-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eul05gBXHksNtpDE7E1uj90SEYoG/Jd/qQ0BCNUJu+GG6mSJWqur4A7nVlG993Dg nniK+sqxE9etkFA+FDqSuA== 0000917677-99-000052.txt : 19991110 0000917677-99-000052.hdr.sgml : 19991110 ACCESSION NUMBER: 0000917677-99-000052 CONFORMED SUBMISSION TYPE: S-6 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19991108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY LIFE SEPARATE ACCOUNT L1 CENTRAL INDEX KEY: 0000917677 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840499703 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6 SEC ACT: SEC FILE NUMBER: 333-90577 FILM NUMBER: 99743693 BUSINESS ADDRESS: STREET 1: 1290 BROADWAY STREET 2: C/O SECURITY LIFE CENTER CITY: DENVER STATE: CO ZIP: 80203 BUSINESS PHONE: 3038601290 MAIL ADDRESS: STREET 1: 1290 BROADWAY CITY: DENVER STATE: CO ZIP: 80203-5699 S-6 1 SECURITY LIFE CVUL PROSPECTUS As filed with the Securities and Exchange Commission on November 8, 1999 Registration No. 333-_________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 Initial Registration ----------------- SECURITY LIFE SEPARATE ACCOUNT L1 (Exact Name of Trust) SECURITY LIFE OF DENVER INSURANCE COMPANY (Name of Depositor) 1290 Broadway Denver, Colorado 80203-5699 (Address of Depositor's Principal Executive Offices) Copy to: GARY W. WAGGONER, ESQ. KIMBERLY J. SMITH, ESQ. Security Life of Denver Insurance Company Sutherland Asbill & Brennan LLP 1290 Broadway 1275 Pennsylvania Avenue, NW Denver, Colorado 80203-5699 Washington, D.C. 20004-2415 (202) 383-0314 (Name and Address of Agent for Service) ---------------------------- Title of securities being registered: Corporate variable life insurance policies. 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 date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Form V-112-00 SECURITY LIFE SEPARATE ACCOUNT L1 (File No. 333-_________) Cross-Reference Table Form N-8B-2 Item No. Caption in Prospectus 1, 2 Cover; Security Life of Denver Insurance Company; Security Life Separate Account L1 3 Inapplicable 4 Security Life of Denver Insurance Company 5, 6 Security Life Separate Account L1 7 Inapplicable 8 Financial Statements 9 Inapplicable 10(a), (b), (c), (d), (e) Policy Summary; Policy Values, Determining the Value in the Variable Division; Charges and Deductions; Surrender; Partial Withdrawals; Transfers of Account Value; Right to Exchange Policy; Lapse; Reinstatement; Premiums 10(f) Voting Privileges; Right to Change Operations 10(g), (h) Right to Change Operations 10(i) Tax Considerations; Detailed Information about the Corporate Variable Universal Life Policy; General Policy Provisions; 11, 12 Security Life Separate Account L1 13 Policy Summary; Charges and Deductions; Group or Sponsored Arrangements and Corporate Purchasers ii Form N-8B-2 Item No. Caption in Prospectus 14, 15 Policy Summary; Free Look Period or Right to Examine Policy Period; General Policy Provisions; Applying for a Policy 16 Premiums; Allocation of Net Premiums; How We Calculate Accumulation Unit Values 17 Surrender; Partial Withdrawals 18 Policy Summary; Tax Considerations; Detailed Information about the Corporate Variable Universal Life Policy; Security Life Separate Account L1 19 Reports to Owners; Notification and Claims Procedures; Performance Information (Appendix C) 20 See 10(g) & 10(a) 21 Policy Loans 22 Policy Summary; Premiums; Grace Period; Security Life Separate Account L1; Detailed Information about the Corporate Variable Universal Life Policy 23 Inapplicable 24 Inapplicable 25 Security Life of Denver Insurance Company 26 Inapplicable 27, 28, 29, 30 Security Life of Denver Insurance Company 31, 32, 33, 34 Inapplicable 35 Inapplicable 36 Inapplicable iii Form N-8B-2 Item No. Caption in Prospectus 37 Inapplicable 38, 39, 40, 41(a) General Policy Provisions; Distribution of the Policies; Security Life of Denver Insurance Company 41(b), 41(c), 42, 43 Inapplicable 44 Determining the Value in the Variable Division; How We Calculate Accumulation Unit Values 45 Inapplicable 46 Partial Withdrawals; Detailed Information about the Corporate Variable Universal Life Policy 47, 48, 49, 50 Inapplicable 51 Detailed Information about the Corporate Variable Universal Life Policy 52 Determining the Value in the Variable Division; Right to Change Operations 53(a) Tax Considerations 53(b), 54, 55 Inapplicable 56, 57, 58 Inapplicable 59 Financial Statements iv Prospectus CORPORATE VARIABLE UNIVERSAL LIFE A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY issued by SECURITY LIFE OF DENVER INSURANCE COMPANY AND SECURITY LIFE SEPARATE ACCOUNT L1 Consider carefully the policy charges and deductions beginning on page 41 in this prospectus. You should read this prospectus and keep it for future reference. A prospectus for each underlying fund portfolio must accompany and should be read together with this prospectus. This policy is not available in all jurisdictions. This policy is not offered in any jurisdiction where this type of offering is not legal. Depending on the state where it is issued, policy features may vary. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. Replacing your existing life insurance policy(ies) with this policy may not be beneficial to you. Your Policy o is a flexible premium variable universal life insurance policy o is issued by Security Life of Denver Insurance Company o is designed primarily for use on a multi-life basis when the insured people share a common employment or business relationship o is returnable by you during the free look period or right to examine policy period if you are not satisfied. YOUR POLICY PREMIUM PAYMENTS o are flexible, so the premium amount and frequency may vary o are allocated to variable investment options and the guaranteed interest division based on your instructions o are invested in shares of the underlying investment portfolios under each variable investment option. YOUR ACCOUNT VALUE o is the sum of your holdings in the variable division, the guaranteed interest division and the loan division o has no guaranteed minimum cash value under the variable division. The value varies with the value of the underlying investment portfolio o has a minimum guaranteed rate of return if you have an amount in the guaranteed interest division and o is subject to various expenses and charges. DEATH PROCEEDS o are paid if the policy is in force when the insured person dies o are equal to the death benefit minus outstanding policy loans, accrued loan interest and unpaid charges incurred before the insured person dies o are calculated under your choice of options; * Option 1- a fixed minimum death benefit * Option 2- a stated death benefit plus your account value * Option 3- a stated death benefit plus the sum of the premiums you have paid minus partial withdrawals and o are generally not federally income taxed if your policy continues to meet the federal income tax definition of life insurance. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS LIFE INSURANCE POLICY IS NOT A BANK DEPOSIT OR OBLIGATION, FEDERALLY INSURED, OR BACKED BY ANY BANK OR GOVERNMENTAL AGENCY. DATE OF PROSPECTUS _____________, _____ Form V-112-00 ISSUED BY: Security Life of Denver UNDERWRITTEN BY: ING America Equities, Inc. Insurance Company 1290 Broadway Security Life Center Denver, CO 80203-5699 1290 Broadway (303) 860-2000 Denver, CO 80203-5699 (800) 525-9852 THROUGH ITS: Security Life Separate Account L1 ADMINISTERED BY: Customer Service Center - -------------------------------------------------------------------------------- Corporate Variable Universal Life 2 TABLE OF CONTENTS POLICY SUMMARY.................................................................6 Your Policy...............................................................6 Free Look Period or Right to Examine Policy Period................................................................6 Your Policy Premiums......................................................6 Allocation of Net Premiums............................................6 Charges and Deductions....................................................7 Deductions from Premiums..............................................7 Annual Deductions.....................................................7 Deductions from the Variable Divisions................................7 Monthly Deductions from Your Account Value............................................................7 Policy Transaction Fees...............................................7 Fees and Expenses of the Investment Portfolios............................8 Investment Portfolio Annual Expenses..................................8 Variable Division........................................................10 Policy Values............................................................10 Your Account Value in the Variable Divisions.........................10 Transfers of Account Value...............................................11 Special Policy Features..................................................11 Dollar Cost Averaging................................................11 Automatic Rebalancing................................................11 Loans................................................................11 Partial Withdrawals..................................................11 Policy Modification, Termination and Continuation Features.............................................................11 Right to Exchange Policy.............................................11 Surrender............................................................11 Lapse................................................................11 Reinstatement........................................................11 Policy Maturity......................................................11 Continuation of Coverage.............................................12 Death Benefits...........................................................12 Tax Considerations.......................................................12 INFORMATION ABOUT SECURITY LIFE, THE SEPARATE ACCOUNT, THE INVESTMENT OPTIONS AND THE GUARANTEED INTEREST DIVISION........................................................12 Security Life of Denver Insurance Company................................12 Year 2000 Preparedness...................................................13 Security Life Separate Account L1........................................13 Separate Account Structure...........................................13 Order of Separate Account Liabilities................................13 Variable Investment Options..........................................13 Investment Portfolios................................................14 Objectives of the Investment Portfolios..................................14 The Guaranteed Interest Division.........................................18 DETAILED INFORMATION ABOUT THE CORPORATE VARIABLE UNIVERSAL LIFE POLICY...................................................................18 Applying for a Policy....................................................18 Policy Issuance......................................................18 Definition of Life Insurance.........................................19 Temporary Insurance......................................................19 Premiums.................................................................19 Scheduled Premiums...................................................19 Unscheduled Premium Payments.........................................20 Target Premium.......................................................20 Allocation of Net Premiums...........................................20 Premium Payments Affect Your Coverage....................................20 Modified Endowment Contracts.........................................21 Death Benefits...........................................................21 Base Death Benefit...................................................23 Death Benefit Options................................................23 Changes in Death Benefit Options.....................................24 Changes in Death Benefit Amounts.....................................24 Adjustable Term Insurance Rider..........................................25 Special Features.........................................................26 Right to Exchange Policy.............................................26 Policy Maturity......................................................26 Continuation of Coverage.............................................27 Policy Values............................................................27 Account Value........................................................27 Net Account Value....................................................27 Determining the Value in the Variable Division........................................................27 How We Calculate Accumulation Unit Values............................28 Transfers of Account Value...............................................29 Excessive Trading....................................................29 Guaranteed Interest Division Transfers...............................29 Dollar Cost Averaging....................................................29 Changing Dollar Cost Averaging.......................................30 Terminating Dollar Cost Averaging....................................30 Automatic Rebalancing....................................................30 Changing Automatic Rebalancing.......................................31 Terminating Automatic Rebalancing....................................31 Policy Loans.............................................................31 Loan Repayment.......................................................32 Loans and Your Benefits..............................................31 Partial Withdrawals......................................................31 Partial Withdrawals under Death Benefit Option 1........................................................31 Partial Withdrawals under Death Benefit Option 2........................................................32 Partial Withdrawals under Death Benefit Option 3........................................................33 Stated Death Benefit and Target Death Benefit Reductions......................................................33 Partial Withdrawal Mechanics.........................................33 Lapse....................................................................33 Grace Period.........................................................33 Reinstatement............................................................34 - -------------------------------------------------------------------------------- Corporate Variable Universal Life 3 Surrender................................................................34 General Policy Provisions................................................34 Free Look Period or Right to Examine Policy Period..........................................................34 Your Policy..........................................................35 Age ................................................................35 Ownership............................................................35 Beneficiary(ies).....................................................35 Collateral Assignment................................................36 Incontestability.....................................................36 Misstatements of Age or Gender.......................................36 Suicide..............................................................36 Transaction Processing...............................................36 Notification and Claims Procedures...................................37 Telephone Privileges.................................................37 Non-participation....................................................37 Distribution of the Policies.........................................37 Advertising Practices and Sales Literature...........................38 Settlement Provisions................................................39 Administrative Information About the Policy..............................39 Voting Privileges....................................................39 Material Conflicts...................................................40 Right to Change Operations...........................................40 Reports to Owners....................................................41 CHARGES AND DEDUCTIONS........................................................41 Deductions from Premiums.................................................41 Tax Charges..........................................................41 Sales Charge.........................................................42 Annual Deduction.........................................................42 Deferred Sales Charge................................................42 Daily Deductions from the Variable Account...............................42 Mortality and Expense Risk Charge....................................42 Monthly Deductions from Your Account Value...............................42 Monthly Administrative Charge........................................43 Cost of Insurance Charge.............................................43 Guaranteed Issue.....................................................44 Changes in Monthly Charges...........................................44 Continuation of Coverage Administrative Fee..........................44 Policy Transaction Fees..................................................44 Partial Withdrawals..................................................44 Transfers............................................................44 Illustrations........................................................44 Premium Allocation Change............................................44 Group or Sponsored Arrangements or Corporate Purchasers...........................................................44 Other Charges............................................................45 TAX CONSIDERATIONS............................................................45 Tax Status of the Policy.................................................45 Diversification Requirements.............................................45 Tax Treatment of Policy Death Benefits...................................46 Modified Endowment Contracts.............................................46 Multiple Policies........................................................46 Distributions Other than Death Benefits from Modified Endowment Contracts.........................................46 Distributions Other than Death Benefits from Policies That Are Not Modified Endowment Contracts............................................................47 Investment in the Policy.................................................47 Policy Loans.............................................................47 Section 1035 Exchanges...................................................47 Tax-exempt Policy Owners.................................................47 Possible Tax Law Changes.................................................47 Changes to Comply with the Law...........................................47 Other....................................................................48 ILLUSTRATIONS.................................................................49 ADDITIONAL INFORMATION........................................................53 Directors and Officers...................................................53 Regulation...............................................................56 Legal Matters............................................................56 Legal Proceedings........................................................56 Experts..................................................................56 Registration Statement...................................................56 FINANCIAL STATEMENTS..........................................................57 APPENDIX A....................................................................58 APPENDIX B....................................................................59 - -------------------------------------------------------------------------------- Corporate Variable Universal Life 4 INDEX OF SPECIAL TERMS The following special terms are used in this prospectus. We explain each term on the page(s) listed in the body of this prospectus and in the summary, if applicable: Account value.................................................................10 Accumulation unit.............................................................27 Accumulation unit value.......................................................28 Adjustable term insurance rider...............................................21 Age.......................................................................18, 35 Base death benefit............................................................23 Beneficiary(ies)..............................................................12 Customer service center........................................................2 Death proceeds................................................................23 Free look period..............................................................34 General account...............................................................13 Guaranteed interest division..................................................18 Initial premium...............................................................18 Insured.......................................................................18 Investment date...............................................................18 Investment option.............................................................18 Loan division.................................................................10 Monthly processing date.......................................................24 Net account value.............................................................10 Net amount at risk............................................................10 Net premium...................................................................20 Owner.........................................................................35 Partial withdrawal............................................................32 Policy.....................................................................6, 13 Policy date...................................................................19 Policy loan...................................................................31 Portfolios....................................................................14 Rider.........................................................................25 Scheduled premium.............................................................19 Segment.......................................................................25 Separate account..............................................................13 Stated death benefit..........................................................19 Target death benefit..........................................................25 Target premium................................................................20 Total death benefit...........................................................25 Transaction date..............................................................28 Valuation date................................................................10 Valuation period..........................................................10, 28 Variable division.............................................................13 - -------------------------------------------------------------------------------- Corporate Variable Universal Life 5 POLICY SUMMARY THIS SUMMARY HIGHLIGHTS SOME OF THE IMPORTANT POINTS ABOUT YOUR POLICY. THE POLICY IS MORE FULLY DESCRIBED IN THE ATTACHED, COMPLETE PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY. "WE," "US," "OUR," AND THE "COMPANY" REFER TO SECURITY LIFE OF DENVER INSURANCE COMPANY. "YOU" AND "YOUR" REFER TO THE POLICY OWNER. THE OWNER IS THE INDIVIDUAL, ENTITY, PARTNERSHIP, REPRESENTATIVE OR PARTY WHO MAY EXERCISE ALL RIGHTS OVER THE POLICY AND RECEIVE THE POLICY BENEFITS DURING THE INSURED PERSON'S LIFETIME. STATE VARIATIONS ARE COVERED IN A SPECIAL POLICY FORM FOR USE IN THAT STATE. THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. YOUR ACTUAL POLICY AND RIDERS ARE THE CONTROLLING DOCUMENTS. IF YOU WOULD LIKE TO REVIEW A COPY OF THE POLICY AND RIDERS, CONTACT OUR CUSTOMER SERVICE CENTER. YOUR POLICY This policy is available only to groups of ten or more insured people with a minimum aggregate group first year premium must total at least $250,000. We generally require a minimum target death benefit of $50,000 per policy. We may reduce the minimum target death benefit if the average target death benefit at policy issuance for the group is at least $50,000. Your policy provides life insurance protection on the insured person. The policy includes the basic policy, applications, and riders or endorsements. As long as the policy remains in force, we pay a death benefit at the death of the insured person. While your policy is in force, you may access your policy value by taking loans or partial withdrawals. You may also surrender your policy for its surrender value. When the insured person reaches age 100, the policy can be surrendered or continued under the continuation of coverage option. SEE CONTINUATION OF COVERAGE, PAGE 27. We designed this policy primarily for use on a multi-life basis where the insured people share common employment or a business relationship. The policy may be owned individually or by a corporation, trust, association or similar entity. Life insurance is not a short-term investment. You should evaluate your need for life insurance coverage and this policy's long-term investment potential and risks before purchasing a policy. FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD Within limits as specified by state law, you have the right to examine your policy and return it for a refund of premiums paid or the account value if you are not satisfied for any reason. The policy is then void. SEE FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD, PAGE 34. YOUR POLICY PREMIUMS The policy is a flexible premium policy because the amount and frequency of the premium payments you make may vary within limits. You must make premium payments: o for us to issue your policy; and o sufficient to keep your policy in force. On your application, you choose how much and how often you want to pay premiums. Depending on your choices, it may not be enough to keep your policy or riders in force. The amount of premium you pay affects the length of time your policy stays in force. SEE PREMIUMS, PAGE 19. ALLOCATION OF NET PREMIUMS This policy has premium-based charges which are subtracted from your payments. We add the balance, or the net premium, to your policy based on your investment instructions. You may allocate the net premiums among one or more variable investment options and the guaranteed interest division. We apply the net premium payments to your policy after we: o receive your initial premium; o have the information we require; o approve your policy application; and o issue your policy. You need to allocate your premiums to your investment choices in percentages that are whole numbers and which total 100%. SEE ALLOCATION OF NET PREMIUMS, PAGE 20. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 6 CHARGES AND DEDUCTIONS DEDUCTIONS FROM PREMIUMS We make the following deductions from each premium payment you make: 1. Tax charges -- We currently deduct a charge of 2.5% of premiums for state and local taxes. We currently deduct a charge of 1.5% of each premium to cover our estimated cost of the federal income tax treatment of deferred acquisition costs. SEE TAX CHARGES, PAGE 41. 2. Sales charge -- We deduct a percentage of each premium to cover a portion of our expenses in selling your policy. This charge is 2% of premiums you have paid in the first policy year and 0.5% of the premiums you have paid for each policy year beyond the first. SEE DEDUCTIONS FROM PREMIUMS, PAGE 41. ANNUAL DEDUCTIONS The deferred sales charge is based on a percentage of premium and is deducted from account value at the beginning of each policy year for nine years after each year of premium payments. It applies to the first ten years of premium payments made. The deduction applies to each segment separately. SEE DEFERRED SALES CHARGE, PAGE 42, AND CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24. DEDUCTIONS FROM THE VARIABLE DIVISION We assess a mortality and expense risk charge of 0.20% per year or 0.000548% per day against the variable divisions. This charge compensates us for mortality and expense risks under the policies. SEE DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT, PAGE 42. MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE We deduct the following charges from your account value at the beginning of each policy month: 1. Monthly administrative charge -- $12 per month for the first policy year, then $6 per month for each policy year beyond that. 2. Cost of insurance charge -- Based on the net amount at risk on the life of the insured person. The amount of this charge differs for: o the segments of the base death benefit; and o the adjustable term insurance rider. SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42. POLICY TRANSACTION FEES We deduct policy transaction fees from your account value at the time of the transaction. The following are the current transaction fees. SEE POLICY TRANSACTION FEES, PAGE 44. 1. Partial withdrawal fee -- $25. 2. Transfer fee -- We allow twelve free transfers among investment options per policy year. For each transfer beyond that, a $10 fee may apply. 3. Illustrations -- You may request one free illustration per policy year. For each illustration beyond that, a $25 fee may apply. 4. Premium Allocation Change -- You may make five free premium allocation changes per policy year. For each premium allocation change beyond that, a $25 fee may apply. 5. Continuation of Coverage -- We will charge a one-time $200 administrative fee when the insured person turns age 100 to activate continued coverage. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 7 FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS The separate account purchases shares of the investment portfolios at net asset value. This price reflects investment management fees and other direct expenses that are deducted from the portfolio assets. The following table describes these investment management fees and other direct expenses of the investment portfolios. The fees and expenses are shown in both gross amounts and net amounts shown after any expenses or fees have been voluntarily absorbed by the investment portfolio advisers. INVESTMENT PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS) /1/
Fees and Investment Total Expenses Total Net Management Other Portfolio Waived or Portfolio Portfolio Fees Expenses Expenses Reimbursed Expenses AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67% NA 0.67% AIM V.I. Government Securities Fund 0.50% 0.26% 0.76% NA 0.76% THE ALGER AMERICAN FUND Alger American Growth Portfolio 0.75% 0.04% 0.79% NA 0.79% Alger American MidCap Growth Portfolio 0.80% 0.04% 0.84% NA 0.84% Alger American Small Capitalization Portfolio 0.85% 0.04% 0.89% NA 0.89% FIDELITY VARIABLE INSURANCE PRODUCTS FUND VIP Growth Portfolio 0.59% 0.09% 0.68% NA 0.68%/3/ VIP Overseas Portfolio 0.74% 0.17% 0.91% NA 0.91%/3/ FIDELITY VARIABLE INSURANCE PRODUCTS FUND II VIP II Index 500 Portfolio 0.24% 0.11% 0.35% 0.07% 0.28%/4/ INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF-Equity Income Fund 0.75% 0.42% 1.17%/2/ 0.24%/5/ 0.93% INVESCO VIF-High Yield Fund 0.60% 0.47% 1.07% NA 1.07% INVESCO VIF-Small Company Growth Fund 0.75% 11.92% 12.67%/2/ 10.80%/6/ 1.87% INVESCO VIF-Total Return Fund 0.75% 0.49% 1.24%/2/ 0.07%/7/ 1.17% INVESCO VIF-Utilities Fund 0.60% 1.24% 1.84%/2/ 0.76%/8/ 1.08% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST /11/ Limited Maturity Bond Portfolio 0.65% 0.11% 0.76% NA 0.76% Partners Portfolio 0.78% 0.06% 0.84% NA 0.84% VAN ECK WORLDWIDE INSURANCE TRUST Worldwide Bond Fund 1.00% 0.15% 1.15% NA 1.15% Worldwide Emerging Markets Fund 1.00% 0.61% 1.61%/2/ 0.11%/9/ 1.50% Worldwide Real Estate Fund 1.00% 4.32% 5.32%/2/ 4.43%/10/ 0.89%
/1/ The preceding portfolio expense information was provided to us by the portfolios, and we have not independently verified such information. These portfolio expenses are not direct charges against division assets or reduction from contract values; rather these portfolio expenses are taken into consideration in computing each underlying portfolio's net asset value, which is the share price used to calculate the unit values of the divisions. For a more complete description of the portfolios' costs and expenses, see the prospectuses for the portfolios. /2/ Certain expenses of the Fund are being voluntarily absorbed by the Funds. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 8 /3/ A Portion of the brokerage commissions that certain funds pay was used to reduce fund expenses. In addition, certain funds have entered into arrangements with their custodian whereby credits realized, as a result of uninvested cash balances were used to reduce custodian expenses. Including these reductions, the total portfolio expenses presented in the table would have been 0.66% for Growth Portfolio and 0.89% for Overseas portfolio. /4/ FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during the period. Without this reimbursement, the funds' total portfolio expenses would have been 0.35%. /5/ Certain expenses of the VIF-Equity Income Fund (formerly VIF-Industrial Income Fund) are being absorbed voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After absorption, the VIF-Equity Income Fund's "Other Expenses" and "Total Portfolio Expenses" were 0.18% and 0.93% respectively. This commitment can be changed at any time following consultation with the board of directors. /6/ Certain expenses of the VIF-Small Company Growth Fund are being absorbed voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After absorption, the VIF-Small Company Growth Fund's "Other Expenses" and "Total Portfolio Expenses" were 1.12% and 1.87% respectively. This commitment can be changed at any time following consultation with the board of directors. /7/ Certain expenses of the VIF-Total Return Fund are being absorbed voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After absorption, the VIF-Total Return Fund's "Other Expenses" and "Total Portfolio Expenses" were 0.42% and 1.17% respectively. This commitment can be changed at any time following consultation with the board of directors. /8/ Certain expenses of the VIF-Utilities Fund are being absorbed voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After absorption, the VIF-Utilities Fund's "Other Expenses" and "Total Portfolio Expenses" were 0.48% and 1.08% respectively. This commitment can be changed at any time following consultation with the board of directors. /9/ Van Eck Associates Corporation (the "Advisor") absorbed expenses exceeding 1.50% of the Fund's average daily net assets. Due to this arrangement, the actual expenses incurred were "Total Portfolio Expenses" of 1.50%. The Adviser has voluntarily agreed to limit the Worldwide Emerging Markets Fund's total annual operating expenses to 1.30% of the Fund's average daily net assets. /10/ Van Eck Associates Corporation (the "Advisor") waived its management fees and assumed certain expenses for the period January 1, 1998 to February 28, 1998. The Advisor also assumed expenses exceeding 1.00% of the Fund's average daily net assets for the period March 1,1998 to December 31, 1998. The Fund's expenses were also reduced by a fee arrangement based on cash balances left on deposit with the custodian and a directed brokerage arrangement where the fund directs certain portfolio trades to a broker that, in turn, pays a portion of the Fund's expenses. Due to this arrangement the actual expenses incurred were "Investment Management Fees" of 0.00%, "Other Expenses" of 0.89% and "Total Portfolio Expenses" of 0.89%. /11/ Neuberger Berman Advisers Management Trust (the "Trust") is divided into portfolios ("Portfolios"), each of which invests all of its net investable assets in a corresponding series ("Series") of Advisers Managers Trust. The figures reported under "Investment Management and Administration Fees" include the aggregate of the administration fees paid by the Portfolio and the management fees paid by its corresponding Series. Similarly, the "Other Expenses" includes all other expenses of the Portfolio and its corresponding Series. See "Expenses" in the Trust's Prospectus. Expenses may reflect expense reimbursement. NBMI has undertaken to reimburse certain operating expenses, including compensation of NBMI and excluding taxes, interest, extraordinary expense, brokerage commissions and transaction costs, that exceed, in the aggregate, 1% of the Portfolios' average daily net asset value. These expense reimbursement policies are subject to termination upon 60 days written notice to the Portfolios. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 9 VARIABLE DIVISION If you invest in any of the following variable investment options, depending on market conditions, you may make or lose money. These investment options are described in the prospectuses for the underlying investment portfolios. SEE OBJECTIVES OF THE INVESTMENT PORTFOLIOS, PAGE 14. AIM VARIABLE INSURANCE FUNDS AIM V.I. Capital Appreciation Fund AIM V.I. Government Securities Fund THE ALGER AMERICAN FUND Alger American Growth Portfolio Alger American MidCap Growth Portfolio Alger American Small Capitalization Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUND & VARIABLE INSURANCE PRODUCTS FUND II VIP Growth Portfolio VIP Overseas Portfolio VIP II Index 500 Portfolio INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO VIF-Equity Income Fund INVESCO VIF-High Yield Fund INVESCO VIF-Small Company Growth Fund INVESCO VIF-Total Return Fund INVESCO VIF-Utilities Fund NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Neuberger Berman AMT Limited Maturity Bond Portfolio Neuberger Berman AMT Partners Portfolio VAN ECK WORLDWIDE INSURANCE TRUST Van Eck Worldwide Bond Fund Van Eck Worldwide Emerging Markets Fund Van Eck Worldwide Real Estate Fund POLICY VALUES Your account value is the amount you have in the guaranteed interest division, plus the amount you have in each variable investment option. If you have an outstanding policy loan, your account value includes the amount in the loan division. The loan division is part of our general account specifically designed to hold money used as collateral for loans and loan interest. The general account contains all of our assets other than those held in the variable account, or our other separate accounts. Your account value reflects: o net premiums; o deductions for charges; o the investment performance of the amounts you have in the variable investment options; o interest earned on the amount you have in the guaranteed interest division; o interest earned on the amount you have in the loan division; and o partial withdrawals. We subtract charges and partial withdrawals you take from your account value. You make a partial withdrawal when you withdraw part of your net account value. Partial withdrawals may reduce the amount of base death benefit. Your net account value is equal to the account value minus the amount of your outstanding policy loans and accrued loan interest, if any. Your surrender value is the same as your net account value. YOUR ACCOUNT VALUE IN THE VARIABLE DIVISION Accumulation units are the way we measure value in the variable division. Accumulation unit value is the value of a unit of a variable investment option on the valuation date. Each variable investment option has a different accumulation unit value. SEE DETERMINING THE VALUE IN THE VARIABLE DIVISION, PAGE 27. On each valuation date, we determine the accumulation unit values. The accumulation unit value for each variable investment option reflects the investment performance of the underlying investment portfolio during the valuation period. The valuation period is the time beginning at 4:00 p.m. Eastern time on a valuation date and ending at 4:00 p.m. Eastern time on the next valuation date. Each accumulation unit value reflects asset-based charges under the policy, and the expenses of the investment portfolios. SEE HOW WE CALCULATE ACCUMULATION UNIT VALUES FOR EACH DIVISION, PAGE 28. The valuation date is each date for which the net asset value of the investment portfolio shares and unit values of the divisions are determined. Valuation dates are each day the New York Stock Exchange and the company's customer service center are open for business and a corresponding investment portfolio values its shares, or as required by law. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 10 TRANSFERS OF ACCOUNT VALUE You may make up to twelve free transfers among the variable divisions or to the guaranteed interest division per policy year. We may charge $10 for each transfer over twelve you make in a policy year. This charge does not apply to automatic rebalancing or dollar cost averaging transfers. There are restrictions on transfers from the guaranteed interest division. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29. SPECIAL POLICY FEATURES DOLLAR COST AVERAGING Dollar cost averaging is a systematic plan of transferring account values to selected variable investment options. It is intended to protect your policy's value from short-term price fluctuations. However, dollar cost averaging does not assure a profit, nor does it protect against a loss in a declining market. Dollar cost averaging is free. SEE DOLLAR COST AVERAGING, PAGE 29. AUTOMATIC REBALANCING Automatic rebalancing periodically reallocates your net account value among the investment options to maintain your specified distribution of account value among those divisions. Automatic rebalancing is free. SEE AUTOMATIC REBALANCING, PAGE 30. LOANS You may take loans against your policy's net account value. We charge an annual loan interest rate of 3.25%. We credit an annual interest rate of 3% on amounts held in the loan division as collateral for your loan. SEE POLICY LOANS, PAGE 31. PARTIAL WITHDRAWALS You may withdraw part of your net account value any time after your first policy year. You may make only one partial withdrawal per policy year. Partial withdrawals may reduce the death benefit and will reduce your account value. SEE PARTIAL WITHDRAWALS, PAGE 32. POLICY MODIFICATION, TERMINATION AND CONTINUATION FEATURES RIGHT TO EXCHANGE POLICY For 24 months after the policy date you can exchange your policy for a guaranteed policy, unless state law requires differently. The right to exchange your policy is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 26. SURRENDER You may surrender your policy at any time while the insured person is living. We calculate your surrender value on the valuation date we receive your request and policy at our customer service center. All insurance coverage ends on the date we receive your request. You must return your policy or a lost policy form to us. SEE SURRENDER, PAGE 34. LAPSE In general, insurance coverage continues as long as your policy's net account value is enough to pay the monthly deductions. SEE LAPSE, PAGE 33. REINSTATEMENT You may reinstate your policy and its riders within five years of its lapse if you still own the policy and the insured person is still living. You will need to give proof that the insured person continues to be insurable. You will also need to pay required reinstatement premiums. We will reinstate any policy loans existing when coverage ended, with accrued loan interest to the date of the lapse. SEE REINSTATEMENT, PAGE 34. POLICY MATURITY If the insured person is still living on the maturity date or the policy anniversary nearest the date when the insured person reaches age 100 and you do not choose continuation of coverage, you must surrender your policy and we will pay the net account value. Your policy then ends. SEE POLICY MATURITY, PAGE 26. