
year periods beginning in 1926 and ending in 1998 include:
The average annual return of stocks was higher than that of bonds in 51
of the 54 periods.
The average annual return of stocks was higher than that of U.S. Treasury
bills in all of the 54 periods.
The average annual return of stocks was higher than inflation in all of
the 54 periods.
In the 44 thirty-year periods beginning in 1926 and ending in 1998, the
average annual return of stocks was higher than that of bonds, U.S. Treasury
bills and inflation in all 44 time periods.
From 1926 through 1998, the average annual return for this 73 year period
was:
11.2% for common stocks
5.80% for high grade, long-term corporate bonds
3.77% for U.S. Treasury bills
101
<PAGE>
Appendix VII
S&P 500
PERFORMANCE HISTORY 1926-1998
[BAR CHART APPEARS HERE]
Yr. ANNUAL TOTAL RETURN
26 11.62
37.5
43.6
-8.4
-24.9
-43.3
-8.2
54
-1.4
47.7
33.9
-35
31.1
0
40 -9.8
11.6
20.3
25.9
19.8
36.4
-8.1
5.7
5.5
18.8
50 31.7
24
18.4
-0.01
52.6
31.6
6.6
-10.8
43.4
12
60 0
26.9
-8.7
22.8
16.5
12.5
-10.1
24
11.1
-8.5
70 4
14.3
19
-14.7
-26.5
37.2
23.8
-7.2
6.6
18.4
80 32.4
-4.9
21.4
22.5
6.3
32.2
18.5
5.2
16.8
31.5
-3.2
30.4
7.67
9.99
1.31
95 37.43
96 23.07
97 33.36
98 28.58
Source: Stocks, Bonds, Bills and Inflation (SBBI), Analyzer Software, Ibbotson
Associates, Inc., Chicago. All rights reserved.
The above chart illustrates that, in any calendar year, the rate of return
for stocks can be positive or negative. However, when viewed over the entire
period of 73 years, stocks have had a positive return in more than two out of
every three years. For the person with a long term view, the results of this
pattern have been very rewarding.
102
<PAGE>
Appendix VIII
RANGE OF RETURNS
Rolling Period Returns Using Ibbotson Asset Class Information*
(1960 through 1998)
[BAR CHART APPEARS HERE]
1 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ --------
Small Cap 83.569 -30.904 16.476
Large Cap Stocks (S&P 500) 37.430 -26.468 13.267
Corporate Bonds 42.562 -8.090 8.176
Government Bonds 29.097 -5.144 7.545
United States T-Bills 14.709 2.127 5.672
5 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ -------
Small Cap 39.804 -12.252 14.504
Large Cap Stocks (S&P 500) 24.057 -2.356 10.984
Corporate Bonds 22.513 -2.222 7.445
Government Bonds 16.978 2.080 7.366
United States T-Bills 11.115 2.834 5.974
10 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ --------
Small Cap 30.381 3.199 13.111
Large Cap Stocks (S&P 500) 19.185 1.238 10.277
Corporate Bonds 16.319 1.677 7.470
Government Bonds 13.126 3.484 7.584
United States T-Bills 9.174 3.878 6.222
15 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ ----------
Small Cap 23.326 5.872 14.081
Large Cap Stocks (S&P 500) 17.904 4.307 10.333
Corporate Bonds 13.659 3.077 7.601
Government Bonds 11.272 4.755 7.864
United States T-Bills 8.323 4.556 6.593
20 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ ----------
Small Cap 20.334 11.472 14.250
Large Cap Stocks (S&P 500) 17.747 6.761 9.732
Corporate Bonds 10.857 3.028 7.006
Government Bonds 9.851 4.836 7.451
United States T-Bills 7.718 5.087 6.428
30 YEAR HIGH % LOW % MEAN %
ROLLING PERIOD RETURN RETURN RETURN
- ----------------------- ------ ------ ----------
Small Cap 15.099 12.052 12.642
Large Cap Stocks (S&P 500) 12.668 9.946 9.900
Corporate Bonds 9.142 6.801 7.086
Government Bonds 8.714 7.338 7.283
United States T-Bills 6.770 6.339 6.010
Source: Ibbotson & Associates.
* Past performance is no guarantee of future results.
The above chart illustrates the volatility in the rate of return for stocks,
represented by Small Cap Stocks, Large Cap Stocks (S&P 500), Corporate Bonds,
Government Bonds, and U.S. T-Bills for progressively longer holding periods.
The volatility is reduced as the holding period is increased from one year to
just five years. For holding periods of 10 years or longer, volatility of
return is reduced even more. These longer holding periods have produced returns
that are quite consistent, and are very attractive when compared with the
returns from U.S. Treasury bills and high-grade, long-term corporate bonds.
The strategy of reducing the year-to-year volatility in the rate of return
for stocks by lengthening the holding period can work to the advantage of a
person who buys a cash value life insurance policy like Variable Adjustable
Life, and utilizes stock sub-accounts. That's because the holding period for
such a policy typically can be extremely long--at least 10 years, and possibly
20, 30 or more years.
103
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The Facing Sheet.
Cross Reference Sheet.
Part I
The prospectus consisting of 103 pages.
Part II
Undertakings - Indemnification; previously filed.
Representation of Insurer Pursuant to (S)26 of the Investment Company
Act of 1940.
Minnesota Life Insurance Company ("Company") hereby represents that
the fees and charges deducted under the policies issued pursuant to
this Registration Statement, in the aggregate, are reasonable in
relation to services rendered, the expenses expected to be incurred,
and the risks assumed by the Company.
The Signatures.
Written consents of the following persons to be filed by subsequent
amendment:
Donald F. Gruber, Esq.
KPMG Peat Marwick LLP
Jaymes G. Hubbell, F.S.A.
Jones & Blouch L.L.P.
The following Exhibits:
A. Exhibits described in Item IX(A) of Form N-8B-2.
(1) The indenture or agreement under the terms of which the trust was
organized or issued securities.
Resolution of the Board of Trustees of The Minnesota Mutual Life
Insurance Company dated October 21, 1985, previously filed as
Exhibit A(1) to Registrant's Form S-6, File Number 33-3233, Post-
Effective Amendment Number 12, is hereby incorporated by reference.
(2) The indenture or agreement pursuant to which the proceeds of payments of
securities are held by the custodian or trustee, if such indenture or
agreement is not the same as the indenture or agreement referred to
immediately above.
None.
(3) Distributing Policies:
(a) Agreements between the trust and principal underwriter or between
the depositor and principal underwriter.
Distribution Agreement, previously filed as Exhibit A(3)(a) to
Registrant's Form S-6, File Number 33-3233, Post-Effective
Amendment Number 12, is hereby incorporated by reference.
(b) Specimen of typical agreements between principal underwriter and
dealers, managers, sales supervisors and salemen.
Agent and General Agent Sales Agreements, previously filed as
Exhibit A(3)(b) to Registrant's Form S-6, File Number 33-3233,
Post-Effective Amendment Number 12, is hereby incorporated by
reference.
(c) Schedules of sales commissions referred to in Item 38(c).
Combined with the Exhibit listed under A. (3)(b) above.
(4) Any agreement between the depositor, principal underwriter and the
custodian or trustee other than indentures or agreements set forth above
as paragraphs (1), (2) and (3) with respect to the trust or its
securities.
None.
(5) The form of each type of security.
(a) Variable Adjustable Life Insurance Policy; form 86-660, previously
filed as Exhibit A(5)(a) to Registrant's Form S-6, File Number 33-
3233, Post-Effective Amendment Number 12, is hereby incorporated by
reference.
(b) Variable Adjustable Life Insurance Policy; form 87-670, previously
filed as Exhibit A(5)(b) to Registrant's Form S-6, File Number 33-
3233, Post-Effective Amendment Number 12, is hereby incorporated by
reference.
<PAGE>
(c) Variable Adjustable Life Insurance Policy; form 90-670, previously filed as
Exhibit A(5)(c) to Registrant's Form S-6, File Number 33-3233, Post-
Effective Amendment Number 12, is hereby incorporated by reference.
(d) Variable Adjustable Life Insurance Policy; form MHC-98-670.
(e) Guaranteed Principal Account Agreement, form 90-930, previously filed as
Exhibit A(5)(e) to Registrant's Form S-6, File Number 33-3233, Post-
Effective Amendment Number 12, is hereby incorporated by reference.
(f) Family Term Agreement-Children, form MHC-86-904.
(g) Exchange of Insureds Agreement, form MHC-86-914.
(h) Face Amount Increase Agreement, form MHC-86-915.
(i) Cost of Living Increase Agreement, form MHC-86-916.
(j) Waiver of Premium Agreement, form MHC-86-917.
(k) Survivorship Life Agreement, form MHC-90-929.
(l) Accelerated Benefit Agreement, form MHC-92-931.
(m) Short Term Agreement, form MHC-E324.1 10-1998.
(n) Policy Enhancement Agreement, form MHC-95-941.
<PAGE>
(o) Protection Option Amendment, form MHC-98-945.
(p) Variable Early Value Agreement, form MHC-98-940.
(6) The certificate of incorporation or other instrument of organization and
bylaws of the depositor.
(a) Restated Certificate of Incorporation of the Depositor.
(b) Bylaws of the Depositor.
(7) Any insurance policy under a contract between the trust and the
insurance company or between the depositor and the insurance company,
together with the table of insurance premiums.
None.
(8) Any agreement between the trust or the depositor concerning the trust
with the issuer, depositor, principal underwriter or investment adviser
of any underlying investment company or any affiliated person of such
persons.
None.
(9) All other material contracts not entered into in the ordinary course of
business of the trust or of the depositor concerning the trust.
None.
(10) Form of application for a periodic payment plan certificate.
(a) New Issue Application - Part 1, form MHC-3198 Rev. 10-1998.
(b) Application - Part 3 - Authorization New Issue; form MHC-42663 Rev.
10-1998.
(c) Policy Change Application - Part 1, form MHC-44096 Rev. 10-1998.
(d) Policy Change Application - Part 3, form MHC-44098 Rev. 10-1998.
(e) Variable Suitability Application - New Issue, form MHC-48653
10-1998.
(f) Variable Suitability Application - Policy Change, form MHC-48654
Rev. 10-1998.
B. A Specimen or Copy of Each Security Being Registered.
See Exhibits Listed under A. (5).
C. An opinion of counsel as to the legality of the securities being
registered.
<PAGE>
Opinion and Consent of Donald F. Gruber, Esq.,
to be supplied by subsequent amendment.
D. Consent of KPMG Peat Marwick LLP, to be supplied by subsequent amendment.
E. Opinion and Consent of Mr. Jaymes G. Hubbell, F.S.A., to be supplied by
subsequent amendment.
F. Consent of Jones & Blouch L.L.P., to be supplied by subsequent amendment.
G. Adjustment Computation Required by Rule 6e-2(b)(13)(v)(B).
Combined with the Exhibit listed under H below.
H. Memorandum on Administrative Procedures with Respect to Issuance, Transfer
and Redemption, Required by Rule 6e-2(b)(12)(ii).
Combined with the Exhibit listed under G above.
I. Notice of Withdrawal Right and Statement of Charges Required by Rule
6e-2(b)(13)(viii)(c).
(1) Notice of Withdrawal Right and Request for Cancellation of Policy.
(2) Notice of Withdrawal Right and Request for Cancellation of Policy
Adjustment.
J. Financial Data Schedule, to be filed by subsequent amendment.
(1) Growth Sub-Account.
(2) Bond Sub-Account.
(3) Money Market Sub-Account.
(4) Asset Allocation Sub-Account.
(5) Mortgage Securities Sub-Account.
(6) Index 500 Sub-Account.
(7) Capital Appreciation Sub-Account.
(8) International Stock Sub-Account.
(9) Small Company Sub-Account.
(10) Value Stock Sub-Account.
K. Minnesota Life Insurance Company - Power of Attorney to Sign Registration
Statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Minnesota Life Variable Life Account, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the Undersigned, thereunto
duly authorized, in the City of Saint Paul, and State of Minnesota, on the 3rd
day of March, 1999.
MINNESOTA LIFE VARIABLE LIFE ACCOUNT
(Registrant)
By: MINNESOTA LIFE INSURANCE COMPANY
(Depositor)
By /s/ Robert L. Senkler
---------------------------------
Robert L. Senkler
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the Depositor,
Minnesota Life Insurance Company, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the Undersigned, thereunto
duly authorized, in the City of Saint Paul, and State of Minnesota, on the 3rd
day of March, 1999.
MINNESOTA LIFE INSURANCE COMPANY
By /s/ Robert L. Senkler
--------------------------------
Robert L. Senkler
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
their capacities with the Depositor and on the date indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board, March 3, 1999
- --------------------------- President and Chief
Robert L. Senkler Executive Officer
* Director
- ---------------------------
Giulio Agostini
<PAGE>
Signature Title Date
--------- ----- ----
* Director
- ---------------------------
Anthony L. Andersen
* Director
- ---------------------------
John F. Grundhofer
* Director
- ---------------------------
David S. Kidwell, Ph.D.
* Director
- ---------------------------
Reatha C. King, Ph.D.
Director
- ---------------------------
William B. Lawson, Sr.
* Director
- ---------------------------
Thomas E. Rohricht
* Director
- ---------------------------
Michael E. Shannon
* Director
- ---------------------------
Frederick T. Weyerhaeuser
/s/ Gregory S. Strong Vice President March 3, 1999
- --------------------------- (chief financial officer)
Gregory S. Strong
/s/ Gregory S. Strong Vice President March 3, 1999
- --------------------------- (chief accounting officer)
Gregory S. Strong
/s/ Dennis E. Prohofsky Attorney-in-Fact March 3, 1999
- ---------------------------
*By Dennis E. Prohofsky
* Pursuant to power of attorney dated October 19, 1998, a copy of which is filed
herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
A.(5)(d) Variable Adjustable Life Insurance Policy; form MHC-98-670.
A.(5)(f) Family Term Agreement-Children, form MHC-86-904.
A.(5)(g) Exchange of Insureds Agreement, form MHC-86-914.
A.(5)(h) Face Amount Increase Agreement, form MHC-86-915.
A.(5)(i) Cost of Living Increase Agreement, form MHC-86-916.
A.(5)(j) Waiver of Premium Agreement, form MHC-86-917.
A.(5)(k) Survivorship Life Agreement, form MHC-90-929.
A.(5)(l) Accelerated Benefit Agreement, form MHC-92-931.
A.(5)(m) Short Term Agreement, form MHC-E324.1 10-1998.
A.(5)(n) Policy Enhancement Agreement, form MHC-95-941.
A.(5)(o) Protection Option Amendment, form MHC-98-945.
A.(5)(p) Variable Early Value Agreement, form MHC-98-940.
A.(6)(a) Restated Certificate of Incorporation of the Depositor.
A.(6)(b) Bylaws of the Depositor.
A.(10)(a) New Issue Application - Part 1, form MHC-3198 Rev. 10-1998.
A.(10)(b) Application - Part 3 - Authorization New Issue; form
MHC-42663 Rev. 10-1998.
A.(10)(c) Policy Change Application - Part 1, form MHC-44096 Rev.
10-1998.
A.(10)(d) Policy Change Application - Part 3, form MHC-44098 Rev.
10-1998.
A.(10)(e) Variable Suitability Application - New Issue, form MHC-48653
10-1998.
A.(10)(f) Variable Suitability Application - Policy Change, form
MHC-48654 Rev. 10-1998.
H. Memorandum on Administrative Procedures with Respect to
Issuance, Transfer and Redemption, Required by Rule
6e-2(b)(12)(ii).
I.(1) Notice of Withdrawal Right and Request for Cancellation of
Policy.
I.(2) Notice of Withdrawal Right and Request for Cancellation of
Policy Adjustment.
K. Minnesota Life Insurance Company - Power of Attorney to Sign
Registration Statements.
<PAGE>
Exhibit 99.A5d
VARIABLE ADJUSTABLE LIFE POLICY
Variable Benefits
Premiums as stated on the Policy Information
Page
Face Amount and Premium may be adjusted by
the owner
NONPARTICIPATING
THE INITIAL DEATH BENEFIT OF THIS POLICY WILL EQUAL THE FACE AMOUNT SHOWN ON
PAGE 1. THE DEATH BENEFIT MAY INCREASE OR DECREASE, AS DESCRIBED ON PAGE 1,
DEPENDING ON THE OPTION ELECTED AND ON SEPARATE ACCOUNT INVESTMENT EXPERIENCE.
HOWEVER, THE DEATH BENEFIT SHALL NEVER BE LESS THAN THE CURRENT FACE AMOUNT
SHOWN ON PAGE 1.
THE ACTUAL CASH VALUE OF THIS POLICY WILL VARY FROM DAY TO DAY. IT MAY INCREASE
OR DECREASE DEPENDING UPON SEPARATE ACCOUNT INVESTMENT EXPERIENCE. THERE IS NO
GUARANTEED MINIMUM CASH VALUE.
Notice of Your Right to Examine this Policy.
It is important to us that you are satisfied with this policy after it is
issued. If you are not satisfied with it, you may return the policy to us or
your agent by the later of; (a) 10 days after you receive it: (b) 45 days after
you signed the application; or (c) 10 days after we mail the notice of your
right of withdrawal. If you return the policy, you will receive a full refund of
any premiums you have paid within 7 days of the date we receive your notice of
cancellation. If you adjust your policy and the adjustment results in an
increased premium, you will again have a right to examine the policy. If you are
not then satisfied, you may return the policy within the times given above and
the requested adjustment will be cancelled. You will receive a refund of any
additional premium paid within 7 days of the date we receive your notice of
cancellation.
READ YOU POLICY CAREFULLY
THIS IS A LEGAL CONTRACT
We promise to pay to the beneficiary, subject to the provisions of this
policy, the death proceeds when we receive proof satisfactory to us of the
insured's death.
This policy, including any adjustment of it, is issued in consideration of
the application for this policy and the payment of the premiums.
The owner and the beneficiary are as named in the initial application
unless they are changed as provided in this policy.
MHC-98-670
<PAGE>
Signed for Minnesota Life Insurance Company at St. Paul, Minnesota, on the
policy date.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky /s/ Mari A. Carlson
President Secretary Registrar
MINNESOTA LIFE
Minnesota Life Insurance Company
400 Robert Street North, Saint Paul, Minnesota 55101-2098
MINNESOTA LIFE
INDEX
<TABLE>
<S> <C>
Additional Information..... 14
Assignment................. 14
Beneficiary................ 12
Death Benefit.............. 5
Definitions................ 2
General Information........ 3
Grace Period............... 6
Incontestability........... 14
Lapse (Premiums)........... 6
Nonrepeating Premium....... 6
Ownership.................. 3
Payment of Proceeds........ 12
Policy Adjustments......... 10
Policy Charges............. 3
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Policy Loans................ 13
Premiums.................... 6
Reinstatement (Premiums).... 7
Separate Account............ 7
Settlement Options.......... 12
Suicide Exclusion........... 14
Surrender................... 9
Values...................... 8
</TABLE>
YOUR POLICY INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PREMIUM CLASS: STANDARD INSURED: ELLIOT A. EXAMPLE
NONSMOKER
TOTAL PREMIUMS: AGE & SEX: 35-MALE
*CURRENT
ANNUAL - $697.89 FACE AMOUNT: $100,000
SEMI-ANNUAL - $355.92
QUARTERLY - $183.20 POLICY NUMBER: 1-000-001V
ORIGINAL POLICY DATE: MAY 15 1995
</TABLE>
DEATH BENEFIT OPTION ON POLICY DATE- CASH
VARIABLE ADJUSTABLE LIFE POLICY
PROCEEDS PAYABLE AT DEATH OR SURRENDER
FACE AMOUNT AND PREMIUM MAY BE ADJUSTED BY THE OWNER
NONPARTICIPATING
MHC-98-670 Minnesota Life 1A
<PAGE>
<TABLE>
<CAPTION>
FACE PREMIUMS ANNUAL
TYPE OF COVERAGE AMOUNT PAYABLE PREMIUM
- -------------------------------------------------------------------
<S> <C> <C> <C>
BASIC POLICY THROUGH
WHOLE LIFE INSURANCE $100,000 MAY 14 2025 $629.89
WITH SCHEDULED CHANGE THROUGH
IN FACE AMOUNT $ 9,676 MAY 14 2060 $629.89
</TABLE>
* THE CURRENT FACE AMOUNT IS GUARANTEED TO AGE 65. IN ADDITION, A WHOLE LIFE
INSURANCE FACE AMOUNT OF $9,676 IS GUARANTEED THEREAFTER FOR LIFE.
CONTINUED ON PAGE 1B
INSURED: ELLIOT A EXAMPLE POLICY NUMBER 1-000-001V
ADDITIONAL AGREEMENTS - CONTINUED FROM PAGE 1A
<TABLE>
<CAPTION>
FACE PREMIUMS ANNUAL
TYPE OF COVERAGE AMOUNT PAYABLE PREMIUM
- -------------------------------------------------------------------
<S> <C> <C> <C>
WAIVER OF PREMIUM THROUGH
AGREEMENT MAY 14 2020 $43.00
POLICY ENHANCEMENT THROUGH $25.00
AGREEMENT PERCENTAGE-5% MAY 14 2016
MAXIMUM AMOUNT OF
EACH INCREASE $35,000
</TABLE>
TOTAL ANNUAL PREMIUM ON POLICY DATE------------------------$697.89
THE ANNUAL ADMINISTRATIVE CHARGE ON THIS POLICY IS $60 PRORATED OVER THE YEAR ON
A MONTHLY BASIS.
THERE WILL BE NO CHARGE FOR SURRENDERING YOUR POLICY.
MHC-98-670 1B
<PAGE>
YOUR POLICY INFORMATION
TABLE OF POLICY VALUES - VARIABLE ADJUSTABLE LIFE- POLICY NUMBER
1-000-001V
THESE VALUES DO NOT INCLUDE DIVIDENDS AND ARE SUBJECT
TO THE POLICY VALUES SECTION IN THIS POLICY.
<TABLE>
<CAPTION>
EXTENDED
POLICY TABULAR TERM
ANNIVERSARY CASH INSURANCE
MAY 15 VALUE* YEARS DAYS
<S> <C> <C> <C>
1996 0 0 0
1997 344 1 323
1998 692 3 173
1999 1,042 4 284
2000 1,394 5 308
2001 1,745 6 252
2002 2,094 7 131
2003 2,439 7 318
2004 2,780 8 87
2005 3,114 8 172
2006 3,439 8 215
2007 3,751 8 220
2008 4,050 8 192
2009 4,331 8 136
2010 4,592 8 56
2011 4,829 7 320
2012 5,035 7 198
2013 5,201 7 61
2014 5,321 6 271
2015 5,384 6 103
AGE 60 4,485 3 172
AGE 62 3,303 2 58
AGE 65 58 0 10
AGE 70 1,685 0 184
</TABLE>
ANNUAL POLICY LOAN INTEREST RATE: 8% PAYABLE IN ARREARS
ANNUAL POLICY REINSTATEMENT INTEREST RATE: 6%
*THE TABULAR CASH VALUE MAY BE MORE OR LESS THAN THE SURRENDER PROCEEDS.
MHC-98-670 Minnesota Life 5
<PAGE>
INSURED AGE FACE AMOUNT
ELLIOT A EXAMPLE 35 $100,000 TO AGE 65
$9,676 THEREAFTER
NOTICE
THIS CONTRACT HAS AN ANNUAL ADMINISTRATIVE CHARGE AND CHARGES WHICH ARE
ASSESSED AGAINST PREMIUMS, BASE PREMIUMS, NONREPEATING PREMIUMS, YOUR ACTUAL
CASH VALUE AND THE SEPARATE ACCOUNT ASSETS. CHARGES ASSESSED AGAINST PREMIUM
INCLUDE, AMONG OTHERS, A BASIC AND FIRST YEAR SALES LOAD CHARGE. THE BASIC SALES
LOAD CHARGE, APPLIED TO BASE PREMIUMS, WILL NOT EXCEED 7 PERCENT. IN ADDITION, A
FIRST YEAR SALES LOAD MAY ALSO BE APPLIED. THE FIRST YEAR SALES LOAD WILL NOT
EXCEED 23 PERCENT.
A COMPLETE DESCRIPTION OF THESE CONTRACT CHARGES AND THEIR APPLICATION CAN
BE FOUND UNDER THE "POLICY CHARGES" SECTIONS OF THE POLICY.
SUMMARY OF POLICY FEATURES
Variability
The net premiums paid for this policy are placed in the separate account; actual
cash values will reflect investment experience. Actual cash values are not
guaranteed and may be more or less than the tabular cash values shown on page 1.
The face amount of this policy is guaranteed as a death benefit for the life of
the insured; investment experience may, depending on the death benefit option
selected, increase the amount of the death benefit. The policy may provide for a
scheduled reduction in face amount at a specified attained age of the insured.
Adjustability (See page 10)
The face amount and annual premium of your policy are shown on page 1. Subject
to the limitations described in this policy, you may at any time adjust:
the face amount, except for increases requiring evidence of insurability
after the insured's age 80.
the base premium to any amount from zero to an amount sufficient to provide
a policy which will become paid-up after the payment of ten annual
premiums.
Actual Cash Value
Your policy has an actual cash value which is available to you during the
insured's lifetime. You may use the actual cash value:
to provide retirement income (see page 12).
MHC-98-670 Minnesota Life 6
<PAGE>
as collateral for a loan or as a policy loan (see page 13).
to continue some insurance protection if you cannot or do not wish to
continue paying premiums (see page 9).
to obtain cash by surrendering your policy, in full or in part (see
page 9).
Death Proceeds
The amount payable to the beneficiary on the death of the insured is the total
of the following amounts:
The death benefit, which is the greater of the face amount of this policy
(see page 1), or the death benefit provided by the variable features of this
policy (see page 5).
PLUS Any additional insurance on the insured's life provided by an
additional benefit agreement (see page 1).
PLUS Under the Cash Option death benefit, any premium paid beyond the end
of the policy month in which the insured died (see page 5).
MINUS Any unpaid policy charges which we assess against actual cash value
(see page 4).
MINUS Any policy loan (see page 13).
Surrender Proceeds The amount payable to the owner on the surrender of the
policy is the surrender value which is:
The actual cash value of the policy.
MINUS Any unpaid policy charges which we assess against actual cash value
(see page 4).
Additional Benefits
The additional benefits, if any, listed on page 1 are described more fully in
the additional benefit agreements.
DEFINITIONS
When we use the following words, this is what we mean:
the insured
The person whose life is insured under this policy as shown on page 1.
MHC-98-670 Minnesota Life 7
<PAGE>
you, your
The owner of this policy as shown in the application, unless changed as
provided in this policy. The owner may be someone other than the insured.
we, our, us
Minnesota Life Insurance Company.
policy date
The effective date of coverage under this policy and the date from which
policy anniversaries, policy years, policy months and premium due dates
are determined.
policy anniversary
The same day and month as your policy date for each succeeding year your
policy remains in force. A monthly policy anniversary is the same day as
your policy date for each succeeding month your policy remains in force.
written request
A request in writing signed by you. We also may require that your policy be
sent in with your written request.
premium
A scheduled payment required for this policy. The premium amounts are shown
on page 1.
nonrepeating premium
A payment made to this policy in addition to its scheduled payments.
base premium
The premium less any amount charged for additional benefits and for
substandard risks.(see page 4).
net premium
The base premium or nonrepeating premium less policy charges assessed
against the premium. The net premium is the amount or amounts which are
allocated to the guaranteed principal account or separate account.
proceeds
The amount we will pay under the terms of this policy when your policy is
surrendered or when the insured dies.
face amount
The minimum amount of insurance provided on the death of the insured,
subject to the conditions of this premium and premium policy. The face
amount paying periods the is shown on page 1. face amount of Under some
schedules of insurance may be scheduled to
MHC-98-670 Minnesota Life 8
<PAGE>
decrease at some specified age of the insured. In those circumstances, that
age and face amount are also shown on page 1.
current face amount
The face amount of this policy at any time when the policy is valued.
separate account
The separate investment account titled "Variable Life Account." We
established this separate account for this class of policies under
Minnesota law. The separate account is composed of several sub-accounts. We
own the assets of the separate account. However, those assets not in excess
of separate account liabilities are not subject to claims arising out of
any other business in which we engage.
guaranteed principal account
The portion of the general account of Minnesota Life which is attributable
to this policy and policies of this class, exclusive of policy loans. The
description is for accounting purposes only. It does not represent a
separate account. It does not represent any division of the general account
for the specific benefit of policies of this class.
fund
The mutual fund or separate investment portfolio within a series mutual
fund which we designate as an eligible investment for the separate account
and its sub-accounts.
general account
All assets of Minnesota Life Insurance Company other than those in the
separate account or in other separate accounts established by us.
loan account
The portion of the general account of Minnesota Life which is attributable
to policy loans under this policy and policies of this class. The loan
account balance is the sum of all outstanding loans under this policy.
valuation date
Any date on which a fund is valued.
valuation period
The period between successive valuation dates measured from the time of one
determination to the next.
unit
A measure of your interest in a sub-account of the separate account.
