<PAGE>
Exhibit 10.7
FIA SERVICE AND EXPENSE AGREEMENT
INTRODUCTION Our Flexible Investment Annuity (FIA) contract offers
you a wide variety of services to make your
retirement program a success.
Our goal is to provide you with outstanding service.
We're so sure we can provide it promptly and
accurately, we guarantee it. If you're unhappy with a
specific service we provided, just tell us. We
promise to fix the problem to your satisfaction. If
we're unable to do so, we'll waive the fee paid for
that service.
This agreement is effective on the indicated date
provided we have received the agreement in our
corporate center. It replaces all prior service
agreements you may have with us for the plan funded
by this contract. However, it does not replace any
previously signed supplemental agreements. In this
agreement you and your means the contractholder. We,
us or our means Principal Life Insurance Company (The
Principal(R)).
If you want more information regarding any of the
services described in this agreement, you can:
- Refer to your plan operations guide
- Contact your regional representative
- Contact your pension service associate
-----------------------------------------------------
SERVICE PARTNERSHIP The success of your plan relies on a working
partnership between you and The Principal. The terms
of the partnership are determined by the services you
select. A steady flow of communication between us
increases its quality. The services you select fall
into three general categories:
- Base services
- Unanticipated events
- Member services
-----------------------------------------------------
BASE SERVICES These services are needed for the daily operation of
your plan. The fee for these services is called the
Base Fee. We determine the Base Fee each year
depending on the services we expect to provide you at
the time the annual calculation is performed. You
will receive advance notice of your annual Base Fee
for each upcoming deposit year. We guarantee the Base
Fee for each deposit year. It can only be modified in
the event of a Major Business Change.
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BASE SERVICES Major Business Changes are events that have a
(CONTINUED) significant impact on your services. They change the
basic contractual agreement between us.
Major business changes include:
- Change of plan type
- Plan or contract termination
- Spin-offs or mergers
- A greater than 50% change in the value of
the funds or number of members
- Adding or removing non-proprietary funds
If you have a Major Business Change, other than a
full contract termination, we'll recalculate your
Base Fee for the remainder of the current deposit
year.
If you choose to terminate your contract, we'll:
- Keep the same basis point for any netted
fees
- Prorate any billed fees based on any plan
funds remaining with us until maturity
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UNANTICIPATED EVENTS These are situations where you request us to perform
additional services unknown at the time of our Base
Fee calculation. Fees for Unanticipated Events will
be charged at the time they occur. Unanticipated
Events may include:
- Supplemental services - Compliance services
- Document changes - Outside our company
charges
MEMBER SERVICES These are requested by the member. These services are
not included in the Base Fee and are typically
deducted (if applicable) from affected member
accounts.
Member services are:
- Loan recordkeeping
- Investment direction changes and transfers
submitted non-electronically
- Personal Retirement Account (PRA)
-----------------------------------------------------
NOTE The Base Fee is calculated using scales that are used
for all customers in your classification. A copy can
be obtained by contacting us. It will not be changed
without notification.
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TERMS OF AGREEMENT We can modify or withdraw the services provided, the
associated expenses, and the service guarantee upon
60-days written notice to you.
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2
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BASE SERVICE ELECTION
We offer a wide range of flexible services to meet your retirement plan needs.
We rely on certain information from you in order to provide the services
outlined in this agreement and guarantee our performance. OPTIONS TO BASE
SERVICES MUST BE ELECTED.
CONTRACT ADMINISTRATION/RECORDKEEPING SERVICES
------------------------------------ -------------------------------------
SERVICE WE OFFER YOUR ROLE AND ELECTIONS
------------------------------------ -------------------------------------
PERSONAL CONTACTS help set up and Work with our local and corporate
maintain your plan. center service experts.
------------------------------------ -------------------------------------
DIRECTIONS, A GUIDE TO RETIREMENT Utilize the guide to help with the
PLAN OPERATIONS assists in the day-to-day activities of your plan.
daily operation of your plan.
------------------------------------ -------------------------------------
EMPLOYER COMMUNICATIONS (such as Use to stay informed on the latest
BENEFIT EDGE QUARTERLY & FIA investment and retirement plan
BRIEFLY) help you make informed issues.
decisions.
------------------------------------ -------------------------------------
MONITOR PLAN REQUIREMENTS such as Complete data collection requests
minimum distributions, beneficiary in a timely manner.
designations and vesting records.
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EMPLOYER AND MEMBER REPORTS Report member contributions,
summarize plan activity for the vesting, enrollment and benefit
period covered. event information to us accurately
and timely.
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BASE SERVICE ASSUMES: OPTIONS TO BASE SERVICE*:
------------------------------------ -------------------------------------
- Member reports are provided Provide reports:
semi-annually. / / Annually
/X/ Quarterly
/ / Monthly
------------------------------------ -------------------------------------
- Member reports are sent to Send reports to:
you in bulk. / / You in individual envelopes.
/ / Members' homes (requires
addresses be reported
electronically)
-----------------
* These optional elections impact Base Fee.
3
<PAGE>
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SERVICE WE OFFER YOUR ROLE AND ELECTIONS
------------------------------------ -------------------------------------
LOCATION RECORDKEEPING services for Provide member location information
more than one employee group or and changes.
location may be provided.
------------------------------------ -------------------------------------
BASE SERVICE ASSUMES all OPTION TO BASE SERVICE*:
communication is handled through / / Communication will be handled
one location. through more than one location.
------------------------------------ -------------------------------------
ELECTRONIC SERVICES use technology Use electronic services provided to
to facilitate the fastest, most report and obtain plan information.
accurate and cost effective means Encourage members to transfer
of communication and access to investments or change investment
information. elections electronically as allowed
by the plan.
------------------------------------ -------------------------------------
We provide the following electronic OPTIONS TO BASE SERVICE:
services:
- TeleTouch (automated voice Report via:
response system) / / Tape or diskette*
- The Principal Retirement / / Paper*
Service Center / / EFT Will not be used
- Internet transactions
- Electronic data reporting
- Electronic Funds Transfer
(EFT)
BASE SERVICE ASSUMES you report via
modem.
------------------------------------ -------------------------------------
MEMBER LOAN RECORDKEEPING OPTIONS TO BASE SERVICE:
BASE SERVICE ASSUMES we provide loan / / Do not provide loan
recordkeeping if your plan allows recordkeeping services.
loans.
Select loan initiation method:
/X/ TeleTouch
/ / Paper
------------------------------------ -------------------------------------
MEMBER DISTRIBUTIONS AND WITHDRAWALS Provide complete and timely distribution
information.
------------------------------------ -------------------------------------
PERIODIC PAYMENTS TO INACTIVE MEMBERS Provide complete termination/retirement
information.
------------------------------------ -------------------------------------
PERSONAL RETIREMENT ACCOUNT (PRA) Inform us timely of member employment,
maintains funds for inactive termination or retirement.
members under your contract. We
communicate directly with these
members.
------------------------------------ -------------------------------------
-----------------
* These optional elections impact Base Fee.
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<PAGE>
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SERVICE WE OFFER YOUR ROLE AND ELECTIONS
-------------------------------------- ---------------------------------------
BASE SERVICE ASSUMES that PRA will be OPTIONS TO BASE SERVICE:
utilized and benefits are paid without / / Your signature is required to
your further consent. pay anybenefit.
-------------------------------------- ---------------------------------------
AUTOMATIC PAYMENT of small amounts Inform us timely of member employment,
based on plan provisions. termination or retirement.
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BASE SERVICES ASSUMES that small OPTIONS TO BASE SERVICE:
amounts benefits will be paid Your signature is required to pay any
without your further consent. benefit.
--------------------------------------------------------------------------------
GOVERNMENT COMPLIANCE AND FILING SERVICES
--------------------------------------------------------------------------------
TOP HEAVY DETERMINATION test is Provide information regarding key
prepared annually and the minimum employees. Review top-heavy test and
top-heavy contribution is calculated, notify us if changes are necessary.
if necessary.
-------------------------------------- ---------------------------------------
MINIMUM COVERAGE DETERMINATION Complete and return census questionnaire
calculation is preformed by an annual by the date requested.
ratio percentage test. Results will
be included on your Annual Form 5500.
-------------------------------------- ---------------------------------------
SECTION 401(k)/(m) NONDISCRIMINATION Complete and return the
DETERMINATION test is prepared, if nondiscrimination test data collection
applicable. We notify you of the information by the date requested.
results, and calculate and process
refunds if necessary.
-------------------------------------- ---------------------------------------
BASE SERVICE ASSUMES two tests per PERFORM TEST AT PLAN YEAR END AND
year. JUNE 30
-------
(insert date)
OPTIONS TO BASE SERVICE*:
/ / Perform test at plan year end only.
/ / Test is not applicable or not test
is desired.
/ / Also perform test on:
____________ and ____________.
------------------------------------ -----------------------------------------
SECTION 415 LIMIT DETERMINATION test Complete and return the compensation
is prepared. If a member exceeds the collection list by the date requested.
limit, we will work with you to
determine the appropriate correction
method.
------------------------------------ -----------------------------------------
-----------------
* These optional elections impact Base Fee.