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 11 CONTINUATION OF COVERAGE If the insured person is still living at age 100, you may either surrender your policy or choose the continuation of coverage feature. If the continuation of coverage feature becomes effective, we will deduct a one-time administrative fee of $200 and keep your policy in force. SEE CONTINUATION OF COVERAGE, PAGE 27. DEATH BENEFITS At the insured person's death, we pay death proceeds to the beneficiary(ies) if your policy is still in force. The beneficiary(ies) is(are) the person or people you name to receive the death proceeds. The death proceeds equal the base death benefit plus amounts payable by rider, minus the amount of any outstanding policy loan on your policy and accrued loan interest. Based on the death benefit option you have chosen, the base death benefit varies. The base death benefit does not include any adjustable term insurance rider you may have on your policy. The target death benefit includes any adjustable term insurance rider you may have on your policy plus your base death benefit. The total death benefit is at least equal to or greater than your target death benefit. The death benefit at issue may vary from the stated death benefit plus adjustable term insurance coverage for some 1035 exchanges. There is no minimum stated death benefit to issue a policy. Generally, there is a minimum target death benefit of $50,000 per policy. SEE DEATH BENEFITS, PAGE 21. You may change your stated death benefit amount while your policy is in force, subject to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24. TAX CONSIDERATIONS Under current federal income tax law, death benefits of life insurance policies generally are not subject to income tax. In order for this treatment to apply, the policy must qualify as a life insurance contract. We believe it is reasonable to conclude that the policy will qualify as a life insurance contract. SEE TAX STATUS OF THE POLICY, PAGE 45. Assuming the policy qualifies as a life insurance contract, under current federal income tax law, your account value earnings are generally not subject to income tax as long as they remain within your policy. However depending on circumstances, the following events may cause taxable consequences for you: o partial withdrawals; o surrender; or o lapse. In addition to the events listed above, if your policy is a modified endowment contract, loans against or secured by the policy may cause income taxation. A penalty tax may be imposed on a distribution from a modified endowment contract as well. SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 46. You should consult a qualified legal or tax adviser before you purchase your policy. INFORMATION ABOUT SECURITY LIFE, THE SEPARATE ACCOUNT, THE INVESTMENT OPTIONS AND THE GUARANTEED INTEREST DIVISION SECURITY LIFE OF DENVER INSURANCE COMPANY Security Life of Denver Insurance Company ("Security Life") is a stock life insurance company organized under the laws of the State of Colorado in 1929. Our headquarters are located at 1290 Broadway, Denver, Colorado 80203-5699. We are admitted to do business in the District of Columbia and all states except New York. At the close of 1998, the company and its consolidated subsidiaries had over $174.3 billion of life insurance in force. As of December 31, 1998, our total assets were over $10.0 billion, and our shareholder's equity was over $926 million. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 12 We have a complete line of life insurance products, including: o annuities; o individual life; o group life; o pension products; and o market life reinsurance. Security Life is a wholly owned indirect subsidiary of ING Groep, N.V. ("ING"). ING is one of the world's three largest diversified financial services organizations. ING is headquartered in Amsterdam, The Netherlands. It has consolidated assets over $461.8 billion on a Dutch (modified U.S.) generally accepted accounting principles basis, as of December 31, 1998. The principal underwriter and distributor for our policies is ING America Equities, Inc. ING America Equities is a stock corporation organized under the laws of the State of Colorado in 1993. It is a wholly owned subsidiary of Security Life and is a registered broker-dealer with the SEC and the NASD. ING America Equities, Inc. is located at 1290 Broadway, Denver, Colorado 80203-5699. YEAR 2000 PREPAREDNESS Security Life of Denver Insurance Company is aware of the computer problems that may exist surrounding the Year 2000. Our senior management is committed to ensuring that information processing and delivery systems will be Year 2000 compliant before December 31, 1999. Our project team implemented the Year 2000 project plan which included the analysis, remediation and testing of our in-house source code. We followed our normal project management methodology, including communication with senior management on a monthly and as-needed basis and we allocated sufficient funds to ensure Year 2000 processing capabilities. On June 28, 1999, the analysis, remediation and system testing phases of the plan were completed. We will continue to do precautionary testing throughout 1999. Security Life has developed a contingency plan with established manual procedures that we believe will allow us to continue to do business in the event our systems do not perform as expected. However, there is no assurance Security Life's efforts will be successful, or that interaction with other service providers will not impact our services. SECURITY LIFE SEPARATE ACCOUNT L1 SEPARATE ACCOUNT STRUCTURE We established Security Life Separate Account L1 (the "separate account") on November 3, 1993, under Colorado's insurance law. It is a unit investment trust, registered with the SEC under the Investment Company Act of 1940. The SEC does not supervise our management of the separate account or Security Life. The variable account is a separate investment account. We keep the separate account assets separate from our general account and other separate accounts. It is used to support our variable life insurance policies and for other purposes allowed by law and regulation. We may offer other variable life insurance contracts with different benefits and charges that invest in the variable account. We do not discuss these contracts in this prospectus. The variable account may invest in other securities not available for the policy described in this prospectus. The general account contains all of our assets other than those held in the separate account or other separate accounts. The company owns all the assets in the separate account. We credit gains to or charge losses against the separate account without regard to performance of other investment accounts. ORDER OF SEPARATE ACCOUNT LIABILITIES State law provides that we may not charge general account liabilities against separate account assets equal to its reserves and other liabilities. This means that in the event we were ever to become insolvent, the separate account assets will be used first to pay separate account policy claims. Only if assets remain in the separate account after these claims have been satisfied can these assets be used to pay other policy owners and our creditors. The separate account may have liabilities from assets credited to other variable life policies offered by the separate account. If the assets of the separate account are greater than required reserves and policy liabilities, we may transfer the excess to our general account. VARIABLE INVESTMENT OPTIONS The separate account has several divisions. Each investment option invests in shares of a matching - -------------------------------------------------------------------------------- Corporate Variable Universal Life 13 investment portfolio. Each investment portfolio has its own investment objective. This means that the investment performance of a policy depends on the performance of the investment portfolios you choose. These investment portfolios are not available directly to individual investors. They are available only as the underlying investments for variable annuity and variable life insurance contracts and certain pension accounts. INVESTMENT PORTFOLIOS Each of the investment portfolios is a separate series of an open-end management investment company. The investment company receives investment advice from a registered investment adviser who is not associated with us. The investment portfolios sell shares to separate accounts of insurance companies. These insurance companies may or may not be affiliated with us. This is known as "shared funding." Investment portfolios may sell shares as the underlying investment for both variable annuity and variable life insurance contracts. This process is known as "mixed funding." The investment portfolios may sell shares to certain qualified pension and retirement plans that qualify under Section 401 of the Internal Revenue Code ("IRC"). As a result, a material conflict of interest may arise between insurance companies, owners of different types of contracts and retirement plans, or their participants. If there is a material conflict, we will consider what should be done, including removing the investment portfolio from the separate account. There are certain risks with mixed and shared funding, and with selling shares to qualified pension and retirement plans. See the investment portfolios' prospectuses. OBJECTIVES OF THE INVESTMENT PORTFOLIOS Each investment portfolio has a different investment objective that it tries to achieve by following its own investment strategy. The objectives and policies of each investment portfolio affect its return and its risks. With this prospectus, you must receive the current prospectus for each investment portfolio. We summarize the investment objectives for each investment portfolio here. You should read each investment portfolio prospectus. Certain investment portfolios offered under this policy have investment objectives and policies similar to other funds managed by the portfolio's investment adviser. The investment results of a portfolio may be higher or lower than those of other funds managed by the same adviser. There is no assurance, and no representation is made, that the investment results of any investment portfolio will be comparable to those of another fund managed by the same investment adviser. Some investment portfolio advisers (or their affiliates) may pay us compensation for servicing, administration or other expenses. Currently, these advisers include AIM Advisors, Inc.; Fidelity Management & Research Company; Fred Alger Management, Inc.; INVESCO Funds Group, Inc.; Neuberger Berman Management Inc.; and Van Eck Associates Corporation. The amount of compensation is usually based on the aggregate assets of the investment portfolio from contracts that we issue or administer. Some advisers may pay us more than others. AIM VARIABLE INSURANCE FUNDS, INC. AIM Variable Insurance Funds, Inc. is a registered, open-end, series, management investment company. A I M Advisors, Inc., ("AIM") serves as each fund's investment adviser. AIM has acted as an investment adviser since its organization in 1976. Today, AIM, together with its subsidiaries, advises or manages over 110 investment portfolios encompassing a broad range of investment objectives. AIM V.I. Capital Appreciation Fund -- seeks growth of capital through investment in common stocks, with emphasis on medium- and small-sized growth companies. AIM V.I. Government Securities Fund -- seeks to achieve high current income consistent with reasonable concern for safety of principal by investing in debt securities issued, guaranteed or otherwise backed by the United States Government. THE ALGER AMERICAN FUND The Alger American Fund is a registered investment company organized on April 6, 1988. It is a multi-series Massachusetts business trust. The Fund's - -------------------------------------------------------------------------------- Corporate Variable Universal Life 14 investment manager is Fred Alger Management, Inc., which has provided investment advisory services since 1964. Alger American Growth Portfolio -- seeks long-term capital appreciation. The portfolio focuses on growing companies that generally have broad product lines, markets, financial resources and depth of management. Under normal circumstances, the portfolio invests primarily in equity securities of large companies. The portfolio considers a large company to have a market capitalization of $1 billion or greater. Alger American MidCap Growth Portfolio -- seeks long-term capital appreciation. The portfolio focuses on midsize companies with promising growth potential. Under normal circumstances, the portfolio invests primarily in equity securities of companies having a market capitalization within the range of companies in the S&P(R) MidCap 400 Index. Alger American Small Capitalization Portfolio --seeks long-term capital appreciation. The portfolio focuses on small, fast-growing companies that offer innovative products, services or technologies to a rapidly expanding marketplace. Under normal circumstances, the portfolio invests primarily in equity securities of small capitalization companies. A small capitalization company is one that has a market capitalization within the range of the Russell(R) 2000 Growth Index or the S&P(R) SmallCap 600 Index. FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II Fidelity Variable Insurance Products Fund ("VIP" established November 13, 1981) and Variable Insurance Products Fund II ("VIP II" established March 21, 1988) are open-end, diversified, management investment companies. These funds are organized as Massachusetts business trusts. Fidelity Management & Research Company ("FMR") manages and provides investment and other services to the funds named here. However, Bankers Trust Company also provides sub-advisory services for VIP II Index 500 Portfolio. FMR is the management arm of Fidelity Investments(R), which was established in 1946, and is one of America's largest mutual fund managers. VIP Growth Portfolio -- seeks capital appreciation. FMR's principal investment strategies include: o Investing primarily in common stocks. o Investing in companies that it believes have above-average growth potential (stocks of these companies are often called "growth" stocks). o Investing in domestic and foreign issuers. o Using fundamental analysis of each issuer's financial condition and industry position and market and economic conditions to select investments. VIP Overseas Portfolio -- seeks long-term growth of capital. FMR's principal investment strategies include: o Investing at least 65% of total assets in foreign securities. o Investing primarily in common stocks. o Allocating investments across countries and regions considering the size of the market in each country and region relative to the size of the international market as a whole. o Using fundamental analysis of each issuer's financial condition and industry position and market and economic conditions to select investments. VIP II Index 500 Portfolio -- seeks investment results that correspond to the total return of common stocks publicly traded in the United States as represented by the S&P(R) 500. Bankers Trust Company (BT)'s principal investment strategies include: o Investing at least 80% of assets in common stocks included in the S&P(R) 500. o Lending securities to earn income for the fund. INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO Variable Investment Funds, Inc. is a registered, open-end management investment company. It was organized as a Maryland corporation on August 19, 1993. It is currently made - -------------------------------------------------------------------------------- Corporate Variable Universal Life 15 up of ten diversified investment portfolios. Five of these investment portfolios are described here. INVESCO Funds Group, Inc. is the Funds' investment adviser. As the adviser, it is mostly responsible for providing the portfolios with investment management, various administrative services, and supervising the Fund's daily business affairs. INVESCO Capital Management, Inc. sub-advises the Total Return Fund. "VIF" refers to INVESCO Variable Investment Fund. INVESCO Distributors, Inc. ("IDI"), provides distribution services for the INVESCO Variable Investment Funds, Inc. INVESCO VIF-Equity Income Fund (Formerly, INVESCO VIF-Industrial Income Portfolio) -- seeks high current income, with growth of capital as a secondary objective. The fund normally invests at least 65% of its assets in dividend-paying common and preferred stocks, although in recent years that percentage has been somewhat higher. Stocks held by the fund generally are expected to produce a relatively high level of income and a consistent, stable return. Although it focuses on the stocks of larger companies with a strong record of paying dividends, the fund also may invest in companies that have not paid regular dividends. The fund's equity investments are limited to stocks that can be traded easily in the United States; it may, however, invest in foreign securities in the form of American Depository Receipts (ADRs). The rest of the fund's assets are invested in debt securities, generally corporate bonds that are rated investment grade or better. The fund also may invest up to 15% of its assets in lower-grade debt securities commonly known as "junk bonds", which generally offer higher interest rates, but are riskier investments than investment grade securities. INVESCO VIF-High Yield Fund -- seeks to provide a high level of current income. It invests substantially all of its assets in lower-rated debt securities, commonly called "junk bonds," and preferred stock, including securities issued by foreign companies. Although these securities carry with them higher risks, they generally provide higher yields-- and therefore higher income--than higher-rated debt securities. INVESCO VIF-Small Company Growth Fund --seeks investment growth over the long term. The fund normally invests at least 80% of its assets in equity securities of companies with market capitalizations of $1 billion or less. INVESCO uses a bottom-up investment approach to the fund's investment portfolio, focusing on companies that are in the developing stages of their life cycles. Using this approach, INVESCO tries to identify companies that it believes are undervalued in the marketplace, have earnings which may be expected to grow faster than the U.S. economy in general, and/or offer the potential for accelerated earnings growth due to rapid growth of sales, new products, management changes, or structural changes in the economy. The prices of securities issued by these small companies tend to rise and fall more rapidly than those of more established companies. The remainder of the fund's assets can be invested in a wide range of securities that may or may not be issued by small companies. In addition to equity securities, the fund can invest in foreign securities and debt securities, including so-called "junk bonds." INVESCO VIF-Total Return Fund -- seeks to provide high total return through both growth and current income. It normally invests at least 30% of its assets in common stocks of companies with a strong history of paying regular dividends and 30% of its assets in debt securities. Debt securities include obligations of the United States Government and government agencies. The remaining 40% of the fund is allocated among these and other investments at INVESCO's discretion, based upon current business, economic and market conditions. INVESCO VIF-Utilities Fund -- seeks capital appreciation and income. The fund normally invests at least 80% of its assets in companies doing business in the utilities economic sector. The remainder of the fund's assets are not required to be invested in the utilities economic sector. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 16 The fund is aggressively managed. Although the fund can invest in debt securities, it primarily invests in equity securities that INVESCO believes will rise in price faster than other investments, as well as options and other investments whose value is based upon the values of equity securities. NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Neuberger Berman Advisers Management Trust (the "Trust,") is a registered, open-end management investment company. It was organized as a Delaware business trust on May 23, 1994. The Trust is made up of separate portfolios ("Portfolios"), each of which invests all of its net investable assets in a matching series ("Series") of Advisers Managers Trust ("Managers Trust"). Managers Trust is a diversified, open-end management investment company organized as a New York common law trust on May 24, 1994. This master feeder structure is different from that of many other investment companies which directly purchase and manage their own securities portfolios. Neuberger Berman Management Incorporated acts as investment manager to Managers Trust. Neuberger Berman, LLC is the sub-adviser. The investments for the Portfolio are managed by the same portfolio manager(s) who manage one or more other mutual funds that have similar names, investment objectives and investment styles as the Portfolio. You should be aware that the Portfolio is likely to differ from the other mutual funds in size, cash flow pattern and tax matters. Accordingly, the holdings and performance of the Portfolio can be expected to vary from those of the other mutual funds. Shares of the separate Portfolios of Neuberger Berman Advisers Management Trust are sold only through the currently effective prospectus and are not available to the general public. Shares of the AMT Portfolios may be purchased only by life insurance companies to be used with their separate accounts which fund variable annuity and variable life insurance policies. Neuberger Berman Limited Maturity Bond Portfolio -- seeks the highest available current income consistent with liquidity and low risk to principal; total return is the secondary goal. The Limited Maturity Bond Portfolio invests mainly in investment-grade bonds and other debt securities from U.S. Government and corporate issuers. These may include mortgage-and asset-backed securities. The portfolio may invest up to 10% of its net assets, measured at the time of investment, in below investment grade fixed income securities, or comparable unrated securities. The Limited Maturity Bond Portfolio maintains an average portfolio duration of four years or less. However, the series may invest in securities of any duration. Neuberger Berman Partners Portfolio -- seeks growth of capital. The Portfolio invests mainly in common stocks of mid-to large-capitalization companies. Its investment program seeks securities believed to be undervalued based on strong fundamentals, including low price to earnings ratio, consistent cash flow, and the company's track record through all points of the market cycle. VAN ECK WORLDWIDE INSURANCE TRUST Van Eck Worldwide Insurance Trust is an open-end management investment company organized as a business trust under the laws of the Commonwealth of Massachusetts on January 7, 1987. On April 12, 1995, Van Eck Investment Trust changed its name to Van Eck Worldwide Insurance Trust. Van Eck Associates Corporation serves as investment adviser and manager to the funds. Van Eck Worldwide Bond Fund -- seeks high total return--income plus capital appreciation--by investing globally, primarily in a variety of debt securities. Van Eck Worldwide Emerging Markets Fund --seeks long term capital appreciation by investing in equity securities in emerging markets around the world. Van Eck Worldwide Real Estate Fund -- seeks high total return by investing in equity securities of companies that own significant real estate or principally do business in real estate. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 17 THE GUARANTEED INTEREST DIVISION You may allocate all or a part of the net premiums and transfers of your net account value into the guaranteed interest division. The guaranteed interest division is part of our general account which guarantees principal. It pays interest at a fixed rate that we declare. The general account supports our non-variable insurance and annuity obligations. We have not registered interests in the guaranteed interest division under the Securities Act of 1933. Also, we have not registered the guaranteed interest division or the general account as an investment company under the Investment Company Act of 1940 (because of exemptive and exclusionary provisions). This means that the general account, the guaranteed interest division and its interests are generally not subject to regulation under these Acts. The SEC staff has not reviewed the disclosures included in this prospectus relating to the general account and the guaranteed interest division. These disclosures, however, may be subject to certain requirements of the federal securities law regarding accuracy and completeness of statements made in this prospectus. The amount you have in the guaranteed interest division is the sum of net premiums you allocate to that division, plus transfers you made to the guaranteed interest division, plus interest earned. Amounts you transfer out of or withdraw from the guaranteed interest division reduce this amount. It is also reduced by deductions for charges from your account value allocated to the guaranteed interest division. We declare the interest rate that applies to all amounts in the guaranteed interest division. These interest rates are never less than the minimum guaranteed interest rate of 3% and will be in effect for periods of at least twelve months. Interest compounds daily at an effective annual rate that equals the declared rate. We credit interest to the guaranteed interest division on a daily basis. We pay interest regardless of the actual investment performance of our account. We bear all of the investment risk for the guaranteed interest division. DETAILED INFORMATION ABOUT THE CORPORATE VARIABLE UNIVERSAL LIFE POLICY This prospectus describes our standard Corporate variable universal life insurance policy. There may be differences in the policy because of state requirements where we issue your policy. We will describe any such differences in your policy. The illustrations beginning on page 51 are to show how the policies work. APPLYING FOR A POLICY You purchase this variable universal life policy by submitting an application to us. On the policy date, the insured person must be no less than 15 years of age and no older than age 85. The insured person is the person on whose life we issue a policy and upon whose death we pay death proceeds. Age is the insured person's age on the birthday nearest the policy date plus the number of completed policy years since the policy date. We may back-date the policy up to six months to allow the insured person to give proof of a younger age for the purposes of your policy. POLICY ISSUANCE Before we issue a policy or apply your net premium to your policy, we require satisfactory evidence of insurability of the insured person and payment of your initial premium. Investment options include the variable and the guaranteed interest divisions, but not the loan division. This evidence may include completion of all underwriting and issue requirements. The investment date is the first date we apply your net premium payments to your policy. Your initial premium is the premium we must receive before coverage can begin. The initial premium is the first premium we receive and apply to your policy. It must be equal to at least the sum of the scheduled premiums which are due from your policy date through your investment date. This policy is available only to groups of ten or more insured people with a minimum total group first year premium of at least $250,000. We generally require - -------------------------------------------------------------------------------- Corporate Variable Universal Life 18 a minimum target death benefit of $50,000 per policy. We may reduce the minimum target death benefit if the average target death benefit at policy issuance for the group or sponsored arrangement is at least $50,000. Our underwriting and reinsurance procedures in effect at the time you apply limit the maximum stated and target death benefit. The policy date as shown on your policy schedule determines: o monthly processing dates; o policy months; o policy years; and o policy anniversaries. It is not affected by the date you receive the policy. The policy date may be different from the date we receive your first premium payment. If the policy date is earlier, we charge monthly deductions from the policy date. The policy date is: o the date you designate on your application, subject to our approval; or o the back-date of the policy to save age, if we permit this for your policy. If there is no designated date or back-date, the policy date is the date all underwriting and administrative requirements have been met if we have received your initial premium before we issue your policy. DEFINITION OF LIFE INSURANCE The federal income tax definition of life insurance is the cash value accumulation test. SEE TAX STATUS OF THE POLICY, PAGE 45. TEMPORARY INSURANCE If you apply and qualify, we may issue temporary insurance in an amount equal to the face amount of insurance for which you applied. The maximum amount of temporary insurance for binding limited life insurance coverage is $3 million, which includes any in force coverage with us. This temporary insurance is in force as long as you meet all requirements. Coverage begins when: 1. you have completed and signed our binding limited life insurance coverage form; 2. we receive and accept a premium payment of at least your scheduled premium (selected on your application); and 3. part I of the application is completed. Binding limited life insurance coverage ends on the earliest of: o the date we return your premiums; o five days after we mail notice of termination to the address on your application; o the date your policy coverage starts; o the date we refuse to issue you a policy based on your application; or o 90 days after you sign our binding limited life insurance coverage form. There is no death benefit under the temporary insurance agreement if: o there is a material misrepresentation in your answers on the binding limited life insurance coverage form; o there is a material misrepresentation in statements on your application; o the person or persons intended to be the insured people die by suicide or self- inflicted injury; or o the bank does not honor your premium check. PREMIUMS You may choose the amount and frequency of premium payments, within limits. SCHEDULED PREMIUMS Your premiums are flexible. You may select your scheduled (planned) premium (within our limits) when you apply for your policy. The scheduled premium, shown in your policy and schedule, is the amount you choose to pay over a stated time period. THIS AMOUNT MAY OR MAY NOT BE ENOUGH TO KEEP YOUR POLICY IN FORCE. You may receive premium reminder notices for the scheduled premium on a monthly, quarterly, semiannual, or annual basis. You are not required to pay the scheduled premium. Alternatively, you may choose to pay your premium by electronic funds transfer each month. This option is not available for your initial premium. The financial institution that makes your electronic funds transfer may charge for this service. You can change the amount of your scheduled premium within our minimum and maximum limits at - -------------------------------------------------------------------------------- Corporate Variable Universal Life 19 any time. If you fail to pay your scheduled premium or if you change the amount of your scheduled premium, your policy performance will be affected. UNSCHEDULED PREMIUM PAYMENTS Generally speaking, you may make unscheduled premium payments at any time, however: 1. We may limit the amount of your unscheduled premium payments that would result in an increase in the base death benefit amount required by the federal income tax law definition of life insurance. We may require satisfactory evidence that the insured person is insurable at the time that you make the unscheduled premium payment if the death benefit is increased due to your unscheduled premium payments. 2. We may require proof that the insured person is insurable if your unscheduled premium payment will cause the net amount at risk to increase; and 3. We will return premium payments which are greater than the "seven-pay" limit for your policy if your payment would cause your policy to become a modified endowment contract, unless you send us notice acknowledging the new modified endowment contract status for your policy. SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 46 AND CHANGES TO COMPLY WITH THE LAW, PAGE 47. If you have an outstanding policy loan and you make an unscheduled payment, we will consider this payment a loan repayment, unless you tell us otherwise. If your payment is a loan repayment, we do not take out tax or sales charges. Unscheduled premiums for more than $10,000 require proof of insurability of the insured person. TARGET PREMIUM Target premiums are not based on the scheduled premium. Target premiums are actuarially determined based on the age, sex and premium class of the insured person. The target premium for your policy and any segments added since the policy date are listed in the schedule we will provide to you. SEE PREMIUMS, PAGE 19. ALLOCATION OF NET PREMIUMS The net premium is the balance remaining after we take tax and sales charges (excluding the deferred sales charge) from your premium payment. We add the net premium to your account value according to your instructions. We apply the initial net premium to your policy after: a) we receive the amount of premium required for your insurance coverage to begin; b) all issue requirements have been met and received by our customer service center; c) we approve your policy application; and d) your policy is issued. All amounts you designated for the guaranteed interest division will be allocated to that division. If your state requires return of your premium during the free look period we invest amounts you have designated for the variable investment option into the Money Market Portfolio until 15 days after we issue your policy (deemed delivery time, plus a typical free look period which varies by state). If your state provides for return of account value during the free look period we invest amounts you designated for the variable investment options directly into your selected investment portfolios. SEE FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD, PAGE 34. We allocate premium payments received after we apply your initial net premium payment to your policy on the valuation date of receipt. We always use your most recent premium allocation instructions. Your instructions must specify percentages that are whole numbers totaling 100%. You may make five free premium allocation changes per year. After the five free premium allocation changes, we may charge you $25 for each additional allocation change per policy year. The $25 fee is withdrawn from each investment division pro rata to the amount in each division. PREMIUM PAYMENTS AFFECT YOUR COVERAGE Your coverage lasts only as long as your net account value is enough to pay the monthly charges and your account value is more than your outstanding policy loan plus accrued loan interest. If these conditions are no longer met, your policy will enter the 61-day grace period and you must make a premium payment - -------------------------------------------------------------------------------- Corporate Variable Universal Life 20 to avoid lapse. SEE LAPSE, PAGE 33, AND GRACE PERIOD, PAGE 33. MODIFIED ENDOWMENT CONTRACTS There are special federal income tax rules for distributions from certain life insurance policies known as "modified endowment contracts." These rules apply to distributions such as policy loans, surrenders, and partial withdrawals. Whether or not these rules apply depends upon whether or not the premiums you paid are greater than the "seven-pay" limit. SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 46. If we find that your scheduled premium causes your policy to be a modified endowment contract on your policy date, we will require you to acknowledge that you know the policy is a modified endowment contract. We will issue your policy based on the scheduled premium you selected. If you do not want your policy to be issued as a modified endowment contract, you may reduce your scheduled premium to a level which does not cause your policy to be a modified endowment contract. We will then issue your policy based on the revised scheduled premium. DEATH BENEFITS You can decide the amount of insurance you need, now and in the future. You can combine the long-term advantages of permanent life insurance base coverage with the flexibility and short-term advantages of term life insurance. Both permanent and term life insurance are available under your one Corporate policy. When we issue your policy, we base the initial insurance coverage on the instructions in your application. The initial death benefit is the stated death benefit amount. You can add an adjustable term insurance rider for additional insurance coverage. Death benefits are valued as of the date of death of the insured person. The stated death benefit is the permanent element of your policy. The adjustable term insurance rider is the term insurance element of your policy. The adjustable term insurance rider acts as a bridge. It provides term insurance coverage which automatically adjusts to fill the gap between your total death benefit and your base death benefit depending on which death benefit option you choose. Generally, your target death benefit may be no less than $50,000 to issue your policy. It may be to your economic advantage to include part of your insurance coverage under the adjustable term insurance rider. Both the cost of insurance under the adjustable term insurance rider and the cost of insurance for the base death benefit are deducted monthly from your account value and generally increase with the age of the insured person. Use of the adjustable term insurance rider may reduce sales compensation. SEE ADJUSTABLE TERM INSURANCE RIDER, PAGE 25. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 21 DEATH BENEFIT SUMMARY THIS CHART ASSUMES NO DEATH BENEFIT OPTION CHANGES, INCREASES OR DECREASES IN STATED OR TARGET DEATH BENEFIT AND THAT PARTIAL WITHDRAWALS ARE LESS THAN THE PREMIUM PAID.
OPTION 1 OPTION 2 OPTION 3 ============== =================================== =================================== ======================================= STATED The amount of policy death The amount of policy death The amount of policy death DEATH benefit at issue, not including benefit at issue, not including benefit at issue, not including BENEFIT rider coverage. This amount rider coverage. This amount rider coverage. This amount stays level throughout the life of stays level throughout the life of stays level throughout the life of the contract. the contract. the contract. BASE DEATH The greater of the stated death The greater of the stated death The greater of the stated death BENEFIT benefit or the account value benefit plus the account value, benefit plus the sum of all multiplied by the death benefit or the account value multiplied premiums you have paid minus corridor factor. by the death benefit corridor partial withdrawals you have factor. taken, or the account value multiplied by the death benefit corridor factor. TARGET Stated death benefit plus Stated death benefit plus Stated death benefit plus DEATH adjustable term insurance rider adjustable term insurance rider adjustable term insurance rider BENEFIT benefit. This amount remains benefit. This amount remains benefit. This amount remains level throughout the life of the level throughout the life of the level throughout the life of the policy. policy. policy. TOTAL DEATH This is the total death proceeds. This is the total death proceeds. This is the total death proceeds. BENEFIT It is the greater of the target It is the greater of the target It is the greater of the target death benefit or the base death death benefit plus the account death benefit plus the sum of all benefit. value, or the base death benefit. premiums you have paid minus partial withdrawals you have taken, or the base death benefit. ADJUSTABLE The adjustable term insurance The adjustable term insurance The adjustable term insurance TERM rider benefit is the total death rider benefit is the total death rider benefit is the total death INSURANCE benefit minus base death benefit, benefit minus the base death benefit minus the base death RIDER but it will not be less than zero. benefit, but it will not be less benefit, but it will not be less BENEFIT If the account value multiplied than zero. If the account value than zero. If the account value by the death benefit corridor multiplied by the death benefit multiplied by the death benefit factor is greater than the stated corridor factor is greater than the corridor factor is greater than the death benefit, the adjustable stated death benefit plus the stated death benefit plus the sum term insurance benefit will be account value, the adjustable of all premiums you have paid decreased. It will be decreased term insurance rider benefit will minus partial withdrawals you so that the sum of the base death be decreased. It will be have taken, the adjustable term benefit and the adjustable term decreased so that the sum of the insurance rider benefit will be insurance rider benefit is not base death benefit and the decreased. It will be decreased greater than the target death adjustable term insurance rider so that the sum of the base death benefit. If the base death benefit benefit is not greater than the benefit and the adjustable term becomes greater than the target target death benefit plus the insurance rider benefit is not death benefit, then the adjustable account value. If the base death greater than the target death term insurance rider benefit is benefit becomes greater than the benefit plus the sum of all zero. target death benefit plus the premiums you have paid minus account value, then the partial withdrawals you have adjustable term insurance rider taken. If the base death benefit benefit is zero. becomes greater than the target death benefit plus the sum of all premiums you have paid minus partial withdrawals you have taken, then the adjustable term insurance rider benefit is zero.