1940 Act
The Investment Company Act of 1940, as amended, or any similar successor
federal act.
MHC-98-670 Minnesota Life 9
<PAGE>
net single premium
The amount of money that is necessary, at the insured's attained age, to
pay for all future guaranteed cost of insurance charges for the entire
lifetime of the insured, of for the coverage period in the case of extended
term insurance, without the payment of additional premium. This
determination shall assume that the current face amount of the policy will
remain constant and that the policy will perform at its assumed rate of
return.
actual cash value
The sum of the values under this policy in the separate account and the
guaranteed principal account. The interest in each is valued separately.
They are identified as the separate account actual cash value and the
guaranteed principal account actual cash value, respectively. Actual cash
value does not include the loan account.
The separate account actual cash value is composed of your interest in one
or more sub-accounts of the separate account. For each sub-account, the
value is determined by multiplying the current number of sub-account units
credited to this policy by the current sub-account unit value. The total of
these values will be the separate account actual cash value.
tabular cash value
The amount which would be equal to the actual cash value of this policy at
any time if: all scheduled premiums are paid when due assuming that
premiums are paid annually; there is no policy adjustment; there are no
policy loans; any percentage increase in the actual cash value matches the
policy's assumed rate of return; the net investment experience for each
sub-account and/or the interest credited to the guaranteed principal
account matches the policy's assumed rate of return; we deduct maximum cost
of insurance charges, on the assumption that they are taken once at the end
of the policy year and we deduct all other charges as set forth in this
policy.
policy value
The actual cash value of this policy, plus any policy loan.
lapse
The insured's life is no longer insured except as may be provided in the
Values section of this policy.
terminate
The insured's life is no longer insured under any of the terms of the
policy.
interest credits
The amount of credit we add to the actual cash value of your policy as the
result of a policy loan.
MHC-98-670 Minnesota Life 10
<PAGE>
age
The insured's age at nearest birthday.
policy assumptions
The assumed rate of return is 4 percent and the assumed mortality rates are
equal to those in the 1980 CSO Tables.
1980 CSO Tables
The 1980 Commissioners Standard Ordinary Mortality Tables, sex-distinct, smoker
distinct, and age nearest birthday.
GENERAL INFORMATION
What is your agreement with us?
Your policy, or any adjustment of it, contains the entire contract between you
and us. This includes the initial application and all subsequent applications
to adjust your policy. Any statements made either by you or by the insured, in
the initial application or in any application for adjustment will, in the
absence of fraud, be considered representations and not warranties. Also, any
statement made either by you or by the insured will not be used to void your
policy nor defend against a claim under your policy unless the statement is
contained in the initial application or in any application for adjustment of
this policy.
No change or waiver of any of the provisions of this policy will be valid unless
made in writing by us and signed by our president, a vice president, our
secretary or an assistant secretary. No agent or other person has the authority
to change or waive any provisions of your policy.
Any additional benefit agreement attached to this policy will become a part of
this policy and will be subject to all the terms and conditions of this policy
unless we state otherwise in the agreement.
How do you exercise your rights under the policy?
You can exercise all the rights under this policy during the insured's lifetime
by making a written request to us. This includes the right to change the
ownership. If your policy is assigned, we will also require the written consent
of the assignee. If you have designated an irrevocable beneficiary, the written
consent of that beneficiary will also be required.
POLICY CHARGES
What types of charges are there under this policy?
Charges under this policy are those which we assess against your premiums, base
premiums, nonrepeating premiums, your actual cash value and the separate account
assets.
MHC-98-670 Minnesota Life 11
<PAGE>
What charges are assessed against premiums?
Against premiums we assess charges for additional benefits and for substandard
risks. The charges for additional benefits compensate us for additional
benefits which you may choose to make a part of this policy. The charge for
substandard risks is for providing the death benefit for policies whose
mortality risks exceed the standard.
What charges are assessed against base premiums?
Against base premiums we assess: (1) the basic and first year sales load; (2)
the underwriting charge; (3) the premium tax charge; and (4) the face amount
guarantee charge.
(1) The sales load is for distribution expenses for this class of policies.
The basic sales load charge described herein applies to base premiums.
The basic sales load will not exceed 7 percent.
In addition to the basic sales load, a first year sales load may also be
applied. The first year sales load applies to base premiums scheduled to
be paid in the twelve month period following the policy date and the date
of any policy adjustment. The first year sales load will not exceed 23
percent.
If any adjustment involving an increase in base premium occurs, a first
year sales load will be assessed on that increase in premium.
If any adjustment occurs during a period when a first year sales load is
being collected, an additional sales load will be collected over the next
twelve months. In that case, that additional first year sales load shall
be calculated using a percentage, not to exceed 23 percent, which shall
be equal to the first year sales load in effect prior to that adjustment.
This percentage shall be applied to the premium amount, determined on the
basis of the lesser of the base premium in effect prior to or following
the adjustment, to be received during the time from the current
adjustment to the end of the period over which the prior first year sales
load was being collected. This additional first year sales load will be
collected during the twelve month period following the adjustment
together with the sales load applicable to the adjustment.
All of the sales load charges are designed to average not more than 9 percent of
the base premiums over the lesser of:
(a) the life expectancy of the insured at policy issue or adjustment; or
(b) 15 years from policy issue or adjustment.
(c) the premium paying period shown on page 1.
(2) The underwriting charge is for our underwriting costs, which include
medical exams, classifying risks and determining insurable interests. The
charge shall not exceed $5 per $1,000 of face amount of insurance at issue.
We can increase this charge in the future. This charge will be deducted
ratably from your payments of the first year base premium.
MHC-98-670 Minnesota Life 12
<PAGE>
Our then current underwriting charge will also apply to increases in face
amount which require new evidence of insurability. In the event of a
policy adjustment which results in a face amount increase and no premium,
you must then remit the then current underwriting charge to us prior to
the effective date of the adjustment or we will assess the charge against
your actual cash value as a transaction charge on adjustment.
(3) The premium tax charge is for the average premium tax we pay to state and
local governments for this class of policies. The charge is currently 2.5
percent of each base premium. We can increase this charge in the future.
(4) The face amount guarantee charge is for providing the minimum death
benefit under the policy. The charge is 1.5 percent of each base premium.
It is guaranteed not to increase.
What charges are assessed against nonrepeating premiums?
Against nonrepeating premiums we assess: (1) a basic sales load; and (2) the
premium tax charge.
(1) The basic sales load is for distribution expenses for this class of
policies. The basic sales load will not exceed 7 percent of each
nonrepeating premium.
(2) The premium tax charge is for the average premium tax we pay to state and
local governments for this class of policies. The charge is currently 2.5
percent of each nonrepeating premium. We can increase this charge in the
future.
What charges are assessed against your actual cash value?
Against your actual cash value, we assess: (1) the administration charge; (2)
transaction charges; and (3) the cost of insurance charge.
(1) The administration charge is for our administrative expenses, including
those attributable to the records we create and maintain for your policy.
The administration charge is $60 per contract year.
(2) The transaction charges are for expenses associated with processing
transactions. We make a charge of $25 for each policy adjustment. We may
also make a charge, not to exceed $25, for each transfer of actual cash
value among the guaranteed principal account and the sub-accounts of the
separate account.
(3) The cost of insurance charge is for providing the death benefit under this
policy. The charge is calculated by multiplying the net amount at risk
under your policy by a rate which varies with the insured's age, sex and
risk class. The rate is guaranteed not to exceed rates determined on the
basis of the 1980 CSO Tables. The net amount at risk is the death benefit
under your policy less your policy value.
MHC-98-670 Minnesota Life 13
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When are charges assessed against your actual cash value?
Administration and cost of insurance charges are assessed against your actual
cash value. This is done monthly on the monthly policy anniversary. In addition,
such charges are assessed on the occurrence of the death of the insured, policy
surrender, lapse or a policy adjustment.
Transaction charges are assessed at the time of a policy adjustment or when a
transfer is made. In the case of a transfer, the charge is assessed against the
amount transferred.
Charges will be assessed against your actual cash value. They will be assessed
against your guaranteed principal account actual cash value and separate account
actual cash value in the same proportion that those values bear to each other
and, as to the actual cash value in the separate account, from each sub-account
in the proportion that the actual cash value in such sub-account bears to your
actual cash value in all of the sub-accounts.
What charges are assessed against separate account assets?
We assess a mortality and expense risk charge against separate account assets.
We also reserve the right to charge or make provisions for income taxes payable
by us based on separate account assets.
What is the mortality and expense risk charge?
This charge is for assuming the risks that the cost of insurance charge will be
insufficient to cover actual mortality experience and that the other charges
will not cover our expenses in connection with the policy. The mortality and
expense risk charge is deducted from separate account assets on each valuation
date at an annual rate of .50 percent of separate account assets.
DEATH BENEFIT
What proceeds are payable at the insured's death?
The amount payable at the insured's death shall be the death benefit provided by
this policy:
plus any additional insurance on the insured's life provided by an additional
benefit agreement;
plus under the Cash Option, any premium paid beyond the end of the policy
month in which the insured died;
minus any unpaid policy charges; and
minus any policy loan.
What are the death benefit options?
The death benefit options are:
(1) the Cash Option; or
(2) the Protection Option.
MHC-98-670 Minnesota Life 14
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The Protection Option is only available until the policy anniversary nearest the
insured's age 70. At the policy anniversary nearest the insured's age 70, the
death benefit option will be changed to the Cash Option.
What is the Cash Option?
Under the Cash Option, the death benefit will be the then current face amount.
This death benefit will not vary with the investment results of the sub-accounts
of the separate account you have elected unless the policy value exceeds the net
single premium for the then current face amount.
If the policy value exceeds the net single premium for the then current face
amount, the death benefit will be that amount of insurance which could be
purchased for the insured using the policy value as the net single premium,
based upon the policy assumptions and the insured's then attained age.
What is the Protection Option?
Under the Protection Option, the death benefit will vary with the investment
results of the sub-accounts of the separate account you have elected. The death
benefit will be the policy value, plus the larger of:
(1) the then current face amount; or
(2) the amount of insurance which could be purchased using the policy value as
a net single premium.
When is the death benefit determined?
The death benefit is determined on each monthly policy anniversary and as of the
date of the insured's death. The death benefit amount as of any other date is
available from us on written request.
How is the death benefit option elected?
You elect a death benefit option on your policy application.
If you fail to make an election, the Cash Option will be in effect.
May the death benefit option be changed?
Yes. You may apply to have the death benefit option changed while this policy is
in force by filing a written request with us at our home office. We may require
evidence satisfactory to us of the insured's insurability before we allow the
change. The change will take effect when we approve and record it in our home
office.
What happens when the policy is paid-up?
When the policy is paid-up, we need no additional scheduled premiums in order to
provide a death benefit equal to the then current face amount for the life of
the insured.
MHC-98-670 Minnesota Life 15
<PAGE>
After the policy is paid-up, we may continue to accept scheduled premiums and
nonrepeating premiums. The payment of any premium after the policy is paid-up
may increase the face amount. We may require you to provide us with evidence
satisfactory to us of the insured's insurability before accepting any premium
after the policy is paid-up. the policy value of your policy will never exceed
the net single premium for the death benefit payable on the insured's death.
How will you know when the policy becomes paid-up?
Each policy anniversary we will determine if your policy has become paid-up.
When your policy becomes paid-up, we will send you a new page 1
Will a paid-up policy have a new face amount?
Yes. A new face amount will be determined when it becomes paid-up. The new face
amount will not be less than the face amount of the policy when it became paid-
up.
Will policy charges continue to apply to a paid-up policy?
Yes.
PREMIUMS
When and where do you pay your premiums?
Your first premium is due as of the policy date and must be paid when your
policy is delivered. All premiums after the first premium are payable on or
before the date they are due and must be mailed to us at our home office or such
other place as we may direct.
If you would like a receipt for a premium payment, we will give you one upon
request.
How often do you pay premiums?
You may pay your premiums once a year, twice a year, or four times a year. These
premiums are shown on page 1 as the annual, semi-annual and quarterly premiums.
If you decide to pay premiums once a year, your annual premium will be due on
the policy anniversary.
If you decide to pay premiums more than once a year, your semi-annual premiums
will be due every six months and your quarterly premiums will be due every three
months. In each year, one of the premium due date must fall on the policy
anniversary.
Are there other methods of paying premiums?
Yes. It may be possible for you to make arrangements with your employer to pay
your premiums by payroll deduction. Also, with the consent of your financial
institution, you may request that your premiums be automatically withdrawn from
your account at that institution and paid directly to us. If for any reason your
employer or financial institution fails to pay a premium when it is
MHC-98-670 Minnesota Life 16
<PAGE>
due or if this premium payment arrangement is ended, you must pay an annual,
semi-annual or quarterly premium directly to us at our home office before the
end of the grace period to keep your policy in force on a premium-paying basis.
Can you stop paying base premiums?
Yes. You may adjust the policy to stop paying base premiums. A stop premium
adjustment is one where, after the adjustment, no further base premium is
required. You may request a stop premium adjustment at any time your policy has
sufficient actual cash value at the date of the request to keep the policy in
force until your next policy anniversary. The policy will be adjusted on the
basis of no additional scheduled premium and, unless instructed otherwise, the
face amount in effect at the time of the adjustment. On a stop premium policy,
any scheduled decrease in face amount shall be to zero and the policy will lapse
at that time.
Can you pay a nonrepeating premium?
Yes. In addition to premiums shown on page 1, you may request to pay a
nonrepeating premium. However, we may at any time refuse to accept a
nonrepeating premium. If the death benefit of your policy increases as a result
of the payment of a nonrepeating premium, we may require you to provide us with
evidence satisfactory to us of the insured's insurability.
Can you pay a premium after the date it is due?
Your policy has a 31-day grace period. This means that if a premium is not paid
on or before the date it is due, you may pay that premium during the 31-day
period immediately following the due date. Your premium payment, however, must
be received in our home office within the 31-day grace period. The insured's
life will continue to be insured during this 31-day period.
This 31-day grace period does not apply to the first premium payment. The first
premium must be paid on or before the date your policy is delivered.
What happens if a premium is not paid before the end of the grace period?
If a premium is not paid before the end of the 31-day grace period, your policy
will lapse and no further premium payments may be made. However, even if your
policy lapses, the values, if any, provided for in the Values section of this
policy on page 8 will be available to you.
Can you reinstate your policy after it has lapsed?
At any time within three years from the date of lapse, you may ask us to restore
your policy to a premium paying status, unless the policy has terminated because
the surrender value has been paid or the period of extended insurance has
expired. We will require:
(1) your written request to reinstate this policy;
(2) that you submit to us at our home office during the insured's lifetime
evidence satisfactory to us of the insured's insurability so that we may have
time to act on the evidence during the insured's lifetime; and
(3) at our option a premium payment which is equal to all overdue premiums
with interest at a rate not to exceed 6 percent per annum compounded annually
and any indebtedness in effect
MHC-98-670 Minnesota Life 17
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at the end of the grace period following the date of default with interest at
a rate not exceeding 6 percent per annum compounded annually.
Is there a premium refund at the insured's death?
Yes. If the Cash Option death benefit is in effect at the insured's death, we
will pay to the beneficiary any part of a paid premium that covers the period
from the end of the policy month in which the insured died to the date to which
premiums are paid. However, if your policy contains a Waiver of Premium
Agreement and the last premium was waived by us under that agreement, we will
not refund that premium. Also, we will not refund a nonrepeating premium.
SEPARATE ACCOUNT
How was the separate account established?
We established the separate account under Minnesota law. It is registered as a
unit investment trust under the 1940 Act.
What is the purpose of the separate account?
Net premiums allocated to the separate account support the operation of this
policy (except extended term coverage, policy loans and settlement options) and
others of its class. Assets may also be allocated for other purposes, but not
for the operation or support of policies other than variable adjustable life.
Are sub-accounts available under the separate account?
Yes. The separate account is divided into sub-accounts. Net premiums will be
allocated to one or more of the sub-accounts you have chosen for such
allocation. We reserve the right to add, combine or remove any sub-account of
the separate account.
What are the investments of the separate account?
For each sub-account, there is a fund for the investment of that sub-account's
assets. The assets of the sub-accounts are invested in the funds at net asset
value. If investment in a fund should no longer be possible or if we determine
it becomes inappropriate for policies of this class, we may substitute another
fund. Substitution may be with respect to both existing policy values and
future premiums. The investment policy of the separate account may not be
changed, however, without the approval of the regulatory authorities of the
state of Minnesota. If required, that approval process will be on file with the
regulatory authorities of the state in which this policy is delivered.
What changes may we make to the separate account?
We reserve the right, when permitted by law, to transfer assets of the separate
account which we determine to be associated with the class of policies to which
this policy belongs, to another separate account. If such a transfer is made,
the term "separate account", as used in this policy, shall then mean the
separate account to which the assets are transferred. A transfer of this kind
may require the advance approval of state regulatory authorities.
MHC-98-670 Minnesota Life 18
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We reserve the right, when permitted by law, to:
(1) de-register the separate account under the 1940 Act;
(2) restrict or eliminate any voting right of policy owners or other persons
who have voting rights as to the separate account; and
(3) combine the separate account with one or more other separate accounts.
How are net premiums allocated?
They are allocated either to the guaranteed principal account or to the separate
account and its sub-accounts. Initially, you indicate your allocation in the
application. You may change your allocation for future premiums. You may do
this by giving us a written request. A change will not take effect until it is
recorded by us in our home office.
Allocations must be expressed in whole percentages. The allocation to any
alternative must be at least 10 percent of the net premium. We reserve the
right to restrict the allocation of premium. If we do so, no more than 50
percent of the net premium may be allocated to the guaranteed principal account.
We reserve the right to delay the allocation of net premiums to named sub-
accounts. Such a delay will be for a period of 30 days after issuance of a
policy or a policy adjustment. If we exercise this right, net premiums will be
allocated to the money market sub-account until the end of that period.
What is a transfer?
A transfer is a reallocation of the actual cash value between the guaranteed
principal account and the separate account or among the sub-accounts of the
separate account.
May you make transfers of amounts under the policy?
Yes. Transfers may be made by your written request. For transfers out of the
separate account or among the sub-accounts of the separate account we will make
the transfer on the basis of sub-account unit values as of the end of the
valuation period during which your written request is received at our home
office. For transfers out of the guaranteed principal account, the transfer
will be made on the basis of your guaranteed principal account actual cash value
at the time of transfer.
Are there limitations on transfers?
Yes. The amount of actual cash value to be transferred to or from a sub-account
of the separate account or the guaranteed principal account must be at least
$250. If the balance is less than $250, the entire actual cash value
attributable to that sub-account or the guaranteed principal account must be
transferred. If a transfer would reduce the actual cash value in the sub-
account from which the transfer is to be made to less than $250 we reserve the
right to include that remaining sub-account actual cash value in the amount
transferred.
MHC-98-670 Minnesota Life 19
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The maximum amount of actual cash value to be transferred out of the guaranteed
principal account to the sub-accounts of the separate account may be limited to
20 percent of the guaranteed principal account balance. Transfers to or from
the guaranteed principal account may be limited to one such transfer per policy
year.
Transfers from the guaranteed principal account must be made by a written
request. It must be received by us or postmarked in the 30-day period before or
after the last day of the policy year. Written requests for transfers which
meet these conditions will be effective after we approve and record them at our
home office.
How are units determined?
The number of units credited with respect to each net premium payment is
determined by dividing the portion of the net premium payment allocated to each
sub-account by the then current unit value for that sub-account. This
determination is made as of the end of the valuation period during which your
premium is received at our home office. Once determined, the number of
accumulation units will not be affected by changes in the unit value.
How are units increased or decreased?
The number of units of each sub-account credited to your policy will be
increased by the allocation of subsequent net premiums, loan repayments,
interest credits and transfers to that sub-account. The number of units of each
sub-account credited to your policy will be decreased by policy charges to the
sub-account, policy loans and unpaid loan interest, transfers from that sub-
account and partial surrenders from that sub-account. The number of sub-account
units will decrease to zero on a policy surrender, lapse or termination.
How is a unit valued?
The unit value will increase or decrease on each valuation date. The assets of
the separate account shall be valued at least as often as any policy benefits
vary but not less often than once a month. The amount of any increase or
decrease will depend on the net investment experience of the sub-accounts of the
separate account. The value of a unit for each sub-account was originally set
at $1.00 on the first valuation date. For any subsequent valuation date, its
value is equal to its value on the preceding valuation date multiplied by the
net investment factor for that sub-account for the valuation period ending on
the subsequent valuation date.
What is the net investment factor for each sub-account?
The net investment factor is a measure of the net investment experience of a
sub-account.
The net investment factor for a valuation period is: the gross investment rate
for such valuation period, less a deduction for the charges under this policy
which are assessed against separate account assets.
The gross investment rate is equal to:
MHC-98-670 Minnesota Life 20
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(1) the net asset value per share of a fund share held in the sub-account of the
separate account determined at the end of the current valuation period; plus
(2) the per-share amount of any dividend or capital gain distributions by the
fund if the "ex-dividend" date occurs during the current valuation period;
divided by
(3) the net asset value per share of that fund share held in the sub-account
determined at the end of the preceding valuation period.
VALUES
Does this policy have cash values?
Yes. This policy has two types of cash values. They are the actual cash value
and the tabular cash value.
How is your actual cash value determined?
It is determined separately for your guaranteed principal account actual cash
value and for your separate account actual cash value. The separate account
actual cash value will include all sub-accounts of the separate account.
The guaranteed principal account actual cash value is the sum of all net premium
payments allocated to the guaranteed principal account. This amount will be
increased by any interest, loan repayments, policy loan interest credits and
transfers into the guaranteed principal account. This amount will be reduced by
any policy loans, unpaid policy loan interest, partial surrenders, transfers
into the sub-accounts of the separate account and charges assessed against your
guaranteed principal account actual cash value.
The separate account actual cash value is the sum of units of each sub-account
multiplied by the accumulation unit value for that sub-account. The number of
units will be increased by any loan repayments, policy loan interest credits and
transfers into a sub-account of the separate account. The number of units will
be reduced by any policy loans, unpaid policy loan interest, partial surrenders,
transfers into the guaranteed principal account, and charges assessed against
your separate account actual cash value.
Is the actual cash value guaranteed?
No. Your separate account actual cash value is not guaranteed.
Your guaranteed principal account actual cash value is guaranteed by us. It
cannot be reduced by any investment experience of the general account.
What is the tabular cash value of your policy?
A table of tabular cash values is shown on page 1. At your request, we will tell
you what the tabular cash values are for any date not shown.
MHC-98-670 Minnesota Life 21
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How is the tabular cash value determined?
The methods and factors used to calculate your tabular cash values, reserves and
net single premiums are based upon the policy assumptions which your state
requires us to use.
We have filed the method used to calculate these values with the insurance
department in the state in which your policy is delivered. The method we use
provides tabular cash values at least as great as those provided by the
Commissioners Reserve Valuation Method. These tabular cash values and reserves
will be greater than, or equal to, the values required by law. The tabular cash
values are calculated on the assumption that there is no indebtedness on your
policy, premiums are paid annually, and that deaths occur at the end of the
year. Also, the calculation of the tabular cash values will be made with an
allowance for the passage of time and the payment of those premiums paid beyond
the last policy anniversary. All tabular values represent the values at the end
of the policy year.
Is interest credited on the guaranteed principal account actual cash value?
Yes. Interest is credited on the guaranteed principal account actual cash value
of this policy. Interest is credited daily at a rate of not less than 4 percent
per year, compounded annually. We guarantee this minimum rate for the life of
the policy without regard to the actual experience of the general account.
May additional interest be credited on the guaranteed principal account? Yes. As
conditions permit, we will credit additional amounts of interest to the
guaranteed principal account actual cash value.
May the policy be surrendered?
Yes. You may request the surrender of the policy at any time while the insured
is living.
What is the surrender value of your policy?
The surrender value is the actual cash value, minus unpaid policy charges which
are assessed against actual cash value.
However, if your policy is being used to provide extended term, your surrender
value at any time will be the reserve on that insurance. The surrender value of
any extended term insurance which is surrendered within 30 days after a policy
anniversary will be at least equal to that anniversary value.
The determination of the surrender value is made as of the end of the valuation
period during which we receive your surrender request at our home office.
How do you surrender your policy?
Send your policy and a written request for surrender to us at our home office.
Instead of payment in a single sum, you may request that your surrender value be
used to provide extended term insurance on the life of the insured.
MHC-98-670 Minnesota Life 22
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Is a partial surrender permitted?
Yes. You may make a partial surrender of your actual cash value. The amount of
a partial surrender must be $500 or more and it cannot exceed the amount
available as a policy loan. This is a policy adjustment as described on page
10. If the policy is not paid up a partial surrender will cause a decrease in
the face amount equal to the amount surrendered.
May you direct us as to how partial surrenders will be taken from actual cash
value?
Yes. You may tell us the sub-accounts from which a partial surrender is to be
taken or whether it is to be taken in whole or in part from the guaranteed
principal account. If you do not, partial surrenders will be deducted from your
guaranteed principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and, as to the
actual cash value in the separate account, from each sub-account in the
proportion that the actual cash value in such sub-account bears to your actual
cash value in all of the sub-accounts.
What happens if the premium due on your policy is not paid?
Your policy will lapse if the premium due is not paid before the end of the
grace period. If your policy has no actual cash value it will terminate. If
your policy has a surrender value it will be used to provide either:
(1) a single sum payment of that value to you, thereby terminating this policy;
or
(2) extended term insurance.
Unless, within 62 days of the date of the first unpaid premium, you request a
single sum payment of your surrender value at the end of the grace period, we
will apply it to purchase extended term insurance on the insured's life. This
insurance will be effective as of the due date of the last unpaid premium and no
further premiums will be due. You may reinstate your policy as described in the
Premiums section on page 6.
May automatic premium loans be used to keep the policy in force?
Yes. Please see the section on policy loans (see page 13).
What is extended term insurance?
It is term insurance that is purchased by applying the surrender value of your
policy as a net single premium to buy term insurance for the maximum period.
This extended term coverage has fixed benefits. Extended term benefits are not
provided by the separate account and they will not vary during the extended term
insurance period. The amount of this insurance will be equal to the face amount
of your policy, less the amount of any policy loan at the date of lapse. At the
end of the extended term period all insurance under this policy will terminate
and this policy will have no further value.
May policy payments be deferred?
Yes. We reserve the right to defer policy payments for up to six months from
the date of your written request, if such payments are based upon policy values
which do not depend on the
MHC-98-670 Minnesota Life 23
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investment performance of the separate account. In that case, if we postpone our
payment for more than 31 days, we will pay you interest at 3 percent per annum
for the period during which payment is postponed. Otherwise, this right of
deferral will be: (a) for any period during which the New York Stock Exchange is
closed for trading (except for normal holiday closing); or (b) when the
Securities and Exchange Commission has determined that a state of emergency
exists which may make such payment impractical.
How will you know the status of your policy?
Each year we will send you a report. This report will show your policy's
status. It will include the actual cash value, the tabular cash value, the face
amount and the variable death benefit as of the date of the report. It will
also show the premiums paid during the year, policy loan activity and the policy
value. The report will be sent without cost to you. The report will be as of a
date within two months of its mailing.
POLICY ADJUSTMENTS
What types of adjustments can be made to this policy?
Except while the policy is on extended term, you may ask us to make any of the
four following policy adjustments:
(1) increase or decrease the current face amount;
(2) increase or decrease the premium;
(3) make a partial surrender;
(4) adjust the policy to zero ("stop premium").
You may request a policy adjustment by completing an application for adjustment.
Adjustments will not apply to any additional benefit agreements attached to your
policy.
Are there any adjustment limitations?
Yes. An adjustment must satisfy certain limits on premiums, face amount and the
attained age of the insured at which an adjusted policy may provide for a
scheduled reduction in face amount. Other limitations on adjustments and on
combinations of adjustments may apply. Our approval on any adjustment is
required. The current limits on adjustments are those described here.
An adjustment may not result in more than a paid-up whole life plan for the then
current face amount. After age 80, increases requiring evidence of insurability
will not be allowed.
Any adjustment for a change of premium must result in a change of the annual
premium of at least $100.
An adjustment with an increase in premium must result in a policy which is
scheduled to become paid-up only after the payment of ten annual premiums or to
age 100, if less. In addition, any policy must have a minimum annual base
premium of at least $300.
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Any adjustment for a change of the face amount must result in a change of the
face amount of at least $5,000, except for face amount changes which are the
result of a Cost of Living Increase Agreement change, or a partial surrender
under the policy, or unless a small change in face amount is required to avoid a
violation of the limitations pertaining to plans of insurance.
After adjustment, other than an adjustment to stop premium, or the automatic
adjustment at the point when the face amount is scheduled to decrease, the
policy must provide a level face amount of insurance to the next policy
anniversary after the greater of:
(a) five years from the date of adjustment; or
(b) a certain number of years from the date of issue, based on the table below.
Issue Age Number of Years
--------- ---------------
55 or less 10
56 9
57 8
58 7
59 6
60 or greater 5
An adjustment to stop premium or the automatic adjustment at the point when the
face amount is scheduled to decrease requires that the policy have an actual
cash value sufficient to keep the policy in force until the next policy
anniversary.