5
<PAGE>
------------------------------------ -------------------------------------
SERVICE WE OFFER YOUR ROLE AND ELECTIONS
-------------------------------------- ---------------------------------------
ANNUAL GOVERNMENT REPORT Form 5500 Complete and return a Form 5500
and attachments will be prepared and questionnaire each year by the date
mailed to you. requested. File completed Form 5500 and
attachments with the IRS.
-------------------------------------- ---------------------------------------
QUALIFICATION PACKAGE will be prepared File the Application for Determination
for those customers using our prototype Form with your IRS key district office.
or custom plan document. Notify us of any changes needed to your
plan document.
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ERISA SECTION 404(c) COMPLIANCE Educate member on their diversified
information is provided to help you investment options. Give investment
reduce fiduciary liability. control to plan members.
--------------------------------------------------------------------------------
CONSULTING SERVICES
--------------------------------------------------------------------------------
CONTROLLED GROUP CONSULTATIONS are Provide us information about the
offered to work with you and your structure of your company's ownership
legal counsel in determining and any possible related companies.
controlled group status.
------------------------------------- ---------------------------------------
REVIEW TRANSFER PLAN DOCUMENTS for Provide copies of complete prior plan
compliance with current legislation documents for review.
and regulations and make
recommendations for any amendments.
-------------------------------------- ---------------------------------------
PLAN DESIGN CONSULTATION is offered Communicate the retirement goals and
providing proposals and objectives of you and your plan members.
recommendations to assist you in
meeting your retirement plan goals.
-------------------------------------- ---------------------------------------
EXECUTIVE SUMMARY REPORT highlights Use to make decisions about future
current and historical data about your needs of your plan.
retirement plan.
-------------------------------------- ---------------------------------------
DOCUMENTATION SERVICES Communicate the plan provisions that
meet your employees' needs.
-------------------------------------- ---------------------------------------
BASE SERVICE ASSUMES we draft your OPTIONS TO BASE SERVICE:
initial plan document and plan / / Do not prepare plan document.
booklets (Summary Plan Descriptions). /X/ Prepare customized booklets.*
Subsequent requests for document / / Do not prepare plan booklets.
services may result in additional
charges.
--------------------------------------------------------------------------------
-----------------
* These optional elections impact Base Fee.
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<PAGE>
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SERVICE WE OFFER YOUR ROLE AND ELECTIONS
-------------------------------------- ---------------------------------------
ASSET ALLOCATION ASSISTANCE to help Provide information as requested such
prepare accurate allocations in as pay, number of hours worked and
accordance with your plan design. transfer balances.
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<PAGE>
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OPTIONAL SERVICES*
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SERVICE WE OFFER OPTIONAL ELECTIONS
--------------------------------------- -------------------------------------
SPECIAL COMPLIANCE TESTING for Internal / / Provide special compliance
Revenue Codes Sections 401(a)(4), testing.
410(b) and 414(s). Your plan design
will dictate the need for this testing.
--------------------------------------- --------------------------------------
TRUST SERVICES are available through: / / Provide Delaware Charter
Guarantee & Trust Company
- Delaware Charter Guarantee & Trust passive trust services.
Company, a subsidiary of Principal
Life Insurance Company. / / Provide Bankers Trust custodial
services.
- Bankers Trust (Des Moines, IA)
/ / Provide Bankers Trust full trust
services.
-------------------------------------- --------------------------------------
PC TIE-IN to our mainframe computer / / PC Tie-in will be used.
(access to limited employee
information).
-------------------------------------- --------------------------------------
ON-SITE ENROLLMENT SERVICES provided / / Provide Benefits Counseling
by our benefits counselors, for each enrollment services.
location with 200 or more eligible
employees.
-------------------------------------- --------------------------------------
ON-SITE RETIREMENT PLANNING SEMINARS / / Provide retirement planning
to help employees plan to reach their seminars.
retirement goals.
-------------------------------------- --------------------------------------
VIDEOTAPES are offered to promote and / / Provide enrollment videotapes
educate members on your plan. for plan members.
-------------------------------------- --------------------------------------
DEPOSIT DIRECTOR provides five suggested /X/ Include the Deposit Director
investment mixes for new deposits mixes on member enrollment form.
based on the member's risk profile.
--------------------------------------------------------------------------------
-----------------
* Optional services may require a supplemental service agreement and may have
additional fees. For more information please contact your local representative
or pension service associate.
8
<PAGE>
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NONPROPRIETARY FUND INVESTMENT /X/ Recordkeep nonproprietary funds
SERVICES can be provided. We work with with linkage mutual fund partners.
investment carriers for investments
held outside of The Principal. The When using linkage mutual fund partners
funds will be recordkept and the the following electronic services are
values reflected on employer and member required:
level statements.
- Electronic data reporting
- EFT
- TeleTouch
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
LINKAGE MUTUAL FUND SERVICE FEE may be /X/ Pay the Linkage Mutual Fund
paid to the agent/broker servicing service fee.
your contract.
-------------------------------------- ---------------------------------------
9
<PAGE>
------------------------------ -----------------------------------------------
COLLECTION METHOD (SELECT ONE) EXPLANATION AND OPTIONAL PLAN FORFEITURES
ELECTION
------------------------------ -----------------------------------------------
/ / Billed You pay directly. BILLED FEES ARE PAYABLE
WITHIN 30 DAYS, OR THEY WILL BE DEDUCTED FROM
MEMBER ACCOUNTS.
/ / Forfeitures will be used to offset plan
fees.
------------------------------ -----------------------------------------------
/ / Netted Fees are converted to basis points and netted
from investment return (up to allowable
maximum).
/ / Forfeitures will be used to offset plan
fees.
------------------------------ -----------------------------------------------
/ / Deducted Fees are deducted from member accounts and
reflected on member reports.
/ / Forfeitures will be used to offset plan
fees.
------------------------------ -----------------------------------------------
/X/ Combination - You pay a portion of fees directly and a
Billed/Netted portion will be netted.
/X/ Amount to bill per deposit year: $2800
/ / Basis point to net per deposit year ______
Forfeitures will be used to offset plan fees in
the following order:
/X/ Billed, then netted
/ / Netted, then billed
------------------------------ -----------------------------------------------
/ / Combination - A specified portion of fees will be deducted
Deducted/Billed from member accounts, the rest will be billed.
/ / Amount to deduct per deposit year: $_____
/ / Amount to bill per deposit year: $_______
/ / Amount to deduct per member per deposit
year: $_______
Use forfeitures to offset plan fees in the
following order:
/ / Deducted, then billed
/ / Billed, then deducted
------------------------------ -----------------------------------------------
10
<PAGE>
--------------------------------------------------------------------------------
MEMBER LEVEL FEES (Deducted from member account unless optional election is
selected.)
-------------------------------------------------- ---------------------------
MEMBER FEE OPTIONAL ELECTIONS
-------------------------------------------------- ---------------------------
Member Loan Recordkeeping / / Billed to you
-------------------------------------------------- ---------------------------
Personal Retirement Account (PRA) / / Billed to you
(unscheduled withdrawals will be collected same as
PRA)
-------------------------------------------------- ---------------------------
Non-Electronic Transactions / / Billed to you
-------------------------------------------------- ---------------------------
FIA SERVICE AND EXPENSE AGREEMENT CONTRACT NO. ___________
--------------------------------------------------------------------------------
This agreement is accompanied by FEXP Proposal No. 36-64126359
-----------
Effective Date of Agreement: OCTOBER 1, 1999
---------------
--------------------------------------------------------------------------------
BY SIGNING BELOW, I CERTIFY I HAVE RECEIVED, READ AND UNDERSTAND THE
CORRESPONDING MATERIALS THAT DESCRIBE THESE SERVICES AND EXPENSES.
-------------------------------------------------- ---------------------------
CONTRACT HOLDER EMPLOYER
-------------------------------------------------- ---------------------------
LEGAL NAME: (Pick one) LEGAL NAME:
/X/ Trustees of Genaissance Pharmaceuticals, Inc. GENAISSANCE PHARMACEUTICALS,
401(k) RETIREMENT PLAN INC.
-------------------------- ----------------------------
(Plan name)
/ /_________________________________________ By: _______________________
(employer name if nontrusteed Plan)
By:_________________________________________ Title: ____________________
Title: /X/ Trustee / / _____________________ Date Signed: ______________
(business title)
Date Signed: _______________________
-------------------------------------------------- ----------------------------
* Complete only if trusteed plan.
PRINCIPAL LIFE INSURANCE COMPANY
By: /S/ D.J. DRURY Title: CHAIRMAN AND CEO
------------------------------- ---------------------------------
11
<PAGE>
Additional fees may apply if any work must be redone due to incomplete or
incorrect information. The Principal(R) will only guarantee performance of
services in time to meet deadlines if a request is received at least 60 days
prior to the governmental deadline.
Services we provide are stated or elected in this agreement. If additional
services are requested they will be discussed and reviewed on an individual
basis. Applicable fees will be determined at that time.
You are ultimately responsible for plan fees. If for some reason fees cannot be
collected from other sources as elected by you, they will be billed to you.