- -------------------------------------------------------------------------------- Corporate Variable Universal Life 22 BASE DEATH BENEFIT Your base death benefit can be different from your stated death benefit as a result of: o your choice of death benefit option; o a change in your death benefit option; o increases to satisfy the federal income tax law definition of life insurance; o partial withdrawals; o increases or decreases in the stated death benefit; or o a transaction which causes the base death benefit to change. As long as your policy is in force, we will pay the death proceeds to your beneficiary when the insured person dies. The beneficiary(ies) is(are) the person (people) you name to receive the death proceeds from your policy. The death proceeds are: o your base death benefit; plus o any rider benefits; minus o your outstanding policy loan with accrued loan interest; minus o outstanding policy charges due before the insured person's date of death. There could be outstanding policy charges if the insured dies while your policy is in the grace period. DEATH BENEFIT OPTIONS You have a choice of three death benefit options: option 1, option 2 or option 3 (described below). You may choose death benefit option 3 only prior to the issue of your policy. Your choice may result in your having a base death benefit which is greater than your stated death benefit. You may change your death benefit option after the policy date and before the continuation of coverage feature begins. SEE CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24 AND SEE CONTINUATION OF COVERAGE, PAGE 27. Under death benefit option 1, your base death benefit is the greater of: 1. your stated death benefit on the date of the insured person's death; or 2. your account value on the date of the insured person's death multiplied by the appropriate factor from the definition of life insurance factors shown in Appendix A. Under death benefit option 2, your base death benefit is the greater of: 1. your stated death benefit plus your account value on the date of the insured person's death; or 2. your account value on the date of the insured person's death multiplied by the appropriate factor from the definition of life insurance factors shown in Appendix A. Under option 1 positive investment performance is generally reflected in a reduced net amount at risk. This lowers your policy's total cost of insurance charges. Option 1 offers insurance coverage that is a set amount with potentially lower cost of insurance charges over time. Under option 2, investment performance is reflected in your insurance coverage. Under death benefit option 3, the base death benefit is the greater of: 1. your stated death benefit plus the sum of all premiums you have paid minus partial withdrawals you have taken under your policy; or 2. your account value on the date of the insured person's death multiplied by the appropriate factor from the definition of life insurance factors shown in Appendix A. Therefore, the base death benefit generally will increase as you pay premiums, and decrease as you take partial withdrawals. In no event will your base death benefit be less than your stated death benefit. Federal income tax law requires that your death benefit be at least as much as your account value multiplied by a factor defined by law. This factor is based on: o the insured person's age; and o the insured person's gender. We will adjust your policy to continue to qualify as life insurance under the federal income tax laws in existence at the time the policy was issued. If the insured person is 100 years of age or older and the continuation of coverage feature is in effect, only death benefit option 1 is available. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 23 CHANGES IN DEATH BENEFIT OPTIONS You may request a change in your death benefit option after the policy date and before the continuation of coverage feature. A death benefit option change applies to your entire stated or base death benefit. You may change from death benefit option 1 to option 2, or from option 2 to option 1. You may also change from death benefit option 3 to option 1. You may not change from death benefit option 3 to option 2. You may choose death benefit option 3 only prior to the issue of your policy. Your death benefit option change is effective on your next monthly processing date after we accept and approve your requested change, so long as at least five days remain before your monthly processing date. If fewer than five days remain before your monthly processing date, your death benefit option change is effective on your next monthly processing date. After we approve your request, we send a new policy schedule page to you. You should attach it to your policy. We may ask you to return your policy to our customer service center so that we can note the change in your schedule. For you to change from death benefit option 1 to option 2, you must provide to us proof that the insured person is insurable under our normal rules of underwriting for your policy class. We may not allow a change to your death benefit option if it reduces the target death benefit below the minimum we require to issue your policy. On the effective date of your option change, your stated death benefit is changed as follows: Change Change Stated Death Benefit From To Following Change: ---- -- ----------------- Option 1 Option 2 your stated death benefit before the change minus your account value as of the effective date of the change. Option 2 Option 1 your stated death benefit before the change plus your account value as of the effective date of the change. Option 3 Option 1 your stated death benefit before the change plus (a) the sum of the premiums you have paid, minus (b) partial withdrawals you have taken as of the effective date of the change. We increase or decrease your stated death benefit to keep the net amount at risk the same on the date of your death benefit option change. Additionally, there is no change to the amount of term insurance if you have an adjustable term insurance rider. SEE COST OF INSURANCE CHARGE, PAGE 43. If you change your death benefit option, we adjust the stated death benefit for each of your segments by allocating your account value to each benefit segment. For example, if you change from death benefit option 1 to option 2, your stated death benefit is decreased by the amount of your account value allocation to that segment. If you change from death benefit option 2 to option 1, your stated death benefit is increased by the amount allocated to that segment. We do not adjust the target premium when you change your death benefit option. CHANGES IN DEATH BENEFIT AMOUNTS You may increase the target or stated death benefit while your policy is in force and before the policy anniversary when the insured person turns age 86. You may request a decrease in the stated death benefit only after your first policy anniversary. Contact our customer service center to request an increase or decrease in death benefit. The request is effective as of the next monthly processing date after we receive your request and approve it. On the monthly processing date, we deduct the monthly deductions from your account value. Any requested change in your coverage must be for at least $1,000. After we approve your request, we will send you a new schedule page. Keep the new schedule with your policy. We may ask you to send your policy to us so that we can note the change in your schedule. We may not approve a requested change if it will disqualify your policy as life insurance under federal income tax law. If we disapprove a change for any reason, we provide you with a notice of our decision. SEE TAX CONSIDERATIONS, PAGE 45. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 24 If you decrease your death benefit, you may not decrease your target death benefit below the minimum we require to issue your policy. There may be tax consequences as a result of a decrease in your death benefit. SEE TAX STATUS OF THE POLICY, PAGE 45 AND MODIFIED ENDOWMENT CONTRACTS, PAGE 46. Requested reductions in the death benefit will first be applied to decrease the target death benefit. We decrease your stated death benefit only after your adjustable term insurance rider coverage is reduced to zero. If you have more than one segment, we divide subsequent decreases in stated death benefit among your benefit segments pro rata unless state law requires differently. You must provide satisfactory evidence that the insured person is still insurable in order to increase your death benefit. Unless you tell us differently, we assume any request you make for an increase in your target death benefit is also a request for an increase to the stated death benefit. Thus, the amount of your adjustable term insurance rider will not change. You may change the target death benefit once in a policy year. The initial death benefit segment, or first segment, is the stated death benefit on the effective date of the policy. An increase in the stated death benefit (other than one caused by an option change) will cause a new segment to be created. The segment year begins on the segment effective date and ends one year later. The following may apply to each new segment: o a new sales charge; o a new deferred sales charge; o new cost of insurance charges, guaranteed and current; o a new incontestability period; o a new suicide exclusion period; and o a new target premium. A requested increase in your stated death benefit creates a new segment. Once we create a new segment, it is permanent unless state law requires differently. If an option change causes the stated death benefit to increase, no new segment is created. Instead, the size of each existing segment(s) is(are) changed. If it causes the stated death benefit to decrease, each segment is decreased. To determine the applicable sales charge and deferred sales charge, premiums you pay after an increase are applied to your policy segments in the same proportion as the target premiums for each segment bears to the sum of the target premium for all segments. For each coverage segment, your schedule shows your target premiums. We allocate the net amount at risk among segments in the same proportion that each segment bears to the total stated death benefit. ADJUSTABLE TERM INSURANCE RIDER You may increase your death proceeds by adding an adjustable term insurance rider on the insured person's life. A rider changes benefits under your policy. As the name suggests, the adjustable term insurance rider adjusts over time. You specify a target death benefit when you apply for this rider. The target death benefit can be level or can be scheduled to change at the beginning of any policy year. The death benefit for the adjustable term insurance rider is the difference between your total death benefit and your base death benefit. The death benefit automatically adjusts daily as your base death benefit changes. Total death benefit depends on which death benefit option is in effect: OPTION 1: If option 1 is in effect, the total death benefit is the greater of: a. the target death benefit; or b. the account value multiplied by the appropriate factor from the death benefit corridor factors in the policy. OPTION 2: If option 2 is in effect, the total death benefit is the greater of: a. the target death benefit plus the account value; or b. the account value multiplied by the appropriate factor from the death benefit corridor factors in the policy. OPTION 3: If option 3 is in effect, the total death benefit is the greater of: a. the target death benefit plus the sum of the premiums you - -------------------------------------------------------------------------------- Corporate Variable Universal Life 25 have paid minus partial withdrawals you have taken; or b. the account value multiplied by the appropriate factor from the death benefit corridor factors in the policy. For example, under option 1, assume your base death benefit increases as a result of an increase in your account value. The adjustable term insurance rider adjusts to provide death proceeds equal to your total death benefit in each year: Base Death Total Death Adjustable Term Benefit Benefit Insurance Rider Amount ------- ------- ---------------------- $201,500 $250,000 $48,500 202,500 250,000 47,500 202,250 250,000 47,750 It is possible that the amount of your adjustable term insurance may be zero if your base death benefit increases enough. Using the same example, if the base death benefit under your policy grew to $250,000 or more, the adjustable term insurance would be zero. The adjustable term insurance can never be less than zero. Even when the adjustable term insurance is reduced to zero, your rider remains in effect until you remove it from your policy. Therefore, if later the base death benefit is reduced below your target death benefit, the adjustable term insurance rider amount reappears to maintain the total death benefit. You may change the target death benefit schedule after it is issued, based on our rules. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24. We may deny any future, scheduled increases to your target death benefit if you cancel a scheduled change, or if you ask for an unscheduled decrease in your target death benefit. Partial withdrawals, changes from death benefit option 1 to option 2 and base decreases may reduce the amount of your target death benefit. SEE PARTIAL WITHDRAWALS, PAGE 32, AND CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24. The only charge for this coverage is the cost of insurance charge. Instead, we deduct a monthly cost of insurance charge from your account value. The cost of insurance for this rider is calculated as the monthly cost of insurance rate for the rider coverage multiplied by the adjustable term death benefit in effect that month. The cost of insurance rates will be determined by us from time to time. They will be based on the issue age, gender, and premium class of the person insured, as well as the length of time since your policy date. The monthly guaranteed maximum cost of insurance rates for this rider will be in the policy. SEE COST OF INSURANCE CHARGE, PAGE 43. There are no deferred sales charges for this coverage. The total charge that you pay may be less if you have coverage under an adjustable term insurance rider instead of the base death benefit. If the target death benefit is increased by you after the rider is issued, we use the same cost of insurance rate schedule for the entire coverage for this rider. These rates are based on the original premium class even though satisfactory new evidence of insurability is given to us for the increased schedule. Not all policy features apply to the adjustable term insurance rider. Under this rider, there is no surrender value and policy loans are not available. The adjustable term insurance rider does not contribute to the policy account value nor to investment performance under your policy. The adjustable term insurance rider provides benefits only at the insured person's death. SPECIAL FEATURES RIGHT TO EXCHANGE POLICY During the first 24 months after your policy date, you have the right to exchange your policy for a guaranteed policy, unless state law requires differently. To do this, we transfer the amount you have in the variable division to the guaranteed interest division. We allocate all of your future net premiums to the guaranteed interest division. We do not allow any future payments or transfers to the variable division after you exercise this right. We will not charge you for this exchange. SEE THE GUARANTEED INTEREST DIVISION, PAGE 18. POLICY MATURITY If the insured person reaches age 100 and you do not want the continuation of coverage feature, you may surrender the policy for the net account value. Your policy then ends. Some part of this payment may be taxable. You should consult your tax adviser. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 26 CONTINUATION OF COVERAGE The continuation of coverage feature allows your insurance coverage to continue beyond when the insured person reaches age 100. If you allow the continuation of coverage feature to become effective, we: o transfer your net account value (excluding the amount in the loan division) into the guaranteed interest division; o charge a one-time $200 administrative fee to your policy to cover future expenses; o terminate the adjustable term insurance rider and the target death benefit becomes the stated death benefit; o convert death benefit option 2 or 3 to death benefit option 1, if applicable; and o terminate investment features. The adjustable term insurance rider then terminates. If you have no adjustable term insurance rider coverage, your stated death benefit is unchanged. You may make no further premium payments. Your insurance coverage continues until the insured person's death, unless the policy lapses or is surrendered. However, we deduct no further cost of insurance charges and your monthly deductions cease. SEE CONTINUATION OF COVERAGE ADMINISTRATIVE FEE, PAGE 44. Your net account value may not be transferred into the variable division after the insured person reaches age 100. During the continuation of coverage period, you may take policy loans or partial withdrawals from your policy. If you have outstanding policy loans, interest continues to accrue. If you fail to make sufficient loan or loan interest payments, it is possible that the loan plus accrued interest may become greater than your account value and cause your policy to lapse. To avoid this, you may repay loans and make loan interest payments during the continuation of coverage period. However, we will not accept additional premium payments. If you wish to stop coverage after the continuation of coverage feature begins, you may surrender your policy and receive the net account value. All other consequences of surrender apply. SEE SURRENDER, PAGE 34. The continuation of coverage feature may not be available in all states. If a state has approved this feature, it is automatic and you do not need to take any action to activate it. The tax consequences of coverage continuing beyond when the insured person reaches age 100 are uncertain. You should consult a tax adviser as to those consequences. POLICY VALUES ACCOUNT VALUE Your account value is the total amount you have in the guaranteed interest division, the variable division, and the loan division. Your account value reflects: o net premiums; o deductions for charges; o partial withdrawals; o investment performance of the variable divisions; o interest earned on the amount you have in the guaranteed interest division; and o interest earned on the amount you have in the loan division. NET ACCOUNT VALUE Your policy's net account value is your account value minus the amount of your outstanding policy loans and accrued loan interest, if any. Your surrender value is the same as your net account value. DETERMINING THE VALUE IN THE VARIABLE DIVISION The amounts included in the variable division are measured by accumulation units and accumulation unit values. The value of a variable investment option is the accumulation unit value for that option times the number of accumulation units you own in that option. Each variable investment option has a different accumulation unit value. You purchase accumulation units whenever you allocate premium or make transfers to a variable investment option. This includes transfers from the loan division. The valuation date is each date for which the net asset value of the investment portfolio shares and - -------------------------------------------------------------------------------- Corporate Variable Universal Life 27 unit values of the variable investment options are determined. Valuation dates are each day the New York Stock Exchange and the company's customer service center are open for business and a corresponding investment portfolio values its shares, or as required by law. We redeem accumulation units: o when you take a partial withdrawal; o when amounts are transferred from a variable investment option (including transfers to the loan division); o for the monthly deductions from your account value; o for policy transaction charges; o on surrender; and o to pay the death benefit after the insured person dies. We calculate the number of variable investment option accumulation units purchased or redeemed by: 1. dividing the dollar amount of your transaction by: 2. the accumulation unit value calculated at the close of business on the valuation date of the transaction. The accumulation unit value is the value determined as of each valuation date. The accumulation unit value of each variable investment option varies with the investment performance of the underlying portfolio. It reflects: o investment income; o realized and unrealized capital gains and losses; o investment portfolio expenses; and o daily mortality and expense risk charges we take from the separate account. SEE HOW WE CALCULATE ACCUMULATION UNIT VALUES, PAGE 28. The date of a transaction is the date we receive your premium or transaction request at our customer service center, so long as the date of receipt is a valuation date. Each valuation date ends at 4:00 p.m. Eastern time. We use the accumulation unit value which is next calculated after we receive your premium or transaction request and we use the number of accumulation units attributable to your policy on the date of receipt. We take monthly deductions from your account value as of the monthly processing date. If your monthly processing date is not a valuation date, the monthly deduction is processed on the next valuation date. The value of amounts allocated to the variable investment option goes up or down depending on investment performance. FOR AMOUNTS IN THE VARIABLE INVESTMENT OPTIONS, THERE IS NO GUARANTEED MINIMUM CASH VALUE. HOW WE CALCULATE ACCUMULATION UNIT VALUES We determine accumulation unit values on each valuation date. We generally set the accumulation unit value for a variable investment option at $10 when the investment option is first opened. After that, the accumulation unit value on any valuation date is: 1. the accumulation unit value for the preceding valuation date multiplied by 2. the accumulation experience factor for that division for the valuation period. Every valuation period begins at 4:00 p.m. Eastern time on a valuation date and ends at 4:00 p.m. Eastern time on the next valuation date. We calculate an accumulation experience factor for each variable investment option every valuation date as follows: 1. We take the share value of the underlying portfolio shares in the division as reported to us by the investment portfolio managers as of the close of business on that valuation date. 2. We add dividends or capital gain distributions declared per share and reinvested by the investment portfolio on the date that the share value is affected. If applicable, we subtract a charge for taxes from this amount. 3. We divide the remaining amount by the value of the shares in the underlying investment portfolio for the variable division at the close of business on the previous valuation date. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 28 4. We then subtract a charge for the mortality and expense risk which we assume under your policy. The daily charge is 0.000548% of the accumulation unit value. This is an annual rate of 0.20% of the accumulation unit value. If the previous day was not a valuation date, the charge is multiplied by the additional number of days since the prior valuation date. The result of these calculations is the accumulation experience factor for the valuation period. TRANSFERS OF ACCOUNT VALUE You may make up to twelve free transfers among the variable investment options, or the guaranteed interest division, in each policy year. You may not make transfers until after your free look period ends if your state requires a refund of premium during the free look period. We do not limit your number of transfers, but we may charge a $10 fee for each transfer that you make after the first twelve in each policy year. We do not include transfers for automatic rebalancing or dollar cost averaging toward your twelve free transfers. You may not make transfers during the continuation of coverage period. You may make transfer requests in writing, or by telephone if you have telephone privileges, to our customer service center. Your transfer takes effect on the valuation date we receive your request. The minimum amount you may transfer is $100. This minimum does not need to come from one division or be transferred to one division as long as the total amount you transfer is at least $100. However, if the amount remaining in a variable division is less than $100 when you make a transfer request, we transfer the entire amount out of that division. EXCESSIVE TRADING Excessive trading activity can disrupt investment portfolio management strategies and increase portfolio expenses by causing: o increased trading and transaction costs; o disruption of planned investment strategies; o forced and unplanned portfolio turnover; o lost opportunity costs; and o the investment portfolios to have large asset swings that decrease their ability to provide maximum investment return to all policyowners. In response to excessive trading, we may place restrictions or refuse transfers made by third-party agents acting on behalf of owners such as a market timing service. We will refuse or place restrictions on transfers when we determine, in our sole discretion, that transfers are harmful to the investment portfolios, or to policyowners as a whole. GUARANTEED INTEREST DIVISION TRANSFERS Transfers into the guaranteed interest division are not restricted. You may transfer from the guaranteed interest division only in the first 30 days of each policy year. Transfer requests received within 30 days before your policy anniversary are deemed to occur on your policy anniversary. A request received by us within 30 days after your policy anniversary is effective as of the valuation date we receive it. Transfer requests made at any other time will not be processed. Transfers from the guaranteed interest division are limited to the largest of: o 25% of your guaranteed interest division balance at the time of your first transfer or withdrawal out of it in that policy year; o the sum of the amounts you have transferred and withdrawn from the guaranteed interest division in the prior policy year; or o $100. DOLLAR COST AVERAGING If your policy has at least $10,000 invested in either the Money Market Portfolio, or the Neuberger Berman AMT Limited Maturity Bond Portfolio, you can elect dollar cost averaging. The main goal of dollar cost averaging is to protect your policy values from short-term price changes. DOLLAR COST AVERAGING DOES NOT ASSURE A PROFIT NOR DOES IT PROTECT YOU AGAINST A LOSS IN A DECLINING MARKET. This systematic plan of transferring account values is intended to reduce the risk of investing too much when the price of an investment portfolio's shares is high. It also reduces the risk of investing too little when the price of an investment portfolio's shares is low. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 29 Since you transfer the same dollar amount to other divisions each period, you purchase more units in a division if the unit value is low, and you purchase fewer units if the unit value is high. You may add dollar cost averaging to your policy at any time. The first dollar cost averaging date must be at least five days after we receive your dollar cost averaging request. Dollar cost averaging cannot begin until after the end of your free look period if your state requires refund of all premiums paid during the free look period. With dollar cost averaging, you designate either a dollar amount, or a percentage of your account value, for automatic transfer from either the investment option invested in either the Money Market Portfolio or the Neuberger Berman AMT Limited Maturity Bond Portfolio for automatic transfer. Each period, we automatically transfer the amount you select from your chosen source investment option to one or more other variable investment options. You may not make transfers to or from the guaranteed interest division or the loan division under dollar cost averaging. The minimum percentage you may transfer to any one investment option is 1% of the total amount you transfer to all investment options you select. You must transfer at least $100 for each dollar cost averaging transfer. Dollar cost averaging may occur on the same day of the month either monthly, quarterly, semi-annually, or annually. Unless you tell us otherwise, dollar cost averaging automatically takes place monthly, on the monthly processing date. We do not count dollar cost averaging transfers toward your twelve free transfers per policy year. There is no charge for this feature. You may have both dollar cost averaging and automatic rebalancing at the same time. The dollar cost averaging division from which your transfer will be taken cannot be included in your automatic rebalancing program. CHANGING DOLLAR COST AVERAGING You may change your dollar cost averaging program one time per policy year. If you have telephone privileges, you may make changes to the dollar cost averaging program by telephoning our customer service center. SEE TELEPHONE PRIVILEGES, PAGE 37. TERMINATING DOLLAR COST AVERAGING You may cancel dollar cost averaging by sending satisfactory notice to our customer service center. We must receive it at least five days before the next dollar cost averaging date. Dollar cost averaging will terminate if: 1. you specify a termination date; or 2. your balance remaining in the investment option from which your dollar cost averaging transfers are taken reaches a dollar amount you set; or 3. on any dollar cost averaging date, the amount in the investment option from which you want to make a transfer is equal to or less than the amount to be transferred. We will transfer the remaining amount and dollar cost averaging ends. AUTOMATIC REBALANCING Automatic rebalancing provides you with a method for maintaining a consistent approach to investing account values over time, and simplifying the process of asset allocation by dividing amounts among the investment options you have chosen. Transfers made for automatic rebalancing do not count toward your twelve free transfers per policy year. There is no charge for this feature. If you choose this feature, on each rebalancing date we transfer amounts among the investment options to match your pre-set automatic rebalancing allocation percentages. After the transfers, the ratio of your account value in each division to your total account value for all investment options included in automatic rebalancing matches the automatic rebalancing allocation percentage for that investment option. This action rebalances the amounts in the investment options that do not match your set allocation. This happens if an investment option outperforms other investment options for that time period. You may choose the automatic rebalancing feature on your application or later by completing our customer service form. Automatic rebalancing may occur on the same day of the month either monthly, quarterly, semi-annually, or annually. If you do not - -------------------------------------------------------------------------------- Corporate Variable Universal Life 30 specify, automatic rebalancing will occur on the last valuation date of a calendar quarter. If you choose automatic rebalancing on your policy application, the first transfer occurs on the date you select (after your free look period if your state requires return of all premiums paid during the free look period). If you elect this feature after your policy date, we process the first transaction on the date you have requested. If you requested no date, processing is on the last valuation date of the calendar quarter we receive your notice at our customer service center. You may have both automatic rebalancing and dollar cost averaging at the same time. The investment option from which your dollar cost averaging transfers are taken cannot be included in your automatic rebalancing allocating program. You may not include the loan division in your automatic rebalancing allocations. CHANGING AUTOMATIC REBALANCING You may change your allocation percentages for automatic rebalancing at any time. Your allocation change is effective on the valuation date that we receive it at our customer service center. If you reduce the amount allocated to the guaranteed interest division, it is considered a transfer from that division. You must meet the requirements for the maximum transfer amount and time limitations on transfers from the guaranteed interest division. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29. TERMINATING AUTOMATIC REBALANCING You may terminate automatic rebalancing at any time, as long as we receive your notice of termination at least five days before the next automatic rebalancing date. POLICY LOANS You may borrow against your policy at any time after the first monthly processing date by using your policy as security for a loan, or as otherwise required by law. The amount you borrow is called a policy loan. Your policy loan is: 1. the total amount you borrow from your policy; plus 2. any policy loan interest that is capitalized when due; minus 3. policy loan repayments you make. Unless state law requires differently, new policy loans must be at least $100. The maximum amount you can borrow on any valuation date, unless required differently by state law, is your net account value minus the monthly deductions to your next policy anniversary or 13 monthly deductions if you take a loan within thirty days before your next policy anniversary. Your request for a policy loan must be directed to our customer service center. If you have telephone privileges, you may request a policy loan for less than $25,000 by telephoning our customer service center. SEE TELEPHONE PRIVILEGES, PAGE 37. When you request a loan you may specify one investment option from which the loan will be taken. If you do not specify one, the loan will be taken proportionately from each active investment option you have. When you take a policy loan, we transfer an amount equal to your policy loan from the specified investment option proportionately or from the variable and the guaranteed interest divisions to the loan division. We follow this same process for loan interest due at your policy anniversary. We credit the loan division with interest at an annual rate of 3%. The loan division is part of our general account, separate from the guaranteed interest division. Loan interest charges on your policy loan accrue daily at an annual interest rate of 3.25%. Interest is due in arrears on each policy anniversary. If you do not pay your interest when it is due, we add it to your policy loan. If you request an additional loan, we add the amount you request to your existing outstanding policy loan. This way, there is only one loan outstanding on your policy at any time. Policy loans may cause your policy to lapse if your net account value is not enough to pay all deductions each month. SEE LAPSE, PAGE 33. Policy loans may have tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM - -------------------------------------------------------------------------------- Corporate Variable Universal Life 31 POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47. LOAN REPAYMENT You may repay all or part of your policy loan at any time. We assume that any payments you make, other than scheduled premiums, are policy loan repayments. You must tell us otherwise if you want additional payments to be premium payments. When you make a loan repayment, we transfer an amount equal to your repayment from the loan division, the variable investment options and the guaranteed interest division in the same proportion as your current premium allocation, unless you tell us otherwise. LOANS AND YOUR BENEFITS Taking a loan decreases the amount you have in the variable division. Accruing loan interest will change your net account value as compared to what it would have been if you did not take a loan. Even if you repay your loan, it has a permanent effect on your account value. The benefits under your policy may be affected. The loan is a first lien on your policy. If you do not repay your policy loan, we deduct your outstanding policy loan and accrued loan interest from the death benefit payable, the surrender value payable. The policy lapses when the account value minus policy loans and accrued loan interest is not enough to cover your monthly deductions. If your policy lapses with a loan outstanding, you may have adverse tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47. If you use the continuation of coverage feature and you have a policy loan, loan interest continues to accrue. If you do not make loan payments your policy could lapse. PARTIAL WITHDRAWALS You may request a partial withdrawal on any valuation date after your first policy anniversary by contacting our customer service center. You make a partial withdrawal when you withdraw part of your net account value. If your request is by telephone, the partial withdrawal must be for an amount less than $25,000 and may not cause a decrease in your death benefit; otherwise, your request must be in writing. SEE TELEPHONE PRIVILEGES, PAGE 37. You may take only one partial withdrawal per policy year. The minimum partial withdrawal you may take is $100. The maximum partial withdrawal you may take is the amount which leaves $500 as your net account value. If you request a withdrawal of more than this maximum, we require you to surrender your policy. When you take a partial withdrawal, we deduct your withdrawal amount plus any service fee from your account value. SEE CHARGES, PAGE 41. Partial withdrawals may have adverse tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47. PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1 If you selected death benefit option 1, and if no more than fifteen years have passed since your policy date and the insured person is not yet age 81, you may make a partial withdrawal of up to the greater of 10% of your account value, or 5% of your stated death benefit without decreasing the stated death benefit. Otherwise amounts you withdraw will reduce your stated death benefit by the amount of the withdrawal unless your policy death benefit has been increased due to the federal income tax definition of life insurance. If your policy death benefit has been increased due to the federal income tax definition of life insurance at the time of the partial withdrawal, then at least part of your partial withdrawal may be made without reducing your stated death benefit. PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 2 If you have selected death benefit option 2, a partial withdrawal does not reduce your stated death benefit or target death benefit. However, we reduce the total death benefit by at least the partial withdrawal amount because your account value is reduced. