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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 /X/
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FARM BUREAU LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
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5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Address of Principal Executive Office)
STEPHEN M. MORAIN, ESQUIRE
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Name and Address of Agent for Service of Process)
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COPY TO:
STEPHEN E. ROTH, ESQUIRE
SUTHERLAND ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2415
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
TITLE OF SECURITIES BEING REGISTERED: FLEXIBLE PREMIUM LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICIES
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FARM BUREAU LIFE VARIABLE ACCOUNT
FLEXIBLE PREMIUM LAST SURVIVOR VARIABLE LIFE INSURANCE POLICY
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PROSPECTUS
May 1, 2000
Farm Bureau Life Insurance Company is offering a flexible premium last survivor
variable life insurance policy (the "Policy") described in this prospectus. Farm
Bureau ("we," "us" or "our") designed the Policy: (1) to provide lifetime
insurance protection to age 115; and (2) to permit the purchaser of a Policy
("you," or "your") to vary premium payments and adjust the death proceeds
payable under the Policy.
Under the Policy, we will pay:
- death proceeds upon the last death of the Joint Insureds, and
- a net surrender value or net accumulated value upon complete surrender or
partial withdrawal of the Policy.
You may allocate net premiums under a Policy to one or more of the subaccounts
of Farm Bureau Life Variable Account (the "Variable Account"). Death proceeds
may, and accumulated value will, vary with the investment experience of the
Variable Account. Each subaccount invests exclusively in shares of the
investment options listed below. Current prospectuses that describe the
investment objectives and risks of each Investment Option must accompany or
precede this prospectus.
<TABLE>
<S> <C>
EquiTrust Variable Insurance T. Rowe Price Equity Series, Inc.:
Series Fund: Mid-Cap Growth Portfolio
Value Growth Portfolio New America Growth Portfolio
High Grade Bond Portfolio Personal Strategy Balanced Portfolio
High Yield Bond Portfolio T. Rowe Price International Series, Inc.:
Managed Portfolio International Stock Portfolio
Money Market Portfolio
Blue Chip Portfolio
Fidelity Variable Insurance Products Fidelity Variable Insurance Products Fund
Fund: II:
Growth Portfolio Contrafund Portfolio
Overseas Portfolio Index 500 Portfolio
Fidelity Variable Insurance Products Fund III:
Growth & Income Portfolio
</TABLE>
You may also allocate net premiums to the Declared Interest Option, which is
supported by our General Account. We credit amounts allocated to the Declared
Interest Option with at least a 4% annual interest rate.
Please note that the Policies and Investment Options are not bank deposits, are
not federally insured, are not guaranteed to achieve their goals and are subject
to risks, including loss of the amount invested.
Please carefully consider replacing any existing insurance with the Policy. Farm
Bureau does not claim that investing in the Policy is similar or comparable to
investing in a mutual fund.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES
OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and retain it for future reference.
Issued By:
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
1-800-247-4170
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS................................................. 3
SUMMARY OF THE POLICY....................................... 6
FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE
ACCOUNT................................................... 11
Farm Bureau Life Insurance Company.................... 11
Iowa Farm Bureau Federation........................... 11
The Variable Account.................................. 11
Investment Options.................................... 11
Addition, Deletion or Substitution of Investments..... 15
THE POLICY.................................................. 15
Purchasing the Policy................................. 15
Premiums.............................................. 16
Examination of Policy (Cancellation Privilege)........ 17
Policy Lapse and Reinstatement........................ 18
Special Transfer Privilege............................ 18
Exchange Privilege.................................... 19
POLICY BENEFITS............................................. 20
Accumulated Value Benefits............................ 20
Transfers............................................. 23
Loan Benefits......................................... 23
Death Proceeds........................................ 25
Benefits at Maturity.................................. 28
Payment Options....................................... 28
CHARGES AND DEDUCTIONS...................................... 29
Premium Expense Charge................................ 30
Monthly Deduction..................................... 30
Transfer Charge....................................... 32
Surrender Charge...................................... 32
Variable Account Charges.............................. 32
THE DECLARED INTEREST OPTION................................ 33
General Description................................... 33
Declared Interest Option Accumulated Value............ 33
Transfers, Surrenders and Policy Loans................ 34
GENERAL PROVISIONS.......................................... 34
The Contract.......................................... 34
Incontestability...................................... 34
Change of Provisions.................................. 34
Misstatement of Age or Sex............................ 35
Suicide Exclusion..................................... 35
Annual Report......................................... 35
Non-Participation..................................... 35
Ownership of Assets................................... 35
Written Notice........................................ 35
Postponement of Payments.............................. 35
Continuance of Insurance.............................. 36
Ownership............................................. 36
The Beneficiary....................................... 36
Changing the Policyowner or Beneficiary............... 37
Additional Insurance Benefits......................... 37
Policy Split Option................................... 37
</TABLE>
1
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
DISTRIBUTION OF THE POLICIES................................ 38
FEDERAL TAX MATTERS......................................... 38
Introduction.......................................... 38
Tax Status of the Policy.............................. 38
Tax Treatment of Policy Benefits...................... 39
Possible Tax Law Change............................... 40
Taxation of the Company............................... 41
Employment-Related Benefit Plans...................... 41
ADDITIONAL INFORMATION...................................... 41
FINANCIAL STATEMENTS........................................ 48
ILLUSTRATIONS OF DEATH BENEFITS AND ACCUMULATED VALUES...... Appendix A
DEATH BENEFIT OPTIONS....................................... Appendix B
MAXIMUM SURRENDER CHARGES................................... Appendix C
</TABLE>
The Policy is not available in all States.
This prospectus constitutes an offering only in those jurisdictions where such
offering may lawfully be made.
Farm Bureau has not authorized any dealer, salesman or other person to give any
information or make any representations in connection with this offering other
than those contained in this prospectus. Do not rely on any such other
information or representations.
2
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DEFINITIONS
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ACCUMULATED VALUE: The total amount invested under the Policy. It is the sum of
the values of the Policy in each subaccount of the Variable Account, the value
of the Policy in the Declared Interest Option and any outstanding Policy Debt.
BENEFICIARY: The person or entity the Policyowner named in the application, or
by later designation, to receive the death proceeds upon the Insured's death.
BUSINESS DAY: Each day that the New York Stock Exchange is open for trading,
except the day after Thanksgiving, the Tuesday after Christmas (in 2000) and any
day on which the Home Office is closed because of a weather-related or
comparable type of emergency and is unable to segregate orders and redemption
requests received on that day.
COMPANY, WE, US, OUR: Farm Bureau Life Insurance Company.
DECLARED INTEREST OPTION: A part of the Company's General Account. Policyowners
may allocate Net Premiums and transfer Accumulated Value to the Declared
Interest Option. The Company credits Accumulated Value in the Declared Interest
Option with interest at an annual rate guaranteed to be at least 4%.
DELIVERY DATE: The date when the Company issues the Policy and mails it to the
Policyowner.
DUE PROOF OF DEATH: Proof of death that is satisfactory to the Company. Such
proof may consist of the following:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FUND: An open-end, diversified management investment company in which the
Variable Account invests.
GENERAL ACCOUNT: The assets of the Company other than those allocated to the
Variable Account or any other separate account.
GRACE PERIOD: The 61-day period beginning on the date we send notice to the
Policyowner that Net Accumulated Value or Net Surrender Value is insufficient to
cover the monthly deduction.
HOME OFFICE: The Company's principal offices at 5400 University Avenue, West Des
Moines, Iowa 50266.
INVESTMENT OPTION: A separate investment portfolio of a Fund.
JOINT EQUAL AGE: The age on which premium and Accumulated Value are based. It is
an actuarial equivalent and is determined by the age and sex of the Joint
Insureds. The current Joint Equal Age on any Policy Anniversary will equal the
Joint Equal Age on the Policy Date plus the number of years since the Policy
Date.
JOINT EQUAL ATTAINED AGE: The Joint Equal Age at the Policy Date plus the number
of Policy Years since the Policy Date.
JOINT INSUREDS: The persons upon whose lives the Company issues a Policy.
MATURITY DATE: The Joint Equal Attained Age 115. It is the date when the Policy
terminates and the Policy's Accumulated Value less Policy Debt becomes payable
to the Policyowner or the Policyowner's estate.
3
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MINIMUM INITIAL PREMIUM: A premium amount specified by the Company. We use this
amount to calculate the premium expense charge during periods when we declare a
premium expense charges less than the 7% guaranteed premium expense charge. We
may declare a lower percentage of premium expense charge on premiums paid in
excess of the Minimum Initial Premium during a Policy Year. We also use Minimum
Initial Premium to calculate registered representative's compensation. Your
Minimum Initial Premium is influenced by your guaranteed mortality basis and a
4% net return to carry your Policy to the later of age 80 or 15 years.
MONTHLY DEDUCTION DAY: The same date in each month as the Policy Date. The
Company makes the monthly deduction on the Business Day coinciding with or
immediately following the Monthly Deduction Day. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.")
NET ACCUMULATED VALUE: The Accumulated Value of the Policy reduced by any
outstanding Policy Debt and increased by any unearned loan interest.
NET ASSET VALUE: The total current value of each Subaccount's securities, cash,
receivables and other assets less liabilities.
NET PREMIUM: The amount of premium remaining after we deduct the premium expense
charge (see "CHARGES AND DEDUCTIONS--Premium Expense Charge"). The Company will
allocate this amount, according to the Policyowner's instructions, among the
Subaccounts of the Variable Account and the Declared Interest Option.
NET SURRENDER VALUE: The Surrender Value minus any Policy Debt plus any unearned
loan interest.
PARTIAL WITHDRAWAL FEE: A fee we assess at the time of any partial withdrawal
equal to the lesser of $25 or 2% of the amount withdrawn.
POLICY: The flexible premium last survivor variable life insurance policy we
offer and describe in this prospectus, which term includes the Policy described
in this prospectus, the Policy application, any supplemental applications and
any endorsements or additional benefit riders or agreements.
POLICY ANNIVERSARY: The same date in each year as the Policy Date.
POLICY DATE: The date set forth on the Policy data page which we use to
determine Policy Years, Policy Months and Policy Anniversaries. The Policy Date
may, but will not always, coincide with the effective date of insurance coverage
under the Policy. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT: The sum of all outstanding Policy Loans and any due and unpaid
Policy Loan interest.
POLICY LOAN: An amount the Policyowner borrows from the Company using the Policy
as the sole security. Interest on Policy Loans is payable in advance (for the
remainder of the Policy Year) upon taking a Policy Loan and upon each Policy
Anniversary thereafter (for the following Policy Year) until the Policy Loan is
repaid.
POLICY MONTH: A one-month period beginning on a Monthly Deduction Day and ending
on the day immediately preceding the next Monthly Deduction Day.
POLICYOWNER, YOU, YOUR: The person who owns a Policy. The Policyowner is named
in the application.
POLICY YEAR: A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
SPECIFIED AMOUNT: The minimum death benefit payable under a Policy so long as
the Policy remains in force. The Specified Amount as of the Policy Date is set
forth on the data page in each Policy.
SUBACCOUNT: A subdivision of the Variable Account which invests exclusively in
shares of a designated Investment Option of a Fund.
SURRENDER CHARGE: A charge we assess at the time of any surrender during the
first ten Policy Years or for ten years following an increase in Specified
Amount.
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SURRENDER VALUE: The Accumulated Value minus the Surrender Charge.
UNIT VALUE: The value determined by dividing each Subaccount's Net Asset Value
by the number of units outstanding at the time of calculation.
VALUATION PERIOD: The period between the close of business (3:00 p.m. central
time) on a Business Day and the close of business on the next Business Day.
VARIABLE ACCOUNT: Farm Bureau Life Variable Account, a separate investment
account the Company established to receive and invest the Net Premiums paid
under the Policies.
5
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SUMMARY OF THE POLICY
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The following is a summary of the Policy's features. Please read the entire
Prospectus and the Policy for more detailed information. Unless otherwise
indicated, the description of the Policy contained in this Prospectus
assumes that the Policy is in force and that there is no outstanding Policy
Debt.
THE POLICY
- The Policy is a flexible premium last survivor variable life insurance
policy providing for:
- death proceeds payable to the Beneficiary upon the last death of
the Joint Insureds,
- the accumulation of Accumulated Value,
- withdrawal and surrender options, and
- loan privileges.
- We normally issue a Policy for a minimum Specified Amount of $100,000,
but we may issue Policies for lower Specified Amounts.
- You have flexibility in determining the frequency and amount of
premiums. (See "THE POLICY--Premiums.")
- We do not guarantee the amount and/or duration of the life insurance
coverage.
- Accumulated Value may increase or decrease, depending upon the
investment experience of the assets supporting the Policy. You bear the
investment risk of any depreciation of, and reap the benefit of any
appreciation in, the value of the underlying assets.
- If either Joint Insured is alive and the Policy is in force on the
Maturity Date, we will pay you the Accumulated Value as of the end of
the Business Day coinciding with or immediately following the Maturity
Date, reduced by any outstanding Policy Debt.
- CANCELLATION PRIVILEGE. You may examine and cancel the Policy by
returning it to us before midnight of the 20th day after you receive it.
We will refund you the greater of:
- premiums paid, or
- Accumulated Value on the Business Day we receive the Policy plus
any charges we deducted. (See "THE POLICY--Examination of Policy
(Cancellation Privilege).")
THE VARIABLE ACCOUNT
- The Variable Account has 15 Subaccounts, each of which invests
exclusively in one of the following Investment Options offered by the
Funds:
<TABLE>
<S> <C>
- Value Growth Portfolio - International Stock Portfolio
- High Grade Bond Portfolio - Growth Portfolio
- High Yield Bond Portfolio - Overseas Portfolio
- Managed Portfolio - Contrafund Portfolio
- Money Market Portfolio - Index 500 Portfolio
- Blue Chip Portfolio - Growth & Income Portfolio
- Mid-Cap Growth Portfolio - New America Growth Portfolio
- Personal Strategy Balanced Portfolio
</TABLE>
- You may instruct us to allocate Net Premiums and transfer Accumulated
Value to any of the Subaccounts.
6
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- We will allocate your initial premium to the Declared Interest Option.
- We will automatically allocate, without charge, your Accumulated Value
in the Declared Interest Option according to your allocation
instructions upon the earlier of:
(1) the date we receive a signed notice that you have received the
Policy, or
(2) 25 days after the Delivery Date.
- If we receive Net Premiums before (1) or (2) above, we will allocate
those monies to the Declared Interest Option.
- We will allocate Net Premiums received after (1) or (2) above according
to your allocation instructions.
THE DECLARED INTEREST OPTION
- You may allocate or transfer all or a portion of the Accumulated Value
to the Declared Interest Option, which guarantees a specified minimum
rate of return (at least 4% annually). (See "THE DECLARED INTEREST
OPTION.")
PREMIUMS
- You choose when to pay and how much to pay.
- You must pay an initial premium that (when reduced by the premium
expense charge) is enough to pay the first monthly deduction.
- We deduct a premium expense charge from each payment. (See "CHARGES and
DEDUCTIONS--Premium Expense Charge.")
POLICY BENEFITS
ACCUMULATED VALUE BENEFITS (SEE "POLICY BENEFITS--ACCUMULATED VALUE BENEFITS.")
- Your Policy provides for a Accumulated Value. A Policy's Accumulated
Value varies to reflect
- the amount and frequency of premium payments,
- the investment experience of the Subaccounts,
- interest earned on Accumulated Value in the Declared Interest
Option,
- Policy Loans,
- partial withdrawals and
- charges we assess under the Policy.
- You may fully surrender your Policy and receive the Net Surrender Value.
- You may obtain a partial withdrawal of your Net Accumulated Value
(minimum $500) at any time before the Maturity Date.
- A partial withdrawal or surrender may have federal income tax
consequences. (See "FEDERAL TAX MATTERS".)
TRANSFERS (SEE "POLICY BENEFITS--TRANSFERS.")
- You may transfer amounts (minimum $100) among the Subaccounts an
unlimited number of times in a Policy Year.
- You may make one transfer per Policy Year between the Subaccounts and
the Declared Interest Option.
- The first transfer in a Policy Year is free. We may deduct a $25 charge
from the amount transferred on subsequent transfers in that Policy Year.
7
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- We do not count certain transfers for purposes of the one free transfer
limit. (See "THE POLICY--Special Transfer Privilege"; and "THE
POLICY--Premiums--Allocating Net Premiums.")
LOANS (SEE POLICY BENEFITS--"LOAN BENEFITS.")
- You may borrow up to 90% of the Policy's Net Surrender Value as of the
date of the most recent loan.
- We charge you a maximum annual interest rate of 5.5%.
- We secure your loan by segregating in the Declared Interest Option an
amount equal to the Policy Loan. We credit this amount with an effective
annual rate of interest equal to at least 4%.
- Policy Loans may have federal income tax consequences. (See "FEDERAL TAX
MATTERS.")
DEATH PROCEEDS (SEE "POLICY BENEFITS--DEATH PROCEEDS.")
- The Policy contains two death benefit options:
- Option A--the death benefit is the greater of the sum of the
Specified Amount and the Policy's Accumulated Value, or the
Accumulated Value multiplied by the specified amount factor for the
Joint Equal Attained Age, as set forth in the Policy.
- Option B--the death benefit is the greater of the Specified Amount,
or the Accumulated Value multiplied by the specified amount factor
for the Joint Equal Attained Age, as set forth in the Policy.
- Under either death benefit option, so long as the Policy remains in
force, the death benefit will not be less than the Specified Amount of
the Policy on the last death of the Joint Insureds.
- To determine the death proceeds, we reduce the death benefit by any
outstanding Policy Debt and increase the death benefit by any unearned
loan interest and any premiums paid after the date of death. We may pay
the proceeds in a lump sum or in accordance with a payment option.
- You may change the Specified Amount or the death benefit option.
CHARGES (SEE "CHARGES AND DEDUCTIONS")
PREMIUM EXPENSE CHARGE
- We deduct a Premium Expense Charge equal to 7% of each premium up to the
Minimum Initial Premium and 2% of each premium in excess of the Minimum
Initial Premium. The remaining amount is the Net Premium.
ACCUMULATED VALUE CHARGES
- Each month, we make a monthly deduction (that varies from month to
month) equal to the sum of:
- a cost of insurance charge, plus
- the cost of any additional insurance benefits added by rider, plus
- a $10 policy expense charge, plus
- a monthly charge of $0.03 per $1,000 of Specified Amount.
- During the first 12 Policy Months and during the 12 Policy Months
immediately following an increase in Specified Amount, the monthly
deduction will include a first year monthly administrative charge of
$0.10 per $1,000 of Specified Amount.
- We apply a $10 first year monthly expense charge during the first 12
Policy Months.
8
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- Upon partial withdrawal of a Policy, we assess a charge equal to the
lesser of $25 or 2.0% of the amount surrendered.
- We apply a charge upon surrender of a Policy during the first ten Policy
Years, as well as during the first ten Policy Years following an
increase in Specified Amount (See "APPENDIX C--Maximum Surrender
Charges").
- We may deduct a $25 charge from the amount transferred on the second and
subsequent transfers in a Policy Year.
CHARGES AGAINST THE VARIABLE ACCOUNT
- We deduct a daily mortality and expense risk charge from the average
daily net assets of each Subaccount. The charge equals an effective
annual rate of .90%.
- We may assess a charge against the Variable Account for federal income
taxes that may be attributable to the Variable Account.
- Because the Variable Account purchases shares of the Investment Options,
the value of the average net assets of the Variable Account will reflect
the investment advisory fee and other expenses incurred by each
Investment Option. The following table indicates the Investment Options'
fees and expenses for 1999.
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
INVESTMENT OPTION FEE EXPENSES EXPENSES
<S> <C> <C> <C>
EquiTrust Variable Insurance Series Fund
Value Growth 0.45% 0.% 0.%
High Grade Bond 0.30% 0.% 0.%
High Yield Bond 0.45% 0.% 0.%
Managed 0.45% 0.% 0.%
Money Market 0.25% 0.% 0.%
Blue Chip 0.20% 0.% 0.%
T. Rowe Price Equity Series, Inc.
Mid-Cap Growth 0.85% 0.00% 0.85%(1)
New America Growth 0.85% 0.00% 0.85%(1)
Personal Strategy Balanced 0.90% 0.00% 0.90%(1)
T. Rowe Price International Series, Inc.
International Stock 1.05% 0.00% 1.05%(1)
Fidelity Variable Insurance Products Fund
VIP Growth 0.59% 0.% 0.%(2)
VIP Overseas 0.74% 0.% 0.%(2)
VIP II Contrafund 0.59% 0.% 0.%(2)
VIP II Index 500 0.24% 0.% 0.%(3)
VIP III Growth & Income 0.49% 0.% 0.%(2)
</TABLE>
9
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(1) Total annual investment option expenses are an all-inclusive fee and
pay for investment management services and other operating costs.
(2) A portion of the brokerage commissions that certain Investment Options
pay is used to reduce Fund expenses. In addition, certain Investment
Options have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances are used to
reduce custodian expenses. The amounts shown in the table do not
include these reductions. Including these reductions, the total
Investment Option operating expenses presented in the preceding table
would have been: Growth 0. %, Overseas 0. %, Contrafund 0. % and
Growth & Income 0. %.
(3) The investment adviser has voluntarily agreed to reimburse the Index
500 Investment Option to the extent that total operating expenses (with
the exceptions noted in the prospectus for the Investment Option) as a
percentage of its average net assets exceed 0. %. If this agreement
had not been in effect, total operating expenses for the fiscal year
ended December 31, 1999, as a percentage of the Index 500 Investment
Option's average net assets would have been 0. %.
[EXPENSE FIGURES TO BE FILED BY AMENDMENT.]
OTHER POLICIES
- We offer other variable life insurance policies (through this Variable
Account and other variable accounts we establish) that invest in the
same Investment Options of the Funds. These policies may have different
charges that could affect Subaccount performance, and may offer
different benefits more suitable to your needs. You may contact us to
obtain more information about these policies.
TAX TREATMENT (SEE "FEDERAL TAX MATTERS")
- If we issue a Policy on the basis of a standard premium class, we
believe that it is reasonable to conclude that the Policy qualifies as a
life insurance contract for federal income tax purposes.
- If a Policy qualifies as a life insurance contract for federal income
tax purposes, the Accumulated Value under a Policy should be subject to
the same federal income tax treatment as accumulated value under a
conventional fixed-benefit Policy--the Policyowner is not deemed to be
in constructive receipt of Accumulated Values under a Policy until there
is a distribution from the Policy.
- Death proceeds payable under a Policy should be completely excludable
from the gross income of the Beneficiary. As a result, the Beneficiary
generally will not be taxed on these proceeds.
- Depending on the total amount of premiums you pay, the Policy may be
treated as a modified endowment contract ("MEC") under Federal tax laws.
If a Policy is treated as a MEC, then complete and partial surrenders,
and loans under the Policy will be taxable as ordinary income to the
extent there are earnings in the Policy. In addition, a 10% penalty tax
may be imposed on complete and partial surrenders, and loans taken
before you reach age 59-1/2. If the Policy is not a MEC, distributions
generally will be treated first as a return of basis or investment in
the Policy and then as taxable income. Moreover, loans will not be
treated as distributions. Finally, neither distributions nor loans from
a Policy that is not a MEC are subject to the 10% penalty tax.
10
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FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT
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FARM BUREAU LIFE INSURANCE COMPANY
Farm Bureau Life Insurance Company is a stock life insurance company which
was incorporated in the State of Iowa on October 30, 1944. At December 31,
1999, Iowa Farm Bureau Federation owned 56.47% of the outstanding voting
shares of FBL Financial Group, Inc., which owns 100% of our outstanding
voting shares.
Our principal business is offering life insurance policies, disability
income insurance policies and annuity contracts. Our principal offices are
at 5400 University Avenue, West Des Moines, Iowa 50266. We are admitted to
do business in 18 states--Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota,
Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South
Dakota, Utah, Washington, Wisconsin and Wyoming.
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IOWA FARM BUREAU FEDERATION
Iowa Farm Bureau Federation is an Iowa not-for-profit corporation located at
5400 University Avenue, West Des Moines, Iowa 50266, the members of which
are county Farm Bureau organizations and their individual members. Through
various divisions and subsidiaries, Iowa Farm Bureau Federation engages in
the formulation, analysis and promotion of programs designed to foster the
educational, social and economic advancement of its members.
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THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on March 3, 1987.
The Variable Account receives and invests the Net Premiums under the Policy,
and may receive and invest net premiums for any other variable life
insurance policies we issue.
The Variable Account's assets are our property, and they are available to
cover our general liabilities only to the extent that the Variable Account's
assets exceed its liabilities arising under the Policies and any other
policies it supports. The portion of the Variable Account's assets
attributable to the Policies generally are not chargeable with liabilities
arising out of any other business that we may conduct. We may transfer to
the General Account any Variable Account assets which are in excess of such
reserves and other Policy liabilities.
The Variable Account currently has 15 Subaccounts but may, in the future,
include additional subaccounts. Each Subaccount invests exclusively in
shares of a single corresponding Investment Option. Income and realized and
unrealized gains or losses from the assets of each Subaccount are credited
to or charged against, that Subaccount without regard to income, gains or
losses from any other Subaccount.
We registered the Variable Account as a unit investment trust with the
Securities and Exchange Commission under the Investment Company Act of 1940.
The Variable Account meets the definition of a separate account under the
federal securities laws. Registration with the Securities and Exchange
Commission does not mean that the SEC supervises the management or
investment practices or policies of the Variable Account or the Company. The
Variable Account is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies domiciled in Iowa.
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INVESTMENT OPTIONS
The Variable Account invests in shares of the Investment Options described
below. Each of these Investment Options was formed as an investment vehicle
for insurance company separate accounts. Each Investment Option has its own
investment objectives and separately determines the income and losses for
that Investment Option. While you may be invested in all Subaccounts, we
only permit you to "actively participate" in a maximum of 10 Investment
Options at any one time.
11
<PAGE>
The investment objectives and policies of certain Investment Options are
similar to the investment objectives and policies of other portfolios that
the same investment adviser, investment sub-adviser or manager may manage.
The investment results of the Investment Options, however, may be higher or
lower than the results of such other portfolios. There can be no assurance,
and no representation is made, that the investment results of any of the
Investment Options will be comparable to the investment results of any other
portfolio, even if the other portfolio has the same investment adviser,
investment sub-adviser or manager.