12
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
BASE FEE SUMMARY
<TABLE>
<CAPTION>
QUARTERLY EMPLOYER
EXPENSE EMPLOYEE EXPENSE
EXPENSE PERIOD (Dollars Billed) (Netted From Investment Return)
-----------------------------------------------------------------------------------------
<S> <C> <C>
10/01/1999-12/31/2000 $700 0.94%
</TABLE>
The Employee Expense illustrated above is an annualized expense collected
monthly. Deposit years of less than 12 months will have 1/2th of the annualized
Employee Expense collected each month.
MEMBER FEES (TO BE DEDUCTED FROM MEMBER ACCOUNTS):
Nonelectronic Transactions - $15 per investment direction change and transfer
submitted nonelectronically
--------------------------------------------
This expense summary is for the period of
10/01/1999-12/31/2000 and is based on the
assumptions provided.
We reserve the right to adjust these
expenses if any of the assumptions are
incorrect or should change.
/s/ Kevin Rakin
--------------------------------------------
(Contractholder)
Executive Vice President
--------------------------------------------
(Title)
September 9, 1999
--------------------------------------------
(Date)
13
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
ASSUMPTION REPORT
- Projection illustrated for an existing Principal customer, Contract
Number: 4-23112
- Total annual deposit amount: $120,000
- Principal annual deposit amount: $78,000 (65.00% of total deposits)
- Annual Linked outside investment deposit recordkept: $42,000 (35.00% of
total deposits)
- Total existing assets: $400,00
- Principal existing assets: $260,000 (65.00% of existing assets)
- Existing Linked outside investment fund recordkept: $140,000 (35.00% of
transfer assets)
- Service Begin\Contract Effective Date: 10/01/1999
- Deposit Year End\Plan Year End Date: 12/31/1999
- Number of Days left in Deposit Year: 92
- Rate of Return: 8.50%
- Expense collection method: Bill - $2,800, Net remainder
- Billed expenses will be collected quarterly. Netted expenses will be
collected monthly.
- Compensation scale: ASSET 60
- Plan and booklet document: Prate Plus
- Number of active participants: 24
- Employee Turnover Rate: 5.00%
- This is a 401(k) salary deferral plan
- ADP/ACP tests performed each year: 2
- Ongoing reporting is sent via Electronic Data Reporting
- Reports provided quarterly
- Reports sent to plan sponsor
- Number of Linked Mutual Funds that Principal recordkeeps: 5
- Assets invested in Linked Mutual Funds are divided equally between each
fund
- Linked Mutual Fund Expense Credit:
<TABLE>
<S> <C>
American Century Select 0.25%
INVESCO Dynamics 0.25%
</TABLE>
- Linked Mutual Funds without Expense Credit: T. Rowe Price New Asia
Vanguard Growth & Income Fund Fidelity Advisor Equity Growth
- This expense illustration does not include investment management fees
- This illustration assumes no life policies. Premium paying life
policies are not allowed. If there are paid-up policies in the plan, an
additional annual contract charge of $300 applies.
- Internal Revenue Service (IRS) qualification rules require that a
401(k) plan be adopted before any salary deferrals are withheld. The
best way to show timely adoption is to sign the plan document.
14
<PAGE>
The Base Fee for this fund and expense projection calculation is based on the
assumptions listed above, current expense scales and standard contract
implementation procedures. The Base Fee can only be modified in the event of a
Major Business Change. Major Business Changes are events that have a significant
impact on your services. They change the basic contractual agreement between us.
In the event of a Major Business Change, the Base Fee is recalculated for the
remainder of the deposit year. Major Business Changes include:
- Change of plan type
- Partial plan/contract termination
- Spin-offs/mergers
- Greater than 50% changes in assets or number of
members
- Adding or removing non-proprietary funds
Unanticipated Events are situations where you request us to perform additional
services unknown at the time of our Base Fee calculation. Fees for Unanticipated
Events will be charged at the time they occur. Unanticipated Events may include:
- Supplemental services
- Compliance services
- Document charges
- Outside our company expenses
--------------------------------------------
This expense summary is for the period of
10/01/1999-12/31/2000 and is based on the
assumptions provided.
We reserve the right to adjust these
expenses if any of the assumptions are
incorrect or should change.
/s/ Kevin Rakin
--------------------------------------------
(Contractholder)
Executive Vice President
--------------------------------------------
(Title)
September 9, 1999
--------------------------------------------
(Date)
15
<PAGE>
REMOVAL OF DIVIDEND SECTION RIDER
This rider is made part of the group annuity contract to which it is attached.
Such group annuity contract is issued by us to you. All terms defined in this
contract have the same meaning where used in this rider.
The effective date of this rider is the latest of (i) July 1, 1998 or (ii) the
date the rider was approved for use in the state of issue of this contract.
This rider modifies the contract by striking SECTION 3--DIVIDENDS from the
General Provisions article of the contract and by renumbering all of the
sections thereafter to reflect the change.
PRINCIPAL LIFE INSURANCE COMPANY
/s/ David J. Drury
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<PAGE>
TRANSFER RIDER
This rider IS made part of the group annuity contract to which it is attached.
Such group annuity contract is issued by us to you. All terms defined in the
contract have the same meaning where used in this rider.
The purpose of this rider is (i) to allow for the transfer to this contract of
certain Member account values from another group annuity contract issued by us,
(ii) to preserve the interest guarantees made under such contract and (iii) for
transfers from certain types of contracts, to transfer the withdrawal charge to
which the accounts were subject under the prior contract.
The effective date of this rider is the latest of (i) the Contract Date, (ii)
the date the rider was approved for use in the state of issue of this contract
or (iii) as stated in the amendment adding it to the contract.
This rider modifies the contract as follows:
A. By adding the following sentence to the end of the definition of
Composite Guaranteed Rate in Article I, Section 2:
The Composite Guaranteed Rate in effect for such Guaranteed Interest
Investments from the date received under this contract until the last
day of the Guarantee Period (date of payment or application, if
earlier) will be the rate of interest such accounts would have received
under the prior contract if the transfer to this contract had not
occurred.
B. By adding the following to the end of the definition of Guaranteed
Interest Investment in Article I, Section 2:
Transfer Contributions which consist of general account investments
under the Prior Contract will be held in Guaranteed Interest
Investments established under this contract for such transfer amounts.
If the Prior Contract had a benefit floor and we agree to transfer the
greater of (i) the value of the Member's total account under the Prior
Contract or (ii) the benefit floor, the amount establishing the
Guaranteed Interest Investment will be such greater amount.
C. By adding the following to the definition of Guarantee Period in
Article I, Section 2:
The initial Guarantee Period for a Guaranteed Interest Investment
established by a Transfer Contribution will end on the last day of the
Deposit Year under this contract closest to the date the guarantee
period would have ended under the Prior Contract had the transfer to
this contract not occurred. In the event there is a difference of
exactly six months between the last day of the Deposit Year under this
contract and the last day of the deposit year under the Prior Contract,
the initial Guarantee Period will end on the last day of the Deposit
Year under this contract which ends just before the date the guarantee
period would have ended under the Prior Contract.
1
<PAGE>
D. By adding the following definitions to Article I, Section 2:
PRIOR CONTRACT means another group annuity contract issued by us to
you.
TRANSFER CONTRIBUTION means a Contribution under Article H, Section 1,
which is a transfer from a Prior Contract and is directed to establish
a Guaranteed Interest Investment or Separate Account Investment on a
Member's behalf.
E. By adding the following as the last paragraph of Article II, Section 4:
Transfer Contributions which consist of a Member's separate account
investments under the Prior Contract will be held in the corresponding
Member's Separate Account Investments established under this contract.
F. By adding the following as the last paragraph of Article III, Section
1:
Any expense charges remaining unpaid under the Prior Contract on the
date of transfer will become an expense charge under this contract.
G. By adding the following as Section 5 of Article VI:
SECTION 5--SPECIAL WITHDRAWAL CHARGE.
If the Prior Contract was an accumulation group annuity contract, any
single sum payment made to or on behalf of a Member due to termination
of the Plan or due to a transfer to another Funding Agent under Article
VI, Section 1, will be subject to a charge in an amount as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Number of Years Percentage of Single
This Contract in Effect* Sum Payment
------------------------------------------------------------------------
<S> <C>
Less than 1 7.0
------------------------------------------------------------------------
1 but less than 2 6.3
------------------------------------------------------------------------
2 but less than 3 5.6
------------------------------------------------------------------------
3 but less than 4 4.9
------------------------------------------------------------------------
4 but less than 5 4.2
------------------------------------------------------------------------
5 but less than 6 3.5
------------------------------------------------------------------------
6 but less than 7 2.8
------------------------------------------------------------------------
7 but less than 8 2.1
------------------------------------------------------------------------
8 but less than 9 1.4
------------------------------------------------------------------------
9 but less than 10 0.7
------------------------------------------------------------------------
2
<PAGE>
------------------------------------------------------------------------
10 or more 0.0
------------------------------------------------------------------------
</TABLE>
* Includes number of years Prior Contract was in effect
PRINCIPAL LIFE INSURANCE COMPANY
/s/ David J. Drury
Chairman and
Chief Executive Officer
3
<PAGE>
SCHEDULE OF SPECIFICATIONS GA 4-40734
This schedule is a part of the contract to which it is attached. Terms defined
in the contract have the same meaning where used in this schedule.