What effect will an adjustment have on the policy's tabular cash values?
After adjustment, the tabular cash value shall be equal to:
(1) the greater of the policy value or the tabular cash value prior to that
adjustment
(2) plus any nonrepeating premium credited to the separate account at the time
of the adjustment and
(3) less the amount of any partial surrender made at the time of the
adjustment.
May evidence of insurability be required?
Yes. We will require evidence satisfactory to us of the insured's continued
insurability. We will need this evidence for adjustments which increase the
current face amount or for adjustments which retain the face amount while also
making a partial surrender. All other adjustments may be made without evidence
of insurability.
What if the insured is disabled?
If this policy contains a Waiver of Premium Agreement and if you are receiving,
or are entitled to receive, the waiver of premium benefit, no adjustments under
this provision will be allowed, except as provided in the Waiver of Premium
Agreement.
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When will an adjustment be effective?
Any adjustment you request will not become effective until after we approve and
record it at our home office.
When we approve your written request for an adjustment, we will send you a new
page 1. A copy of your adjustment application will be attached to that new page
1. We may require that you return your policy to our home office for attachment
of the new page 1 or we may simply mail it to you at your last known address and
ask you to attach it to your policy. In either event, the new page 1 and its
application will become part of this policy.
What will be the effect of the policy adjustments?
The effects of policy adjustments are shown below.
<TABLE>
<CAPTION>
IF YOU MAKE THIS KIND UNDER THIS CONDITION IT WILL DO THIS:
OF ADJUSTMENT,
<S> <C> <C>
Decrease the current face while the premium remains any scheduled decrease in the
amount... the same... current face amount will take
Retain the current face while the premium increases... place at an increased age of
amount... the insured; a scheduled de-
crease in the face amount will
be eliminated; or the
premium paying period will
be shortened.
Increase the current face with no increase in premium... any scheduled decrease in the
amount... current face amount will take
Retain the current face while the premium place at a decreased age of
amount... decreases... the insured; a scheduled de-
If you make a partial while the premium and face crease in the face amount will
surrender... amount remain the same... occur; or the premium paying
period will be lengthened.
Stop premium... while the face amount remains any scheduled decrease in the
the same... current face amount will take
place at a decreased age of
the insured or, scheduled
decrease in the face amount
will occur; and no insurance
will be provided after the
decrease.
</TABLE>
You may request a description of the effect of other types or combinations of
adjustments from us.
MHC-98-670 Minnesota Life 26
<PAGE>
PAYMENT OF PROCEEDS
When will the policy proceeds by payable?
The proceeds of this policy will be payable if the policy is surrendered while
it is in force or if we receive proof satisfactory to us of the insured's death.
These events must occur while the policy is in force. The proceeds will be paid
at our home office and in a single sum unless a settlement option has been
selected. We will deduct any indebtedness from the proceeds. Proof of any
claim under this policy must be submitted in writing to our home office.
We will pay interest on single sum death proceeds from the date of the insured's
death until the date of payment. Interest will be at an annual rate determined
by us, but never less than 3 percent.
Can proceeds be paid in other than a single sum?
Yes. You may, during the insured's lifetime, request that we pay the proceeds
under one of the following settlement options. We may also use any other method
of payment that is agreeable to you and us. A settlement option may be selected
only if the payments are to be made to a natural person in that person's own
right.
The following settlement options are all payable in fixed amounts as are
described below. These payments do not vary with the investment performance of
the separate account.
MHC-98-670 Minnesota Life 27
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Option 1 - Interest Payments
Payment of interest on the proceeds at such times and for a period that is
agreeable to you and us. Withdrawal of proceeds may be made in amounts of at
least $500. At the end of the period, any remaining proceeds will be paid in
either a single sum or under any other method we approve.
Option 2 - Payments for a Specified Period
Monthly payments for a specified number of years. The amount of each monthly
payment for each $1,000 of proceeds applied under this option is shown in the
following table. The monthly payments for any period not shown will be
furnished upon request.
Number of Years Monthly Payments
5 $17.91
10 9.61
15 6.87
20 5.51
25 4.71
Option 3 - Life Income
Monthly payments for the life of the person who is to receive the income. We
will require satisfactory proof of the person's age and sex. Payments can be
guaranteed for 5, 10, or 20 years. The amount of each monthly payment for each
$1,000 of proceeds applied under this option is shown in the following table.
The monthly payments for any ages not shown will be furnished upon request.
Life Income with Payments
Age Life Guaranteed for
Male Female Income 5 years 10 years 20 years
---------------------------------------------------------
50 55 $4.37 $4.36 $4.33 $4.18
55 60 4.87 4.85 4.79 4.51
60 65 5.56 5.52 5.39 4.85
65 70 6.51 6.41 6.13 5.16
70 75 7.86 7.64 7.03 5.38
Option 4 - Payments of a Specified Amount
Monthly payments of a specified amount until the proceeds and interest are
fully paid.
If you request a settlement option, we will prepare an agreement for you to
sign, which will state the terms and conditions under which the payments will be
made.
MHC-98-670 Minnesota Life 28
<PAGE>
Can a beneficiary request payment under a settlement option?
Yes. A beneficiary may select a settlement option only after the insured's
death. However, you may provide that the beneficiary will not be permitted to
change the settlement option you have selected.
Are the proceeds exempt from claims of creditors?
To the extent permitted by law, no payment of proceeds or interest we make will
be subject to the claims of any creditors.
Also, if you provide that the option selected cannot be changed after the
insured's death, the payments will not be subject to the debts or contracts of
the person receiving the payments. If garnishment or any other attachment of the
payments is attempted, we will make those payments to a trustee we name. The
trustee will apply those payments for the maintenance and support of the person
you named to receive the payments.
What is the guaranteed interest rate on settlement options?
The minimum amount of interest we will pay under any settlement option is 3
percent per annum. Additional interest earnings, if any, on deposits under a
settlement option will be payable as determined by us.
BENEFICIARY
To whom will we pay the death proceeds?
When we receive proof satisfactory to us of the insured's death, we will pay the
death proceeds of this policy to the beneficiary or beneficiaries named in the
application for this policy unless you have changed the beneficiary. In that
event, we will pay the death proceeds to the beneficiary named in your last
change of beneficiary request as provided below.
What happens if one or all of the beneficiaries dies before the insured?
If a beneficiary dies before the insured, that beneficiary's interest in the
policy ends with that beneficiary's death. Only those beneficiaries who survive
the insured will be eligible to share in the death proceeds. If no beneficiary
survives the insured we will pay the death proceeds of this policy to you, if
living, otherwise to your estate, or to your successor if you are a corporation
no longer in existence.
Can you change the beneficiary?
Yes. If you have reserved the right to change the beneficiary you can file a
written request with us to change the beneficiary. If you have not reserved the
right to change the beneficiary, the written consent of the irrevocable
beneficiary will be required.
Your written request will not be effective until we record it in our home
office. After we record it, the change will take effect as of the date you
signed the request. However, if the insured dies before the request has been so
recorded, the request will not be effective as to those death proceeds we have
paid before your request was so recorded.
MHC-98-670 Minnesota Life 29
<PAGE>
POLICY LOANS
Can you borrow money on your policy?
Yes. You may borrow up to the maximum loan amount. This amount is determined as
of the date we receive your request for a loan. We will require your written
request for a policy loan. We will charge interest on the loan in arrears.
At your request, we will send you a loan agreement for your signature. The
policy will be the only security required for your loan.
When the policy loan is to come from your guaranteed principal account actual
cash value, we have the right to postpone your loan for up to six months. We
cannot do so if the loan is to be used to pay premiums on any policies you have
with us.
What is the total amount available for policy loans?
The total amount available for loans under your policy is 90 percent of the
policy value (see page 3). Your policy value will be determined as of the date
we receive your written request for a loan at our home office.
What is the effect of a policy loan?
When you take a loan we will reduce the actual cash value of the policy. It will
be reduced by the amount you borrow. This determination will be made as of the
end of the valuation period during which your loan agreement is received at our
home office.
How does a policy loan reduce the actual cash value?
Unless you direct us otherwise, the policy loan will be taken from your
guaranteed principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and, as to the
actual cash value in the separate account, from each sub-account in the
proportion that the actual cash value in such sub-account bears to your actual
cash value in all of the sub-accounts.
Policy loans shall be transferred to the loan account. The loan account
continues to be a part of the policy in the general account.
The policy value of your policy may decrease between premium due dates. If your
policy has a policy loan and no actual cash value the policy will lapse.
What rate of interest do you have to pay?
The interest rate on indebtedness will be the rate shown on page 1 of this
policy. Interest accrues daily at this annual interest rate.
MHC-98-670 Minnesota Life 30
<PAGE>
When is policy loan interest due and payable?
Policy loan interest is due on the date of the death of the insured, on a policy
adjustment, surrender, lapse, a policy loan transaction and on each policy
anniversary.
If you do not pay the interest on your loan in cash, your policy loan will be
increased by an additional policy loan in the amount of the unpaid interest. It
will then be charged the same rate of interest as your loan. Your actual cash
value will be reduced by the amount of the policy loan and unpaid policy loan
interest when it is due.
How and when can you repay your loan?
If your policy is in force, your loan can be repaid in part or in full at any
time before the insured's death. Your loan may also be repaid within 60 days
after the date of the insured's death if we have not paid any of the benefits
under this policy. Any loan repayment must be at least $100 unless the balance
due is less than $100.
How are loan repayments allocated?
Loan repayments are allocated to the guaranteed principal account until all
loans from the guaranteed principal account have been repaid.
Thereafter, loan repayments are allocated to the guaranteed principal accounts
or the sub-accounts of the separate account as you direct.
In the absence of your instructions, loan repayments will be allocated to the
guaranteed principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and, as to the
actual cash value in the separate account, to each sub-account in the proportion
that the actual cash value in such sub-account bears to your actual cash value
in all of the sub-accounts.
Loan repayments reduce your loan account by the amount of the loan repayment:
What is the rate of interest credited to a policy as a result of a policy loan?
Interest credits shall be at a rate which is not less than your policy loan
interest rate minus 2 percent per annum.
When are interest credits on a policy loan allocated to your actual cash value?
Policy loan interest credits are allocated to your actual cash value as of the
date of the death of the insured, on a policy adjustment, surrender, lapse, a
policy loan transaction and on each policy anniversary.
How are policy loan interest credits allocated?
Policy loan interest credits are allocated to the guaranteed principal account
and separate account following your instructions to us. We will use your
instructions for the allocation of net premiums. In the absence of such
instructions, this amount will be allocated to the guaranteed principal account
actual cash value and separate account actual cash value in the same proportion
MHC-98-670 Minnesota Life 31
<PAGE>
that those values bear to each other and, as to the actual cash value in the
separate account, to each sub-account in the proportion that the actual cash
value in such sub-account bears to your actual cash value in all of the sub-
accounts.
What happens if you do not repay your loan?
If your policy has indebtedness, your policy will remain in force so long as it
has actual cash value. If it does not, your policy will lapse.
In this event, to keep your policy in force, you will have to make a loan
repayment. We will give you notice of our intent to terminate the policy and the
loan repayment required to keep it in force. The time for repayment will be
within 31 days after our mailing of the notice.
Can you arrange for automatic premium loans to keep your policy in force?
Yes. If you asked for this option in your application, or if you write us and
ask for this option after your policy has been issued, we will make automatic
premium loans. You can also write to us at any time and tell us you do not want
this option. If you have this option and you have not paid the premium that is
due before the end of the grace period, we will make a policy loan to pay the
premium. However, in order for this to occur, the amount available for a loan
must be enough to pay at least a quarterly premium. If the loan value is not
enough to pay at least a quarterly premium, your policy will lapse.
Is there a minimum policy loan?
Yes. Any policy loan we pay in cash must be in an amount of at least $100. A
policy loan may be in a lesser amount if it is used to pay a premium under the
automatic premium loan provisions.
ADDITIONAL INFORMATION
Can you assign your policy?
Yes. Your policy may be assigned. The assignment must be in writing and filed
with us at our home office. We assume no responsibility for the validity or
effect of any assignment of this policy or of any interest in it. Any proceeds
which become payable to the assignee will be payable in a single sum. Any claim
made by an assignee will be subject to proof of the assignee's interest and the
extent of that interest.
What if the insured's age is misstated?
If the insured's age has been misstated, the amount of proceeds will be adjusted
to reflect the cost of insurance charges, based upon the insured's correct age.
When does your policy become incontestable?
After this policy has been in force during the insured's lifetime for two years
from the original policy date, we cannot contest this policy, except for fraud
or the nonpayment of premiums. However, if there has been a face amount increase
for which we required evidence of
MHC-98-670 Minnesota Life 32
<PAGE>
insurability, that increase will be contestable for two years, during the
lifetime of the insured, from the effective date of the increase.
Is there a suicide exclusion?
If the insured, whether sane or insane dies by suicide, within two years of the
original policy date, our liability will be limited to an amount equal to the
premiums paid for this policy. If there has been a face amount increase for
which we required evidence of insurability, and if the insured dies by suicide
within two years from the effective date of the increase, our liability with
respect to that increase will be limited to an amount equal to the premiums paid
for such increase.
May the policy be converted?
Yes. During the first 24 months from the original policy date while this policy
is in force and the required premiums are fully paid you may convert this
policy. This right is in addition to your right to make described policy
adjustments. This policy, before the death of the insured, may be converted to
any adjustable life policy, with a fixed death benefit and fixed cash values,
which we may then offer. The converted policy shall have the same face amount as
is currently provided by this policy. The issue age and risk class of the
insured shall be as stated in this policy. The premium provided in the converted
policy may be different.
VARIABLE ADJUSTABLE LIFE POLICY
Variable Benefits
Premiums as stated on the Policy Information Page
Face Amount and Premium may be adjusted by the owner
NONPARTICIPATING
Minnesota Life Insurance Company is a subsidiary of Minnesota Mutual Companies,
Inc., a mutual insurance holding company. You are a member of the Minnesota
Mutual Companies, Inc., which holds its annual meetings on the first Tuesday in
March of each year at 3 p.m. local time. The meetings are held at 400 Robert
Street North, St. Paul, Minnesota 55101-2098.
MINNESOTA LIFE
MHC-98-670 Minnesota Life 33
<PAGE>
Exhibit 99.A5f
Family Term Agreement - Children
- --------------------------------------------------------------------------------
What does this agreement provide?
We will pay the death benefit shown for this agreement on page 1 of this policy
upon receipt of proof satisfactory to us that an insured child died while under
this agreement. As used in this agreement, "insured child" means any natural
child, step-child, or legally adopted child of the insured, who is at least 14
days old, and who:
(1) is named in the application for this agreement and on the date of that
application has not attained his or her 18th birthday; or
(2) is born to the insured after the date of that application; or
(3) is legally adopted by the insured after the date of that application
but before the child's 18th birthday.
The insurance on each insured child is level term insurance which expires on
that child's 25th birthday. The amount of life insurance on each insured child
is shown on page 1 of this policy.
What is the cost for this agreement?
The additional annual premium for this agreement is shown on page 1 of the
policy. Premiums for this agreement are payable until:
(1) the youngest insured child's 25th birthday; or
(2) the death of the last surviving insured child; or
(3) the death of the insured.
If the insured dies before termination of this agreement, the insurance then
provided by this agreement will continue for the remainder of its term without
payment of further premiums. Any premium payable on this policy after this
agreement terminates will be reduced by the premium for this agreement.
Who will receive the proceeds from this agreement?
The death benefit will be paid to the beneficiary designated for this agreement,
if living; otherwise to the legal spouse of the insured, if living; otherwise to
the living person or persons then insured under this agreement, equally if more
than one, or if none, the estate of the person at whose death payment is to be
made.
When does this agreement terminate?
This agreement will terminate on:
(1) the date any premium due for this policy remains unpaid at the end of
the grace period; or
MHC-86-904 Family Term Agreement - Children Minnesota Life
<PAGE>
(2) the date this policy is continued as extended term insurance; or
(3) the date this policy is surrendered or terminated; or
(4) the date we receive a written request to cancel this agreement; or
(5) the date the youngest insured child attains age 25; or
(6) the date of death of the last surviving insured child.
Who will control this agreement at the insured's death?
At the death of the insured, the legal spouse of the insured will have complete
control of this agreement. At the death of the legal spouse, or if the insured
has no legal spouse, all rights will vest in each insured child with respect to
the insurance then in force under this agreement on the life of each insured
child.
Can this agreement be reinstated?
If the policy to which this agreement is attached is reinstated in accordance
with its provisions, this agreement may also be reinstated. Evidence of
insurability satisfactory to us will be required of all persons then eligible
for insurance under this agreement. No benefits will be paid for the death of
an insured child occurring after the expiration of the grace period on this
policy and prior to the date of reinstatement.
Is there a suicide limitation?
If within two years from the effective date of this agreement, the insured dies
by suicide, whether sane or insane, our liability under this agreement will be
limited to the return of the amount of additional premiums paid for this
agreement, and this agreement will then automatically terminate.
When does this agreement become incontestable?
Except for nonpayment of premium, this agreement will be incontestable after it
has been in force during an insured child's lifetime for two years from the
effective date of the agreement.
Will this agreement increase your policy values or dividends?
This agreement will not increase the policy values of this policy nor will it
increase the dividends on this policy.
Can this insurance be converted to a new policy?
Upon termination of the insurance on an insured child, you may convert that
insurance without evidence of insurability to a new policy on that child.
Application for the new policy and payment of the first premium must be received
at our home office within 31 days after the insurance terminates or expires.
<PAGE>
The new policy may be on any adjustable or variable-adjustable policy form which
we then offer. Also, the new policy must be within the issue and amount limits
for the plan. It will be issued as of the date of termination at the premium
rate then used for the insured child's age on that date.
If the insurance on an insured child is converted prior to the child's 25th
birthday, the amount of the new policy may not exceed the amount of that
insurance. If the insurance on an insured child is converted within 30 days of
the child's 25th birthday, the amount of the new policy may not exceed 5 times
the amount of that insurance.
Evidence of insurability on the insured child satisfactory to us will not be
required unless the new policy is to contain an additional benefit agreement.
However, if this policy contains a waiver of premium agreement, a waiver of
premium agreement may be included in the new policy without evidence of
insurability. The waiver of premium agreement will not cover any disability of
the insured child commencing before the policy date of the new policy.
If evidence of insurability is not required for the converted policy, we will
waive any underwriting charge usually assessed on a variable adjustable policy.
This agreement is effective as of the policy date of this policy unless a
different effective date is shown here.
/s/ Robert L. Senkler
President
/s/ Dennis E. Prohofsky
Secretary
<PAGE>
Exhibit 99.A5g
Exchange of Insureds Agreement
- --------------------------------------------------------------------------------
What does this agreement provide?
This agreement provides for the exchange of this policy for a reissued policy on
the life of a substitute insured you designate, subject to the following
conditions:
(1) this policy and agreement must be in force;
(2) you must have an insurable interest in the life of the substitute
insured;
(3) we must receive an application for the policy exchange signed by you
and the substitute insured;
(4) you must provide evidence of insurability on the substitute insured
which is satisfactory to us.
When will the reissued policy become effective?
Coverage under the reissued policy will become effective on the date of the
exchange only if the insured under this policy is then living. This policy will
terminate at the end of the day prior to the date of the exchange.
Is evidence of insurability required?
Yes, the policy exchange is subject to current evidence of insurability on the
substitute insured which is satisfactory to us.
What will be the face amount of the reissued policy?
The face amount of the reissued policy may not exceed the face amount of this
policy on the date of exchange.
What policy form will be available?
The reissued policy will be on the same policy form as this policy. If on the
date of exchange we are not issuing this policy form, the reissued policy will
be on a similar variable adjustable life policy form we then use. The reissued
policy will also have the same policy number as this policy.
What will be the premium rate for the new policy?
Premiums will be based on the sex and the age of the substitute insured on his
or her birthday nearest the policy date of the reissued policy.
What will be the policy date of the reissued policy?
The policy date of the reissued policy will be the same as the policy date of
this policy. If the substitute insured was not living on the policy date of
this policy, the policy date of the reissued policy will be the policy
anniversary which follows the substitute insured's date of birth.
What is this policy has an outstanding policy loan?
The reissued policy will be subject to any outstanding policy loans on this
policy on the date of the exchange.
MHC-86-914 Exchange of Insureds Agreement Minnesota Life
<PAGE>
What if this policy is assigned?
The reissued policy will be subject to any outstanding assignment of this policy
on file at our home office on the date of the exchange.
Who will be the beneficiary?
The reissued policy will have the same beneficiary as this policy, unless you
request another beneficiary. If you have designated an irrevocable beneficiary
on this policy, the written consent of that beneficiary will be required for any
policy exchange under this agreement and for any beneficiary change.
Can additional benefit agreements be added to the reissued policy?
Additional benefit agreements may be attached to the reissued policy, but only
with our consent.
Will this agreement increase your policy values or policy dividends?
No, this agreement will not increase the policy values of this policy nor will
it increase policy dividends.
What is the premium for this agreement?
There is no premium charge for this agreement.
Is this agreement subject to the suicide and incontestable provisions?
Yes, those provisions apply to this agreement. The suicide and contestable
periods for the reissued policy will be measured from the effective date of the
policy exchange and not from the policy date. If the substitute insured,
whether sane or insane, dies by suicide, within two years from the effective
date of the policy exchange, our liability under the reissued policy will be
limited to an amount equal to the premiums paid for the reissued policy as of
the effective date of the policy exchange. After the reissued policy has been
in force during the substitute insured's lifetime for two years from the
effective date of the policy exchange, we cannot contest the reissued policy,
except for the nonpayment of premiums. The reissued policy will show the date
from which the suicide and contestable periods will be measured.
When will this agreement terminate?
This agreement will terminate on the date:
(1) any premium due for this policy remains unpaid at the end of the grace
period; or
(2) this policy is surrendered or terminates; or
(3) this policy is continued as extended term insurance; or
(4) we receive your request to cancel this agreement; or
(5) this policy is exchanged for a new policy under the provisions of this
agreement; or
(6) of the insured's death.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 99.A5h
Face Amount Increase Agreement
- ------------------------------
What does this agreement provide?
This agreement gives you the right to increase the face amount of your policy on
each regular face amount increase date shown on page 1. You must exercise this
right within the 30 day period immediately before, or the 30 day period
immediately after, a regular face amount increase date. If you do not exercise
your right within this 60 day period you will lose that right to increase the
face amount. Whenever we use the words "increase date" in this agreement, we
mean the face amount increase date.
Are there alternate face amount increase dates?
Yes, an alternative increase date will be available on the date of:
(1) the insured's lawful marriage,
(2) the birth of a live child to the insured and the insured's then lawful
spouse
(3) the legal adoption of a child by the insured.
These alternate increase dates are not in addition to the regular increase dates
provided by this agreement. If an alternate increase date is elected it will
replace the regular increase date then currently available. If there is no
increase date then currently available, it will replace the next available
regular increase date not previously replaced. When all future regular increase
dates are so replaced this agreement will terminate.
Multiple births resulting from the same pregnancy and multiple adoptions
resulting from the same adoption proceeding will be considered as one birth or
one adoption.
You must furnish proof satisfactory to us of the occurrence of an alternate
increase date within 90 days after the occurrence. You must also exercise your
right to increase the face amount of your policy within this 90 day period.
What must you do?
You must notify us in writing that you are exercising your right to increase the
face amount of your policy. Also, you must pay the first premium due on your
increased policy. Your written request and adjusted premium payment must be
received in our home office within the 60 day period allowed for regular
increase dates or within the 90 day period allowed for alternate increase dates.
What will be the amount of the face amount increase?
The maximum face amount increase provided by this agreement is shown on page 1.
When will an increase in the face amount be effective?
If you exercise your right to increase the face amount of this policy, the
increase will be effective as of the regular or alternate increase date used.
However, your request to increase the face amount of your policy must be
received in our home office during the lifetime of the insured to be effective.
When we receive your written request to increase the face amount, along with the
MHC-86-915 Face Amount Increase Agreement Minnesota Life
<PAGE>
adjusted premium for the increase, we will adjust your policy and issue a new
page 1. The new page 1 will show the adjusted premiums and policy values for
your policy.
Are there any limitations?
Since a face amount increase results in a policy adjustment, any such increase
is subject to all adjustment limitations described in the "Policy Adjustments"
section of your policy.
Will evidence of insurability be required?
No. We will also waive any underwriting charge usually assessed in connection
with a face amount increase.
What is the cost?
The annual premium for this agreement is shown on page 1 of this policy. If this
agreement terminates, the total annual premium for this policy will be reduced
by the amount shown.
When does an increase in the face amount become incontestable?
The contestable and suicide period for any face amount increase will be measured
from the effective date of this agreement.
Will this agreement increase your policy values or policy dividends?
No, this agreement will not increase the policy values of this policy nor will
it increase policy dividends.
When will this agreement terminate?
This agreement will terminate on:
(1) the date any premium due for this policy remains unpaid at the end of
the grace period; or
(2) the date this policy is surrendered or terminates; or
(3) the date this policy is continued as extended term insurance; or
(4) the date we receive your written request to cancel this agreement; or
(5) the policy anniversary nearest the insured's 40th birthday; or
(6) the date when all regular increase dates have been replaced by
alternate increase dates; or
(7) the date of the insured's death.
The right to increase the face amount of this policy cannot be exercised after
this agreement has terminated.
What if the insured is totally disabled on a regular increase date?
If this policy contains a waiver of premium agreement, and if the insured is
totally disabled as defined in that agreement on an available regular increase
date and has qualified, or subsequently qualifies, for those disability benefits
retroactive through the regular increase date, the regular face amount increase
shown on page 1 will be placed in effect.
We must receive written notice of disability at our home office while the
insured is living and totally disabled and within one year after the regular
increase date before this provision will be
<PAGE>
effective. However, failure to give that notice within the time provided will
not invalidate a claim if it is shown that notice was given as soon as
reasonably possible.
We will adjust your policy and issue a new page 1 which will show the adjusted
premiums and policy values for the new policy. The adjusted premium for this
policy will be waived only while the insured continues to qualify for the waiver
of premium benefit.
This agreement is effective as of the original policy date of this policy unless
a different effective date is shown here.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 99.A5i
Cost of Living Increase Agreement
- --------------------------------------------------------------------------------
What does this agreement provide?
You may periodically request an increase in the face amount of your policy
without evidence of insurability based on increases in the cost of living. Your
request must be in writing.
When may the face amount be increased?
On the third policy anniversary and on each policy anniversary thereafter while
this agreement is in force, we will determine whether or not your policy is
eligible for a cost of living increase. You may increase the face amount of
your policy if the following conditions are met:
(1) there has not been a policy adjustment (an increase or decrease) to the
face amount of this policy during the three year period immediately
preceding the policy anniversary.
(2) there has been an increase in the cost of living as defined in this
agreement, and
(3) an annual premium for the basic policy of at least $300 has been paid
during each of the three years immediately preceding the policy
anniversary.
The increase in the face amount will be effective as of the policy anniversary.
However, the face amount will be determined as of the day immediately preceding
the policy anniversary.
How is the increase in the cost of living determined?
We use the Consumer Price Index published by the United States Department of
Labor for all urban households. If any alteration in the composition, base, or
method of computation of the Consumer Price Index is introduced which, in our
opinion, makes the Index inappropriate for this agreement, or if the publication
of the Index is discontinued or delayed, we have the right to choose what we
believe to be an appropriate standard, published or unpublished, as a substitute
for the Consumer Price Index.
What will be the amount of the increase?
You may increase the face amount of your policy by applying the following
formula:
Consumer Price Index 5
months before the date of
the cost of living increase -1.00
- -------------------------------
Consumer Price Index 41
months before the date of
the cost of living increase
The increase will be rounded off to the next highest $1,000 of face amount.
However, please note that any one increase in the face amount of this policy may
not exceed 20% of the face amount or the maximum amount shown for this agreement
on page 1, whichever amount is less.
MHC-86-916 Cost of Living Increase Agreement Minnesota Life
<PAGE>
If this formula would produce a reduction in the face amount no change will be
made.
What will be the cost of the increase?
If the face amount of this policy is increased, the annual premium for this
policy will also be increased. The premium will increase by the same percent as
the face amount increases.
The change in face amount, premium, and policy values will be made by adjusting
your policy and issuing a new page 1. This will be subject to the Policy
Adjustments provisions of your policy.
Are there any limitations?
Yes. If your policy did not have a scheduled decrease in face amount prior to
the Cost of Living Increase, the premium may be increased by a greater percent
than the face amount in order to avoid any scheduled decrease in the face amount
caused by the increase. In addition, any increase will be subject to all
adjustment limitations described in the Policy Adjustments provisions of your
policy.
Is evidence of insurability required?
No.
Do you have to accept an increase?
No, you have the right to refuse any increase. If you refuse any increase
before the insured has attained age 21, no increase will be offered until the
insured attains age 21. However, if you refuse any increase after the insured
has attained age 21, this agreement will terminate and no further increases will
be offered under this agreement.