The paragraphs below summarize each Investment Option's investment
objectives and policies. There is no assurance that any Investment Option
will achieve its stated objectives. Please refer to the prospectus for each
Investment Option for more detailed information, including a description of
risks, for each Investment Option. The Investment Option prospectuses must
accompany or precede this Prospectus and you should read them carefully and
retain them for future reference.
EQUITRUST VARIABLE INSURANCE SERIES FUND. Equitrust Investment Management
Services, Inc. is this Fund's investment adviser.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Value Growth Portfolio - This Portfolio seeks long-term capital appreciation.
Portfolio pursues its objective by investing primarily in
equity securities of companies that the investment
adviser believes have a potential to earn a high return
on equity, and/or in equity securities that the
investment adviser believes are undervalued by the market
place. Such equity securities may include common stock,
preferred stock and securities convertible or
exchangeable into common stock.
High Grade Bond Portfolio - This Portfolio seeks as high a level of current income as
is consistent with a high grade portfolio of debt
securities. Portfolio pursues this objective by investing
primarily in debt securities rated AAA, AA or A by
Standard & Poor's, and/or Aaa, Aa or A by Moody's
Investors Service, Inc., and in securities issued or
guaranteed by the United States government or its
agencies or instrumentalities.
High Yield Bond Portfolio - This Portfolio seeks, as a primary objective, as high a
level of current income as is consistent with investment
in a portfolio of fixed-income securities rated in the
lower categories of established rating services (commonly
known as "junk bonds"). As a secondary objective, the
Portfolio seeks capital appreciation when consistent with
its primary objective. The Portfolio pursues these
objectives by investing primarily in fixed-income
securities rated Baa or lower by Moody's Investors
Service, Inc., and/or BBB or lower by Standard & Poor's,
or in unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus "HIGHER
RISK SECURITIES AND INVESTMENT STRATEGIES--Lower Rated
Debt Securities.")
Managed Portfolio - This Portfolio seeks the highest total investment return
of income and capital appreciation. Portfolio pursues
this objective through a fully managed investment policy
consisting of investments in the following three market
sectors: (1) growth common stocks and securities
convertible or exchangeable into growth common stocks,
including warrants and rights; (2) high grade debt
securities and preferred stocks of the type in which the
High Grade Bond Portfolio may invest; and (3) high
quality short-term money market instruments of the type
in which the Money Market Portfolio may invest.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Money Market Portfolio - This Portfolio seeks maximum current income consistent
with liquidity and stability of principal. Portfolio
pursues this objective by investing in high quality
short-term money market instruments. The United States
Government and its agencies do not insure or guarantee an
investment in the Money Market Portfolio. AN INVESTMENT
IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE F.D.I.C. OR ANY GOVERNMENT AGENCY.
THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Blue Chip Portfolio - This Portfolio seeks growth of capital and income.
Portfolio pursues this objective by investing primarily
in common stocks of well-capitalized, established
companies. Because this Portfolio may be invested heavily
in particular stocks or industries, an investment in this
Portfolio may entail relatively greater risk of loss.
</TABLE>
T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Associates, Inc. is the
investment adviser to the Fund. The following three portfolios are available
under the Policy:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Mid-Cap Growth Portfolio - This Portfolio seeks to provide long-term capital
appreciation by investing primarily in mid-cap common
stocks with the potential for above-average earnings
growth. The investment adviser defines mid-cap companies
as those whose market capitalization falls within the
range of companies in the Standard & Poor's Mid-Cap 400
Index.
New America Growth Portfolio - This Portfolio seeks long-term capital growth by
investing primarily in common stocks of U.S. growth
companies operating in service industries.
Personal Strategy Balanced Portfolio - This Portfolio seeks the highest total return over time
consistent with an emphasis on both capital appreciation
and income.
</TABLE>
T. ROWE PRICE INTERNATIONAL SERIES, INC. Rowe Price-Fleming International, Inc.
is the investment adviser to the Fund.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
International Stock Portfolio - This Portfolio seeks to provide capital appreciation
through investments primarily in established companies
based outside the United States.
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS. Fidelity Management & Research
Company serves as the investment adviser to these Funds. Bankers Trust Company
serves as sub-investment adviser to the Index 500 Portfolio. The following
portfolios are available under the Policy.
13
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Fidelity VIP Growth Portfolio - This Portfolio seeks capital appreciation by investing
primarily in common stocks. The Portfolio, however, is
not restricted to any one type of security and may pursue
capital appreciation through the purchase of bonds and
preferred stocks. The Portfolio does not place any
emphasis on dividend income from its investments, except
when the adviser believes this income will have a
favorable influence on the market value of the security.
Growth may be measured by factors such as earnings or
gross sales.
Fidelity VIP Overseas Portfolio - This Portfolio seeks long-term growth of capital by
investing primarily in foreign securities. The Portfolio
defines foreign securities as securities of issuers whose
principal activities are located outside the United
States. Normally, at least 65% of the Portfolio's total
assets will be invested in foreign securities. The
Portfolio may also invest in U.S. issuers.
Fidelity VIP II Contrafund Portfolio - This Portfolio seeks capital appreciation by investing in
securities of companies whose value the adviser believes
is not fully recognized by the public. The Portfolio
normally invests primarily in common stocks and
securities convertible into common stock, but it has the
flexibility to invest in other types of securities.
Fidelity VIP II Index 500 Portfolio - This Portfolio seeks to provide investment results that
correspond to the total return of a broad range of common
stocks publicly traded in the United States. To achieve
this objective, the Portfolio attempts to duplicate the
composition and total return of the S&P 500.
Fidelity VIP III Growth & Income - This Portfolio seeks high total return through a
Portfolio combination of current income and capital appreciation by
investing mainly in equity securities. The Portfolio
expects to invest the majority of its assets in domestic
and foreign equity securities, with a focus on those that
pay current dividends and show potential earnings growth.
However, the Portfolio may buy debt securities as well as
equity securities that are not currently paying
dividends, but offer prospects for capital appreciation
or future income.
</TABLE>
The Funds currently sell shares: (1) to the Variable Account as well as to
separate accounts of insurance companies that may or may not be affiliated
with the Company or each other; and (2) to separate accounts to serve as the
underlying investment for both variable life insurance policies and variable
annuity contracts. We currently do not foresee any disadvantage to
Policyowners arising from the sale of shares to support variable life
insurance policies and variable annuity contracts, or from shares being sold
to separate accounts of insurance companies that may or may not be
affiliated with the Company. However, we will monitor events in order to
identify any material irreconcilable conflicts that might possibly arise. In
that event, we would determine what action, if any, should be taken in
response to those events or conflicts. In addition, if we believe that a
Fund's response to any of those events or conflicts insufficiently protects
Policyowners, we will take appropriate action on our own, including
withdrawing the Variable Account's investment in that Fund. (See the Fund
prospectuses for more detail.)
We may receive compensation from an affiliate(s) of one or more of the Funds
based upon an annual percentage of the average assets we hold in the
Investment Options. These amounts are intended to compensate us for
administrative and other services we provide to the Funds and/or
affiliate(s).
14
<PAGE>
Each Fund is registered with the Securities and Exchange Commission as an
open-end, diversified management investment company. Such registration does
not involve supervision of the management or investment practices or
policies of the Fund by the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from or substitutions for the shares of the
Investment Options that the Variable Account holds or that the Variable
Account may purchase. If the shares of an Investment Option are no longer
available for investment or if, in our judgment, further investment in any
Investment Option should become inappropriate in view of the purposes of the
Variable Account, we reserve the right to dispose of the shares of any
Investment Option and to substitute shares of another Investment Option. We
will not substitute any shares attributable to a Policyowner's Accumulated
Value in the Variable Account without notice to and prior approval of the
Securities and Exchange Commission, to the extent required by the Investment
Company Act of 1940 or other applicable law. In the event of any such
substitution or change, we may, by appropriate endorsement, make such
changes in these and other policies as may be necessary or appropriate to
reflect such substitution or change. Nothing contained in this Prospectus
shall prevent the Variable Account from purchasing other securities for
other series or classes of policies, or from permitting a conversion between
series or classes of policies on the basis of requests made by Policyowners.
We also reserve the right to establish additional subaccounts of the
Variable Account, each of which would invest in shares of a new Investment
Option, with a specified investment objective. We may establish new
subaccounts when, in our sole discretion, marketing, tax or investment
conditions warrant, and we may make any new subaccounts available to
existing Policyowners on a basis we determine. Subject to obtaining any
approvals or consents required by applicable law, we may transfer the assets
of one or more Subaccounts to any other Subaccount(s), or one or more
Subaccounts may be eliminated or combined with any other Subaccount(s) if,
in our sole discretion, marketing, tax or investment conditions warrant.
If we deem it to be in the best interests of persons having voting rights
under the Policies, we may
- operate the Variable Account as a management company under the
Investment Company Act of 1940,
- deregister the Variable Account under that Act in the event such
registration is no longer required, or,
- subject to obtaining any approvals or consents required by
applicable law, combine the Variable Account with other Company
separate accounts.
To the extent permitted by applicable law, we may also transfer the Variable
Account's assets associated with the Policies to another separate account.
In addition, we may, when permitted by law, restrict or eliminate any voting
rights of Policyowners or other persons who have voting rights as to the
Variable Account. (See "ADDITIONAL INFORMATION--Voting Rights.")
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURCHASING THE POLICY
In order to issue a Policy, we must receive a completed application,
including payment of the initial premium, at our Home Office. We ordinarily
will issue a Policy only for Joint Insureds who have a Joint Equal Age of 18
to 85 years of age at their last birthday and who supply satisfactory
evidence of insurability to the Company. Acceptance is subject to our
underwriting rules and we may, in our sole discretion, reject any
application or premium for any lawful reason. The minimum Specified Amount
for which we will issue a Policy is normally $100,000, although we may, in
our discretion, issue Policies with Specified Amounts of less than $100,000.
15
<PAGE>
The effective date of insurance coverage under the Policy will be the later
of:
- the Policy Date,
- the date the Joint Insureds sign the last of any amendments to the
initial application required by our underwriting rules, or
- the date when we receive the full initial premium at the Home
Office.
The Policy Date will be the later of (1) the date of the initial
application, or (2) the date we receive any additional information at the
Home Office if our underwriting rules require additional medical or other
information.
The Policy Date may also be any other date mutually agreed to by you and the
Company. If the later of (1) or (2) above is the 29th, 30th or 31st of any
month, the Policy Date will be the 28th of such month. We use the Policy
Date to determine Policy Years, Policy Months and Policy Anniversaries. The
Policy Date may, but will not always, coincide with the effective date of
insurance coverage under the Policy.
- --------------------------------------------------------------------------------
PREMIUMS
Subject to certain limitations, you have flexibility in determining the
frequency and amount of premiums.
PREMIUM FLEXIBILITY. We do not require you to pay premiums in accordance
with a rigid and inflexible premium schedule. We may require you to pay an
initial premium that, when reduced by the premium expense charge, will be
sufficient to pay the monthly deduction for the first Policy Month.
Thereafter, subject to the minimum and maximum premium limitations described
below, you may also make unscheduled premium payments at any time prior to
the Maturity Date.
PLANNED PERIODIC PREMIUMS. Each Policyowner will determine a planned
periodic premium schedule that provides for the payment of a level premium
over a specified period of time on a quarterly, semi-annual or annual basis.
We may, at our discretion, permit you to make planned periodic premium
payments on a monthly basis. We ordinarily will send periodic reminder
notices to the Policyowner for each planned periodic premium. Depending on
the duration of the planned periodic premium schedule, the timing of planned
payments could affect the tax status of the Policy. (See "FEDERAL TAX
MATTERS.")
You are not required to pay premiums in accordance with the planned periodic
premium schedule. Furthermore, you have considerable flexibility to alter
the amount, frequency and the time period over which you pay planned
periodic premiums; however, we must consent to any planned periodic payment
less than $100. Changes in the planned premium schedule may have federal
income tax consequences. (See "FEDERAL TAX MATTERS.")
Paying a planned periodic premium will not guarantee that the Policy remains
in force. Instead, the duration of the Policy depends upon the Policy's
Accumulated Value. Thus, even if you do pay planned periodic premiums, the
Policy will nevertheless lapse if, during the first three Policy Years, the
Net Accumulated Value (Net Surrender Value if you have taken a policy loan)
or, after three Policy Years, the Net Surrender Value, is insufficient on a
Monthly Deduction Day to cover the monthly deduction (see "CHARGES AND
DEDUCTIONS--Monthly Deduction") and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and Reinstatement--
LAPSE").
UNSCHEDULED PREMIUMS. Each unscheduled premium payment must be at least
$100; however, we may, in our discretion, waive this minimum requirement. We
reserve the right to limit the number and amount of unscheduled premium
payments. An unscheduled premium payment may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all premiums paid, both
planned periodic and unscheduled, exceed the applicable maximum premium
limitation imposed by federal tax laws. Because the maximum premium
limitation is in part dependent upon the Specified Amount for each Policy,
changes in the Specified Amount may affect this limitation. If at any time
you pay a premium
16
<PAGE>
that would result in total premiums exceeding the applicable maximum premium
limitation, we will accept only that portion of the premium which will make
total premiums equal the maximum. We will return any part of the premium in
excess of that amount and we will not accept further premiums until allowed
by the applicable maximum premium limitation.
PAYMENT OF PREMIUMS. We will treat any payments you make first as payment of
any outstanding Policy Debt unless you indicate that the payment should be
treated otherwise. Where you make no indication, we will treat any portion
of a payment that exceeds the amount of any outstanding Policy Debt as a
premium payment.
NET PREMIUMS. The Net Premium is the amount available for investment. The
Net Premium equals the premium paid less the premium expense charge. (See
"CHARGES AND DEDUCTIONS--Premium Expense Charge.")
ALLOCATING NET PREMIUMS. In your application for a Policy, you can allocate
Net Premiums or portions thereof to the Subaccounts, to the Declared
Interest Option, or both. We will allocate Net Premiums to the Declared
Interest Option if we receive them either
(1) before the date we obtain a signed notice from you that you
have received the Policy, or
(2) before the end of 25 days after the Delivery Date (the date we
issue and mail the Policy to you).
Upon the earlier of (1) or (2) above, we will automatically allocate the
Accumulated Value in the Declared Interest Option, without charge, among the
Subaccounts and Declared Interest Option in accordance with your allocation
instructions.
We allocate Net Premiums received on or after (1) or (2) above in accordance
with your instructions, to the Variable Account, the Declared Interest
Option, or both. You do not waive your cancellation privilege by sending us
the signed notice of receipt of the Policy (see "THE POLICY--Examination of
Policy (Cancellation Privilege)").
The following additional rules apply to Net Premium allocations:
- You must allocate at least 10% of each premium to any subaccount of
the Variable Account or to the Declared Interest Option.
- Your allocation percentages must be in whole numbers (we do not
permit fractional percentages).
- You may change the allocation percentages for future Net Premiums
without charge, at any time while the Policy is in force, by
providing us with a written notice signed by you on a form we
accept. The change will take effect on the date we receive the
written notice at the Home Office and will have no effect on prior
Accumulated Values.
- --------------------------------------------------------------------------------
EXAMINATION OF POLICY (CANCELLATION PRIVILEGE)
You may cancel the Policy by delivering or mailing written notice or sending
a telegram to us at the Home Office, and returning the Policy to us at the
Home Office before midnight of the 20th day you receive the Policy. (Certain
states may provide for a 30 day free-look period in a replacement
situation.) Notice given by mail and return of the Policy by mail are
effective on being postmarked, properly addressed and postage prepaid.
With respect to all Policies, we will refund, within seven days after
receipt of satisfactory notice of cancellation and the returned Policy at
our Home Office, an amount equal to the greater of premiums paid, or:
- the Accumulated Value on the Business Day on or next following the
date we receive the Policy at the Home Office,
- any premium expense charges we deducted,
- monthly deductions made on the Policy Date and any Monthly Deduction
Day, and
- amounts approximating the daily mortality and expense risk charges
against the Variable Account.
17
<PAGE>
POLICY LAPSE AND REINSTATEMENT
LAPSE. Your Policy may lapse (terminate without value) during the first
three Policy Years if the Net Accumulated Value (Net Surrender Value if you
have taken a policy loan), or after three Policy Years if the Net Surrender
Value, is insufficient on a Monthly Deduction Day to cover the monthly
deduction (see "CHARGES AND DEDUCTIONS--Monthly Deduction") AND a Grace
Period expires without a sufficient payment. Insurance coverage will
continue during the Grace Period, but we will deem the Policy to have no
Accumulated Value for purposes of Policy Loans and surrenders during such
Grace Period. The death proceeds payable during the Grace Period will equal
the amount of the death proceeds payable immediately prior to the
commencement of the Grace Period, reduced by any due and unpaid monthly
deductions.
A Grace Period of 61 days will commence on the date we send you a notice of
any insufficiency, at which time the Accumulated Value in each Subaccount
will be automatically transferred without charge to the Declared Interest
Option.
To avoid lapse and termination of the Policy without value, we must receive
from you during the Grace Period a premium payment that, when reduced by the
premium expense charge (see "CHARGES AND DEDUCTIONS--Premium Expense
Charge"), will be at least equal to three times the monthly deduction due on
the Monthly Deduction Day immediately preceding the Grace Period (see
"CHARGES AND DEDUCTIONS--Monthly Deduction"). If your Policy enters a Grace
Period, the amount transferred to the Declared Interest Option will remain
there unless and until you provide us with allocation instructions.
REINSTATEMENT. Prior to the Maturity Date, you may reinstate a lapsed Policy
at any time within five years of the Monthly Deduction Day immediately
preceding the Grace Period which expired without payment of the required
premium. You must submit the following items to us:
- A written application for reinstatement signed by the Policyowner
and the Joint Insureds;
- Evidence of insurability we deem satisfactory;
- A premium that, after the deduction of the premium expense charge,
is at least sufficient to keep the Policy in force for three months;
and
- An amount equal to the monthly cost of insurance for the two Policy
Months prior to lapse.
State law may limit the premium to be paid on reinstatement to an amount
less than that described. To the extent that we did not deduct the first
year monthly administrative charge for a total of twelve Policy Months prior
to lapse, we will continue to deduct such charge following reinstatement of
the Policy until we have assessed such charge, both before and after the
lapse, for a total of 12 Policy Months. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.") We will not reinstate a Policy surrendered
for its Net Surrender Value. The lapse of a Policy with loans outstanding
may have adverse tax consequences (see "FEDERAL TAX MATTERS--Policy
Proceeds.")
The effective date of the reinstated Policy will be the Monthly Deduction
Day coinciding with or next following the date we approve the application
for reinstatement. Upon reinstatement of your Policy, the amount tranferred
to the Declared Interest Option during the Grace Period will remain there
unless and until you provide us with allocation instructions.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER PRIVILEGE
You may, at any time prior to the Maturity Date while the Policy is in
force, operate the Policy as a flexible premium fixed-benefit last survivor
life insurance policy by requesting that we transfer all of the Accumulated
Value in the Variable Account to the Declared Interest Option. You may
exercise this special transfer privilege once each Policy Year. Once you
exercise the special transfer privilege, we automatically will credit all
future premium payments to the Declared Interest Option, until you request a
change in allocation to convert the Policy back to a flexible premium
variable life insurance policy. The Company will not impose any charge for
transfers resulting from the exercise of the special transfer privilege.
18
<PAGE>
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
The Company will permit the owner of a flexible premium fixed-benefit last
survivor life insurance policy ("fixed-benefit policy") issued by the
Company to exchange his fixed-benefit last survivor policy (forms #434-158
and #834-158 only) for a Policy on the life of the Insured. The Policy Date
will be the date you sign the application for the Policy. Riders issued on
the original fixed-benefit last survivor policy which are not offered in the
Policy will not be available on the new Policy. Riders which are available
may be exchanged to the new Policy.
If an exchange occurs:
- the Policy will have a Specified Amount equal to the specified
amount of the fixed-benefit last survivor policy plus any increase
in Specified Amount at the time of exchange,
- no evidence of insurability will be required to exercise the
exchange privilege, but any increase in Specified Amount will
require underwriting,
- we will place the Insured in the premium class applicable to the
initial specified amount under the fixed-benefit last survivor
policy, unless there has been an underwritten increase in specified
amount, in which event we will place the Insured in the premium
class applicable to such increase in specified amount with respect
to the entire amount exchanged,
- the incontestable and suicide provisions of the Policy will apply
only to the increased amount of coverage (if any), except for any
period remaining on the fixed-benefit last survivor policy, and
- registered representatives will receive commissions on the increase
in Specified Amount only.
The Company will initially allocate the net accumulated value of the
fixed-benefit last survivor policy to the Declared Interest Option. When we
receive, at our Home Office, a notice signed by you that the Policy has been
received, the Company will automatically allocate the Policy's Accumulated
Value in the Declared Interest Option, without charge, among the Subaccounts
and the Declared Interest Option pursuant to the allocation instructions set
forth in the application for the Policy.
The Company will waive the premium expense charge on the net accumulated
value of the fixed-benefit last survivor policy applied to the Policy
pursuant to an exchange. In addition, the Company will assess the First Year
Monthly Administrative Charge and First Year Monthly Expense Charge only to
the extent that the Company has not assessed 12 monthly per $1,000 charges
under the fixed-benefit last survivor policy. We will assess the First Year
Monthly Administrative Charge and First Year Monthly Expense Charge on an
increase in Specified Amount related to a fixed-benefit last survivor policy
as well. Otherwise, we will make charges and deductions in the manner and
amounts described elsewhere in the Prospectus. (See "CHARGES AND
DEDUCTIONS")
We will not permit an exchanging owner to carry over an outstanding loan
under his fixed-benefit last survivor policy. Any outstanding loan and loan
interest must be repaid prior to the date of exchange. If not repaid prior
to the date of exchange, the Company will reflect the amount of the
outstanding loan and interest thereon in the net accumulated value of the
fixed-benefit last survivor policy. To the extent a fixed-benefit last
survivor policy with an outstanding loan is exchanged for an unencumbered
Policy, the exchanging owner could recognize income at the time of the
exchange up to the amount of such loan (including any due and unpaid
interest on such loan). (See "FEDERAL TAX MATTERS--Tax Treatment of Policy
Benefits").
The Company believes that an exchange of a fixed-benefit last survivor
policy for a Policy generally should be treated as a nontaxable exchange
within the meaning of Section 1035 of the Internal Revenue Code of 1986, as
amended. A Policy purchased in exchange will generally be treated as a newly
issued contract as of the effective date of the Policy. If you surrender
your fixed-benefit last survivor policy in whole or in part, and after
receipt of the proceeds you use the surrender proceeds
19
<PAGE>
or partial surrender proceeds to purchase a Policy, it will not be treated
as a non-taxable exchange. The surrender proceeds will generally be
includible in income. (See "FEDERAL TAX MATTERS--Tax Treatment of Policy
Benefits.")
The Policy differs from a fixed-benefit policy in many significant respects.
Most importantly, the Accumulated Value under this Policy may consist,
entirely or in part, of Subaccount value which fluctuates in response to the
net investment return of the Variable Account. In contrast, the accumulated
values under a fixed-benefit last survivor policy always reflect interest
credited by the Company. While we guarantee a minimum rate of interest, we
have previously credited interest at higher rates. Accordingly, accumulated
values under a fixed-benefit last survivor policy reflect changing current
interest rates and do not vary with the investment performance of the
Variable Account.
Owners of a fixed-benefit last survivor policy should carefully consider
whether it will be advantageous to replace a fixed-benefit last survivor
policy with a Policy (or to surrender in full or in part a fixed-benefit
last survivor policy and use the surrender or partial surrender proceeds to
purchase a Policy). Owners of a fixed-benefit last survivor policy should
consult their tax advisers before exchanging a fixed-benefit last survivor
policy for this Policy, or before surrendering in whole or in part their
fixed-benefit last survivor policy and using the proceeds to purchase a
Policy.
- --------------------------------------------------------------------------------
POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain benefits prior to the
Maturity Date. Subject to certain limitations, you may at any time obtain
all or a portion of the Net Accumulated Value by surrendering or taking a
partial withdrawal from the Policy. (See "POLICY BENEFITS--Accumulated Value
Benefits--SURRENDER AND WITHDRAWAL PRIVILEGES.") In addition, you have
certain policy loan privileges under the Policies. (See "POLICY
BENEFITS--Loan Benefits--POLICY LOANS.") The Policy also provides for the
payment of death proceeds upon the last death of the Joint Insureds under
one of two death benefit options selected by you (see "POLICY BENEFITS--
Death Proceeds--DEATH BENEFIT OPTIONS"), and benefits upon the maturity of a
Policy (see "POLICY BENEFITS--Benefits at Maturity").
- --------------------------------------------------------------------------------
ACCUMULATED VALUE BENEFITS
SURRENDER AND WITHDRAWAL PRIVILEGES. At any time prior to the Maturity Date
while the Policy is in force, you may surrender the Policy or make a partial
withdrawal by sending a written request to the Company at our Home Office. A
Surrender Charge will apply to any surrender during the first ten Policy
Years, as well as during the first ten years following an increase in
Specified Amount. A Partial Withdrawal Fee equal to the lesser of $25 or 2%
of the amount withdrawn will be payable upon each partial withdrawal. (See
"CHARGES AND DEDUCTIONS--Surrender Charge, and -- Partial Withdrawal Fee").
We ordinarily mail surrender proceeds to the Policyowner within seven days
after we receive a signed request for a surrender at our Home Office,
although we may postpone payments under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
SURRENDERS. The amount payable upon surrender of the Policy is the Net
Surrender Value at the end of the Valuation Period when we receive the
request, less the Surrender Charge. We may pay this amount in a lump sum or
under one of the payment options specified in the Policy, as requested by
the Policyowner. (See "POLICY BENEFITS--Payment Options"). If you surrender
the Policy, all insurance in force will terminate. See "FEDERAL TAX MATTERS"
for a discussion of the tax consequences associated with complete
surrenders.
PARTIAL WITHDRAWALS. A Policyowner may obtain a portion of the Policy's Net
Accumulated Value upon partial withdrawal of the Policy.
- A partial withdrawal must be at least $500.
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- A partial withdrawal cannot exceed the lesser of (1) the Net
Surrender Value less $500 or (2) 90% of the Net Surrender Value.
We deduct the Partial Withdrawal Fee from the remaining Accumulated Value.
You may request that we pay the proceeds of a partial withdrawal in a lump
sum or under one of the payment options specified in the Policy. (See
"POLICY BENEFITS--Payment Options").