This is Schedule number 1 , effective OCTOBER 1, 1999. It replaces all previous
Schedules.
PLAN NAME: Genaissance Pharmaceuticals, Inc. 401(K) Retirement Plan
DEPOSIT YEAR: The initial Deposit Year begins on the Contract Date and ends on
DECEMBER 31, 1999. Subsequent Deposit Years begin on JANUARY 1 and the same day
of each following year.
INVESTMENT OPTIONS AVAILABLE:
GUARANTEED INTEREST INVESTMENTS
SEPARATE ACCOUNT INVESTMENTS (ELECTED BY YOU)
<TABLE>
<S> <C>
Bond and Mortgage Separate Account Medium Company Growth Separate Account
Bond Emphasis Balanced Separate Account Medium Company Value Separate Account
Government Securities Separate Account Money Market Separate Account
International Emerging Markets Separate Account Real Estate Separate Account
International Small Company Separate Account Small Company Blend Separate Account
International Stock Separate Account Small Company Growth Separate Account
Large Company Blend Separate Account Small Company Value Separate Account
Large Company Growth Separate Account Stock Emphasis Balanced Separate Account
Large Company Value Separate Account Stock Index 500 Separate Account
Medium Company Blend Separate Account U.S. Stock Separate Account
</TABLE>
RIDERS AND SPECIAL ATTACHMENTS:
Separate Account Investment Rider
Transfer Rider
Removal of Dividend Rider
Flexible Investment Annuity Endorsement Rider
NOTATIONS:
--------------------------------------------------------------------------------
(Signatures are not required for the original Schedule 1 issued with the
Contract)
---------------------------------------- ----------------------------------
Contractholder Name Registrar
---------------------------------------- ----------------------------------
Title Date
---------------------------------------- ----------------------------------
Date
<PAGE>
FLEXIBLE INVESTMENT ANNUITY ENDORSEMENT RIDER
This rider is made a part of the Group Annuity Contract to which it is
attached. This contract is issued to you, the Contractholder, by us. All
terms defined in the contract have the same meaning where used in this rider.
The purpose of this rider is to clarify certain terms and language in this
contract.
The effective date of this rider will be the latest of the Contract Date, the
date of the amendment adding this rider to the contract, or the date this
rider is approved for use by the state of issue.
1. This rider adds the following definition in ARTICLE I, SECTION 2--OTHER
DEFINED TERMS:
APPLICABLE U.S. TREASURY RATE means the yield associated with the
average of accepted bids for the U.S. bonds, notes, or bills which will
mature on the date the Guaranteed Interest Investment would have
matured. This yield will be those provided by the WALL STREET JOURNAL,
or a similar publication, or by an agency that provides similar
information.
Rates for terms of less than twelve months will not be used. The twelve
month Treasury rate will be used for any such transaction.
If the publication or agency does not provide a rate for the date of
payment or application, this rate will be determined using linear
interpolation between the rates for the maturities closest to the date
the Investment would have matured.
2. This rider deletes the definitions of Guaranteed Interest Rate and
Guarantee Period found in ARTICLE I, SECTION 2--OTHER DEFINED TERMS,
and replaces them with the following:
GUARANTEED INTEREST RATE means the annual rates of interest determined
and made available by us in advance for Guaranteed Interest Investments
under contracts of this class from time to time, which, when credited
and compounded daily, produce the effective annual interest rates. Each
Guaranteed Interest Investment will be credited with the effective
annual Guaranteed Interest Rate in effect for it.
GUARANTEE PERIOD means, for each Guaranteed Interest Investment, the
period or periods which we make available under contracts of this class
issued under the same or similar circumstances. We reserve the right,
in our sole discretion, to change at any time the Guarantee Periods
available for new Guaranteed Interest Investments; provided, however,
we will always offer at least one Guarantee Period of at least two
years. You must provide us with Notification selecting the Guarantee
Period for each Guaranteed Interest Investment established under this
contract.
Once established, the Guarantee Period for a Guaranteed Interest
Investment will not be changed by us. If a certain Guarantee Period
will become unavailable for future Contributions, we will notify you at
least 60 days before the date the use of such Guarantee Period will no
longer be available.
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3. This rider deletes the first paragraph of ARTICLE II, SECTION
1--CONTRIBUTIONS, and replaces it with the following:
Contributions may be accepted under this contract on any Business Day
on or after the Contract Date, subject to the limitations of the last
paragraph of this Section and Article VII, Section 13. Contributions
may be any amount determined or allowed by the Plan and accepted on
behalf of a Member. Contributions in excess of those determined or
allowed by the Plan for the current Plan year may be paid to us only
with our consent We will maintain separate accounting records for each
type of Contribution, to the extent possible under our procedures.
4. This rider deletes ARTICLE II, SECTION 6--TRANSFERS BETWEEN
INVESTMENTS, and replaces it with the following:
In general, all or a portion of a Member's Investments may be
transferred to another Investment as of any date requested subject to
the following:
a) All requests to transfer must be received by us at least
7 Business Days before the date such transfer is to occur.
We must receive Notification to transfer from you or the
Member, as permitted by the Plan. The Notification must specify
the amount or percentage to be transferred and may specify the
Investments involved. If a requested transfer from a Member's
Investments does not specify the Investments to be transferred,
the Order of Application will determine the Investments to be
transferred.
b) A transfer from a Member's Guaranteed Interest Investment to a
Separate Account Investment may occur only on a Valuation Date
of such Separate Account Investment.
c) Except as provided in Section 7 of this Article, all transfers
from a Guaranteed Interest Investment are subject to the charge
contained in Article VI, Section 3. All transfers are subject
to the limitations contained in Article VI, Section 4 and the
Separate Account Investment Rider.
d) All Separate Account Investment transfers are subject to the
provisions of the Separate Account Investment Rider.
Any transfer under this Section will be an application from the
Investment as of the date of transfer.
5. This rider deletes ARTICLE II, SECTION 8--INVESTMENT MANAGER, and
replaces it with the following:
As set out in Sections 2 and 6 of this Article, the right to direct the
split of Contributions between Guaranteed Interest Investments and
Separate Account Investments and to direct any transfer between these
Investments is reserved to you and/or the Member, all in accordance
with provisions of the Plan.
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Application for and issuance of this contract constitutes appointment
of and acceptance and affirmation by us that (i) we are an "investment
manager" as described under the Employee Retirement Income Security Act
of 1974 (ERISA) solely with respect to Plan assets held in Separate
Accounts under this contract, except for the right reserved in the
preceding paragraph and (ii) we are qualified to accept such
appointment and acknowledge that by virtue of such appointment we are a
fiduciary of the plan for this purpose, within the meaning of ERISA
with respect to our responsibilities as investment manager.
The Guaranteed Interest Investments are guaranteed benefit policies, as
defined in ERISA. We are not an investment manager nor are we any kind
of ERISA fiduciary with regard to any amounts held under the Guaranteed
Interest Investments.
6. This rider deletes ARTICLE V. SECTION 1--WITHDRAWAL BENEFITS,
Subsection (d), and the first sentence of the next paragraph
thereafter, and replaces them with the following:
d) We reserve the right to limit the number of withdrawals and the
right to charge for processing such withdrawals; provided,
however, that two (2) withdrawals will always be available each
Deposit Year and provided further that any increase in such
processing charge will not apply to total withdrawals made
during or at the end of the Guarantee Periods for the
applicable Guaranteed Interest Investments.
The amount available will be determined as of the date we receive the
Notification at our Corporate Center, or at some later date specified
in the Notification.
7. This rider deletes the portion of ARTICLE VI, SECTION 3--CHARGES FOR
EARLY SURRENDER OF A GUARANTEED INTEREST INVESTMENT, which follows
Subsection (d), and replaces it with the following:
If all or a portion of a Guaranteed Interest Investment is surrendered
early, such amount or amounts will be in accordance with the following:
e) The interest rate to be used for comparison in f) and g) below
will be the Applicable U.S. Treasury Rate on the date of
surrender plus .50%.
f) If the interest rate determined in accordance with e) above is
equal to or less than the Guaranteed Interest Rate for the
Guaranteed Interest Investment, there is no charge.
g) If the interest rate determined in accordance with e) above is
greater than the Guaranteed Interest Rate for the Guaranteed
Interest Investment, such charge is equal to:
1) the difference between such interest rate on the date of
surrender and the Guaranteed Interest Rate multiplied by
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2) the number of years (including fractional parts of a
year) remaining in the Guarantee Period for such Guaranteed
Interest Investment multiplied by
3) the amount being surrendered.
If the payment or transfer under this Subsection results in the
application of all of the Investment, the amount paid or transferred
will be equal to such Investment reduced by the amount determined under
g) above.
If the entire Guaranteed Interest Investment is surrendered, the
Guaranteed Interest Investment will be reduced on the date of surrender
and the remainder will be paid or transferred.
If a portion of the Guaranteed Interest Investment is surrendered, the
Guaranteed Interest Investment will be reduced by the amount being
surrendered plus the surrender charge, if any.