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 32 PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 3 If you have selected death benefit option 3 and your partial withdrawal is less than the total of premiums you have paid less the total of your prior partial withdrawals, then your stated death benefit will not be reduced. However, your total death benefit will be reduced by at least the amount of your partial withdrawal. If your partial withdrawal is more than the amount of premiums you have paid less the total of your prior partial withdrawals, then the excess is treated in the same manner as partial withdrawals under death benefit option 1. SEE PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1, PAGE 32. STATED DEATH BENEFIT AND TARGET DEATH BENEFIT REDUCTIONS Generally, we reduce the stated death benefit by the amount of the partial withdrawal. A partial withdrawal may reduce your target death benefit. Partial withdrawals do not reduce the stated death benefit if your base death benefit has been increased to qualify your policy as life insurance under the federal income tax laws, if you withdraw an amount that is no greater than the amount that reduces your account value to a level which no longer requires your base death benefit to be increased to qualify as life insurance for federal income tax law purposes. SEE TAX STATUS OF THE POLICY, PAGE 45. We require a minimum target death benefit to issue your policy. You are not allowed to take a partial withdrawal if it reduces your target death benefit below this minimum. SEE GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS, PAGE 44. PARTIAL WITHDRAWAL MECHANICS Unless you tell us otherwise, we will make a partial withdrawal from the guaranteed interest division and the variable division in the same proportion that each has to your net account value immediately before your withdrawal. The amount withdrawn from the guaranteed interest division may not be for more than your total withdrawal multiplied by the ratio of your account value in the guaranteed interest division to your total net account value immediately before the partial withdrawal transaction. We will send a new schedule page for your policy showing the effect of your withdrawal if there is any change to your stated death benefit or your target death benefit. Or, to make this change, we may ask that you return the policy to our customer service center. Your withdrawal and any reductions in the death benefits are effective as of the valuation date on which we receive your request. SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47. LAPSE Your insurance coverage continues as long as your net account value is enough to pay all deductions each month. In any policy year, if you have an outstanding policy loan, your policy will lapse if the loan plus the accrued interest owed is more than the account value. After the insured person reaches age 100 and if the continuation of coverage feature is active, the policy could lapse even though there are no further monthly deductions. GRACE PERIOD Your policy enters the 61-day lapse grace period if, on a monthly processing date your net account value is zero (or less). We notify you that the policy is in a grace period at least 30 days before the grace period ends. We provide this notice to you, or a person to whom you have assigned your policy, at the last address in our records. We notify you of the required premium payment necessary to prevent your policy from lapsing. This amount is generally the amount of past due charges, plus the amount that covers your estimated monthly policy deductions for the next two months. If the insured person dies during the grace period, we pay death proceeds to your beneficiary(ies) with reductions for policy loans, accrued loan interest, and monthly deductions owed. If we receive payment of the required amount before the end of the grace period, we apply it to your account value in the same manner as your other premium payments, then we take the overdue deductions from your account balance. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 33 If you do not pay the full amount required within the 61-day grace period, your policy (and rider) lapse without value. We then withdraw your remaining account balance from the variable and guaranteed interest divisions. We deduct amounts you owe us and inform you that the policy has ended. REINSTATEMENT If you do not pay enough premium before the end of the grace period, your policy lapses. You may reinstate your policy and rider within five years after the grace period ends. Unless state law requires differently, we will reinstate your policy and rider if: 1. you have not surrendered your policy for its surrender value; 2. you provide satisfactory evidence to us that the insured person is still insurable according to our normal rules of underwriting; and 3. we receive enough premium from you to keep your policy and rider in force from the beginning to the end of the grace period and for two months after the reinstatement date. Reinstatement is effective as of the monthly processing date following our approval of your reinstatement application. If you had a policy loan when coverage ended, we reinstate it with accrued loan interest to the date of lapse. The cost of insurance charges in effect at the time of reinstatement for the age of the insured person are adjusted to reflect the time since the lapse. We apply the net premiums received after reinstatement according to the premium allocation instructions in effect at the start of the grace period, unless you tell us otherwise. SURRENDER You may surrender your policy for its surrender value any time while the insured person is living. You do this by sending a written request and your policy or a lost policy form to our customer service center. We compute your surrender value as of the valuation date we receive your surrender request and policy at our customer service center. All insurance coverage ends on the date we receive your surrender request and policy. SEE POLICY VALUES, PAGE 10. We do not pro-rate or add back charges and expenses to your account value which we deducted on the monthly anniversary before the date your surrender is processed. A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47. GENERAL POLICY PROVISIONS FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD You have the right to examine your policy. The right to examine your policy (or free look period) starts on the date you receive your policy. If for any reason you do not want it, you may return your policy to us or your registered representative within the period shown in the policy. If you return your policy to us within your state's specified time limit, we will consider it canceled as of your policy date. If you cancel your policy during this free look period, you will receive a refund as determined by state law. Generally, there are two types of free look refunds. Some states require a return of all premiums paid while others permit payment of the account value plus a refund of all charges deducted. Your policy will specify what free look refund applies in your state. The type of free look refund allowed in your state will affect when your initial net premium and additional net premiums paid before the end of the free look period are invested into the variable division. If your state requires us to return the premiums paid if you cancel your policy during the free look period, that portion of the net premiums you paid during the free look period allocated to the variable investment options will be held in the division investing in the Money Market Portfolio for 15 days after we issue your policy (five days deemed delivery time plus a - -------------------------------------------------------------------------------- Corporate Variable Universal Life 34 typical free look period of 10 days), unless state law requires otherwise. At the end of 15 days, your account value will be allocated among your chosen variable investment options, based on your most recent premium allocation instructions. If your state requires us to return your account value plus a refund of all charges deducted, that portion of your premiums paid that you have allocated to the variable investment options will be invested according to your most recent premium allocation instructions on the date we issue your policy. Amounts you allocated to the guaranteed interest division will be invested into that division when we issue your policy if you have made a premium payment and have no outstanding information or document requests from us. Once we have applied your net premium to your selected investment options, you may transfer funds between investment options and activate policy investment features such as automatic rebalancing or dollar cost averaging. YOUR POLICY Some groups under this policy may choose to use a master policy and certificate rather than a series of individual policies. The entire contract between you and us is the combination of: o the policy (or certificate); o a copy of your original application and any applications for benefit increases or decreases; o the adjustable term insurance rider; o endorsements; o schedule pages; and o reinstatement applications. If you make a change to your coverage, we give you a copy of your changed application and new schedules. If you send us your policy, we attach these items to your policy and return it to you. Otherwise, you need to attach them to your policy. Unless there is fraud, we consider all statements made in an application to be representations and not guarantees. We use no statement to deny a claim, unless it is in an application. A president or an officer of our company and our secretary or assistant secretary must sign all changes or amendments we make to your policy. No other person may change the terms or conditions of your policy. AGE We issue your policy at the insured person's age stated in your policy schedule. This is based on the insured person's age as of the nearest birth date to the policy date. We determine the insured person's age at any given time by adding the number of completed policy years to the age calculated at issue and shown in the schedule. At issue of your policy, the insured person must be no less than age 15 and no more than age 85. OWNERSHIP The original owner is the person named as the owner in the policy application. The owner can exercise all rights and receive the benefits during the insured person's lifetime before the maturity date. This includes the right to change the owner, beneficiaries, or method to pay proceeds. As a matter of law, all rights of ownership are limited by the rights of any person who has been assigned rights under the policy, and any irrevocable beneficiary(ies). You may name a new owner by giving us written notice. The effective date of the change to the new owner is the date the prior owner signs the notice. However, we will not be liable for any action we take before a change is recorded at our customer service center. A change in ownership may cause the prior owner to recognize taxable income on gain under the policy. BENEFICIARY(IES) You, as owner, name the beneficiary(ies) when you apply for your policy. The primary beneficiary(ies) who survives the insured person receives the death proceeds. Other surviving beneficiary(ies) receive death proceeds only if there is no surviving primary beneficiary(ies). If more than one beneficiary(ies) survives the insured person, they share the death proceeds equally, unless you have told us otherwise. If none of your policy beneficiaries has survived the insured person, we pay the death proceeds to you, or to your estate as owner. Once you tell us who the beneficiary(ies) is/are, we keep this information on file. You may name a new - -------------------------------------------------------------------------------- Corporate Variable Universal Life 35 beneficiary during the insured person's lifetime. We pay the death proceeds to the most recent beneficiary(ies) whom you have most recently named and which we have on record. We do not make multiple payments. COLLATERAL ASSIGNMENT You may assign your policy as security by sending written notice to us. After we record the assignment, your rights as owner and the beneficiary's(ies') rights (unless the beneficiary(ies) was made an irrevocable beneficiary(ies) under an earlier assignment) are subject to the assignment. It is your responsibility to make sure the assignment is valid. INCONTESTABILITY After your policy has been in force while the insured person is alive for two years from your policy date, we will not question the validity of the statements in your application. After your policy has been in force while the insured person is alive for two years from the effective date of any new segment or from the effective date of an increase in any other benefit, we will not contest the statements in your application for the new segment or other benefit increase. After this policy has been in force while the insured person is alive for two years from the effective date of any reinstatement, we will not contest the statements in your application for reinstatement. MISSTATEMENTS OF AGE OR GENDER If the insured person's age or gender has been misstated, we adjust the death benefit. We adjust death benefits to the amount which would have been purchased for the insured person's correct age and gender. We base the adjusted death benefit on the cost of insurance charges deducted from your account value on the last monthly processing date before the insured person's death, or as otherwise required by state law. If unisex cost of insurance rates apply, we do not make any adjustments for a misstatement of gender. SUICIDE If the insured person commits suicide, while that insured person is sane or insane within two years of your policy date, unless otherwise required by state law, we limit death benefits to: 1. the total of all premiums paid to the time of death; minus 2. the amount of outstanding policy loans and accrued loan interest; minus 3. any partial withdrawals you have taken. If the insured person has been changed, and the new insured person dies by suicide within two years of the change date, we then limit the death benefit to: 1. your net account value as of the change date; plus 2. the premiums you paid since the change date; minus 3. the sum of any increases in policy loans, accrued loan interest, and partial withdrawals taken since the change date. We make a limited payment to the beneficiary(ies) for a new segment or other increase if the insured person commits suicide, while sane or insane within two years of the effective date of a new segment, or within two years of an increase in any other benefit, unless otherwise required by state law. The limited payment we make is equal to the cost of insurance and monthly expense charges which were deducted for such increase. TRANSACTION PROCESSING Generally, within seven days of when we receive all information required to process a payment, we pay: o death proceeds; o surrender value; o partial withdrawals; and o loan proceeds. We may delay processing these transactions if: o the NYSE is closed for trading; o trading on the NYSE is restricted by the SEC; o there is an emergency so that it is not reasonably possible to sell securities in the variable divisions or to determine the value of an investment division's assets; or o a governmental body with jurisdiction over the separate account allows suspension by its order. SEC rules and regulations determine whether or not these conditions exist. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 36 We execute transfers among the variable investment options as of the valuation date of our receipt of your request at our customer service center. We determine death proceeds as of the insured person's date of death. The death proceeds are not affected by subsequent changes in the value of the variable investment options. We pay interest at our stated rate (or at a higher rate if required by law) from the insured person's date of death to the date of payment. We may delay payment from our guaranteed interest division for up to six months, unless state law requires otherwise, of: o surrender proceeds; o withdrawal amounts; or o loan amounts. We pay interest at our declared rate (or at a higher rate if required by law) from the date we receive the request if we delay payment more than 30 days. NOTIFICATION AND CLAIMS PROCEDURES Except for certain authorized telephone requests, we must receive in writing any election, designation, change, assignment or request made by the owner. You must use a form acceptable to us. We are not liable for actions taken before we receive and record the written notice. We may require you to return your policy for certain policy changes or if you surrender it. If the insured person dies while your policy is in force, please let us or your registered representative know as soon as possible. We will immediately send you instructions on how to make a claim. As proof of the deceased insured person's death, we may require you to provide proof of the deceased insured person's age, and a certified copy of the deceased insured person's death certificate. The beneficiary(ies) and the deceased insured person's next of kin may need to sign authorization forms. These forms allow us to get information about the deceased insured person. This information may include medical records of doctors and hospitals used by the deceased insured person. TELEPHONE PRIVILEGES Telephone privileges are automatically provided to you and your agent or registered representative, unless you decline it on the application or contact our customer service center. Telephone privileges allow you or your agent/registered representative, if applicable, to call our customer service center to: o make transfers; o change premium allocations; o change features in your dollar cost averaging and automatic rebalancing programs; o request partial withdrawals; or o request a policy loan. Our customer service center uses reasonable procedures to make sure that instructions received by telephone are genuine. These procedures may include: 1. requiring some form of personal identification; 2. providing written confirmation of any transactions; and 3. tape recording telephone calls. By accepting automatic telephone privileges, you authorize us to record your telephone calls to us. If we use reasonable procedures to confirm instructions, we are not liable for losses due to unauthorized or fraudulent instructions. We may discontinue this privilege at any time. NON-PARTICIPATION Your policy does not participate in the surplus earnings of Security Life. DISTRIBUTION OF THE POLICIES The principal underwriter (distributor) for our policies is ING America Equities, Inc. ING America Equities, Inc. is a wholly owned subsidiary of Security Life. It is registered as a broker-dealer with the SEC and the NASD. We pay ING America Equities, Inc. for acting as the principal underwriter under a distribution agreement. We sell our policies through registered representatives of other broker-dealers including, but not limited to: 1. VESTAX Securities Corporation, a subsidiary of ING America Insurance Holdings, Inc.; - -------------------------------------------------------------------------------- Corporate Variable Universal Life 37 2. Locust Street Securities, Inc., an affiliate of Security Life of Denver Insurance Company; 3. Multi-Financial Services, Inc., an affiliate of Security Life of Denver Insurance Company; and 4. IFG Network Securities, Inc., a subsidiary of Investors Financial Group, Inc., which is a subsidiary of ING America Insurance Holdings, Inc. These broker-dealers have entered into selling agreements with us. They are registered with the SEC and the NASD. Under these selling agreements, we pay a distribution allowance to broker-dealers, who then pay commissions to the registered representative who sells this policy. During the first policy year, the distribution allowance may be up to 12% of the target premium that you paid, with no allowance on premiums that you paid over your first target premium. For policy years two through four, the distribution allowance may be up to 10% of the target premium, with no allowance on premiums you have paid over the target premium. For policy years five through ten, the distribution allowance may equal up to 2% of the target premiums that you have paid, with no allowance on premiums you have paid over target premium. After the tenth policy year, there is no distribution allowance. Broker-dealers may receive annual renewal payments of up to 0.20% of the net account value beginning in the first year of your policy. Compensation arrangements vary among broker-dealers and depend on particular circumstances. In addition to the above-described compensation, we may pay: o wholesaler fees and marketing allowances; and o training allowances. We pay all distribution and other allowances from our resources which includes sales charges deducted from premiums. ADVERTISING PRACTICES AND SALES LITERATURE We may use advertisements and sales literature to promote this product, including: o articles on variable life insurance and other information published in business or financial publications; o indices or rankings of investment securities; and o comparisons with other investment vehicles, including tax considerations. We may use information regarding the past performance of the variable investment options. Past performance is not indicative of future performance of the investment options or the policies and is not reflective of the actual investment experience of policyowners. We may feature certain investment options and their managers, as well as describe asset levels and sales volumes for our products. We may refer to past, current, or prospective economic trends and investment performance or other information we believe may be of interest to our customers. SETTLEMENT PROVISIONS You may elect to have the beneficiary(ies) receive the death proceeds other than in one payment. If you make this election, you must do so during the insured person's lifetime. If you have not made this election, the beneficiary(ies) may do so within 60 days after we receive proof of the insured person's death. You may take your surrender value in other than one payment. The investment performance of the variable divisions does not affect payments under these settlement options. Instead, interest accrues at a fixed rate based on the option you choose. Payment options are subject to our rules at the time you make your selection. A periodic payment must be at least $20. Currently, these alternate payment options are available if the proceeds are $2,000 or more. Option I: PAYOUTS FOR A DESIGNATED PERIOD: Payout payments may be made on a monthly, quarterly, semi-annual, or annual basis for a period from five to thirty years. The installment dollar amounts are equal except for any excess interest. Settlement Option Table I in your policy shows the amount of the first monthly payout for each $1,000 of account value applied. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 38 Option II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD: Payout payments may be made on a monthly, quarterly, semi-annual, or annual basis throughout the lifetime of the person receiving the payment, or if longer for guaranteed periods of five, ten, fifteen, or twenty years. You choose the length of time to receive the guaranteed payments. If you choose a longer guaranteed period, the amount of your periodic payments will be lower. The installment dollar amounts are equal except for any excess interest. The Settlement Option Table II in your policy shows the amount of the first monthly payout for each $1,000 of account value applied. This option is available only for the ages shown in this table. Option III: HOLD AT INTEREST: Amounts may be left on deposit with us to be paid at the death of the person you choose to receive the payment, or at a chosen earlier date. We will pay interest at our declared rate on any unpaid balance (or at a higher rate if required by law). You may choose interest to be accumulated or be paid on a monthly, quarterly, semi-annual, or annual basis. You may not leave money on deposit for more than 30 years. Option IV: PAYOUTS OF A DESIGNATED AMOUNT: Payouts will be made until proceeds, including interest, are exhausted. Interest is at a rate we declare (or at a higher rate as required by law). Payout payment choices are on a monthly, quarterly, semi-annual, or annual basis. Option V: OTHER: You, as owner, may ask us to apply money under any options we offer at the time we pay the benefit. The beneficiary(ies) or other person (successor to the beneficiary(ies)) who has the right to receive payments may name someone else to receive amounts that we would otherwise pay to the beneficiary's(ies') estate if he/she/they die(s). The person who has the right to receive payment may name another person, at any time. Designating another person to receive payment may have income, gift or estate tax consequences. Consult a professional tax adviser before making this designation. We must approve an arrangement that involves someone who is to receive payment who is not a human being (for example, a corporation). We must approve a situation involving a person who is to receive payment while acting on behalf of another, called a fiduciary. We base the details of all arrangements on our rules at the time the arrangements are effective. This includes rules on the: o minimum amount we pay under an option; o minimum amounts for installment payments; o withdrawal rights; o right to receive payments over time, which we may offer as a lump sum payment; o naming of people who have the right to receive payment and their successors; and o proof of age and survival. ADMINISTRATIVE INFORMATION ABOUT THE POLICY VOTING PRIVILEGES We invest the variable division's assets in shares of investment portfolios. We are the legal owner of the shares held in the separate account and we have the right to vote on certain issues. Among other things, we may vote on issues described in the fund's current prospectus, or issues requiring a vote by shareholders under the Investment Company Act of 1940. Even though we own the shares, we give you the opportunity to tell us how to vote the number of shares attributable to your account value. We count fractional shares. If you have a voting interest, we send you proxy material and a form on which to give us your voting instructions. Each investment portfolio's shares have the right to one vote. The votes of all investment portfolios are cast together on a collective basis, except on issues for which the interests of the portfolios differ. In these cases, voting is done on a portfolio-by-portfolio basis. Examples of issues that require a portfolio-by-portfolio vote are: - -------------------------------------------------------------------------------- Corporate Variable Universal Life 39 1. changes in the fundamental investment policy of a particular investment portfolio; or 2. approval of an investment advisory agreement. We vote the shares in accordance with your instructions at meetings of investment portfolio shareholders. We vote any investment portfolio shares that are not attributable to policies, and any investment portfolio shares for which the owner does not give us instructions, the same way we vote as if we did receive owner instructions. We reserve the right to vote investment portfolio shares without getting instructions from policy owners if the federal securities laws, regulations, or their interpretations change to allow this. You may instruct us only on matters relating to the investment portfolios corresponding to divisions in which you have invested assets as of the record date set by the investment portfolio's Board for the portfolio's shareholders meeting. We determine the number of investment portfolio shares in each division that we attribute to your policy by dividing your account value allocated to that division by the net asset value of one share of the matching investment portfolio. MATERIAL CONFLICTS We are required to track events to identify any material conflicts arising from using investment portfolios for both variable life and variable annuity separate accounts. The boards of the investment portfolios, Security Life, and other insurance companies participating in the investment portfolios, have this same duty. There may be a material conflict if: o state insurance law or federal income tax law changes; o investment management of an investment portfolio changes; or o voting instructions given by owners of variable life insurance policies and variable annuity contracts differ. The investment portfolios may sell shares to certain qualified pension and retirement plans qualifying under Code Section 401. These include cash or deferred arrangements under Code Section 401(k). Therefore, there is a possibility that a material conflict may arise between the interests of owners in general, or between certain classes of owners, and these retirement plans or participants in these retirement plans. If there is a material conflict, we have the duty to determine appropriate action, including removing the portfolios involved from our variable investment options. We may take other action to protect policy owners. This could mean delays or interruptions of the variable operations. When state insurance regulatory authorities require us, we may ignore voting instructions relating to changes in an investment portfolio's adviser or its investment policies. If we do ignore voting instructions, we give you a summary of our actions in the next semi-annual report to owners. Under the Investment Company Act of 1940, we must get your approval for certain actions involving our separate account. In this case, you have one vote for every $100 of value you have in the variable divisions. We cast votes credited to amounts in the variable divisions, but not credited to policies in the same proportion as votes cast by owners. RIGHT TO CHANGE OPERATIONS Subject to state limitations, we may from time to time make any of the following changes to our separate account: 1. Change the investment objective. 2. Offer additional investment options which will invest in portfolios we find appropriate for policies we issue. 3. Eliminate variable investment options. 4. Combine two or more variable investment options. 5. Substitute a new investment portfolio for a portfolio in which the division currently invests. A substitution may become necessary if, in our judgment: o a portfolio no longer suits the purposes of your policy; o there is a change in laws or regulations; o there is a change in a portfolio's investment objectives or restrictions; o the portfolio is no longer available for investment; or - -------------------------------------------------------------------------------- Corporate Variable Universal Life 40 o another reason we deem a substitution is appropriate. 6. Transfer assets related to your policy class to another separate account. 7. Withdraw the separate account from registration under the 1940 Act. 8. Operate the separate account as a management investment company under the 1940 Act. 9. Cause one or more divisions to invest in a mutual fund other than, or in addition to, the investment portfolios. 10. Stop selling these policies. 11. End any employer or plan trustee agreement with us under the agreement's terms. 12. Limit or eliminate any voting rights for the separate account. 13. Make any changes required by the 1940 Act, or its rules or regulations. We will not make a change until it is effective with the SEC and approved by the appropriate state insurance departments, if necessary. We will notify you of changes. If you wish to transfer the amount you have in the affected option to another variable investment option, or to the guaranteed interest division, you may do so free of charge. Just notify us at our customer service center. REPORTS TO OWNERS At the end of each policy year we send a report to you that shows: o your total net policy death benefit (your stated death benefit plus adjustable term insurance rider death benefit, if any); o your account value; o your policy loan if any, plus accrued interest; o your surrender value; o information about the variable investment options; and o your account transactions during the previous year showing net premiums, transfers, deductions, loans, or withdrawals. We also send semi-annual reports with financial information on the investment portfolios, including a list of the investment holdings of each portfolio, to you. We send confirmation notices to you throughout the year for certain policy transactions. CHARGES AND DEDUCTIONS The amount of a charge may not exactly correspond to the cost incurred by us to provide the service or benefits associated with the particular policy. Many charges are not at "cost". For example, the sales charges may not cover all of the sales and distribution expenses actually incurred by us. Proceeds from other charges, including the mortality and expense risk charge or cost of insurance charges, may be used in part to cover such expenses. DEDUCTIONS FROM PREMIUMS We consider any payment we receive to be a premium if the insured person is not yet age 100 and you do not have an outstanding policy loan. After we deduct certain expenses from your premium payment, we add the remaining net premium to your account value. TAX CHARGES We pay state and local taxes in almost all states. These taxes vary in amount from state to state and may vary from jurisdiction to jurisdiction within a state. Currently, state and local taxes range from 0% to 5%. We currently deduct 2.5% of each premium payment you make to cover these taxes which approximates the average tax rate we expect to pay. We currently deduct 1.5% of each premium payment you make to cover our estimated costs for the federal income tax treatment of deferred acquisition costs. This cost is determined solely by the amount of life insurance premiums we receive. We reserve the right to increase or decrease your premium expense charge for taxes as a result of changes in the tax law, within limits set by state law. We also reserve the right to increase or decrease your premium expense charge for the federal income tax treatment of deferred acquisition costs based on any change in that cost to us. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 41 SALES CHARGE We deduct a percentage from each of your premium payments to compensate us for the costs we incur in selling the policies. This charge is 2% of the premiums you pay in the first policy year and 0.5% of the premiums you pay for each policy year beyond the first. The sales charge covers the costs of distribution, preparing our sales literature, promotional expenses, and other direct and indirect expenses. The amount charged is not specifically related to sales expenses in a particular year. ANNUAL DEDUCTION DEFERRED SALES CHARGE We deduct a deferred sales charge that is based on a percentage of the premium payments you make in each of the first ten policy years, up to your target premium, as specified in your schedule pages. The charge is based on premium payments, but is deducted from your account value in equal installments on each of the ten policy anniversaries following the date on which you make the premium payment. Each policy segment has its own target premium and deferred sales charge. We allocate your premium payments to determine the deferred sales charges under your policy if you have more than one segment. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24. The deferred sales charge compensates us for a portion of the costs we incur in selling the policies. There is no deferred sales charge on premiums which are in excess of the target premium. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24. Deferred Sales Policy or Charge as a Deducted at Segment Year Percentage of Beginning of Premium Paid Target Premium Policy Years ------------ ------------ -------------- 1 2% 2 - 10 2 1.5% 3 - 11 3 1.5% 4 - 12 4 1.5% 5 - 13 5 0.25% 6 - 14 6 0.25% 7 - 15 7 0.25% 8 - 16 8 0.25% 9 - 17 9 0.25% 10 - 18 10 0.25% 11 - 19 DAILY DEDUCTIONS FROM THE VARIABLE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE We deduct a charge each day for the mortality and expense risks we assume. This charge is 0.000548% per day of the amount you have in the variable divisions. This is an annual rate of 0.20%. The mortality risk we assume is that insured people, as a group, may live less time than we estimated. We assume risk that expenses we incur in issuing and administering the policies and in operating the variable divisions are greater than the amount we estimated when we set these charges. The mortality and expense risk charge does not apply to your account value which is invested in the guaranteed interest division or the loan division. MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE We deduct charges from your account value on each monthly processing date. You have the option to designate a single withdrawal investment option from which we will take your monthly deductions. You may make this designation at policy application or later. You may not use the loan division as your designated withdrawal investment option from which to deduct monthly deductions. If you do not choose a withdrawal investment option from which to deduct monthly deductions, or if the amount in your designated withdrawal investment option is not enough to cover the monthly deductions, these charges are taken from the variable and guaranteed interest divisions in the same proportion that your account value in each division has to your total net account value as of the monthly processing date. If you change your designated withdrawal investment option from which monthly deductions are deducted, we consider this a premium allocation change for which there may be a charge. SEE POLICY TRANSACTION FEES, PAGE 44. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 42 DIVISIONS FROM WHICH WE DEDUCT CHARGES
MONTHLY CHARGES: COST OF INSURANCE CHARGES AND LOANS AND ADMINISTRATION FEES TRANSACTION FEES PARTIAL WITHDRAWALS - ----------- ----------------------------------------- --------------------------- ----------------------------------- CHOICE May choose one withdrawal investment Proportionally among May choose any withdrawal option, including guaranteed interest variable and guaranteed investment options or combination division interest divisions of investment options, subject to requirements - ----------- ----------------------------------------- --------------------------- ----------------------------------- DEFAULT Proportionally among variable investment Proportionally among Proportionally among variable option and guaranteed interest division variable investment options investment options and guaranteed and guaranteed interest interest division division