We will allocate a partial withdrawal (together with the Partial Withdrawal
Fee) among the Subaccounts and the Declared Interest Option in accordance
with the Policyowner's written instructions. If we do not receive any such
instructions with the request for partial withdrawal, we will allocate the
partial withdrawal among the Subaccounts and the Declared Interest Option in
the same proportion that the Accumulated Value in each of the Subaccounts
and the Accumulated Value in the Declared Interest Option, reduced by any
outstanding Policy Debt, bears to the total Accumulated Value on the date we
receive the request at the Home Office.
Partial withdrawals will affect both the Policy's Accumulated Value and the
death proceeds payable under the Policy. (See "POLICY BENEFITS--Death
Proceeds.")
- The Policy's Accumulated Value will be reduced by the amount of the
partial withdrawal and the Partial Withdrawal Fee.
- If the death benefit payable under either death benefit option both
before and after the partial withdrawal is equal to the Accumulated
Value multiplied by the specified amount factor set forth in the
Policy, a partial withdrawal will result in a reduction in death
proceeds equal to the amount of the partial withdrawal, multiplied
by the specified amount factor then in effect.
- If the death benefit is not so affected by the specified amount
factor, the reduction in death proceeds will be equal to the partial
withdrawal.
If Option B is in effect at the time of the partial withdrawal, the partial
withdrawal will reduce the Policy's Specified Amount by the amount of
Accumulated Value withdrawn. If Option A is in effect at the time of the
partial withdrawal, there will be no effect on Specified Amount. (See
"POLICY BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") The Specified
Amount remaining in force after a partial withdrawal may not be less than
the minimum Specified Amount for the Policy in effect on the date of the
partial withdrawal, as published by the Company. As a result, we will not
process any partial withdrawal that would reduce the Specified Amount below
this minimum.
If increases in the Specified Amount previously have occurred, a partial
withdrawal will first reduce the Specified Amount of the most recent
increase, then the next most recent increases successively, then the
coverage under the original application. Thus, a partial withdrawal may
either increase or decrease the amount of the cost of insurance charge,
depending upon the particular circumstances. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.") For a discussion of the
tax consequences associated with partial withdrawals, see "FEDERAL TAX
MATTERS."
NET ACCUMULATED VALUE. Net Accumulated Value equals the Policy's Accumulated
Value reduced by any outstanding Policy Debt and increased by any unearned
loan interest.
CALCULATING ACCUMULATED VALUE. The Policy provides for the accumulation of
Accumulated Value. The Accumulated Value of the Policy is equal to the sum
of the Accumulated Values in each Subaccount, plus the Accumulated Value in
the Declared Interest Option, including amounts transferred to the Declared
Interest Option to secure outstanding Policy Debt. We determine Accumulated
Value on each Business Day, and there is no guaranteed minimum Accumulated
Value.
- Accumulated Value will reflect a number of factors, including
- Net Premiums paid,
- partial withdrawals,
- Policy Loans,
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- charges assessed in connection with the Policy,
- interest earned on the Accumulated Value in the Declared
Interest Option, and
- investment performance of the Subaccounts to which the
Accumulated Value is allocated.
As of the Policy Date, the Accumulated Value equals the initial Net Premium
less the monthly deduction made on the Policy Date.
On the Business Day coinciding with or immediately following the date we
receive notice that the Policyowner has received the Policy, but no later
than 25 days after the Delivery Date, we will automatically transfer the
Accumulated Value (all of which is in the Declared Interest Option) among
the Subaccounts and the Declared Interest Option in accordance with your
percentage allocation instructions. At the end of each Valuation Period
thereafter, the Accumulated Value in a Subaccount will equal:
- The total Subaccount units represented by the Accumulated Value at
the end of the preceding Valuation Period, multiplied by the
Subaccount's unit value for the current Valuation Period; PLUS
- Any Net Premiums received during the current Valuation Period which
are allocated to the Subaccount; PLUS
- All Accumulated Values transferred to the Subaccount from the
Declared Interest Option or from another Subaccount during the
current Valuation Period; MINUS
- All Accumulated Values transferred from the Subaccount to another
Subaccount or to the Declared Interest Option during the current
Valuation Period, including amounts transferred to the Declared
Interest Option to secure Policy Debt; MINUS
- All partial withdrawals (and any portion of the Partial Withdrawal
Fee) from the Subaccount during the current Valuation Period; MINUS
- The portion of any monthly deduction charged to the Subaccount
during the current Valuation Period to cover the Policy Month
following the Monthly Deduction Day.
The Policy's total Accumulated Value in the Variable Account equals the sum
of the Policy's Accumulated Value in each Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When you allocate Net Premiums
or transfer other amounts into a Subaccount, we purchase a number of units
based on the Unit Value of the Subaccount as of the end of the Valuation
Period during which the allocation or transfer is made. Likewise, when
amounts are transferred out of a Subaccount, units are redeemed on the same
basis. On any day, a Policy's Accumulated Value in a Subaccount is equal to
the number of units held in such Subaccount, multiplied by the Unit Value of
such Subaccount on that date.
For each Subaccount, we initially set the Unit Value set at $10 when the
Subaccount first purchased shares of the designated Investment Option. We
calculate the Unit Value for each subsequent valuation period by dividing
(a) by (b) where:
(a) is (1) the Net Asset Value of the net assets of the Subaccount at
the end of the preceding Valuation Period, plus
(2) the investment income and capital gains, realized or
unrealized, credited to the net assets of that Subaccount
during the Valuation Period for which the Unit Value is being
determined, minus
(3) the capital losses, realized or unrealized, charged against
those assets during the Valuation Period, minus
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(4) any amount charged against the Subaccount for taxes, or any
amount we set aside during the Valuation Period as a provision
for taxes attributable to the operation or maintenance of that
Subaccount, minus
(5) a charge no greater than 0.0024548% of the average daily net
assets of the Subaccount for each day in the Valuation Period.
This corresponds to an effective annual rate of .90% of the
average daily net assets of the Subaccount for mortality and
expense risks incurred in connection with the Policies.
(b) is the number of units outstanding at the end of the preceding
Valuation Period.
The Unit Value for a Valuation Period applies for each day in the period. We
value the assets in the Variable Account at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
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TRANSFERS
The following features apply to transfers under the Policy:
- You may transfer amounts among the Subaccounts an unlimited number
of times in a Policy Year.
- You may only make one transfer per Policy Year between the Declared
Interest Option and the Variable Account.
- You may make transfers by written request to the Home Office or, if
you elected the "Telephone Transfer Authorization" on the
supplemental application, by calling the Home Office toll-free at
(800) 247-4170.
- The amount of the transfer must be at least $100, or if less than
$100, the total Accumulated Value in the Subaccount or in the
Declared Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt). The Company may,
at its discretion, waive the $100 minimum requirement.
- The transfer will be effective as of the end of the Valuation Period
during which we receive the request at the Home Office.
- The first transfer in each Policy Year is free. Each time you
subsequently transfer amounts in that Policy Year, we may assess a
transfer charge of $25. We will deduct the transfer charge from the
amount transferred unless you submit payment for the charge at the
time of your request. Once we issue a Policy, we will not increase
this charge. (See "CHARGES AND DEDUCTIONS--Transfer Charge.")
- For purposes of these limitations and charges, we consider all
transfers effected on the same day as a single transfer.
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LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and has a positive Net
Surrender Value, you may borrow money from the Company at any time using the
Policy as the sole security for the Policy Loan. A loan taken from, or
secured by, a Policy may have federal income tax consequences. (See "FEDERAL
TAX MATTERS.")
The maximum amount that you may borrow at any time is 90% of the Net
Surrender Value as of the end of the Valuation Period during which we
receive the request for the Policy Loan at our Home Office, less any
previously outstanding Policy Debt. The Company's claim for repayment of
Policy Debt has priority over the claims of any assignee or other person.
During any time that there is outstanding Policy Debt, we will treat
payments you make first as payment of outstanding Policy Debt, unless you
indicate that we should treat the payment otherwise. Where no indication is
made, we will treat as a premium payment any portion of a payment that
exceeds the amount of any outstanding Policy Debt.
ALLOCATION OF POLICY LOAN. When you take a Policy Loan, we segregate an
amount equal to the Policy Loan within the Declared Interest Option as
security for the Policy Loan. If, immediately prior to the Policy Loan, the
Accumulated Value in the Declared Interest Option less Policy Debt
outstanding is
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less than the amount of such Policy Loan, we will transfer the difference
from the subaccounts of the Variable Account, which have Accumulated Value,
in the same proportions that the Policy's Accumulated Value in each
Subaccount bears to the Policy's total Accumulated Value in the Variable
Account. We will determine Accumulated Values as of the end of the Valuation
Period during which we receive the request for the Policy Loan at the Home
Office.
We normally will mail loan proceeds to you within seven days after receipt
of a written request. Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as security for
Policy Debt will bear interest at an effective annual rate set by the
Company. (See "POLICY BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
LOAN INTEREST CHARGED. The interest rate charged on Policy Loans is not
fixed. The maximum annual loan interest rate we charge will be the higher of
the "Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds" as published by Moody's Investors Service, Inc. (or any successor
thereto) for the calendar month ending two months before the date on which
the rate is determined; or 5.5%. We may elect to change the interest rate at
any time, of which you will be notified. The new rate will take effect on
the Policy Anniversary coinciding with, or next following, the date the rate
is changed.
Interest is payable in advance at the time you make any Policy Loan (for the
remainder of the Policy Year) and on each Policy Anniversary thereafter (for
the entire Policy Year) so long as there is Policy Debt outstanding. We will
subtract interest payable at the time you make a Policy Loan from the loan
proceeds. Thereafter, we will add interest not paid when due to the existing
Policy Debt and it will bear interest at the same rate charged for Policy
Loans. We will segregate the amount equal to unpaid interest within the
Declared Interest Option in the same manner that amounts for Policy Loans
are segregated within the Declared Interest Option. (See "POLICY
BENEFITS--Loan Benefits--ALLOCATION OF POLICY LOAN.")
Because we charge interest in advance, we will add any interest that has not
been earned to the death benefit payable at the last Joint Insureds' death
and to the Accumulated Value upon surrender, and we will credit it to the
Accumulated Value in the Declared Interest Option upon repayment of Policy
Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred from the Variable
Account as security for Policy Debt will no longer participate in the
investment performance of the Variable Account. We will credit all amounts
held in the Declared Interest Option as security for Policy Debt with
interest on each Monthly Deduction Day at an effective annual rate equal to
the greater of 4% or the current effective loan interest rate minus no more
than 3%, as determined and declared by the Company. We will not credit
additional interest to these amounts. The interest credited will remain in
the Declared Interest Option unless and until transferred by the Policyowner
to the Variable Account, but will not be segregated within the Declared
Interest Option as security for Policy Debt.
From time to time, we may allow a loan spread of 0% on the gain in a Policy
in effect a minimum of ten years. When we do so, the federal income tax
treatment of the loan is unclear. You should consult a tax adviser before
taking a loan.
Even though you may repay Policy Debt in whole or in part at any time prior
to the Maturity Date if the Policy is still in force, Policy Loans will
affect the Accumulated Value of a Policy and may affect the death proceeds
payable. The effect could be favorable or unfavorable depending upon whether
the investment performance of the Subaccount(s) from which the Accumulated
Value was transferred is less than or greater than the interest rates
actually credited to the Accumulated Value segregated within the Declared
Interest Option as security for Policy Debt while Policy Debt is
outstanding. In comparison to a Policy under which no Policy Loan was made,
Accumulated Value will be lower where such interest rates credited were less
than the investment performance of the Subaccount(s), but will be higher
where such interest rates were greater than the performance of the
Subaccount(s). In addition, death proceeds will reflect a reduction of the
death benefit by any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid Policy Loans and any
due and unpaid policy loan interest. Policy Debt is not included in Net
Accumulated Value, which is equal to Accumulated Value less Policy Debt. If,
during the first three Policy Years, the Net Accumulated Value (Net
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Surrender Value if you take a policy loan) or, after three Policy Years, the
Net Surrender Value is insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly Deduction"), we will
notify you. To avoid lapse and termination of the Policy without value (see
"THE POLICY--Policy Lapse and Reinstatement--Lapse"), you must, during the
Grace Period, make a premium payment that, when reduced by the premium
expense charge (see "CHARGES AND DEDUCTIONS--Premium Expense Charge"), will
be at least equal to three times the monthly deduction due on the Monthly
Deduction Day immediately preceding the Grace Period (see "CHARGES AND
DEDUCTIONS--Monthly Deduction"). Therefore the greater the Policy Debt under
a Policy, the more likely it would be to lapse.
REPAYMENT OF POLICY DEBT. You may repay Policy Debt in whole or in part any
time during the Joint Insureds' lifetimes and before the Maturity Date so
long as the Policy is in force. We subtract any Policy Debt not repaid from
the death benefit payable at the last Joint Insureds' death, from
Accumulated Value upon complete surrender or from the maturity benefit. Any
payments made by a Policyowner will be treated first as the repayment of any
outstanding Policy Debt, unless the Policyowner indicates otherwise. Upon
partial or full repayment of Policy Debt, we will no longer segregate within
the Declared Interest Option the portion of the Accumulated Value securing
the repaid portion of the Policy Debt, but that amount will remain in the
Declared Interest Option unless and until transferred to the Variable
Account by the Policyowner. We will notify you when your Policy Debt is
repaid in full.
For a discussion of the tax consequences associated with Policy Loans and
lapses, see "FEDERAL TAX MATTERS."
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DEATH PROCEEDS
So long as the Policy remains in force, the Policy provides for the payment
of death proceeds upon the last death of the Joint Insureds.
- You may name one or more primary Beneficiaries or contingent
Beneficiaries and we will pay proceeds to the primary Beneficiary or
a contingent Beneficiary.
- If no Beneficiary survives the Joint Insureds, we will pay the death
proceeds to you or your estate. We may pay death proceeds in a lump
sum or under a payment option. (See "POLICY BENEFITS--Payment
Options.")
- If the Joint Insureds die simultaneously, we will pay an equal
portion of the death proceeds to each beneficiary.
To determine the death proceeds, we will reduce the death benefit by any
outstanding Policy Debt and increase it by any unearned loan interest and
any premiums paid after the date of death. We will ordinarily mail proceeds
within seven days after receipt by the Company of Due Proof of Death. We may
postpone payment, however, under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.") We pay interest on those proceeds,
at an annual rate of no less than 3.0% or any rate required by law, from the
date of death to the date payment is made.
DEATH BENEFIT OPTIONS. Policyowners designate in the initial application one
of two death benefit options offered under the Policy. The amount of the
death benefit payable under a Policy will depend upon the option in effect
at the time of the last Joint Insureds' death.
Under Option A, the death benefit will be equal to the greater of:
(1) the sum of the current Specified Amount and the Accumulated Value,
or
(2) the Accumulated Value multiplied by the specified amount factor.
We will determine Accumulated Value as of the end of the Business Day
coinciding with or immediately following the last death of the Joint
Insureds. The specified amount factor is 2.50 for a Joint Insureds' Joint
Equal Attained Age 40 or below on the date of death. For Joint Insureds with
a Joint Equal Attained Age over 40 on the date of death, the factor declines
with age as shown in the Specified Amount Factor Table in Appendix B.
Accordingly, under Option A, the death proceeds will always
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vary as the Accumulated Value varies (but will never be less than the
Specified Amount). If you prefer to have favorable investment performance
and additional premiums reflected in increased death benefits, Policyowners
generally should select Option A.
Under Option B, the death benefit will be equal to the greater of:
- the current Specified Amount, or
- the Accumulated Value (determined as of the end of the Business Day
coinciding with or immediately following the last death of the Joint
Insureds) multiplied by the specified amount factor.
The specified amount factor is the same as under Option A. Accordingly,
under Option B the death benefit will remain level at the Specified Amount
unless the Accumulated Value multiplied by the specified amount factor
exceeds the current Specified Amount, in which case the amount of the death
benefit will vary as the Accumulated Value varies. If you are satisfied with
the amount of your insurance coverage under the Policy and prefer to have
favorable investment performance and additional premiums reflected in higher
Accumulated Value, rather than increased death benefits, Policyowners
generally should select Option B.
Appendix B shows examples illustrating Option A and Option B.
CHANGING THE DEATH BENEFIT OPTION. You may change the death benefit option
in effect at any time by sending a written request to us at our Home Office.
The effective date of such a change will be the Monthly Deduction Day
coinciding with or immediately following the date we approve the change. A
change in death benefit options may have federal income tax consequences.
(See "FEDERAL TAX MATTERS.")
If you change the death benefit option from Option A to Option B, the death
benefit will not change and the current Specified Amount will be increased
by the Accumulated Value on the effective date of the change. If you change
the death benefit option from Option B to Option A, we will reduce the
current Specified Amount by an amount equal to the Accumulated Value on the
effective date of the change. You may not make a change in the death benefit
option if it would result in a Specified Amount which is less than the
minimum Specified Amount in effect on the effective date of the change, or
if after the change the Policy would no longer qualify as life insurance
under federal tax law.
We impose no charges in connection with a change in death benefit option;
however, a change in death benefit option will affect the cost of insurance
charges. (See "CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in force for one Policy
Year, you may adjust the existing insurance coverage by increasing or
decreasing the Specified Amount. To make a change, you must send us a
written request at our Home Office. Any change in the Specified Amount may
affect the cost of insurance rate and the net amount at risk, both of which
will affect your cost of insurance charge. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE RATE, and--NET AMOUNT AT
RISK.") If decreases in the Specified Amount cause the premiums paid to
exceed the maximum premium limitations imposed by federal tax law (see "THE
POLICY--Premiums--PREMIUM LIMITATIONS"), the decrease will be limited to the
extent necessary to meet these requirements. A change in existing coverage
may have federal income tax consequences. (See "FEDERAL TAX MATTERS.")
Any decrease in the Specified Amount will become effective on the Monthly
Deduction Day coinciding with or immediately following the date we approve
the request. The decrease will first reduce the Specified Amount provided by
the most recent increase, then the next most recent increases successively,
then the Specified Amount under the original application. The Specified
Amount following a decrease can never be less than the minimum Specified
Amount for the Policy in effect on the date of the decrease. A Specified
Amount decrease will not reduce the Surrender Charge.
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To apply for an increase, you must provide us with evidence of insurability
we deem satisfactory. Any approved increase will become effective on the
Monthly Deduction Day coinciding with or immediately following the date we
approve the request. An increase will not become effective, however, if the
Policy's Accumulated Value on the effective date would not be sufficient to
cover the deduction for the increased cost of the insurance for the next
Policy Month.
CHANGES IN INSURANCE PROTECTION. You may increase or decrease the pure
insurance protection provided by a Policy--the difference between the death
benefit and the Accumulated Value--in one of several ways as insurance needs
change. These ways include increasing or decreasing the Specified Amount of
insurance, changing the level of premium payments and, to a lesser extent,
partially withdrawing Accumulated Value.
Although the consequences of each of these methods will depend upon the
individual circumstances, they may be summarized as follows:
- A decrease in the Specified Amount will, subject to the applicable
specified amount factor limitations (see "POLICY BENEFITS--Death
Proceeds--DEATH BENEFIT OPTIONS"), decrease the pure insurance
protection and the cost of insurance charges under the Policy
without generally reducing the Accumulated Value.
- An increase in the Specified Amount may increase the amount of pure
insurance protection, depending on the amount of Accumulated Value
and the resultant applicable specified amount factor. If the
insurance protection is increased, the cost of insurance charge
generally will increase as well.
- If you elect Option B, an increased level of premium payments will
increase the Accumulated Value and reduce the pure insurance
protection, until the Accumulated Value multiplied by the applicable
specified amount factor exceeds the Specified Amount. Increased
premiums should also increase the amount of funds available to keep
the Policy in force.
- If you elect Option B, a reduced level of premium payments generally
will increase the amount of pure insurance protection, depending on
the applicable specified amount factor. It also will result in a
reduced amount of Accumulated Value and will increase the
possibility that the Policy will lapse.
- A partial withdrawal will reduce the death benefit. (See "POLICY
BENEFITS--Accumulated Value Benefits--SURRENDER PRIVILEGES.")
However, it only affects the amount of pure insurance protection if
the death benefit payable is based on the specified amount factor,
because otherwise the decrease in the benefit is offset by the
amount of Accumulated Value withdrawn. The primary use of a partial
withdrawal is to withdraw cash and reduce Accumulated Value.
In comparison, an increase in the death benefit due to the operation of the
specified amount factor occurs automatically and is intended to help assure
that the Policy remains qualified as life insurance under federal tax law.
The calculation of the death benefit based upon the specified amount factor
occurs only when the Accumulated Value of a Policy reaches a certain
proportion of the Specified Amount (which may or may not occur). Additional
premium payments, favorable investment performance and large initial
premiums tend to increase the likelihood of the specified amount factor
becoming operational after the first few Policy Years. Such increases will
be temporary, however, if the investment performance becomes unfavorable
and/or premium payments are stopped or decreased. A change in insurance
protection may have federal income tax consequences. (See "FEDERAL TAX
MATTERS.")
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BENEFITS AT MATURITY
If either Joint Insured is alive and the Policy is in force on the Maturity
Date, we will pay to you the Policy's Accumulated Value as of the end of the
Business Day coinciding with or immediately following the Maturity Date,
reduced by any outstanding Policy Debt. (See "POLICY BENEFITS--Loan
Benefits--REPAYMENT OF POLICY DEBT.") We may pay benefits at maturity in a
lump sum or under a payment option. The Maturity Date is Joint Equal
Attained Age 115.
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PAYMENT OPTIONS
We may pay death proceeds and Accumulated Value due at maturity, or upon
surrender or partial withdrawal of a Policy in whole or in part under a
payment option. In any case, a supplemental agreement will be issued for the
payment option. Under a supplemental agreement, the Effective Date is the
date on which death proceeds and Accumulated Value are applied to a payment
option.
You may designate an option in your application or notify us in writing at
our Home Office. During the lives of the Joint Insureds, you may select a
payment option; in addition, during that time you may change a previously
selected option by sending written notice to us requesting the cancellation
of the prior option and the designation of a new option. If you have not
chosen an option prior to the last Joint Insureds' death, the Beneficiary
may choose an option. The Beneficiary may change a payment option by sending
a written request to us, provided that a prior option chosen by you is not
in effect.
If you have not elected a payment option, we will pay the proceeds of the
Policy in one sum. The Company will also pay the proceeds in one sum if,
(1) the proceeds are less than $2,000;
(2) periodic payments would be less than $20; or
(3) the payee is an assignee, estate, trustee, partnership, corporation
or association.
Amounts paid under a payment option are paid pursuant to a payment contract
and will not vary. Proceeds applied under a payment option earn interest at
a rate guaranteed to be no less than 3% compounded yearly. The Company may
be crediting higher interest rates on the Effective Date, but is not
obligated to declare that such additional interest be applied to such funds.
If a payee dies, any remaining payments will be paid to a contingent payee.
At the death of the last payee, the commuted value of any remaining payments
will be paid to the last payee's estate. A payee may not withdraw funds
under a payment option unless the Company has agreed to such withdrawal in
the payment contract. We reserve the right to defer a withdrawal for up to
six months and to refuse to allow partial withdrawals of less than $250.
We have provided a description of the available payment options below.
Payments under Options 2, 3, 4 or 5 will begin as of the date of the last
Joint Insureds' death, on partial withdrawal or surrender, or on the
Maturity Date. Payments under Option 1 will begin at the end of the first
interest period after the date proceeds are otherwise payable.
OPTION 1--INTEREST INCOME. Periodic payments of interest earned from the
proceeds will be paid. Payments can be annual, semi-annual, quarterly or
monthly, as selected by the payee, and will begin at the end of the first
period chosen. Proceeds left under this plan will earn interest at a rate
determined by the Company, in no event less than 3% compounded yearly. The
payee may withdraw all or part of the proceeds at any time.
OPTION 2--INCOME FOR A FIXED PERIOD. Periodic payments will be made for a
fixed period not longer than 30 years. Payments can be annual, semi-annual,
quarterly or monthly. Guaranteed amounts payable under the plan will earn
interest at a rate determined by the Company, in no event less than 3%
compounded yearly.
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OPTION 3--LIFE INCOME WITH TERM CERTAIN. Equal periodic payments will be
made for a guaranteed minimum period elected. If the payee lives longer than
the minimum period, payments will continue for his or her life. The minimum
period can be 0, 5, 10, 15 or 20 years. Guaranteed amounts payable under
this plan will earn interest at a rate determined by the Company, in no
event less than 3% compounded yearly.
OPTION 4--INCOME OF A FIXED AMOUNT. Equal periodic payments of a definite
amount will be paid. Payments can be annual, semi-annual, quarterly or
monthly. The amount paid each period must be at least $20 for each $1,000 of
proceeds. Payments will continue until the proceeds are exhausted. The last
payment will equal the amount of any unpaid proceeds. Unpaid proceeds will
earn interest at a rate determined by the Company, in no event less than 3%
compounded yearly.
OPTION 5--JOINT AND TWO-THIRDS SURVIVOR MONTHLY LIFE INCOME. Equal monthly
payments will be made for as long as two payees live. The guaranteed amount
payable under this plan will earn interest at a minimum rate of 3%
compounded yearly. When one payee dies, payments of two-thirds of the
original monthly payment will be made to the surviving payee. Payments will
stop when the surviving payee dies.
ALTERNATE PAYMENT OPTION. The Company may make available alternative payment
options.
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CHARGES AND DEDUCTIONS
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We deduct certain charges in connection with the Policy to compensate us for
(1) the services and benefits we provide; (2) the costs and expenses we
incur; and (3) the risks we assume, some of which are described below.
<TABLE>
<S> <C> <C>
SERVICES AND BENEFITS WE PROVIDE: - the death benefit, cash and loan benefits
under the Policy
- investment options, including premium
allocations
- administration of elective options
- the distribution of reports to Policyowners
COSTS AND EXPENSES WE INCUR: - costs associated with processing and
underwriting applications, issuing and
administering the Policy (including any
Policy riders)
- overhead and other expenses for providing
services and benefits
- sales and marketing expenses
- other costs of doing business, such as
collecting premiums, maintaining records,
processing claims, effecting transactions,
and paying Federal, state and local premium
and other taxes and fees
RISKS WE ASSUME: - that the cost of insurance charges we may
deduct are insufficient to meet our actual
claims because Insureds die sooner than we
estimate
- that the costs of providing the services
and benefits under the Policies exceed the
charges we deduct
</TABLE>
The nature and amount of these charges are described more fully below.