What if this policy contains a waiver of premium agreement?
Cost of living increases may continue to be made while the insured is totally
disabled. We will also waive the increased premiums on your policy during the
period of continuous total and permanent disability.
When does this agreement terminate?
This agreement will terminate on:
(1) the policy anniversary nearest the insured's 56th birthday; or
(2) the date we receive your written request to cancel this agreement; or
(3) the date you refuse an increase in the face amount offered under this
agreement, except if the insured has not attained age 21 on that date; or
(4) the date this policy is surrendered, terminated or continued in force as
extended term insurance; or
(5) the date of the death of the insured.
<PAGE>
This agreement is effective as of the original policy date of this policy unless
a different effective date is shown here.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 99.A5j
Waiver of Premium Agreement
- ---------------------------
What does this agreement provide?
This agreement provides for the waiver of premiums on this policy if the insured
becomes totally and permanently disabled. This means that you will not be
required to pay any premium that falls due while the insured is totally and
permanently disabled. To qualify for this benefit you must give us timely notice
of the insured's disability. You must also furnish evidence satisfactory to us
that the insured's total disability:
(1) commenced while this policy and agreement were in force, and
(2) commenced after the policy anniversary nearest the insured's age 5 but
before the policy anniversary nearest the insured's age 60, and
(3) was continuous for six months or more, and
(4) did not result directly from any act of war.
What is "total" disability?
Total disability is a disability resulting from an accidental injury or a
disease that requires the care of a licensed physician and continuously prevents
the insured from engaging in an occupation. During the first 24 months of total
disability "occupation" means the insured's regular occupation. After 24 months
it means any occupation for which the insured is reasonably fitted by education,
training or experience.
Also, the insured's total and irrecoverable loss of:
(1) the sight of both eyes, or
(2) the use of both hands, or
(3) the use of both feet, or
(4) the use of one hand and one foot, or
(5) hearing or speech
will be considered total disability even in the insured engages in an
occupation.
What is "permanent" disability?
Total disability will be considered permanent only after it has existed
continuously for at least six months.
On what basis will premiums be waived or refunded?
We will waive or refund premiums according to the frequency of premium payment
that was in effect on this policy on the date the insured's total disability
commenced.
MHC-86-917 Waiver of Premium Agreement Minnesota Life
<PAGE>
is approved we will waive premiums under this agreement as if your policy were
on a plan with premiums payable to the insured's age 100 and no scheduled
decrease in the face amount. If your policy is not on this plan, we will
automatically increase or decrease your annual premium so that your policy is on
this plan. In that event, we will issue a new page 1 which will be subject to
the Policy Adjustments provisions of your policy. In addition, we will waive the
premium for any additional benefit agreement that is attached to your policy.
What is the insured recovers from the disability?
We will, of course, no longer waive any premiums on this policy due after the
insured recovers. In addition, we will, upon your request, restore your policy
to the premium level that was in effect before the insured's disability
commenced, subject to the Policy Adjustments provisions of your policy.
Are there any limitations?
No premium will be waived or refunded if the insured's total disability results
directly from an act of war while the insured is serving in the military, naval
or air forces of any country at war, declared or undeclared.
When must we be notified?
We must receive written notice of the insured's total disability at our home
office:
(1) while the insured is living and totally disabled, and
(2) not later than one year after the termination of this agreement, and
(3) within one year after the due date of the premium that you request us to
waive or refund.
However, the failure to give this notice within the time provided will not
invalidate the claim if it is shown that notice was given as soon as reasonably
possible.
What is the cost?
The annual premium for this agreement is shown on page 1 of this policy. If
this agreement terminates, the total annual premium for this policy will be
reduced by the amount shown.
What proof will be required?
You must furnish proof satisfactory to us that the insured is totally and
permanently disabled as defined in this agreement before any premiums will be
waived or refunded. We will from time to time also require additional proof
satisfactory to us that the insured continues to be totally and permanently
disabled. We may also require the insured to submit to one or more physical
examinations at our expense. However, we will not require a physical
examination of the insured more frequently than once a year if the total
disability has continued for two years.
What if this policy lapses?
<PAGE>
If this policy lapsed for nonpayment of premium before notice of the insured's
total disability is received at our home office, premiums will be waived or
refunded only if the notice is received within one year after the due date of
the first unpaid premium. Also, the total disability must have commenced prior
to the due date of the unpaid premium or during the grace period allowed for the
payment of that premium.
When is this agreement incontestable?
This agreement is subject to the incontestability provision in this policy.
However, the contestable period for this agreement will be measured from the
effective date of this agreement.
Will this agreement increase your policy values or policy dividends?
No, this agreement will not increase the policy values of this policy nor will
it increase policy dividends.
When will this agreement terminate?
This agreement will terminate on:
(1) the date any premium due for this policy remains unpaid at the end of
the grace period; or
(2) the date this policy is continued as extended term insurance; or
(3) the date this policy is surrendered or terminates; or
(4) the date we receive your written request to cancel this agreement; or
(5) the policy anniversary nearest the insured's 60th birthday.
This agreement is effective as of the original policy date of this policy unless
a different effective date is shown here.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 99.A5k
Survivorship Life Agreement
- -------------------------------------------------------------------------------
This agreement is a part of the policy to which it is attached; it is subject to
all the terms and conditions of the policy.
What does this agreement provide?
This agreement gives you the right to increase the face amount of this policy,
without evidence of insurability, at the death of the designated life.
Who is the designated life?
The designated life is the person named as such in the application for this
agreement. The designated life may not be changed.
When may this right be exercised?
At the death of the designated life, you may exercise the right to increase the
face amount of this policy within the ninety days immediately following the
designated life's death. This ninety day period is the Option Period.
What will be the amount of the face amount increase?
The maximum face amount increase provided by this agreement is shown on page 1.
The maximum face amount increase will decrease each year according to the
schedule on page 1.
How do you exercise this right?
You must notify us in writing that you are exercising your right to increase the
face amount of this policy. You must also send us:
(1) proof satisfactory to us of the designated life's death; and
(2) a completed application for a face amount increase; and
(3) the first premium due for the increased policy
We must receive these requirements in our home office within the Option Period.
When will an increase in the face amount be effective?
If you exercise your right to increase the face amount of this policy, the
increase will be effective at the end of the Option Period.
How will we increase the face amount?
When we receive your written request to increase the face amount, along with the
premium for the increase, we will adjust this policy and issue a new page 1.
The adjustment will be subject to all the provisions of the Policy Adjustments
Section of this policy, except that there will be no age limitations on face
amount increases.
MHC-90-929 Survivorship Life Agreement Minnesota Life
<PAGE>
What will the premium be for the increase in the face amount?
It will be based on the age of the insured at the time of exercise, the plan of
insurance selected and the same premium classification applicable to the insured
at the time this policy is issued or at the time this agreement is added,
whichever is later.
What if the insured dies within the Option Period?
If the insured dies during the Option Period but not simultaneously with the
designated life, we will pay the maximum face amount increase to the beneficiary
of this policy.
What if the insured and the designated life die simultaneously?
If the insured and the designated life die at the same time or under
circumstances in which the order of death cannot be determined, we will pay one-
half of the maximum face amount increase to the beneficiary of this policy.
When does the increase in the face amount become incontestable?
The contestable and suicide period for the increase will be measured from the
effective date of this agreement.
What if the face amount of this policy decreases before the death of the
designated life?
If the face amount of this policy decreases, the maximum face amount increase
and the premium for this agreement will also be decreased proportionately.
What is the cost for this agreement?
The annual premium for this agreement is shown on page 1. If this agreement
terminates, the total annual premium for this policy will be reduced by the
amount shown for this agreement.
When is this agreement incontestable?
If this agreement is issued on the same date as this policy, it will be subject
to the incontestability provision in this policy. If this agreement is issued at
a date later than the policy, then this agreement will be contestable for two
years from the effective date of this agreement, but only as to the evidence of
insurability which we required to issue this agreement at the later date.
When will this agreement terminate?
This agreement will terminate on the earliest of:
(1) the date any premium due for this policy remains unpaid at the end of the
grace period; or
(2) the date this policy is surrendered or terminates; or
(3) the date this policy is continued as extended term or reduced-paid up
insurance; or
(4) the date we receive your written request to cancel this agreement; or
<PAGE>
(5) the date on which you exercise your right under this agreement to
increase the face amount of this policy; or
(6) the date of the death of the insured; or
(7) the end of the Option Period; or
(8) the policy anniversary when the maximum face amount increase, as shown on
page 1, decreases to zero.
This agreement is effective as of the policy date of this policy unless a
different effective date is shown here.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 99.A5l
Accelerated Benefit Agreement
- --------------------------------------------------------------------------------
General Information
This agreement amends the policy to which it is attached and is subject to all
its terms and conditions.
What does this agreement provide?
This agreement provides for the payment of an accelerated benefit if the insured
has a terminal condition, as described below.
The accelerated benefit will be paid as a loan. The entire amount of the loan
will be due and payable at the death of the insured.
The receipt of any accelerated benefit may be taxable to you. You should seek
assistance from your personal tax advisor.
Definitions
When we use the following words, this is what we mean:
death benefit
The face amount of this policy, plus any additional insurance provided by paid-
up additions, less any existing loans or indebtedness under the policy; we will
adjust the face amount for any policy loan interest paid or payable.
maximum accelerated benefit
The maximum amount of the death benefit we will pay if you are eligible under
this agreement. The maximum accelerated benefit will be 75% of the death
benefit.
physician
An individual who is licensed to practice medicine or treat illness in the state
in which treatment is received. This does not include you, the insured, or a
member of your or the insured's immediate family.
immediate family
The insured's or your spouse, child, parent, grandparent, grandchild, brothers
and sisters and their spouses.
Terminal Condition
What is a terminal condition?
A terminal condition is a condition caused by sickness or accident which
directly results in a life expectancy of 12 months or less.
MHC-92-931 Accelerated Benefit Agreement Minnesota Life
<PAGE>
What evidence do we require of the insured's terminal condition?
We must be given evidence that satisfies us that the insured's life expectancy,
because of sickness or accident, is 12 months or less. That evidence must
include certification by a licensed physician.
Do we have the right to obtain independent medical verification?
Yes. We retain the right to have the insured medically examined at our own
expense to verify the insured's medical condition. We may do this as often as
reasonably required while an accelerated benefit is being considered or paid.
Payment of an Accelerated Benefit
What are the conditions for the payment of an accelerated benefit?
We will consider the payment of an accelerated benefit, subject to all of the
following conditions:
(1) your policy must be in force other than as extended term insurance and
all premiums due must be fully paid;
(2) you must apply in writing and in a form satisfactory to us;
(3) the policy must not be assigned, except to us as security for a loan;
(4) if the policy has an irrevocable beneficiary, that beneficiary must
consent to the payment of an accelerated benefit.
Is there a minimum or maximum amount for an accelerated benefit?
Yes. The minimum accelerated benefit we will pay is $10,000. The maximum
accelerated benefit is the less of $1,000,000 and 75% of the death benefit.
How will we pay the accelerated benefit?
We will pay the accelerated benefit in one sum or in any other mutually
agreeable manner.
To whom will we pay accelerated benefits?
All accelerated benefits will be paid to you unless you validly assign them.
How is your policy affected when you receive an accelerated benefit?
The accelerated benefit plus any accrued interest will be considered a loan to
you of a portion of the death benefit. After the accelerated benefit has been
paid, we do not expect that any further dividends will be declared on this
policy.
If the accelerated benefit, plus interest exceeds the loan value of your policy,
you will not be able to surrender the policy, or receive any further policy
loans.
MHC-92-931 Minnesota Life
<PAGE>
At the death of the insured, the entire amount of the loan and interest will be
due and payable. Any balance of the proceeds will be paid to the beneficiary of
your policy.
Can you repay an accelerated benefit?
Yes. The accelerated benefit may be repaid in full or in part at any time.
Is the request for an accelerated benefit voluntary?
Yes. An accelerated benefit is not intended to cause you to involuntarily reduce
the death proceeds ultimately payable to the named beneficiary. An accelerated
benefit will be made available to you on a voluntary basis only.
If you are required by law to use this option to meet the claims of creditors,
whether in bankruptcy or otherwise, you are not eligible for this benefit. If
you are required by a government agency to use this option to apply for, obtain,
or keep a government benefit or entitlement, you are not eligible for this
benefit.
Interest
Will interest be charged on the amount loaned as an accelerated benefit?
Yes. The accelerated benefit interest rate will be set quarterly on the first
day of each calendar quarter. It will not exceed the greater of the "published
monthly average" for the calendar month ending two months before the beginning
of the calendar quarter, or the policy loan interest rate.
The "published monthly average" means the Moody's Composite Average of Yields on
Bonds as published by the Moody's Investors Service. In the event this average
is no longer published, we will use a substantially similar average. The
interest rate charged on the portion of the accelerated benefit equal to the
loan value of the policy at the time the accelerated benefit is paid shall not
exceed the policy loan interest rate.
We will not notify you when we process the accelerated benefit what the interest
rate charge will be. The interest rate will not be changed during the course of
the accelerated benefit loan.
Interest is charged daily on the unpaid balance of any accelerated benefit; it
is payable annually in arrears. If you do not pay the interest on the
accelerated benefit when it is due, the unpaid interest will be added to the
accelerated benefit and charged the same rate of interest as your accelerated
benefit.
Additional interest will not accrue if the accelerated benefit plus accrued
interest equals the face amount.
Will it be necessary to continue to pay premiums if I receive an accelerated
benefit?
Yes. Once an accelerated benefit has been paid, you must keep the policy in
force until such time as the death benefit is payable or the entire accelerated
benefit is repaid to us. It will be necessary to continue to pay premiums to do
this. If premiums are not paid when due, we will pay them and add the premium
amounts to the accelerated benefit amount which must be repaid
<PAGE>
before any death benefits are payable. If the policy includes a waiver of
premium provision and the insured qualifies under that provision, we will waive
those premiums.
Termination of Agreement
When does this agreement terminate?
This agreement will terminate on the earliest of:
(1) the date any premium due for this policy remains unpaid at the end of
the grace period; or
(2) the date we receive your written request to cancel this agreement; or
(3) the date this policy matures, is surrendered, terminated or continued
in force as extended term or reduced paid-up insurance; or
(4) the date of the insured's death.
This agreement is effective as of the policy date of this policy unless a
different effective date is shown on page 1.
/s/ Robert L. Senkler /s/ Dennis E. Prohofsky
President Secretary
<PAGE>
Exhibit 5(m)
================================================================================
MINNESOTA LIFE SHORT TERM AGREEMENT
- --------------------------------------------------------------------------------
AGREEMENT DATE APPLICABLE COVERAGE SHORT TERM PREMIUM
Entire Policy
- --------------------------------------------------------------------------------
GENERAL
In consideration of the payment of the Short Term Premium shown above, the
Company hereby agrees to pay the death benefit provided by this agreement upon
receipt of due proof that an insured Person has died while this agreement is in
effect.
APPLICABLE COVERAGE
This short term agreement provides temporary protection preceding another
coverage which shall be known as the Applicable Coverage. If the Applicable
Coverage is a policy, it shall be identified by the words "Entire Policy" in the
space above. If the Applicable Coverage is an agreement being added to a policy
already in force, it shall be identified by its form number in the space above.
INSURED PERSON
An Insured Person shall be that person or those persons to be insured under the
Applicable Coverage.
SHORT TERM PERIOD
This agreement shall take effect at the same time and subject to the same
conditions as those stated in the application for the Applicable Coverage,
provided that wherever the words "first premium" appear therein, the words
"Short Term Premium" are substituted. This agreement shall terminate on the
day preceding the date of issue of the Applicable Coverage. However, a grace
period of 31 days will be allowed for payment of the first regular premium
required under the Applicable Coverage. This agreement shall continue in force
during the grace period. If death occurs during the grace period, the unpaid
premium shall be deducted from the amount otherwise payable.
DEATH BENEFIT
This agreement applies to the life coverage on the lives of all Insured Persons.
The death benefit provided by this agreement shall be those benefits which would
have been payable under the Applicable Coverage had death taken place on its
date of issue, except that if an infant insured dies before attaining the age
of 32 days, the amount shall be reduced to one-fourth the amount otherwise
payable.
DISABILITY
Any total and permanent disability benefits provided under the Applicable
Coverage shall be included under this agreement.
CONTESTABLE AND SUICIDE PERIODS
The contestable and suicide periods for the Applicable Coverage shall be
measured from the date of this agreement.
This agreement is not in force unless countersigned by a Registrar.
/s/ Robert L. Senkler
President
/s/ Dennis E. Prohofsky
Secretary
Registrar
GA/SA: OP-10:
MHC-E324.1 10-1998
<PAGE>
CONTESTABLE AND SUICIDE PERIODS
The contestable and suicide periods for the Applicable Coverage shall be
measured from the date of this agreement.
This agreement is not in force unless countersigned by a Registrar.
/s/ Coleman Bloomfield
President
/s/ Robert J. Hasling
Secretary
Registrar
<PAGE>
POLICY ENHANCEMENT AGREEMENT
This agreement is a part of the policy to which it is attached; it is subject to
all its terms and conditions.
WHAT DOES THIS AGREEMENT PROVIDE?
Each year while this agreement is in force, we will increase the face amount of
your policy without evidence of insurability. Your premium will also increase
as described below.
WHAT WILL BE THE AMOUNT OF THE INCREASE?
The face amount increase percent is shown on page 1. This percent will be
multiplied by the face amount at the time of the increase to determine the face
amount increase. The increase will be rounded off to the next higher $1,000 of
face amount. The maximum increase amount is shown on page 1.
WHEN WILL THE FACE AMOUNT BE INCREASED?
On each policy anniversary while this agreement is in force, we will determine
whether your policy is eligible for an increase. We will increase the face
amount of your policy if the following conditions are met:
(1) there has not been a policy adjustment (an increase or a decrease) to the
face amount of this policy during the six-month period immediately
preceding the policy anniversary, and
(2) an annual base premium of at least $300 has been paid during the
immediately preceding policy year.
The increase in the face amount will be effective as of the policy anniversary.
However, the face amount will be determined as of the day immediately preceding
the policy anniversary.
WHAT WILL BE THE COST OF THE INCREASE?
When the face amount of this policy is increased, the annual base premium for
this policy will also be increased, in the same percent as the face amount
increases.
The change in face amount, premium, and policy values will be made by adjusting
your policy and issuing a new page 1.
ARE THERE ANY LIMITATIONS?
Yes. Any adjustments will be subject to the Policy Adjustments section of your
policy; if the adjustment required for the increase does not satisfy the
adjustment limitations described in the
MHC-95-941 Minnesota Life
<PAGE>
Policy Adjustments section of your policy, we will not increase the face amount.
However, we will waive the minimum face amount and premium change requirements.
IS EVIDENCE OF INSURABILITY REQUIRED?
No.
IS THE INCREASE SUBJECT TO THE FREE LOOK PROVISION?
Yes. You have the right to examine your policy during the free look period, and
this provision applies to the increase. However, if you reject any increase
during the free look period, this agreement will terminate and no further
increases will be offered under this agreement.
WHAT IF THIS POLICY CONTAINS A WAIVER OF PREMIUM AGREEMENT?
Face amount increases will continue to be made while the insured is totally
disabled. We will also waive the increased premiums, as described in the Waiver
of Premium agreement, during the period of continuous total and permanent
disability.
WHAT IS THE COST FOR THIS AGREEMENT?
The annual premium for this agreement is shown on page 1. If this agreement
terminates, the total annual premium for this policy will be reduced by the
amount shown.
WHEN DOES THIS AGREEMENT BECOME INCONTESTABLE?
Except for the nonpayment of premium, this agreement will be incontestable after
it has been in force during the insured's lifetime for two years from the
effective date of this agreement.
WHEN DOES THIS AGREEMENT TERMINATE?
This agreement will terminate on the earliest of:
(1) the date any premium due for this policy remains unpaid at the end of the
grace period; or
(2) the policy anniversary nearest the insured's 59th birthday; or
(3) the date we receive your written request to cancel this agreement; or
(4) the date you reject an increase in the face amount under the free look
period; or
(5) the date this policy is surrendered, terminated or continued in force as
extended term insurance; or
(6) the date of the death of the insured.
MHC-95-941 Minnesota Life
<PAGE>
This agreement is effective as of the original policy date of this policy unless
a different effective date is shown here.
Robert L. Senkler
President
Dennis E. Prohofsky
Secretary
MHC-95-941 Minnesota Life
<PAGE>
Exhibit 5(o)
================================================================================
MINNESOTA LIFE PROTECTION OPTION AMENDMENT
- --------------------------------------------------------------------------------
[LETTERHEAD OF MINNESOTA LIFE APPEARS HERE]
- --------------------------------------------------------------------------------
The "Death Benefit" section of your policy beginning on page 5 has been amended
as follows:
What are the death benefit options?
The death benefit options are:
(1) the Cash Option; or
(2) the Protection Option.
At no time will the death benefit be less that the larger of the then current
face amount or the amount of insurance that could be purchased using the policy
value as a net single premium.
What is the Cash Option?
Under the Cash Option, the death benefit will be the then current face amount.
The death benefit will not vary with the investment results of the sub-accounts
of the separate account you have elected unless the policy value exceeds the net
single premium for the then current face amount.
If the policy value exceeds the net single premium for the then current face
amount, the death benefit will be that amount of insurance which could be
purchased for the insured using the policy value as the net single premium.
What is the Protection Option?
Under the Protection Option, the death benefit will vary with the investment
results of the sub-accounts of the separate account you have elected.
Before the anniversary nearest the insured's age 70, the death benefit will be
the policy value, plus the larger of:
(1) the then current face amount; or
(2) the amount of insurance which could be purchased using the policy value as
a net single premium.
At the anniversary nearest the insured's age 70, we will automatically adjust
the policy's face amount to equal the death benefit immediately preceding the
adjustment.
After the anniversary nearest the insured's age 70, the death benefit will be:
(1) the then current face amount; plus
(2) an amount of insurance which could be purchased by the excess, if any, of
the policy value over the tabular cash value applied as a net single
premium for that insurance.
/s/ Dennis E. Prohofsky /s/ Robert L. Senkler
Secretary President
MHC-98-945
<PAGE>
Exhibit 5(p)
================================================================================
MINNESOTA LIFE VARIABLE EARLY VALUE AGREEMENT
- --------------------------------------------------------------------------------
Minnesota Life Insurance Company * 400 Robert Street North
* St. Paul, Minnesota 55101-2098
- --------------------------------------------------------------------------------
This agreement is a part of the policy to which it is attached; it is subject to
all its terms and conditions. This agreement is effective as of the policy date
of this policy.
What does this agreement provide?
We will waive a portion of the first-year sales load and the underwriting charge
which we assess against the base premium in effect when this policy is issued.
The waived amount of the first-year sales load and the underwriting charge are
shown on page 1. Any first-year sales loads or underwriting charges assessed
when you adjust the policy will not be waived.
Is there a premium for this agreement?
Yes. The annual premium for this agreement is shown on page 1. This premium will
be payable for the period shown on page 1.
What effect will the waived charges have on your net premiums?
This agreement will increase the net premiums allocated to either the guaranteed
principal account or to the separate account in the first policy year.
When does/will this agreement terminate?
This agreement will terminate on the earliest of:
(1) the date any premiums due for this policy remain unpaid at the end of the
grace period; or
(2) the date the policy is continued as extended term insurance; or
(3) the date this policy matures, is surrendered, or otherwise terminates.
/s/ Dennis E. Prohofsky /a/ Robert L. Senkler
Secretary President
MHC-98-940
<PAGE>
Exhibit 6(a)
RESTATED CERTIFICATE OF INCORPORATION
of
MINNESOTA LIFE INSURANCE COMPANY
Robert L. Senkler and Dennis E. Prohofsky, respectively, the President and
Secretary of Minnesota Life Insurance Company, a corporation under and existing
by virtue of the laws of the State of Minnesota, do hereby certify that the
following Restated Certificate of Incorporation was duly adopted by an
affirmative vote of a majority of the stockholders at a special meeting of the
Company on December 10, 1998.
This Restated Certificate of Incorporation of Minnesota Life Insurance Company
supersedes and takes the place of the existing Certificate of Incorporation and
all amendments to it:
ARTICLE I
The name of the Company is Minnesota Life Insurance Company (the "Company").
ARTICLE II
The principal office of the Company shall be located at 400 Robert Street North,
Saint Paul, Minnesota 55101-2098.
ARTICLE III
The Company is incorporated for the purpose of transacting the business of and
making insurance upon the lives of individuals and every assurance pertaining
thereto or connected therewith, to grant, purchase and dispose of annuities and
endowments of every kind and description whatsoever, to provide an indemnity
against death and for weekly or other periodic indemnity for disability
occasioned by accident or sickness to the person of the assured and to have all
the further rights, powers and privileges granted or permitted life insurance
companies organized under the provisions of Minnesota Statutes, Chapter 300, and
all Acts amendatory thereof or additional thereto.
ARTICLE IV
The duration and continuation of the Company shall be perpetual.
ARTICLE V
The authorized capital stock of this Company shall be 5,000,000 shares initially
paid in by operation of Minnesota Statutes Section 60A.077 and subsequently paid
in cash, consisting of shares of Common Stock, with par value of $1.00 per
share. Each share of the Common Stock shall have one vote per share.
No shareholder of the Company shall have any pre-emptive or preferential right,
nor be entitled as such as a matter of right, to subscribe for or purchase any
part of any new or additional issue
<PAGE>
of stock of the Company of any class or series, whether issued for money or for
consideration other than money, or of any issue of securities convertible into
stock of the Company.
ARTICLE VI
The corporate powers of the Company shall be vested in a Board of Directors of
at least five persons and shall be exercised by the Board of Directors and by
such officers, agents, employees and committees as the Board of Directors may,
in its discretion, from time to time appoint and empower. The Board of Directors
shall have the power from time to time to make, amend or repeal such bylaws,
rules and regulations for the transaction of the business of the Company as the
Board of Directors may deem expedient and as are not inconsistent with this
Certificate of Incorporation or the constitution or other laws of the State of
Minnesota.
The directors of the Company shall be divided into three classes, as nearly
equal in number as reasonably possible: the first class, the second class and
the third class. Each such director shall serve for a term ending on the third
annual meeting of stockholders following the annual meeting at which such
director was elected, provided, that the directors first elected to the first
class shall serve for a term ending upon the election of directors at the annual
meeting in 2000, the directors first elected to the second class shall serve for
a term ending upon the election of directors at the annual meeting in 2001, and
the directors first elected to the third class shall serve for a term ending
upon the election of directors at the annual meeting in 2002.
At each annual election, commencing at the annual meeting in 2000, the
successors to the class of directors whose term expires at that time shall be
elected by stockholders to hold office for a term of three years to succeed
those directors whose term expires, so that the term of one class of directors
shall expire each year.
Notwithstanding the requirement that the three classes of directors shall be as
nearly equal in number of directors as reasonably possible, in the event of any
change in the authorized number of directors, each director then continuing to
serve as such shall nevertheless continue as a director of the class of which he
or she is a member until the expiration of his or her current term, or his or
her prior resignation, disqualification, disability or removal. There shall be
no cumulative voting in the election of the directors.
Any vacancy on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office, an increase in the number of
directorships or other cause shall be filled only by the affirmative vote of a
majority of directors then in office, although less than a quorum or by the sole
remaining director. A director so chosen shall hold office for a term expiring
at the annual meeting at which the term of the class to which he or she has been
elected expires. If the number of directors is changed, any increase or decrease
shall be apportioned among the three classes by a two-thirds (2/3) vote of the
directors then in office. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
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ARTICLE VII
The incumbent members of the Board of Directors as of the date of the filing of
this Restated Certificate of Incorporation shall continue to be directors of the
Company until their successors are duly elected and qualified in accordance with
the bylaws. The current members of the Board of Directors who shall continue to
be directors of the Company and their respective addresses are:
Name of Director Address
Giulio Agostini 3M
3M Center - Executive 220-14W-08
St. Paul, MN 55144-1000
Anthony L. Andersen H. B. Fuller Company
2424 Territorial Road
St. Paul, MN 55114
Leslie S. Biller Norwest Corporation
Sixth and Marquette
Minneapolis, MN 55479-1052
John F. Grundhofer U.S. Bancorp
601 2nd Avenue South
Suite 2900
Minneapolis, MN 55402-4302
Harold V. Haverty 701 Fourth Avenue South, Suite 300
Minneapolis, MN 55415
David S. Kidwell The Curtis L. Carlson School of Management
University of Minnesota
321 19th Avenue South
Minneapolis, MN 55455
Reatha C. King General Mills Foundation
P O Box 1113
Minneapolis, MN 55440
Thomas E. Rohricht Doherty, Rumble & Butler P.A.
2800 Minnesota World Trade Center
30 East Seventh Street
St. Paul, MN 55101-4999
Terry T. Saario Bravo!, LLC
900 Hennepin Avenue
Minneapolis, MN 55403
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<PAGE>
Robert L. Senkler Minnesota Life Insurance Company
400 Robert Street North
St. Paul, MN 55101
Michael E. Shannon Ecolab, Inc.