MONTHLY ADMINISTRATIVE CHARGE For this policy, we charge an administrative charge of $12 per month for the first policy year and $6 per month for each policy year beyond that. The monthly administrative charge is designed to compensate us for ongoing costs such as: o premium billing and collections; o claim processing; o policy transactions; o record keeping; o reporting and communications with policy owners; and o other expenses and overhead. COST OF INSURANCE CHARGE The cost of insurance charge compensates us for the ongoing costs of providing insurance coverage under the policy, including the expected cost of paying death proceeds that are more than your account value at the insured person's death. The cost of insurance rates may depend on the: o issue age of the insured people in the group; o risk class of the insured people in the group; o size of the group; and o total premium the group pays. The cost of insurance charge is equal to our current monthly cost of insurance rate times the net amount at risk for each portion of your death benefit. We calculate the net amount at risk monthly, at the beginning of each policy month. For the base death benefit, the net amount at risk is calculated using the difference between the current base death benefit and your account value. We determine the amount of your account value after we deduct your policy charges due on that date, other than cost of insurance charges for the base death benefit and adjustable term insurance rider. If your base death benefit at the beginning of a month increases (due to requirements of the federal income tax law definition of life insurance), the net amount at risk for your base death benefit for that month also increases. Similarly, the net amount at risk for your adjustable term insurance rider decreases. This means that the amount of your cost of insurance charge varies from month to month with changes in your net amount at risk, changes in the death benefit and with the increasing age of the insured person. We allocate the net amount at risk to any segments in the same proportion that each segment has to the total stated death benefit for all coverage segments as of the monthly processing date. We apply unisex rates where appropriate under the law. This currently includes the State of Montana and policies purchased by employers and employee organizations in connection with employment-related insurance or benefit programs. Separate cost of insurance rates apply to each segment of the base death benefit and your adjustable term insurance rider. These rates are never more than the guaranteed maximum rates shown in your policy; however, they may change from time to time. The guaranteed maximum rates for base coverage are based on the 1980 Commissioner's Standard Ordinary Sex Distinct Mortality Table. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 43 The maximum rates for the initial and any new segment will be printed in the schedule which we will provide to you. This may result in higher cost of insurance charges than those that would apply if the policy were on an individual instead of group basis. GUARANTEED ISSUE We only offer this policy on a guaranteed issue basis. We issue these policies up to a preset face amount with evidence of insurability requirements. CHANGES IN MONTHLY CHARGES Changes we make in the cost of insurance charges or charges for additional benefits are for a class of insured persons. We base the new charge on changes in expectations about: o investment earnings; o mortality; o the time policies remain in effect; o expenses; and o taxes. New monthly charges will never be more than the guaranteed maximum rates shown in your policy. CONTINUATION OF COVERAGE ADMINISTRATIVE FEE When the insured person reaches age 100, if your policy has not been surrendered, the continuation of coverage period begins. We will charge a one-time administrative fee of $200. This charge compensates us for maintaining and servicing your policy until the death of the insured person. We then no longer charge you a monthly administrative fee. POLICY TRANSACTION FEES We also charge fees for certain transactions you may make under your policy. We take these fees from the variable and the guaranteed interest divisions in the same proportion that your account value in each division has to your net account value immediately after the transaction. PARTIAL WITHDRAWALS We deduct a service fee of $25 of the amount you request from your account value for each partial withdrawal you take to cover our costs. SEE PARTIAL WITHDRAWALS, PAGE 32. TRANSFERS There may be a $10 fee for each additional transfer over twelve per policy year to cover our costs. If you include multiple transfers in one request, it counts as one transfer. There is no transfer fee if you are exercising the right to exchange feature in your policy. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29, AND RIGHT TO EXCHANGE POLICY, PAGE 26. ILLUSTRATIONS The first policy illustration you request in a policy year is free. After that, we may charge a fee of up to $25 for each additional policy illustration you request. PREMIUM ALLOCATION CHANGE You may make five free premium allocation changes per policy year. After the five free premium allocation changes, we may charge you $25 for each additional premium allocation change per policy year. If you change your designated withdrawal investment option, we consider this a premium allocation charge for which there may be a charge. SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42. GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS Groups of individuals, corporations or other institutions may purchase this policy. For some group or sponsored arrangements including employees and certain family members of employees of Security Life of Denver, its affiliates and appointed sales agent or special exchange programs which we may offer from time to time, we may reduce or waive the: o administrative charge; o minimum target death benefit; o target premium; o sales charges; o cost of insurance charges; or o other charges normally assessed. We can reduce or waive these items due to expected economies based on the characteristics of the group or sponsored arrangement or with a corporate purchaser. Group arrangements include those in which there is a trustee, an employer or an association. The group may either purchase policies covering a group of individuals or endorse a policy to - -------------------------------------------------------------------------------- Corporate Variable Universal Life 44 a group of individuals. Sponsored arrangements include those in which an employer or association allows us to offer policies to its employees or members on an individual basis. Our sales, administration and mortality costs generally vary with the size and stability of the group, among other factors which we take into account when we reduce charges. We make reductions to charges based on our rules in effect when we approve a policy application. We may change these rules from time to time. We will not be unfairly discriminatory in the variation in the administrative charge, or other charges, fees and privileges. These variations are based on differences in costs or services. OTHER CHARGES Under current law, we pay no tax on investment income and capital gains included in variable life insurance policy reserves. This means that no charge is currently made to any variable division for our federal income taxes. If the tax law changes and we have federal income tax chargeable to the variable divisions, we may make such a charge in the future. TAX CONSIDERATIONS 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 advisers 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 This policy is designed to qualify as a life insurance contract under the Internal Revenue Code. All terms and provisions of the policy shall be construed in a manner which is consistent with that design. 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 policy must satisfy certain requirements which are set forth in Internal Revenue Code Section 7702. However, there is very little guidance, with respect to policies issued on a substandard basis. Nevertheless, we believe it is reasonable to conclude that our policies satisfy the applicable requirements. If it is subsequently determined that a policy does not satisfy the applicable requirements, we will take appropriate and reasonable steps to bring the policy into compliance with such requirements and we reserve the right to restrict policy transactions or modify your policy in order to do so. Specifically this policy must meet the requirements of the "cash value accumulation test" as specified in Code Section 7702. Under the cash value accumulation test, there is no limit to the amount that may be paid in premiums as long as there is enough death benefit in relation to account value at all times. The death benefit at all times must be at least equal to an actuarially determined factor, depending on the insured person's age and sex at any point in time, multiplied by the account value. SEE APPENDIX A, PAGE 58, FOR A TABLE OF THE CASH VALUE ACCUMULATION TEST FACTORS. We will at all times assure that the policy meets the statutory definition which qualifies the policy as life insurance for federal income tax purposes. In addition, as long as the policy remains in force, increases in account value as a result of interest or investment experience will not be subject to federal income tax unless and until there is a distribution from the policy, such as a partial withdrawal or loan. SEE TAX TREATMENT OF POLICY DEATH BENEFITS, PAGE 46. DIVERSIFICATION REQUIREMENTS In addition to meeting the Code Section 7702 tests, Code Section 817(h) requires separate account investments, such as our variable account, to be adequately diversified. The Treasury has issued regulations which set the standards for measuring the adequacy of any diversification. To be adequately diversified, each variable division must meet certain tests. If your variable life policy is not adequately diversified under these regulations, it is not treated as life insurance under Code Section 7702. You would then be subject to federal income tax on your policy income as you earn it. Our variable divisions' - -------------------------------------------------------------------------------- Corporate Variable Universal Life 45 investment portfolios have promised they will meet the diversification standards that apply to your policy. In certain circumstances, you, as owner of a variable life insurance contract, may be considered the owner for federal income tax purposes of the separate account assets used to support your contract. Any income and gains from the separate account assets are includable in the gross income from your policy under these circumstances. The IRS has stated in published rulings that a variable contract owner is considered the owner of separate account assets if the contract owner has "indicia of ownership" in those assets. "Indicia of ownership" includes the ability to exercise investment control over the assets. Your ownership rights under your policy are similar to, but different in some ways from those described by the IRS in rulings in which it determined that policy owners are not owners of separate account assets. For example, you have flexibility in allocating your premium payments and in your policy values. These differences could result in the IRS treating you as the owner of a pro rata share of the variable account assets. We do not know what standards will be set forth in the future, if any, in Treasury regulations or rulings. We reserve the right to modify your policy, as necessary, to try to prevent you from being considered the owner of a pro rata share of the variable account assets, or to otherwise qualify your policy for favorable tax treatment. The following discussion assumes that the policy will qualify as a life insurance contract for federal income tax purposes. TAX TREATMENT OF POLICY DEATH BENEFITS We believe that the death benefit under a policy is generally excludable from the gross income of the beneficiary(ies) under section 101(a)(1) of the Code. However, there are exceptions to this general rule. Additionally, federal and local transfer, estate inheritance, and other tax consequences of ownership or receipt of policy proceeds depend on the circumstances of each policy owner or beneficiary(ies). A tax adviser should be consulted about these consequences. Generally, the policy owner will not be taxed on any of the policy cash value until there is a distribution. When distributions from a policy occur, or when loans are taken from or secured by a policy, the tax consequences depend on whether or not the policy is a "modified endowment contract." Special rules also apply if you are subject to the alternative minimum tax. You should consult a tax adviser if you are subject to the alternative minimum tax. MODIFIED ENDOWMENT CONTRACTS Under the Internal Revenue Code, certain life insurance contracts are classified as "modified endowment contracts," and are given less favorable tax treatment than other life insurance contracts. Due to the flexibility of the policies as to premiums and benefits, the individual circumstances of each policy will determine whether or not it is classified as a modified endowment contract. The rules are too complex to be summarized here, but generally depend on the amount of premiums paid during the first seven policy years. Certain changes in a policy after it is issued could also cause it to be classified as a modified endowment contract. A current or prospective policy owner should consult with a competent adviser to determine whether or not a policy transaction will cause the policy to be classified as a modified endowment contract. MULTIPLE POLICIES All modified endowment contracts that are issued by us (or our affiliates) to the same policy owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includable in the policy owner's income when a taxable distribution occurs. DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS Once a policy is classified as a modified endowment contract, the following tax rules apply both prospectively and to any distributions made in the prior two years: 1. All distributions other than death benefits, including distributions upon surrender and - -------------------------------------------------------------------------------- Corporate Variable Universal Life 46 withdrawals, from a modified endowment contact will be treated first as distributions of gain taxable as ordinary income and as tax-free recovery of the policy owner'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 first as distributions of gain taxable as ordinary income and as tax-free recovery of the policy owner's investment in the policy only after all gain has been distributed. 3. A 10% additional income tax penalty may be imposed on the distribution amount subject to income tax. Consult a tax adviser to determine whether or not you may be subject to this penalty tax. 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 policy owner's investment in the policy. Only after the recovery of all investment in the policy, is there taxable income. However, certain distributions which must be made in order to enable the policy to continue to qualify as a life insurance contract for federal income tax purposes, if policy benefits are reduced during the first fifteen 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 are generally not treated as distributions. Finally, neither distributions from, nor loans from or secured by, a policy that is not a modified endowment contract are subject to the 10% additional income tax. INVESTMENT IN THE POLICY Your investment in the policy is generally the total of your aggregate premiums. When a distribution is taken from the policy other than a policy loan, your investment in the policy is reduced by the amount of the distribution that is tax free. POLICY LOANS In general, interest on a policy loan will not be deductible. Before taking out a policy loan, you should consult a tax adviser as to the tax consequences. SECTION 1035 EXCHANGES Code Section 1035 generally provides that no gain or loss shall be recognized on the exchange of one life insurance policy for another life insurance policy, or for an endowment or annuity contract. We accept 1035 exchanges with outstanding loans. Special rules and procedures apply to Section 1035 exchanges. If you wish to take advantage of Section 1035, you should consult your tax adviser. TAX-EXEMPT POLICY OWNERS Special rules may apply to a policy that is owned by a tax-exempt entity. Tax-exempt entities should consult their tax adviser regarding the consequences of purchasing and owning a policy. These consequences could include an effect on the tax-exempt status of the entity and the possibility of the unrelated business income tax. POSSIBLE TAX LAW CHANGES Although the likelihood of legislative action is uncertain, there is always the possibility that the tax treatment of the policy could be changed by legislation or otherwise. You should consult a tax adviser with respect to legislative developments and their effect on the policy. CHANGES TO COMPLY WITH THE LAW So that your policy continues to qualify as life insurance under the Code, we reserve the right to refuse to accept all or part of your premium payments, or to change your death benefit. We may refuse to allow you to make partial withdrawals that would cause your policy to fail to qualify as life insurance. We also may: o make changes to your policy or its riders; or o take distributions from your policy to the - -------------------------------------------------------------------------------- Corporate Variable Universal Life 47 degree that we deem necessary to qualify your policy as life insurance for tax purposes. If we make any change of this type, it applies the same way to all affected policies. We will give you advance notice of this change. The tax law limits the mortality charge used to calculate whether your policy qualifies as life insurance for federal income tax purposes. We must base these calculations on reasonable mortality charges expected to be paid. The Treasury issued proposed regulations on what it considers reasonable mortality charges. We believe that the charges used for your policy should meet the Treasury's current requirement for "reasonableness." We reserve the right to make changes to the mortality charges used in the calculation if future regulations have standards which make changes necessary in order to continue to qualify your policy as life insurance for federal income tax purposes. Additionally, assuming that you do not want your policy to be or to become a modified endowment contract, we include a policy endorsement under which we have the right to amend your policy, including riders. We do this to attempt to enable your policy to continue to meet the seven-pay test for federal income tax purposes. If the policy premium you pay is more than the seven-pay limit, we have the right to remove any excess premium or to make any appropriate adjustments to your policy's account value and death benefit. It is not clear, however, whether we can take effective action pursuant to this endorsement under all possible circumstances to prevent a policy that has exceeded the premium limitation from being classified as a modified endowment contract. Any increase in your death benefit will cause an increase in your cost of insurance charges. OTHER Policy owners may use our policies in various arrangements, including: o qualified plans; o non-qualified deferred compensation or salary continuance plans; o split dollar insurance plans; o executive bonus plans; o retiree medical benefit plans; and o other plans. The tax consequences of these plans may vary depending on the particular facts and circumstances of each arrangement. If you want to use any of your policies in this type of arrangement, you should consult a qualified tax adviser regarding the tax issues of your particular arrangement. In recent years, 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. The IRS requires us to withhold income taxes from any portion of the amounts individuals receive in a taxable transaction. We do not withhold income taxes if you elect in writing not to have withholding apply. If the amount withheld for you is insufficient to cover income taxes, you may have to pay income taxes and possibly penalties later. The transfer of the policy or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. For example, the transfer of the policy to, or the designation as a beneficiary of, or the payment of proceeds to a person who is assigned to a generation which is two or more generations below the generation assignment of the policy owner may have generation skipping transfer tax consequences under federal tax law. The individual situation of each policy owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes. YOU SHOULD CONSULT QUALIFIED LEGAL OR TAX ADVISERS FOR COMPLETE INFORMATION ON FEDERAL, STATE, LOCAL, AND OTHER TAX CONSIDERATIONS. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 48 ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES, AND ACCUMULATED PREMIUMS The following tables are intended to show how the policy works. This includes how benefits and values can vary over a long period of time. Each table also compares these values with total premiums paid with interest. The policies illustrated include:
Definition Death of Life Stated Target Smoker Benefit Insurance Death Death Gender Age Status Option Test Benefit Premium Benefit - ------ --- ------ ------ ---- ------- ------- ------ Male 45 Non-smoker 1 CVAT 300,000 $5,750 300,000 Male 45 Non-smoker 1 CVAT 150,000 $5,750 300,000
The tables show how death benefits, account values, and surrender values of a hypothetical policy could vary over an extended period of time, assuming the variable divisions had constant hypothetical gross annual investment returns of 0%, 6%, or 12% over the periods indicated in each table. Values would differ from those shown in the tables if the annual investment returns were not constant. The amounts shown would differ if we had used female or unisex rates. These illustrations assume there are no policy loans. We illustrate premium payments as if they were made at the beginning of the year. The third column of each table shows what would happen if an amount equal to the assumed premiums earned interest, after taxes, of 5% compounded annually. The net investment return on your policy is lower than the gross investment return on the variable division. This is due to the mortality and expense risk charge, and the portfolio charge for management fees and portfolio expenses. We show the effect of the net investment return in the amounts for death benefits, account values and surrender values. The tables reflect annual investment management fees of 0.65% of the portfolios' aggregate average daily net assets. This hypothetical rate is a simple average of the investment advisory fees applying to the investment portfolios for the year ending December 31, 1998. We assume other portfolio expenses at the rate of 0.29% of the portfolios' average daily net assets. This is an average of all the portfolios' other expenses for the year ending December 31, 1998, after any absorption by investment portfolio managers has been made. The average of all portfolios' total expenses is 0.94%. Actual fees vary by portfolio. The portfolio fees and expenses used in the illustrations are the net amounts shown after absorption of fees and expenses by the portfolio's investment manager. Absent such absorption, the total average investment management fees, average other portfolio expenses and the average of all portfolios' total expenses used in the illustrations would have been higher (0.72%, 1.15% and 1.87%, respectively). The tables assume that the current expense reimbursement arrangements will continue. However, they may not continue through 1999. The effect of these portfolio charges and expenses, and mortality and expense risk charges results in a net rate of return of: o (1.14)% on a 0% gross rate of return; o 4.85% on a 6% gross rate of return; and o 10.84% on a 12% gross rate of return. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 49 The tables assume that charges have been deducted including deductions for premiums, cost of insurance rider charges, monthly deductions and administrative and sales charges. The tables show charges at our current rates. The tables also show charges at the maximum rates we guarantee in our policies. SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42. The tables reflect that we do not currently charge against the separate account for state or federal taxes. If we charge for the taxes in the future, it will take a higher gross rate of return than the rates shown to produce the same death benefits, account values, and surrender values. If we are asked to do so, we will give you a comparable personal illustration based on: o each insured person's age and gender; o standard premium class assumptions; o initial stated death benefit; o the chosen death benefit option; o scheduled premiums consistent with your policy form; and o special features elected on your policy. For individual policies, at issue we deliver an individualized illustration showing the scheduled premium you chose and the insured person's actual risk class. This Corporate policy is issued only to groups. For this policy, we deliver an illustration similar to the individualized illustration. However, this illustration shows a single life scheduled premium and risk class that is representative of the particular group covered by this policy. We base these hypothetical future benefits on both guaranteed and current cost factor assumptions and actual account value. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 50 [to be filed by amendment] PROSPECT: INSURED PERSON'S NAME MALE 45 NON-TOBACCO USER PRESENTED BY: SECURITY LIFE CORPORATE VARIABLE UNIVERSAL LIFE STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1 ANNUAL PREMIUM: $5,750.00 GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST SUMMARY PAGE ASSUMING GUARANTEED CHARGES Assuming Hypothetical Gross Investment Return of:
-----------0.00%-------- ---------12.00%--------- -----------6.00%---------- PREMIUM CASH CASH CASH ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 5750 2 5750 3 5750 4 5750 5 5750 6 5750 7 5750 8 5750 9 5750 10 5750 15 5750 20 5750 25 5750 30 5750 AGE 65 5750
THE EXPENSE CHARGES AND COST OF INSURANCE RATES WILL NEVER BE GREATER THAN THOSE WHICH WERE USED TO CALCULATE THE ABOVE VALUES. THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO THE DIVISIONS OF THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND THE INVESTMENT EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL GROSS INVESTMENT RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN A DIFFERENT FREQUENCY THAN SHOWN. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 51 [to be filed by amendment] PROSPECT: INSURED PERSON'S NAME: MALE 45 NON-TOBACCO USER PRESENTED BY: SECURITY LIFE CORPORATE LAST SURVIVOR UNIVERSAL LIFE STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1 ANNUAL PREMIUM: $5,750.00 GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST SUMMARY PAGE ASSUMING CURRENT CHARGES Assuming Hypothetical Gross Investment Return of:
--------0.00%------ ---------12.00%--------- ----------6.00%-------- PREMIUM CASH CASH CASH ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 5750 2 5750 3 5750 4 5750 5 5750 6 5750 7 5750 8 5750 9 5750 10 5750 15 5750 20 5750 25 5750 30 5750 AGE 65 5750
THE CURRENT COST OF INSURANCE RATES ARE SUBJECT TO CHANGE. ACCOUNT VALUES WILL VARY FROM THOSE ILLUSTRATED IF ACTUAL RATES DIFFER FROM THOSE ASSUMED. CURRENT MORTALITY CHARGE RATES ARE BASED ON CURRENT MORTALITY EXPERIENCE AND ARE NOT DEPENDENT UPON FUTURE IMPROVEMENTS IN UNDERLYING MORTALITY. THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS AND POLICY CHARGES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO THE DIVISIONS OF THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND THE INVESTMENT EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL GROSS INVESTMENTS RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN A DIFFERENT FREQUENCY THAN SHOWN. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 52 ADDITIONAL INFORMATION DIRECTORS AND OFFICERS Set forth below is information regarding the directors and principal officers of Security Life of Denver Insurance Company. Security Life's address, and the business address of each person named, except as noted with one or two asterisks (*/**), is Security Life Center, 1290 Broadway, Denver, Colorado 80203-5699. The business address of each person denoted with one asterisk (*) is ING North America Insurance Corporation, 5780 Powers Ferry Road, Atlanta, Georgia 30327-4390. The business address of each person denoted with two asterisks (**) is Security Life of Denver Insurance Company, 9140 Arrowpoint Blvd., Suite 400, Charlotte, North Carolina 28273. Name and Principal Business and Address Position and Offices with Security Life of Denver Stephen M. Christopher Chairman, President and Chief Executive Officer Thomas F. Conroy Director, President, ING Reinsurance Michael W. Cunningham* Director, Executive Vice President Linda B. Emory* Director Jess A. Skriletz Chief Executive Officer and General Manager, ING Reinsurance and ING Institutional Markets Gregory G. McGreevey President, ING Institutional Markets Jerome J. Cwiok Executive Vice President and Chief Operations Officer James L. Livingston, Jr. Executive Vice President and Chief Financial Officer Jeffrey R. Messner Executive Vice President and Chief Marketing Officer John R. Barmeyer* Senior Vice President, Chief Legal Officer Wayne D. Bidelman Senior Vice President, CCRC Eugene L. Copeland Senior Vice President and General Counsel, ING Reinsurance Arnold A. Dicke Senior Vice President, Chief Actuary, ING Reinsurance Charles LeDoyen** Senior Vice President, Structured Settlements Terry L. Morrison Senior Vice President, New Business Operations - -------------------------------------------------------------------------------- Corporate Variable Universal Life 53 Name and Principal Jeffery W. Seel* Senior Vice President, Chief Investment Officer Mark A. Smith Senior Vice President, Customer Service Operations Lawrence D. Taylor Senior Vice President, Chief Actuary William D. Tyler* Senior Vice President, Chief Information Officer Katherine Anderson Vice President, Chief Product Actuary, ING Reinsurance Evelyn A. Bentz Vice President, M Financial Sales Joseph H. Bradford, III Vice President, Communications Thomas Kirby Brown, Jr. Vice President, Operations, ING Institutional Markets Douglas W. Campbell Vice President, Agency Sales Kim M. Curley Vice President, Valuation Stanley F. Eckert Vice President, National Marketing Shari A. Enger Vice President and Controller Larry D. Erb Vice President, Information Technology Nathan E. Eshelman Vice President, Product Development Martha K. Evans Vice President, Variable Operations Fitz E. Fisher Vice President, Information Technology Craig Fowler Vice President, Risk Management and Chief Actuary, ING Institutional Markets Deborah B. Holden* Vice President, Corporate Benefits Brian Holland Vice President, Domestic and International Risk Management Thomas D. Hull Vice President, Product Development Kenneth R. Kiefer** Vice President, Structured Settlements, Operations - -------------------------------------------------------------------------------- Corporate Variable Universal Life 54 Name and Principal Stephen F. Kraysler Vice President, Structured Reinsurance C. Lynn McPherson* Vice President Sue A. Miskie Vice President, Corporate Services David S. Pendergrass* Vice President and Treasury Officer Stephen R. Pryde Vice President, Business Operations Christiaan M. Rutten Vice President, International Reinsurance Shelley Ray Schaal-Pettet Vice President, Human Resources Casey J. Scott Vice President, National Marketing Alan C. Singer Vice President, Customer Relations and Regulatory Compliance Jerome M. Strop Vice President, Strategic Marketing Gary W. Waggoner Vice President, General Counsel and Corporate Secretary Amy L. Winsor Vice President and Treasurer William Wojciechowski* Vice President, CCRC Jay Thomas Wolfmeier Vice President and Chief Underwriter Eric G. Banta Assistant Secretary Roger O. Beebe Actuarial Officer John B. Dickinson Actuarial Officer Relda A. Fleshman Deputy General Counsel Shirley A. Knarr Actuarial Officer Glen E. Stark Actuarial Officer William J. Wagner Actuarial Officer - -------------------------------------------------------------------------------- Corporate Variable Universal Life 55 REGULATION We are regulated and supervised by the Division of Insurance of the Department of Regulatory Agencies of the State of Colorado which periodically examines our financial condition and operations. In addition, we are subject to the insurance laws and regulations in every jurisdiction in which we do business. As a result, the provisions of this policy may vary somewhat from jurisdiction to jurisdiction. We are required to submit annual statements, including financial statements, of our operations and finances to the insurance departments of the various jurisdictions in which we do business to determine solvency and compliance with state insurance laws and regulations. We are also subject to various federal securities laws and regulations. LEGAL MATTERS The legal matters in connection with the policy described in this prospectus have been passed on by the General Counsel of Security Life. Sutherland Asbill & Brennan LLP has provided advice on certain matters relating to the federal securities laws. LEGAL PROCEEDINGS Security Life, as an insurance company, is ordinarily involved in litigation. We do not believe that any current litigation is material to Security Life's ability to meet its obligations under the policy or to the variable account, and we do not expect to incur significant losses from such actions. ING America Equities, Inc., the principal underwriter and distributor of the policy, is not engaged in any litigation of any material nature. EXPERTS Actuarial matters in this prospectus have been examined by Lawrence D. Taylor, F.S.A., M.A.A.A., who is Senior Vice President and Chief Actuary of Security Life. His opinion on actuarial matters is filed as an exhibit to the Registration Statement we filed with the SEC. [to be filed by amendment] REGISTRATION STATEMENT We have filed a Registration Statement relating to the Variable Account and the variable life insurance policy described in this prospectus with the SEC. The Registration Statement, which is required by the Securities Act of 1933, includes additional information that is not required in this prospectus under the rules and regulations of the SEC. The additional information may be obtained from the SEC's principal office in Washington, DC. There is a charge for this material. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 56 FINANCIAL STATEMENTS [to be filed by amendment] - -------------------------------------------------------------------------------- Corporate Variable Universal Life 57 APPENDIX A [to be filed by amendment] FACTORS FOR THE CASH VALUE ACCUMULATION TEST FOR A LIFE INSURANCE POLICY
Attained Attained Attained Age Male Female Unisex Age Male Female Unisex Age Male Female Unisex --- ---- ------ ------ --- ---- ------ ------ --- ---- ------ ------ 0 1 34 67 2 35 68 3 36 69 4 37 70 5 38 71 6 39 72 7 40 73 8 41 74 9 42 75 10 43 76 11 44 77 12 45 78 13 46 79 14 47 80 15 48 81 16 49 82 17 50 83 18 51 84 19 52 85 20 53 86 21 54 87 22 55 88 23 56 89 24 57 90 25 58 91 26 59 92 27 60 93 28 61 94 29 62 95 30 63 96 31 64 97 32 65 98 33 66 99 100
- -------------------------------------------------------------------------------- Corporate Variable Universal Life 58 APPENDIX B [to be filed by amendment] PERFORMANCE INFORMATION POLICY PERFORMANCE The following hypothetical illustrations demonstrate how the actual investment experience of each variable investment option of the variable account affects the cash surrender value, account value and death benefit of a policy. These hypothetical illustrations are based on the actual historical return of each portfolio as if a policy had been issued on the date indicated. Each portfolio's Annual Total Return is based on the total return calculated for each fiscal year. These Annual Total Return figures reflect the portfolio's management fees and other operating expenses but do not reflect the policy level or Variable Account asset-based charges and deductions, which if reflected, would result in lower total return figures than those shown. The illustrations are based on the payment of a $5,750 annual premium, paid at the beginning of each year, for a hypothetical policy with a $300,000 face amount death benefit Option 1, issued on a preferred, nonsmoker male, Age 45. It is assumed that all premiums are allocated to the investment option illustrated for the period shown. The benefits are calculated for a specific date. The amount and timing of premium payments and the use of other policy features, such as policy loans, would affect individual policy benefits. The amounts shown for the cash surrender values, account values and death benefits take into account the charges against premiums, current cost of insurance and monthly deductions, the daily charge against the Variable Account for mortality and expense risks, and each portfolio's charges and expenses. See Charges, page 41. This prospectus also contains illustrations based on assumed rates of return. See Illustrations of Death Benefits, Account Values, Surrender Values and Accumulated Premiums, page 49. - -------------------------------------------------------------------------------- Corporate Variable Universal Life 59 HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment] Nonsmoker Male Age 50 Preferred Risk Class Death Benefit Option 1 Stated Death Benefit $1,000,000 Annual Premium $12,500 - -------------------------------------------------------------------------------- AIM VI CAPITAL APPRECIATION FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit AIM VI GOVERNMENT SECURITIES FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit ALGER AMERICAN GROWTH PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit ALGER AMERICAN MIDCAP GROWTH PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit FIDELITY VIP GROWTH PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit FIDELITY VIP OVERSEAS PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit FIDELITY VIP II INDEX 500 PORTFOLIO Year Annual Total Cash Surrender Account Death Ended Return * Value Value Benefit INVESCO VIF EQUITY INCOME FUND Year Annual Total Cash Surrender Account Death Ended Return * Value Value Benefit INVESCO VIF HIGH YIELD FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit - -------------------------------------------------------------------------------- Corporate Variable Universal Life 60 HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment] Nonsmoker Male Age 50 Preferred Risk Class Death Benefit Option 1 Stated Death Benefit $1,000,000 Annual Premium $12,500 INVESCO VIF SMALL COMPANY GROWTH FUND Year Annual Total Cash Surrender Account Death Ended Return * Value Value Benefit INVESCO VIF TOTAL RETURN FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit INVESCO VIF UTILITIES FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit NEUBERGER BERMAN AMT LIMITED MATURITY BOND PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit NEUBERGER BERMAN AMT PARTNERS PORTFOLIO Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit VAN ECK WORLDWIDE BOND FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit VAN ECK WORLDWIDE EMERGING MARKETS FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit VAN ECK WORLDWIDE REAL ESTATE FUND Year Annual Total Cash Surrender Account Death Ended: Return* Value Value Benefit - -------------------------------------------------------------------------------- Corporate Variable Universal Life 61 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. UNDERTAKING REGARDING INDEMNIFICATION Please refer to the Articles of Incorporation listed as Exhibits 1.A(6)(a) and 1.A(6)(b-g) and the By-Laws listed as Exhibits 1.A(6)(h) and 1.A(6)(h)(i). Security Life of Denver's (the "corporation") Certificate of Incorporation and bylaws provide that the corporation shall have every power and duty of indemnification of directors, officers, employees and agents, without limitation, provided by the laws of the state of Colorado. Under Colorado law, the corporation has the power to indemnify such persons against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed action, suit or proceeding, if such person acted in good faith and in a manner which that person reasonably believed to be in or not opposed to the best interest of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In the case of actions by or in the right of the corporation, such indemnification cannot be made where such person is adjudged liable to the corporation, except pursuant to a court order. The corporation is required to indemnify directors, officers, employees and agents against expense actually and reasonably incurred in connection with actions where such persons have been successful on the merits or otherwise in defense of such actions. Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the securities and Exchange commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling preceding, 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. UNDERTAKING REQUIRED BY SECTION 26(E)(2)(A) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED Security Life of Denver Insurance Company represents that 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 Company. CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. Cross-Reference table. The prospectus. - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 1 The undertaking to file reports. The undertaking regarding indemnification. The undertaking required by Section 26(e)2(A) of the Investment Company Act of 1940, as amended. The signatures. Written consents of the following persons: Lawrence D. Taylor (See Exhibit 6B). [To be filed by amendment] Ernst & Young, L.L.P. (See Exhibit 7A). [To be filed by amendment] Sutherland Asbill & Brennan, LLP (See Exhibit 7B). [To be filed by amendment] The following exhibits: 1.A (1) Resolution of the Executive Committee of the Board of Directors of Security Life of Denver Insurance Company ("Security Life of Denver") authorizing the establishment of the Registrant./1/ (2) Not Applicable. (3) (a) Security Life of Denver Distribution Agreement./1/ (b) Specimen Amendment to Broker/Dealer Supervisory and Selling Agreement for Variable Contracts with Compensation Schedule. [To be filed by amendment] (c) Commission Schedule for Policies.