8. This rider deletes ARTICLE VII, SECTION 6- -CONTRACT AMENDMENTS,
Subsection (c), and replaces it with the following:
c) As of any date after the Contract Date, we may amend or change
the length of the Guarantee Period; the Order of Application;
the provisions for transferring values between accounts; the
percentage in Item (a) of Article IV, Section 4; the percentage
contained in Article VI, Section 3; and the items included in
the Operating Expenses for Separate Accounts under the Separate
Account Investment Rider (if such rider is attached to this
contract). We will give you 60 days written notice of any such
change.
9. By adding the following Section 6A to ARTICLE VII--GENERAL PROVISIONS:
SECTION 6A--EXPENSE GUARANTEES.
We charge expenses in accordance with Article Ill, but subject to
Section 6(g)(iii) of this Article. If you choose not to accept an
expense change, as provided in Section 6(g)(iii), the following will
occur:
a) Cessation of Contributions will occur on the date specified in
your Notification; provided, however, such date must be before
or within the 90 day period following the date we receive such
Notification.
b) Separate Account Investments will be transferred to you, if you
are a trustee, or to the Funding Agent you tell us to, when you
request such transfer, but in no event more than 90 days after
the date the new expenses would otherwise take effect for this
contract.
If you have not designated the Funding Agent to whom funds are
to be transferred within the 90 days after the date expenses
changed, we will pay these funds to you, if you are a trustee
of the Plan. If you are not Plan trustee, you must
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designate the Funding Agent to whom these amounts are to be
transferred. Failure to designate an alternate Funding Agent
within the time allowed by this Section will be deemed to be
acceptance of the changed expenses for this contract.
c) You are not required to transfer any Guaranteed Interest
Investments during their respective Guarantee Periods. You may
choose to have Guaranteed Interest Investments mature under
this contract before transferring any of such amount to another
Funding Agent. All such amounts must be transferred to another
Funding Agent or used to purchase annuities hereunder at the
end of the Guarantee Period of each. The expense rate used to
calculate expenses on each Guaranteed Interest Investment will
remain the same as before Notification.
10. This rider deletes the paragraph under ARTICLE VII, SECTION 14--TERM
AND TERMINATIONS.. and replaces it with the following:
Except as provided in Section 13 of this Article, or by any amendment
to this contract, this contract will continue in force as long as we
hold Investments under the contract or we are making annuity payments.
If you transfer all of the Investments under this contract not
associated with any annuity payments to a Funding Agent, our
obligations under this contract will cease, except to the extent that
we are making annuity payments. However, if we discover that we
underpaid the Funding Agent, we will have the obligation to pay the
appropriate amount to the Funding Agent.
11. This rider deletes the second paragraph under ARTICLE VII, SECTION
15--QUALIFICATION OF PLANS., and replaces it with the following:
Notwithstanding any other provision in this contract or in any other
agreement between you and us, if the Internal Revenue Service or a
court makes a final determination that the Plan no longer qualifies as
a Qualified Plan, we may require that you transfer all Investments
invested under this contract to another Funding Agent If we decide that
you must transfer Investments from this contract, we will send you a
written notice describing your options. If we do not receive an
acceptable response Notice from you within five Business Days, we will
return the Investments held under this contract to you, or if
appropriate, to a Plan trustee. We will not accept any Notice under
this Section unless the Notice clearly specifies the Funding Agent to
receive the Investments.
PRINCIPAL LIFE INSURANCE COMPANY
/s/ David J. Drury
---------------------------------
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
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SEPARATE ACCOUNT INVESTMENT RIDER
This rider is added to the Group Annuity Contract issued by us of which it is a
part. All terms defined in the contract have the same meaning where used in this
rider. The effective date of this rider is the latest of (i) the Contract Date,
(ii) the date this rider has been approved for use in the state of issue, or
(iii) the date stated in the amendment adding this rider to the contract.
The purpose of this rider is to allow the contract to participate in our
Separate Accounts. We reserve the right to limit both the number of Separate
Accounts available under the contract and the number available to each Member~
The following Separate Accounts may be available under this contract:
Bond and Mortgage Separate Account
Bond Emphasis Balanced Separate Account
Government Securities Separate Account
International Emerging Markets Separate Account
International Small Company Separate Account
International Stock Separate Account
Large Company Blend Separate Account
Large Company Growth Separate Account
Large Company Value Separate Account
Medium Company Blend Separate Account
Medium Company Growth Separate Account
Medium Company Value Separate Account
Money Market Separate Account
Real Estate Separate Account
Small Company Blend Separate Account
Small Company Growth Separate Account
Small Company Value Separate Account
Stock Emphasis Balanced Separate Account
Stock Index 500 Separate Account
U.S. Stock Separate Account
Although all Separate Accounts listed above may be available under this
contract, you may send us Notification indicating you want the contract
administered so that assets held under this contract will not participate in one
or more of these Separate Accounts. You may revoke your Notification by sending
us a new Notification.
1. DESCRIPTIONS OF THE SEPARATE ACCOUNTS. Each Separate Account is a
pooled Separate Account for use by our retirement plan customers. The
funds held in each Separate Account will be invested and reinvested by
us in accordance with applicable law, without regard to any investment
requirements of our general account assets or of any of our other
Separate Accounts.
A Separate Account consists of funds we receive under group annuity
contracts or policies which permit deposit in such Separate Account and
under which amounts are directed to such Separate Account. All income
gains and losses (whether or not realized),
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and expenses from the assets allocated to a Separate Account will be
credited to or charged against that Separate Account without regard
to any other income, gains or losses, or expenses we might have for
our general account or any other Separate Account. The assets of a
Separate Account will not be charged with any liabilities arising
out of the investment experience of our general account or any other
Separate Accounts outside that Separate Account. We may occasionally
invest the assets of any Separate Account in short term money market
instruments, cash or cash equivalents.
BOND AND MORTGAGE SEPARATE ACCOUNT. Bond and Mortgage Separate Account
is invested primarily in bond and mortgage-type investments similar to
our general account, including bonds and mortgages from both United
States and non-United States corporations.
BOND EMPHASIS BALANCED SEPARATE ACCOUNT. Bond Emphasis Balanced
Separate Account is invested in other Separate Accounts established and
maintained by us. The majority of the assets will be invested in other
Separate Accounts which are invested primarily in bonds, mortgages,
commercial paper and other fixed income type investments. The remainder
of the assets of this Separate Account will be invested in one or more
of our Separate Accounts invested primarily in common stocks and other
equity investments.
GOVERNMENT SECURITIES SEPARATE ACCOUNT. Government Securities Separate
Account is invested primarily in obligations issued or guaranteed by
United States governmental agencies and instrumentalities, including,
but not limited to, the Government National Mortgage Association, the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Association and the Student Loan Marketing Association.
INTERNATIONAL EMERGING MARKETS SEPARATE ACCOUNT. International Emerging
Markets Separate Account is invested primarily in common stocks of
corporations located in countries outside the United States where
structural changes are causing rapid economic growth and improved
standards of living. These investments may be made in either United
States or foreign currency or equivalencies.
INTERNATIONAL SMALL COMPANY SEPARATE ACCOUNT. International Small
Company Separate Account is invested primarily in stocks or other
securities of small corporations located outside the United States.
These investments may be made in either United States or foreign
currency or equivalencies.
INTERNATIONAL STOCK SEPARATE ACCOUNT. International Stock Separate
Account is invested primarily in a broad base of stocks or other
securities of corporations located outside the United States, but
especially in Europe, North America, and the Pacific rim. These
investments may be made in either United States or foreign currency or
equivalencies.
LARGE COMPANY BLEND SEPARATE ACCOUNT. Large Company Blend Separate
Account is invested primarily in common stocks from large, established
companies whose stock exhibits a combination of substantial value and
good earnings growth potential. The investments may also include
derivative instruments such as options and futures, other equity
securities, or other convertible securities that may be converted to
common stocks.
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LARGE COMPANY GROWTH SEPARATE ACCOUNT. Large Company Growth Separate
Account is invested primarily in common stocks from large, established
companies whose earnings are expected to grow at above average rates.
The investments may also include derivative instruments such as options
and futures, other equity securities, or other convertible securities
that may be converted to common stocks.
LARGE COMPANY VALUE SEPARATE ACCOUNT. Large Company Value Separate
Account is invested primarily in common stocks from large, established
companies with below-average price/earnings ratios and above-average
dividend yields which we view as undervalued by the market. The
investments may also include derivative instruments such as options and
futures, other equity securities or other convertible securities that
may be converted to common stocks. If the market as a whole is
overvalued, we may hold assets of this account in fixed income
securities instead of stocks.
MEDIUM COMPANY BLEND SEPARATE ACCOUNT. Medium Company Blend Separate
Account is invested primarily in common stocks from medium-sized,
established companies whose stock exhibits a combination of substantial
value and good earnings growth potential. The investments may also
include derivative instruments such as options and futures, other
equity securities, or other convertible securities that may be
converted to common stocks.
MEDIUM COMPANY GROWTH SEPARATE ACCOUNT, Medium Company Growth Separate
Account is invested primarily in common stocks from medium-sized,
developing companies whose earnings are expected to grow at above
average rates. The investments may also include derivative instruments
such as options and futures, other equity securities, or other
convertible securities that may be converted to common stocks.