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<PAGE>
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PREMIUM EXPENSE CHARGE
Before allocating Net Premiums among the Subaccounts and the Declared
Interest Option, we reduce premiums paid by a premium expense charge. The
premium less the premium expense charge equals the Net Premium.
The premium expense charge is 7% of each premium up to the Minimum Initial
Premium (or 2% for each premium over Minimum Initial Premium) and is used to
compensate us for expenses incurred in distributing the Policy, including
registered representative sales commissions, the cost of printing
prospectuses and sales literature, advertising costs and charges we consider
necessary to pay all taxes imposed by states and subdivisions thereof (which
currently range from 1% to 3%).
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MONTHLY DEDUCTION
We deduct certain charges monthly from the Accumulated Value of each Policy
("monthly deduction") to compensate us for the cost of insurance coverage
and any additional benefits added by rider (See "GENERAL
PROVISIONS--Additional Insurance Benefits"), for underwriting and start-up
expenses in connection with issuing a Policy and for certain administrative
costs. We deduct the monthly deduction on the Policy Date and on each
Monthly Deduction Day. We deduct it from the Declared Interest Option and
each Subaccount in the same proportion that the Policy's Net Accumulated
Value in the Declared Interest Option and the Policy's Accumulated Value in
each Subaccount bear to the total Net Accumulated Value of the Policy. For
purposes of making deductions from the Declared Interest Option and the
Subaccounts, we determine Accumulated Values as of the end of the Business
Day coinciding with or immediately following the Monthly Deduction Day.
Because portions of the monthly deduction, such as the cost of insurance,
can vary from month to month, the monthly deduction itself will vary in
amount from month to month.
During the first 12 Policy Months and during the 12 Policy Months
immediately following an increase in Specified Amount, the monthly deduction
will include a first year monthly administrative charge.
We make the monthly deduction on the Business Day coinciding with or
immediately following each Monthly Deduction Day and it will equal:
- the cost of insurance for the Policy; plus
- the cost of any optional insurance benefits added by rider; plus
- the monthly policy expense charges.
COST OF INSURANCE. This charge is designed to compensate us for the
anticipated cost of paying death proceeds to Beneficiaries when the Joint
Insureds die prior to the Maturity Date. We determine the cost of insurance
on a monthly basis, and we determine it separately for the initial Specified
Amount and for any subsequent increases in Specified Amount. We will
determine the monthly cost of insurance charge by dividing the applicable
cost of insurance rate, or rates, by 1,000 and multiplying the result by the
net amount at risk for each Policy Month.
NET AMOUNT AT RISK. Under Option A the net amount at risk for a Policy Month
is equal to (a) divided by (b); and under Option B the net amount at risk
for a Policy Month is equal to (a) divided by (b), minus (c), where:
(a) is the Specified Amount;
(b) is 1.0032737(1); and
(c) is the Accumulated Value.
- ------------------------
(1) Dividing by this number reduces the net amount at risk, solely for the
purposes of computing the cost of insurance, by taking into account
assumed monthly earnings at an annual rate of 4%.
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<PAGE>
We determine the Specified Amount and the Accumulated Value as of the end of
the Business Day coinciding with or immediately following the Monthly
Deduction Day.
We determine the net amount at risk separately for the initial Specified
Amount and any increases in Specified Amount. In determining the net amount
at risk for each Specified Amount, we first consider the Accumulated Value a
part of the initial Specified Amount. If the Accumulated Value exceeds the
initial Specified Amount, we will consider it to be a part of any increase
in the Specified Amount in the same order as the increases occurred.
COST OF INSURANCE RATE. We base the cost of insurance rate for the initial
Specified Amount on the Joint Insureds' sex, premium class and Joint Equal
Age. For any increase in Specified Amount, we base the cost of insurance
rate on the Joint Insureds' sex, premium class and age at last birthday on
the effective date of the increase. Actual cost of insurance rates may
change and we will determine the actual monthly cost of insurance rates by
the Company based on its expectations as to future mortality experience.
However, the actual cost of insurance rates will never be greater than the
guaranteed maximum cost of insurance rates set forth in the Policy. These
guaranteed rates are based on the 1980 Commissioners' Standard Ordinary
Non-Smoker and Smoker Mortality Table. Current cost of insurance rates are
generally less than the guaranteed maximum rates. Any change in the cost of
insurance rates will apply to all persons of the same age, sex and premium
class whose Policies have been in force the same length of time.
The cost of insurance rates generally increase as the Joint Insureds' Joint
Equal Attained Age increases. The premium class of the Joint Insureds also
will affect the cost of insurance rate. The Company currently places Joint
Insureds into a standard premium class or into premium classes involving a
higher mortality risk. In an otherwise identical Policy, Joint Insureds in
the standard premium class will have a lower cost of insurance rate than
those in premium classes involving higher mortality risk. The standard
premium class is also divided into two categories: tobacco and non-tobacco.
(The Company may offer preferred classes in addition to the standard tobacco
and non-tobacco classes.) Non-tobacco-using Joint Insureds will generally
have a lower cost of insurance rate than similarly situated Joint Insureds
who use tobacco.
We determine the cost of insurance rate separately for the initial Specified
Amount and for the amount of any increase in Specified Amount. In
calculating the cost of insurance charge, we apply the rate for the premium
class on the Policy Date to the net amount at risk for the initial Specified
Amount; for each increase in Specified Amount, we use the rate for the
premium class applicable to the increase. However, if we calculate the death
benefit as the Accumulated Value times the specified amount factor, we will
use the rate for the premium class for the most recent increase that
required evidence of insurability for the amount of death benefit in excess
of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction will include charges
for any additional benefits provided by rider. (See "GENERAL
PROVISIONS--Additional Insurance Benefits.")
MONTHLY POLICY EXPENSE CHARGES. We have primary responsibility for the
administration of the Policy and the Variable Account. Administrative
expenses include premium billing and collection, recordkeeping, processing
death benefit claims, cash withdrawals, surrenders and Policy changes, and
reporting and overhead costs. As reimbursement for administrative expenses
related to the maintenance of each Policy and the Variable Account, we
assess a $10 monthly administrative charge against each Policy. We guarantee
this charge will not exceed $14 per Policy Month. We also apply a charge of
$0.03 per $1,000 of Specified Amount against each Policy. We guarantee this
charge will not exceed $0.05 per $1,000 of Specified Amount.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. We deduct monthly administrative
charges from Accumulated Value as part of the monthly deduction during the
first twelve Policy Months and during the twelve Policy Months immediately
following an increase in Specified Amount. The charge will compensate us for
first year underwriting, processing and start-up expenses incurred in
connection with the Policy and the Variable Account. These expenses include
the cost of processing applications,
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<PAGE>
conducting medical examinations, determining insurability and the Joint
Insureds' premium class, and establishing policy records. The first year
monthly administrative charge is $0.10 per $1,000 of Specified Amount or
increase in Specified Amount. We guarantee this charge will not exceed $0.14
per $1,000 of Specified Amount.
FIRST YEAR MONTHLY EXPENSE CHARGE. We will deduct a monthly expense charge
of $10 from Accumulated Value during the first twelve Policy Months. We
guarantee this charge will not exceed $14 per Policy Month.
- --------------------------------------------------------------------------------
TRANSFER CHARGE
We may impose a transfer charge of $25 for the second and each subsequent
transfer during a Policy Year to compensate us for the costs in making the
transfer.
- Unless paid in cash, we will deduct the transfer charge from the
amount transferred.
- Once we issue a Policy, we will not increase this charge for the
life of the Policy.
- We will not impose a transfer charge on transfers that occur as a
result of Policy Loans, the exercise of the special transfer
privilege or the initial allocation of Accumulated Value among the
Subaccounts and the Declared Interest Option following acceptance of
the Policy by the Policyowner.
Currently there is no charge for changing the net premium allocation
instructions.
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PARTIAL WITHDRAWAL FEE
Upon partial withdrawal of a Policy, we assess a charge equal to the lesser
of $25 or 2% of the amount withdrawn to compensate us for costs incurred in
accomplishing the withdrawal. We deduct this fee from the Accumulated Value.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
We apply a Surrender Charge during the first ten Policy Years, as well as
during the first ten years following an increase in Specified Amount. This
charge is an amount per $1,000 of Specified Amount which declines to $0 in
the eleventh year and varies by Joint Equal Age, underwriting category and
Policy Year. We have listed below the maximum Surrender Charge for select
ages in various underwriting categories in the first Policy Year.
<TABLE>
<CAPTION>
ISSUE AGE NON-TOBACCO TOBACCO COMBINED
<S> <C> <C> <C>
30 13.67 15.00 14.23
50 24.28 27.59 25.68
70 54.10 53.81 53.97
</TABLE>
The Surrender Charge is level within each Policy Year. (See "APPENDIX
C--Maximum Surrender Charges.")
We reserve the right to waive the Surrender Charge after the first Policy
Year if either Joint Insured is terminally ill or stays in a qualified
nursing care center for 90 days.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT CHARGES
MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily mortality and expense
risk charge from each Subaccount at an effective annual rate of .90% of the
average daily net assets of the Subaccounts. We guarantee not to increase
this charge for the duration of the Policy. We may realize a profit from
this
32
<PAGE>
charge and may use such profit for any lawful purpose, including payment of
our distribution expenses.
The mortality risk we assume is that Joint Insureds may die sooner than
anticipated and therefore, we may pay an aggregate amount of life insurance
proceeds greater than anticipated. The expense risk assumed is that expenses
incurred in issuing and administering the Policies will exceed the amounts
realized from the administrative charges assessed against the Policies.
FEDERAL TAXES. Currently no charge is made to the Variable Account for
federal income taxes that may be attributable to the Variable Account. We
may, however, make such a charge in the future. Charges for other taxes, if
any, attributable to the Account may also be made. (See "FEDERAL TAX
MATTERS--Taxation of the Company.")
INVESTMENT OPTION EXPENSES. The value of net assets of the Variable Account
will reflect the investment advisory fee and other expenses incurred by each
Investment Option. The investment advisory fee and other expenses applicable
to each Investment Option are listed in the "SUMMARY OF THE POLICY" and
described in the prospectus for each Fund's Investment Option.
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THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
You may allocate Net Premiums and transfer Accumulated Value to the Declared
Interest Option. Because of exemptive and exclusionary provisions, we have
not registered interests in the Declared Interest Option under the
Securities Act of 1933 and we have not registered the Declared Interest
Option as an investment company under the Investment Company Act of 1940.
Accordingly, neither the Declared Interest Option nor any interests therein
are subject to the provisions of these Acts and, as a result, the staff of
the Securities and Exchange Commission has not reviewed the disclosures in
this Prospectus relating to the Declared Interest Option. Disclosures
regarding the Declared Interest Option may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses. Please
refer to the Policy for complete details regarding the Declared Interest
Option.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
Our General Account supports the Declared Interest Option. The General
Account consists of all assets we own other than those in the Variable
Account and other separate accounts. Subject to applicable law, we have sole
discretion over the investment of the General Account's assets.
You may elect to allocate Net Premiums to the Declared Interest Option, the
Variable Account, or both. You may also transfer Accumulated Value from the
Subaccounts to the Declared Interest Option, or from the Declared Interest
Option to the Subaccounts. Allocating or transferring funds to the Declared
Interest Option does not entitle you to share in the investment experience
of the General Account. Instead, we guarantee that Accumulated Value in the
Declared Interest Option will accrue interest at an effective annual rate of
at least 4%, independent of the actual investment experience of the General
Account.
- --------------------------------------------------------------------------------
DECLARED INTEREST OPTION ACCUMULATED VALUE
Net premiums allocated to the Declared Interest Option are credited to the
Policy. The Company bears the full investment risk for these amounts. We
guarantee that interest credited to each Policyowner's Accumulated Value in
the Declared Interest Option will not be less than an effective annual rate
of 4%. The Company may, in its sole discretion, credit a higher rate of
interest, although it is not obligated to credit interest in excess of 4%
per year, and might not do so. Any interest credited on the Policy's
Accumulated Value in the Declared Interest Option in excess of the
guaranteed rate of 4% per year will be determined in the sole discretion of
the Company and may be changed at any time by us, in our sole discretion.
The Policyowner assumes the risk that the interest
33
<PAGE>
credited may not exceed the guaranteed minimum rate of 4% per year. The
interest credited to the Policy's Accumulated Value in the Declared Interest
Option that equals Policy Debt may be greater than 4%, but will in no event
be greater than the current effective loan interest rate minus no more than
3%. From time to time, we may allow a loan spread of 0% on the gain in a
Policy in effect a minimum of 10 years. The Accumulated Value in the
Declared Interest Option will be calculated no less frequently than each
Monthly Deduction Day.
The Company guarantees that, at any time prior to the Maturity Date, the
Accumulated Value in the Declared Interest Option will not be less than the
amount of the Net Premiums allocated or Accumulated Value transferred to the
Declared Interest Option, plus interest at the rate of 4% per year, plus any
excess interest which we credit, less the sum of all policy charges
allocable to the Declared Interest Option and any amounts deducted from the
Declared Interest Option in connection with partial surrenders or transfers
to the Variable Account.
- --------------------------------------------------------------------------------
TRANSFERS, SURRENDERS AND POLICY LOANS
You may transfer amounts between the Subaccounts and the Declared Interest
Option. However, only one transfer between the Variable Account and the
Declared Interest Option is permitted in each Policy Year. We may impose a
transfer charge of $25 in connection with the transfer unless such transfer
is the first transfer requested by the Policyowner during such Policy Year.
Unless you submit the transfer charge in cash with your request, we will
deduct the charge from the amount transferred. No more than 50% of the Net
Accumulated Value in the Declared Interest Option may be transferred from
the Declared Interest Option unless the balance in the Declared Interest
Option immediately after the transfer will be less than $1,000. If the
balance in the Declared Interest Option after a transfer would be less than
$1,000, you may transfer the full Net Accumulated Value in the Declared
Interest Option. A Policyowner may also make surrenders and obtain Policy
Loans from the Declared Interest Option at any time prior to the Policy's
Maturity Date.
We may delay transfers and surrenders from, and payments of Policy Loans
allocated to, the Declared Interest Option for up to six months. Surrenders
and partial withdrawals will have tax consequences (see "FEDERAL TAX
MATTERS").
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
We issue the Policy in consideration of the statements in the application
and the payment of the initial premium. The Policy, the application, any
supplemental applications and endorsements or additional benefit riders or
agreements make up the entire contract. In the absence of fraud, we will
treat the statements made in an application or supplemental application as
representations and not as warranties. We will not use any statement to void
the Policy or in defense of a claim unless the statement is contained in the
application or any supplemental application.
- --------------------------------------------------------------------------------
INCONTESTABILITY
The Policy is incontestable, except for fraudulent statements made in the
application or supplemental applications, after it has been in force during
the lifetimes of the Joint Insureds for two years from the Policy Date or
date of reinstatement. Any increase in Specified Amount will be
incontestable only after it has been in force during the lifetimes of the
Joint Insureds for two years from the effective date of the increase.
- --------------------------------------------------------------------------------
CHANGE OF PROVISIONS
We reserve the right to change the Policy, in the event of future changes in
the federal tax law, to the extent required to maintain the Policy's
qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can change any part of
the Policy except the Policyowner and the President, a Vice President, the
Secretary or an Assistant Secretary of the
34
<PAGE>
Company. Both must agree to any change and such change must be in writing.
No agent may change the Policy or waive any of its provisions.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE OR SEX
If either Joint Insureds' age or sex was misstated in the application, we
will adjust each benefit and any amount to be paid under the Policy to
reflect the correct age and sex.
- --------------------------------------------------------------------------------
SUICIDE EXCLUSION
If the Policy is in force and the surviving Joint Insured commits suicide,
while sane or insane, within one year from the Policy Date, we will limit
life insurance proceeds payable under the Policy to all premiums paid,
reduced by any outstanding Policy Debt and any partial surrenders, and
increased by any unearned loan interest. If the Policy is in force and the
surviving Joint Insured commits suicide, while sane or insane, within one
year from the effective date of any increase in Specified Amount, we will
not pay any increase in the death benefit resulting from the requested
increase in Specified Amount. Instead, we will refund to the Policyowner an
amount equal to the total cost of insurance applied to the increase.
- --------------------------------------------------------------------------------
ANNUAL REPORT
At least once each year, we will send an annual report to each Policyowner.
The report will show
- the current death benefit,
- the Accumulated Value in each Subaccount and in the Declared
Interest Option,
- outstanding Policy Debt, and
- premiums paid, partial withdrawals made and charges assessed since
the last report.
The report will also include any other information required by state law or
regulation. Further, the Company will send the Policyowner the reports
required by the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
NON-PARTICIPATION
The Policy does not participate in the Company's profits or surplus
earnings. No dividends are payable.
- --------------------------------------------------------------------------------
OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute ownership and control over
assets, including the assets of the Variable Account.
- --------------------------------------------------------------------------------
WRITTEN NOTICE
You should send any written notice to the Company at our Home Office. The
notice should include the policy number and the Joint Insureds' full names.
Any notice we send to a Policyowner will be sent to the address shown in the
application unless you filed an appropriate address change form with the
Company.
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
The Company will usually mail the proceeds of complete surrenders, partial
withdrawals and Policy Loans within seven days after we receive your signed
request at our Home Office. We will usually mail death proceeds within seven
days after receipt of Due Proof of Death and maturity benefits within seven
days of the Maturity Date. However, we may postpone payment of any amount
upon a
35
<PAGE>
partial withdrawal from or surrender of a Policy, payment of any Policy
Loan, and payment of death proceeds or benefits at maturity whenever:
- the New York Stock Exchange is closed other than customary weekend
and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission;
- the Securities and Exchange Commission by order permits postponement
for the protection of Policyowners; or
- an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of the securities is not
reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Variable Account.
We also may postpone transfers under these circumstances.
Payments under the Policy which are derived from any amount paid to the
Company by check or draft may be postponed until such time as the Company is
satisfied that the check or draft has cleared the bank upon which it is
drawn.
- --------------------------------------------------------------------------------
CONTINUANCE OF INSURANCE
The insurance under a Policy will continue until the earlier of:
- the end of the Grace Period following the Monthly Deduction Day on
which the Net Accumulated Value during the first three Policy Years,
or Net Surrender Value after three Policy Years, is less than the
monthly deduction for the following Policy Month;
- the date the Policyowner surrenders the Policy for its entire Net
Accumulated Value;
- the last death of the Joint Insureds; or
- the Maturity Date.
Any rider to a Policy will terminate on the date specified in the rider.
- --------------------------------------------------------------------------------
OWNERSHIP
The Policy belongs to the Policyowner. The original Policyowner is the
person named as owner in the application. If there is more than one owner,
the Policy will be owned jointly with right of survivorship. Ownership of
the Policy may change according to the ownership option selected as part of
the original application or by a subsequent endorsement to the Policy.
During the Joint Insureds' lifetimes, all rights granted by the Policy
belong to the Policyowner, except as otherwise provided for in the Policy.
Special ownership rules may apply if the Joint Insureds are under legal age
(as defined by state law in the state in which the Policy is delivered) on
the Policy Date.
The Policyowner may assign the Policy as collateral security. The Company
assumes no responsibility for the validity or effect of any collateral
assignment of the Policy. No assignment will bind us unless in writing and
until we receive notice of the assignment at the Home Office. The assignment
is subject to any payment or action we may have taken before we received
notice of the assignment at the Home Office. Assigning the Policy may have
federal income tax consequences. [See "FEDERAL TAX MATTERS."]
- --------------------------------------------------------------------------------
THE BENEFICIARY
The Policyowner designates the primary Beneficiaries and contingent
Beneficiaries in the application. If changed, the primary Beneficiary or
contingent Beneficiary is as shown in the latest change filed with the
Company. One or more primary or contingent Beneficiaries may be named in the
application. In such case, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless requested otherwise
by the Policyowner.
36
<PAGE>
Unless a payment option is chosen, we will pay the proceeds payable at the
Insured's death in a lump sum to the primary Beneficiary. If the primary
Beneficiary dies before the last Joint Insured, we will pay the proceeds to
the contingent Beneficiary. If no Beneficiary survives the last Joint
Insured, we will pay the proceeds to the Policyowner or the Policyowner's
estate.
- --------------------------------------------------------------------------------
CHANGING THE POLICYOWNER OR BENEFICIARY
During the Joint Insureds' lives, the Policyowner and the Beneficiary may be
changed. To make a change, you must send a written request to us at our Home
Office. The request and the change must be in a form satisfactory to the
Company and we must actually receive and record the request. The change will
take effect as of the date you sign the request and will be subject to any
payment made before we recorded the change. We may require return of the
Policy for endorsement.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE BENEFITS
Subject to certain requirements, you may add one or more of the following
additional insurance benefits to a Policy by rider:
- Last Survivor Universal Cost of Living Increase;
- Universal Term Life Insurance; and
- Estate Protector 4-Year Non-Renewable Last Survivor Term.
We will deduct the cost of any additional insurance benefits as part of the
monthly deduction. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.") You
may obtain detailed information concerning available riders, and their
suitability for inclusion to your Policy, from the registered representative
selling the Policy.
- --------------------------------------------------------------------------------
POLICY SPLIT OPTION
You may split the Policy into two single-life policies, one on each of the
Joint Insureds, upon the occurrence of the following events:
- divorce or annulment with respect to the marriage of the Joint
Insureds, or
- certain changes in the Federal Estate Tax Law resulting in reductions
in the Unlimited Marital Deduction, the Federal Unified Credit or the
Federal Estate Tax.
You may elect this option subject to the following provisions:
- you must provide us with written notification within 90 days after
the effective date of one of the events listed above;
- each new policy will be issued for no more than one-half the
Specified Amount of this Policy;
- the Net Surrender Value will be divided and allocated in proportion
to the Specified Amount of each new policy;
- the Beneficiary of this Policy will be the beneficiary of each new
policy;
- if the Joint Insureds are the owners of this Policy, each will be the
owner of their new policy; if the Joint Insureds are not the owners
of this Policy, then the owners will be the owners of each new policy
(in this case, there will be a taxable event);
- the new policies will be issued based on the age and premium class
for each Joint Insured on the effective date of the election of this
option;
- the new policies must fit our single-life issue limits in effect at
the time you elect the option. The new policies will be subject to
the same charges as those in effect for regularly underwritten
policies;
- this option will not be available after the date of first death of
the Joint Insureds;
37
<PAGE>
- the two single-life policies may be any permanent single life
policies currently offered by the Company at the time this option is
elected; and
- any assignments of this Policy will apply to each new policy.
Please consult your registered representative for more information on this
option.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition to being licensed
as life insurance agents for the Company, are also registered
representatives of the principal underwriter of the Policies, EquiTrust
Marketing Services, LLC ("EquiTrust Marketing"). EquiTrust Marketing, a
corporation organized on May 7, 1970, under the laws of the State of
Delaware, is registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. EquiTrust Marketing
currently receives annual compensation of $100 per registered representative
for acting as principal underwriter.
Writing agents will receive commissions based on a commission schedule and
rules. The Company may pay agents first year commissions at a rate not
exceeding 50% of minimum initial premiums and 4% of unscheduled premiums
paid in the first Policy Year. Agents will be paid renewal commissions at a
rate equal to 5% of unplanned periodic premiums and 4% of unscheduled
premiums paid after the first Policy Year. Additional commissions at a rate
not exceeding 50% of the increase in planned periodic premiums may be paid
during the first year following an increase in Specified Amount.
These commissions (and other distribution expenses, such as production
incentive bonuses, agent's insurance and pensions benefits, agency
management compensation and bonuses and expense allowances) are paid by the
Company. They do not result in any additional charges against the Policy
that are not described above under "CHARGES AND DEDUCTIONS."
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon our understanding
of the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to
how they may be interpreted by the Internal Revenue Service.
- --------------------------------------------------------------------------------
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a life insurance policy must satisfy
certain requirements which are set forth in the Internal Revenue Code.
Guidance as to how these requirements are to be applied is limited
especially with regard to policies issued on joint lives. While we believe
that it is reasonable to conclude that a Policy should satisfy the
applicable requirements of the Code, certain features of the Policy are not
addressed in the relevant authorities. For example, the relevant authorities
do not address the Policy's use of Joint Equal Age calculations to test for
compliance with the requirements of the Code. If it is subsequently
determined that a Policy does not satisfy the applicable requirements to be
treated as a life insurance contract, we may take appropriate steps to bring
the Policy into compliance with such requirements and we reserve the right
to modify the Policy as necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have
been considered for Federal income tax purposes to be the owners of the
assets of variable account supporting their contracts due
38
<PAGE>
to their ability to exercise investment control over those assets. Where
this is the case, the policyowners have been currently taxed on income and
gains attributable to variable account assets. There is little guidance in
this area, and some features of the Policy, such as the flexibility to
allocate premium payments and Accumulated Values, have not been explicitly
addressed in published rulings. While we believe that the Policy does not
give the Policyowner investment control over Variable Account assets, we
reserve the right to modify the Policy as necessary to prevent the
Policyowner from being treated as the owner of the Variable Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Subaccounts be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that the
Subaccounts, through the funds, will satisfy these diversification
requirements.
THE FOLLOWING DISCUSSION ASSUMES THAT THE POLICY WILL QUALIFY AS A LIFE
INSURANCE CONTRACT FOR FEDERAL INCOME TAX PURPOSES.
- --------------------------------------------------------------------------------
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the death benefit under a Policy
should be excludible from the gross income of the beneficiary. Federal,
state and local estate, inheritance, transfer, and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
Policyowner or beneficiary. A tax adviser should be consulted on these
consequences.
Generally, a Policyowner will not be deemed to be in constructive receipt of
the Accumulated Value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the
tax consequences depend on whether the Policy is classified as a "modified
endowment contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "modified endowment contracts," with
less favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policy as to premium payments and benefits, the
individual circumstances of each Policy will determine whether it is
classified as a modified endowment contract. The rules are too complex to be
summarized here, but generally depend on the amount of premium payments made
during the first seven Policy years. Certain changes in a Policy after it is
issued (including a reduction in benefits anytime after issuance) could also
cause it to be classified as a modified endowment contract. You should
consult with a competent tax adviser to determine whether a Policy
transaction will cause the Policy to be classified as a modified endowment
contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as modified endowment contracts are subject
to the following tax rules:
(1) All distributions other than death benefits from a modified
endowment contract, including distributions upon surrender and
withdrawals, will be treated first as distributions of gain taxable
as ordinary income and as tax-free recovery of the Policyowner's
investment in the Policy only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a modified
endowment contract are treated as distributions and taxed
accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject
to tax except where the distribution or loan is made when the
Policyowner has attained age 59 1/2 or is disabled, or where the
distribution is part of a series of substantially equal periodic
payments for the life (or life expectancy) of the Policyowner or
the joint lives (or joint life expectancies) of the Policyowner and
the Policyowner's beneficiary or designated beneficiary.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS.