370 Wabasha Street
Ecolab Center
St. Paul, MN 55102
Frederick T. Weyerhaeuser Clearwater Investment Trust
332 Minnesota Street
Suite W-2090
St. Paul, MN 55101-1308
ARTICLE VIII
A director of the Company shall not be liable to the Company or the stockholders
of the Company for monetary damages for a breach of the fiduciary duty of care
as a director, except to the extent such exemption from liability or limitation
thereof is not permitted under the Minnesota Statutes, Section 300.64, as the
same currently exists or hereafter is amended. Specifically such exemption shall
not apply to:
(a) a breach of the director's duty of loyalty to the Company or its
stockholders;
(b) acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law;
(c) acts prohibited under Minnesota Statutes, Section 300.60, as the
same currently exists or is hereafter amended;
(d) payment of a dividend when the Company is insolvent;
(e) intentional neglect or refusal to perform a duty imposed by law;
(f) a transaction from which the director derives an improper personal
benefit; or
(g) an act or omission occurring prior to the date when this Restated
Certificate of Incorporation became effective.
ARTICLE IX
In no event shall any funds or investments be held in the name of any individual
who is an officer or employee of the Company. The Board of Directors shall
designate those banks and financial institutions in which the Company funds
shall be deposited. The Board by separate resolution also shall designate the
persons authorized to withdraw or transfer funds held in those accounts. No
funds shall be withdrawn or transferred from those accounts except upon the
authorization of the person or persons so authorized.
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ARTICLE X
The annual meeting of the Company shall be held on the first Tuesday in May of
each year, if not a legal holiday, and if a legal holiday, then on the next day
not a legal holiday.
ARTICLE XI
The Company is authorized to issue any or all of its policies with or without
participation in profits, savings or unabsorbed portions of premiums; to
classify such policies issued on a participating or nonparticipating basis; and
to determine the right to participate and the extent of participation of any
class or classes of such policies, at the discretion of the Board of Directors.
The declaration and crediting of any policy dividend shall be subject to
approval by majority vote of the Minnesota Mutual Companies, Inc. Board of
Directors.
ARTICLE XII
This Restated Certificate of Incorporation may be amended at any annual meeting
of the Company, or any special meeting of the Company called for that expressly
stated purpose, by the affirmative vote of a majority of the stockholders.
IN WITNESS WHEREOF, the undersigned have executed this Restated Certificate of
Incorporation.
__________________________, 1998 ________________________________
Robert L. Senkler
Chairman of the Board, President
and Chief Executive Officer
__________________________, 1998 ________________________________
Dennis E. Prohofsky
Senior Vice President, Secretary
and General Counsel
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<PAGE>
Exhibit 6(b)
BYLAWS
of
MINNESOTA LIFE INSURANCE COMPANY
As adopted on October 1, 1998
<PAGE>
BYLAWS
of
MINNESOTA LIFE INSURANCE COMPANY
TABLE OF CONTENTS
ARTICLE I STOCKHOLDERS.........................................................1
SECTION 1.1 ANNUAL MEETING.....................................................1
SECTION 1.2 SPECIAL MEETINGS...................................................1
SECTION 1.3 PLACE AND HOUR OF MEETING..........................................1
SECTION 1.4 NOTICE OF MEETINGS; RECORD DATE....................................1
SECTION 1.5 QUORUM.............................................................2
SECTION 1.6 VOTING RIGHTS......................................................2
SECTION 1.7 VOTING BY PROXY....................................................2
SECTION 1.8 VOTING OF SHARES BY CERTAIN HOLDERS................................2
ARTICLE II BOARD OF DIRECTORS..................................................3
SECTION 2.1 NUMBER.............................................................3
SECTION 2.1 NON-OVERLAPPING DIRECTORS..........................................3
SECTION 2.2 FILLING OF VACANCIES...............................................3
SECTION 2.3 PLACE OF MEETING, CORPORATE BOOKS..................................3
SECTION 2.4 REGULAR MEETINGS...................................................3
SECTION 2.5 SPECIAL MEETINGS...................................................4
SECTION 2.6 QUORUM.............................................................4
SECTION 2.7 COMPENSATION OF DIRECTORS..........................................4
SECTION 2.8 ACTION BY UNANIMOUS WRITTEN CONSENT OF DIRECTORS...................4
SECTION 2.9 REMOVAL............................................................4
ARTICLE III COMMITTEES OF THE BOARD............................................5
SECTION 3.1 CREATION OF COMMITTEES.............................................5
SECTION 3.2 APPOINTMENTS.......................................................5
SECTION 3.3 QUALIFICATIONS.....................................................5
SECTION 3.4 COMMITTEE CHAIRS...................................................5
SECTION 3.5 MEETINGS...........................................................5
SECTION 3.6 QUORUM.............................................................5
SECTION 3.7 VACANCIES..........................................................6
SECTION 3.8 MINUTES AND REPORTS................................................6
SECTION 3.9 AUDIT COMMITTEE....................................................6
SECTION 3.10 INVESTMENT COMMITTEE..............................................7
SECTION 3.11 COMMITTEE OF NON-OVERLAPPING DIRECTORS............................7
<PAGE>
ARTICLE IV OFFICERS............................................................7
SECTION 4.1 NUMBER.............................................................7
SECTION 4.2 ELECTION...........................................................7
SECTION 4.3 TERM OF OFFICE.....................................................8
SECTION 4.4 REMOVAL............................................................8
SECTION 4.5 VACANCIES..........................................................8
SECTION 4.6 DUTIES OF OFFICERS.................................................8
SECTION 4.7 ABSENCE OR DISABILITY..............................................9
ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.................9
ARTICLE VI DISPOSITION OF FUNDS AND INVESTMENTS................................9
SECTION 6.1 FUNDS AND INVESTMENTS..............................................9
SECTION 6.2 DEPOSITS..........................................................10
ARTICLE VII CORPORATE STOCK...................................................10
SECTION 7.1 CERTIFICATES FOR SHARES...........................................10
SECTION 7.2 TRANSFER OF SHARES................................................10
SECTION 7.3 TRANSFER BOOKS....................................................10
ARTICLE VIII AMENDMENTS.......................................................10
<PAGE>
BYLAWS
of
MINNESOTA LIFE INSURANCE COMPANY
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting.
The annual meeting of stockholders shall be held on the first Tuesday in May of
each year, if not a legal holiday, and if a legal holiday, then on the next day
not a legal holiday, when members of the Board of Directors shall be elected to
succeed those whose terms are then expiring and such other business shall be
transacted as may properly be brought before the meeting.
Section 1.2 Special Meetings.
Special meetings of stockholders for the transaction of such business as may
properly come before the meeting may be called by order of the Board of
Directors or by stockholders holding together at least a majority of all the
shares of the Company entitled to vote at the meeting. Business transacted at
all special meetings of stockholders shall be confined to the purpose or
purposes stated in the notice of the meeting.
Section 1.3 Place and Hour of Meeting.
Every annual meeting of stockholders shall commence at such hour as shall be
determined by the Board of Directors. Every meeting of stockholders, whether an
annual or a special meeting, shall be held at the principal office of the
Company at 400 Robert Street North in the City of Saint Paul, in the State of
Minnesota (the "Home Office"), or at such other place as may be selected by the
Board of Directors.
Section 1.4 Notice of Meetings; Record Date.
Notice of each meeting of stockholders shall be mailed to each stockholder of
the Company not less than thirty days previous to such meeting, and every such
notice shall state the day and hour and the place at which the meeting is to be
held and, in the case of any special meeting, shall indicate briefly the purpose
or purposes thereof. The Board of Directors may fix in advance a date, not less
than twenty calendar days preceding the dates of the aforenamed occurrences, as
a record date for the determination of the shareholders entitled to notice of,
and to vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
shares. In such case, such stockholders, and only such stockholders as are
stockholders of the Company of record on the record date so fixed, are entitled
to notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Company after such record date so fixed. If the
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Board of Directors shall not set a record date for the determination of the
stockholders entitled to notice of, and to vote at, a meeting of stockholders,
only the stockholders who are stockholders of record at the close of business on
the 20th day preceding the date of the meeting are entitled to notice of, and to
vote at, the meeting and any adjournment of the meeting.
Section 1.5 Quorum.
A majority of the outstanding shares entitled to notice of and to vote at a
meeting, present in person or by proxy conforming the requirements of Section
1.7 of these bylaws, shall constitute a quorum for the transaction of any
business coming before any regular or special meeting of stockholders duly and
properly called, except as provided by law, the Restated Certificate of
Incorporation of the Company, or these bylaws. If, however, such quorum of
stockholders shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a requisite number of stockholders shall be
present. At any such adjourned meeting at which the requisite number of
stockholders shall be represented, any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 1.6 Voting Rights.
Each outstanding share of Common Stock shall be entitled to one vote upon each
matter submitted to a vote at any annual or special meeting of stockholders.
Section 1.7 Voting by Proxy.
Any stockholder may vote by proxy at any meeting of stockholders. To be valid,
the proxy appointment must be in writing and must be filed with, and received
by, the Secretary at the Home Office of the Company at least five days before
the meeting at which it is to be used, exclusive of the day of the meeting, but
inclusive of the day of receipt and filing of the proxy. A proxy appointment may
be for a specified period of time not to exceed one year. A proxy may be revoked
by a stockholder at any time by written notice to the Secretary of the Company,
or by executing a new proxy appointment and filing it as required herein, or by
personally appearing and exercising his or her rights as a stockholder at any
meeting of the stockholders.
Section 1.8 Voting of Shares by Certain Holders.
(a) Shares of stock in the name of another corporation, foreign or
domestic, are to be voted by such officer, agent, or proxy as the bylaws of such
corporation may determine.
(b) Shares of stock in the name of a deceased person are to be voted by
his executor or administrator in person or by proxy.
(c) Shares of stock in the name of a fiduciary, such as guardian,
curator, or trustee are to be voted by such fiduciary either in person or by
proxy, provided the books of the Company show the stock to be in the name of
such fiduciary in such capacity.
(d) Shares of stock in the name of a receiver are to be voted by such
receiver, and shares held by, or in the control of, a receiver are to be voted
by such receiver without the
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transfer thereof into his name, if such voting authority is contained in an
appropriate order of the court by which such receiver was appointed.
(e) Shares of stock which have been pledged are to be voted by the
pledgor until the shares of stock have been transferred into the name of the
pledgee, and thereafter, the pledgee is entitled to vote the shares so
transferred.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number.
The Board of Directors shall consist of such number of Directors, not fewer than
five or more than sixteen, as the Board shall from time to time determine.
Section 2.1 Non-overlapping Directors.
Commencing with the first annual election of directors, and unless and until
Minnesota Mutual Companies, Inc. (or any successor mutual insurance holding
company) is converted from a mutual insurance holding company to a stock
company, the Board of Directors shall at all times include at least three
directors who are not concurrently serving as directors on the board(s) of
Minnesota Mutual Companies, Inc., Securian Holding Company or Securian Financial
Group, Inc. ("Non-overlapping Directors").
Section 2.2 Filling of Vacancies.
If the office of any Director becomes vacant for any reason, a majority of the
remaining Directors may choose a successor. Each Director so chosen shall hold
office until the next regular annual meeting of the shareholders and until his
or her successor has been duly elected and qualified. Not more than one-third of
the maximum number of Directors may be so chosen by the Board between regular
annual meetings of the shareholders.
Section 2.3 Place of Meeting, Corporate Books.
The Board of Directors may hold its meetings and keep the books of the Company
at the Home Office of the Company, or at such other place or places as they may
from time to time by resolution determine, except as otherwise required by law.
Section 2.4 Regular Meetings.
Regular meetings of the Board shall be held at such times and places as are
fixed from time to time by resolution of the Board. Notice need not be given of
those regular meetings of the Board held at the times and places fixed by
resolution, nor need notice be given of adjourned meetings. If either or both
the time or place of a regular meeting are other than that fixed by resolution,
a telephonic or written notice shall be given to each Director not less than
twenty-four hours prior to the time of that regular meeting.
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Section 2.5 Special Meetings.
Special meetings of the Board may be held at any time upon call either of the
Chair of the Board, or of the Chief Executive Officer, or upon written request
of any three or more directors. Except as otherwise provided, notice of a
special meeting shall be given to each director either in writing or by
telephone. Notice of at least seventy-two hours prior to the meeting time is
required if written notice is deposited in the United States mail in the City of
Saint Paul. Notice of at least twenty-four hours prior to the meeting time is
required if written notice is left at either the place of business or residence
of each director. Notice of at least six hours prior to the meeting time is
required if all directors are personally either served with a written notice or
contacted by telephone. Notice need not be given to the directors of adjourned
special meetings. Also, special meetings may be held at any time without notice
if all of the directors are present, or if, before the meeting, those not
present waive such notice in writing. Notice of a special meeting shall state
the purpose of the meeting.
Section 2.6 Quorum.
At all meetings of the Board of Directors, a majority of the directors then in
office shall be necessary and sufficient to constitute a quorum for the
transaction of business, but if, at any meeting, less than a quorum shall be
present, a majority of those present may adjourn the meeting from time to time,
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Restated Certificate of
Incorporation of the Company or by these bylaws.
Section 2.7 Compensation of Directors.
Members of the Board of Directors, who are not salaried officers of the Company,
shall receive such annual compensation as shall be fixed from time to time by
resolution of the Board of directors; and, in addition, the directors who are
not salaried officers of the Company shall receive a sum in such amount as shall
be fixed from time to time by resolution of the Board of Directors, and the
expenses of attendance, if any, for attendance at each regular or special
meeting of the Board, whether or not an adjournment be had because of the
absence of a quorum.
Section 2.8 Action by Unanimous Written Consent of Directors.
If all the directors severally or collectively consent in writing to any action
taken or to be taken by the directors, such consents have the same force and
effect as a unanimous vote of the directors at a meeting duly held, and may be
stated as such in any certificate or document filed with the Secretary of State
of Minnesota or any other state in the United States of America or other
Country. The Secretary of the Company shall file such consents with the minutes
of the meetings of the Board of Directors.
Section 2.9 Removal.
Any director or the entire Board of Directors may be removed at any time but
only for cause or pursuant to the Company's retirement policy in effect when the
director was first elected.
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<PAGE>
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1 Creation of Committees.
The following designated standing committees of the Board are hereby authorized
and created: Audit, Investment, and Non-overlapping Directors. In addition, the
Board is authorized to create any other committee or committees of the Board as
the Board from time to time deems necessary. The name, duration and duties of
each other committee and the number of members thereof shall be as prescribed in
the action creating the committee. In the event the Board of Directors creates
an Executive Committee invested with the full powers of the Board of Directors
between meetings of the Board of Directors, then that Committee must have at
least the same proportion of Non-overlapping Directors as does the full Board of
Directors.
Section 3.2 Appointments.
The members of each standing Board committee shall consist of those Directors
appointed by the Board of Directors. Each Director appointed to a Board
committee shall continue to serve on that committee at the will and pleasure of
the Board for the period specified in his or her appointment or until his or her
earlier death, resignation or removal.
Section 3.3 Qualifications.
Each Director is qualified to be appointed and successively reappointed to one
or more committees.
Section 3.4 Committee Chairs.
The Board shall appoint one of the members of each of the Board committees to
chair that committee and, in its discretion, may also appoint one of the members
of each of the committees to serve as a vice chair of that committee. If neither
the committee chair nor the committee vice chair is present at a meeting of a
committee, the committee members present at that committee meeting shall elect
another committee member to chair that meeting.
Section 3.5 Meetings.
Each committee shall meet at such times as the chair of that committee may
designate or as a majority of that committee may determine, subject to a minimum
of not less than two meetings per calendar year.
Section 3.6 Quorum.
A majority of each Board committee shall constitute a quorum at each meeting of
that committee. At any meeting of a committee at which a quorum is present, the
committee may continue to transact business until adjournment, even though
committee member(s) may have left the meeting so that less than a quorum is
present at the meeting. If a quorum is not present for a committee meeting, the
chair of that committee may request the Board to appoint a sufficient number of
other directors to serve as members of the committee only for that meeting, so
as to obtain a quorum. If the Board makes the requested appointments, any action
so taken at the committee meeting shall be valid and binding.
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<PAGE>
Section 3.7 Vacancies.
In the case of the death, resignation or removal of a member of a committee, the
Board may appoint another Director to fill the vacancy so created on that
committee for the balance of the unexpired appointment. The appointment shall be
subject to the qualifications set forth for that committee.
Section 3.8 Minutes and Reports.
Each committee shall keep a written record of its acts and proceedings and shall
submit that record to the Board of Directors at a regular meeting of the Board
and at such other times as requested by the Board or when a majority of the
committee deems it desirable to do so. Failure to submit a record will not,
however, invalidate any action taken by the committee prior to the time the
record of the action was, or should have been, submitted to the Board. The
minutes of each committee shall be recorded by the person designated by the
chair of that committee.
Section 3.9 Audit Committee.
The Audit Committee shall consist of not fewer than four directors that are not
officers or employees of Minnesota Mutual Companies, Inc. or any of its
subsidiaries. The committee shall have the following powers and duties:
(a) Annually recommend to the Board a firm of independent certified
public accountants to audit the Company's books, records and accounts.
(b) Approve the scope of audits to be conducted by the independent
certified public accountants, taking into account the principal risks inherent
in the Company's business and the recommendations from the independent
accountants as to scope of audit.
(c) Review all recommendations made by the independent certified public
accountants in their audit reports to the Board.
(d) Approve the scope of audits to be conducted by the Company's
internal auditors and review the reports of those audits.
(e) Review the reports which result from the examinations of the
Company conducted by state insurance authorities.
(f) Review corporate litigation involving extra-contractual damages.
(g) Periodically review the Company's plans for data security and
disaster recovery.
(h) Advise the Board of the results of the committee's reviews and
recommendations resulting therefrom.
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<PAGE>
Section 3.10 Investment Committee.
The Investment Committee shall consist of not fewer than four directors and
shall have the following powers and duties which shall be exercised not less
than once every twelve months:
(a) Review the written investment policy for the Company investments,
recommend changes thereto, and submit to the Board for its approval and adoption
the policy and procedures for the ensuing twelve months.
(b) Review all investments of Company funds, including their
acquisition and sale and report findings to the Board.
(c) Furnish the Board with summaries of investment transactions.
(d) Review compliance with the written investment policy and valuation
procedures and submit findings to the Board.
Section 3.11 Committee of Non-Overlapping Directors.
The Committee of Non-overlapping Directors shall consist of not fewer than three
Non-overlapping Directors (as described in Section 2.1 of these bylaws) and
shall have the following powers and duties:
(a) Review all agreements and material transactions between and among
the Company, its affiliates and subsidiaries to assure that such agreements and
transactions are fair and reasonable and that they comply with Minnesota
Statutes, Section 60D, and all Acts amendatory thereof or additional thereto.
For purposes of this section, the term "material" shall have the definition set
forth in Minnesota Statutes, Section 60D.19, subd. 4, as it may be amended from
time to time.
(b) Such other powers and duties as determined by the Board of
Directors.
ARTICLE IV
OFFICERS
Section 4.1 Number.
The officers of the Company shall be a Chief Executive Officer, a President, one
or more Vice Presidents, a Treasurer, an Actuary, a Controller, a Secretary, and
one or more Assistant Secretaries. In addition, there may be such other officers
as the Board of Directors from time to time may deem necessary. One individual
may hold two or more offices, except those of President and Secretary.
Section 4.2 Election.
Officers shall be elected or appointed by the Board of Directors.
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Section 4.3 Term of Office.
Each officer shall serve for the term stated in his or her election or
appointment or until his or her earlier death, resignation or removal.
Section 4.4 Removal.
Any officer may be removed from office, with or without cause, at any time by
the affirmative vote of the majority of the Board of Directors then in office.
Section 4.5 Vacancies.
Any vacancy in any office from any cause may be filled by the Board of Directors
at its next meeting.
Section 4.6 Duties of Officers.
The duties of the officers shall be as follows:
(a) Chief Executive Officer. The Chief Executive Officer shall have
general active management of the business of the Company and, in the absence of
the Chair of the Board, shall preside at all meetings of the members and the
Board of Directors, and shall see that all orders and resolutions of the Board
are carried into effect. Except where, by law, the signature of the President is
required, the Chief Executive Officer shall possess the same power as the
President to sign and execute all authorized certificates, contracts, bonds, and
other obligations of the Company.
(b) President. The President, in the absence of the Chair of the Board
and the Chief Executive Officer, shall preside at all meetings of the members
and the Board of Directors. The President shall be the chief administrative
officer of the Company and shall have the power to sign and execute all
authorized certificates, contracts, bonds, and other obligations of the Company.
The President also shall perform such other duties as are incident to the office
or are properly required of him or her by the Board or the Chief Executive
Officer.
(c) Vice Presidents. Each Vice President will perform those duties as
from time to time may be assigned by the Chief Executive Officer. In the absence
of the President, a Vice President designated by the Board of Directors shall
perform the duties of the President. A Vice President shall have the power to
sign and execute all authorized certificates, contracts, bonds and other
obligations of the Company. One or more of the Vice Presidents may be entitled
Executive Vice President, Senior Vice President, Vice President, Second Vice
President, or such other variation thereof as may be designated by the Board.
(d) Secretary. The Secretary shall give notice and keep the minutes of
all meetings of the members and of the Board of Directors and shall give and
serve all notices of the Company. The Secretary or an Assistant Secretary shall
have the power to sign with the Chief Executive Officer, President, or any Vice
President in the name of the Company all authorized certificates, contracts,
bonds, or other obligations of the company and may affix the Company Seal
thereto. The Secretary shall have charge and custody of the books and papers of
the Company and in general shall perform all duties incident to the office of
Secretary, except as
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otherwise specifically provided in these bylaws, and such other duties as from
time to time may be assigned by the Chief Executive Officer. If Assistant
Secretaries are elected or appointed, they shall have those powers and perform
those duties as from time to time may be assigned to them by the Chief Executive
Officer and, in the absence of the Secretary, one of them shall perform the
duties of the Secretary.
(e) Treasurer. The Treasurer shall have those powers and shall perform
those duties as from time to time may be assigned by the Chief Executive
Officer. If Assistant Treasurers are elected or appointed, they shall have those
powers and perform those duties as from time to time may be assigned to them by
the Chief Executive Officer and, in the absence of the Treasurer, one of them
shall perform the duties of the Treasurer.
(f) Controller. The Controller shall have those powers and shall
perform those duties as from time to time may be assigned by the Chief Executive
Officer.
(g) Actuary. The Actuary shall have those powers and shall perform
those duties as from time to time may be assigned by the Chief Executive
Officer.
(h) Other Officers. Other officers elected or appointed by the Board of
Directors shall have those powers and perform those duties as from time to time
may be assigned by the Chief Executive Officer.
Section 4.7 Absence or Disability.
In the case of the absence or disability of any officer of the Company or of any
person authorized to act in his or her place during such period of absence or
disability, the Board of Directors from time to time may delegate the powers and
duties of such officer to any other officer, or any Director, or any other
person whom they may select.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS and EMPLOYEES
The Company shall, to the fullest extent permitted under Minnesota Statutes,
Section 300.083, as the same currently exists or hereafter is amended, indemnify
(and advance expenses to) the directors, officers and employees of this Company.
The provisions of this Article shall not be deemed to limit or preclude
indemnification of a director, officer or employee by the Company for any
liability which has not been eliminated by the provisions of this Article.
ARTICLE VI
DISPOSITION OF FUNDS AND INVESTMENTS
Section 6.1 Funds and Investments.
All funds and investments of the Company shall be held in the name of "Minnesota
Life Insurance Company" or its nominee or as otherwise provided in accordance
with applicable Minnesota Statutes, as amended from time to time. In no event
shall any funds or investments be held in the name of any individual who is an
officer or employee of the Company.
-9-
<PAGE>
Section 6.2 Deposits.
The Board of Directors shall designate those banks and financial institutions in
which Company funds shall be deposited. The Board by separate resolution also
shall designate the persons authorized to withdraw or transfer funds held in
those accounts. No funds shall be withdrawn or transferred from those accounts
except upon the authorization of the person or persons so authorized.
ARTICLE VII
CORPORATE STOCK
Section 7.1 Certificates for Shares.
The Board of Directors is to prescribe the form of the certificate(s) of stock
of the Company. The certificate is to be signed by the President or Vice
President and by the Secretary, Treasurer, or Assistant Secretary or Assistant
Treasurer, is to be sealed with the seal of the Company and is to be numbered
consecutively. The name of the owner of the certificate, the number of shares of
stock represented thereby, and the date of issue are to be recorded on the books
of the Company. Certificates of stock surrendered to the Company for transfer
are to be canceled, and new certificates of stock representing the transferred
shares issued. New stock certificates may be issued to replace lost, destroyed
or mutilated certificates upon such terms and with such security to the Company
as the Board of Directors may require.
Section 7.2 Transfer of Shares.
Shares of stock of the Company may be transferred on the books of the Company by
the delivery of the certificates representing such shares to the Company for
cancellation, and with an assignment in writing on the back of the certificate
executed by the person named in the certificates as the owner thereof, or by a
written power of attorney executed for such purpose by such person. The person
registered on the books of the Company as the owner of shares of stock of the
Company is deemed the owner thereof and is entitled to all rights of ownership
with respect to such shares.
Section 7.3 Transfer Books.
Transfer books are to be maintained under the direction of the Secretary,
showing the ownership and transfer of all certificates of stock issued by the
Company.
ARTICLE VIII
AMENDMENTS
These bylaws may be amended by the Board of Directors or by the stockholders at
a regular meeting, or at a special meeting called for that expressly-stated
purpose, by the affirmative vote of a majority of the stockholders present, in
person or by proxy, at the meeting.
-10-
<PAGE>
EXHIBIT 10(a)
<TABLE>
<CAPTION>
=================================================================================================================================
MINNESOTA LIFE APPLICATION PART 1
- ---------------------------------------------------------------------------------------------------------------------------------
Minnesota Life Insurance Company . Individual Policy Issues . 400 Robert Street North . St. Paul, Minnesota 55101-2098
- ---------------------------------------------------------------------------------------------------------------------------------
ALL APPLICATIONS
PERSONAL INFORMATION
Proposed Insured's Name (Last, First, Middle Name) Date of Birth (Mo., Day, Yr.)
| | - - |
- ----------------------------------------------------------------------------------------------------------------------------------
[_] Check if new address and you
want our records to reflect this.
Street address or RFD route
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
City or Town County State Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
Social Security Number Birthplace (State or Country if outside US)
- ----------------------------------------------------------------------------------------------------------------------------------
Sex [_] Male [_] Female Home Telephone ( ) Business Telephone ( )
- ----------------------------------------------------------------------------------------------------------------------------------
Driver's License Number Indicate here for special dating
- ----------------------------------------------------------------------------------------------------------------------------------
Employer's name
- ----------------------------------------------------------------------------------------------------------------------------------
[_] Check box if mail to be
Business address sent to business address.
- ----------------------------------------------------------------------------------------------------------------------------------
City or Town County State Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
PERSONAL HISTORY INTERVIEW
Please indicate the best day of week and time of day to reach you for your interview. Interviewers are available Monday through
Friday, 8:00am to 8:30pm central standard time.
Day: Time: Call Preference: [_] Home [_] Business
---------------------- -------------------------
Special Instructions
------------------------------------------------------------------------------------------------------------
LIFE INSURANCE
Occupational title Years in occupation Income $
- ---------------------------------------------------------------------------------------------------------------------------------
BASE POLICY INFORMATION
Basic Face amount $ Product Total annual premium or plan
- ----------------------------------------------------------------------------------------------------------------------------------
PREMIUMS PAYABLE: [_] Automatic Payment Plan # PREMIUMS PAID BY:
---------------
[_] Annual [_] Direct Monthly [_] Proposed Insured
[_] Semi-annual [_] List Bill # [_] Employer
[_] Quarterly ------------------ [_] Other (indicate name and address in
[_] Payroll Deduction # Additional Remarks, pg. 2.)
---------------
Non-Repeating Premium
Amount? Included at issue?
---------------------------------------------- ---------------------------------------------
($500.00 Minimum required)
If billable: Amount Frequency
--------------------------------------- --------------------------------------------
($200.00 Minimum per billing with a $2,400.00 minimum annual base premium.)
DIVIDEND INFORMATION
Dividend Option
-----------------------------------------------------------
Unless otherwise requested, dividends will be used to purchase: paid-up additions on permanent plans, policy or plan improvement on
Adjustable Life, and accumulations on term plans.