MEDIUM COMPANY VALUE SEPARATE ACCOUNT. Medium Company Value Separate
Account is invested primarily in common stocks from medium-sized,
financially stable companies with below-average price/earnings ratios
and above-average dividend yields which we view as undervalued by the
market. The investments may also include derivative instruments such as
options and futures, other equity securities or other convertible
securities that may be converted to common stocks. If the market as a
whole is overvalued, we may hold assets of this account in fixed income
securities instead of stocks.
MONEY MARKET SEPARATE ACCOUNT. Money Market Separate Account is
invested primarily in money market instruments such as the obligations
of the United States government and its agencies, commercial paper,
bank certificates of deposit and similar instruments.
REAL ESTATE SEPARATE ACCOUNT. Real Estate Separate Account is invested
primarily in real estate such as office buildings, industrial
buildings, shopping centers, retail stores and similar property.
SMALL COMPANY BLEND SEPARATE ACCOUNT. Small Company Blend Separate
Account is invested primarily in common stocks from smaller,
established companies whose stock exhibits a combination of substantial
value and good earnings growth potential. The
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investments may also include derivative instruments such as options
and futures, other equity securities, or other convertible
securities that may be converted to common stocks.
SMALL COMPANY GROWTH SEPARATE ACCOUNT. Small Company Growth Separate
Account is invested primarily in common stocks from smaller, developing
companies whose earnings are expected to grow at above average rates.
The investments may also include derivative instruments such as options
and futures, other equity securities, or other convertible securities
that may be converted to common stocks.
SMALL COMPANY VALUE SEPARATE ACCOUNT. Small Company Value Separate
Account is invested primarily in common stocks from smaller,
financially stable companies with below-average price/earnings ratios
and above-average dividend yields which we view as undervalued by the
market. The investments may also include derivative instruments such as
options and futures, other equity securities or other convertible
securities that may be converted to common stocks. If the market as a
whole is overvalued, we may hold assets of this account in fixed income
securities instead of stocks.
STOCK EMPHASIS BALANCED SEPARATE ACCOUNT. Stock Emphasis Balanced
Separate Account is invested in other Separate Accounts established and
maintained by us. The majority of the assets will be invested in other
Separate Accounts which are invested primarily in common stocks and
other equity investments. The remainder of the assets of this Separate
Account will be invested in one or more of our Separate Accounts
invested primarily in bonds, mortgages, commercial paper and other
fixed income type investments.
STOCK INDEX 500 SEPARATE ACCOUNT. Stock Index 500 Separate Account is
invested primarily in stocks and securities of companies whose stocks
are used to calculate the Standard and Poor's 500 Stock Index (or a
similar stock index if the Standard and Poor's 500 Stock Index is no
longer calculated). The investments may also include a reasonable
amount of stock index futures, commercial paper, derivative securities
and other types of investments. In addition, some funds may be invested
in stock index accounts operated by other investment managers. Stock
Index 500 Separate Account attempts to earn a return that mirrors the
Standard & Poor's 500 Stock Index.
U.S. STOCK SEPARATE ACCOUNT. U.S. Stock Separate Account is
primarily invested in common stocks of United States companies.
The investments may also include derivative instruments such as
options and futures, other equity securities or other
convertible securities that may be converted to common STOCKS.
The U.S. Stock Separate Account is managed by looking for shifts in
the economy, industries that stand to benefit from those shifts,
and companies in those industries that are undervalued by the market.
2. DETERMINING SEPARATE ACCOUNT VALUES; OPERATING EXPENSES. The value of a
Separate Account is its market value (appraised market value for Real
Estate Separate Account) less Operating Expenses, if any. If there is
no readily available market, its value is the fair market value of the
assets held in such Separate Account as determined by us using
generally accepted accounting practices and applicable law. The
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value of all Separate Accounts will always be expressed in U.S.
dollars. We will determine the value of a Separate Account on each
Valuation Date.
OPERATING EXPENSES are those charges which must be paid in order to
operate a Separate Account or obtain investments for a Separate
Account. Operating Expenses include, but are not limited to, custodial
fees, transfer taxes, brokerage fees, processing fees, and other taxes
and fees associated with the operation of a Separate Account. Operating
Expenses will be deducted from the Separate Account associated with a
particular charge on the next Valuation Date after the Operating
Expenses have been paid or are immediately payable. In accordance with
our then-current procedures, various Separate Accounts may share in the
payment of certain Operating Expenses and, in some cases, we may use
certain fees paid to us by third parties to offset Operating Expenses
incurred by a Separate Account which would otherwise be payable from
that Separate Account.
VALUATION DATE means the date we determine the value of a Separate
Account Valuation Dates will occur on dates we determine, but at
least on the last Business Day of a calendar month. Valuation will
occur at the end of each such day, according to our then-current
procedures. For purposes of the International Stock Separate
Account, International Small Company Separate Account, and
International Emerging Markets Separate Account, only those days on
which both the value of the underlying investments is determined and
we are open for business will be Valuation Dates.
3. MANAGEMENT CHARGES. The Management Charge under each Separate Account
will be a percentage of the value of assets in such Separate Account,
subject to the equivalent of a maximum annual percentage listed in the
Table of Separate Account Features. We reserve the right to change the
Management Charge to any charge up to the maximum limit at any time by
giving you written notice at least 30 days before the date the change
is to take effect.
MANAGEMENT CHARGE means the charge consisting of the investment
management charge and the contract expense charge applicable to this
class of contracts for each Separate Account.
The assets of Bond Emphasis Balanced Separate Account and Stock
Emphasis Balanced Separate Account will pay Management Charges under
our other Separate Accounts in which they are invested. An additional
Management Charge will be charged under these Separate Accounts only
for management services actually performed exclusively for assets held
in these Separate Accounts.
A prorata charge will be deducted from each Separate Account on each
Valuation Date for the number of calendar days within the Valuation
Period ending on such Valuation Date.
VALUATION PERIOD means the period from the end of a Valuation Date to
the end of the next following Valuation Date.
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4. SEPARATE ACCOUNT INVESTMENT. A Separate Account Investment is
established for each Member for a Separate Account for each type of
Contribution a Member directs to a Separate Account.
Where Money Market Separate Account is available and we receive
Notification from you to do so, an Unallocated Separate Investment
Account will be established for Contributions for which either i) we do
not have all the necessary information needed to allocate such
Contributions to individual Members, or ii) you have notified us that
such Contributions are to be unallocated. If Money Market Separate
Account is not available, an Unallocated Contribution Investment will
be established, using a Guaranteed Interest Investment with the
shortest Guaranteed Period available.
UNALLOCATED SEPARATE ACCOUNT INVESTMENT means the Investment
established to hold unallocated Contributions, invested in Money Market
Separate Account, if available, and operates as if it were a Member's
Investment.
5. RETURNS CREDITED TO SEPARATE INVESTMENT ACCOUNTS. Each Separate Account
Investment established under this contract will be credited with its
portion of the return associated with the appropriate Separate Account.
The return for a Separate Account will be based on the change in value
of that Separate Account less any Management Charge.
In order to track the returns for the Separate Account Investments
established under this contract, we will use a unit value system of
recordkeeping, unless we determine that another recordkeeping system
would be more appropriate.
6. UNIT VALUE SYSTEM OF RECORDKEEPING. Under a unit value system of
recordkeeping, we will calculate the value of a Separate Account
Investment for each Valuation Date by multiplying the number of
Separate Account units held in the Separate Account Investment by the
applicable Unit Value. A Unit Value is the dollar value for one unit.
Contributions or transfers to a Separate Account Investment increase
the number of Separate Account units credited to it. Transfers and
payments from a Separate Account Investment reduce the number of
Separate Account units. The increase or decrease in the number of
Separate Account units is calculated by dividing the dollar amount of
the contribution, transfer, or payment by the applicable Unit Value.
We will calculate the Unit Value applicable to each Separate Account
Investment on each Valuation Date. The Unit Value will be based upon
the total value of the Separate Account and the number of existing
Separate Account units.
When crediting Contributions and transfers added to a Separate Account
Investment we will use the Unit Value applicable to the Separate
Account Investment for the Valuation Date on which we accept the
Contribution or transfer. If we accept the Contribution or transfer on
a date other than a Valuation Date, we will use the Unit Value for the
next following Valuation Date.
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7. DEPOSITS TO SEPARATE ACCOUNTS; RESTRICTIONS AND ORDER OF ENTRY. We
reserve the right to defer or stop your ability to direct Contributions
and transfers to a Separate Account, and we may require you to transfer
existing account balances out of a Separate Account. We may exercise
these rights if we
a) need to comply with regulation, statute, or decisional law to
which we are subject,
b) believe it would be imprudent not to do so in fulfilling our
fiduciary role as an investment advisor under ERISA,
c) believe the investment approach of the Separate Account no
longer makes sense, is excessively expensive, or does not
currently have any favorable investment opportunities
available, or
d) if, in our opinion, continued operation of the Separate Account
is inappropriate.