Distributions other than death benefits from a Policy that is not classified
as a modified endowment contract are generally treated first as a recovery
of the Policyowner's investment in the Policy, and only after the recovery
of all investment in the Policy, as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue
to qualify as a life
39
<PAGE>
insurance contract for Federal income tax purposes if Policy benefits are
reduced during the first 15 Policy years may be treated in whole or in part
as ordinary income subject to tax.
Loans from or secured by a Policy that is not a modified endowment contract
will generally not be treated as taxable distributions. However, the tax
treatment of loans available after the tenth Policy Year where there is a
minimal spread between the interest rate charged and the interest rate
credited or the loaned amount is unclear. You should consult a tax adviser
before taking out such a loan.
Finally, neither distributions from, nor loans from or secured by, a Policy
that is not a modified endowment contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that
is tax-free.
POLICY LOAN INTEREST. In general, interest on a Policy Loan will not be
deductible.
MULTIPLE POLICIES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Policyowner during any calendar year
are treated as one modified endowment contract for purposes of determining
the amount includible in the Policyowner's income when a taxable
distribution occurs.
ACCELERATED DEATH BENEFITS. The Company believes that for federal income tax
purposes, an accelerated death benefit payment received under an accelerated
death benefit endorsement should be fully excludable from the gross income
of the beneficiary, as long as the beneficiary is the insured under the
Policy. However, you should consult a qualified tax adviser about the
consequences of adding this Endorsement to a Policy or requesting an
accelerated death benefit payment under this Endorsement.
EXCHANGES. The Company believes that an exchange of a fixed-benefit policy
issued by the Company for a Policy as provided under "THE POLICY--Exchange
Privilege" generally should be treated as a non-taxable exchange of life
insurance policies within the meaning of section 1035 of the Code. However,
in certain circumstances, the exchanging owner may receive a cash
distribution that might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the extent a
fixed-benefit policy with an outstanding loan is exchanged for an
unencumbered Policy, the exchanging owner could recognize income at the time
of the exchange up to an amount of such loan (including any due and unpaid
interest on such loan). An exchanging Policyowner should consult a tax
adviser as to whether an exchange of a fixed-benefit policy for the Policy
will have adverse tax consequences.
POLICY SPLIT OPTION. The policy split option permits a Policy to be split
into two single life insurance policies. It is not clear whether exercising
the policy split option will be treated as a taxable transaction or whether
the individual policies that result would be modified endowment contracts.
Consult a tax adviser before exercising the policy split option.
OTHER POLICYOWNER TAX MATTERS. Businesses can use the Policy in various
arrangements, including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and nonexempt welfare benefit plans, retiree medical benefit plans
and others. The tax consequences of such plans may vary depending on the
particular facts and circumstances. If you are purchasing the Policy for any
arrangement the value of which depends in part on its tax consequences, you
should consult a qualified tax adviser. In recent years, moreover, Congress
has adopted new rules relating to life insurance owned by businesses. Any
business contemplating the purchase of a new Policy or a change in an
existing Policy should consult a tax adviser.
- --------------------------------------------------------------------------------
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the Policy could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Policy.
40
<PAGE>
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TAXATION OF THE COMPANY
At the present time, the Company makes no charge for any Federal, state or
local taxes (other than the charge for state premium taxes) that may be
attributable to the Variable Account or to the policies. The Company
reserves the right to charge the Subaccounts of the Variable Account for any
future taxes or economic burden the Company may incur.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED BENEFIT PLANS
The Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employer's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary
between men and women on the basis of sex. In addition, legislative,
regulatory or decisional authority of some states may prohibit use of
sex-distinct mortality tables under certain circumstances. The Policy
described in this Prospectus contains guaranteed cost of insurance rates and
guaranteed purchase rates for certain payment options that distinguish
between men and women. Accordingly, employers and employee organizations
should consider, in consultation with legal counsel, the impact of Norris,
and Title VII generally, on any employment-related insurance or benefit
program for which a Policy may be purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from the General Account.
We maintain records of all purchases and redemptions of shares by each
Investment Option for each corresponding Subaccount. Additional protection
for the assets of the Variable Account is afforded by a blanket fidelity
bond issued by Chubb Insurance Group in the amount of $5,000,000 covering
all the officers and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS
To the extent required by law, the Company will vote the Fund shares held in
the Variable Account at regular and special shareholder meetings of the
Funds in accordance with instructions received from persons having voting
interests in the corresponding Subaccounts. If, however, the Investment
Company Act of 1940 or any regulation thereunder should be amended or if the
present interpretation thereof should change, and, as a result, we determine
that it is permitted to vote the Fund shares in its own right, we may elect
to do so.
The number of votes which a Policyowner has the right to instruct are
calculated separately for each Subaccount and are determined by dividing a
Policy's Accumulated Value in a Subaccount by the net asset value per share
of the corresponding Investment Option in which the Subaccount invests.
Fractional shares will be counted. The number of votes of the Investment
Option which you have the right to instruct will be determined as of the
date coincident with the date established by that Investment Option for
determining shareholders eligible to vote at such meeting of the Fund.
Voting instructions will be solicited by written communications prior to
such meeting in accordance with procedures established by each Fund. Each
person having a voting interest in a Subaccount will receive proxy
materials, reports and other materials relating to the appropriate
Investment Option.
The Company will vote Fund shares attributable to Policies as to which no
timely instructions are received (as well as any Fund shares held in the
Variable Account which are not attributable to Policies) in proportion to
the voting instructions which are received with respect to all Policies
participating in each Investment Option. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast on a matter.
41
<PAGE>
Fund shares may also be held by separate accounts of other affiliated and
unaffiliated insurance companies. The Company expects that those shares will
be voted in accordance with instructions of the owners of insurance policies
and contracts issued by those other insurance companies. Voting instructions
given by owners of other insurance policies will dilute the effect of voting
instructions of Policyowners.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
sub-classification or investment objective of an Investment Option or to
approve or disapprove an investment advisory contract for an Investment
Option. In addition, the Company itself may disregard voting instructions in
favor of changes initiated by a Policyowner in the investment policy or the
investment adviser of an Investment Option if the Company reasonably
disapproves of such changes. A change would be disapproved only if the
proposed change is contrary to state law or prohibited by state regulatory
authorities, or the Company determined that the change would have an adverse
effect on the General Account in that the proposed investment policy for an
Investment Option may result in overly speculative or unsound investments.
In the event the Company does disregard voting instructions, a summary of
that action and the reasons for such action will be included in the next
annual report to Policyowners.
- --------------------------------------------------------------------------------
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws of
Iowa, is subject to regulation by the Iowa Insurance Department. An annual
statement is filed with the Iowa Insurance Department on or before
March lst of each year covering the operations and reporting on the
financial condition of the Company as of December 31st of the preceding
year. Periodically, the Iowa Insurance Department examines the liabilities
and reserves of the Company and the Variable Account and certifies their
adequacy, and a full examination of operations is conducted periodically by
the National Association of Insurance Commissioners.
In addition, the Company is subject to the insurance laws and regulations of
other states within which it is licensed or may become licensed to operate.
Generally, the insurance department of any other state applies the laws of
the state of domicile in determining permissible investments.
42
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS OF FARM BUREAU LIFE INSURANCE COMPANY
The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West Des Moines, Iowa 50266. The
principal occupation shown reflects the principal employment of each
individual during the past five years.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Kenneth R. Ashby Farmer; President, Utah Farm Bureau Federation and affiliated
Director companies and Ashby's Valley View Farms; Vice President and
Director, Utah Farm Bureau Insurance Co.; Director, Millard County
Water Conservancy District, American Farm Bureau Federation and
affiliated companies, Multi States Farmers Service Co., FBL
Financial Group, Inc. and Universal Assurors Life Insurance
Company
Al Christopherson Farmer; President, Minnesota Farm Bureau Federation; Director, FBL
Director Financial Group, Inc., Universal Assurors Life Insurance Company,
Farm Bureau Mutual Insurance Company and FBL Insurance
Brokerage, Inc.
Ernest A. Glienke Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc., Utah Farm Bureau Insurance Company and
FBL Financial Services, Inc.
Philip A. Hemesath Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc. and FBL Financial Services, Inc.
Craig D. Hill Farmer; President, CAPA Hill, Inc.; Director, Farm Bureau Mutual
Director Insurance Company, FBL Insurance Brokerage, Inc., Utah Farm Bureau
Insurance Company and FBL Financial Services, Inc.
Daniel L. Johnson Farmer; Farm Bureau Mutual Insurance Company, FBL Insurance
Director Brokerage, Inc. and FBL Financial Services, Inc.
Richard G. Kjerstad Farmer; President and Director, South Dakota Farm Bureau Federation
Director and South Dakota Farm Bureau Mutual Insurance Company; Director,
FBL Financial Group, Inc. and Universal Assurors Life Insurance
Company
Lindsey D. Larsen Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc., Utah Farm Bureau Insurance Company and
FBL Financial Services, Inc.
David R. Machacek Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc., and FBL Financial Services, Inc.
Donald O. Narigon Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc., and FBL Financial Services, Inc.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Bryce P. Neidig Farmer; President, Nebraska Farm Bureau Federation, Nebraska Farm
Director Bureau Services, Inc., Farm Bureau Insurance Company of Nebraska,
Nebraska Farm Bureau Insurance Agency, Inc.; Director, American
Agriculture Insurance Company, American Agriculture Insurance
Agency, Inc., American Farm Bureau Service Company, American Farm
Bureau Federation, American Agricultural Communications
Systems, Inc., Western Agricultural Insurance Co., Western
Agricultural Management Corp., FBL Financial Group, Inc., Blue
Cross/Blue Shield of Nebraska and Universal Assurors Life
Insurance Company
Charles E. Norris Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc. and FBL Financial Services, Inc.
Keith R. Olsen Farmer
Director
Bennett M. Osmonson Farmer
Director
Howard D. Poulson Farmer; President, Wisconsin Farm Bureau Federation, Rural Mutual
Director Insurance Company and Midwest Livestock Producers; Director, FBL
Financial Group, Inc. and Universal Assurors Life Insurance
Company
Sally A. Puttmann Farmer; Director, Farm Bureau Mutual Insurance Company, FBL
Director Insurance Brokerage, Inc. and FBL Financial Services, Inc.
Beverly L. Schnepel Farmer; Director, Farm Bureau Mutual Insurance Company, Utah Farm
Director Bureau Insurance Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
F. Gary Steiner Farmer; Director, Wisconsin Farm Bureau Insurance Company and Bank
Director of Alma (Alma, WI)
Edward M. Wiederstein Farmer; Chairman and Director, FBL Financial Group, Inc.; President
President and Director and Director, Iowa Farm Bureau Federation, FBL Insurance
Brokerage, Inc., Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services, Inc., Universal
Assurors Life Insurance Company, EquiTrust Life Insurance Company
and Farm Bureau Agricultural Business Corporation; Director,
Multi-Pig Corporation, Western Agricultural Insurance Company,
Western Ag Insurance Agency, Inc., Western Farm Bureau Life
Insurance Company and American Ag Insurance Company
Craig A. Lang Farmer; Director, Growmark, Inc., Western Farm Bureau Life Insurance
Vice President and Director Company, Utah Farm Bureau Insurance Company, Vice President and
Director, Farm Bureau Mutual Insurance Company, FBL Insurance
Brokerage, Inc. and FBL Financial Services, Inc., Vice President,
Universal Assurors Life Insurance Company
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Richard D. Harris Senior Vice President and Secretary-Treasurer, Farm Bureau Mutual
Senior Vice President and Insurance Company, FBL Insurance Brokerage, Inc., Universal
Secretary-Treasurer Assurors Life Insurance Company, Utah Farm Bureau Insurance
Company, Western Farm Bureau Life Insurance Company, FBL Financial
Services, Inc. and FBL Financial Group, Inc.; Senior Vice
President and Assistant Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain Senior Vice President, General Counsel and Management Director, FBL
Senior Vice President and Financial Group, Inc.
General Counsel
Thomas R. Gibson Chief Executive Officer and Management Director, FBL Financial
Chief Executive Officer Group, Inc.
William J. Oddy Chief Operating Officer, FBL Financial Group, Inc.
Executive Vice President and
General Manager
Timothy J. Hoffman Vice President, Chief Property/Casualty Officer, FBL Financial
Vice President Group, Inc.
James W. Noyce Chief Financial Officer, FBL Financial Group, Inc.
Chief Financial Officer
Barbara J. Moore Vice President-Market Development, FBL Financial Group, Inc.
Vice President
JoAnn W. Rumelhart Vice President-Life Operations, FBL Financial Group, Inc.
Vice President-Life Operations
John M. Paule Vice President-Corporate Administration, FBL Financial Group, Inc.
Vice President-Corporate
Administration
Lynn E. Wilson Vice President-Life Sales, FBL Financial Group, Inc.
Vice President-Life Sales
F. Walter Tomenga Vice President-Corporate Affairs and Marketing Services, FBL
Vice President - Corporate Financial Group, Inc.
Affairs and Marketing Services
Robert L. Tatge Vice President-Property/Casualty Operations, FBL Financial
Vice President Group, Inc.
LouAnn Sandburg Vice President-Investments and Assistant Treasurer, FBL Financial
Vice President - Investments Group, Inc.
and Assistant Treasurer
Thomas E. Burlingame Vice President-Associate General Counsel, FBL Financial Group, Inc.
Vice President - Associate
General Counsel
Kathryn Coleson Horner Accounting Vice President, FBL Financial Group, Inc.
Accounting Vice President
Dennis M. Marker Investment Vice President, Administration, FBL Financial Group, Inc.
Investment Vice President,
Administration
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Paul Grinvalds Variable Operations Vice President, Appointed Actuary, FBL Financial
Variable Operations Vice Group, Inc.
President
James P. Brannen Controller and Vice President, FBL Financial Group, Inc.
Controller and Vice President
Ronald J. Palmer Agency Services Vice President, FBL Financial Group, Inc.
Agency Services Vice President
Christopher G. Daniels Life Product Development and Pricing Vice President, FBL Financial
Life Product Development and Group, Inc.
Pricing Vice President
James M. Mincks Human Resources Vice President, FBL Financial Group, Inc.
Human Resources Vice President
Don Seibel GAAP Accounting Vice President, FBL Financial Group, Inc.
GAAP Accounting Vice President
Scott Shuck Marketing Services Vice President, FBL Financial Group, Inc.
Marketing Services Vice
President
Jim Streck Traditional Operations Vice President, FBL Financial Group, Inc.
Traditional Operations Vice
President
Blake D. Weber Sales Services Vice President, FBL Financial Group, Inc.
Sales Services Vice President
Kermit J. Larson Agency Vice President, Farm Bureau Life Insurance Company
Agency Vice President
Larry W. Riley Agency Vice President, Farm Bureau Life Insurance Company
Agency Vice President
John F. Mottet Agency Vice President, Farm Bureau Life Insurance Company
Agency Vice President
Richard J. January Regional Vice President, Farm Bureau Life Insurance Company
Regional Vice President
Cyrus S. Winters Regional Vice President, Farm Bureau Life Insurance Company
Regional Vice President
Michael J. Tousley Regional Vice President, Farm Bureau Life Insurance Company
Regional Vice President
Ronnie G. Lee Agency Vice President, Farm Bureau Life Insurance Company
Agency Vice President
Art Sieler Agency Vice President, Farm Bureau Life Insurance Company
Agency Vice President
</TABLE>
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to federal securities laws applicable to the
issuance of the flexible premium variable life insurance policy described in
this Prospectus. All matters of Iowa law pertaining to the Policy, including
the validity of the Policy and the Company's right to issue the Policy under
Iowa Insurance
46
<PAGE>
Law, have been passed upon by Stephen M. Morain, Senior Vice President and
General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
The Company, like other insurance companies, is involved in lawsuits.
Currently, there are no class action lawsuits naming us as a defendant or
involving the Variable Account. In some lawsuits involving other insurers,
substantial damages have been sought and/or material settlement payments
have been made. Although the outcome of any litigation cannot be predicted
with certainty, we believe that at the present time, there are no pending or
threatened lawsuits that are reasonably likely to have a material adverse
impact on the Variable Account or the Company.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of the Variable Account at December 31, 1999 and
for each of the three years in the period then ended, and the financial
statements and schedules of the Company at December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999, appearing
herein, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their respective reports thereon appearing elsewhere herein and are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by
Christopher G. Daniels, FSA, MAAA, Life Product Development and Pricing Vice
President, as stated in the opinion filed as an exhibit to the registration
statement.
- --------------------------------------------------------------------------------
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits to
the registration statement, to all of which reference is made for further
information concerning the Variable Account, the Company and the Policy
offered hereby. Statements contained in this Prospectus as to the contents
of the Policy and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
47
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Variable Account's statement of net assets as of December 31, 1999 and
the related statements of operations and changes in net assets for each of
the three years in the period then ended, and the consolidated balance
sheets of the Company at December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999,
appearing herein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their respective reports thereon appearing
elsewhere herein. The Policy was not offered through the Variable Account
prior to May 1, 2000.
[Financial statements to be filed by amendment.]
48
<PAGE>
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APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS AND ACCUMULATED VALUE
The following tables illustrate how the death benefits, Accumulated Value
and Surrender Values of a Policy may vary over an extended period of time at
certain ages, assuming hypothetical gross rates of investment return for the
Investment Options equivalent to constant gross annual rates of 0%, 4%, 8%
and 12%. The hypothetical rates of investment return are for purposes of
illustration only and should not be deemed a representation of past or
future rates of investment return. Actual rates of return for a particular
Policy may be more or less than the hypothetical investment rates of return
and will depend on a number of factors including the investment allocations
made by a Policyowner. Also, values would be different from those shown if
the gross annual investment returns averaged 0%, 4%, 8% and 12% over a
period of years but fluctuated above and below those averages for individual
Policy Years.
The amounts shown are as of the end of each Policy Year. The tables assume
that the assets in the Investment Options are subject to an annual expense
ratio of % of the average daily net assets. This annual expense ratio is
based on the average of the expense ratios of each of the Investment Options
available under the Policy for the last fiscal year and takes into account
current expense reimbursement arrangements. The fees and expenses of each
Investment Option vary, and in 1999 the total fees and expenses ranged from
an annual rate of % to an annual rate of % of average daily net
assets. For information on Investment Option expenses, see "SUMMARY AND
DIAGRAM OF THE POLICY" and the prospectuses for the Investment Options.
The tables reflect deduction of the premium expense charge, the monthly
policy expense charges, the first-year monthly administrative charge, the
first-year monthly expense charge, the daily charge for the Company's
assumption of mortality and expense risks, and cost of insurance charges for
the hypothetical Joint Insureds. The surrender values illustrated in the
tables also reflect deduction of applicable surrender charges. The charges
the Company may assess are reflected in separate tables on each of the
following pages.
Applying the current charges and the average Investment Option fees and
expenses of % of average net assets, the gross annual rates of investment
return of 0%, 4%, 8% and 12% would produce net annual rates of return of
%, %, % and %, respectively.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes against the Variable Account since the Company is not
currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would
have to exceed 0%, 4%, 8% or 12% by an amount sufficient to cover tax
charges in order to produce the death benefits and Accumulated Value
illustrated. (See "FEDERAL TAX MATTERS--Taxation of the Company.")
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated,
if all Net Premiums are allocated to the Variable Account and if no Policy
Loans have been made. The tables are also based on the assumptions that the
Policyowner has not requested an increase or decrease in Specified Amount,
and that no partial withdrawals or transfers have been made.
For comparative purposes, the second column of each table shows the amount
to which the premiums would accumulate if an amount equal to those premiums
were invested to earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable illustration based upon
the proposed Joint Insureds' age, sex and premium class, the Specified
Amount or premium requested, and the proposed frequency of premium payments.
[Updated illustrations to be filed by amendment.]
A-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume that the Joint
Insureds' Joint Equal Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option A, a Policy with a Specified Amount of
$50,000 will generally provide a death benefit of $50,000 plus Accumulated
Value. Thus, for example, a Policy with a Accumulated Value of $5,000 will
have a death benefit of $55,000 ($50,000 + $5,000); a Accumulated Value of
$10,000 will provide a death benefit of $60,000 ($50,000 + $10,000). The
death benefit, however, must be at least 2.50 multiplied by the Accumulated
Value. As a result, if the Accumulated Value of the Policy exceeds $33,333,
the death benefit will be greater than the Specified Amount plus Accumulated
Value. Each additional dollar of Accumulated Value above $33,333 will
increase the death benefit by $2.50. A Policy with a Specified Amount of
$50,000 and a Accumulated Value of $40,000 will provide a death benefit of
$100,000 ($40,000 x 2.50); a Accumulated Value of $60,000 will provide a
death benefit of $150,000 ($60,000 x 2.50).
Similarly, any time Accumulated Value exceeds $33,333, each dollar taken out
of Accumulated Value will reduce the death benefit by $2.50. If, for
example, the Accumulated Value is reduced from $40,000 to $35,000 because of
partial surrenders, charges, or negative investment performance, the death
benefit will be reduced from $100,000 to $87,500. If at any time, however,
Accumulated Value multiplied by the specified amount factor is less than the
Specified Amount plus the Accumulated Value, then the death benefit will be
the current Specified Amount plus Accumulated Value of the Policy.
The specified amount factor becomes lower as the Joint Insureds' Joint Equal
Attained Age increases. If the Joint Equal Attained Age of the Joint
Insureds in the example above were, for example, 50 (rather than under 40),
the specified amount factor would be 1.85. The amount of the death benefit
would be the sum of the Accumulated Value plus $50,000 unless the
Accumulated Value exceeded $58,824 (rather than $33,333), and each dollar
then added to or taken from the Accumulated Value would change the death
benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume that the Joint
Insureds' Joint Equal Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option B, a Policy with a $50,000 Specified
Amount will generally pay $50,000 in death benefits. However, because the
death benefit must be equal to or be greater than 2.50 multiplied by the
Accumulated Value, any time the Accumulated Value of the Policy exceeds
$20,000, the death benefit will exceed the $50,000 Specified Amount. Each
additional dollar added to Accumulated Value above $20,000 will increase the
death benefit by $2.50. A Policy with a $50,000 Specified Amount and a
Accumulated Value of $30,000 will provide death proceeds of $75,000 ($30,000
x 2.50); a Accumulated Value of $40,000 will provide a death benefit of
$100,000 ($40,000 x 2.50); a Accumulated Value of $50,000 will provide a
death benefit of $125,000 ($50,000 x 2.50).
Similarly, so long as Accumulated Value exceeds $20,000, each dollar taken
out of Accumulated Value will reduce the death benefit by $2.50. If, for
example, the Accumulated Value is reduced from $25,000 to $20,000 because of
partial surrenders, charges, or negative investment performance, the death
benefit will be reduced from $62,500 to $50,000. If at any time, however,
the Accumulated Value multiplied by the specified amount factor is less than
the Specified Amount, the death benefit will equal the current Specified
Amount of the Policy.
The specified amount factor becomes lower as the Joint Insureds' Joint Equal
Attained Age increases. If the Joint Equal Attained Age of the Joint
Insureds in the example above were, for example, 50 (rather than between 0
and 40), the specified amount factor would be 1.85. The death proceeds would
not exceed the $50,000 Specified Amount unless the Accumulated Value
exceeded
B-1
<PAGE>
approximately $27,028 (rather than $20,000), and each dollar then added to
or taken from the Accumulated Value would change the life insurance proceeds
by $1.85 (rather than $2.50).
<TABLE>
<CAPTION>
JOINT EQUAL ATTAINED AGE SPECIFIED AMOUNT FACTOR
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 to 114 1.01
115 or older 1.00
</TABLE>
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
- --------------------------------------------------------------------------------
MAXIMUM SURRENDER CHARGES
The chart below reflects the maximum surrender charge per $1,000 of
Specified Amount for selected issue ages as policy years increase.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-TOBACCO
ISSUE POLICY YEAR
AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
20 11.25 10.35 9.37 8.35 7.30 6.20 5.05 3.86 2.63 1.34 0.00
30 13.67 12.61 11.42 10.18 8.89 7.55 6.15 4.71 3.20 1.63 0.00
40 17.62 16.30 14.76 13.16 11.50 9.76 7.96 6.09 4.14 2.11 0.00
50 24.28 22.58 20.45 18.23 15.92 13.52 11.03 8.43 5.73 2.92 0.00
60 36.13 33.88 30.66 27.33 23.87 20.28 16.55 12.68 8.64 4.42 0.00
70 54.10 51.00 46.06 41.01 35.84 30.54 25.07 19.37 13.36 6.95 0.00
80 51.96 47.73 43.12 38.44 33.91 29.44 24.86 19.97 14.49 8.04 0.00
TOBACCO
ISSUE POLICY YEAR
AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
20 12.10 11.14 10.09 8.99 7.86 6.67 5.44 4.16 2.83 1.44 0.00
30 15.00 13.84 12.53 11.17 9.76 8.29 6.76 5.17 3.51 1.79 0.00
40 19.74 18.29 16.56 14.76 12.90 10.95 8.93 6.83 4.64 2.37 0.00
50 27.59 25.71 23.28 20.75 18.12 15.40 12.56 9.61 6.54 3.34 0.00
60 41.03 38.50 34.83 31.04 27.12 23.06 18.85 14.47 9.89 5.08 0.00
70 53.81 50.57 45.64 40.67 35.62 30.45 25.11 19.51 13.55 7.10 0.00
80 51.77 47.50 42.93 38.42 34.07 29.74 25.27 20.42 14.91 8.31 0.00
COMBINED
ISSUE POLICY YEAR
AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
20 11.61 10.69 9.68 8.63 7.53 6.40 5.22 3.99 2.71 1.38 0.00
30 14.23 13.13 11.89 10.60 9.26 7.86 6.41 4.90 3.33 1.70 0.00
40 18.52 17.14 15.52 13.84 12.09 10.26 8.37 6.40 4.35 2.22 0.00
50 25.68 23.91 21.65 19.30 16.85 14.32 11.68 8.93 6.07 3.10 0.00
60 38.26 35.88 32.47 28.94 25.28 21.49 17.55 13.45 9.17 4.70 0.00
70 53.97 50.81 45.87 40.85 35.74 30.49 25.08 19.42 13.44 7.01 0.00
80 51.87 47.62 43.02 38.42 33.98 29.58 25.05 20.18 14.69 8.16 0.00
</TABLE>
C-1
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Article XII also provides for the indemnification by the Company of any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Company to procure
a judgment in its factor by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, offer, employee or agent of another corporation, partnership, joint
venture, trust or another enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Farm Bureau Life Insurance Company represents that the aggregate charges under
the Policies are reasonable in relation to the services rendered, the expenses
to be incurred and the risks assumed by the Company.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 52 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire
Messrs. Sutherland Asbill & Brennan LLP
Ernst & Young LLP, Independent Auditors
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing
Vice President
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1.A. 1. Certified Resolution of the Board of Directors of the Company
establishing the Variable Account.(1)
2. None.
3. (a) Form of Principal Underwriting Agreement.(1)
(b) Forms of Career Agent's Contract.(1)
(c) Commission schedules. (See Exhibit 3(b) above.)(1)
4. None.
5. *(a) Policy Form.