</TABLE>
F. MHC-3198 10-1998
<PAGE>
ADDITIONAL BENEFITS AND AGREEMENTS
<TABLE>
<S> <C>
[_] Additional Insured Agreement (Complete Family Term Agreement).............................$_________________
[_] Family Term - Children's Agreement (Complete Family Term Agreement).......................$_________________
[_] Accidental Death Benefit..................................................................$_________________
[_] Face Amount Increase Agreement............................................................$_________________
[_] Additional Term Protection (Automatically includes FX Dividend option)....................$_________________
[_] Policy Enhancement Rider (if available) _____________% (Indicate a whole number between three & ten percent)
[_] Omit Automatic Premium Loan (if available)
[_] Guaranteed Protection Waiver (if available)
[_] Waiver of Premium Agreement (if available)
[_] Accelerated Benefits Agreement (Complete Outline of Coverage F.44244)
[_] Omit Cost of Living Agreement (if available)
[_] Adjustable Survivorship Life $___________________ Designated Insured _____________________________________________
Automatic Election Option: [_] Yes [_] No
[_] Other _____________________________________________________________________________________________________________
</TABLE>
REPLACEMENT
Will this policy replace any existing life insurance or annuity(ies), or has
there been, or will there be a lapse, surrender, loan withdrawal or other
change to any existing life insurance or annuity as a result of, or in
anticipation of this application? [_] Yes [_] No
If yes, please indicate which coverage will be replaced in the box and submit
replacement forms where required.
LIFE INSURANCE IN FORCE AND PENDING. Life insurance on Proposed Insured: (if
none, insert, "None").
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Policy Business/ Pending? Will it be
Issued Amount Type of Coverage Full Company Name Number Personal Yes No Replaced?
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
BENEFICIARIES
Beneficiaries: Beneficiaries may be labeled class 1,2, or 3; the class
determines the order in which death proceeds should be paid. If there is more
than one surviving Beneficiary in the same class, they will share benefits
equally, unless we are told otherwise. The Owner may change any Beneficiary
unless designated "Irrevocable" below. All of this is subject to the complete
Beneficiary provisions in the policy. If the Beneficiary is a Trust, please
indicate the date it was established and give its complete name.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Print Given Name, Middle Initial and Surname (if Corporate Relationship to
Class Beneficiary, give full name and State of incorporation) Insured
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL REMARKS FOR POLICY ISSUES OR UNDERWRITING:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F. MHC-3198 2
<PAGE>
DISABILITY AND OVERHEAD EXPENSE INSURANCE
POLICY TYPE AND INFORMATION
[_] Level Disability. [_] Annual Renewable Disability Income (ARDI).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Coverage Amount Benefit Period Waiting Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base $
- ----------------------------------------------------------------------------------------------------------------------
ADMIA $
- ----------------------------------------------------------------------------------------------------------------------
ADMIA $
- ----------------------------------------------------------------------------------------------------------------------
Supplementary Income Benefit $ [_] to 365 days
- ----------------------------------------------------------------------------------------------------------------------
Social Security Agreement $ //////////////////////////////// 365 days
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PLAN OF COVERAGE: (Complete one section - A or B)
A. [_] Disability Income B. [_] Disability Income
Insurance Policy Insurance Policy Plus
(all occupation classes) (class *P, 1*, *S, 1 only)
OPTIONAL AGREEMENTS
[_] Inflation Protection Agreement: [_] Future Income Protection Agreement:
[_] 4% [_] 6% $_____________ of aggregate monthly
benefit
OCCUPATION
A. Class [_]*P [_]1* [_]*S [_]1 [_]2 [_]3
B. Occupational title and/or professional designation
--------------------------
Nature of business
-----------------------------------------------------------
OCCUPATIONAL DETAILS (Provide description of daily job activities and percentage
of time spent on each)
- --------------------------------------------------------------------------------
Duties % Duties %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. How many years have you been employed by your current employer?
--------------
B. How many hours do you work per week on average?
------------------------------
C. How many full-time employees report to you?
----------------------------------
D. Do you have any part-time or other full-time jobs?
---------------------------
- --------------------------------------------------------------------------------
PREVIOUS EMPLOYMENT
Please list your other jobs within the past ten years.
- --------------------------------------------------------------------------------
Employer Dates Employed
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
F. MHC-3198 3
<PAGE>
INCOME - Fill in amounts that are (or will be) shown on the Proposed Insured's
individual and/or business income tax forms and supporting schedules. Note: Do
not list income that is not reported to the IRS. Explain any significant
fluctuations between years in Remarks. Ask for third party income verification
on all disability applications.
(Complete Sections A - G)
<TABLE>
<CAPTION>
Current Year Last Calendar Two Calendar
A. EARNED INCOME (Fill in all which apply.) 19__ Year 19__ Years ago 19__
<S> <C> <C> <C>
1. Non-owner Employee's salary, bonus, and
profit sharing (Form W-2). ------------- -------------- --------------
2. a. Owner of Regular or S Corporation's
salary and bonus (Form W-2). ------------- -------------- --------------
B. Owner's share of after tax corporate
profits or losses (after expenses)
provided the Proposed Insured has
significant ownership and is active in
the corporation (Form 1120 or 1120S).
If losses, indicate with parentheses. ------------- -------------- --------------
C. Pension plan or other contributions
that would cease if the Proposed
Insured became disabled. ------------- -------------- --------------
3. Sole Proprietor net income, after
expenses (Form 1040 Schedule C). ------------- -------------- --------------
4. Share of partnership net income, after
expenses (Proposed Insured's Schedule
K-1 of Form 1040 Schedule E.) ------------- -------------- --------------
5. Other earned income (describe in Remarks) ------------- -------------- --------------
Total earned income ------------- -------------- --------------
B. UNEARNED INCOME - This includes capital gains,
interest, dividends, tax exempt unearned
income, income from other investments, net
rental income, pensions, annuities, and alimony.
Itemize in Remarks if exceeding 15% of earned
income of $125,000. ------------- -------------- --------------
</TABLE>
<TABLE>
<S> <C> <C>
C. NET WORTH - Is the Proposed Insured's net worth, exclusive of primary
residence, greater than $4,000,000? [_] Yes [_] No
If yes, itemize the Net Worth in the Remarks.
D. Premiums will be paid by: [_] Proposed Insured
[_] Employer - Will any portion of the premium be
included in your taxable income? [_] Yes [_] No
If yes, provide details in Remarks.
[_] Other (indicate name and address in Remarks)
(Note: Individual paid Issue and Participation limits should be used for
those Proposed Insureds who are owners in a Sole Proprietorship, Partnership,
or S Corporation. Employer paid Issue and Participation Limits can be used
for Owners of a Regular Corporation when the Corporation is paying the
premium and for Non-Owner Employees when the employer is paying the premium.)
E. Is the Proposed Insured self-employed, including any partial ownership? [_] Yes [_] No
(If yes, answer questions F and G.)
F. For tax purposes the Proposed Insured's business is set up as a/an:
[_] Sole Proprietorship [_] Partnership [_] Regular Corporation [_] S Corporation
</TABLE>
G. What is the Proposed Insured's ownership? ____%
REMARKS:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: If this application is an exercise for guaranteed coverage (such as GFIA,
AMIO or FIPA) on an existing policy, indicate policy number and type of
exercise.
----------------------------------------------------------------
-------------------------------------------------------------------------
F. MHC-3198 4
<PAGE>
REPLACEMENT
A. Will you drop any existing disability, overhead expense, or any other
accident and sickness insurance when this policy is issued? [_] Yes [_] No
B. If yes, I agree upon accepting this policy to drop the coverage indicated
below. NOTE: Please submit replacement forms where required.
DISABILITY AND OVERHEAD EXPENSE IN FORCE OR PENDING (If none, insert "None").
List Disability with all Companies including Group, Pension or Retirement Plans,
Salary Continuation Plans, Association Plans, Credit Insurance Plans, Overhead
Expense Plans, and any other Disability or Health Coverage. Also include
coverage for which the Proposed Insured will become eligible in the next five
years after a qualifying period of employment has been met.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
Paid To Policy Benefit Elimination Pending? Will It Be
Date Amount Type Company Number Period Period -------- Replaced?
Yes No
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
DIVIDENDS: Dividends paid in cash unless otherwise requested below.
[_] Reduce (not available on Automatic Payment Plan) [_] Accumulate
<TABLE>
<S> <C>
PREMIUM PAYABLE: DISCOUNTS (Choose one selection from A):
[_] Annual [_] Direct Monthly A. [_] Association Discount #
-----------------------------
[_] Semi-annual [_] List Bill # [_] Employer/Employee Discount # (Include F. 37443)
------------ ------------
[_] Quarterly [_] Payroll Deduction # [_] Professional Group Discount #
------------- ------------------------------
[_] Automatic Payment Plan #
---------------------
B. [_] Income Documentation Discount (Complete page 8
and submit appropriate income documentation.)
</TABLE>
F. MHC-3198 5
<PAGE>
ALL APPLICATIONS
SPECIAL ACTIVITIES AND OTHER INSURANCE ACTIVITY: (Provide details in Additional
Remarks).
<TABLE>
<S> <C>
A. Do you plan to change jobs within the next 12 months? (If yes, please advise the industry, [_] Yes [_] No
company and location that you are planning to go to. If you don't know the specifics yet but
are contemplating such a change, please provide as many details as you can.)
--------------------------------------------------------------------------------------------------- [_] Yes [_] No
B. Do you plan to travel or reside outside the U.S. in the next three years? If yes, please
provide the country(s) and city(s) you will be visiting or moving to and whether this is for
business or pleasure. _____________________________________________________________________________
How long will you be there? _________How frequently will you be visiting if more than once?________
C. Have you, within the last five years, or do you plan in the next six months, to pilot a plane? [_] Yes [_] No
(If yes, complete the Aviation Statement form F. 4883.)
D. Have you, within the last five years, or do you plan in the next six months, to engage in sky [_] Yes [_] No
diving, organized vehicle racing, mountain/rock climbing, hang gliding, underwater diving,
bungee jumping, or other activity requiring special equipment and/or training? (If yes,
complete Avocation Statement F. 11393.)
E. Have you, within the last five years, been declined, modified, rated or been issued [_] Yes [_] No
a rider for life or disability insurance?
F. Within the last year, have you missed any work due to illness or injury? [_] Yes [_] No
G. Are you in the Armed Forces, National Guard, or Reserves? [_] Yes [_] No
(If yes, complete Military Statement F. 4883.)
H. Have you applied elsewhere for insurance within the last six months? [_] Yes [_] No
DRIVING AND CONVICTION HISTORY: (Provide details in Additional Remarks.)
A. In the last five years, have you been charged with a driving while intoxicated violation, had [_] Yes [_] No
your driver's license restricted or revoked, or been cited with a moving violation?
B. Except for traffic violations, have you ever been convicted? [_] Yes [_] No
PREPAYMENT: MAKE CHECKS PAYABLE TO MINNESOTA LIFE
A. Have you paid money to the agent, or has the Payroll Deduction Authorization or Government [_] Yes [_] No
Allotment been completed?
</TABLE>
NOTE: Money should not be taken by the agent if there is a history of heart
----------
disease, stroke, cancer, or diabetes or if the Proposed Insured has been
rated or declined for insurance in the past. If money is taken on these
or other impaired risks, it will be returned to the client, until
underwriting is completed. Checks or money orders collected for Variable
Adjustable Life must be issued by the Client, made payable to Minnesota
Life, and sent directly to the Home Office.
<TABLE>
<S> <C>
Amount paid for: Life Insurance $___________________ Disability or Overhead Expense Insurance $____________________
B. Have you received a receipt? [_] Yes [_] No
</TABLE>
ADDITIONAL REMARKS:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER
The Proposed Insured will be the Owner of any policy issued on this application,
unless requested otherwise below. The Owner has every benefit, right or
privilege given the Insured by policy terms. Policy transactions between
Minnesota Life and the Owner do not require the Insured's notice or consent.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
POLICYOWNER NAME (last, first, middle name) DATE OF BIRTH MONTH - DAY - YEAR (if other than Proposed Insured)
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
RELATIONSHIP TO PROPOSED INSURED TAX I.D. NUMBER OR SOCIAL SECURITY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
POLICYOWNER'S ADDRESS STREET OR RFD ROUTE
- -----------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------------
(if a Corporation, give the state which it is incorporated)
</TABLE>
FOR HOME OFFICE USE ONLY
Home Office Corrections or Additions - Acceptance of the policy shall ratify
changes entered here by Minnesota Life. Not to be used in CA (for Disability
only), IA, IL, KS, KY, MD, MI, MN, MO, NH, NJ, OR, PA, TX, WI, or WV for change
in age, amount, classification, plan or benefits unless agreed to in writing.
F. MHC-3198 6
<PAGE>
Exhibit 10(b)
- --------------------------------------------------------------------------------
MINNESOTA LIFE APPLICATION PART 3
AGREEMENTS, CERTIFICATION AND AUTHORIZATION
- --------------------------------------------------------------------------------
Minnesota Life Insurance Company . Individual Policy Issues
. 400 Robert Street North . St. Paul, Minnesota 55101-2098
- --------------------------------------------------------------------------------
Proposed Insured's Name (Last, First, Middle Name)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
AGREEMENTS/CERTIFICATION: I have read, or had read to me the statements and
answers recorded on Part 1 and Part 2 of my application. They are given to
obtain this insurance and are, to the best of my knowledge and belief, true and
complete and correctly recorded. I understand that any false statement or
misrepresentation on this application may result in loss of coverage under this
policy subject to the Time Limit on Certain Defenses, incontestability
provision, and legal proceedings. I agree that they will become part of this
application and any policy issued on it. The insurance applied for will not take
effect unless the policy is issued and delivered and the full first premium is
paid while the health of the Proposed Insured remains as stated in Part 1 and
Part 2 of the application. If such conditions are met the insurance will take
effect as of the Policy Date specified in the policy; the only exception to this
is provided in the Receipt and Temporary Life Insurance Agreement, and the
Conditional Health Receipt, issued if the premium is paid in advance. No deposit
has been made nor any premium paid on the policy applied for, either in cash or
by extension of credit, except as stated on this application.
VARIABLE ADJUSTABLE LIFE: I also agree that if this application is for a
Variable Adjustable Life policy, that Minnesota Life, if it is unable for any
reason to collect funds for units which have been allocated to a sub-account
under the policy applied for, may redeem for itself the full value of such
units. If such units are no longer available, it may recover that value from any
other units of equal value available under the policy.
I UNDERSTAND THAT THE AMOUNT OR THE DURATION OF THE DEATH BENEFIT (OR BOTH) OF
THE POLICY APPLIED FOR MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT
RESULTS OF THE SUB-ACCOUNTS OF THE SEPARATE ACCOUNT. I UNDERSTAND THAT THE
ACTUAL CASH VALUE OF THE POLICY APPLIED FOR INCREASES AND DECREASES DEPENDING ON
INVESTMENT RESULTS. THERE IS NO MINIMUM ACTUAL CASH VALUE FOR POLICY VALUES
INVESTED IN THESE SUB-ACCOUNTS.
AUTHORIZATION: I authorize any physician, medical practitioner, hospital, clinic
or other health care provider, insurance or reinsuring company, consumer
reporting agency, the Medical Information Bureau, Inc. (MIB), or employer which
has any records or knowledge of the physical or mental health of me or my minor
children, to give all such information and any other nonmedical information
relating to such persons to Minnesota Life or its reinsurers. This shall include
ALL INFORMATION as to any medical history, consultations, diagnoses, prognoses,
prescriptions or treatments and tests, including information regarding alcohol
or drug abuse, sickle cell disease and AIDS or AIDS-related conditions. To
facilitate rapid submission of such information, I authorize all said sources,
except MIB, to give such records or knowledge to any agency employed by
Minnesota Life to collect and transmit such information.
I understand this information is to be used for the purpose of determining
eligibility for insurance and may be used for determining eligibility for
benefits. I understand this information may be made available to Underwriting,
Claims and support staff of Minnesota Life. I authorize Minnesota Life or its
reinsurers to release any such information to reinsuring companies, the MIB, or
other persons or organizations performing business or legal services in
connection with my application, claim or as may be otherwise lawfully required
or as I may further authorize.
I agree this authorization shall be valid for twenty-six months from the date it
is signed.
I understand that I have the right to request and receive a copy of this
authorization and that a photocopy of this authorization shall be as valid as
the original.
I acknowledge that I have been given the Minnesota Life Consumer Privacy Notice.
(Notice Regarding Consumer Reports and Notice Regarding Medical Information
Bureau, Inc.)
Any person who, with intent to defraud or knowing that he or she is facilitating
a fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
- --------------------------------------------------------------------------------
PROPOSED INSURED DATE SIGNED CITY STATE
X
- --------------------------------------------------------------------------------
SIGNATURE OF APPLICANT (if other DATE SIGNED CITY STATE
than Proposed Insured) Give title
if signed on behalf of a business.
X
- --------------------------------------------------------------------------------
WITNESS/REGISTERED REPRESENTATIVE (licensed resident agent)
- --------------------------------------------------------------------------------
SIGNATURE OF PARENT, CONSERVATOR, OR GUARDIAN APPLICANTS TELEPHONE NUMBER
(on juvenile applications) (if other than Proposed Insured)
X
- --------------------------------------------------------------------------------
F. MHC-42663 10-1998
<PAGE>
Exhibit 10(c)
================================================================================
POLICY CHANGE APPLICATION PART 1
MINNESOTA LIFE UNDERWRITING REQUIRED
- --------------------------------------------------------------------------------
Minnesota Life Insurance Company . Individual Policyowner Services
. 400 Robert Street North . St. Paul, Minnesota 55101-2098
- --------------------------------------------------------------------------------
ALL APPLICATIONS
PERSONAL INFORMATION
- --------------------------------------------------------------------------------
Policy Number(s) INSURED'S BIRTHPLACE
(State or Country if outside US)
- --------------------------------------------------------------------------------
INSURED'S NAME INSURED'S SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
INSURED'S OCCUPATION INSURED'S INCOME
- --------------------------------------------------------------------------------
OWNER'S NAME OWNER'S SOCIAL SECURITY/TAX I.D. NUMBER
- --------------------------------------------------------------------------------
OWNER'S ADDRESS
(Street, City, State, Zip) [_] Check if new address and you
want our records to reflect
this.
- --------------------------------------------------------------------------------
EFFECTIVE DATE [_] Current AMOUNT SUBMITTED: MAKE CHECKS POLICY SENT
OF CHANGE [_] Other PAYABLE TO MINNESOTA LIFE [_] Yes
(Indicate month $ [_] Receipt given [_] No
and reason)
- --------------------------------------------------------------------------------
PERSONAL HISTORY INTERVIEW
Please indicate the best day of week and time of day to reach you for your
interview. Interviewers are available Monday through Friday, 8:00 am to 8:30 pm
central standard time.
Day: Time: Call Preference [_] Home [_] Business
------------- ---------------
- --------------------------------------------------------------------------------
LIFE INSURANCE (ALL PRODUCTS)
FACE/PREMIUM ADJUSTMENTS
[_] Change face amount to $
---------------------
[_] Change annual premium amount to $
-----------
Premiums Payable
[_] Annual [_] Semi-annual
[_] Quarterly [_] Direct Monthly
[_] APP/LIST BILL/PRD #
---------------------
[_] Change plan of insurance to
----------------
[_] Credit a Non-Repeating Premium of $
---------
[_] Increase face by Non-Repeating Premium Amount
[_] Do not increase face by Non-Repeating Premium
amount
[_] All or part of the Non-Repeating Premium is the
result of surrendering or borrowing the cash value of
another policy(ies)
(Complete Replacement Section, Page 2)
Amount $
---------------------------
($500.00 Minimum required)
If billable: Frequency
--------------------------
($200.00 Minimum per billing with a
$2,400.00 minimum annual base
premium.)
[_] Partial Surrender of $
---------------------------------
(Complete Withholding Election on page 2)
[_] Maintain same face amount
[_] Reduce face amount
Send check direct to client [_] Yes [_] No
PRODUCT ADJUSTMENTS (Policy required - if policy
lost, see page 10)
Automatic Premium Loan Provision (APL), is
automatically added to rollover or conversion
unless indicated here. [_] Omit APL
[_] Convert term insurance at attained age to:
[_] Adjustable Life [_] Variable Adjustable Life
[_] Partial conversion:
[_] Retain balance [_] Surrender balance
[_] Conversion of term agreement:
Name
------------------------------------
[_] Rollover at attained age to:
[_] Adjustable Life [_] Variable Adjustable Life
(loans will be eliminated)
Please note: Waiver will be a separate premium
charge. Loan interest rate will be 8%.
[_] Combine policies and rollover at attained age to:
[_] Adjustable Life [_] Variable Adjustable Life
(loans will be eliminated)
Please note: Waiver will be a separate premium
charge. Loan interest rate will be 8%.
Policies must have same beneficiary
and owner. Complete F. MHC-17092-2a, page
15 if needed.
[_] Eliminate policy loan
(Complete Withholding Election on page 2)
[_] Maintain same face amount
[_] Reduce face amount
Please note: Dividend additions and
accumulations will be surrendered first.
F. MHC-44096 10-1998
<PAGE>
LIFE INSURANCE (CONTINUED)
BENEFIT AND AGREEMENT ADJUSTMENTS
[_] Maintain same total annual premium [_] Change total annual premium
accordingly.
<TABLE>
<CAPTION>
Change New
Add Remove Amount Amount
<S> <C> <C> <C> <C>
Accidental Death Benefit................... [_] [_] [_] $_________
Additional Insured Rider................... [_] [_] [_] $_________ (Complete Family Term Agreement)
Automatic Premium Loan..................... [_] [_]
Adjustable Survivorship Life Rider......... [_] [_] [_] $_________ Designated Life ________________
(To add, please complete
application for Designated Life)
Additional Term Protection................. [_]
Cost of Living Agreement................... [_] [_]
Face Amount Increase Agreement............. [_] [_] [_] $_________
Family Term-Children's Rider............... [_] [_] [_] $_________ (Complete Family Term Agreement)
Family Term-Spouse Rider................... [_] [_] [_] $_________ (Complete Family Term Agreement)
Guaranteed Protection Waiver............... [_] [_]
(Indicate whole
Policy Enhancement Rider.....(if available) [_] [_] [_] ________% number between
3 - 10%)
Waiver of Premium Agreement................ [_] [_]
Other...................................... [_] [_] [_] $_________
</TABLE>
OTHER ADJUSTMENTS
[_] Remove/reconsider rating
[_] Maintain same total annual premium [_] Reduce total annual premium
accordingly
[_] Change dividend option to ________
[_] Reinstate
I understand that this application may be attached to and considered part of
the policy to which it applies. Also, I understand that this policy will be
contestable, as to representations in this application, from the date of
reinstatement for the time period stated in the incontestable provision of
the policy.
WITHHOLDING FOR TAX PURPOSES - Required information for all partial surrenders
and loan eliminations.
Social Security Number or Tax I.D. of owner:____________________________
(If a correct number is not provided, the IRS requires us to withhold 31% of
any gain, irrespective of the withholding election)
Withholding election if reissue results in a taxable gain (Withholding is
automatic if no election is made):
[_] Yes, I elect withholding [_] No, I do not elect withholding
REPLACEMENT
Has there been, or will there be a lapse, surrender, loan withdrawal or other
change to any existing life insurance or annuity as a result of, or in
anticipation of this application? [_] Yes [_] No
If yes, please indicate which coverage will be replaced in the box below and
submit replacement forms where required.
LIFE INSURANCE IN FORCE AND PENDING (Complete for face increase and/or
replacement requests.)
Do you have any life insurance in force or pending? [_] Yes [_] No
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Policy Business/ Pending? Will it be
Issued Amount Type of Coverage Full Company Name Number(s) Personal Yes No Replaced?
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
F.MHC-44096 2
<PAGE>
DISABILITY AND OVERHEAD EXPENSE INSURANCE
PRE-DI '90 SERIES ADJUSTMENTS
NOTE: . Any increases to pre-DI '90 policies must be done as an exchange to
the DI '90 series by completing the lower half of this page.
. GFIA and AMIO exercises must be added to an existing DI '90 series
policy or submitted as a new application.
<TABLE>
<CAPTION>
Decrease New Benefit Waiting
Risk Remove Amount Period Period
<S> <C> <C> <C> <C> <C>
Base..................................................... [_] $____________ _______ _______
Additional Disability Monthly Income Agreement........... [_] [_] $____________ _______ _______
Additional Disability Monthly Income Agreement........... [_] [_] $____________ _______ _______
Additional Disability Monthly Income Agreement........... [_] [_] $____________ _______ _______
Guaranteed Future Insurability Agreement................. [_] [_] RETAIN
Supplementary Income Benefit............................. [_] [_] $____________
Social Security Agreement................................ [_] [_]
Proportionate Benefit Agreement.......................... [_]
Additional Monthly Income Option......................... [_]
Monthly Income Benefit Escalator......................... [_] [_] [_] 4% [_] 6%
Monthly Income Benefit Escalator......................... [_] [_] 4% [_] 6% [_] 8% [_] 10%
OVERHEAD EXPENSE POLICIES ONLY:..........................
Base..................................................... $____________ _______ _______
Cost of Living Agreement................................. [_]
Replacement Expense Agreement............................ [_]
Transitional Disability Benefit Agreement................ [_]
</TABLE>
DI '90 SERIES
PRODUCT ADJUSTMENTS (Policy required--if policy lost, see page 10)
[_] Exchange pre-DI '90 Level Rate policy(ies) to DI-'90 Level Rate (Indicate
Plan of Coverage below)
[_] Exchange pre-DI '90 Step Rate policy(ies) to DI '90 Annual Renewable
Disability Income (ARDI) (Indicate Plan of Coverage below)
[_] Change Pre-DI '90 Step Rate or DI '90 ARDI policy(ies) of DI '90 Level Rate
Policy. (Indicate Plan of Coverage below) Premiums will be calculated at
attained age.
[_] Change DI '90 Series policy Plan of Coverage (Indicate Plan of Coverage
below)
PLAN OF COVERAGE (Indicate one section--A or B)
A. [_] Disability Income B. [_] Disability Income
Insurance Policy Insurance Policy Plus
(all occupation classes) (class *P, 1*, *S, 1 only)
BENEFIT AND AGREEMENT ADJUSTMENTS
<TABLE>
<CAPTION>
New Benefit Waiting
Add Change Renew Remove Amount Period Period
<S> <C> <C> <C> <C> <C> <C> <C>
Base....................................................... [_] $_______ ______ ______
Additional Disability Monthly Income Agreement*............ [_] [_] [_] $_______ ______ ______
Additional Disability Monthly Income Agreement*............ [_] [_] [_] $_______ ______ ______
Additional Disability Monthly Income Agreement*............ [_] [_] [_] $_______ ______ ______
Supplementary Income Benefit (365)......................... [_] [_] [_] $_______ ______ ______
Social Security Agreement.................................. [_] [_] [_] $_______ ______ ______
Inflation Protection Agreement............................. [_] [_] [_] [_] 4% [_] 6%
Guaranteed Increase Agreement.............................. [_] [_] [_]
Guaranteed Increase Agreement Plus......................... [_] [_] [_]
Future Income Protection Agreement......................... [_] [_] (Increase [_] $_______ aggregate
only)
</TABLE>
*[_] Check here if this is a GFIA/FIPA/AMIO exercise. From policy #____________
F.MHC-44096 3
<PAGE>
DISABILITY AND OVERHEAD EXPENSE INSURANCE (CONTINUED)
ADJUSTMENTS - ALL SERIES
[_] Remove/Reconsider
[_] Rating [_] Exclusion Rider
[_] Add Discount (choose one selection from A, and/or select B)
<TABLE>
<S> <C>
A. [_] Association Discount # B. [_] Income Documentation Discount
-------------------- (For 1994 Rates only. Complete income
[_] Employer/Employee Discount # (Include F. 37443) section on page 9 and submit
--------------- appropriate income documentation.)
[_] Professional Group Discount #
-------------
</TABLE>
[_] Reinstate
I understand that this application may be attached to and considered part of
the policy to which it applies. Also I understand that this policy will be
contestable, as to representations in this application, from the date of
reinstatement for the time period stated in the incontestable provision of
the policy.
[_] Change contract to level rate
[_] Change dividend option to: [_] Reduce premiums [_] Accumulate [_] Cash
[_] Change premium payment frequency to:
<TABLE>
<S> <C>
[_] Annual [_] Semi-annual [_] Quarterly [_] Direct Monthly (must meet requirements)
[_] Automatic Payment Plan # [_] Payroll Deduction/List Bill #
-------------- -----------------
</TABLE>
REPLACEMENT - COMPLETE FOR ALL INCREASES IN RISK
Will you drop any existing disability, overhead expense, or any other accident
and sickness insurance when this coverage is issued? [_] Yes [_] No
If yes, I agree upon accepting this policy to drop the coverage indicated below.
Note: please submit replacement forms where required.
DISABILITY AND OVERHEAD EXPENSE IN FORCE OR PENDING (If none, insert "None")
Do you have any disability insurance in force or pending? [_] Yes [_] No
If yes, complete below.
List Disability with all Companies including Group, Pension or Retirement Plans,
Salary Continuation Plans, Association Plans, Credit Insurance Plans, Overhead
Expense Plans, and any other Disability or Health Coverage. Also include
coverage for which the Insured will become eligible in the next five years after
a qualifying period of employment has been met.
<TABLE>
- -----------------------------------------------------------------------------------------------
Pending?
Paid To Policy Benefit Elimination --------- Will it be
Date Amount Type Company Number(s) Period Period Yes No Replaced?