[To be filed by amendment] (4) Not Applicable. (5) (a) Specimen Corporate Variable Universal Life Insurance Policy (Form No. 2505(VUL)-3/00). (b) Specimen Adjustable Term Insurance Rider (Form No. R2006-3/00). (c) Certificate of Insurance. (6) (a) Security Life of Denver's Restated Articles of Incorporation./1/ (b-g) Amendments to Articles of Incorporation through June 12, 1987./1/ (h) Security Life of Denver's By-Laws./1/ (i) Bylaws of Security Life of Denver Insurance Company (Restated with Amendments through September 30, 1997)./2/ (7) Not Applicable. (8) (a) Participation Agreements (i) Participation Agreement by and among AIM Variable Insurance Funds, Inc., Life Insurance Company, on Behalf of Itself and its Separate Accounts and Name of Underwriter of Variable Contracts and Policies./3/ (ii) Sales Agreement by and among The Alger American Fund, Fred Alger Management, Inc., and Security Life of Denver Insurance Company./1/ (iii) Sales Agreement by and among Neuberger & Berman Advisers Management Trust, Neuberger & Berman Management Incorporated, and Security Life of Denver Insurance Company./1/ (iv) Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and Security Life of Denver Insurance Company./1/ (v) Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors Corporation and Security Life of Denver Insurance Company./1/ (vi) Participation Agreement among INVESCO Variable Investment Funds, Inc., INVESCO Funds Group, Inc., and Security Life of Denver Insurance Company./1/ (vii) Participation Agreement between Van Eck Investment Trust and the Trust's investment adviser, Van Eck Associates Corporation, and Security Life of Denver Insurance Company./1/ - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 2 (b) (i) Third Amendment to Participation Agreement among Security Life of Denver Insurance Company, INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc./4/ (ii) Fourth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and Security Life of Denver Insurance Company./4/ (iii) Fourth Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors Corporation and Security Life of Denver Insurance Company./4/ (iv) Amendment No. 2 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security Life of Denver Insurance Company and ING America Equities, Inc./4/ (v) Fourth Amendment to Participation Agreement among Security Life of Denver Insurance Company, INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. (vi) Amendment No. 3 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security Life of Denver Insurance Company and ING America Equities, Inc. (9) Not Applicable. (10) Specimen Guaranteed Issue Variable Life Insurance Application with Guaranteed Issue Binding Limited Life Insurance Coverage Form (Form Nos. Q2009-11/97 and Q-1112 B-6/98). 2. Included as Exhibit 1.A(5) above. 3.A Opinion and consent of Gary W. Waggoner as to securities being registered. 4. Not Applicable. 5. Not Applicable. 6.A Opinion and consent of Lawrence D. Taylor.[To be filed by amendment] 7.A Consent of Ernst & Young L.L.P. [To be filed by amendment] B Consent of Sutherland Asbill & Brennan LLP. [To be filed by amendment] 8. Not Applicable. 11. Issuance, Transfer and Redemption Procedures Memorandum.[To be filed by amendment] - --------------- /1/ Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed with the Securities and Exchange Commission on April 27, 1998 (File No. 33-74190). /2/ Incorporated herein by reference to Post-Effective Amendment No. 5 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed with the Securities and Exchange Commission on October 29, 1998 (File No. 33-74190). /3/ Incorporated herein by reference to Post-Effective Amendment No. 6 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed with the Securities and Exchange Commission on March 2, 1998 (File No. 33-74190). /4/ Incorporated herein by reference to the Pre-Effective Amendment No. 2 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed with the Securities and Exchange Commission on May 10, 1999 (File No. 333-72753). - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Security Life of Denver Insurance Company and the Registrant, Security Life Separate Account L1, have duly caused this Registration Statement to be signed on their behalf by the undersigned, hereunto duly authorized, and their seal to be hereunto fixed and attested, all in the City and County of Denver and the State of Colorado on the 8th day of November, 1999. SECURITY LIFE OF DENVER INSURANCE COMPANY (Depositor) BY: /s/ Stephen M. Christopher -------------------------- Stephen M. Christopher President (Seal) ATTEST: /s/ Gary W. Waggoner - -------------------- Gary W. Waggoner SECURITY LIFE SEPARATE ACCOUNT L1 (Registrant) BY: SECURITY LIFE OF DENVER INSURANCE COMPANY (Depositor) BY: /s/ Stephen M. Christopher -------------------------- Stephen M. Christopher President (Seal) ATTEST: /s/ Gary W. Waggoner - -------------------- Gary W. Waggoner - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 4 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities with Security Life of Denver Insurance Company and on the date indicated. PRINCIPAL EXECUTIVE OFFICERS: /s/ Stephen M. Christopher - ----------------------------- Stephen M. Christopher President, Chief Executive Officer and Director /s/ James L .Livingston, Jr. - ----------------------------- James L .Livingston, Jr. Executive Vice President and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: /s/ Shari A. Enger - ----------------------------- Shari A. Enger Vice President and Controller DIRECTORS: /s/ Thomas F. Conroy - ----------------------------- Thomas F. Conroy /s/ Linda B. Emory - ----------------------------- Linda B. Emory Michael W. Cunningham /s/ Michael W. Cunningham - ----------------------------- - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 5 EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- 1.A(3)(b)(v) Fourth Amendment to Participation Agreement among Security Life of Denver Insurance Company, INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. 1.A(3)(b)(vi) Amendment No. 3 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security Life of Denver Insurance Company and ING America Equities, Inc. 1.A(5)(a) Specimen Corporate Variable Universal Life Insurance Policy (Form No. 2505 (VUL)-3/00). 1.A(5)(b) Specimen Adjustable Term Insurance Rider (Form No. R2006-3/00). 1.A(5)(c) Certificate of Insurance. 1.A(10) Specimen Guaranteed Issue Variable Universal Life Insurance Application with Guaranteed Issue Binding Limited Life Insurance Coverage Form (Form Nos. Q2009-11/97 and Q-1112 B-6/98). 3.A Opinion and consent of Gary W. Waggoner as to securities being registered. - -------------------------------------------------------------------------------- Corporate Variable Universal Life II - 6 EX-1 2 INVESCO AMDT 4 Exhibht 1.A(3)(b)(v) FOURTH AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT is made by and among Security Life of Denver Insurance Company, a life insurance company organized under the laws of the State of Colorado ("Insurance Company"), INVESCO Variable Investment Funds, Inc., a Maryland corporation (the "Company"), and INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO") (collectively, the "Parties). WHEREAS, the Parties executed a participation agreement dated August 26, 1994 (the "Participation Agreement"), governing how shares of the Company's portfolios are to be made available to certain variable life insurance and/or variable annuity contracts (the "Contracts") offered by the Insurance Company through certain separate accounts (the "Separate Accounts"); WHEREAS, the various Contracts for which shares are purchased are listed in Schedule B of the Participation Agreement; WHEREAS, the Parties have agreed that it is in their interests to add an additional Contract funded by the Separate Accounts; NOW THEREFORE, in consideration of their mutual promises, the Insurance Company, the Company and INVESCO agree as follows: 1. The Participation Agreement is hereby amended by substituting for the original Schedule B an amended Schedule B in the form attached hereto which adds the Variable Survivorship Universal Life Policy to the list of Contracts funded by the Separate Accounts. Executed this 3rd day of November, 1999. ATTEST: INVESCO Variable Investment Funds, Inc. BY: /s/ Ronald L. Grooms Ronald L. Grooms Senior Vice President ATTEST: Security Life of Denver Insurance Company BY: /s/ Gary W. Waggoner ATTEST: INVESCO Funds Group, Inc. BY: /s/ Ronald L. Grooms Ronald L. Grooms Senior Vice President -1- SCHEDULE B Contracts 1. The Exchequer Variable Annuity (Flexible Premium Deferred Combination Fixed and Variable Annuity Contract) 2. FirstLine (Flexible Premium Variable Life Insurance Policy) 3. Strategic Advantage Variable Universal Life (Flexible Premium Variable Universal Life Insurance Policy) 4. FirstLine II Variable Universal Life (Flexible Premium Variable Universal Life Insurance Policy) 5. Strategic Advantage II Variable Universal Life (Flexible Premium Variable Universal Life Insurance Policy) 6. Variable Survivorship Universal Life (Flexible Premium Variable Universal Life Insurance Policy) 7. Corporate Variable Universal Life (Flexible Premium Variable Universal Life Insurance Policy)
-2- EX-2 3 AIM AMDT 3 Exhibit 1.A(3)(b)(vi) AMENDMENT NO. 3 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated December 3, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, Security Life of Denver Insurance Company, a Colorado life Insurance company and ING America Equities, Inc., a Colorado corporation, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE POLICIES UTILIZING THE FUNDS ACCOUNTS AIM V.I. Government Securities Fund | Separate Account Al | o THE EXCHEQUER VARIABLE ANNUITY - ---------------------------------------- ------------------- ------------------------------------- AIM V.I. Capital Appreciation Fund | Separate Account Ll | o FIRSTLINE VARIABLE UNIVERSAL LIFE AIM V.I. Government Securities Fund | | o FIRSTLINE II VARIABLE UNIVERSAL LIFE | | o STRATEGIC ADVANTAGE VARIABLE | | UNIVERSAL LIFE | | o STRATEGIC ADVANTAGE II VARIABLE | | UNIVERSAL LIFE | | o VARIABLE SURVIVORSHIP UNIVERSAL | | LIFE | | o CORPORATE VARIABLE UNIVERSAL | | LIFE - ---------------------------------------- ------------------- -------------------------------------
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: November 1, 1999 AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ P. Michelle Grace By: /s/ Robert H. Graham Name: P. Michelle Grace Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) 1 of 2 SECURITY LIFE OF DENVER INSURANCE COMPANY Attest: /s/ Eric G. Banta By: /s/ Gary W. Waggoner Name: Eric G. Banta Name: Gary W. Waggoner Title: Assistant Secretary Title: Vice President (SEAL) ING AMERICA EQUITIES, INC. Attest: /s/ Eric G. Banta By: /s/ James L. Livingston, Jr. Name: Eric G. Banta Name: James L. Livingston, Jr. Title: Assistant Secretary Title: President (SEAL) 2 of 2 EX-3 4 CVUL POLICY Exhibit 1.A(5)(a) SECURITY LIFE OF DENVER INSURANCE COMPANY INSURED: JOHN DOE POLICY DATE: March 1, 2000 POLICY NUMBER: 67000001 WE AGREE TO PAY the death benefit to the beneficiary upon the death of the insured while this policy is in force. WE ALSO AGREE to provide the other rights and benefits of the policy. These agreements are subject to the provisions of the policy. RIGHT TO EXAMINE PERIOD. You have the right to examine and return this policy within 10 days after receipt. The policy may be returned by delivering or mailing it to us at our Customer Service Center or to your registered representative. Immediately upon return it will be deemed void as of the policy date. Upon return of the policy to us, we will refund all premiums paid. If this policy is a replacement policy as defined by state law where this policy is delivered, you have the right to examine and return this policy within 20 days. /s/ Gary W. Waggoner /s/ Stephen M. Christopher Secretary President In this policy "you" and "your" refer to the owner of the policy. "We", "us" and "our" refer to Security Life of Denver Insurance Company. THIS POLICY IS A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY. THIS IS A NON-PARTICIPATING POLICY. DEATH BENEFITS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. DEATH BENEFITS ARE PAYABLE BY US UPON THE DEATH OF THE INSURED. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY YOU DURING THE LIFETIME OF THE INSURED UNTIL THE POLICY ANNIVERSARY NEAREST THE INSURED'S 100TH BIRTH DATE. SECURITY LIFE OF DENVER INSURANCE COMPANY A Stock Company Customer Service Center, P.O. Box 173888, Denver, Colorado 80217 Toll Free Number: 1(800) 848-6362 Form 2505 (VUL)-3/00 TABLE OF CONTENTS SCHEDULE.......................................................................5 DEFINITION OF TERMS............................................................6 INSURANCE COVERAGE PROVISIONS..................................................7 EFFECTIVE DATE OF COVERAGE..............................................7 BASE DEATH BENEFIT......................................................7 CHANGE IN REQUESTED INSURANCE COVERAGE..................................8 REQUESTED INCREASES IN COVERAGE..................................8 REQUESTED DECREASES IN COVERAGE..................................8 DEATH BENEFIT OPTION CHANGES.....................................8 CONTINUATION OF COVERAGE AFTER AGE 100..................................9 PAYOUT OF PROCEEDS.....................................................10 PREMIUM PROVISIONS............................................................10 INITIAL PREMIUM ALLOCATION.............................................10 SUBSEQUENT PREMIUM ALLOCATION..........................................11 CHANGES TO PREMIUM ALLOCATIONS.........................................11 SCHEDULED PREMIUMS.....................................................11 UNSCHEDULED PREMIUMS...................................................11 NET PREMIUM............................................................11 PREMIUM LIMITATION.....................................................12 FAILURE TO PAY PREMIUM.................................................12 SEPARATE ACCOUNT PROVISIONS...................................................12 THE SEPARATE ACCOUNT...................................................12 SEPARATE ACCOUNT INVESTMENT OPTIONS....................................12 CHANGES WITHIN THE SEPARATE ACCOUNT....................................13 GENERAL ACCOUNT PROVISIONS....................................................14 THE GENERAL ACCOUNT....................................................14 GUARANTEED INTEREST DIVISION...........................................14 LOAN DIVISION..........................................................14 Form 2505 (VUL)-3/00 Page 2 TRANSFER PROVISIONS...........................................................14 ACCOUNT VALUE PROVISIONS......................................................14 ACCOUNT VALUES ON THE INVESTMENT DATE..................................15 ACCUMULATION UNIT VALUE................................................15 ACCUMULATION EXPERIENCE FACTOR.........................................15 ACCOUNT VALUE OF THE INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT........16 ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION......................16 ACCOUNT VALUE OF THE LOAN DIVISION.....................................17 DEDUCTIONS....................................................................17 MONTHLY DEDUCTION......................................................17 DEFERRED SALES LOAD....................................................17 COST OF INSURANCE......................................................18 LOAN PROVISIONS...............................................................18 POLICY LOANS...........................................................18 LOAN INTEREST..........................................................19 LOAN DIVISION..........................................................19 PARTIAL WITHDRAWAL PROVISIONS.................................................19 SURRENDER PROVISIONS..........................................................20 SURRENDER VALUE........................................................20 BASIS OF COMPUTATIONS..................................................20 FULL SURRENDERS........................................................20 GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS........................21 GRACE PERIOD...........................................................21 TERMINATION............................................................21 REINSTATEMENT..........................................................21 DEFERRAL OF PAYMENT....................................................22 Form 2505 (VUL)-3/00 Page 3 GENERAL POLICY PROVISIONS.....................................................22 THE POLICY.............................................................22 CONTRACT CHANGES.......................................................22 PROCEDURES.............................................................23 OWNERSHIP..............................................................23 BENEFICIARIES..........................................................23 EXCHANGE RIGHT.........................................................23 COLLATERAL ASSIGNMENT..................................................23 INCONTESTABILITY.......................................................24 MISSTATEMENT OF AGE OR GENDER..........................................24 SUICIDE EXCLUSION......................................................24 PERIODIC REPORTS.......................................................24 ILLUSTRATION OF BENEFITS AND VALUES....................................24 NONPARTICIPATING.......................................................25 CUSTOMER SERVICE CENTER................................................25 PAYOUTS OTHER THAN AS ONE SUM.................................................25 ELECTION...............................................................25 PAYOUT OPTIONS.........................................................25 CHANGE AND WITHDRAWAL..................................................26 EXCESS INTEREST........................................................26 MINIMUM AMOUNTS........................................................26 SUPPLEMENTARY POLICY...................................................26 INCOME PROTECTION......................................................27 DEATH OF PRIMARY PAYEE.................................................27 PAYMENTS OTHER THAN MONTHLY............................................27 SETTLEMENT OPTION TABLES......................................................28 ADDITIONAL BENEFITS OR RIDERS, IF ANY, WILL BE LISTED IN THE SCHEDULE. THE ADDITIONAL PROVISIONS WILL BE INSERTED IN THE POLICY. Form 2505 (VUL)-3/00 Page 4 SCHEDULE (Schedule Effective Date: March 1,2000) POLICY INFORMATION Policy Number 67000001 Initial Stated Death Benefit $250,000.00 Adjustable Term Insurance Death Benefit $500,000.00* Policy Date March 1, 2000 Target Death Benefit $750,000.00** Insured JOHN DOE Additional Benefits: Issue Age and Gender 35, Male Adjustable Term Insurance Rider Death Benefit Option OPTION 1 Scheduled Premium $2,000.00 Annually
Definition of Life Insurance Test: Cash Value Accumulation Test Coverage will expire if premiums are insufficient to continue coverage. Coverage will also be affected by partial withdrawals, policy loans, changes in the current cost of insurance rates, the actual credited interest rate for the Guaranteed Interest Division and the investment experience of the Separate Account. *This amount is the amount of adjustable term death benefit on the policy date. This death benefit will vary from time to time, and may depend on your account value. See the rider and policy for details. **This amount is the target death benefit on the policy date. It may change at the beginning of each policy year. See the schedule and rider for details. CUSTOMER SERVICE CENTER: P.O. BOX 173888, DENVER, COLORADO 80217 TOLL FREE NUMBER 1(800) 848-6362 Form 2505 (VUL)-3/00 Page 5 SCHEDULE (CONTINUED) SEGMENT BENEFIT PROFILE (SCHEDULE EFFECTIVE DATE: MARCH 1, 2000)
DESCRIPTION SEGMENT STATED DEATH SEGMENT EFFECTIVE DATE SEGMENT GUIDELINE ANNUAL SEGMENT TARGET PREMIUM SEGMENT PREMIUM CLASS BENEFIT AMOUNT PREMIUM - ------------------------------------------------------------------------------------------------------------------------------------ Segment #1 $250,000 March 1, 2000 $1,445.24 $3,981.00 Standard Non Tobacco
ADDITIONAL BENEFITS: Adjustable Term Insurance Rider rating is the same as Segment #1 A segment is a block of death benefit coverage. The stated death benefit shown on the schedule page at issue is Segment #1. Additional segments may be added to the policy after issue to increase the death benefit. Each individual segment added to the policy has its own cost of insurance charges and expense loads as shown in the schedule. This is further defined in the Definition section of your policy. Form 2505 (VUL)-3/00 Page 5A SCHEDULE (CONTINUED) EXPENSE CHARGES A. PREMIUM EXPENSE CHARGE. This charge will equal the sum of a sales load plus a deferred sales load plus a tax charge. See Net Premium provision for details. 1. SALES LOAD: 0.50% OF EACH PREMIUM. 2. DEFERRED SALES LOAD 3. FEDERAL DEFERRED ACQUISITION COST TAX CHARGE AND OTHER CHARGES (TAX CHARGE): 4.0% of each premium. We reserve the right to increase or decrease the tax charges due to any change in tax laws. We further reserve the right to increase or decrease the tax charge for federal deferred acquisition cost tax due to any change in the cost to us. B. MONTHLY EXPENSE CHARGES: The monthly expense charge will equal the following: PER POLICY CHARGE: $12 per month for the first 12 months $6 per month thereafter ANNUAL MORTALITY AND EXPENSE RISK CHARGE ANNUAL MORTALITY AND EXPENSE RISK CHARGE 0.15% (0.000411% per day) Form 2505 (VUL)-3/00 Page 5B SCHEDULE (CONTINUED) POLICYHOLDER TRANSACTION CHARGES Requests for Sales Illustrations: We reserve the right to charge a $25 fee for each policy illustration over one illustration per policy year. Partial Withdrawal Service Fee: See below. Other Policy Transaction Charges: The charges for transfers between divisions of the Separate Account or between the Guaranteed Interest Division and the Separate Account Divisions; charges for allocation changes; and charges for other Separate Account management functions are governed by the prospectus in effect at the time of the transaction. POLICY LOANS Policy Loan Interest Rate: 3.25% per year Guaranteed Interest Rate Credited To Loan Division: 3.00% per year Minimum Loan Amount: $100 Maximum Loan Amount: See the Loan Provisions section. PARTIAL WITHDRAWALS Minimum Partial Withdrawal Amount: $100 Maximum Partial Withdrawal Amount: Amount which will leave $500 as the net account value Partial Withdrawal Service Fee: $25 Limit On Partial Withdrawals: One per policy year GUARANTEED INTEREST DIVISION Guaranteed Interest Rate For Guaranteed Interest Division: 3.00% per year Form 2505 (VUL)-3/00 Page 5C SCHEDULE (CONTINUED) The policy's base death benefit at any time will be at least equal to the account value times the appropriate factor from this table. DEFINITION OF LIFE INSURANCE CASH VALUE ACCUMULATION TEST DEATH BENEFIT FACTORS
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- Insured's Attained Factor Insured's Factor Insured's Factor Insured's Factor Age Attained Age Attained Age Attained Age - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 15 7.564 40 3.439 65 1.692 90 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 16 7.335 41 3.330 66 1.654 91 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 17 7.118 42 3.226 67 1.617 92 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 18 6.911 43 3.125 68 1.583 93 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 19 6.713 44 3.028 69 1.550 94 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 20 6.521 45 2.936 70 1.518 95 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 21 6.334 46 2.846 71 1.488 96 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 22 6.150 47 2.761 72 1.459 97 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 23 5.969 48 2.678 73 1.432 98 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 24 5.791 49 2.599 74 1.406 99 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 25 5.615 50 2.522 75 1.382 100 and older - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 26 5.441 51 2.449 76 1.359 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 27 5.271 52 2.378 77 1.338 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 28 5.104 53 2.311 78 1.318 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 29 4.940 54 2.246 79 1.299 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 30 4.781 55 2.184 80 1.281 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 31 4.626 56 2.125 81 1.264 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 32 4.476 57 2.068 82 1.248 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 33 4.330 58 2.014 83 1.233 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 34 4.188 59 1.962 84 1.218 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 35 4.052 60 1.912 85 1.205 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 36 3.920 61 1.864 86 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 37 3.793 62 1.818 87 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 38 3.670 63 1.774 88 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ ------------- 39 3.553 64 1.732 89 - --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
Form 2505 (VUL)-3/00 Page 5D SCHEDULE (CONTINUED) TABLE OF GUARANTEED RATES-SEGMENT #1 Guaranteed Maximum Cost of Insurance Rates Per $1000 of Net Amount at Risk (These rates apply to the Base Policy.)
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- Attained Age Monthly Cost of Attained Age Monthly Cost of Attained Age Monthly Cost of Attained Age Monthly Cost of Insurance Rate Insurance Rate Insurance Rate Insurance Rate - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 15 0.11085 36 0.18670 57 1.04192 78 7.04089 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 16 0.12585 37 0.20004 58 1.13378 79 7.64551 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 17 0.13919 38 0.21505 59 1.23235 80 8.30507 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 18 0.14836 39 0.23255 60 1.34180 81 9.03761 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 19 0.15502 40 0.25173 61 1.46381 82 9.86724 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 20 0.15836 41 0.27424 62 1.60173 83 10.80381 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 21 0.15919 42 0.29675 63 1.75809 84 11.82571 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 22 0.15752 43 0.32260 64 1.93206 85 12.91039 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 23 0.15502 44 0.34929 65 2.12283 86 14.03509 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 24 0.15169 45 0.37931 66 2.32623 87 15.18978 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 25 0.14752 46 0.41017 67 2.54312 88 16.36948 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 26 0.14419 47 0.44353 68 2.77350 89 17.57781 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 27 0.14252 48 0.47856 69 3.02328 90 18.82881 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 28 0.14169 49 0.51777 70 3.30338 91 20.14619 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 29 0.14252 50 0.55948 71 3.62140 92 21.57655 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 30 0.14419 51 0.60870 72 3.98666 93 23.20196 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 31 0.14836 52 0.66377 73 4.40599 94 25.28174 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 32 0.15252 53 0.72636 74 4.87280 95 28.27411 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 33 0.15919 54 0.79730 75 5.37793 96 33.10677 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 34 0.16669 55 0.87326 76 5.91225 97 41.68475 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 35 0.17586 56 0.95591 77 6.46824 98 58.01259 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ -------------------- 99 83.33333 - ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
The rates shown are for a standard premium class. If the policy is based on a premium class other than standard, the maximum cost of insurance rates will be adjusted using the rating factor shown in the Segment Benefit Profile of the Schedule for the premium class. If the premium class is a stated percentage increase, the maximum cost of insurance rates will be determined by multiplying the rates for a standard premium class shown above by the rating factor show in the Segment Benefit Profile of the Schedule. If the premium class is a flat amount per $1,000, the maximum cost of insurance rates will be determined by adding the flat amount per $1,000 shown in the Segment Benefit Profile of the Schedule to the rate per $1,000 for the standard premium class shown above. The rates shown above are based on the 1980 Commissioners' Standard Ordinary Male Smoker Composite Mortality Table (Male), age nearest birth date. Form 2505 (VUL)-3/00 Page 5E DEFINITION OF TERMS ACCOUNT VALUE - The sum of the amounts allocated to the investment options of the Separate Account and to the Guaranteed Interest Division, as well as any amount set aside in the Loan Division to secure a policy loan. ACCUMULATION UNIT - A unit of measurement used to calculate the account value in each investment option of the Separate Account. ACCUMULATION UNIT VALUE - The value of an accumulation unit of each investment option of the Separate Account. The accumulation unit value is determined as of each valuation date. AGE - The policy is issued at the age shown in the Schedule. Each issue age is the age nearest birthday on the policy date. BASE DEATH BENEFIT - The base death benefit is defined in the Base Death Benefit provision of the policy. CUSTOMER SERVICE CENTER - Our administrative office whose address is P. O. Box 173888, Denver, CO 80217. INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT - The investment options available, each of which invests in shares of one of the portfolios. Five-Day deemed delivery time. Five (5) days from the day we mail you your policy. GENERAL ACCOUNT - The account that contains all of our assets other than those held in the Separate Account or our other separate accounts. GUARANTEED INTEREST DIVISION - Part of our General Account to which a portion of the account value may be allocated and which provides guarantees of principal and interest. INVESTMENT DATE -The first time we allocate funds to your policy. We will allocate the initial net premium to your policy at the end of the valuation period during which the latest of the following requirements is satisfied: 1) we receive the amount of premium required for coverage to begin under the policy; 2) we have approved the policy for issue, and 3) all issue requirements have been met and received in our Customer Service Center. LOAN DIVISION - Part of our General Account in which funds are set aside to secure any outstanding policy loan and accrued loan interest when due. MONTHLY PROCESSING DATE - The date each month on which the monthly deductions from the account value are due. The first monthly processing date will be the policy date or the investment date, if later. Subsequent monthly processing dates will be the same date as the policy date each month thereafter. If that date is not a valuation date, monthly processing will use the next calculated accumulation unit value. NET ACCOUNT VALUE - The amount of the account value minus any policy loan and accrued loan interest. This is the same as your surrender value. NET PREMIUM - The net premium equals the premium paid minus the premium expense charges shown in the Schedule. These charges are deducted from the premium before the premium is applied to your account value. PARTIAL WITHDRAWAL - The withdrawal of a portion of your net account value from the policy. The partial withdrawal may reduce the amount of base death benefit in force. POLICY LOAN - The sum of amounts you have borrowed from your policy, increased by any policy loan interest capitalized when due, and reduced by any policy loan repayments. RIGHT TO EXAMINE PERIOD - The period of time within which the owner may examine the policy and return it for a refund. SCHEDULED PREMIUM - The premium amount that you specify on the application as the amount you intend to pay at fixed intervals over a specified period of time. Premiums may be paid on a monthly, quarterly, semiannual, or annual basis, as you determine. You need not pay the scheduled premium and you may change it at any time. Form 2505 (VUL)-3/00 Page 6 Also, within limits, you may pay less or more than the scheduled premium. SEGMENT - The stated death benefit shown on the Segment Benefit Profile of the Schedule is the initial segment, or Segment #1. Each increase in the stated death benefit (other than due to an option change) is a new segment. Each new segment will be shown separately on the Segment Benefit Profile of the Schedule. The first year for a segment begins on the effective date of the segment and ends one year later. Each subsequent year begins at the end of the prior segment year. Each new segment may be subject to a new sales load, new cost of insurance charges and new incontestability and suicide exclusion periods. STATED DEATH BENEFIT -The sum of the segments under the policy. The stated death benefit changes when there is an increase or a decrease or when a transaction on the policy causes it to change (for example, a partial withdrawal under an Option 1 base death benefit may cause the stated death benefit to change). TARGET DEATH BENEFIT - The target death benefit for your policy is defined in the Adjustable Term Insurance Rider, if any, attached to the policy. VALUATION DATE - Each date as of which the net asset value of the shares of the portfolios and unit values of the divisions are determined. Except for days that a division's corresponding portfolio does not value its shares, a valuation date is any day: (a) The New York Stock Exchange ("NYSE") is open for trading and on which Security Life's Customer Service Center is open for business; or (b) as may be required by law. VALUATION PERIOD - The period which begins at 4:00 p.m. Eastern Time on a valuation date and ends at 4:00 p.m. Eastern Time on the next succeeding valuation date. Form 2505 9VUL)-3/00 Page 6a INSURANCE COVERAGE PROVISIONS EFFECTIVE DATE The policy date shown in the Schedule is the effective date for all coverage provided in the original application. The policy date is the date from which we measure policy years and determine the monthly processing date. The first monthly processing date is the investment date. Future monthly processing dates are the same calendar day of each month as the policy date unless this is not a valuation date in which case the monthly processing date occurs on the next valuation date. A policy anniversary occurs each year on the same month and day as the policy date unless this is not a valuation date in which case the policy anniversary occurs on the next valuation date. The effective date for new segments and additional benefits is shown in the Schedule. BASE DEATH BENEFIT The base death benefit will be, at any time, determined as follows: Option 1: Under Option 1, the base death benefit is the greater of: (a) The stated death benefit; or (b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. Option 2: Under Option 2, the base death benefit is the greater of: (a) The stated death benefit plus the account value, or (b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. Option 3: Under Option 3, the base death benefit is the greater of: (a) The stated death benefit plus premiums paid less withdrawals, or (b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. The stated death benefit and the death benefit option are shown in the Schedule. This policy is designed to qualify as a life insurance contract under the Internal Revenue Code. All terms and provisions of the policy shall be construed in a manner consistent with that design. The base death benefit in force at any time shall not be less than the amount of insurance necessary to achieve such qualification under the applicable provisions of the Internal Revenue Code in existence at the time the policy is issued. We reserve the right to amend the policy or adjust the amount of insurance when required. We will send you a copy of any policy amendment. Form 2505 (VUL)-3/00 Page 7 CHANGE IN REQUESTED INSURANCE COVERAGE You may request that the insurance coverage be increased or decreased. Decreases are not allowed before the first policy anniversary. The change in coverage may not be for an amount less than $1,000. The effective date of the change will be the monthly processing date immediately following the date your written application is approved by us. After any change to the stated death benefit, you will receive an amended Schedule reflecting the change, the benefit under any riders, if applicable, the guaranteed cost of insurance rates, the guideline annual premium and the new target premium. REQUESTED INCREASES IN COVERAGE Subject to our limits, you may request an increase in the stated death benefit through attained age 75. An increase will become effective as of the monthly processing date immediately following the date your written application is approved by us. You must provide evidence satisfactory to us that the insured is insurable according to our normal rules of underwriting for the applicable premium class for this type of policy. This evidence will include an application and may include required medical information. An increase will consist of a new segment of stated death benefit . Each new segment will result in a new sales load which will be deducted from the premium allocated to the new segment. A new deferred sales load will be deducted from the premium. The new segment may also be subject to new monthly expense charges, new cost of insurance charges and new incontestability and suicide exclusion periods. REQUESTED DECREASES IN COVERAGE After the first policy anniversary, you may request a decrease in the stated death benefit. We will limit the decrease such that, immediately after the requested decrease: (a) If there is no adjustable term insurance on the policy, the stated death benefit is at least $50,000. (b) If there is adjustable term insurance on the policy, the target death benefit is at least $50,000. A decrease will be effective as of the monthly processing date immediately following the date your written application is approved by us. A decrease will first reduce Adjustable Term Insurance Rider coverage, if attached to your policy, and will then reduce each of the stated death benefit segments in the same proportion as the stated death benefit is reduced. DEATH BENEFIT OPTION CHANGES Beginning with the first monthly processing date and ending with the policy anniversary nearest the insured's 100th birth date, you may request to change the death benefit option. This change will be effective as of the monthly processing date next following approval. A death benefit option change applies to the entire stated death benefit. We may not allow any change if it would reduce the target death benefit below the minimum we require to issue this policy at the time of reduction. Death benefit option changes from Option 1 to Option 3, from Option 2 to Option 3 and from Option 3 to Option 2 are not allowed. After the effective date of the change, the stated death benefit will be changed according to the following table: Form 2505 (JTVUL)-8/99 Page 8
OPTION CHANGE FROM TO STATED DEATH BENEFIT FOLLOWING THE OPTION CHANGE EQUALS: Option 1 Option 2 Stated death benefit prior to such change minus your account value as of the effective date of the change. Option 2 Option 1 Stated death benefit prior to such change plus your account value as of the effective date of the change. Option 3 Option 1 Stated death benefit prior to such change plus the sum of the premiums paid minus partial withdrawals taken as of the effective date of the change.