Contributions or transfers directed to a Separate Account that we have
closed on a temporary or permanent basis will be directed to Money
Market Separate Account, if available, or to the Guaranteed Interest
Investment with the shortest Guarantee Period available under the
contract. If the Separate Account has been closed on a temporary basis,
we will treat a Contribution or transfer request as a Notification that
money should be transferred to the closed Separate Account as soon as
permitted under the terms of the contract.
PROVISIONS FOR A TEMPORARILY CLOSED SEPARATE ACCOUNT. We have
established the following order of entry into a Separate Account that
was temporarily closed, then reopened:
a) All amounts held in Money Market Separate Account waiting for
transfer to the Separate Account.
b) Any amounts held in any other Separate Account or in our
general account which are to be transferred to the Separate
Account.
Within each of the above 2 categories, funds will be transferred one
customer at a time, in order from the oldest waiting Notification to
the newest Notification.
Normally, if the amount of the intended transfer is greater than the
amount open for acceptance by a previously closed Separate Account, the
entire amount of the transfer will continue to be held in the account
it was at the time of the request until the Valuation Date when
complete transfer may be made. However, we and you (the Member, if
permitted by the Plan) may mutually agree to transfer only a portion of
the intended amount to the Separate Account.
We will notify you in writing when amounts have been transferred to
a reopened Separate Account.
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You or a Member, as permitted by the Plan, may revoke a request for
transfer of funds to a Separate Account by giving us Notification
before the date transfer is made. The Notification must also include
new investment directions for the intended transfer.
PROVISIONS FOR A PERMANENTLY CLOSED SEPARATE ACCOUNT. We will notify
you in writing of our intent to permanently close a Separate Account
You will have 60 days to request transfer as described in 8. BELOW. If
after 60 days we have not received Notification of where to transfer a
closed Separate Account balance, we will treat the account as a
Contribution for which we do not have investment direction.
8. TRANSFERS AND PAYMENTS FROM A SEPARATE ACCOUNT INVESTMENT. We will,
upon Notification from you (the Member if permitted by the Plan), and
subject to our right to defer a transfer or payment as described in
Section 9,
a) transfer to the Member's Guaranteed Interest Investment or
another Separate Account Investment all or any portion of the
Separate Account Investment specified, or
b) transfer to another Funding Agent all or any portion of the
Member's Separate Account Investment, or
c) pay the Member an amount equal to all or any portion of the
Member's Separate Account Investment.
The amount to be paid or transferred will be determined and paid or
transferred within seven Business Days after (i) the Valuation Date on
which we receive the Notification, or (ii) a later Valuation Date
specified in the Notification. Payments and transfers will be made in
accordance with our then-current procedures. We will notify you in
writing of these procedures. The amount transferred or paid will be
deducted from the Separate Account Investment from which such transfer
or payment was requested on the date of such transfer or payment. Each
transfer to another Separate Account Investment may occur only on a
Valuation Date of that Separate Account.
We are not responsible for the application of amounts transferred to
another Funding Agent.
9. LIMITATIONS ON TRANSFERS AND PAYMENTS FROM A SEPARATE ACCOUNT
INVESTMENT. In general, transfers and payments from a Separate
Account Investment will be made within seven Business Days after the
first Valuation Date following the request specified in Section 8 of
this rider. We reserve the right, however, to defer such transfers
or payments up to the maximum number of days shown in the Table of
Separate Account Features for each Separate Account. If we defer any
transfer or payment under this Section, we will determine the amount
to be transferred or paid on the date transfer or payment occurs. We
will notify you in the event of any deferment of more than 30 days
under the provisions of this Section.
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<PAGE>
These limitations will not apply to the payments to the beneficiary of
a Member due to the Member's death, payments to a Member due to
disability or retirement under the Plan and to purchases of annuity
under Article IV, Section 2 of the contract.
SPECIAL REAL ESTATE LIMITATIONS. Because of the illiquid nature of the
assets in which Real Estate Separate Account is invested, we reserve
the right to defer transfers or payments from a Real Estate Separate
Account Investment if a transfer or payment would exceed the amount of
cash and other liquid assets held in Real Estate Separate Account,
reduced by amounts committed to purchase properties or needed for
Operating Expenses.
Real Estate Separate Account may be illiquid for indefinite periods of
time. We will not manage Real Estate Separate Account to provide a
liquidity pool for requests for transfer or payment. If requests for
transfer or payment from Real Estate Separate Account are deferred,
then the deferred transfers or payments, when made, will be made in the
following order:
a) Any death benefits payable under a defined contribution plan.
b) All or a portion of each of the other requests for payment,
determined as follows:
i) the amount of the request, divided by
ii) the amount of all waiting requests, multiplied by
iii) amount we determine to be available to pay requests;
provided, however, that no more than the amount of
the request shall be paid out.
Deferred transfers or payments, when paid, will be made as of a
Valuation Date and will be based on the Real Estate Separate Account
Unit Value as of the date paid. In determining the amount available to
pay requests, we will subtract amounts payable under any other group
annuity contract which requires that we make payments from the Real
Estate Separate Account using a method other than the one described in
this Section.
We reserve the right to make payments in a different manner than
described in this Section if we (i) are required to do so under
applicable statutes, regulations, or decisional law to which we are
subject, (ii) must do so to comply with our fiduciary responsibilities
as an ERISA investment manager as described in Article II, Section 8,
or (iii) deem it necessary to make a change to maintain an equitable
distribution of assets under all of our group annuity contracts. We
will not implement a change under item (iii) before the notice to all
affected contractholders is provided and the appropriate time period
after the notice has elapsed.
SPECIAL LIMITATION FOR CERTAIN SEPARATE ACCOUNTS. We reserve the right
to make the portion of a requested transfer in excess of the specified
dollar limit in substantially equal monthly installments over a period
not to exceed the specified period, if, in the specified period which
ends on the requested date of transfer, all transfers and payments from
the total of all Separate Account Investments invested in a particular
Separate Account which is subject to the dollar limit total the
specified dollar limit or more. For purposes of this
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limitation, transfers and payments from any other Separate Account
investments or funds included in the Separate Account from any other
contracts or policies issued in connection with the Plan or with any
other retirement plan of the Employer will be included as a transfer
or payment from a Separate Account Investment. If this limitation is
imposed by us, the first installment will be made one month after
the date of request, or on such later date that you specify. The
specified dollar limit and period are:
a) $1,000,000 and twelve months, respectively, for International
Stock Separate Account, International Small Company Separate
Account, International Emerging Markets Separate Account, and
Stock Index 500 Separate Account.
b) $20,000,000 and 36 months, respectively, for Bond Emphasis
Balanced Separate Account, Government Securities Separate
Account, Large Company Blend Separate Account, Large Company
Growth Separate Account, Large Company Value Separate Account,
Medium Company Blend Separate Account, Medium Company Growth
Separate Account, Medium Company Value Separate Account, Small
Company Blend Separate Account, Small Company Growth Separate
Account, Small Company Value Separate Account, Stock Emphasis
Balanced Separate Account, and U.S. Stock Separate Account.
10. PLANS WHICH MAY INVEST IN THE SEPARATE ACCOUNTS. The Separate
Accounts are not registered with the federal Securities and Exchange
Commission and therefore only Plans which meet certain requirements
under the Code may invest in the Separate Accounts. If the Internal
Revenue Service or a court makes a final determination that the Plan
no longer qualifies as a Qualified Plan, we will require that you
transfer any assets invested in the Separate Accounts. If we decide
that you must transfer assets from the Separate Accounts, we will
send you a notice describing your options. Your Notification must
clearly specify the Guaranteed Interest Investment(s) or the Funding
Agent to which you want the assets transferred. If we do not receive
an acceptable Notification from you within 5 Business Days, we will
transfer the assets to the Guaranteed Interest Investment with the
shortest duration.
11. FUNDS. We are the sole owner of all assets held in the Separate
Accounts.
PRINCIPAL LIFE INSURANCE COMPANY
/s/ David J. Drury
--------------------------------
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
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<PAGE>
TABLE OF SEPARATE ACCOUNT FEATURES
<TABLE>
<CAPTION>
CURRENT ANNUAL MANAGEMENT MAXIMUM ANNUAL MANAGEMENT MAXIMUM NUMBER OF DAYS
CHARGE PERCENTAGE CHARGE PERCENTAGE ALLOWED TO DEFER TRANSFERS
OR PAYMENTS
------------------------- ------------------------- --------------------------
<S> <C> <C> <C>
Bond Emphasis Balanced None 2.00* 270
Separate Account
Bond and Mortgage 0.45 2.00 270
Separate Account
Government Securities 0.45 2.00 90
Separate Account
International Emerging 0.69 2.00 270
Markets Separate Account
International Small 0.69 2.00 270
Company Separate Account
International Stock 0.69 2.00 270
Separate Account
Large Company Blend 0.45 2.00 270
Separate Account
Large Company Growth 0.45 2.00 270
Separate Account
Medium Company Blend 0.45 2.00 270
Separate Account
Medium Company Growth 0.45 2.00 270
Separate Account
Medium Company Value 0.45 2.00 270
Separate Account
Money Market Separate 0.45 2.00 90
Account
Real Estate Separate 1.05 None Indefinite
Account
Small Company Blend 0.45 2.00 270
Separate Account
Small Company Growth 0.45 2.00 270
Separate Account
Small Company Value 0.45 2.00 270
Separate Account
Stock Emphasis Balanced None 2.00* 270
Separate Account
Stock Index 500 Separate 0.35 2.00 270
Account
U.S. Stock Separate 0.45 2.00 270
Account
</TABLE>
* The maximum annual Management Charge percentage includes Management Charges
paid under this Separate Account (currently none) and the Separate Accounts in
which this Separate Account is invested.