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
OCCUPATION
A. Change Occupational Class to [_] *P [_] 1* [_] *S [_] 1 [_] 2 [_] 3
B. Occupational title and/or professional designation
-------------------------
Nature of business
-------------------------------------------------------------
OCCUPATIONAL DETAILS (Provide description of daily job activities and percentage
spent on each)
- --------------------------------------------------------------------------------
Duties Percentage
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. Number of years employed by current employer?
--------------------------------
B. How many hours do you work per week on an average?
---------------------------
C. How many full-time employees report to Insured?
------------------------------
D. Does Insured have any part-time or full-time jobs other than the above?
[_] Yes [_] No
---------------------------------------------------------------
If yes, provide full details
----------------------------------------------------
F.MHC-44096 4
<PAGE>
DISABILITY AND OVERHEAD EXPENSE INSURANCE (CONTINUED)
INCOME
Fill in amounts that are (or will be) shown on the Insured's individual and/or
business income tax forms and supporting schedules. Note: Do not list income
that is not reported to the IRS. Explain any significant fluctuations between
years in Remarks. Ask for third party income verification on all disability
applications. Complete sections A-G:
<TABLE>
<CAPTION>
Two
Current Last Calendar
Year Calendar Years
19__ Year 19__ ago 19__
<S> <C> <C> <C>
A. EARNED INCOME (Fill in all which apply.)
1. Non-owner Employee's salary, bonus, and profit sharing
(Form W-2).
---------- ---------- ----------
2. a. Owner of Regular or S Corporation's salary and bonus
(Form W-2).
---------- ---------- ----------
b. Owner's share of after tax corporate profits or losses
(after expenses) provided the Insured has significant
ownership and is active in the corporation (Form 1120
or 1120S). If losses, indicate with parentheses.
---------- ---------- ----------
c. Pension plan or other contributions that would cease
if the insured became disabled.
---------- ---------- ----------
3. Sole Proprietor net income, after expenses (Form 1040
Schedule C).
---------- ---------- ----------
4. Share of partnership net income, after expenses
(Insured's Schedule K-1 or Form 1040 Schedule E).
---------- ---------- ----------
5. Other earned income (describe in Remarks)
---------- ---------- ----------
Total earned income
---------- ---------- ----------
B. UNEARNED INCOME - This includes capital gains, interest,
dividends, tax exempt unearned income, income from other
investments, net rental income, pensions, annuities, and
alimony. Itemize in Remarks if exceeding 15% of earned
income or $125,000.
---------- ---------- ----------
C. NET WORTH is the Insured's net worth, exclusive of primary residence,
greater than $4,000,000? [_] Yes [_] No
If yes, itemize the Net Worth in Remarks.
D. Premiums will be paid by: [_] Insured
[_] Employer - Will any portion of the premium be
included in your taxable income? [_] Yes [_] No
If yes, provide details in Remarks
[_] Other (Indicate name and address in Remarks)
(NOTE: Individual paid Issue and Participation limits should be used for those Insureds who are
owners in a Sole Proprietorship, Partnership, or S Corporation. Employer paid Issue and
Participation Limits can be used for Owners of a Regular Corporation when the Corporation is
paying the premium and for Non-Owner Employees when the employer is paying the premium.)
E. Is the Insured self-employed, including any partial ownership? [_] Yes [_] No
(If yes, answer questions F and G.)
F. For tax purposes the Insured's business is set up as a/an:
[_] Sole Proprietorship [_] Partnership [_] Regular Corporation [_] S Corporation
G. What is the Insured's ownership? ____%
</TABLE>
REMARKS:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F.MHC-44096 5
<PAGE>
ALL PRODUCTS (Complete for all requests)
SPECIAL ACTIVITIES AND OTHER INSURANCE ACTIVITY (Provide details in space
provided to all yes answers)
A. Do you plan to change jobs within the next 12 months? (If [_] Yes [_] No
yes, please advise the industry, company and location that
you are planning to go to. If you don't know the specifics
yet but are contemplating such a change, please provide as
many details as you can.) _________________________________
___________________________________________________________
B. Do you plan to travel or reside outside of the U.S. in the [_] Yes [_] No
next three years? If yes, please provide the country(s) and
city(s) you will be visiting or moving to and whether this
is for business or pleasure._______________________________
___________________________________________________________
How long will you be there? _______ How frequently will you
be visiting if more than once? ____________________________
C. Have you, within the last five years, or do you plan in the [_] Yes [_] No
next six months, to pilot a plane? (If yes, complete the
Aviation Statement form F.MHC-4883.)
D. Have you, within the last five years, or do you plan in the [_] Yes [_] No
next six months, to engage in sky diving, organized vehicle
racing, mountain/rock climbing, hang gliding, underwater
diving, bungee jumping, or other activity requiring special
equipment and/or training. (If yes, complete Avocation
Statement F.MHC-1393.)
E. Have you, within the last five years, been declined, [_] Yes [_] No
modified, rated or been issued a rider for life or disability
insurance?
F. Within the last year, have you missed any work due to illness [_] Yes [_] No
or injury?
G. Are you in the Armed Forces, National Guard, or Reserves? [_] Yes [_] No
(If yes, complete Military Statement F.MHC-4883.)
H. Have you applied elsewhere for insurance within the last six [_] Yes [_] No
months?
DRIVING AND CONVICTION HISTORY: (Provide details in Additional Information)
A. In the last five years, have you been charged with a driving [_] Yes [_] No
while intoxicated violation, had your driver's license
restricted or revoked, or been cited with a moving violation?
B. Except for traffic violations, have you ever been convicted [_] Yes [_] No
of a felony?
NON-SMOKER STATEMENT
[_] Add non-smoker designation
I do not currently smoke any cigarettes, nor have I smoked cigarettes for
the past 12 months. (If tobacco other than cigarettes is used, list type
______________________ and frequency ___________________________.) I
understand that a material misrepresentation, including but not limited to
statements regarding my smoking status, may result in the cancellation of
insurance and nonpayment of any claim.
LOST POLICY DECLARATION
[_] I am not able to find the policy(ies) listed on page 1. I agree that when
the duplicate policy(ies) is issued, the original policy(ies) will be void.
I also agree that if the original policy(ies) is found, it will be returned
to the Company immediately.
[_] Issue duplicate policy [_] Issue certificate [_] Rollover/conversion/
exchange - Issue new
policy
If rollover/conversion/exchange or duplicate requested:
[_] Lost policy fee is attached [_] See "Additional Information" for
instructions on payment of lost
policy fee
ADDITIONAL INFORMATION
HOME OFFICE ENDORSEMENTS
Home Office Corrections or Additions - Acceptance of the policy shall ratify
changes entered here by the Company. Not to be used in CA (for disability
insurance only), IA, IL, KS, KY, MD, MI, MN, MO, NH, NJ, OR, PA, TX, WI or WV
for changes unless agreed to in writing.
F.MHC-44096 6
<PAGE>
Exhibit 10(d)
================================================================================
POLICY CHANGE APPLICATION PART 3
MINNESOTA LIFE AGREEMENTS, CERTIFICATION AND AUTHORIZATION
- --------------------------------------------------------------------------------
Minnesota Life Insurance Company . Individual Policyowner Services .
400 Robert Street North . St. Paul, Minnesota 55101-2098
- --------------------------------------------------------------------------------
Insured's Name (Last, First, Middle Name)
- --------------------------------------------------------------------------------
AGREEMENTS/CERTIFICATION:
I have read, or had read to me the statements and answers recorded on Part 1 and
Part 2 of my application. They are given to obtain this insurance and are, to
the best of my knowledge and belief, true and complete and correctly recorded.
I agree that they will become part of this application and any coverage issued
on it. I understand that the policy will be contestable, as to representations
in this application, from the date of reinstatement or reissue, for the time
period stated in the incontestable provision of the policy. The insurance
applied for will not take effect unless and until the policy is reissued and
delivered and the full first premium is paid while the health of the Insured
remains as stated in Part 1 and Part 2 of the Policy Change Application, as
provided in the Receipt and Temporary Life Insurance Agreement and the
Conditional Health Receipt.
VARIABLE ADJUSTABLE LIFE:
I also agree that if this application is for a Variable Adjustable Life Policy,
that Minnesota Life, if it is unable for any reason to collect funds for units
which have been allocated to a sub-account under the policy applied for, may
redeem for itself the full value of such units. If such units are no longer
available, it may recover that value from any other units of equal value
available under the policy.
I UNDERSTAND THAT THE AMOUNT OR THE DURATION OF THE DEATH BENEFIT (OR BOTH) OF
THE REISSUED POLICY APPLIED FOR MAY INCREASE OR DECREASE DEPENDING ON THE
INVESTMENT RESULTS OF THE SUB-ACCOUNTS OF THE SEPARATE ACCOUNT. I UNDERSTAND
THAT THE ACTUAL CASH VALUE OF THE REISSUED POLICY APPLIED FOR INCREASES AND
DECREASES DEPENDING ON INVESTMENT RESULTS. THERE IS NO MINIMUM ACTUAL CASH
VALUE FOR POLICY VALUES INVESTED IN THESE SUB-ACCOUNTS.
AUTHORIZATION:
I authorize any physician, medical practitioner, hospital, clinic or other
health care provider, insurance or reinsuring company, consumer reporting
agency, the Medical Information Bureau, Inc., (MIB), or employer which has any
records or knowledge of the physical or mental health of me or my minor
children, to give all such information and any other nonmedical information
relating to such persons to Minnesota Life or its reinsurers. This shall
include ALL INFORMATION as to any medical history, consultations, diagnoses,
prognoses, prescriptions or treatments and tests, including information
regarding alcohol or drug abuse, sickle cell disease, AIDS or AIDS-related
conditions. To facilitate rapid submission of such information, I authorize all
said sources, except MIB, to give such records or knowledge to any agency
employed by Minnesota Life to collect and transmit such information.
I understand this information is to be used for the purpose of determining
eligibility for insurance and may be used for determining eligibility for
benefits. I understand this information may be made available to Underwriting,
Claims and support staff of Minnesota Life. I authorize Minnesota Life or
its reinsurers to release any such information to reinsuring companies, the
Medical Information Bureau, Inc., or other persons or organizations performing
business or legal services in connection with my application, claim or as may be
otherwise lawfully required or as I may further authorize.
I agree this authorization shall be valid for twenty-six months from the date it
is signed.
I understand that I have the right to request and receive a copy of this
Authorization and that a photocopy of this authorization shall be a valid as
the Original.
I acknowledge that I have been given Minnesota Life's Consumer Privacy Notice.
(Notice Regarding Consumer Reports and Notice Regarding Medical Information
Bureau, Inc.)
Any person who, with intent to defraud or knowing that he or she is facilitating
a fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
- --------------------------------------------------------------------------------
DATE SIGNED CITY STATE
- --------------------------------------------------------------------------------
INSURED
X
- --------------------------------------------------------------------------------
OWNER (If other than insured, list title if signed on behalf of corporation)
X
- --------------------------------------------------------------------------------
ASSIGNEE (List title if signed on behalf of corporation)
X
- --------------------------------------------------------------------------------
IRREVOCABLE BENEFICIARY
X
- --------------------------------------------------------------------------------
PARENT/CONSERVATOR/GUARDIAN
X
- --------------------------------------------------------------------------------
[_] CHANGE SERVICE AGENT (Print name/code only if policy(ies) is being
reassigned)
AGENT CODE
- --------------------------------------------------------------------------------
AGENCY CODE
- --------------------------------------------------------------------------------
OWNER'S TELEPHONE NUMBER
( ) -
- --------------------------------------------------------------------------------
WITNESS/REGISTERED REPRESENTATIVE (Licensed agent where required) CODE %
X
- --------------------------------------------------------------------------------
AGENT CODE %
X
- --------------------------------------------------------------------------------
AGENT CODE %
X
- --------------------------------------------------------------------------------
F.MHC-44098 10-1998
<PAGE>
Exhibit 10(e)
VARIABLE ADJUSTABLE LIFE (ONLY)
DEATH BENEFIT OPTION SELECTION
[_] Change Death Benefit Option to: [_] Protection [_] Cash (Default to cash if
none selected)
INVESTMENT ALLOCATIONS
[_] Select Sub-Account or Guaranteed Principal Account allocation as follows:
(Increments of 5%, Minimum is 5% - must total 100%. This applies to the
investment allocation only. Complete "Separate Account Transfer" section to
transfer existing value between sub-accounts.)
Premium NRP Premium NRP
$____ ____% Growth $____ ____% Value Stock Portfolio
____ ____% Bond ____ ____% Small Company Value
____ ____% Money Market ____ ____% Global Bond
____ ____% Asset Allocation ____ ____% Index 400 Mid-Cap
____ ____% Mortgage Securities ____ ____% Macro-Cap Value
____ ____% Index 500 ____ ____% Micro-Cap Growth
____ ____% Capital Appreciation ____ ____% Real Estate Securities
____ ____% Guaranteed Principal Account ____ ____% Templeton Dev. Mkt.
____ ____% International Stock ____ ____% Other______________
____ ____% Small Company
SEPARATE ACCOUNT TRANSFERS (Minimum transfer lesser of $250 or the account
balance)
Growth $_____to_____ Value Stock Portfolio $_____to_____
Bond $_____to_____ Small Company Value $_____to_____
Money Market $_____to_____ Global Bond $_____to_____
Asset Allocation $_____to_____ Index 400 Mid-Cap $_____to_____
Mortgage Securities $_____to_____ Macro-Cap Value $_____to_____
Index 500 $_____to_____ Micro-Cap Growth $_____to_____
Capital Appreciation $_____to_____ Real Estate Securities $_____to_____
Guaranteed Principal Account $_____to_____ Templeton Dev. Mkt. $_____to_____
International Stock $_____to_____ Other________________ $_____to_____
Small Company $_____to_____
SYSTEMATIC TRANSFER (DOLLAR COST AVERAGING)
If you wish to begin a systematic transfer of funds, please complete the
following section.
PART A: Transfer Option (Minimum transfer lesser of $250 or the account balance)
I wish to transfer: (Select one of the following)
[_]_______ units from the _____________________ Account. (Units must be a
positive whole number)
[_]$______ from the ___________________________ Account. (Must be a positive
whole number)
PART B: Transfer Allocation (Increments of 1%, Minimum is 1% - must total 100%)
Indicate dollar amounts only if transferring a dollar amount from Part A.
I wish the amount transferred to be allocated as follows:
DOLLAR AMOUNT OR PERCENT DOLLAR AMOUNT OR PERCENT
$____ ____% Growth $____ ____% Value Stock Portfolio
____ ____% Bond ____ ____% Small Company Value
____ ____% Money Market ____ ____% Global Bond
____ ____% Asset Allocation ____ ____% Index 400 Mid-Cap
____ ____% Mortgage Securities ____ ____% Macro-Cap Value
____ ____% Index 500 ____ ____% Micro-Cap Growth
____ ____% Capital Appreciation ____ ____% Real Estate Securities
____ ____% Guaranteed Principal Account ____ ____% Templeton Dev. Mkt.
____ ____% International Stock ____ ____% Other________________
____ ____% Small Company
PART C: FREQUENCY
I wish the transfer to occur:
[_] Monthly [_] Quarterly [_] Semi-annually [_] Annually
PART D: TRANSFER DATE (10th or 20th only)
[_] 10th [_] 20th Starting ______________ (Month and Year)
Ending ________________ (Month and Year)
F.MHC-48653 10-1998
<PAGE>
INVESTMENT SUITABILITY -- TO BE COMPLETED BY POLICYOWNER
NASD rules require inquiry concerning the financial condition of individuals
applying for variable policies. The proposed Policyowner must supply such
information so that an informed judgment may be made as to the suitability of
the investment for the Policyowner.
(Note: If the proposed Policyowner and the proposed insured are not the same,
the proposed Policyowner must complete questions 11-13 also.)
1. Employer ____________________ Address ______________________________________
Occupation ____________________________________ Years Employed _____________
2. Are you an employee of Minnesota Life or a subsidiary? [_] Yes [_] No
3. Are you a spouse or dependent child of an employee of
Minnesota Life or a subsidiary? [_] Yes [_] No
4. Are you an employee of a NASD firm? [_] Yes [_] No
5. Are you of legal age in the state of your mailing address? [_] Yes [_] No
6. Dependents: [_] Spouse [_] Children How many? _______ Ages ______________
7. Approximate: Annual Income $____ Assets $_____ Debt $____ Tax Bracket______%
Please indicate spouse's income if it should be considered in
determining suitability. $___________________
8. Who will be primarily responsible for paying the premium? __________________
9. Face amount of life insurance in force $____________________
10. Asset Breakdown:
Savings $___________ Balanced/Total Return Funds $__________
Insurance Cash Values $___________ Stock Funds $__________
Real Estate $___________ Bond Funds $__________
Business Interests $___________ Individual Stock $__________
Retirement Funds $___________ Individual Bonds $__________
Other _______________ $___________
11. Ranking of Investment Objectives (Rank 1-5, in order of importance):
______Capital Preservation/Conservation Growth _______Growth
______Current Income
______Total Return/Conservation Growth _______Aggressive Growth
12. Risk Tolerance (Check one):
[_] Low Risk [_] Moderate Risk [_] High Risk
13. Did you receive the current Variable Adjustable Life and
Funds Prospectuses? [_] Yes [_] No
14. Would you like us to send you a Statement of Additional
Information referred to in the Variable Adjustable Life
and Funds Prospectuses? [_] Yes [_] No
================================================================================
Suitability accepted by Registered Principal ___________________ Date __________
F.MHC-48653 10-1998
<PAGE>
Exhibit 10(f)
VARIABLE ADJUSTABLE LIFE ONLY
DEATH BENEFIT OPTION SELECTION
[_] Change Death Benefit option to: [_] Protection [_] Cash (Default to cash if
none selected)
INVESTMENT ALLOCATIONS
[_] Change Sub-Account or Guaranteed Principal Account allocation as follows:
(Increments of 5%, Minimum is 5% - must total 100%. This applies to the
investment allocation only. Complete "Separate Account Transfer" section
to transfer existing value between sub-accounts.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Premium NRP Partial Surrender Premium NRP Partial Surrender
$____ ____ ____% Growth $____ ____ ____% Value Stock Portfolio
____ ____ ____% Bond ____ ____ ____% Small Company Value
____ ____ ____% Money Market ____ ____ ____% Global Bond
____ ____ ____% Asset Allocation ____ ____ ____% Index 400 Mid-Cap
____ ____ ____% Mortgage Securities ____ ____ ____% Macro-Cap Value
____ ____ ____% Index 500 ____ ____ ____% Micro-Cap Growth
____ ____ ____% Capital Appreciation ____ ____ ____% Real Estate Securities
____ ____ ____% Guaranteed Principal ____ ____ ____% Templeton Dev. Mkt.
Account ____ ____ ____% Other______________
____ ____ ____% International Stock
____ ____ ____% Small Company
</TABLE>
SEPARATE ACCOUNT TRANSFERS
(Minimum Transfer lesser of $250 or the account balance)
Growth $_____to_____ Value Stock Portfolio $_____to_____
Bond $_____to_____ Small Company Value $_____to_____
Money Market $_____to_____ Global Bond $_____to_____
Asset Allocation $_____to_____ Index 400 Mid-Cap $_____to_____
Mortgage Securities $_____to_____ Macro-Cap Value $_____to_____
Index 500 $_____to_____ Micro-Cap Growth $_____to_____
Capital Appreciation $_____to_____ Real Estate Securities $_____to_____
Guaranteed Principal Account $_____to_____ Templeton Dev. Mkt. $_____to_____
International Stock $_____to_____ Other________________ $_____to_____
Small Company $_____to_____
SYSTEMATIC TRANSFER (DOLLAR COST AVERAGING)
REQUEST TYPE (CHECK BOX) COMPLETE
I wish to: [_] start a systematic transfer of funds......(Part A, B, C, D)
[_] change the transfer amount................(Part A, B)
[_] change the frequency......................(Part C)
[_] change the distribution date..............(Part D)
[_] cancel the systematic transfer
PART A: Transfer Option (Minimum transfer lesser of $250 or the account balance)
I wish to transfer: (Select one of the following)
[_]_______ units from the _____________________ Account. (Units must be a
positive whole number)
[_]$______ from the ___________________________ Account. (Must be a positive
whole number)
PART B: Transfer Allocation (Increments of 1%, Minimum is 1% - must total 100%)
Indicate dollar amounts only if transferring a dollar amount from Part A
I wish the amount transferred to be allocated as follows:
DOLLAR AMOUNT OR PERCENT DOLLAR AMOUNT OR PERCENT
$____ ____% Growth $____ ____% Value Stock Portfolio
____ ____% Bond ____ ____% Small Company Value
____ ____% Money Market ____ ____% Global Bond
____ ____% Asset Allocation ____ ____% Index 400 Mid-Cap
____ ____% Mortgage Securities ____ ____% Macro-Cap Value
____ ____% Index 500 ____ ____% Micro-Cap Growth
____ ____% Capital Appreciation ____ ____% Real Estate Securities
____ ____% Guaranteed Principal Account ____ ____% Templeton Dev. Mkt.
____ ____% International Stock ____ ____% Other________________
____ ____% Small Company
PART C: FREQUENCY
I wish the transfer to occur:
[_] Monthly [_] Quarterly [_] Semi-annually [_] Annually
PART D: TRANSFER DATE (10th or 20th only)
[_] 10th [_] 20th Starting ______________ (Month and Year)
Ending ________________ (Month and Year)
F.MHC-48654 10-1998
<PAGE>
INVESTMENT SUITABILITY - TO BE COMPLETED BY POLICYOWNER
NASD rules require inquiry concerning the financial condition of individuals
applying for variable policies. The proposed Policyowner must supply such
information so that an informed judgment may be made as to the suitability of
the investment for the Policyowner.
1. Employer ____________________ Address ______________________________________
Occupation ____________________________________ Years Employed _____________
2. Are you an employee of Minnesota Life or a subsidiary? [_] Yes [_] No
3. Are you a spouse or dependent child of an employee of
Minnesota Life or a subsidiary? [_] Yes [_] No
4. Are you an employee of a NASD firm? [_] Yes [_] No
5. Are you of legal age in the state of your mailing address? [_] Yes [_] No
6. Dependents: [_] Spouse [_] Children How many? _______ Ages ______________
7. Approximate: Annual Income $____ Assets $_____ Debt $____ Tax Bracket _____%
Please indicate spouse's income if it should be considered
in determining suitability. $____________
8. Who will be primarily responsible for paying the premium? __________________
9. Face amount of life insurance in force? $____________________
10. Asset Breakdown:
Savings $___________ Balanced/Total Return Funds $__________
Insurance Cash Values $___________ Stock Funds $__________
Real Estate $___________ Bond Funds $__________
Business Interests $___________ Individual Stocks $__________
Retirement Funds $___________ Individual Bonds $__________
Other _______________ $___________
11. Ranking of Investment Objectives (Rank 1-5, in order of importance):
______ Capital Preservation/Conservative Growth _______ Growth
______ Current Income
______ Total Return/Conservative Growth _______ Aggressive Growth
12. Risk Tolerance (Check one):
[_] Low Risk [_] Moderate Risk [_] High Risk
13. Did you receive the current Variable Adjustable Life and
the Funds Prospectuses? [_] Yes [_] No
14. Would you like us to send you a Statement of Additional
Information referred to in the Variable Adjustable Life
and Funds Prospectuses? [_] Yes [_] No
================================================================================
Suitability Accepted by Registered Principal ___________________ Date __________
<PAGE>
Exhibit 99.H May 1999
DESCRIPTION OF MINNESOTA LIFE
INSURANCE COMPANY'S ISSUANCE, TRANSFER
AND REDEMPTION PROCEDURES FOR POLICIES
PURSUANT TO RULE 6e-2(b)(12)(ii)
AND
METHOD OF COMPUTING ADJUSTMENTS IN
PAYMENTS AND CASH VALUES OF POLICIES
UPON CONVERSION TO FIXED BENEFIT
POLICIES PURSUANT TO RULE 6e-2(b)(13)(v)(B)
This document sets forth the administrative procedures established by Minnesota
Life Insurance Company ("we", "our", "us") in connection with the issuance of
our Variable Adjustable Life insurance policy ("policy"), the transfer of assets
held thereunder, and the redemption by owners of their interests in those
policies. This document also explains the method that we will follow when a
policy is exchanged for a fixed benefit insurance policy as provided by the
policy provisions and subject to Rule 6e-2(b)(13)(v)(B).
I. Procedures Relating to Issuance and Purchase of the Policies
------------------------------------------------------------
Persons wishing to purchase a policy must send a completed application to
us at our home office. The minimum face amount that we will issue on a
policy is $50,000; the annual base premium on each policy must be at
least $300. The minimum plan of insurance at policy issue is a term plan
which has a level death benefit for a period of ten years. If the
insured's age at original issue is over age 55, the minimum plan of
protection will be less than ten years, as described in the table below:
-1-
<PAGE>
<TABLE>
<CAPTION>
Minimum Plan
Issue Age (in years)
--------- ----------
<S> <C>
56 9
57 8
58 7
59 6
60 or greater 5
</TABLE>
The policy must be issued on an insured who is no more than age 85. Before
issuing any policy, we will require evidence of insurability satisfactory
to us, which in some cases will require a medical examination. Persons who
satisfy the underwriting requirements are offered the most favorable
premium rates, while a higher premium is charged to persons with a greater
mortality risk. Acceptance of an application is subject to our
underwriting rules and we reserve the right to reject an application for
any reason.
Guaranteed maximum cost of insurance charges will vary by age, sex and risk
class. We use the male, female and unisex 1980 Commissioners Standard
Ordinary Mortality Tables ("1980 CSO"), as appropriate. The unisex tables
are used in circumstances where legal considerations require the
elimination of sex-based distinctions in the calculation of mortality
costs. Maximum cost of insurance charges are based on an assumption of
mortality not greater than the mortality rates reflected in 1980 CSO
Tables.
In most cases, we intend to impose cost of insurance charges which are
substantially lower than the maximum charges determined as described above.
In addition to the factors governing maximum cost of insurance charges,
actual charges will vary depending on the level of scheduled premiums for a
given amount of insurance, the duration of the policy and the smoking
habits of the insured.
-2-
<PAGE>
When the policy is issued, the face amount, premium, tabular cash values
and a listing of any supplemental agreements are stated on the policy
information pages of the policy form, page 1.
A. Premium Schedules and Underwriting Standards
--------------------------------------------
Premiums for the policies will not be the same for all owners.
Insurance is based on the principle of pooling and distribution of
mortality risks, which assumes that each owner pays a premium
commensurate with the insured's mortality risk as actuarially determined
utilizing factors such as age, sex, health and occupation. A uniform
premium for all insureds would discriminate unfairly in favor of those
insureds representing greater risk. Although there will be no uniform
premium for all insureds, there will be a single price for all insureds
in a given risk classification.
The policies will be offered and sold pursuant to established premium
schedules and underwriting schedules in accordance with state insurance
laws. The prospectus specifies premiums for specified illustrative
ages. In addition, the premiums to be paid by the owner of a policy
will be specified in the policy.
B. Application and Initial Premium Processing
------------------------------------------
When we receive a completed application from an applicant we will follow
certain insurance underwriting (risk evaluation) procedures designed to
determine whether the applicant is insurable. This process may involve
such verification procedures as medical examinations and may require
that further information be provided by the proposed insured before a
determination can be made. A policy cannot be issued,
-3-
<PAGE>
i.e., physically issued through our computerized issue system, until
this underwriting procedure has been completed.
These processing procedures are designed to provide immediate benefits
to the prospective owner in connection with payment of the initial
premium and will not dilute any benefit payable to any existing owner.
Although a policy cannot be issued until after the underwriting process
has been completed, the proposed insured may receive immediate insurance
coverage, if he proves to be insurable and has paid the first premium
and is covered under the terms of a conditional insurance agreement. In
accordance with industry practice, we will establish procedures to
handle errors in initial and subsequent premium payments to refund
overpayments and collect underpayments, except for de minimis amounts.
If an application is accompanied by a check for all or at least one-
twelfth of the annual premium and we accept the application, the policy
date will be the date the underwriting decision is made. The policy
date is the date used to determine subsequent policy anniversaries and
premium due dates. The issuance will take effect as of the policy date
specified in the policy, except as altered by another agreement, e.g.,
the receipt and temporary life insurance agreement. If the application
is accompanied by a check for all or at least one-twelfth of the annual
premium, the insured life may be covered under the terms of a
conditional insurance agreement until the policy date. If we accept an
application not accompanied by a check for the initial premium, the
policy will be issued with a policy date which will normally be fifteen
days after the date our underwriters approve issuance of the policy.
The initial plan premium must be received within 60 days after the issue
date. If the premium is not paid or if the application is rejected, the
policy will be cancelled and any partial premiums paid will be returned
to the applicant. In a case where there is no paid premium, there will
be no life insurance coverage provided. On delivery of the policy
within the 60 day
-4-
<PAGE>
period following issue, the applicant may obtain a policy which has a
policy date of the date when we receive the initial plan premium. In
that case the applicant has to indicate to us his or her intention to
obtain such a policy. This should be done with payment of the first
premium. If the applicant requests a change, Policy pages with updated
policy information and a policy date that reflects the date the first
premium was received will be sent to the agent for delivery to the
applicant. Under certain circumstances a policy may be issued where the
applicant wishes to retain the original policy issue date. In such cases
all premiums due between the issue date and the date of delivery must be
paid on delivery in order for the original policy issue date to be
retained.