To determine the segment stated death benefit after an option change, your account value will be allocated to each segment in the same proportion that segment bears to the stated death benefit as of the effective date of the change. CONTINUATION OF COVERAGE AFTER AGE 100 If the policy is in force on the policy anniversary nearest the insured's 100th birth date, the policy will continue pursuant to the terms of the policy. On this date, the following will occur: (a) The target death benefit on the policy anniversary nearest the insured's 100th birth date will then become the stated death benefit for the policy and any remaining death benefit in force under the Adjustable Term Insurance Rider will terminate. (b) All other riders attached to the policy also will terminate. (c) The portion of your account value invested in the investment options of the Separate Account will be transferred into the Guaranteed Interest Division and no further investment in the Separate Account will be allowed. (d) If the death benefit option in force on the policy is Option 2 or Option 3, the policy will be converted to death benefit Option 1 in accordance with the procedures outlined in the Death Benefit Option Changes provision of the policy. No further changes will be allowed to the death benefit option. After the policy anniversary nearest the insured's 100th birth date, no further premiums will be accepted and no monthly deductions will be made. However, a one-time administrative fee of $200 will be charged against the policy's account value. We will continue to credit interest to the account value in the Guaranteed Interest Division. Policy loans and withdrawals continue to be available. Any existing policy loan will continue. Policy loan interest will continue to accrue. Payments on policy loans and policy loan interest will be accepted. The policy will enter the 61-day grace period if the surrender value is zero or less. If you do not want coverage to continue past the policy anniversary nearest the insured's 100th birth date, the policy may be surrendered at that time, or earlier. Form 2505 (VUL)-3/00 Page 9 PAYOUT OF PROCEEDS Proceeds refer to the amount we will pay: a) upon surrender of the policy; or b) upon the death of the insured. The proceeds upon surrender of this policy will be the net account value. The amount of proceeds payable upon the death of the insured will be the base death benefit in effect on the date of death, plus any amounts payable from any additional benefits provided by rider, minus any outstanding policy loan including accrued but unpaid interest, minus any unpaid monthly deductions incurred prior to the date of death. The calculation of the death proceeds will be computed as of the date of the insured's death. We will determine the amount of proceeds payable upon the death of the insured when we have received due proof of death and any other information which is necessary to process the claim. Any proceeds we pay are subject to adjustments as provided in the Misstatement of Age or Gender, Suicide Exclusion and Incontestability provisions. We will pay proceeds in one sum unless you request an alternate form of payment. There are many possible methods of payment. The available payout options are described in the Payouts Other Than As One Sum provision. Contact us or your registered representative for additional information. Interest will be paid on the one sum death proceeds from the date of death to the date of payment, or until a payout option is selected. Interest will be at the rate we declare, or at any higher rate required by law. PREMIUM PROVISIONS INITIAL PREMIUM ALLOCATION If the 5-day deemed delivery time plus your right to examine period have not ended on the investment date, net premium amounts designated for allocation to investment options of the Separate Account will be allocated on the investment date to the Money Market Division and any net premium amount designated for allocation to the Guaranteed Interest Division will be allocated to that division. Any additional net premium amounts received after the investment date and before the end of the 5-day deemed delivery time plus your right to examine period will be allocated in the same manner as the initial net premium, at the end of the valuation period during which we receive the premium at our Customer Service Center. On the valuation date immediately following the end of the 5-day deemed delivery time plus your right to examine period, the balance of the amount in the Money Market Division will be transferred to other investment options of the Separate Account according to your allocation instructions. The amounts allocated to the Guaranteed Interest Division will remain in that division. If the 5-day deemed delivery time plus your right to examine period has ended on the investment date, initial net premium amounts will be allocated on the investment date to investment options of the Separate Account and/or to the Guaranteed Interest Division in accordance with your allocation instructions. Form 2505 (JTVUL)-8/99 Page 10 SUBSEQUENT PREMIUM ALLOCATIONS After the initial premium allocation, all future scheduled and unscheduled premiums will be allocated to the investment options of the Separate Account in accordance with your allocation instructions. This allocation will occur at the end of the valuation period during which we receive the premium at our Customer Service Center. CHANGES TO PREMIUM ALLOCATIONS You may change your premium allocation in accordance with instructions included in your annual policy prospectus. If the change causes a premium allocation charge to be incurred according to the Schedule, we will deduct a charge from the investment options of the Separate Account and from the Guaranteed Interest Division as described in the prospectus in effect at the time of the transaction. SCHEDULED PREMIUMS The scheduled premium as shown in the Schedule may be paid while this policy is in force prior to the policy anniversary nearest the insured's 100th birth date. You may increase or decrease the amount of the scheduled premium, subject to limits we may set and provisions in the Premium Limitation section. Under conditions provided in the Grace Period provision, you may be required to make premium payments to keep the policy in force. You may pay premiums on a monthly basis through an automated payment facility. All payment modes are subject to our minimum requirements for the payment mode selected. UNSCHEDULED PREMIUMS You may make unscheduled premium payments at any time the policy is in force prior to the policy anniversary nearest the insured's 100th birth date, subject to the Premium Limitation section. Unless you tell us otherwise, these premium payments will first be applied to reduce or pay off any existing policy loan and, as such, premium expense charges will not be deducted. NET PREMIUM The net premium equals the premium paid minus the premium expense charge shown in the Schedule. The premium expense charge is the sales load plus the tax charge. The tax charge is the applicable tax percentage times the premium. To determine the sales load, we multiply the applicable percentage sales load times the premium allocated to the segment. There is a different percentage sales load for the allocated premium that is below the segment target premium than for the allocated premium that is above that segment target premium. The Form 2505 (JTVUL)-8/99 Page 11 applicable percentage sales load also depends on the segment year the premium is received. Each premium received is allocated to the existing segments. (If there is only one segment the entire premium is allocated to that segment.) Premiums are allocated in the same proportion that the target premium of each segment bears to the sum of the target premiums of all segments. The Schedule shows: (1) the target premium for each segment; (2) the percentage sales loads; (3) the deferred sales load; and (4) the tax percentage. PREMIUM LIMITATION We will refund any premium that causes your policy not to qualify as a life insurance policy under the Internal Revenue Code. No premium may be paid after the death of the insured. No premium may be paid after the policy anniversary nearest the insured's 100th birth date. FAILURE TO PAY PREMIUM If you stop paying premiums prior to the policy anniversary nearest the insured's 100th birth date, your coverage may lapse. See your Grace Period provision for details. SEPARATE ACCOUNT PROVISIONS THE SEPARATE ACCOUNT The Separate Account is an account established by us, pursuant to the laws of the State of Colorado, to separate the assets funding the benefits for the class of policies to which this policy belongs from the other assets of Security Life of Denver Insurance Company. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940. All income, gains and losses, whether or not realized, from assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to income, gains or losses of our General Account. The assets of the Separate Account are our property but are separate from our General Account and our other Separate Accounts. That portion of the assets of the Separate Account which is equal to the reserves and other policy liabilities with respect to the Separate Account is not chargeable with liabilities arising out of any other business we may conduct or subject to creditor claims against us. SEPARATE ACCOUNT INVESTMENT OPTIONS The Separate Account is divided into investment options, each of which invests in a fund portfolio designed to meet the objectives of the investment option. The current eligible investment options are shown in your annual policy prospectus. We may, from time to time, add additional investment options. If we do, you may be permitted to select from these other divisions subject to the terms and conditions we may impose on those allocations. Form 2505 (VUL)-3/00 Page 12 We reserve the right to limit the number of divisions in which you may invest over the life of the policy. This limit, if any, will be listed in the updated policy prospectus provided to you each year. CHANGES WITHIN THE SEPARATE ACCOUNT When permitted by law, and subject to any required notice to you and approval of the Securities and Exchange Commission ("SEC"), state regulatory authorities or policy owners, we may from time to time make the following changes to the Separate Account: o Make additional investment options available. These investment options will invest in portfolios we find suitable for the policy. o Eliminate investment options from the Separate Account or combine 2 or more investment options. o Substitute a new portfolio for the portfolio in which a investment option invests. A substitution may become necessary if, in our judgment, a portfolio no longer suits the purposes of the policy. This may happen due to a change in laws or regulations, or a change in a portfolio's investment objectives or restrictions. This may also happen if the portfolio is no longer available for investment, or for some other reason, such as a declining asset base. o Transfer assets of the Separate Account, which we determine to be associated with the class of policies to which your policy belongs, to another Separate Account. o Withdraw the Separate Account from registration under the Investment Company Act of 1940. o Operate the Separate Account as a management investment company under the Investment Company Act of 1940. o Invest one or more investment option in a mutual fund other than, or in addition to, the portfolios. o Discontinue the sale of policies. o Terminate any employer or plan trustee agreement with us pursuant to its terms. o Restrict or eliminate any voting rights as to the Separate Account. o Make any changes required by the Investment Company Act of 1940 or the rules or regulations thereunder. Form 2505 (VUL)-3/00 Page 13 GENERAL ACCOUNT PROVISIONS THE GENERAL ACCOUNT The General Account holds all of our assets other than those held in the Separate Account or our other separate accounts. The Guaranteed Interest Division is a part of our General Account. GUARANTEED INTEREST DIVISION The Guaranteed Interest Division is another division to which you may allocate premiums or make transfers. The account value of the Guaranteed Interest Division is equal to amounts allocated to this division plus any earned interest minus deductions taken from this division. Interest is credited at the guaranteed rate shown in the schedule or may be credited at a higher rate. Any higher rate is guaranteed to be in effect for at least a 12-month period. LOAN DIVISION The Loan Division is the account that is set aside to secure the policy loan, if any. See the Loan Provisions section for information. TRANSFER PROVISIONS After the initial premium allocation and until the policy anniversary nearest the insured's 100th birth date, your account value in each division may be transferred to any other investment option of the Separate Account or to the Guaranteed Interest Division upon your request. One transfer from the Guaranteed Interest Division into the variable divisions may be made during the first 30 days of each policy year. Additional limitations, requirements and charges for transfers will be listed in and governed by your annual policy prospectus in effect at the time of the transfer. We reserve the right to modify these limitations, requirements and charges from time to time. On the policy anniversary nearest the insured's 100th birth date, your account value in each investment option of the Separate Account will be transferred into the Guaranteed Interest Division and no further transfers will be allowed. ACCOUNT VALUE PROVISIONS The account value is the sum of the current amounts allocated to the investment options of the Separate Account and to the Guaranteed Interest Division plus your balance in the Loan Division. Form 2505 (VUL)-3/00 Page 14 The account value is based on the premiums paid, policy and rider charges assessed, loans and withdrawals taken, monthly deductions, premium expense charges, transaction charges, and the investment experience or credited interest of the divisions to which your account value is allocated. Your net account value is equal to your account value minus any policy loan and accrued but unpaid loan interest. ACCOUNT VALUES ON THE INVESTMENT DATE The account value of each investment option of the Separate Account and the Guaranteed Interest Division as of the investment date is equal to: a) The allocation to that division of the first net premium paid; minus b) The portion of any monthly deductions allocated to that division due on the investment date. ACCUMULATION UNIT VALUE The investment experience of an investment option of the Separate Account is determined as of each valuation date. We use an accumulation unit value to measure the experience of each of the Separate Account investment options during a valuation period. We generally set the accumulation unit value at $10 when each investment option is opened. The accumulation unit value for a valuation date equals the accumulation unit value for the preceding valuation date multiplied by the accumulation experience factor defined below for the valuation period ending on the valuation date. The number of units for a given transaction related to an investment option of the Separate Account as of a valuation date is determined by dividing the dollar value of that transaction by that division's accumulation unit value for that date. ACCUMULATION EXPERIENCE FACTOR For each investment option of the Separate Account, the accumulation experience factor reflects the investment experience of the portfolio in which that option invests and the charges assessed against that investment option for a valuation period. The accumulation experience factor is calculated as follows: a) The net asset value of the portfolio in which that investment option invests as of the end of the current valuation period; plus b) The amount of any dividend or capital gains distribution declared and reinvested in the portfolio in which that investment option invests during the current valuation period; minus c) A charge for taxes, if any. d) The result of (a), (b) and (c) is then divided by the net asset value of the portfolio in which that investment option invests as of the end of the preceding valuation period. e) The daily equivalent of the annual mortality and expense risk charge shown in the Schedule for each day in the current valuation period is then subtracted from the result obtained in (d). Form 2505 (VUL)-3/00 Page 15 ACCOUNT VALUE OF THE INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT On subsequent valuation dates after the investment date, your account value of each investment options of the Separate Account is calculated as follows: a) The number of accumulation units in an investment option as of the beginning of the current valuation period multiplied by that option's accumulation unit value for the current valuation period; plus b) Any additional net premiums allocated to that investment option during the current valuation period; plus c) Any account value transferred to or minus any account value transferred from the Separate Account during the current valuation period (including the applicable portion of any transfer fee); minus d) Any partial withdrawals allocated to the investment option and any applicable withdrawal service fees which are allocated to the Separate Account during the current valuation period; plus e) Any amounts released from the Loan Division as a result of a loan or loan interest payment, or minus amounts transferred to the Loan Division as a result of any loans which are allocated to the Variable Division during the current valuation period; minus f) The portion of the monthly deduction allocated to the Separate Account, if a monthly processing date occurs during the current valuation period; minus g) The deferred sales load, if any. ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION On valuation dates after the investment date, your account value of the Guaranteed Interest Division is calculated as follows: a) The account value of the Guaranteed Interest Division at the end of the preceding valuation period plus interest at the declared rate credited during the current valuation period; plus b) Any additional net premiums allocated to the Guaranteed Interest Division plus interest credited to these premiums during the current valuation period; plus c) Any account value transferred to or minus any account value transferred from the Guaranteed Interest Division during the current valuation period (including the applicable portion of any transfer fee); minus d) Any partial withdrawals taken and any applicable withdrawal service fees which are allocated to the Guaranteed Interest Division during the current valuation period; plus e) Any amounts released from the Loan Division as a result of a loan or loan interest payment, or minus amounts transferred to the Loan Division as a result of any loans which are allocated to the Guaranteed Interest Division during the current valuation period; minus f) The portion of the monthly deduction allocated to the Guaranteed Interest Division, if a monthly processing date occurs during the current valuation period; minus g) The deferred sales load, if any. Form 2505 (VUL)-3/00 Page 16 ACCOUNT VALUE OF THE LOAN DIVISION On valuation dates after the investment date, your account value of the Loan Division is equal to: a) The account value of the Loan Division on the prior valuation date; plus b) Any interest credited to the Loan Division during the valuation period; plus c) An amount equal to any additional loans since the prior valuation date; minus d) Any loan repayments, including payment of loan interest; plus e) The amount of accrued loan interest if the valuation date is a policy anniversary; minus f) The amount of interest credited to the Loan Division during the year if the valuation date is a policy anniversary. On policy anniversaries, any amount of interest credited to the Loan Division during the year is transferred from the Loan Division to the Separate Account and Guaranteed Interest Division according to your premium allocation then in effect. DEDUCTIONS MONTHLY DEDUCTION The monthly deduction is equal to: a) The cost of insurance charges for this policy; plus b) The monthly charges for any other additional benefits provided by riders in force under the policy; plus c) The monthly expense charges shown in the Schedule; plus d) The policyholder transaction charges as described in the Schedule as applicable. The monthly deductions are allocated to the divisions of the Separate Account and Guaranteed Interest Division as described in the prospectus in effect at the time of the transaction. This deduction is taken from your account value as of the monthly processing date. These deductions will display in periodic reports that we send you at least once per policy year. After the policy anniversary nearest the insured's 100th birth date no further monthly deductions will be made, except policy transaction charges incurred after this date. DEFERRED SALES LOAD The deferred sales load will be deducted annually on each policy anniversary. It is calculated based on a percentage of premiums paid in prior policy years up to the target premium. Form 2505 (VUL)-3/00 Page 17 COST OF INSURANCE The cost of insurance for the policy is the sum of the cost of insurance for all segments. A segment's cost of insurance is the cost of insurance rate for the premium class for the segment multiplied by the net amount at risk allocated to the segment. It is determined on a monthly basis. The net amount at risk is (a) minus (b) where: a) Is the base death benefit for all segments as of the monthly processing date after the monthly deductions (other than cost of insurance charges for the base death benefit, and any Adjustable Term Insurance Rider), divided by the result of 1 plus the monthly equivalent of the guaranteed interest rate for the Guaranteed Interest Division as shown in the Schedule; and b) Is your account value as of the monthly processing date after the monthly deductions (other than the cost of insurance charges for the base death benefit and any Adjustable Term Insurance Rider). The net amount at risk will be allocated to a segment in the same proportion as that segment's stated death benefit bears to the sum of the stated death benefits for all segments. The cost of insurance rate for each segment will be determined by us from time to time. Different rates will apply to each segment. They will be based on the age of the insured as of the effective date of segment coverage, the duration since the coverage began and the segment premium class. Any change in rates will apply to all individuals of the same premium class and whose policies have been in effect for the same length of time. The rates will never exceed those rates shown in the Table of Guaranteed Rates for the segment as adjusted for any rating. These tables are in the Schedule. LOAN PROVISIONS POLICY LOANS You may obtain a policy loan on or after the first monthly processing date. The maximum amount you may borrow at any time equals the net account value on the date of the loan request less all monthly deductions to the next policy anniversary, or 13 monthly deductions if you take a loan within the 30 day period before your next policy anniversary. The policy loan is a first lien on your policy. The minimum amount you may borrow is shown in the Schedule. The outstanding policy loan amount is equal to the loan amount as of the beginning of the policy year plus new loans and minus loan repayments, plus accrued interest. LOAN INTEREST The annual policy loan interest rate is shown in the Schedule. If a loan is made, interest is due and payable at the end of the policy year. Thereafter, interest on the loan amount is due annually at the end of each policy year until the loan is repaid. If interest is not paid when due, it is added to the policy loan. If the policy loan amount and any accrued interest equals or exceeds the account value, a premium sufficient to keep this policy in force must be paid as provided in the Grace Period provision. Form 2505 (VUL)-3/00 Page 18 LOAN DIVISION When a policy loan is taken or when interest is not paid in cash when due, an amount equal to the loan or unpaid loan interest respectively, is transferred from the investment options of the Separate Account and the Guaranteed Interest Division to the Loan Division to secure the loan. This amount will be deducted from the investment options of the Separate Account and the Guaranteed Interest Division in the same proportion that your account value in each investment option bears to your net account value as of the date the transfer is effective unless otherwise specified in your instructions to us. Your account value in the Loan Division will be credited with interest at the interest rate for the Loan Division shown in the Schedule. When a loan repayment is made, an amount equal to the repayment is transferred from the Loan Division to the Guaranteed Interest Division and the investment options of the Separate Account in the same proportion as your current premium allocation unless you request a different allocation in writing. PARTIAL WITHDRAWAL PROVISIONS You may apply for a partial withdrawal from your account value on any monthly processing date after the first policy anniversary by writing to us at our Customer Service Center. The minimum and maximum partial withdrawal amounts are shown in the Schedule. When a partial withdrawal is made, the amount of the withdrawal plus a service fee is deducted from your account value. The amount of the service fee is shown in the Schedule. We limit the number of partial withdrawals in a policy year. This number is shown in the Schedule. The stated death benefit is reduced by the amount of the partial withdrawal unless one of the following exceptions applies. The stated death benefit is not reduced by a partial withdrawal taken when the base death benefit has been increased to qualify your policy as life insurance under the Internal Revenue Code and the amount withdrawn is not greater than that which reduces your account value to the level which no longer requires the base death benefit to be increased for Internal Revenue Code purposes. For a policy under an Option 1 death benefit, the stated death benefit is not reduced by a partial withdrawal: a) If no more than 15 years have elapsed since the policy date; b) If the insured is not yet age 81; and c) If the partial withdrawal taken is less than the greater of 10% of your account value or 5% of the stated death benefit, calculated immediately before the partial withdrawal. Any additional amount withdrawn reduces your stated death benefit by that additional amount. For a policy under an Option 2 death benefit, a partial withdrawal does not reduce your stated death benefit. For a policy under an Option 3 death benefit, a partial withdrawal reduces your stated death benefit by any amount of the partial withdrawal in excess of premiums paid, less prior withdrawals, to the date of the partial withdrawal. Any reduction in death benefit or account value will occur as of the date the partial withdrawal occurs. We will limit the amount of the partial withdrawal such that, immediately after the requested withdrawal: Form 2505 (VUL)-3/00 Page 19 a) If there is no adjustable term insurance on the policy, the stated death benefit is at least $50,000. b) If there is adjustable term insurance on the policy, the target death benefit is at least $50,000. You may specify how much of the withdrawal you wish taken from each investment option of the Separate Account or from the Guaranteed Interest Division. You may not withdraw from the Guaranteed Interest Division more than the total withdrawal times the ratio of your account value in the Guaranteed Interest Division to your net account value immediately prior to the withdrawal. Unless you indicate otherwise, we will make the withdrawal from the amounts in the Guaranteed Interest Division and the investment options of the Separate Account in the same proportion that your account value in each investment option bears to your net account value immediately prior to the withdrawal. The withdrawal service fee deducted from your account value is deducted from each Variable Division and the Guaranteed Interest Division as described in the prospectus in effect at the time of the transaction. We may send you a new Schedule to reflect the effect of the withdrawal if there is any change to the stated death benefit. We may ask you to return your policy to our Customer Service Center to make this change. The withdrawal and the reductions in death benefits will be effective as of the valuation date after we receive your request. SURRENDER PROVISIONS SURRENDER VALUE The surrender value on any date will be your account value minus any policy loan including accrued but unpaid loan interest. BASIS OF COMPUTATIONS The surrender value under the policy is not less than the minimum required as of the policy date by the state in which your policy was delivered. A detailed statement of the method of computation of policy values under the policy has been filed with the insurance department of the state in which the policy was delivered, if required. FULL SURRENDERS You may surrender your policy after the Right to Examine Period or at any time during the lifetime of the insured and receive the surrender value. We will compute the surrender value as of the next valuation date after we receive both your request and the policy at our Customer Service Center. This policy will be canceled as of the date we receive your request, and there will be no further benefits under this policy. Once you surrender this policy, it cannot be reinstated. Form 2505 (VUL)-3/00 Page 20 GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS GRACE PERIOD If the net account value is zero or less on a monthly processing date, the policy will enter a 61-day grace period: We will give you a 61-day grace period from this monthly processing date to make the required premium payment. The required premium payment then due must be paid to keep the policy in force. If this amount is not received in full by the end of the grace period, the policy will lapse without value. The required premium payment will be equal to past due charges plus an amount we expect to be sufficient to keep the policy and any riders in force for 2 months following receipt of the required premium payment. If we receive at least the required premium payment during the grace period, we will apply the net premium payment to the policy and make deductions for the past due amounts. Notice of the amount of the required premium payment will be mailed to you or any assignee at the last known address at least 30 days before the end of the grace period. If the insured dies during the grace period, we will deduct any overdue monthly charges from the death proceeds of the policy. TERMINATION All coverage provided by this policy will end as of the earliest of: a) The date the policy is surrendered; b) The date of the death of the insured; or c) The date the grace period ends without payment of the required premium. REINSTATEMENT The policy and its riders may be reinstated within five years after the beginning of the grace period. The reinstatement will be effective as of the monthly processing date on or next following the date we approve your written application. We will reinstate the policy and any riders if the following conditions are met: a) You have not surrendered the policy for its surrender value; b) You submit evidence satisfactory to us that the insured and those insured under any riders are still insurable according to our normal rules of underwriting for the applicable underwriting class for this type of policy; and c) We receive payment of the amount of premium sufficient to keep the policy and any riders in force from the beginning of the grace period to the end of the expired grace period and for 2 months after the date of reinstatement. We will let you know, at the time you request reinstatement, the amount of premium needed for this purpose. Form 2505 (VUL)-3/00 Page 21 We will reinstate any policy loan, with accrued loan interest to the end of the grace period, which existed when coverage ended. Upon reinstatement, the net premium received minus past due amounts will be allocated to the investment options of the Separate Account and the Guaranteed Interest Division according to the premium allocation percentages in effect at the start of the grace period or as directed by you in writing at the time of reinstatement. DEFERRAL OF PAYMENT Requests for transfers, withdrawals, policy loans or payment of proceeds for a full surrender will be mailed within 7 days of receipt of the request in a form acceptable to us. However, we may postpone the processing of any such Separate Account transactions for any of the following reasons: a) The New York Stock Exchange (NYSE) is closed, other than customary weekend and holiday closings. b) Trading on the NYSE is restricted by the Securities and Exchange Commission (SEC). c) The SEC declares that an emergency exists as a result of which disposal of securities in the Separate Account is not reasonably practicable to determine your account value in the divisions. d) A governmental body having jurisdiction over the Separate Account by order permits such suspension. Rules and regulations of the SEC, if any, are applicable and will govern as to whether conditions described in (b), (c), or (d) exist. Death proceeds will be paid within 7 days of determination of the proceeds and are not subject to deferment. We may defer for up to 6 months payment of any surrender proceeds, withdrawal or loan amounts from the Guaranteed Interest Division. GENERAL POLICY PROVISIONS THE POLICY The policy, including the original application and applications for any increases, decreases, riders, endorsements, any Schedule pages, and any reinstatement applications make up the entire contract between you and us. A copy of the original application will be attached to the policy at issue or at delivery. A copy of any application as well as a new Schedule will be attached or furnished to you for attachment to the policy at the time of any change in coverage. In the absence of fraud, all statements made in any application will be considered representations and not warranties. No statement will be used to deny a claim unless it is in an application. CONTRACT CHANGES All changes made by us must be signed by our president or an officer and by our secretary or assistant secretary. No other persons can change any of this policy's terms and conditions. Form 2505 (VUL)-3/00 Page 22 PROCEDURES We must receive any election, designation, assignment or any other change request you make in writing, except those specified on the application. It must be in a form acceptable to us. We may require a return of the policy for any change or for a full surrender. We are not liable for any action we take before we receive and record the written request at our Customer Service Center. In the event of the death of the insured, please notify us, or our agent, as soon as possible. Upon notification to us, or our agent, instructions will be sent to you or the beneficiary immediately. We may require proof of age and a certified copy of the death certificate. We may require the beneficiary and next of kin to sign authorizations as part of due proof. These authorization forms allow us to obtain information about the decedent, including, but not limited to, medical records of physicians and hospitals used by the decedent. Settlement will be made upon receipt of due proof of death. OWNERSHIP The original owner is the person or entity named as the owner in the application. You, as the owner, can exercise all rights and receive the benefits until the death of the insured. This includes the right to change the owner, beneficiaries, and methods for the payment of proceeds. All rights of the owner are subject to the rights of any assignee and any irrevocable beneficiary. You may name a new owner by sending written notice to us. The effective date of the change to the new owner will be the date you sign the notice. The change will not affect any payment made or action taken by us before recording the change at our Customer Service Center. BENEFICIARIES The primary beneficiary surviving the insured will receive any death proceeds which become payable. Surviving contingent beneficiaries are paid death proceeds only if no primary beneficiary has survived the insured. If more than one beneficiary in a class survives the insured, they will share the death proceeds equally, unless your designation provides otherwise. If there is no designated beneficiary surviving, you or your estate will be paid the death proceeds. The beneficiary designation will be on file with us or at a location designated by us. Until the death of the insured, you may name a new beneficiary. The effective date of the change will be the date the request was signed. We will pay proceeds to the most recent beneficiary designation on file. We will not be subject to multiple payments. EXCHANGE RIGHT If, for any reason, within the first 2 policy years you want to exchange this policy for a policy in which values do not vary with the investment experience of the Separate Account, we will exchange this policy. The exchange will be implemented by transferring your account value in all the Divisions of the Separate Account to the Guaranteed Interest Division and removing your future right to choose to allocate funds to the Divisions of the Separate Account. This transfer will not be subject to the excess transfer charge. We will require a return of this policy before this change will be processed. COLLATERAL ASSIGNMENT You may assign this policy as collateral security by written notice to us. Once it is recorded with us, the rights of the owner and beneficiary are subject to the assignment. It is your responsibility to make sure the assignment is valid. Form 2505 (VUL)-3/00 Page 23 INCONTESTABILITY After this policy has been in force during the insured's life from the policy date, we will not contest the statements in the application attached at issue. After this policy has been in force during the insured's life from the effective date of any new segment or from the effective date of an increase in any other benefit, we will not contest the statements in the application for the new segment or other increase. After this policy has been in force while the insured is alive for 2 years from the effective date of any reinstatement, we will not contest the statements in the application for such reinstatement. MISSTATEMENT OF AGE OR GENDER If the insured's age or gender has been misstated, the death benefit will be adjusted. The death benefit will be that which the cost of insurance, which was deducted from your Account Value on the last monthly processing date prior to the insured's death, would have purchased for the insured's correct age and gender. If the death benefit adjustment is made prior to death, the adjusted benefit will be to an equitable amount determined by us. This adjustment will reflect the death benefit for the correct age or gender. SUICIDE EXCLUSION If the insured commits suicide, while sane or insane, within 2 years of the policy date, we will make a limited payment to the beneficiary. We will pay in one sum the amount of all premiums paid to us during that time, minus any outstanding policy loan (including accrued but unpaid interest) and partial withdrawals. Coverage under the policy and all riders will then terminate. If the insured commits suicide, while sane or insane, within 2 years of the effective date of a new segment or of an increase in any other benefit, we will make a limited payment to the beneficiary for the new segment or other increase. This payment will equal the cost of insurance and any applicable monthly expense charges deducted for such increase. Coverage under that segment will then terminate. PERIODIC REPORTS We will send you, without charge, at least once each year a report that shows the current account value, cash surrender value and premiums paid since the last report. The report will also show the allocation of your account value as of the date of the report and the amounts added to or deducted from your account value of each division since the last report. The report will include any other information that may be currently required by the insurance supervisory official of the jurisdiction in which this policy is delivered. ILLUSTRATION OF BENEFITS AND VALUES We will send you, upon written request, a hypothetical illustration of future death benefits and account values. This illustration will include the information as required by the laws or regulations where this policy is delivered. If you request more than one illustration during a policy year, we reserve the right to charge a reasonable fee for each additional illustration. The maximum amount of this fee is shown in the Schedule. Form 2505 (VUL)-3/00 Page 24 NONPARTICIPATING The policy does not participate in our surplus earnings. CUSTOMER SERVICE CENTER Our Customer Service Center is at the address shown in the Schedule. Unless you are otherwise notified: a) All requests and payments should be sent to us at our Customer Service Center; and b) All transactions are effective as of the valuation date the required information is received at our Customer Service Center. PAYOUTS OTHER THAN AS ONE SUM ELECTION During the insured's lifetime, you may elect to have the beneficiary receive the proceeds other than in one sum. If you have not made an election, the beneficiary may do so within 60 days after we receive due proof satisfactory to us of the insured's death. You may also elect to take the net cash surrender value of the policy upon its surrender other than in one sum. Satisfactory written request must be received at our Customer Service Center before payment can be made. A payee that is not a natural person may not be named without our consent. The various methods of settlement are described in the following Payout Options section. PAYOUT OPTIONS OPTION I. PAYOUTS FOR A DESIGNATED PERIOD. Payouts will be made in annual, semi-annual, quarterly or monthly installments per year as elected for a designated period, which may be 5 to 30 years. The installment dollar amounts will be equal except for any excess interest as described below. The amount of the first monthly payout for each $1,000 of account value applied is shown in Settlement Option Table I. OPTION II. LIFE INCOME WITH PAYOUTS FOR A DESIGNATED PERIOD. Payouts will be made in annual, semi-annual, quarterly or monthly installments per year throughout the payee's lifetime, or if longer, for a period of 5, 10, 15 or 20 years as elected. The installment dollar amounts will be equal except for any excess interest as described below. The amount of the first monthly payout for each $1,000 of account value applied is shown in Settlement Option Table II. This option is available only for ages shown in the table. Payouts for Payout Option II will be determined by using the 1983 Individual Annuity Mortality Table for the appropriate gender at 3 1/2% interest. OPTION III. HOLD AT INTEREST. Amounts may be left on deposit with us to be paid upon the death of the payee or at any earlier date elected. Interest on any unpaid balance will be at the rate declared by us or at any higher rate required by law. Interest may be accumulated or paid in 1, 2, 4, or 12 installments per year, as elected. Money may not be left on deposit for more than 30 years. Form 2505 (VUL)-3/00 Page 25 OPTION IV. PAYOUTS OF A DESIGNATED AMOUNT. Payouts will be made until proceeds, together with interest which will be at the rate declared by us or at any higher rate required by law, are exhausted. Payouts will be made in annual, semi-annual, quarterly or monthly equal installments per year, as elected. OPTION V. OTHER. Settlement may be made in any other manner as agreed upon in writing between you (or the beneficiary) and us. CHANGE AND WITHDRAWAL You may change an election at any time before the death of the insured. If you have given the beneficiary the right to make changes or withdrawals, or if the beneficiary has elected the option, the beneficiary (as primary payee) may take the actions below. a) Changes may be made from Payout Options I, III, and IV to another option. b) Full withdrawals may be made under Payout Option III or IV. Partial withdrawals of not less than $300 may be made under Payout Option III. c) Remaining installments under Payout Option I may be commuted at 3 1/2% interest and received in one sum. d) Changes in any contingent payee designation may be made. A written request must be sent to our Customer Service Center in writing to make a change or withdrawal. We also may require that you send in the supplementary policy. We may defer payment of commuted and withdrawable amounts for a period up to 6 months. EXCESS INTEREST If we declare that Payout Options are to be credited with an interest rate above that guaranteed, it will apply to Payout Options I, II, III, and IV. The crediting of excess interest for one period does not guarantee the higher rate for other periods. Any declared interest rate will be in effect for at least 12 months. MINIMUM AMOUNTS The minimum amount which may be applied under any option is $2,000. If the payments to the payee are ever less than $20, we may change the frequency of payments so as to result in payments of at least that amount. SUPPLEMENTARY POLICY When a payout option becomes effective, the policy will be surrendered in exchange for a supplementary policy. It will provide for the manner of settlement and rights of the payees. The supplementary policy's effective date will be the date of death or the date of other settlement. The first payment under Options I, II, and IV will be payable as of the effective date. The first interest payment under Option III will be made as of the end of the interest payment period elected. Subsequent payments will be made in accordance with the frequency of payment elected. The supplementary policy may not be assigned or payments made to another without our consent. Form 2505 (VUL)-3/00 Page 26 INCOME PROTECTION Unless otherwise provided in the election, a payee does not have the right to commute, transfer or encumber amounts held or installments to become payable. To the extent provided by law, the proceeds, amount retained, and installments are not subject to any payee's debts, policies, or engagements. DEATH OF PRIMARY PAYEE Upon the primary payee's death, any payments certain under Option I or II, interest payments under Option III, or payments under Option IV will be continued to the contingent payee; or, amounts may be released in one sum if permitted by the policy. The final payee will be the estate of the last to die of the primary payee and any contingent payee. PAYMENTS OTHER THAN MONTHLY The tables that follow show monthly installments for Options I and II. To arrive at annual, semiannual, or quarterly payments, multiply the appropriate figures by 11.813, 5.957 or 2.991 respectively. Factors for other periods certain or for other options that may be provided by mutual agreement will be provided upon reasonable request. Form 2505 (VUL)-3/00 Page 27 SETTLEMENT OPTION TABLES SETTLEMENT OPTION TABLE I (Per $1,000 of Net Proceeds) - ---------------------- ---------------- ------------------- ----------------- No. of Monthly No. of Monthly Years Payable Installments Years Payable Installments - ---------------------- ---------------- ------------------- ----------------- 1 $84.65 16 6.76 - ---------------------- ---------------- ------------------- ----------------- 2 43.05 17 6.47 - ---------------------- ---------------- ------------------- ----------------- 3 29.19 18 6.20 - ---------------------- ---------------- ------------------- ----------------- 4 22.27 19 5.97 - ---------------------- ---------------- ------------------- ----------------- 5 18.12 20 5.75 - ---------------------- ---------------- ------------------- ----------------- - ---------------------- ---------------- ------------------- ----------------- 6 15.35 21 5.56 - ---------------------- ---------------- ------------------- ----------------- 7 13.38 22 5.39 - ---------------------- ---------------- ------------------- ----------------- 8 11.90 23 5.24 - ---------------------- ---------------- ------------------- ----------------- 9 10.75 24 5.09 - ---------------------- ---------------- ------------------- ----------------- 10 9.83 25 4.96 - ---------------------- ---------------- ------------------- ----------------- - ---------------------- ---------------- ------------------- ----------------- 11 9.09 26 4.84 - ---------------------- ---------------- ------------------- ----------------- 12 8.46 27 4.73 - ---------------------- ---------------- ------------------- ----------------- 13 7.94 28 4.63 - ---------------------- ---------------- ------------------- ----------------- 14 7.49 29 4.53 - ---------------------- ---------------- ------------------- ----------------- 15 7.10 30 4.45 - ---------------------- ---------------- ------------------- ----------------- Form 2505 (VUL)-3/00 Page 28 SETTLEMENT OPTION TABLE II FEMALE ( Per $1,000 of Net Proceeds)