(b) Application Form.(1)
6. (a) Certificate of Incorporation of the Company.(1)
(b) By-Laws of the Company.(1)
7. None.
8. None.
9. (a) Participation Agreement relating to EquiTrust Variable
Insurance Series Fund.(1)
*(b) Participation Agreement relating to Fidelity Variable
Insurance Products Fund.
*(c) Participation Agreement relating to Fidelity Variable
Insurance Products Fund II.
*(d) Participation Agreement relating to Fidelity Variable
Insurance Products Fund III.
*(e) Participation Agreement relating to T. Rowe Price Equity
Series, Inc. and T. Rowe Price International Series, Inc.
10. Form of Application (see Exhibit 1.A.(5)(b) above.)
2. *Opinion and Consent of Stephen M. Morain, Esquire.
3. Financial Statement Schedules.
4. None.
5. Not applicable.
6. *Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product
Development and Pricing Vice President.
7. (a) Consent of Ernst & Young LLP ( to be filed by amendment)
(b) Consent of Messrs. Sutherland Asbill & Brennan LLP (to be filed
by amendment)
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto).
9. Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy. (to be filed by amendment)
10. Powers of Attorney.(1)
</TABLE>
*Attached as an exhibit.
(1) Incorporated herein by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, Farm
Bureau Life Variable Account, has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized in the City of
West Des Moines, State of Iowa, on the 25th day of February, 2000.
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU LIFE VARIABLE ACCOUNT
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the dates set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EDWARD M. WIEDERSTEIN President and Director
- ------------------------------ [Principal Executive February 25, 2000
Edward M. Wiederstein Officer]
Senior Vice President and
/s/ RICHARD D. HARRIS Secretary-Treasurer
- ------------------------------ [Principal Financial February 25, 2000
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ------------------------------ [Principal Accounting February 25, 2000
James W. Noyce Officer]
*
- ------------------------------ Vice President and February 25, 2000
Craig A. Lang Director
*
- ------------------------------ Director February 25, 2000
Kenneth R. Ashby
*
- ------------------------------ Director February 25, 2000
Al Christopherson
- ------------------------------ Director
Kenny J. Evans
*
- ------------------------------ Director February 25, 2000
Ernest A. Glienke
- ------------------------------ Director
Karen J. Henry
*
- ------------------------------ Director February 25, 2000
Craig D. Hill
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
- ------------------------------ Director February 25, 2000
Richard G. Kjerstad
*
- ------------------------------ Director February 25, 2000
Lindsey D. Larsen
- ------------------------------ Director
David L. McClure
- ------------------------------ Director
Roger Bill Mitchell
*
- ------------------------------ Director February 25, 2000
Bryce P. Neidig
*
- ------------------------------ Director February 25, 2000
Howard D. Poulson
- ------------------------------ Director
Frank S. Priestley
*
- ------------------------------ Director February 25, 2000
Beverly L. Schnepel
- ------------------------------ Director
John J. VanSweden
</TABLE>
*By /s/ STEPHEN M. MORAIN
-------------------------
Stephen M. Morain
ATTORNEY-IN-FACT,
PURSUANT TO POWER OF
ATTORNEY.
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM
LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT THE LAST DEATH OF JOINT INSUREDS PRIOR TO THE MATURITY
DATE. FLEXIBLE PREMIUMS PAYABLE UNTIL THE LAST DEATH OF JOINT INSUREDS OR UNTIL
THE MATURITY DATE. THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH
BENEFIT MAY VARY UNDER THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT PROVISIONS.
THE ACCUMULATED VALUE IN THE VARIABLE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE OF THAT ACCOUNT AND MAY INCREASE OR DECREASE DAILY. IT IS NOT
GUARANTEED AS TO DOLLAR AMOUNT. THE VARIABLE FEATURES OF THIS POLICY ARE
DESCRIBED ON PAGES 16 THROUGH 18.
Farm Bureau Life Insurance Company will pay the benefits of this policy subject
to all of its terms.
RIGHT TO EXAMINE POLICY
THE OWNER MAY CANCEL THIS POLICY BY DELIVERING OR MAILING A WRITTEN NOTICE OR
SENDING A TELEGRAM OR FAX TO THE AGENT THROUGH WHOM IT WAS PURCHASED OR THE FARM
BUREAU LIFE INSURANCE COMPANY, 5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA
50266-5997 AND BY RETURNING THE POLICY OR CONTRACT BEFORE MIDNIGHT OF THE
TWENTIETH DAY AFTER THE DATE YOU RECEIVE THE POLICY. NOTICE GIVEN BY MAIL AND
RETURN OF THE POLICY OR CONTRACT BY MAIL ARE EFFECTIVE ON BEING POSTMARKED,
PROPERLY ADDRESSED AND POSTAGE PREPAID. FARM BUREAU LIFE WILL REFUND WITHIN
SEVEN DAYS AFTER IT RECEIVES NOTICE OF CANCELLATION AND THE RETURNED POLICY AN
AMOUNT EQUAL TO THE GREATER OF THE PREMIUMS PAID OR THE SUM OF:
A) THE ACCUMULATED VALUE OF THE POLICY ON THE DATE THE POLICY IS RECEIVED AT OUR
HOME OFFICE;
B) ANY PREMIUM EXPENSE CHARGES WHICH WERE DEDUCTED FROM PREMIUMS;
C) MONTHLY DEDUCTIONS MADE ON THE POLICY DATE AND ANY MONTHLY DEDUCTION DAY; AND
D) AMOUNTS EQUAL TO DAILY CHARGES AGAINST THE VARIABLE ACCOUNT.
SIGNED FOR AND ON BEHALF OF FARM BUREAU LIFE INSURANCE COMPANY AT ITS HOME
OFFICE AT 5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997, EFFECTIVE AS
OF THE DATE OF ISSUE OF THIS POLICY.
/s/ Edward M. Wiederstein /s/ Richard D. Harris
PRESIDENT SECRETARY
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997
[LOGO]
<PAGE>
Form #: 434-159(05-00)
This policy is a legal contract between the owner and Farm Bureau Life Insurance
Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
<TABLE>
<CAPTION>
<S> <C>
POLICY DATA ..............................................................................................................Page 3
Insured; Insuring Age; Sex; Policy Number; Policy Date; Owner(s); Date of Issue; Death Benefit Option; Maturity
Date; Specified Amount at Issue; Schedule of Forms and Premiums; Schedule of Current Charges;
Schedule of Current Surrender Charges.
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1000.............................................................Page 6
SPECIFIED AMOUNT FACTORS..................................................................................................Page 7
SECTION 1 - DEFINITIONS...................................................................................................Page 8
1.1 You , Your or Joint Insureds; 1.2 Accumulated Value; 1.3 Net Accumulated Value; 1.4 Age; 1.5 Joint Equal Attained Age; 1.6
Joint Equal Age; 1.7 Business Day; 1.8 Declared Interest Option; 1.9 Eligible for Waiver of Surrender Charge; 1.10 Fund; 1.11
General Account; 1.12 Home Office; 1.13 Monthly Deduction Day; 1.14 Net Premium; 1.15 Partial Withdrawal Fee; 1.16 Policy
Anniversary; 1.17 Policy Date; 1.18 Policy Year; 1.19 Premium Expense Charge; 1.20 Qualified Physician; 1.21 Qualified Nursing
Care Center; 1.22 SEC; 1.23 Surrender Charge; 1.24 Surrender Value; 1.25 Net Surrender Value; 1.26 Valuation Period; 1.27
Variable Account; 1.28 We, Our, Us or the Company.
SECTION 2 - THE CONTRACT.................................................................................................Page 10
2.1 Death Proceeds 2.2 Death Benefit Options; 2.3 Contract; 2.4 Modification; 2.5 Incontestable Clause; 2.6
Misstatement of Age or Sex; 2.7 Suicide; 2.8 Return of Policy and Policy Settlement; 2.9 Maturity Proceeds; 2.10
Policy Split Option; 2.11 Termination; 2.12 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES .................................................................................Page 12
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary; 3.4 Assignment.
SECTION 4 - PREMIUMS AND REINSTATEMENT ..................................................................................Page 13
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Grace Period; 4.4 Reinstatement; 4.5 Unscheduled Premiums;
4.6 Premium Limitations; 4.7 Premium Application; 4.8 Allocation of Premium.
SECTION 5 - POLICY CHANGE................................................................................................Page 15
5.1 Change of Specified Amount; 5.2 Specified Amount Decrease; 5.3 Specified Amount Increase; 5.4 Change of
Death Benefit Option; 5.5 Life Insurance Qualification.
SECTION 6 - VARIABLE ACCOUNT.............................................................................................Page 16
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers; 6.5 Special Transfer Privilege.
SECTION 7 - ACCUMULATED VALUE BENEFITS..................................................................................Page 18
7.1 Accumulated Value Determination; 7.2 Net Accumulated Value Determination; 7.3 Surrender Value; 7.4 Net
Surrender Value; 7.5 Variable Accumulated Value; 7.6 Account Units; 7.7 Unit Value; 7.8 Declared Interest Option
Accumulated Value; 7.9 Declared Interest Option Interest; 7.10 Monthly Deduction; 7.11 Cost of Insurance; 7.12
Cost of Insurance Rate; 7.13 Basis of Values; 7.14 Surrender; 7.15 Waiver of Surrender Charge; 7.16 Partial
Withdrawal; 7.17 Use of Payment Option; 7.18 Delay of Payment; 7.19 Continuance of Insurance; 7.20 Annual Report.
SECTION 8 - POLICY LOANS.................................................................................................Page 23
8.1 Cash Loan; 8.2 Loan Value; 8.3 Loan Interest; 8.4 Loan Allocation; 8.5 Loan Repayment.
SECTION 9 - PAYMENT OF PROCEEDS..........................................................................................Page 24
9.1 Choice of Options; 9.2 Payment Options; 9.3 Interest and Mortality; 9.4 Requirements; 9.5 Effective Date;
</TABLE>
<PAGE>
<TABLE>
9.6 Death of Payee; 9.7 Withdrawal of Proceeds; 9.8 Claims of Creditors.
<S> <C>
PAYMENT OPTION TABLES....................................................................................................Page 26
</TABLE>
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 26 of this policy.
434-159(05-00)
<PAGE>
POLICY DATA
Joint Insured(s) John Doe
Jane Doe
Joint Equal Age 35
Policy Number 000123456
Policy Date 09-01-1999
Owner(s) John Doe
Date of Issue 09-01-1999
Death Benefit Option Option A
Maturity Date 09-01-2079
Specified Amount at Issue $1,000,000.00
Summary of Current Specified Amount
<TABLE>
<CAPTION>
Description Specified Amount Effective Date Premium Class
<S> <C> <C> <C>
AT ISSUE $1,000,000.00 09-01-1999 TOBACCO
Universal Term Rider - Covered Person John Doe
Current face amount of $25,000 consisting of:
Description Face Amount Effective Date Premium Class
<S> <C> <C> <C>
At Issue $25,000.00 09-01-1999 TOBACCO
</TABLE>
<TABLE>
<CAPTION>
Schedule of Forms and Premiums
Current Original Minimum
Initial
<S> <C> <C> <C> <C>
Form No. Description Amount or No. of Units Effective Date Premium
434-159(05-00) Non-Par Last Survivor $1,000,000.00 09-01-1999 $XXX.XX
Flexible Premium Variable
Universal Life
434-871(05-00) Universal Term Rider $25,000.00 09-01-1999
434-870(05-00) Estate Protector Rider $100,000.00 09-01-1999
434-093(05-00) Cost of Living Increase Rider
</TABLE>
Form Number 434-159(05-00)
Policy Number 000123456
3
<PAGE>
POLICY DATA
Schedule of Current Charges
<TABLE>
<S> <C>
Premium Expense Charge 7% of each premium up to Minimum Initial Premium
2% of each premium over Minimum Initial Premium
Policy Expense Charge $10.00 per month
Per $1,000 Expense Charge $.03 per $1,000 of specified amount per month
First Year Per $1,000 Policy Expense Charge $0.10 per $1,000 of specified amount per month
First Year Policy Expense Charge $10.00 per month
Partial Withdrawal Fee Lesser of $25.00 per withdrawal or 2% of accumulated value
withdrawn
Transfer Charge $25.00 per transfer
Mortality and Expense Risk Charge 0.0024548% of the variable accumulated value per day
(equivalent to .90% per year)
Monthly Deduction Day 20th of each month
Policy Loan Interest Rate Adjustable Loan Rate (as described in Section 8.3 of
your policy)
</TABLE>
SCHEDULE OF INVESTMENT OPTIONS
General Account: The general assets of Farm Bureau Life Insurance Company
Separate Account: Farm Bureau Life Variable Account
<TABLE>
<CAPTION>
Subaccounts: Fund:
<S> <C> <C>
Blue Chip EquiTrust Variable Insurance Series Fund
Value Growth EquiTrust Variable Insurance Series Fund
High Grade Bond EquiTrust Variable Insurance Series Fund
High Yield Bond EquiTrust Variable Insurance Series Fund
Managed EquiTrust Variable Insurance Series Fund
Money Market EquiTrust Variable Insurance Series Fund
T. Rowe - Intl Stock T. Rowe Price International Series, Inc.
T. Rowe - MidCap Growth T. Rowe Price Equity Series, Inc.
T. Rowe - New America Growth T. Rowe Price Equity Series, Inc.
T. Rowe - Pers Strategy Bal T. Rowe Price Equity Series, Inc.
Fidelity VIP Growth Fidelity* Variable Insurance Products Fund
Fidelity VIP Overseas Fidelity* Variable Insurance Products Fund
Fidelity VIP Contrafund Fidelity* Variable Insurance Products Fund
Fidelity VIP Index 500 Fidelity* Variable Insurance Products Fund
Fidelity VIP Growth/Income Fidelity* Variable Insurance Products Fund
</TABLE>
*Fidelity is a registered trademark of FMR Corp.
Net premiums will be allocated to the subaccounts or the declared interest
option in accordance with the net premium allocation percentages shown in the
application or in the most recent written instructions of the owner. For a full
description of the Separate Account and the designated subaccounts, please refer
to the current prospectus.
Form Number 434-159(05-00)
Policy Number 000123456
4
POLICY DATA
Schedule of Current Surrender Charges
<TABLE>
<CAPTION>
SURRENDER DATE SURRENDER CHARGE
<S> <C>
January 1, 1999-December 31, 1999 $17,070.00
January 1, 2000-December 31, 2000 $15,790.00
January 1, 2001-December 31, 2001 $14,290.00
January 1, 2002-December 31, 2002 $12,740.00
January 1, 2003-December 31, 2003 $ 9,450.00
January 1, 2004-December 31, 2004 $ 7,710.00
January 1, 2005-December 31, 2005 $ 5,890.00
January 1, 2006-December 31, 2006 $ 4,010.00
January 1, 2007-December 31, 2007 $ 2,040.00
January 1, 2008-December 31, 2008 $ 0.00
January 1, 2009 and thereafter
</TABLE>
Form Number 434-159(05-00)
Policy Number 000123456
5
<PAGE>
POLICY DATA
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER
$1,000
<TABLE>
<CAPTION>
Joint Equal Age Rate Joint Equal Age Rate
<S> <C> <C> <C> <C>
35 0.000334 76 3.433919
36 0.001084 77 3.924089
37 0.001917 78 4.456523
38 0.003001 79 5.043476
39 0.004417 80 5.703681
40 0.006084 81 6.45338
41 0.008084 82 7.310219
42 0.010584 83 8.279403
43 0.013501 84 9.341795
44 0.016917 85 10.483004
45 0.021084 86 11.690421
46 0.025918 87 12.957158
47 0.031501 88 14.283993
48 0.038085 89 15.669582
49 0.045836 90 17.146893
50 0.055004 91 18.734528
51 0.066005 92 20.498846
52 0.079173 93 22.58019
53 0.094926 94 25.306794
54 0.113347 95 29.300056
55 0.134852 96 35.747711
56 0.159526 97 46.886012
57 0.187286 98 66.09363
58 0.218882 99 90.909091
59 0.255316 100 90.909091
60 0.298339 101 90.909091
61 0.349539 102 90.909091
62 0.411586 103 90.909091
63 0.48657 104 90.909091
64 0.57458 105 90.909091
65 0.676041 106 90.909091
66 0.790458 107 90.909091
67 0.917174 108 90.909091
68 1.05862 109 90.909091
69 1.219152 110 90.909091
70 1.409651 111 90.909091
71 1.632495 112 90.909091
72 1.893914 113 90.909091
73 2.207948 114 90.909091
74 2.571345
75 2.98153
</TABLE>
Form Number 434-159(05-00)
Policy Number 000123456
6
<PAGE>
POLICY DATA
SPECIFIED AMOUNT FACTORS
<TABLE>
<CAPTION>
Attained Age Attained Age Attained Age
At Date of Factor At Date of Factor At Date of Factor
Death Death Death
<S> <C> <C> <C> <C> <C> <C>
0-40 2.50 59 1.34 78 1.05
41 2.43 60 1.30 79 1.05
42 2.36 61 1.28 80 1.05
43 2.29 62 1.26 81 1.05
44 2.22 63 1.24 82 1.05
45 2.15 64 1.22 83 1.05
46 2.09 65 1.20 84 1.05
47 2.03 66 1.19 85 1.05
48 1.97 67 1.18 86 1.05
49 1.91 68 1.17 87 1.05
50 1.85 69 1.16 88 1.05
51 1.78 70 1.15 89 1.05
52 1.71 71 1.13 90 1.05
53 1.64 72 1.11 91 1.04
54 1.57 73 1.09 92 1.03
55 1.50 74 1.07 93 1.02
56 1.46 75 1.05 94 1.01
57 1.42 76 1.05 94-114 1.01
58 1.38 77 1.05 115 1.00
</TABLE>
Form Number 434-159(05-00)
Policy Number 000123456
7
<PAGE>
POLICY DATA
FOR UNIVERSAL TERM RIDER
Covered Person John Doe
Age 35
Sex MALE
Effective Date 09-01-1999
Expiration Date 09-01-2064
Face Amount $25,000.00
Premium Class TOBACCO
Form Number 434-159(05-00)
Policy Number 000123456
7A
<PAGE>
POLICY DATA
GUARANTEED MONTHLY COST OF INSURANCE RATES PER 1,000
FOR UNIVERSAL TERM RIDER
<TABLE>
<CAPTION>
Covered Person Guaranteed Maximum Covered Person Guaranteed Maximum
Attained Age Monthly Insurance Rates Attained Age Monthly Insurance Rates
<S> <C> <C> <C> <C>
35 0.294500 71 5.162350
36 0.294500 72 5.629850
37 0.294500 73 6.148410
38 0.294500 74 6.717320
39 0.294500 75 7.325780
40 0.294500 76 7.948510
41 0.294500 77 8.574560
42 0.294500 78 9.208180
43 0.294500 79 9.871490
44 0.294500 80 10.58674
45 0.546130 81 11.37459
46 0.594520 82 12.24906
47 0.647090 83 13.19603
48 0.703830 84 14.18421
49 0.765590 85 15.18033
50 0.834030 86 16.16034
51 0.911660 87 17.16810
52 0.999330 88 18.22020
53 1.098710 89 19.26842
54 1.207290 90 20.32834
55 1.323420 91 21.43307
56 1.446260 92 22.71710
57 1.575810 93 24.36888
58 1.712090 94 26.62992
59 1.858450 95 30.20740
60 2.021580 96 36.35803
61 2.205690 97 47.21180
62 2.413310 98 66.20701
63 2.645310 99 99.90909
64 2.899210
65 3.168340
66 3.450200
67 3.742290
68 4.048830
69 4.381610
70 4.749110
</TABLE>
Form Number 434-159(05-00)
Policy Number 000123456
7B
<PAGE>
- ------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- ------------------------------------------------------------------------------
1.1 YOU, YOUR OR JOINT INSUREDS means the persons whose lives are insured.
1.2 ACCUMULATED VALUE
means the policy's accumulated value which is calculated as:
a) the variable accumulated value, which is defined in section 7.5; plus
b) the declared interest option accumulated value which is defined in section
7.8.
1.3 NET ACCUMULATED VALUE
means the policy's net accumulated value which is calculated as:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
1.4 AGE
means age at the last birthday for each joint insured.
1.5 JOINT EQUAL ATTAINED AGE
means your joint equal age at issue plus the number of policy years since the
policy date.
1.6 JOINT EQUAL AGE
means the age on which premium and policy values are based. It is an actuarial
equivalent based upon the age and sex of both persons insured. The current joint
equal age on any anniversary will equal the joint equal age on the policy date
plus the number of years since the policy date.
1.7 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.
1.8 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.
1.9 ELIGIBLE FOR WAIVER OF SURRENDER CHARGE
means the insured:
a) is diagnosed by a Qualified Physician as having a terminal illness. A
terminal illness is any disease or medical condition which the Qualified
Physician expects will result in death within one year; or
b) stays in a Qualified Nursing Care Center for 90 days.
1.10 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.
1.11 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.
1.12 HOME OFFICE
means Farm Bureau Life Insurance Company at 5400 University Avenue, West Des
Moines, Iowa, 50266-5997.
1.13 MONTHLY DEDUCTION DAY
8
<PAGE>
means the same date in each month as the policy date. The charges for this
policy are deducted on the business day on or next following the monthly
deduction day.
1.14 NET PREMIUM
means the amount of premium remaining after the premium expense charge has been
deducted. This amount will be allocated among the subaccounts of the variable
account and the declared interest option according to the allocations shown on
the policy data page or the most recent instructions received from the owner.
1.15 PARTIAL WITHDRAWAL FEE
means a fee equal to the lesser of $25 or 2% of the accumulated value that is
applied at the time of any partial withdrawal.
1.16 POLICY ANNIVERSARY
means the same date in each year as the policy date.
1.17 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and any policy anniversaries.
1.18 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.
1.19 PREMIUM EXPENSE CHARGE
means the premium expense charge shown on the policy data page. This amount may
go up or down, but is guaranteed to never exceed 7 percent.
1.20 QUALIFIED PHYSICIAN:
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the insured, or a member of
the immediate family of either you or the insured.
1.21 QUALIFIED NURSING CARE CENTER:
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
a) Skilled Nursing Center - means a center:
1) That provides skilled nursing care supervised by a licensed physician;
2) That provides 24-hour nursing care by, or supervised by, an R.N.; and
3) That keeps daily medical record of each patient.
b) Intermediate Care Center - means a center:
1) That provides 24-hour nursing care by, or supervised by, an R.N. or an
L.P.N.; and
2) That keeps a daily medical record of each patient.
c) Hospital - means a center:
1) That operates for the care and treatment of sick or injured persons as
inpatients;
2) That provides 24-hour nursing care by, or supervised by, an R.N.;
3) That is supervised by a staff of licensed physicians; and
4) That has medical, diagnostic, and major surgery capabilities or access
to such capabilities.
Qualified Nursing Care Center does not include:
a) Drug or alcohol treatment centers;
b) Home for the aged or mentally ill, community living centers, or places that
primarily provide domiciliary, residency or retirement care;
c) Places owned or operated by a member of the annuitant's immediate family.
9
<PAGE>
1.22 SEC
means the Securities and Exchange Commission, a U.S. government agency.
1.23 SURRENDER CHARGE
means a fee that is applied at the time of a surrender. The surrender charge
will be the amount shown on the policy data page.
A specified amount increase has its own surrender charge period which begins on
the date of the increase. If a specified amount increase is made, the surrender
charges will be a composite of all charges which apply for each year.
1.24 SURRENDER VALUE
means the policy's surrender value which is calculated as:
a) the accumulated value; minus
b) the surrender charge.
1.25 NET SURRENDER VALUE
means the policy's net surrender value which is calculated as:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
1.26 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.
1.27 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit
investment trust registered with the SEC under the Investment Company Act of
1940.
1.28 WE, OUR, US OR THE COMPANY
means the Farm Bureau Life Insurance Company.
- -------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- -------------------------------------------------------------------------------
2.1 DEATH PROCEEDS
We will pay the death proceeds to the beneficiary on the last death of the
joint insureds:
a) within seven days after receipt by us of due proof of death of both joint
insureds;
b) if the policy is in force on the date of the last joint insured's death;
and
c) subject to the terms and conditions of this policy.
If you both die simultaneously, we will pay a death benefit to each joint
insured's beneficiary. In such an event, the benefit payment to the beneficiary
of each joint insured will be one half of the amount determined under death
proceeds.
The death proceeds will be the sum of:
a) the death benefit; and
b) any premiums paid after the date of death; and
c) any unearned policy loan interest on the date of death;
less:
a) any policy loan; and
b) any policy loan interest due;
plus any interest credited on this amount from the date of death to the
date of payment, the rate to be set by us but not less than 3% per year or
any rate required by law.
2.2 DEATH BENEFIT OPTIONS
The death benefit option in effect for this policy is shown on the policy
data page and is one of the following: Option A -- The death benefit will be
the greater of a) or b) where:
10
<PAGE>
a) is the sum of the specified amount shown on the policy data page and the
accumulated value; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your joint equal age.
Option B -- The death benefit will be the greater of a) or b) where:
a) is the specified amount shown on the policy data page; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your joint equal age.
All values are determined as of the end of the business day on or next following
the date of death.
2.3 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) this basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.