The policy date, assuming the payment of the first premium, marks the
date on which benefits begin to vary in accordance with the investment
performance of any selected sub-accounts of the Variable Life Account.
Premium payments may also be allocated to the guaranteed principal
account. The policy date is also the date as of which the insurance age
of the proposed insured is determined. It represents the first day of
the policy year and therefore determines the policy anniversary and also
the monthly dates. It also represents the commencement of the suicide
and contestable periods for purposes of the policy.
The owner of the policy must pay the initial premium within 60 days of
the date of the policy. The first net premiums, namely premiums after
the deduction of the charges assessed against premiums and nonrepeating
premiums, are allocated to the guaranteed principal account or any sub-
accounts of the Variable Life Account which will, in turn, invest in
shares of the Portfolios of Advantus Series Fund, Inc. and Class 2 of
the Templeton Developing Markets Fund. The variable benefits under all
policies will be calculated on the basis of the allocation of that
initial net premium to the Variable Life Account.
-5-
<PAGE>
Net premiums are allocated to the guaranteed principal account or any
one or more of the sub-accounts as selected by the owner on the
application for the policy. The owner may change the allocation
instructions for future premiums by giving us a written request. A
change will not take effect until it is recorded by us in our home
office. The allocation to the guaranteed principal account or any sub-
account, expressed in whole percentages, must be at least 10 percent of
the net premium and preferably, in increments of 5 percent. We reserve
the right to restrict the allocation of premium. If we do so, no more
than 50 percent of the net premium may be allocated to the guaranteed
principal account. This restriction will not apply when all premiums
are being allocated to the guaranteed principal account as a conversion
privilege.
We also reserve the right to delay the allocation of net premiums to
named sub-accounts. Such a delay will be for a period of 30 days after
issuance of a policy or policy adjustment. If we exercise this right,
net premiums will be allocated to the money market sub-account of the
separate account until the end of that period.
C. Premium Processing
------------------
Twenty days before the premium due date, we will send a premium notice
for the premium due to the owner's address on record. The amount of the
net premium will depend upon such factors as the insured's age at issue,
sex, risk classification, smoking status, and the additional benefits
associated with the policy.
-6-
<PAGE>
D. Reinstatement
-------------
At any time within three years from the date of lapse, the owner may
restore the policy to a premium paying status, unless the policy
terminated because the surrender value has been paid or the period of
extended insurance has expired. We will require:
(1) the owner's written request to reinstate the policy;
(2) that the owner submits to us at our home office during the insured's
lifetime, evidence satisfactory to us of the insured's insurability
so that we may have time to act on the evidence during the insured's
lifetime; and
(3) at our option, a premium payment which is equal to all overdue
premiums with interest at a rate not to exceed 6 percent per annum
compounded annually and any policy loan in effect at the end of the
grace period following the date of default with interest at a rate
not exceeding 8 percent per annum compounded annually.
This reinstatement provision is designed to comply with the insurance
laws of a number of states.
In order to assist an owner of a lapsed policy in making a considered
judgment as to whether to reinstate, we may calculate the amount payable
upon reinstatement and "freeze" the amount for up to 15 days.
The reinstatement will take effect as of the date we receive the
required proof of insurability and payment of the reinstatement amount
at our home office.
-7-
<PAGE>
We will allocate the net premiums, namely premiums after the deduction
of the charges assessed against premiums and nonrepeating premiums, to
the guaranteed principal account or the sub-accounts of the Variable
Life Account which, in turn, invest in Fund shares. The amount
submitted by the owner is required to support the reinstated benefits.
E. Repayment of a Policy Loan
--------------------------
If the policy is in force, a policy loan can be repaid in part or in
full at any time before the insured's death. The loan may also be
repaid within 60 days after the date of the insured's death, if we have
not paid any of the benefits under the policy. Any loan repayment must
be at least $100 unless the balance due is less than $100. Currently,
we will waive this Minimum Loan Repayment Provision for loan repayments
made under our automatic bank check plan.
Loan repayments are allocated to the guaranteed principal account until
all loans from the guaranteed principal account have been repaid.
Thereafter, loan repayments are allocated to the guaranteed principal
account or the sub-accounts of the separate account as the owner may
direct.
In the absence of instructions from the owner, loan repayments will be
allocated to the guaranteed principal account actual cash value and
separate account actual cash value in the same proportion that those
values bear to each other and, as to the actual cash value in the
separate account, to each sub-account in the proportion that the
-8-
<PAGE>
actual cash value in such sub-account bears to the actual cash value in
all of the owner's sub-accounts.
Loan repayments reduce your loan account by the amount of the loan
repayment.
II. Transfer Among Sub-Accounts
---------------------------
A separate account called the Minnesota Life Variable Life Account was
established on October 21, 1985, by our Board of Trustees in accordance
with certain provisions of the Minnesota insurance law. The Variable Life
Account currently has seventeen sub-accounts to which owners may allocate
premiums. Each sub-account invests in shares of a corresponding Portfolio
of the Advantus Series Fund, Inc. or the Templeton Developing Markets Fund.
The amount of actual cash value to be transferred to or from a sub-account
of the separate account or the guaranteed principal account must be at
least $250. If the balance is less than $250, the entire actual cash value
attributable to that sub-account or the guaranteed principal account must
be transferred. If a transfer would reduce the actual cash value in the
sub-account from which the transfer is to be made to less than $250 we
reserve the right to include that remaining sub-account actual cash value
in the amount transferred.
The maximum amount of actual cash value to be transferred out of the
guaranteed principal account to the sub-accounts of the separate account
may be limited to 20 percent of the guaranteed principal account balance.
Transfers to or from the guaranteed principal account may be limited to one
such transfer per policy year.
-9-
<PAGE>
None of the foregoing restrictions will apply when the owner is
transferring all of the policy value, or allocating all of the premiums, to
the guaranteed principal account as a conversion privilege.
Transfers from the guaranteed principal account must be made by a written
request. It must be received by us or postmarked in the 30-day period
before or after the last day of the policy year. Written requests for
transfers which meet these conditions will be effective after we approve
and record them at our home office. Currently, we do not impose such
restrictions.
III. "Redemption" Procedures:
------------------------
Surrender and Related Transactions
----------------------------------
A. Request for Surrender Value
---------------------------
If the insured is living, we will pay the surrender value of the policy
to the owner upon written request. On surrender, the surrender value of
the policy is the actual cash value minus unpaid policy charges which
are assessed against the actual cash value. The determination of the
surrender value is made as of the end of the valuation period during
which we receive the surrender request at our home office. The policy
may be surrendered by sending us the policy and a written request for
its surrender. The owner may request that the surrender value be paid
in cash or, as an alternative, the owner may request that the surrender
value be applied on a settlement option as described in the policy or to
provide extended term insurance on the life of the insured.
-10-
<PAGE>
A partial surrender of the actual cash value of the policy is also
permitted in any amount of $500 or more. However, if there is a policy
loan, a partial surrender will not be permitted if it would reduce the
actual cash value to an amount which is less than 10 percent of the
policy value immediately after the partial surrender. If a Policy is
not paid-up, the death benefit of the Policy will be reduced by the
amount of the partial surrender. If the Policy is paid-up, the death
benefit will be reduced so as to retain the same ratio between the
policy value and the death benefit of the Policy as existed prior to the
partial surrender. With any partial surrender, the Policy will be
adjusted to reflect the new face amount and actual cash value and,
unless otherwise instructed, the existing level of premium payments.
On a partial surrender, the owner may tell us which sub-accounts of the
actual cash value of the policy should be reduced or whether it is to be
taken in whole or in part from the guaranteed principal account. If the
owner does not, partial surrenders will be deducted from the guaranteed
principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and,
as to the actual cash value in the separate account, from each sub-
account in the proportion that the actual cash value in such sub-account
bears to the actual cash value in all of the sub-accounts.
Payment of a surrender or a partial surrender will be made as soon as
possible, but not later than seven days after our receipt of a completed
written request for surrender. However, if any portion of the actual
cash value to be surrendered is attributable to a premium or
nonrepeating premium payment made by non-guaranteed funds such as a
personal check, we will delay mailing that portion of the surrender
proceeds until we have reasonable assurance that the payment has cleared
and that
-11-
<PAGE>
good payment has been collected. The amount the owner receives on the
surrender may be more or less than the total of premiums paid to the
policy.
B. Death Claims
------------
We will pay a death benefit to the beneficiary within seven days after
receipt at our home office of due proof of death of the insured and on
completion of all other requirements necessary to make payment. In
addition, payment of the death benefit is subject to the provisions of
the policy regarding suicide and incontestability.
The death benefit provided by the policy depends upon the death benefit
option chosen by the owner. The owner may choose one of two available
death benefit options -- the Cash Option or the Protection Option. If
the owner fails to make an election, the Cash Option will be in effect.
The scheduled premium for a policy is the same no matter which death
benefit option is chosen.
Under the Cash Option, the death benefit will be the current face amount
at the time of the insured's death. The death benefit will not vary
unless the policy value exceeds the net single premium for the current
face amount.
Under the Protection Option, the death benefit will vary with the
investment experience of the allocation options selected by the owner,
any interest credited as a result of a policy loan and the extent to
which we assess lower insurance charges than those maximums derived from
the 1980 Commissioners Standard Ordinary Mortality Tables. With VAL
'87, the amount of the death benefit is equal to the current face amount
or, if the policy value is greater than the tabular cash value at the
date of the
-12-
<PAGE>
insured's death, the current face amount plus an additional amount of
insurance which could be purchased by using that difference between
values as a net single premium.
With VAL '87, when a policy becomes paid-up, the death benefit under the
Protection Option is the greater of the face amount of the policy when
it became paid-up or the amount of insurance which could be purchased at
the date of the insured's death by using the policy value as a net
single premium based upon the policy assumptions and the insured's
attained age. The two assumptions we use in computing the additional
amount of insurance are an interest rate assumption of 4 percent per
year and an assumption of mortality based upon the 1980 Commissioners
Standard Ordinary Mortality Tables.
Before the policy anniversary nearest the insured's age 70, and with the
VAL '95 Protection Option and the Amended VAL '95 Protection Option,
the death benefit will be the policy value, plus the larger of:
(1) the then current face amount; and
(2) the amount of insurance which could be purchased using the policy
value as a net single premium.
At the policy anniversary nearest the insured's age 70, we will
automatically adjust the face amount to equal the death benefit
immediately preceding the adjustment. The Protection Option of VAL '95
is only available until the policy anniversary nearest the insured's age
70; at that time we will convert the death benefit option to the Cash
Option. With the Amended VAL '95 Protection Option, after the policy
anniversary nearest the insured's age 70, the amount of the death
benefit is equal to the current face amount or, if the policy value is
greater than the tabular cash value at the date of the insured's death,
the current face amount plus an additional amount of insurance which
could be purchased by using that difference between values as a net
single premium.
-13-
<PAGE>
As noted, the death benefit under the Cash Option does not vary from the
policy's face amount until the policy value exceeds the net single
premium for the current face amount. Once paid-up, the death benefit
under the Cash Option is the greater of the face amount of the policy
when it became paid-up or the amount of insurance which could be
purchased at the date of the insured's death by using the policy value
as a net single premium based upon the policy assumptions and the
insured's attained age. The two assumptions we use in computing the
additional amount of insurance are an interest rate assumption of 4
percent per year and an assumption of mortality based upon the 1980
Commissioners Standard Ordinary Mortality Tables.
A policy is paid-up when no additional premiums are required to provide
the face amount of insurance for the life of the insured. We may or may
not accept additional premiums. When a policy becomes paid-up, the
policy value will then equal or exceed the net single premium needed to
purchase an amount of insurance equal to the face amount of the policy
at the insured's then attained age. However, its actual cash value will
continue to vary daily to reflect the investment experience of the
Variable Life Account and any interest credited as a result of a policy
loan. Once a policy becomes paid-up, it will always retain its paid-up
status regardless of any subsequent decrease in its policy value.
However, on a paid-up policy with indebtedness, where the actual cash
value decreases to zero, a loan repayment may be required to keep the
policy in force.
The owner may elect to have the death benefit option changed while the
policy is in force by filing a written request with us at our home
office. We may require that the owner provide us with satisfactory
evidence of the insured's insurability before we make a change to the
Protection Option. The change will take effect when we approve and
record it in our home office.
-14-
<PAGE>
The amount payable as death proceeds upon the insured's death will be
the death benefit provided by the policy, plus any additional insurance
on the insured's life provided by an additional benefit agreement, if
any, minus any policy charges and minus any policy loans. In addition,
if the Cash Option death benefit is in effect at the insured's death we
will pay to the beneficiary any part of a paid premium that covers the
period from the end of the policy month in which the insured died to the
date to which premiums are paid.
The death benefit is determined on each monthly policy anniversary and
as of the date of the insured's death.
We will pay interest on single sum death proceeds from the date of the
insured's death until the date of payment. Interest will be at an
annual rate determined by us, but never less than 3 percent (4 percent
for VAL '87).
Proceeds of the policy may be paid in other than a single sum. The
owner, during the lifetime of the insured, may request that we pay the
proceeds under one of the policy settlement options as described in the
policy. We may also use any other method of payment that is agreeable
between the owner and us. A settlement option may be selected only if
the payments are to be made to a natural person in that person's own
right. Each settlement option is payable in fixed amounts as described
in the policy. The payments do not vary with the investment performance
of the Variable Life Account.
-15-
<PAGE>
C. Default and Options on Lapse
----------------------------
A policy may lapse in one of two ways: (1) if a scheduled premium is
not paid, or (2) if there is no actual cash value when there is a policy
loan.
As a scheduled premium policy, the policy will lapse if a premium is not
paid on or before the date it is due or within the 31-day grace period
provided by the policy. The owner may pay that premium during the 31-
day period immediately following the premium due date. The premium
payment, however, must be received in our home office within the 31-day
grace period. The insured's life will continue to be insured during
this 31-day period.
With VAL '95, if a policy covers an insured in a sub-standard risk
class, the portion of the scheduled premium equal to the charge for such
risk will continue to be payable notwithstanding the adjustment to a
stop premium mode. As with any scheduled premium, failure to pay the
premium for the sub-standard risk within the grace period provided will
cause the policy to lapse.
If scheduled premiums are paid on or before the dates they are due or
within the grace period, absent any policy loans, the policy will remain
in force even if the investment results of the sub-accounts have been so
unfavorable that the actual cash value has decreased to zero. However,
should the actual cash value decrease to zero while there is an
outstanding policy loan the policy will lapse, even if the policy was
paid-up and all scheduled premiums have been paid.
If the policy lapses because not all scheduled premiums have been paid
or if a policy with a policy loan has no actual cash value, we will send
the owner a notice of default
-16-
<PAGE>
that will indicate the payment required to keep the policy in force on a
premium paying basis. If the payment is not received within 31 days
after the date of mailing the notice of default, the policy will
terminate or the nonforfeiture benefits will apply.
If at the time of any lapse a policy has a surrender value, that is, an
amount remaining after subtracting from the actual cash value all unpaid
policy charges, it will be used to purchase extended term insurance. As
an alternative to the extended term insurance, the owner may have the
surrender value paid to the owner in a single sum payment, thereby
terminating the policy. Unless the owner requests a single sum payment
of the surrender value within 62 days of the date of the first unpaid
premium, we will apply it to purchase extended term insurance on the
insured's life.
The duration of the extended term benefit is determined by applying the
surrender value of the policy as of the end of the grace period as a net
single premium to buy fixed benefit term insurance. The extended term
benefit is not provided through the Variable Life Account and the death
benefit will not vary during the extended term insurance period. The
amount of this insurance will be equal to the face amount of the policy,
less the amount of any policy loans at the date of lapse. During the
extended term period, a policy has a surrender value equal to the
reserve for the insurance coverage for the remaining extended term
period. At the end of the extended term period all insurance provided
by the policy will terminate and the policy will have no further value.
D. Loans
-----
The policy provides that an owner, if no premium is in default beyond
the grace period, may make a loan at anytime a loan value is available.
The owner may borrow
-17-
<PAGE>
from us using only the policy as the security for the loan. The total
amount of the loan may not exceed 90 percent of the policy value. The
policy value is the actual cash value of the policy plus any policy
loan. Any policy loan paid to the owner in cash must be in an amount of
at least $100. Policy loans in smaller amounts are allowed under the
automatic premium loan provision. We will charge interest on the loan in
arrears. At the owner's request we will send a loan request form for the
signature of the owner. The policy value will be determined as of the
date we receive the owner's written request at our home office.
When a loan is taken, we will reduce the actual cash value by the amount
borrowed and any unpaid interest. Unless the owner directs us
otherwise, the policy loan will be taken from a policy's guaranteed
principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and,
as to the actual cash value in the separate account, from each sub-
account in the proportion that the actual cash value in such sub-account
bears to the policy's actual cash value in all of the sub-accounts.
The number of units to be cancelled will be based upon the value of the
units as of the end of the valuation period during which we receive the
loan requests at our home office. This amount shall be transferred to
our general account. It will continue to be part of the policy in the
general account.
The actual cash value of a policy may decrease between premium due
dates. If a policy has indebtedness and no actual cash value, the
policy will lapse. In this event, to keep a policy in force, the owner
will have to make a loan repayment. We will give the owner notice of
our intent to terminate the policy and notice of the amount
-18-
<PAGE>
of the loan repayment required to keep the policy in force. The time for
repayment will be within 31 days after our mailing of the notice.
The interest rate on a policy loan will not be more than the rate shown
on page 1 of the policy. The interest rate charged on a policy loan
will not be more than that permitted in the state in which the policy is
delivered.
Policy loan interest is due on the date of the death of the insured, on
a policy adjustment, surrender, lapse, a policy loan transaction and on
each policy anniversary. If the owner does not pay the interest on the
loan in cash, the policy loan will be increased and the actual cash
value will be reduced by the amount of the unpaid interest. The new
loan will be subject to the same rate of interest as the loan in effect.
Interest is also credited to the policy when there is a policy loan.
Interest credits on a policy loan shall be at a rate which is not less
than the policy loan interest rate minus 2 percent per annum. Policy
loan interest credits are allocated to the actual cash value as of the
date of the death of the insured, on a policy adjustment, surrender,
lapse, a policy loan transaction and on each policy anniversary. Policy
loan interest credits are allocated to the guaranteed principal account
and separate account following the owner's instructions to us. We will
use the instructions for the allocation of net premiums. In the absence
of such instructions, this amount will be allocated to the guaranteed
principal account actual cash value and separate account actual cash
value in the same proportion that those values bear to each other and,
as to the actual cash value in the separate account, to each sub-account
in the proportion that the actual cash value in such sub-account bears
to the policy's actual cash value in all of the sub-accounts.
-19-
<PAGE>
Policy loans may also be used as automatic premium loans to keep a
policy in force. If the owner has asked for this service in the
application, or if the owner writes us and asks for this service after
the policy has been issued, we will make automatic premium loans. The
owner can also write to us at any time and tell us to delete this
service. If the owner has this service and has not paid the premium due
that is due before the end of the grace period, we will make a policy
loan to pay the premium. Interest on such a policy loan is charged from
the date the premium was due. However, in order for an automatic
premium loan to occur, the amount available for a loan must be enough to
pay at least a quarterly premium. If the loan value is not enough to
pay at least a quarterly premium, the policy will lapse.
A policy loan has no immediate effect on policy value since at the time
of the loan the policy value is the sum of the actual cash value and any
policy loan.
A policy loan, whether or not it is repaid, will have a permanent effect
on the policy value because the investment results of the sub-accounts
of the Variable Life Account will apply only to the amount remaining in
the sub-accounts. The effect could be either positive or negative. If
net investment results of the sub-accounts of the Variable Life Account
are greater than the amount being credited on the loan, the policy value
will not increase as rapidly as it would have if no loan had been made.
If investment results of the sub-accounts are less than the amount being
credited on the loan, the policy value will be greater than if no loan
had been made.
The guaranteed minimum death benefit is not affected by a policy loan if
premiums are duly paid. However, on settlement, the amount of any
policy loan is subtracted from the insurance amount.
-20-
<PAGE>
IV. Policy Conversion
-----------------
The policy provides that the owner may exchange the policy to an Adjustable
Life policy, with a fixed death benefit and cash value, which we may then
offer. This right exists while the policy is in force and all scheduled
premiums have been fully paid. The converted policy will have the same
face amount as was currently provided by the policy and premiums will be
based upon the same issue age and risk classification of the insured as
stated in the policy. The premiums and cash values provided by the
converted policy may be different as a result of an equitable adjustment
made to reflect any variances in the premiums and cash values under the
policy and the new policy.
The procedure to effect such a conversion will be to use the surrender
value of the policy as a no load nonrepeating premium for the converted
policy which is newly created, with a new policy number and transferred
insurability. We will provide the insured with an expense allowance credit
for previously taken expense allowance under the policy. This exchange
privilege is designed to permit the owner to obtain a fixed benefit
Adjustable Life insurance policy at any time during the existence of the
policy. For VAL '95, this conversion privilege is only available during
the first 24 months from the original policy date, but comparable fixed
insurance coverage can be obtained after 24 months from the original policy
date by transferring all of the policy value to the guaranteed principal
account and thereafter allocating all premiums to that account.
-21-
<PAGE>
Minnesota Life Letterhead
Notice of Withdrawal Right
May 1, 1996
JOHN DOE
400 ROBERT STREET NORTH
ST. PAUL MN 55101
SPECIMEN
RE: 1-234-567V
JOHN DOE
MONTHLY - $83.33
ANNUALIZED - $1,000.00
Dear John Doe:
Congratulations on your purchase of the attached Variable Adjustable Life
Insurance policy. Minnesota Life wants you to understand that this is an
investment-oriented life insurance contract with customary insurance expense
charges. You have a right to examine and return the contract for cancellation
and a full refund of premiums paid. This letter will explain the procedure for
returning your policy if it does not meet your needs.
Your policy cash value will vary depending on the investment experience of the
portfolios (sub-accounts) you selected. The Minnesota Life Variable Life Account
and all sub-accounts are described in your prospectus.
Your scheduled premium is shown on Page 1A of your policy, and we encourage you
to review your ongoing ability to pay the premium. Your prospectus describes the
various deductions from your premiums before application to the Variable Life
Account. These charges are similar to those made in a whole life insurance
policy. They are:
-- A premium tax charge of 2.5 percent, a 1.5 percent face amount guarantee
charge and a 7 percent basic sales load, and
-- A first year sales charge not to exceed 23 percent of premium and a
first year underwriting charge not to exceed $5 per $1,000 of face
amount of insurance.
These charges do not include any premiums for additional benefits or
deductions for administration, transaction or insurance costs assessed
against policy actual cash values.
If you have any questions, please contact your agent immediately. We want you to
understand and be satisfied with this adjustment. If you are satisfied, no
action on your part is required. If the policy is not what you want, you must
complete the attached form and return it, along with the policy, postmarked no
later than the later of:
-- 10 days from the date you received this notice and policy, or
-- 45 days from the date you completed Part 1 of the application.
We are confident you'll be satisfied with this policy and look forward to a long
association. Thank you for choosing Minnesota Life.
Sincerely,
Nancy Winter
Director
Individual Policy Services
<PAGE>
Exhibit 99.I2
Minnesota Life Letterhead
Notice of Withdrawal Right
May 1, 1996
JOHN DOE
400 ROBERT STREET NORTH
ST. PAUL MN 55101
SPECIMEN
RE: 1-234-567V
JOHN DOE
MONTHLY - $83.33
ANNUALIZED - $1,000.00
May 1, 1996
Dear John Doe:
Congratulations on your recent adjustment to your Variable Adjustable Life
Insurance policy. You already know this is an investment-oriented life insurance
contract with customary insurance expense charges. You have a right to examine
and return the contract for cancellation of the adjustment and a refund of any
associated premiums. This letter will explain the procedure of declining your
adjustment if it does not meet your needs.
Your policy cash value will vary depending on the investment experience of the
portfolios (sub-accounts) you selected. The Minnesota Life Variable Life Account
and all sub-accounts are described in your prospectus.
Your scheduled premium is shown on Page 1A of your policy, and we encourage you
to review your ongoing ability to pay the premium. Your prospectus describes the
various deductions from your premiums before application to the Variable Life
Account. These charges are similar to those made in a whole life insurance
policy. They are:
-- A premium tax charge of 2.5 percent, a 1.5 percent face amount guarantee
charge and a 7 percent basic sales load, and
-- A first year sales charge not to exceed 23 percent of the increased
premium and a first year underwriting charge not to exceed $5 per $1,000
of the increased face amount of insurance.
These charges do not include any premiums for additional benefits or
deductions for administration, transaction or insurance costs assessed
against policy actual cash values.
If you have any questions, please contact your agent immediately. We want you to
understand and be satisfied with this adjustment. If you are satisfied, no
action on your part is required. If the adjustment is not what you want, you
must complete the attached form and return it, along with the policy, postmarked
no later than the later of:
-- 10 days from the date you received this notice and adjustment, or
-- 45 days from the date you completed Part 1 of the application.
We are confident you'll be satisfied with this adjustment and look forward to a
long association. Thank you for choosing Minnesota Life.
Sincerely,
Nancy Winter
Director
Individual Policy Services
<PAGE>
Exhibit K
Minnesota Life Insurance Company
Power of Attorney
To Sign Registration Statements
WHEREAS, Minnesota Life Insurance Company ("Minnesota Life") has
established certain separate accounts to fund certain variable annuity and
variable life insurance contracts, and
WHEREAS, Variable Fund D ("Fund D") is a separate account of Minnesota
Life registered as a unit investment trust under the Investment Company Act of
1940 offering variable annuity contracts registered under the Securities Act of
1933, and
WHEREAS, Variable Annuity Account ("Variable Annuity Account") is a
separate account of Minnesota Life registered as a unit investment trust under
the Investment Company Act of 1940 offering variable annuity contracts
registered under the Securities Act of 1933, and
WHEREAS, Minnesota Life Variable Life Account ("Variable Life Account")
is a separate account of Minnesota Life registered as a unit investment trust
under the Investment Company Act of 1940 offering variable adjustable life
insurance policies registered under the Securities Act of 1933,
WHEREAS, Group Variable Annuity Account ("Group Variable Annuity
Account") is a separate account of Minnesota Life which has been established for
the purpose of issuing group annuity contracts on a variable basis and which is
to be registered as a unit investment trust under the Investment Company Act of
1940 offering group variable annuity contracts and certificates to be registered
under the Securities Act of 1933;
WHEREAS, Minnesota Life Variable Universal Life Account ("Variable
Universal Life Account") is a separate account of Minnesota Life which has been
established for the purpose of issuing group and individual variable universal
life insurance policies on a variable basis and which is to be registered as a
unit investment trust under the Investment Company Act of 1940 offering group
and individual variable universal life insurance policies to be registered under
the Securities Act of 1933;
NOW THEREFORE, We, the undersigned Directors and Officers of Minnesota
Life, do hereby appoint Dennis E. Prohofsky and Garold M. Felland, and each of
them individually, as attorney in fact for the purpose of signing in their names
and on their behalf as Directors of Minnesota Life and filing with the
Securities and Exchange Commission Registration Statements, or any amendment
thereto, for the purpose of: a) registering contracts and policies of Fund D,
the Variable Annuity Account, the Variable Life Account, the Group Variable
Annuity Account and the Variable Universal Life Account for sale by those
entities and Minnesota Life under the Securities Act of 1933; and b) registering
Fund D, the Variable Annuity Account, the Variable Life Account, the Group
Variable Annuity Account and the Variable Universal Life Account as unit
investment trusts under the Investment Company Act of 1940.
Signature Title Date
--------- ----- ----
/s/Robert L. Senkler Chairman of the Board, October 19, 1998
- ------------------------------ President and Chief
Robert L. Senkler Executive Officer
<PAGE>
Signature Title Date
--------- ----- ----
/s/Giulio Agostini Director October 19, 1998
- ------------------------------
Giulio Agostini
/s/Anthony L. Andersen Director October 19, 1998
- ------------------------------
Anthony L. Andersen
/s/Leslie S. Biller Director October 19, 1998
- ------------------------------
Leslie S. Biller
/s/John F. Grundhofer Director October 19, 1998
- ------------------------------
John F. Grundhofer
/s/David S. Kidwell Director October 19, 1998
- ------------------------------
David S. Kidwell, Ph.D.
/s/Reatha C. King, Ph.D. Director October 19, 1998
- ------------------------------
Reatha C. King, Ph.D.
/s/Thomas E. Rohricht Director October 19, 1998
- ------------------------------
Thomas E. Rohricht
/s/Michael E. Shannon Director October 19, 1998
- ------------------------------
Michael E. Shannon
/s/Frederick T. Weyerhaeuser Director October 19, 1998
- ------------------------------
Frederick T. Weyerhaeuser