- ------------------------------------------------------------------------------------------------------------------------------------ Age of Payee Nearest Monthly Age of Payee Nearest Monthly Birth date When First Installment Birth date When First Installments Installment is Payable Installment is Payable - ------------------------------------------------------------------------------------------------------------------------------------ 5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years Female Certain Certain Certain Certain Female Certain Certain Certain Certain - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 15 3.19 3.19 3.19 3.19 41 3.76 3.76 3.75 3.73 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 16 3.20 3.20 3.20 3.20 42 3.80 3.80 3.78 3.77 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 17 3.22 3.22 3.21 3.21 43 3.84 3.84 3.82 3.81 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 18 3.23 3.23 3.23 3.23 44 3.88 3.88 3.86 3.84 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 19 3.24 3.24 3.24 3.24 45 3.93 3.92 3.91 3.88 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 20 3.26 3.26 3.26 3.25 46 3.98 3.97 3.95 3.92 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 21 3.27 3.27 3.27 3.27 47 4.03 4.02 4.00 3.97 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 22 3.29 3.29 3.29 3.28 48 4.08 4.07 4.05 4.01 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 23 3.31 3.30 3.30 3.30 49 4.13 4.12 4.10 4.06 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 24 3.32 3.32 3.32 3.32 50 4.19 4.18 4.15 4.11 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 25 3.34 3.34 3.34 3.33 51 4.25 4.24 4.21 4.16 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 26 3.36 3.36 3.35 3.35 52 4.32 4.30 4.26 4.21 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 27 3.38 3.38 3.37 3.37 53 4.38 4.36 4.33 4.27 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 28 3.40 3.40 3.39 3.39 54 4.46 4.43 4.39 4.32 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 29 3.42 3.42 3.41 3.41 55 4.53 4.51 4.46 4.38 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 30 3.44 3.44 3.43 3.43 56 4.61 4.58 4.53 4.44 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 31 3.46 3.46 3.46 3.45 57 4.70 4.66 4.60 4.51 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 32 3.49 3.48 3.48 3.48 58 4.79 4.75 4.68 4.57 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 33 3.51 3.51 3.51 3.50 59 4.88 4.84 4.76 4.64 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 34 3.54 3.54 3.53 3.52 60 4.99 4.93 4.84 4.70 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 35 3.57 3.56 3.56 3.55 61 5.09 5.03 4.93 4.77 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 36 3.60 3.59 3.59 3.58 62 5.21 5.14 5.02 4.84 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 37 3.63 3.62 3.62 3.61 63 5.33 5.25 5.12 4.91 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 38 3.66 3.65 3.65 3.64 64 5.46 5.37 5.21 4.98 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 39 3.69 3.69 3.68 3.67 65 5.60 5.50 5.31 5.05 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ---------- 40 3.73 3.72 3.71 3.70 66 5.75 5.63 5.42 5.12 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
Form 2505 (VUL)-3/00 Page 29 SETTLEMENT OPTION TABLE II/FEMALE (Continued) ( Per $1,000 of Net Proceeds)
- ------------------------------------------------------------------------------------------------------------------------------------ Age of Payee Nearest Monthly Age of Payee Nearest Monthly Birth date When First Installment Birth date When First Installments Installment is Payable Installment is Payable - ------------------------------------------------------------------------------------------------------------------------------------ 5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years Female Certain Certain Certain Certain Female Certain Certain Certain Certain - ---------------------- ------- -------- -------- --------- ---------------------- ----------- -------------- ---------- ----------- 67 5.91 5.77 5.53 5.19 92 14.45 9.61 7.09 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 68 6.08 5.91 5.63 5.25 93 14.81 9.66 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 69 6.26 6.07 5.74 5.32 94 15.16 9.70 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 70 6.46 6.23 5.86 5.37 95 15.49 9.73 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 71 6.67 6.40 5.97 5.43 96 15.80 9.76 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 72 6.89 6.58 6.08 5.48 97 16.11 9.79 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 73 7.13 6.76 6.18 5.52 98 16.40 9.80 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 74 7.39 6.95 6.29 5.57 99 16.68 9.82 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 75 7.67 7.14 6.39 5.60 100 16.95 9.82 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 76 7.96 7.34 6.48 5.63 101 17.20 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 77 8.28 7.54 6.57 5.66 102 17.43 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 78 8.61 7.74 6.65 5.68 103 17.62 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 79 8.97 7.94 6.72 5.70 104 17.78 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 80 9.34 8.13 6.79 5.71 105 17.91 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 81 9.73 8.32 6.84 5.72 106 18.00 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 82 10.14 8.50 6.89 5.73 107 18.06 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 83 10.57 8.67 6.94 5.74 108 18.09 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 84 11.01 8.83 6.97 5.74 109 18.11 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 85 11.46 8.97 7.00 5.75 110 18.11 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 86 11.91 9.10 7.02 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 87 12.36 9.22 7.04 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 88 12.81 9.32 7.06 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 89 13.25 9.41 7.07 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 90 13.67 9.48 7.08 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------ 91 14.07 9.55 7.09 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
Form 2505 (VUL)-3/00 Page 30 SETTLEMENT OPTION TABLE II MALE ( Per $1,000 of Net Proceeds)
- ------------------------------------------------------------------------------------------------------------------------------------ Age of Payee Nearest Monthly Age of Payee Nearest Monthly Birth date When First Installment Birth date When First Installments Installment is Payable Installment is Payable - ------------------------------------------------------------------------------------------------------------------------------------ 5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years Male Certain Certain Certain Certain Male Certain Certain Certain Certain - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 15 3.28 3.28 3.27 3.27 41 4.01 4.00 3.97 3.94 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 16 3.29 3.29 3.29 3.28 42 4.06 4.04 4.01 3.98 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 17 3.31 3.31 3.30 3.30 43 4.11 4.09 4.06 4.02 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 18 3.32 3.32 3.32 3.32 44 4.16 4.14 4.11 4.06 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 19 3.34 3.34 3.34 3.33 45 4.22 4.20 4.16 4.11 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 20 3.36 3.36 3.35 3.35 46 4.28 4.25 4.21 4.16 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 21 3.38 3.38 3.37 3.37 47 4.34 4.31 4.27 4.21 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 22 3.40 3.40 3.39 3.39 48 4.41 4.38 4.33 4.26 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 23 3.42 3.42 3.41 3.41 49 4.48 4.44 4.39 4.31 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 24 3.44 3.44 3.43 3.43 50 4.55 4.51 4.45 4.36 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 25 3.46 3.46 3.45 3.45 51 4.62 4.58 4.52 4.42 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 26 3.49 3.48 3.48 3.47 52 4.70 4.66 4.58 4.48 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 27 3.51 3.51 3.50 3.49 53 4.79 4.74 4.65 4.54 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 28 3.54 3.53 3.53 3.52 54 4.88 4.82 4.73 4.60 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 29 3.56 3.56 3.55 3.54 55 4.97 4.91 4.80 4.66 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 30 3.59 3.59 3.58 3.57 56 5.07 5.00 4.88 4.72 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 31 3.62 3.62 3.61 3.60 57 5.17 5.10 4.97 4.78 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 32 3.65 3.65 3.64 3.62 58 5.29 5.20 5.05 4.85 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 33 3.68 3.68 3.67 3.65 59 5.41 5.31 5.14 4.91 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 34 3.72 3.71 3.70 3.68 60 5.53 5.42 5.23 4.97 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 35 3.75 3.75 3.73 3.72 61 5.67 5.54 5.33 5.04 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 36 3.79 3.78 3.77 3.75 62 5.81 5.67 5.42 5.10 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 37 3.83 3.82 3.81 3.78 63 5.97 5.80 5.52 5.16 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 38 3.87 3.86 3.85 3.82 64 6.13 5.94 5.62 5.22 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 39 3.92 3.90 3.89 3.86 65 6.31 6.08 5.72 5.28 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- ------------- 40 3.96 3.95 3.93 3.90 - ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
Form 2505 (VUL)-3/00 Page 31 SETTLEMENT OPTION TABLE II/MALE (Continued) (Per $1,000 of Net Proceeds)
- ------------------------------------------------------------------------------------------------------------------------------------ Age of Payee Nearest Monthly Age of Payee Nearest Monthly Birth date When First Installment Birth date When First Installments Installment is Payable Installment is Payable - ------------------------------------------------------------------------------------------------------------------------------------ 5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years Male Certain Certain Certain Certain Male Certain Certain Certain Certain - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 66 6.49 6.23 5.82 5.33 91 14.64 9.64 7.09 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 67 6.69 6.38 5.92 5.38 92 15.00 9.68 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 68 6.90 6.54 6.02 5.43 93 15.34 9.72 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 69 7.12 6.71 6.12 5.48 94 15.68 9.75 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 70 7.35 6.87 6.21 5.52 95 16.00 9.78 7.10 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 71 7.60 7.05 6.30 5.55 96 16.30 9.80 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 72 7.86 7.22 6.39 5.59 97 16.59 9.81 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 73 8.13 7.40 6.47 5.62 98 16.86 9.82 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 74 8.42 7.57 6.55 5.64 99 17.11 9.83 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 75 8.72 7.75 6.62 5.66 100 17.33 9.83 7.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 76 9.04 7.92 6.69 5.68 101 17.53 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 77 9.37 8.09 6.75 5.70 102 17.69 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 78 9.72 8.26 6.81 5.71 103 17.82 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 79 10.08 8.42 6.86 5.72 104 17.92 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 80 10.44 8.57 6.90 5.73 105 18.00 9.83 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 81 10.82 8.71 6.94 5.74 106 18.05 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 82 11.21 8.85 6.97 5.74 107 18.08 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 83 11.59 8.97 7.00 5.75 108 18.10 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 84 11.99 9.09 7.02 5.75 109 18.11 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 85 12.38 9.20 7.04 5.75 110 18.11 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 86 12.76 9.29 7.05 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 87 13.15 9.38 7.07 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 88 13.53 9.46 7.08 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 89 13.91 9.53 7.08 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- ------------- 90 14.28 9.59 7.09 5.75 - ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
Form 2505 (VUL)-3/00 Page 32 THIS POLICY IS A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY THIS IS A NON-PARTICIPATING POLICY DEATH BENEFITS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. DEATH BENEFITS ARE PAYABLE BY US UPON THE DEATH OF THE INSURED. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY YOU DURING THE LIFETIME OF THE INSURED UNTIL THE POLICY ANNIVERSARY NEAREST THE INSURED'S 100TH BIRTH DATE. TO OBTAIN INFORMATION OR MAKE A COMPLAINT, CONTACT SECURITY LIFE OF DENVER INSURANCE COMPANY AT: Customer Service Center P. O. Box 173888 Denver, Colorado 80217 Toll Free Number: 1(800)848-6362 SECURITY LIFE OF DENVER INSURANCE COMPANY A Stock Company Form 2505 (VUL)-3/00 EX-4 5 SNGL LIFE TERM INS RIDER Exhibit 1.A(5)(b) ADJUSTABLE TERM INSURANCE RIDER This rider is a part of the policy to which it is attached if this rider is shown in the Schedule. This rider must be read with all policy provisions. This rider does not participate in our surplus earnings. The insured under this rider is listed in the Schedule. This rider has no loan value. There is no surrender charge applicable to this rider. The rider effective date is the policy date or, if added later, the monthly processing date on or next following the date your application for this rider is approved by us. The owner of the policy is the owner of this rider. THE DEATH BENEFIT. Subject to this rider's terms, we will pay the term death benefit in force on the date of the insured's death. This benefit is payable to the beneficiary. The amount of term death benefit is the difference between the total death benefit and the base death benefit provided by the policy. Total death benefit depends on which death benefit option is in effect. Option 1: If option 1 is in effect, the total death benefit is the greater of a) The target death benefit; or b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. Option 2: If option 2 is in effect, the total death benefit is the greater of: a) The target death benefit plus the account value; or b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. Option 3. If option 3 is in effect, the total death benefit is the greater of: a) The target death benefit plus premiums paid less withdrawals, or b) The account value multiplied by the appropriate factor from the Death Benefit Factors shown in the Schedule. In no event will the term death benefit be less than zero. It is also not increased or decreased by policy loan activity. In your application for this rider you may request a pattern of increasing or decreasing target death benefits. The actual target death benefit is subject to our approval. The target death benefit is shown in the Schedule attached to your policy. It may be a constant amount or it may change at the beginning of a policy year. The target death benefit may be reduced if there is a partial withdrawal. If a partial withdrawal reduces the stated death benefit, the target death benefit for the current year and all future years will be reduced by an amount equal to the reduction in the stated death benefit. You will receive a new Schedule reflecting the new target death benefit. See your policy for details. The stated death benefit is defined in your policy. Any requested decrease in the stated death benefit in the policy will eliminate any future scheduled increases in the target death benefit. We may choose not to eliminate these increases upon submission of evidence satisfactory to us that the insured is still insurable according to our normal rules of underwriting for their current premium classes. R2006-3/00 COST OF INSURANCE. The cost of insurance for this rider is determined on a monthly basis. The cost is added to the policy's monthly deduction from the account value as of each monthly processing date until this rider terminates. The cost of insurance rates will be determined by us from time to time. They will be based on the issue age, and premium classes of the insured as well as the duration since the rider effective date. The cost of insurance for this rider is calculated as the monthly cost of insurance rate multiplied by the death benefit (in thousands) for this rider. The monthly guaranteed maximum cost of insurance rates per $1,000 for this rider are shown in the Schedule on the applicable table of guaranteed rates attached to your policy. INCONTESTABILITY. After this rider has been in force while the insured is alive for two years from the rider effective date, we will not contest the statements in the application for this rider attached at the time the rider is issued. After this rider has been in force while the insured is alive for two years from the effective date of any increase in the amount of insurance, we will not contest the statements in the application for the increase. After this rider has been in force while the insured is alive for two years from the effective date of any reinstatement of this rider, we will not contest the statements in the application for such reinstatement of this rider. SUICIDE EXCLUSION. If the policy terminates for suicide, this rider will then terminate without value. If the insured commits suicide, while sane or insane, within two years of the rider effective date and the policy is not terminated due to this suicide, we will terminate this rider and make a limited payment to the beneficiary for the rider. We will pay in one sum the amount of the cost of insurance for this rider which was deducted from the policy. If the insured commits suicide, while sane or insane, within two years of the effective date of an increase and the policy is not terminated due to this suicide, we will terminate the increase and pay the cost of insurance associated with the increase. MISSTATEMENT OF AGE OR GENDER. If the insured's age or gender has been misstated, the death benefit will be adjusted. The death benefit will be that which the cost of insurance which was deducted from the policy value on the last monthly processing date prior to the death of the insured would have purchased for the insured's correct age or gender. If the death benefit adjustment is made prior to the death of the insured, the adjusted benefit will be to an equitable amount determined by us. The adjustment will reflect the death benefit for the correct age or gender. CHANGE IN AMOUNT OF COVERAGE. On any policy anniversary after the first rider anniversary, the target death benefit under this rider may be changed. The target death benefit may be increased or decreased by sending a written request to our Customer Service Center. Any request for increased death benefits will automatically be an increase to the stated death benefit as well as to the target death benefit unless you specifically request an increase only to the target death benefit. You may increase or decrease the target death benefit only once each policy year. You may not increase insurance coverage provided by this rider after attained age 75. Any change in coverage may not be for an amount less than $1,000. Such change is subject to the following conditions: a) Any requested decrease in target death benefit is subject to our approval. Our approval may be conditioned on eliminating any future increases to the target death benefit that are shown in the Schedule. R2006-3/00 Page 2 b) Any request for an increase must be applied for on a supplemental application. The increase is subject to evidence satisfactory to us that the insured is still insurable according to our normal rules of underwriting for the current premium class for this type of rider. If there is no change in premium class, the increase will be processed. c) For any increase or addition to coverage, the effective date will be the monthly processing date that falls on or next follows the date the supplemental application is approved by us. For any decrease in coverage, the effective date will be the monthly processing date that falls on or next follows receipt of the written request to reduce coverage. d) Any decrease in the total death benefit will first reduce adjustable term insurance before stated death benefit is reduced. For any change in coverage, a supplemental Schedule will be issued. TERMINATION. This rider will terminate on the earliest of the following dates: a) Expiration of the grace period of the policy. b) Termination or surrender of the policy. c) Receipt by us of a written request from you to cancel this rider on any monthly processing date. d) Policy anniversary nearest the insured's 100th birth date. Any deduction for the cost of insurance after termination of this rider will not be considered a reinstatement of this rider nor a waiver by us of the termination. Any such deduction will be credited to the account value of the policy as of the date of the deduction. REINSTATEMENT. If you reinstate your policy under the Reinstatement provision in the policy, this rider will be reinstated. Signed for the company at Denver, Colorado SECURITY LIFE OF DENVER INSURANCE COMPANY /s/ Gary W. Waggoner SECRETARY R2006-3/00 Page 3 EX-5 6 CERT OF INS Exhibit 1.A(5)(c) CERTIFICATE OF INSURANCE POLICY NUMBER INSURED EFFECTIVE DATE OWNER FACE AMOUNT ISSUE AGE The Company certifies that it has issued the above numbered policy to the Owner. This Certificate is provided only as a matter of notice. All insured benefits are stated in the policy and are subject to all the provisions thereof and shall continue only while the policy remains in force. The face amount reflects the amount of insurance in force for the policy number indicated as of the effective date shown. Security Life of Denver Insurance Company /s/ Mark A. Smith Mark A. Smith Vice President Insurance Services Division EX-6 7 BINDER Exhibit 1.A(10) [logo of ING Security Life] Security Life of Denver Insurance Company Variable Life Customer Service Center P.O. Box 173888 Denver, CO 80217-3885 1-800-848-6362 Fax: 303-860-2695 GUARANTEED ISSUE VARIABLE LIFE INSURANCE APPLICATION _ 1 |_| Check here if for PENSION or similar tax qualified plan. State plan type in Special Instructions. SECTION A - PROPOSED INSURED 2 Name (First Middle Last) Birthdate (Mo/Day/Yr) Birthstate Sex _ _ |_| M |_| F Home Address (Street, Apt. No.) City State Zip Code Social Security Number Home Phone ( ) Work Phone ( )
3a Occupation:________________________________ 3b Date of Hire:_____________ 4a Is Proposed Insured currently actively at work on a full time basis performing all duties of Proposed Insured's regular occupation, at Proposed Insured's customary place of employment for at least 30 hours per week? _ _ |_| Yes |_| No If "No" explain: ____________________________________________________________________________ 4b Has Proposed Insured: (1) been absent from work due to illness or medical treatment for a period of 5 business days or more within the last 90 days; or (2) been hospitalized for any reason during this same period? _ _ |_| Yes |_| No If "Yes" explain: ____________________________________________________________________________ 5 Has Proposed Insured used tobacco (cigarettes, cigars, chewing tobacco, pipe, nicotine substitutes, etc.) or any other substance containing nicotine within the last 12 months? _ _ |_| Yes |_| No If "Yes," what type and frequency? ____________________________________________________________________________ 6 Is this insurance to replace, or will it cause any change in, any existing life insurance or annuity on any person proposed for coverage? _ _ |_| Yes |_| No If "Yes" submit a completed replacement form with this application. SECTION B - OWNER (IF OTHER THAN PROPOSED INSURED) 7a Owner's Name and Address 7b Owner's Social Security Number (or Tax I.D. Number) 7c Owner's Relationship to Proposed Insured 1 Q2009-11/97 (Guaranteed Issue Application) SECTION C - BENEFICIARIES 8a Primary Beneficiary_______________________ Relationship to Insured_________ (or Trust information) Social Security Number (or Tax I.D. Number)________ 8b Contingent Beneficiary____________________ Relationship to Insured_________ (or Trust information) Social Security Number (or Tax I.D. Number)________ SECTION D - BILLING 9 Employer's Name and Address 10 Mailing address (for Premium Notices and Correspondence) 11 Payment Method: List bill 12 Premium Mode: SECTION E - PLAN INFORMATION - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY 13 Product 14 Policy Issue Date (Mo/Day/Yr):________________________ 15 Guaranteed Issue Version 16 Unisex Version 17 Stated Death Benefit SECTION F - GUARANTEED MINIMUM DEATH BENEFIT OPTION 18 GUARANTEE PERIOD (SELECT ONE, IF OPTION DESIRED; OTHERWISE THERE WILL BE NO GUARANTEED PERIOD) _ _ |_| Later of ten years or proposed insured's age 65 |_| Lifetime of proposed insured Note: The Guarantee Period will terminate if: a. You fail to pay the required Guarantee Period Annual premium defined in your prospectus; or b. Your Account Value on any Monthly Processing date is not diversified according to the following rules: 1. No more than 35% of your Net Account Value may be invested in any one division; and 2. Your Net Account Value must be invested in at least FIVE divisions. You will satisfy these diversification requirements if: (i) you participate in the Automatic Rebalancing feature defined in and governed by the policy prospectus in effect at the time you elect the Guarantee Period and your Automatic Rebalancing allocations comply with the diversifications specified above; or (ii) you elect Dollar Cost Averaging and direct the resulting transfers into at least four other Divisions with no more than 35% of any transfer being to any one division. There may be other circumstances that will cause the Guarantee Period to terminate before its scheduled expiration date. See your prospectus for further information. 2 Q2009-11/97 (Guaranteed Issue Application) SECTION G - PREMIUM INFORMATION 19 Initial Premium Allocation. Please allocate your Initial Premium to the Guaranteed Interest Division and/or among the Variable Account Divisions. Please use whole number percentages for each Division elected. You must allocate at least 1% of your Premium Allocation to each Division in which you elect to invest. The total must equal 100%. _______% GUARANTEED INTEREST DIVISION
VARIABLE ACCOUNT DIVISIONS AIM INVESCO VAN ECK _____% V.I. Government Securities _____% Equity Income _____% Worldwide Emerging Markets _____% V.I. Capital Appreciation _____% High Yield _____% Worldwide Bond _____% Utilities _____% Worldwide Real Estate ALGER AMERICAN _____% Total Return _____% Small Capitalization _____% VIF Small Company Growth _____% MidCap Growth _____% Growth NEUBERGER & BERMAN _____% Limited Maturity Bond FIDELITY INVESTMENTS _____% Partners Portfolio _____% Growth Portfolio _____% Overseas _____% Index 500
SECTION H - SUITABILITY 20 a. Have you, the Proposed Insured, and the Owner, if other than the Proposed Insured, received a current Prospectus dated ________________ for the Variable Life Insurance policy applied for and current prospectus _ _ for each of the Variable Account Divisions? |_| Yes |_| No b. DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED CONDITIONS; POLICY VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF INVESTMENT DIVISIONS IN A SEPARATE ACCOUNT, AND MAY INCREASE IN ACCORDANCE WITH THE INTEREST CREDITED IN THE GUARANTEED INTEREST DIVISION; AND THE AMOUNT PAYABLE AT THE FINAL POLICY DATE IS NOT GUARANTEED BUT IS DEPENDENT ON THE AMOUNT THEN IN THE ACCOUNT VALUE? _ _ |_| YES |_| NO c. Do you understand that any personalized illustrations received are based on hypothetical interest assumptions which may not be indicative of actual future investment experience of our Separate Account or of actual _ _ interest credited in our Guaranteed Interest Division? |_| Yes |_| No d. With this in mind, is the policy in accord with your insurance objectives _ _ and your anticipated financial needs? |_| Yes |_| No 21 Special Instructions HOME OFFICE CORRECTIONS (INSURANCE COMPANY USE ONLY) (NOT APPLICABLE IN NORTH DAKOTA, OREGON, PENNSYLVANIA, AND WEST VIRGINIA.) 3 Q2009-11/97 (Guaranteed Issue Application)
FRAUD WARNINGS (FOR ALL STATES EXCEPT OREGON) FOR APPLICANTS IN ALL STATES Any person who knowingly and with intent to injure, defraud, or deceive any insurance company, EXCEPT COLORADO, CONNECTICUT, files an application, statement or claim containing any false, incomplete, or misleading information PENNSYLVANIA AND VIRGINIA: may be guilty of insurance fraud. FOR APPLICANTS IN COLORADO: IT IS UNLAWFUL TO KNOWINGLY PROVIDE FALSE, INCOMPLETE, OR MISLEADING FACTS OR INFORMATION TO AN INSURANCE COMPANY FOR THE PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE COMPANY. PENALTIES MAY INCLUDE IMPRISONMENT, FINES, DENIAL OF INSURANCE, AND CIVIL DAMAGES. ANY INSURANCE COMPANY OR AGENT OF AN INSURANCE COMPANY WHO KNOWINGLY PROVIDES FALSE, INCOMPLETE, OR MISLEADING FACTS OR INFORMATION TO A POLICYHOLDER OR CLAIMANT FOR THE PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE POLICYHOLDER OR CLAIMANT WITH REGARD TO A SETTLEMENT OF AWARD PAYABLE FROM INSURANCE PROCEEDS SHALL BE REPORTED TO THE COLORADO DIVISION OF INSURANCE WITHIN THE DEPARTMENT OF REGULATORY AGENCIES. FOR APPLICANTS IN CONNECTICUT: Any person who knowingly and with intent to injure, defraud, or deceive any insurance company, files an application, statement or claim containing any false, incomplete, or misleading information may be guilty of insurance fraud as determined by a court of competent jurisdiction. FOR APPLICANTS IN PENNSYLVANIA: Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. FOR APPLICANTS IN VIRGINIA: Any person who with intent to defraud, or knowing that he is facilitating a fraud against an insurer, submits an application, statement or files a claim containing false, or deceptive statement may have violated state law.
AGREEMENTS: All statements and answers in this application (which includes supplements and amendments) are true and complete to the best of my knowledge and belief. I also agree that: 1. The statements and answers in this application will be relied upon and form the basis of any insurance. 2. No information will be considered as having been given to Security Life unless it is written in this application. (THIS PARAGRAPH DOES NOT APPLY IN THE STATES OF ALASKA, MAINE, MISSOURI, OREGON, SOUTH CAROLINA, SOUTH DAKOTA AND WISCONSIN.) 3. No agent or any other unauthorized person can make or change any insurance contract or give up any of Security Life's rights or requirements. Any change must be in writing and signed by an officer of Security Life. 4. Security Life may amend this application by an appropriate notation in the space designated "Home Office Corrections" in order to correct errors or omissions or to conform the application with any policy that may be issued. The acceptance of the policy constitutes a ratification of such amendments. (THIS PARAGRAPH DOES NOT APPLY IN THE STATES OF NORTH DAKOTA, OREGON, PENNSYLVANIA, AND WEST VIRGINIA.) In those states, including Maryland, where change in amount, age at issue, classification, plan, premium, or benefit requires the written consent of the applicant, no change may be ratified except by a written acceptance. We reserve the right to make any changes required by law. 5. INSURANCE UNDER POLICY APPLIED FOR - EXCEPT AS MAY BE PRO- VIDED IN ANY COVERAGE PROVIDED BY A CONDITIONAL RECEIPT, NO POLICY OF INSURANCE WILL BE IN FORCE UNTIL (1) THE FIRST POLICY PREMIUM IS PAID AND (2) THE POLICY IS DELIVERED WHILE THE FACTS AND HEALTH CONDITION OF THE PROPOSED INSURED(S) ARE AS REPRESENTED IN THIS APPLICATION. WHEN THESE CONDITIONS ARE SATISFIED, THE POLICY AS DELIVERED WILL THEN TAKE EFFECT. 6. I certify, under penalty of perjury, that my social security/tax identification number(s) is shown and is correct and that I am not subject to back up withholding. 7. If the contract applied for is for a pension, profit-sharing, HR10, or other tax qualified plan, any policy issued shall not be transferable other than to the insurer, except as directed by the Plan Administrator. Other applicable provisions may be added to the contract. I know of nothing else affecting the risk. In addition to the Agreements above, I have read and agree to the information and agreements contained in Section 21, Special Instructions. - -> Signature of Proposed Insured________________________ -> Date______________ - -> Signature of Owner___________________________________ -> Date______________ (If other than Proposed Insured) - -> Name and Title of Owner______________________________________________________ (If owner is a business entity, print the business entity's name and the title of person signing.) - -> APPLICATION SIGNED BY PROPOSED INSURED OR OWNER (IF OTHER THAN PROPOSED INSURED) IN: -> STATE ____________ AGENT USE ONLY (Please print) Do you have knowledge or reason to believe that replacement of existing life _ _ insurance or annuity may be involved? |_| Yes |_| No If "Yes" please provide appropriate replacement forms. Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________ Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________ Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________
________________________________________ _____________________________________ Name of Broker/Dealer/Branch/OSJ Name of Broker/Dealer/Branch/OSJ 4 Q2009-11/97 (Guaranteed Issue Application) [Logo of Security Life] Security Life of Denver Insurance Company 1290 Broadway Denver, CO 80203-5699 Guaranteed Issue Binding Limited Life Insurance Coverage For premium(s) received from the employer in connection with the following Guaranteed Issue Applications, Security Life provides a limited amount of life insurance coverage for a short time while it decides whether to issue and deliver the policy or certificate applied for. This coverage is subject to the terms and conditions set out below.
AMOUNT | AMOUNT PROPOSED PREMIUM OF LIMITED | PROPOSED PREMIUM OF LIMITED APP.# INSURED RECEIVED LIFE INS. | APP.# INSURED RECEIVED LIFE INS. - ----------------------------------------------------------------------------------------------------------------------------- ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________ ______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
TERMS AND CONDITIONS AMOUNT OF COVERAGE If a Proposed Insured dies while this coverage is in effect, Security Life will pay the Amount of Limited Life Insurance on the Proposed Insured set out above. There is no premium waiver coverage. DATE COVERAGE BEGINS Coverage on the Proposed Insured under this agreement starts when a premium has been accepted while the Proposed Insured is currently engaged in active full-time work. Active full-time work is working at least 30 hours per week in a normal capacity with no hospitalizations and no absences from work due to illness or accident (except absences due to minor illnesses or accidents for no more than 5 total days during the 3-month period). DATE COVERAGE ENDS The coverage on the Proposed Insured will end automatically on the EARLIEST of the dates: o Security Life returns the premium(s) o Five days after Security Life mails a notice of termination to the owner's address on the Application; or o Coverage starts under any Security Life policy or certificate resulting from Application. Security Life may send the notice of return premium(s) at any time before delivery of the policy or certificate. There is no insurance coverage if: o The Proposed Insured dies by suicide, or self-inflicted injury; o The premium check is not honored; or o The Proposed Insured is not currently engaged in active full-time work at the time the premium is accepted. BENEFICIARY Any benefit will be paid to the beneficiary named in the application on the Proposed Insured. If death is before such an application is completed, it will be paid to (check one): _ |_| Proposed Insured's estate, or _ |_| Other __________________________________________________ Premiums for an application will be returned if: an application is not approved; or a benefit is paid under this coverage; or any condition of the Guaranteed Issue offer is not met. No agent can waive or modify this coverage in any way. - -------------------------------------------------------------------------------- No premium may be accepted if: o the Proposed Insured is not currently engaged in active full-time work; or o any condition of the Guaranteed Issue offer is not met. The amount of Limited Life Insurance shall be no more than the lesser of: the amount specified in the Guaranteed Issue offer; or $3 million. - -------------------------------------------------------------------------------- Agreed to on ______________________________, 19________ _____________________________________________(EMPLOYER) By ____________________________________________________ Print employer's name and have officer sign. Agent _________________________________________________ Q1112 B-6/98 HOME OFFICE COPY EX-7 8 CONSENT Exhibit 3.A November 8, 1999 Security Life of Denver Insurance Company Security Life Center 1290 Broadway Denver, Colorado 80203-5699 Dear Sirs: This opinion is furnished in connection with the Form S-6 Registration Statement being filed by Security Life of Denver Insurance Company ("Security Life") under the Securities Act of 1933, as amended (the "Act"), for the offering of interests ("Interests") in Security Life Separate Account L1 ("Separate Account L1") under the Flexible Premium Variable Life Insurance Policies ("Policies") to be issued by Security Life. The securities being registered under the Act are to be offered in the manner described in the Registration Statement. I have examined or supervised the examination of all such corporate records of Security Life and such other documents and such laws as I consider appropriate as a basis for the opinion hereinafter expressed. On the basis of such examination, it is my opinion that: 1. Security Life is a corporation duly organized and validly existing under the laws of the State of Colorado. 2. Separate Account L1 was duly created as a separate investment account of Security Life pursuant to the laws of the State of Colorado. 3. The assets of Separate Account L1 will be owned by Security Life. Under Colorado law and the provisions of the Policies, the income, gains and losses, whether or not realized, from assets allocated to Separate Account L1 must be credited to or charged against such Account, without regard to the other income, gains or losses of Security Life. 4. The Policies provide that the assets of Separate Account L1 may not be charged with liabilities arising out of any other business Security Life may conduct, except to the extent that assets of Separate Account L1 exceed its liabilities arising under the Policies. November 8, 1999 Page 2 5. The Policies and the Interests in Separate Account L1 to be issued under the Policies have been duly authorized by Security Life; and the Policies, including the Interests therein, when issued and delivered, will constitute validly issued and binding obligations of Security Life in accordance with their terms. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of my name under the caption "Legal Matters" in the Prospectus contained in the Registration Statement. Very truly yours, /s/ Gary W. Waggoner Gary W. Waggoner Vice President, General Counsel and Corporate Secretary -----END PRIVACY-ENHANCED MESSAGE-----