We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.4 MODIFICATION
No one can change any part of this policy except the owner and one of our
officers. Both must agree to a change, and it must be in writing. No agent may
change this policy or waive any of its provisions.
2.5 INCONTESTABLE CLAUSE
We will not contest payment of the death benefit for any reason other than fraud
after this policy has been in force during your lifetime for two years from the
date of issue shown on the policy data page.
Any requested increase in the specified amount will be incontestable only after
such increase has been in force during your lifetime for two years from the
effective date of such increase.
2.6 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.
2.7 SUICIDE
If, within one year of the policy date, the last death of the joint insureds is
by suicide, whether this person is sane or insane, our total liability under
this policy is limited to the premium paid plus any unearned loan interest at
the date of death, less any policy loan, any loan interest due and any partial
withdrawals.
Any increase in death benefits resulting from a requested increase in specified
amount will not be paid if the insured dies by suicide, while sane or insane,
within one year of the date of such increase. Instead, we will return to the
owner an amount equal to the cost of insurance for such increase in specified
amount.
2.8 RETURN OF POLICY AND POLICY SETTLEMENT
11
<PAGE>
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c)surrender; d) assignment; e) change of
owner or beneficiary; f) election; or g) exercise of any policy privilege.
We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.
2.9 MATURITY PROCEEDS
If either joint insured is living on the maturity date and this policy is in
force, we will pay the proceeds to the owner. Such proceeds will be:
a) the accumulated value; less
b) any policy loan.
The maturity date will be your joint equal attained age 115.
All values are determined as of the end of the business day on or next following
the maturity date.
2.10 POLICY SPLIT OPTION
This policy may be exchanged for two single-life policies, one on each of the
joint insureds, upon occurrence of one of the following events:
a) Entry of a divorce or annulment decree with respect to the marriage of the
joint insureds.
b) A change in the Federal Estate Tax Law was implemented that results in:
1) a reduction of the Unlimited Marital Deduction to 50% or less of the
value of the joint insured's estate; or
2) a reduction of the Federal Unified Credit to 50% or less of the amount
in effect at the date of issue of this policy; or
3) a reduction in the Federal Estate Tax rate to 50% or less of the rate
in effect at the date of issue of this policy.
Election of this option is subject to the following provisions:
a) Each new policy will be for up to one-half of the specified amount of this
policy.
b) The owner must notify us in writing at our home office within 90 days after
the effective date of one of the above events. The date that we receive the
written notification will be the effective date of the new policies.
c) The net surrender value will be divided and allocated in proportion to the
specified amount of each new policy.
d) Any assignments of this policy will apply to each new policy.
e) The beneficiary of this policy will be the beneficiary of each new policy.
f) If the joint insureds are the owners of this policy, each will be the owner
of his or her new policy. If the owner of this policy is other than the
joint insureds, the owner of this policy will be the owner of each new
policy.
g) The new policies will be issued based on the age and premium class for each
joint insured on the effective date of election of this option. The new
policies must fit the single-life issue limits in effect at the time of
election of this option. The new policies will be subject to the same
charges as those in effect for regularly-underwritten policies.
h) This option will not be available after the date of the first death of the
joint insureds.
i) The two single life policies may be any single life permanent policies
being offered
12
<PAGE>
by the company at the time of election of this option.
2.11 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) you die;
c) the policy matures;
d) the policy is surrendered; or
e) the grace period ends without payment of the premium.
2.12 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.
- -------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- -------------------------------------------------------------------------------
3.1 OWNERSHIP
The original owner of this policy is shown on the policy data page. If there is
more than one owner, the policy will be owned jointly with right of
survivorship. Ownership of the policy may change according to the provisions
indicated in the original application or by a subsequent endorsement to the
policy.
3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
beneficiaries shown on our records on the date of the last joint insured's death
will receive the death benefit. The interests of any beneficiary in a class who
dies before you will pass to any survivors of the class, unless the policy
provides otherwise. Secondary beneficiaries will have the right to receive the
proceeds only if no primary beneficiary survives. If no beneficiary survives
you, we will pay the proceeds to the owner or the owner's estate.
In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.
3.3 CHANGE OF OWNER OR BENEFICIARY
While you live, a change of owner or beneficiary can be made at any time,
subject to the following rules:
a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
c) the form must be sent to our home office and recorded by us; and
d) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.
3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.
We will not be responsible for the validity of an assignment.
- -------------------------------------------------------------------------------
SECTION 4 - PREMIUMS AND REINSTATEMENT
- -------------------------------------------------------------------------------
4.1 PREMIUM PAYMENT
Premium payments are flexible as to both timing and amount. Each premium is to
be paid at our home office.
4.2 PAYMENT FREQUENCY
13
<PAGE>
The first premium is due on or prior to the policy date. We will send periodic
reminder notices to the owner upon request. The minimum amount for which such
notice will be sent will be $100. A reminder notice may be sent for different
periods, which may be 12, 6, 3 or 1-month intervals. The reminder notice period
may be changed upon request.
4.3 GRACE PERIOD
A grace period of 61 days will be allowed for payment of a premium that, when
reduced by the premium expense charge, is at least equal to three times the
monthly deduction charge due on such date. The grace period applies:
a) During the first three policy years, if the net accumulated value is not
large enough on any monthly deduction day to cover the monthly deduction
due; and
b) During the first three policy years, if you have taken out a policy loan
and during this period, the net surrender value is not large enough to
cover the monthly deduction due; and
c) During subsequent years, if the net surrender value is not large enough on
any monthly deduction day to cover the monthly deduction due.
The grace period begins on the date we send the owner of record written notice
of the required payment. Such premium shall be due on such monthly deduction day
and if not received by us within the grace period, all coverage under this
policy will terminate without value at the end of the 61-day period. If a claim
by death during the grace period becomes payable under the policy, any due and
unpaid monthly deductions will be deducted from the proceeds.
4.4 REINSTATEMENT
Prior to the maturity date, a lapsed policy which has not been surrendered for
its accumulated value may be reinstated at any time within 5 years of the
monthly deduction day immediately preceding the grace period which expired
without payment of the required premium, subject to the following rules:
a) You and the owner must send a written request to us.
b) You must provide proof of your good health and insurability satisfactory to
us.
c) A premium sufficient to keep the policy in force for three months must be
paid.
d) The owner must pay a charge equal to the cost of insurance for the coverage
provided during the 61-day grace period which was in effect prior to the
termination of this policy.
e) The effective date of the reinstated policy will be the monthly deduction
day on or next following the date we approve reinstatement.
4.5 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $100 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $100 minimum
requirements. The Company reserves the right to limit the number and amount of
unscheduled premium payments.
4.6 PREMIUM LIMITATIONS
The company reserves the right to limit the number and amount of premium
payments in order to maintain this policy's qualifications under federal tax
law. We will refund any portion of a premium payment that would cause the policy
to lose such qualification.
4.7 PREMIUM APPLICATION
14
<PAGE>
While any policy loan is outstanding, unless the owner requests otherwise,
premium payments will be applied as a payment to reduce the outstanding balance
of the loan. When such loan has been repaid, the balance of any premium payment
remaining after payment of the loan, plus any subsequent payments, will be
allocated as described in the following provision.
4.8 ALLOCATION OF PREMIUM
The owner will determine the percentage of net premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the net premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the net premium. A fractional percent may not be chosen.
Net premiums will be allocated to the declared interest option if they are
received either before the date the company obtains a signed notice from the
owner that the policy has been received, or before the end of 25 days after the
delivery date. Upon the earlier of (i) the date the company obtains a notice
signed by the owner that the policy has been received, or (ii) 25 days after the
delivery date, we will transfer part or all of the accumulated value in the
declared interest option to the subaccounts in accordance with the owner's
allocation instructions. Net premiums received on or after (i) or (ii) above
will be allocated in accordance with the net premium allocation percentages
shown in the application or the most recent written instructions of the owner.
The owner may change the allocation for future net premiums at any time, subject
to the following rules:
a) The policy must be in force;
b) There must be a net accumulated value;
c) The change must be in writing on a form acceptable to us;
d) The form must be signed by the owner; and
e) The change will take effect on the business day on or next following the
date we receive the signed form at our home office.
- -------------------------------------------------------------------------------
SECTION 5 - POLICY CHANGE
- -------------------------------------------------------------------------------
5.1 CHANGE OF SPECIFIED AMOUNT
The owner may change the specified amount at any time after the policy has been
in effect for one policy year, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) It must be signed by the owner.
c) The change will take effect on the monthly deduction day coinciding with or
next following the date the request is approved by us.
d) We will issue a new policy data page for any change in specified amount.
5.2 SPECIFIED AMOUNT DECREASE
Any decrease in specified amount will reduce such amount in the following order:
a) the specified amount provided by the most recent increase will be reduced;
then
b) the next most recent increases will be reduced in succession; and
c) the initial specified amount will be reduced last.
A specified amount decrease will not reduce the surrender charge.
The total specified amount which remains in force after a requested decrease may
not be
15
<PAGE>
less than the minimum specified amount in effect for the policy on the date of
decrease, as published by us.
5.3 SPECIFIED AMOUNT INCREASE
In addition to the rules for change in specified amount, an increase in
specified amount is subject to the following:
a) proof of insurability acceptable to us; and
b) payment of the first month's cost of insurance or sufficient accumulated
value for deduction of such cost of insurance.
5.4 CHANGE OF DEATH BENEFIT OPTION
The owner may request to change the death benefit option. The change will take
effect on the monthly deduction day coinciding with or next following the date
we approve the request.
If Option A is changed to Option B, the current specified amount will not
change.
If Option B is changed to Option A, the current specified amount will be reduced
by an amount equal to the accumulated value on the effective date of the change.
5.5 LIFE INSURANCE QUALIFICATION
If following a requested change of specified amount or a change of death benefit
option, this policy would no longer qualify as life insurance under federal tax
law, we will limit the change to an amount that would maintain such
qualification. The Company reserves the right to change the policy, in the event
of future changes in the federal tax law, to the extent required to maintain the
policy's qualification as life insurance under federal tax law.
- -------------------------------------------------------------------------------
SECTION 6 - VARIABLE ACCOUNT
- -------------------------------------------------------------------------------
6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.
That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.
While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa.
We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy shall then mean the variable account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
16
<PAGE>
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction of a committee;
c) restrict or eliminate any voting rights of owners, or other persons who
have voting rights as to the variable account; and
d) combine the variable account with other separate accounts.
6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
the policy data page. Subject to obtaining any approvals or consents required by
applicable law, we reserve the right to eliminate or combine any subaccounts and
the right to transfer the assets of one or more subaccounts to any other
subaccount. We also reserve the right to add new subaccounts and make such
subaccounts available to any class or series of policies as we deem appropriate.
Each new subaccount would invest in a new investment option of the Fund, or in
shares of another investment company. The owner will determine the percentage of
net premium that will be allocated to each subaccount in accordance with the
allocation of premium provision.
6.3 FUND INVESTMENT OPTIONS
The fund has several investment options, each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Net premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
to which net premiums have been allocated through the subaccounts.
We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for the shares of a fund investment option that are held by
the variable account or that the account may purchase.
We also reserve the right to dispose of the shares of an investment option of
the fund listed on the policy data page and to substitute shares of another
investment option of such fund or another mutual fund investment option, if:
a) the shares of the investment option are no longer available for investment;
or
b) if in our judgment further investment in the investment option should
become inappropriate in view of the purposes of the variable account.
In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.
6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and the declared
interest option, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our Home office.
d) The owner may transfer amounts among the subaccounts of the variable
account an
17
<PAGE>
unlimited number of times in a policy year.
e) The owner may transfer amounts between the declared interest option and the
variable account only once in a policy year.
f) The first transfer in each policy year will be made without a transfer
charge. Thereafter, each time amounts are transferred a transfer charge
will be imposed. This transfer charge is shown on the policy data page.
g) The accumulated value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. Unless paid in
cash, the transfer charge will be deducted on a pro rata basis from the
declared interest option and/or the subaccounts to which the transfer is
made.
h) The owner must transfer at least:
1) a total of $100; or
2) the total accumulated value in the subaccount or the total accumulated
value in the declared interest option less any policy loan, if the
total amount transferred is less than $100.
The following additional rules apply to transfers from the declared interest
option:
a) The accumulated value in the declared interest option after a transfer from
such option must at least equal the amount of all policy loans.
b) No more than 50% of the net accumulated value in the declared interest
option may be transferred unless the balance in the declared interest
option after the transfer, would be less than $1,000. If the balance in the
declared interest option would fall below $1,000, the full net accumulated
value in the declared interest option may be transferred.
6.5 SPECIAL TRANSFER PRIVILEGE
The owner may transfer, at any time, all of the amounts in the subaccounts to
the declared interest option. This policy will then become one in which the
benefits do not vary with the investment performance of the variable account.
The owner must tell us this special transfer privilege is being exercised. We
will then waive the transfer charge. The owner may exercise this special
transfer privilege once per policy year. If the owner exercises this special
transfer privilege, we will automatically credit all future premium payments to
the declared interest option until the owner requests a change in the
allocation. At the time of the transfer, there is no effect on the policy's
death benefit, accumulated value, specified amount, or net amount at risk, or on
your premium class or joint equal age.
- -------------------------------------------------------------------------------
SECTION 7 - ACCUMULATED VALUE BENEFITS
- -------------------------------------------------------------------------------
7.1 ACCUMULATED VALUE DETERMINATION
The accumulated value in the policy is equal to:
a) the variable accumulated value; plus
b) the declared interest option accumulated value.
7.2 NET ACCUMULATED VALUE DETERMINATION
The net accumulated value of this policy will be:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
7.3 SURRENDER VALUE
The surrender value of this policy will be:
a) the accumulated value; minus
18
<PAGE>
b) the surrender charge.
7.4 NET SURRENDER VALUE
The net surrender value of this policy will be:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
7.5 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive notice that the
owner has received and accepted the policy, the variable accumulated value is
the total amount of net premium, if any, credited to the subaccounts of the
variable account, minus the monthly deduction applicable to those subaccounts if
the net premium is allocated on a monthly deduction day. After such date, the
policy's variable accumulated value is equal to the sum of the policy's
accumulated value in each subaccount. The accumulated value in a subaccount is
equal to a) multiplied by b) where:
a) is the current number of account units; and
b) is the current unit value.
The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.
7.6 ACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to account units. The number of account units for a
transaction is found by dividing the dollar amount of the transaction by the
current unit value.
The number of account units for a subaccount increases when:
a) net premiums are credited to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited to that subaccount.
The number of account units for a subaccount decreases when:
a) the owner takes out a policy loan from that subaccount;
b) the owner makes a partial withdrawal from that subaccount;
c) we take a portion of the monthly deduction from that subaccount; or
d) transfers are made from that subaccount to the declared interest option or
other subaccounts.
7.7 UNIT VALUE
The unit value for each subaccount was set initially at $10.00 when the
subaccounts first purchased fund shares. The unit value for each subsequent
valuation period is calculated by dividing a) by b), where:
a) is:
1) the net asset value of the net assets of the subaccount at the end of
the preceding valuation period; plus
2) the investment income and capital gains, realized or unrealized,
credited to the net assets of that subaccount during the valuation
period for which the unit value is being determined; minus
3) the capital losses, realized or unrealized, charged against those net
assets during the valuation period; minus
4) any amount charged against the subaccount for taxes, or any amount set
aside during the valuation period by the Company as a provision for
taxes attributable to the operation or maintenance of that subaccount;
minus
19
<PAGE>
5) the mortality and expense risk charge shown on the policy data page.
This charge may go up or down but will never exceed 0.0024548% of the
daily net assets in that subaccount for each day in the valuation
period. The maximum charge corresponds to a charge of .90% per year of
the average daily net assets of the subaccount for mortality and
expense risks.
b) is the number of units outstanding at the end of the preceding
valuation period.
The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
7.8 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the policy date is the net
premium credited to the declared interest option as of that date minus the
monthly deduction applicable to the declared interest option for the first
policy month.
After the policy date, the declared interest option accumulated value is
computed as a) + b) + c) + d) - e) - f), where:
a) is the declared interest option value on the preceding monthly deduction
day plus any interest from the preceding monthly deduction day to the date
of calculation;
b) is the total of net premiums credited to the declared interest option since
the preceding monthly deduction day, plus interest from the date premiums
are credited to the date of calculation;
c) is the total of the transfers from the variable account to the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of calculation;
d) is the total amount transferred from the variable account to the declared
interest option to secure policy loans since the preceding monthly
deduction day, plus interest from the date of transfer to the date of
calculation;
e) is the total of the transfers to the variable account from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of the calculation; and
f) is the total of partial withdrawals from the declared interest option since
the preceding monthly deduction day, plus interest from the date of
withdrawal to the date of calculation.
If the date of calculation is a monthly deduction day, we also reduce the
declared interest option accumulated value by the applicable monthly deduction
for the policy month following the monthly deduction day.
7.9 DECLARED INTEREST OPTION INTEREST
The minimum interest rate applied to the declared interest option accumulated
value is an effective rate of 4.00% per year. Interest in excess of the minimum
rate may be applied. The amount of the excess interest and the manner in which
it is determined will be set by us.
The interest credited on the portion of the declared interest option accumulated
value which equals any policy loan will be equal to the greater of 4.00% or:
a) the current effective loan interest rate; minus
b) no more than 3.00%.
20
<PAGE>
Interest will be credited to the declared interest option accumulated value on
each monthly deduction day.
7.10 MONTHLY DEDUCTION
The monthly deduction is a charge made each monthly deduction day from the
declared interest option accumulated value and the variable accumulated value on
a proportionate basis as of the close of business on the monthly deduction day.
For the purpose of determining the proportion of the deduction, the declared
interest option accumulated value is reduced by the amount of any policy loans.
We make the deduction from each subaccount of the variable account based on each
subaccount's proportional percentage of the variable accumulated value.
The monthly deduction for a policy month will be computed as a) plus b) plus c)
plus d) plus e) plus f) where:
a) is the cost of insurance as described in the cost of insurance provision;
b) is the charge for all additional benefit riders attached to this policy;
c) is the monthly policy expense charge shown on the policy data page. This
amount may go up or down, but is guaranteed never to exceed $14; and
d) is the monthly per $1,000 charge shown on the policy data page. This amount
may go up or down, but is guaranteed never to exceed $0.05 per $1,000; and
e) is the first year monthly per $1,000 charge shown on the policy data page
This charge may go up or down, but is guaranteed not to exceed $0.14 per
$1,000.
This charge will be deducted for 12 months following issue of this policy
and during the 12 months following the effective date of an increase in the
specified amount. Should this policy lapse and later be reinstated, to the
extent that the monthly per $1,000 charge was not deducted for a total of
twelve policy months prior to lapse, the charges will continue to be
deducted following reinstatement of the policy until such charge has been
assessed, both before and after the lapse, for a total of 12 policy months.
f) is the first year monthly policy expense charge shown on the policy data
page. This amount may go up or down, but is guaranteed never to exceed $14
per month.
7.11 COST OF INSURANCE
If the owner chooses death benefit option B, the cost of insurance is
computed as a) multiplied by the result of b) minus c). If death benefit
option A is chosen, the cost of insurance is computed as a) multiplied by b).
In either case:
a) is the cost of insurance rate as described in the cost of insurance rate
provisions, divided by 1000;
b) is the specified amount as described in the death benefit provisions as of
the close of business on the monthly deduction day, divided by 1.0032737;
and
c) is the accumulated value as of the close of business on the monthly
deduction day.
The cost of insurance is determined separately for the initial specified amount
and any increases made later. If the premium class for the initial specified
amount is different from that of any increases, the accumulated value will first
be considered a part of the initial specified amount. If the accumulated value
as of the close of business on the monthly deduction day exceeds the initial
specified amount, it will be considered to be a part of any increase in the
specified
21
<PAGE>
amount in the same order as the increases occurred.
7.12 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate for the initial specified amount is based on your sex, premium
class and joint equal age. For any increase in the specified amount, age
will be determined from your age as of your last birthdate on the effective
date of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in your premium
class.
d) The monthly guaranteed rates shown on the policy data page are based on the
1980 Commissioners' Standard Ordinary Smoker and Nonsmoker Mortality Table.
The monthly rate will never be more than the rates shown on the policy data
page.
7.13 BASIS OF VALUES
All reserves for the policy are based on the 1980 Commissioners' Standard
Ordinary Smoker and Non-Smoker Mortality Table.
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered. We have filed a detailed statement of the
way these values are determined with the insurance department in that state. It
shows the figures and methods used.
7.14 SURRENDER
While either of you live and prior to the maturity date, the owner may surrender
the policy subject to the following rules:
a) The request must be in writing to us.
b) The amount of any such surrender may be paid in cash or we will apply part
or all of it under a payment option.
c) We have the right to defer payment of a surrender from the declared
interest option for up to 6 months.
d) A surrender charge may apply. If the surrender charge is not paid in cash,
such charge will be deducted from the amount surrendered.
e) Upon surrender, all insurance in force will terminate.
7.15 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the insured becomes eligible for waiver of the surrender charge.
The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve the
right to seek a second medical opinion or have an examination performed at
our expense by a physician we choose.
d) The insured must become eligible for waiver of surrender charge after the
first policy year ends.
7.16 PARTIAL WITHDRAWAL
While either of you live and prior to the maturity date, the owner may obtain a
partial withdrawal of the net surrender value, subject to the following rules:
22
<PAGE>
a) The amount of any partial withdrawal must be at least $500 and may not
exceed the lesser of:
1) the net surrender value less $500; or
2) 90% of the net surrender value.
b) The death benefit will be reduced as a result of any partial withdrawal.
c) At the time of the partial withdrawal, if the death benefit option in
effect is:
1) Option A: there will be no effect on the specified amount.
2) Option B: the specified amount will be reduced by the amount of
accumulated value withdrawn.
d) The specified amount remaining in force after a partial withdrawal may not
be less than the minimum specified amount for the policy in effect on the
date of the partial withdrawal, as published by the Company.
e) The accumulated value will be reduced by the amount of any partial
withdrawal and any partial withdrawal fee. The owner may tell us how to
allocate a partial withdrawal among the subaccounts and the declared
interest option. If the owner does not so instruct, we will allocate the
partial withdrawal among the subaccounts and the declared interest option
in the same proportion that the accumulated value in each of the
subaccounts and the accumulated value of the declared interest option
reduced by any outstanding policy loans bears to the total accumulated
value reduced by any outstanding policy loans on the date we receive the
request.
7.17 USE OF PAYMENT OPTION
If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the surrender charge will be determined by adding the fixed number of years
for which payment will be made to the Surrender Date shown on the policy
data page.
7.18 DELAY OF PAYMENT
Proceeds from surrenders, partial withdrawals, and policy loans will usually be
mailed to the owner within seven days after the owner's signed request is
received in our home office. We will usually mail any death claim proceeds
within seven days after we receive due proof of death. We will usually mail the
maturity proceeds within seven days after the maturity date. We have the right
to delay any payment whenever:
a) the New York Stock Exchange is closed other than on customary weekend and a
holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by the
SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities; or
e) it is not reasonably possible to determine the value of the net assets of
the variable account.
We have the right to defer payment which is derived from any amount paid to us
by check or draft until we are satisfied the check or draft has been paid by the
bank on which it is drawn.
We also have the right to delay making a surrender, partial withdrawal, or
policy loan from the declared interest option for up to six
23
<PAGE>
months from the date we receive the owner's request.
7.19 CONTINUANCE OF INSURANCE
The insurance under this policy will continue until the earlier of:
a) the end of any grace period during which a
required premium payment is not made;
b) the date the owner surrenders this policy for its entire net accumulated
value;
c) the date of the last joint insured's death; or
d) the date the policy matures.
This provision will not continue the policy beyond the maturity date or continue
any rider beyond its termination date as specified in the rider.
7.20 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current accumulated value including the value in each subaccount and
the declared interest option;
c) any partial withdrawals since the last report;
d) any policy loans; and
e) the current death benefit.
An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.
- -------------------------------------------------------------------------------
SECTION 8 - POLICY LOANS
- -------------------------------------------------------------------------------
8.1 CASH LOAN
The owner may obtain a cash loan at any time on the sole security of this
policy, if:
a) the policy is in force;
b) there is a net surrender value.
We have the right to delay making a policy loan from the declared interest
option for up to six months from the date we receive the owner's request.
8.2 LOAN VALUE
The total of all loans may not exceed 90% of the net surrender value as of the
date of the most recent loan. For any loan that is made we will deduct interest
in advance on the requested loan to the next policy anniversary.
8.3 LOAN INTEREST
The loan interest rate is an annual rate. We may change this rate at the
beginning of each policy year. The annual loan interest is to be paid in advance
on each policy anniversary. Interest not paid when due will be added to the loan
and will bear interest at the same rate. Any change in the interest rate will
apply to any existing or new policy loans on this policy.
The maximum annual loan interest rate will be the higher of:
a) The Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds as published by Moody's Investors Service, Inc. or any successor
thereto, for the calendar month ending two months before the date on which
the rate is determined; or
b) 5.50%; but
it will never exceed the usury rate, if applicable.
If the Monthly Average is no longer published, we will use a substantially
similar average which will be substituted by the
24
<PAGE>
insurance supervisory official of the state in which this policy was
delivered.
We will not make a change of less than 0.5% in this policy's loan interest rate.
We will inform you of the loan interest rate at the time a loan is made. Notice
of any loan interest rate change on existing loans will be made in advance of
the policy anniversary on which the change becomes effective.
8.4 LOAN ALLOCATION
When the owner takes out a policy loan, an amount equal to the loan will be
segregated within the declared interest option as security for the loan. Amounts
held as security for the loan will first be allocated to the accumulated value
in the declared interest option. If the accumulated value in the declared
interest option less any existing policy loan is not sufficient to cover the
amount of the policy loan, the balance necessary will be transferred from the
subaccounts on a proportional basis. This transfer is not treated as a transfer
for the purpose of the transfer charge or the limit of one transfer in a policy
year.
A transfer will also be made from the subaccounts on a proportional basis for
any due and unpaid loan interest if the accumulated value in the declared
interest option is not sufficient to cover such interest.
8.5 LOAN REPAYMENT
All or part of any policy loan may be repaid at any time while the policy is
still in force. Loan amounts repaid will be allocated to the declared interest
option. The portion of the accumulated value in the declared interest option
securing the repaid portion of the loan will no longer be segregated within the
declared interest option as security for the loan, but will remain in the
declared interest option until transferred to the subaccounts by the owner.
Any outstanding policy loans will be deducted from the proceeds at death,
maturity or surrender.
- -------------------------------------------------------------------------------
SECTION 9 - PAYMENT OF PROCEEDS
- -------------------------------------------------------------------------------
9.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After the death of the last joint insured, that joint insured's
beneficiary may choose an option if the owner had not done so before your death.
If no payment option is chosen, we will pay the proceeds of this policy in one
sum. We may also fulfill our obligation under this policy by paying the proceeds
in one sum if:
a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee, partnership, corporation,
or association.
9.2 PAYMENT OPTIONS
The payment options choices are:
1) INTEREST INCOME - The proceeds will be left with us to earn interest.
The interest will be paid every 1, 3, 6 or 12 months as the payee
chooses. The rate of interest will be determined by us. The payee may
withdraw all or part of the proceeds at any time.
2) INCOME FOR FIXED TERM - The proceeds will be paid out in equal
installments for a fixed term of years.
25
<PAGE>
3) LIFE INCOME WITH TERM CERTAIN - The proceeds will be paid out in equal
installments for as long as the payee lives, but for not less than a
term certain. The owner or payee may choose one of the terms certain
shown in the payment option tables.
4) INCOME FOR FIXED AMOUNT - The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until
all proceeds plus interest have been paid out.
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME - The proceeds
will be paid out in equal monthly installments for as long as two joint
payees live. When one payee dies, installments of two-thirds of the
first installment will be paid to the surviving payee. Payments will
stop when the surviving payee dies.
The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.
9.3 INTEREST AND MORTALITY
Proceeds applied under a payment option no longer earn interest at the rate
applied to the declared interest option or participate in the investment
experience of the variable account. The minimum interest rate used in computing
any payment option is 3% per year. Higher interest rates may be used on the
effective date of the payment contract. We may at any time declare additional
interest on these funds. The amount of additional interest and how it is
determined will be set by us.
The mortality table which is used for options 3) and 5) is the "Annuity 2000"
individual annuity mortality table.
9.4 REQUIREMENTS
For the owner to choose or change a payment option:
a) this contract must be in force;
b) the request must be in writing to us at our home office; and
c) any prior option must be canceled.
After the death of the last joint insured, and before this contract is settled,
for a beneficiary to choose or change a payment option:
a) a prior option by the owner cannot be in effect;
b) the request must be in writing to us at our home office; and
c) any prior option must be canceled.
9.5 EFFECTIVE DATE
If a payment option has been chosen by the owner, it is effective on the date
the proceeds of this policy are due. If a beneficiary chooses a payment option,
it is effective on the date of election. The first payment under options 2, 3,
4, or 5 is due on the effective date. The first payment under payment option 1
is due at the end of the period chosen.
9.6 DEATH OF PAYEE
If a payee dies, any remaining payments will be paid to a contingent payee. If
no payee survives, we will pay the commuted value of any remaining payments to
the last payee's estate.
9.7 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may
26
<PAGE>
also refuse to allow partial withdrawals of less than $250.
9.8 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors to
the maximum extent allowed by law.
Payment Option Tables
(per $1,000 of proceeds)
<TABLE>
<CAPTION>
- -----------------------------------------
Option 2 - Income for Fixed Term
Installments per $1,000 of Proceeds
- -----------------------------------------
Number of
Years Annual Monthly
- -----------------------------------------
<S> <C> <C>
5 211.99 17.91
- -----------------------------------------
10 113.82 9.61
- -----------------------------------------
15 81.33 6.87
- -----------------------------------------
20 65.26 5.51
- -----------------------------------------
25 55.76 4.71
- -----------------------------------------
30 49.53 4.18
- -----------------------------------------
</TABLE>
-----------------------------------------------------
Guaranteed Settlement Option 5
Joint and Two-thirds to Survivor Monthly Life Income
Monthly Installments per $1,000 of Proceeds
-----------------------------------------------------
<TABLE>
<CAPTION>
Male Female Age
Age
55 60 62 65 70
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
60 4.33 4.58 4.68 4.85 5.16
62 4.41 4.67 4.79 4.97 5.31
65 4.53 4.82 4.95 5.16 5.54
70 4.75 5.09 5.24 5.49 5.97
75 4.97 5.35 5.53 5.83 6.42
-----------------------------------------------------
<CAPTION>
Unisex Unisex Age
Age
55 60 62 65 70
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
60 4.35 4.58 4.68 4.84 5.13
62 4.43 4.68 4.79 4.97 5.28
65 4.56 4.84 4.97 5.16 5.52
70 4.79 5.13 5.28 5.52 5.97
75 5.04 5.43 5.60 5.90 6.47
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
GUARANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS
- ----------------------------------------------------------------------------------------------
Male Female Unisex
- ----------------------------------------------------------------------------------------------
AGE 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20
- ----------------------------------------------------------------------------------------------
<S> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 4.51 4.49 4.45 4.38 4.27 4.19 4.19 4.16 4.12 4.06 4.35 4.34 4.30 4.25 4.16
56 4.60 4.59 4.54 4.46 4.33 4.27 4.26 4.24 4.19 4.12 4.43 4.42 4.39 4.32 4.22
57 4.70 4.68 4.63 4.54 4.39 4.35 4.35 4.32 4.27 4.19 4.52 4.51 4.47 4.40 4.29
58 4.81 4.79 4.73 4.62 4.46 4.44 4.43 4.40 4.34 4.25 4.62 4.61 4.56 4.48 4.35
59 4.92 4.90 4.83 4.70 4.52 4.54 4.53 4.49 4.42 4.32 4.72 4.71 4.65 4.56 4.42
60 5.04 5.01 4.93 4.79 4.59 4.64 4.63 4.58 4.51 4.39 4.83 4.81 4.75 4.65 4.49
- ----------------------------------------------------------------------------------------------
61 5.16 5.14 5.05 4.88 4.66 4.75 4.73 4.68 4.59 4.46 4.95 4.93 4.86 4.74 4.55
62 5.30 5.27 5.16 4.98 4.72 4.86 4.84 4.79 4.68 4.53 5.07 5.05 4.97 4.83 4.62
63 5.45 5.41 5.29 5.08 4.79 4.98 4.96 4.90 4.78 4.60 5.20 5.18 5.08 4.92 4.69
64 5.60 5.56 5.42 5.17 4.85 5.11 5.09 5.01 4.88 4.67 5.35 5.31 5.21 5.02 4.76
65 5.77 5.72 5.55 5.27 4.91 5.25 5.22 5.14 4.98 4.75 5.50 5.46 5.34 5.12 4.83
- ----------------------------------------------------------------------------------------------
66 5.95 5.89 5.69 5.38 4.97 5.40 5.36 5.26 5.08 4.82 5.66 5.61 5.47 5.23 4.89
67 6.14 6.06 5.84 5.48 5.03 5.55 5.52 5.40 5.19 4.89 5.83 5.78 5.61 5.33 4.96
68 6.34 6.25 5.99 5.58 5.09 5.73 5.68 5.55 5.30 4.95 6.01 5.95 5.76 5.44 5.02
69 6.55 6.45 6.15 5.68 5.14 5.91 5.86 5.70 5.41 5.02 6.21 6.14 5.91 5.54 5.08
70 6.78 6.66 6.31 5.78 5.19 6.11 6.05 5.86 5.53 5.08 6.42 6.34 6.07 5.65 5.13
- ----------------------------------------------------------------------------------------------
71 7.03 6.89 6.47 5.88 5.23 6.32 6.25 6.02 5.64 5.14 6.65 6.55 6.24 5.75 5.19
72 7.29 7.12 6.64 5.97 5.27 6.55 6.47 6.20 5.75 5.19 6.89 6.77 6.41 5.86 5.23
73 7.56 7.37 6.81 6.07 5.31 6.80 6.70 6.38 5.86 5.24 7.15 7.01 6.59 5.96 5.28
74 7.86 7.63 6.99 6.15 5.34 7.07 6.95 6.57 5.97 5.29 7.44 7.26 6.77 6.06 5.31
75 8.18 7.90 7.16 6.24 5.37 7.37 7.22 6.76 6.08 5.33 7.74 7.53 6.95 6.15 5.35
- ----------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM
LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
If you have any questions concerning this policy or if
anyone suggests that you change or replace this policy,
please contact your Farm Bureau Life agent or our home
office. (515-225-5400)
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997
434-159(05-00)
[LOGO]
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 29th day of
September, 1998 by and among FARM BUREAU LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Iowa corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and
1
<PAGE>
Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order");
and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of
2
<PAGE>
the Fund. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Boston time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section
3
<PAGE>
2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 508A of the Iowa Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its
4
<PAGE>
shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has
adopted a Rule 12b-1 Plan under which it makes payments to finance
distribution expenses. The Fund represents and warrants that it has a board
of trustees, a majority of whom are not interested persons of the Fund, which
has formulated and approved the Fund's Rule 12b-1 Plan to finance
distribution expenses of the Fund and that any changes to the Fund's Rule
12b-1 Plan will be approved by a similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The
5
<PAGE>
Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Iowa and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the Commonwealth of Massachusetts and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have
6
<PAGE>
the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its
Statement of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in
the following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information
provided by the Company to its existing owners of Contracts in order to
update disclosure annually as required by the 1933 Act and/or the 1940 Act,
the cost of printing shall be borne by the Fund. If the Company chooses to
receive camera-ready film in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of A and B where A is the number of such prospectuses distributed to
owners of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset
7
<PAGE>
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule B attached hereto
and incorporated herein by this reference, which standards will also be
provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration
8
<PAGE>
statement or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in published
reports for each Account which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
9
<PAGE>
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly
10
<PAGE>
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision
11
<PAGE>
has created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may
12
<PAGE>
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
13
<PAGE>
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
14
<PAGE>
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this
15
<PAGE>
Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation
16
<PAGE>
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
17
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60)
days advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts
issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision,
18
<PAGE>
or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the
diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of
the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company and/or its affiliated companies
has suffered a material adverse change in its business,
operations, financial condition or prospects since the
date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in
its sole judgment exercised in good faith, that either
the Fund or the Underwriter has suffered a material
adverse change in its business, operations, financial
condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund and
the Underwriter the written notice specified in Section
1.6(b) hereof and at the time such notice was given there
was no notice of termination outstanding under any other
provision of this Agreement; provided, however any
termination under this Section 10.1(h) shall be effective
forty five (45) days after the notice specified in
Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as
19
<PAGE>
necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel for
the Company (which counsel shall be reasonably satisfactory to the Fund and
the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Attention: Sue Cornick
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
20
<PAGE>
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent
of all parties hereto; provided, however, that the Underwriter may assign
this Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement. The Company shall promptly notify the Fund and the
Underwriter of any change in control of the Company.
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<PAGE>
12.9. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in
any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders
and/or policyholders, as soon as practical after
the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of
the books of the Company, as soon as practical
after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Dennis M. Marker
----------------------------
Name: Dennis M. Marker
----------------------------
Title: Investment Vice President, Administration
-----------------------------------------
22
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Robert C. Pozen
---------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin J. Kelly
---------------------------
Kevin J. Kelly
Vice President
23
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Farm Bureau Life Flexible Premium Variable
Variable Account - 3/3/87 Life Insurance Policy
No. 434-114 (0798)
Farm Bureau Life
Variable Account II - 1/6/98
Farm Bureau Life
Variable Account III - 1/6/98
- --------------------------------------------------------------------------------
Farm Bureau Life Flexible Premium Deferred Variable
Annuity Account - 1/26/93 Annuity Contract
No. 434-062 (0798)
Farm Bureau Life Annuity Account II - 1/6/98
Farm Bureau Life Annuity Account III - 1/6/98
24
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
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<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but NOT including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
26
<PAGE>
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
27
<PAGE>
SCHEDULE C
Other investment companies currently available under the Contracts:
Equitrust Variable Insurance Series Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price International Series, Inc.
28
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 29th day of
September, 1998 by and among FARM BUREAU LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Iowa corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and
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Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order");
and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of
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the Fund. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Boston time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section
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2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 508A of the Iowa Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its
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shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has
adopted a Rule 12b-1 Plan under which it makes payments to finance
distribution expenses. The Fund represents and warrants that it has a board
of trustees, a majority of whom are not interested persons of the Fund, which
has formulated and approved the Fund's Rule 12b-1 Plan to finance
distribution expenses of the Fund and that any changes to the Fund's Rule
12b-1 Plan will be approved by a similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The
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Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Iowa and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the Commonwealth of Massachusetts and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have
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the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its
Statement of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in
the following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information
provided by the Company to its existing owners of Contracts in order to
update disclosure annually as required by the 1933 Act and/or the 1940 Act,
the cost of printing shall be borne by the Fund. If the Company chooses to
receive camera-ready film in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of A and B where A is the number of such prospectuses distributed to
owners of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset
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account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule B attached hereto
and incorporated herein by this reference, which standards will also be
provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration
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statement or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in published
reports for each Account which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
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5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly
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inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision
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has created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may
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become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
13
<PAGE>
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons
or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the Fund
Shares or the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
14
<PAGE>
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this
15
<PAGE>
Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation
16
<PAGE>
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
17
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision,
18
<PAGE>
or if the Company reasonably believes that the Fund may fail
to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five (45) days after
the notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as
19
<PAGE>
necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel for
the Company (which counsel shall be reasonably satisfactory to the Fund and
the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Attention: Sue Cornick
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
20
<PAGE>
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent
of all parties hereto; provided, however, that the Underwriter may assign
this Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement. The Company shall promptly notify the Fund and the
Underwriter of any change in control of the Company.
21
<PAGE>
12.9. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in
any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders
and/or policyholders, as soon as practical after
the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of
the books of the Company, as soon as practical
after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Dennis M. Marker
----------------------------
Name: Dennis M. Marker
----------------------------
Title: Investment Vice President, Administration
-----------------------------------------
22
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ Robert C. Pozen
----------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin J. Kelly
----------------------------
Kevin J. Kelly
Vice President
23
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Farm Bureau Life Flexible Premium Variable
Variable Account - 3/3/87 Life Insurance Policy
No. 434-114 (0798)
Farm Bureau Life
Variable Account II - 1/6/98
Farm Bureau Life
Variable Account III - 1/6/98
- --------------------------------------------------------------------------------
Farm Bureau Life Flexible Premium Deferred Variable
Annuity Account - 1/26/93 Annuity Contract
No. 434-062 (0798)
Farm Bureau Life Annuity Account II - 1/6/98
Farm Bureau Life Annuity Account III - 1/6/98
24
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
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<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but NOT including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
26
<PAGE>
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
27
<PAGE>
SCHEDULE C
Other investment companies currently available under the Contracts:
Equitrust Variable Insurance Series Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price International Series, Inc.
28
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND III,
FIDELITY DISTRIBUTORS CORPORATION
and
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 29th day of
September, 1998 by and among FARM BUREAU LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Iowa corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND III, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and
1
<PAGE>
Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order");
and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of
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the Fund. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Boston time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section
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2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 508A of the Iowa Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its
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<PAGE>
shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has adopted a
Rule 12b-1 Plan under which it makes payments to finance distribution expenses.
The Fund represents and warrants that it has a board of trustees, a majority of
whom are not interested persons of the Fund, which has formulated and approved
the Fund's Rule 12b-1 Plan to finance distribution expenses of the Fund and that
any changes to the Fund's Rule 12b-1 Plan will be approved by a similarly
constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The
5
<PAGE>
Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Iowa and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the Commonwealth of Massachusetts and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have
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<PAGE>
the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its
Statement of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in
the following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information
provided by the Company to its existing owners of Contracts in order to
update disclosure annually as required by the 1933 Act and/or the 1940 Act,
the cost of printing shall be borne by the Fund. If the Company chooses to
receive camera-ready film in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of A and B where A is the number of such prospectuses distributed to
owners of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset
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<PAGE>
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule B attached hereto
and incorporated herein by this reference, which standards will also be
provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration
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<PAGE>
statement or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in published
reports for each Account which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
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<PAGE>
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly
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<PAGE>
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision
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<PAGE>
has created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may
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become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
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8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons
or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the Fund
Shares or the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
14
<PAGE>
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this
15
<PAGE>
Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation
16
<PAGE>
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
17
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company;
or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor
or similar provision,
18
<PAGE>
or if the Company reasonably believes that the Fund may fail
to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section
10.1(h) shall be effective forty five (45) days after the
notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as
19
<PAGE>
necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel for
the Company (which counsel shall be reasonably satisfactory to the Fund and
the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Attention: Sue Cornick
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
20
<PAGE>
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent
of all parties hereto; provided, however, that the Underwriter may assign
this Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement. The Company shall promptly notify the Fund and the
Underwriter of any change in control of the Company.
21
<PAGE>
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery
thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state insurance
regulator, as soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company,
as soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Dennis M. Marker
----------------------------
Name: Dennis M. Marker
----------------------------
Title: Investment Vice President, Administration
-----------------------------------------
22
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND III
By: /s/ Robert C. Pozen
----------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin J. Kelly
----------------------------
Kevin J. Kelly
Vice President
23
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors By Separate Account
- -------------------------------------- --------------------------------
Farm Bureau Life Flexible Premium Variable
Variable Account - 3/3/87 Life Insurance Policy
No. 434-114 (0798)
Farm Bureau Life
Variable Account II - 1/6/98
Farm Bureau Life
Variable Account III - 1/6/98
- --------------------------------------------------------------------------------
Farm Bureau Life Flexible Premium Deferred Variable
Annuity Account - 1/26/93 Annuity Contract
No. 434-062 (0798)
Farm Bureau Life Annuity Account II - 1/6/98
Farm Bureau Life Annuity Account III - 1/6/98
24
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
25
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important.
One copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
26
<PAGE>
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
27
<PAGE>
SCHEDULE C
Other investment companies currently available under the Contracts:
Equitrust Variable Insurance Series Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price International Series, Inc.
28
<PAGE>
PARTICIPATION AGREEMENT
Among
T. ROWE PRICE EQUITY SERIES, INC.,
T. ROWE PRICE INTERNATIONAL SERIES, INC.,
T. ROWE PRICE INVESTMENT SERVICES, INC.,
and
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 8th day of June, 1998
by and among Farm Bureau Life Insurance Company (hereinafter, the "Company"), a
Iowa insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), and the
undersigned funds, each, a corporation organized under the laws of Maryland
(each hereinafter referred to as the "Fund") and T. Rowe Price Investment
Services, Inc. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net asset
value pursuant to rules of the SEC, and the Fund shall use its best efforts to
calculate such net asset value on each day which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the Board of Directors of the
Fund (hereinafter the "Board") may refuse to sell shares of any Designated
Portfolio to any person, or suspend or terminate the offering of shares of any
Designated Portfolio if such action is required by law or by regulatory
authorities having jurisdiction, or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
<PAGE>
shares of any Designated Portfolios will be sold to the general public. The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares one Business Day after receipt
of an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For
purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
<PAGE>
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Baltimore time) and shall use its best efforts to make such net
asset value per share available by 7 p.m. Baltimore time. If the net asset
value is materially incorrect through no fault of the Company, the Company on
behalf of each Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value in
accordance with Fund procedures. Any material error in the net asset value
shall be reported to the Company promptly upon discovery. Any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at Company's expense.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Iowa insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
<PAGE>
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Iowa to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of Iowa and any
applicable state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $2.5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund if, and when, applicable. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies. The Company
agrees to exercise its best efforts to ensure that other individuals/entities
not employed or controlled by the Company and dealing with the money and/or
securities of the Fund maintain a similar bond or coverage in a reasonable
amount.
ARTICLE III. Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the
<PAGE>
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners in the Fund. The Underwriter (at the Company's
expense) shall provide the Company with copies of the Fund's annual and semi-
annual reports to shareholders in such quantity as the Company shall reasonably
request for use in connection with offering the Variable Contracts issued by the
Company. If requested by the Company in lieu thereof, the Underwriter shall
provide such documentation (which may include a final copy of the Fund's annual
and semi-annual reports as set in type or on diskette) and other assistance as
is reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated Portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
<PAGE>
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a Portfolio
thereof) or the Adviser or the Underwriter is named, at least ten calendar days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten calendar days after receipt of such
material. The Fund or its designee reserves the right to reasonably object to
the continued use of such material, and no such material shall be used if the
Fund or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within ten calendar days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account, within a
reasonable time after the filing of such document(s) with the SEC or other
regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
<PAGE>
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's
prospectus (in accordance with 3.1) and of distributing the Fund's prospectus,
proxy materials, and reports to Contract owners and prospective Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund will invest the assets of each Designated Portfolio in such
a manner as to ensure that the Contracts will be treated as annuity, endowment,
or life insurance contracts, whichever is appropriate, under the Internal
Revenue Code of 1986, as amended (the Code ) and the regulations issued
thereunder (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio of the Fund will comply with Section 817(h)
of the Code and Treasury Regulation 1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
<PAGE>
the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.
6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus offering a
contract that is a "modified endowment contract" as that term is defined in
Section 7702A of the Code (or any successor or similar provision), shall
identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
<PAGE>
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
<PAGE>
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement, prospectus, or statement of additional information ( SAI ) for the
Contracts or contained in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature or other promotional material
(or any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature or other promotional material of the
Fund not supplied by the Company or persons under its control) or wrongful
conduct of the Company or persons under its authorization or control, with
respect to the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, SAI, or
sales literature or other promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the Company;
or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in Article VI of this
Agreement); or
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
<PAGE>
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or prospectus or SAI or sales literature or other promotional material
of the Fund (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or in sales
literature or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature or other promotional
material for the Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
SAI, or sales literature or other promotional material of the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter;
<PAGE>
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3 Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
<PAGE>
comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
<PAGE>
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by six (6) months' advance written notice
delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio based upon the
Company's determination that shares of the Fund are not reasonably available to
meet the requirements of the Contracts; provided that such termination shall
apply only to the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the Company by the
NASD, the SEC, the Insurance Commissioner or like official of any state or any
other regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any Account, or the
purchase of the Fund shares; provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or Underwriter by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body; provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the qualifications
specified in Section 6.3 hereof; or if the Fund or Underwriter reasonably
believes that such Contracts may fail to so qualify; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
<PAGE>
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith, that the Fund or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company s assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a Legally Required Redemption ), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund
and the Underwriter the opinion of counsel for the Company (which counsel shall
be reasonably satisfactory to the Fund and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
<PAGE>
West Des Moines, Iowa 50266
Attention: Sue Cornick
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
ARTICLE XII. Miscellaneous
12.1 All references herein to the Fund are to each of the undersigned
Funds as if this agreement were between such individual Fund and the Underwriter
and the Company. All references herein to the Adviser relate solely to the
Adviser of such individual Fund, as appropriate. All persons dealing with a
Fund must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolio listed on Schedule A hereto as
though such Designated Portfolio had separately contracted with the Company and
the Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all
<PAGE>
information reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as such information may come into the public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Iowa
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.9 The Company shall furnish or cause to be furnished, to the Fund or
its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles ( GAAP ), if any), as soon as practical and in any event within 90
days after the end of each fiscal year.
(b) the Company s quarterly statements (statutory) (and GAAP, if any),
as soon as practical and in any event within 45 days after the end of each
quarterly period.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
<PAGE>
COMPANY: FARM BUREAU LIFE INSURANCE COMPANY
By its authorized officer
By: /s/ William J. Oddy
Title: Executive Vice President & General Manager
Date: June 8, 1998
FUND: T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: June 8, 1998
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: June 8, 1998
<PAGE>
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/ Darrell N. Braman
Title: Vice President
Date: June 8, 1998
<PAGE>
SCHEDULE A
Name of Separate Account and Date Established by Board of Directors:
Farm Bureau Life Variable Account II
1/6/98
Farm Bureau Life Variable Account III
1/6/98
Contracts Funded by Separate Account:
Flexible Premium Variable Life Insurance Policy
Designated Portfolios:
T. Rowe Price Equity Series, Inc.
- Equity Income Portfolio
- Mid-Cap Growth Portfolio
- New America Growth Portfolio
- Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
- International Stock Portfolio
Name of Separate Account and Date Established by Board of Directors:
Farm Bureau Life Annuity Account II
1/6/98
Farm Bureau Life Annuity Account III
1/6/98
Contracts Funded by Separate Account:
Flexible Premium Deferred Variable Annuity Contract
Designated Portfolios:
T. Rowe Price Equity Series, Inc.
- Equity Income Portfolio
- Mid-Cap Growth Portfolio
- New America Growth Portfolio
- Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
- International Stock Portfolio
Name of Separate ACcount and Date Established by Board of Directors:
Farm Bureau Life Variable Account, Flexible Premium Variable Life
Insurance Policy 3/3/87
Farm Bureau Life Annuity Account, Flexible Premium Deferred Variable
Annuity Contract 1/26/93.
Designated Portfolios:
T. Rowe Price Equity Series, Inc.
- Mid-Cap Growth Portfolio
- New America Growth Portfolio
- Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
- International Stock Portfolio
<PAGE>
February 14, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen,
With reference to the Registration Statement on Form S-6 filed by Farm Bureau
Life Insurance Company ("Company") and its Farm Bureau Life Variable Account
with the Securities and Exchange Commission covering certain variable universal
life insurance policies, I have examined such documents and such law as I
considered necessary and appropriate, and on the basis of such examinations, it
is my opinion that:
(1) Company is duly organized and validly existing under the laws of the State
of Iowa.
(2) The variable universal life policies, when issued as contemplated by the
said Form S-6 Registration Statement will constitute legal, validly issued
and binding obligations of Farm Bureau Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the said Form
S-6 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration Statement.
In giving this consent, I am not admitting that I am in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Stephen M. Morain
Stephen M. Morain
Senior Vice President
& General Counsel
<PAGE>
February 14, 2000
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by Farm Bureau
Life Insurance Company of a flexible premium last survivor variable life
insurance policy ("Policy") under the Securities Act of 1933, as amended. The
prospectus included in this initial filing to the Registration Statement on Form
S-6 describes the Policy. I have provided actuarial advice concerning the
preparation of the policy form described in the Registration Statement, and I am
familiar with the Registration Statement and exhibits thereto.
It is my professional opinion that:
(1) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is consistent
with the provisions of the Policy.
(2) The fees and charges deducted under the Policy, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.
I hereby consent to the use of this opinion as an exhibit to this initial filing
to the Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus.
Sincerely,
/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MSAA
Life Product Development and Pricing
Vice President
Farm Bureau Life Insurance Company