11
<PAGE>
SCHEDULE OF SPECIFICATIONS
RIDERS TO THE CONTRACT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 DEFINITIONS
<S> <C>
Section 1 Parties to this Contract
Section 2 Other Defined Terms
ARTICLE II CONTRIBUTIONS, INVESTMENTS AND ACCOUNTS
Section 1 Contributions
Section 2 Investment Direction
Section 3 Guaranteed Interest Investments
Section 4 Separate Account Investments
Section 5 Nonvested Funds Accounts
Section 6 Transfers Between Investments
Section 7 Maturing Guaranteed Interest Investments
Section 8 Investment Manager
Section 9 Funds
ARTICLE III EXPENSES
Section 1 Expenses
Section 2 Billed Expenses
Section 3 Deducted Expenses
Section 4 Alternative Expense Deductions
Section 5 Expenses for Certain Members and Beneficiaries
Section 6 Associated Contracts
ARTICLE IV BENEFIT EVENTS AND OPTIONS
Section 1 Benefit Events
Section 2 Annuity Benefits
Section 3 Single Sum Payments
Section 4 Full Flexibility Option
Section 5 Modification in Mode of Payment of Income
Section 6 Facility of Payment
Section 7 Assignment
ARTICLE V OTHER BENEFITS
Section 1 Withdrawal Benefits
ARTICLE VI TRANSFER TO ANOTHER FUNDING AGENT; CESSATION;
CHARGES AND LIMITATIONS
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 1 Transfer to Another Funding Agent
Section 2 Cessation of Contributions
Section 3 Charges for Early Surrender of a Guaranteed Interest Investment
Section 4 Limitations on Transfers and Payments from Guaranteed Interest
Investments
ARTICLE VII GENERAL PROVISIONS
Section 1 Certificates
Section 2 Beneficiary
Section 3 Dividends
Section 4 Plan and Plan Amendments
Section 5 Contract
Section 6 Contract Amendments
Section 7 Waiver and Modification
Section 8 Information, Proofs and Determination of Facts
Section 9 Reliance on Instructions
Section 10 Single Payment
Section 11 Overpayment
Section 12 Ownership
Section 13 Termination and Cash Out of Contract
Section 14 Term and Termination
Section 15 Qualification of Plans
Section 16 Our Relationship to the Plan
</TABLE>
2
<PAGE>
ARTICLE 1--DEFINITIONS
SECTION 1--PARTIES TO THIS CONTRACT.
This contract is between the Contractholder and Principal Life Insurance
Company.
CONTRACTHOLDER means the holder of this contract named on the face page and will
be referred to in this contract as you or your.
Principal Life Insurance Company will be referred to in this contract as we, us,
or our.
SECTION 2--OTHER DEFINED TERMS.
ACCOUNT means the total of a Member's Guaranteed Interest Investments and
Separate Account Investments.
ANNUITY PREMIUM means the amount applied to purchase an annuity for a Member.
ANNUITY PURCHASE DATE means the date on which the Account of a Member is applied
to purchase an annuity benefit for the Member.
ANNUITY START DATE means the beginning date for annuity benefits to a Member.
ASSOCIATED CONTRACT(S) means this contract and any other group annuity
contract(s) issued by us which we have agreed in writing to treat as Associated
Contracts.
BENEFIT EVENT means, depending upon Plan provisions, termination of employment,
Retirement Date, disability (as defined in the Plan) or death. We may require
any proof of a Benefit Event we deem necessary.
BUSINESS DAY means a day on which both we and the New York Stock Exchange are
open for business, or any other day which we agree will be a Business Day. If
you request a list of our Business Days for any calendar year, we will provide
you with the list.
CODE means the Internal Revenue Code of 1986. as amended, and the regulations
thereunder. Reference to the Code means such Internal Revenue Code or the
corresponding provisions of any subsequent revenue code and any regulations
thereunder.
COMPOSITE GUARANTEED RATE means, on any date, the rate determined for each of
the Member's Guaranteed Interest Investments which is based on the Guaranteed
Interest Rate in effect on the date we accept the Contribution or transfer. If
more than one Contribution or transfer is accepted during a Deposit Year, the
Composite Guaranteed Rate for such Investment will be determined based on the
amount and timing of Contributions or transfers and the amount of any payment or
application on or before the end of the Deposit Year in which the Contributions
or transfers were accepted. At the end of Deposit Year, that year's Guaranteed
Interest Investments close. Each Guaranteed Interest Investment then earns the
Composite Guaranteed Rate determined for it, compounded annually, until the end
of the Guaranteed Period.
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<PAGE>
CONTRACT DATE means the date this contract is effective, as shown on the face
page.
CONTRIBUTIONS means funds we receive and accept under Article, II, Section 1.
The types of Contributions are those allowed by the Plan.
CORPORATE CENTER means our offices at 711 High Street, Des Moines, Iowa, 50392,
or any other office or address to which we direct you to send Contributions.
DEPOSIT YEAR means the period (not to exceed 12 months) selected for the
crediting of interest to Guaranteed Interest Investments established under this
contract, as shown on the Schedule.
EMPLOYER means the corporation(s) or firm(s) named as employer in the Plan and
any successor by change of name, merger, purchase of stock, or purchase of
assets.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and
the regulations issued by the U.S. Department of Labor.
FUNDING AGENT means an insurance company, trustee or custodian designated by you
and authorized to transfer or receive any amount(s) transferred to or from this
contract and to apply such amount(s) for the exclusive benefit of Plan Members,
without any obligation on our part as to such application. Funding Agent will
also mean Principal Life Insurance Company when you direct us to transfer such
amounts from this contract to another group annuity contract issued by us.
GUARANTEED INTEREST INVESTMENT means the investment established for a Member for
each Deposit Year for each Contribution type as described in Article II, Section
3.
GUARANTEED INTEREST RATE means the annual rate of interest we declare from time
to time for contracts of this class for each Contribution to a Guaranteed
Interest Investment.
GUARANTEE PERIOD means the period for which a Guaranteed Interest Investment
exists. The period or periods available may be any that we offer to contracts of
this class under the same or similar circumstances. Currently, Guarantee Periods
of two through seven years are available. We reserve the right to change, at any
time, the Guarantee Periods available for new Contributions and transfers,
including transfers from existing Guaranteed Interest Investments. We reserve
the right to limit both the number of Guarantee Periods available under this
contract and the number available to each Member.
You must give us Notification of the Guarantee Periods you select from those
available under the contract. Your selection will remain in effect until
modified by (b) and (c) below.
Our rights to change and to limit the Guarantee Periods available are subject to
the following:
a) Once established by us, the Guarantee Period for a particular
Guaranteed Interest Investment may not be changed by us.
However, a different Guarantee Period may apply to amounts
maturing from such account.
2
<PAGE>
b) If a particular Guarantee Period is no longer offered, we
will notify you at least 60 days in advance.
c) For each Deposit Year, you have the right to select Guarantee
Periods or to change the selection of Guarantee Periods
available to Members by giving us Notification before the
beginning of the Deposit Year for which the selection applies.
The selections for a Deposit Year cannot be changed after its
start.
INACTIVE MEMBER ACCOUNT means the Account of an Inactive Member.
INVESTMENTS means the Guaranteed Interest Investments and/or Separate Account
Investments of the Member.
MEMBER means a person entitled to benefits under the Plan for whom an Account
exists under this contract. A Member will be considered either active or
inactive, as follows:
a) Active Member-a person who is actively participating in the
Plan or an alternate payee of a person who is actively
participating in the Plan pursuant to a Qualified Domestic
Relations Order.
b) Inactive Member-a Member who is not an Active Member
MEMBER ACCOUNT means the Account of a Member.
NONVESTED FUNDS ACCOUNT means the accounts established to hold certain Plan
funds as described in Article II, Section 5. These accounts will operate in the
same manner as a Member Account for the purpose of transfers.
NORMAL RETIREMENT DATE means the date, determined by the Plan, on which the
Member's normal retirement benefit will begin. If the Plan does not specify, it
will be the first day of the month on or after the later of (I) the Member's
65th birthday or (ii) the fifth anniversary of the time a Member began
participation in the Plan.
NOTIFICATION means a form of notice approved by us, including written forms,
electronic transmissions, facsimiles or photocopies. We will notify you
regarding the acceptable forms of notice we will allow. At our discretion, we
may require that a specific form of notice be used in a particular case or that
a particular notice be confirmed. Notification will also include the terms
Notice, Notify and Notified.
ORDER OF APPLICATION means the order in which we will apply the Investments of a
Member when a partial transfer or withdrawal of a portion of the Member's
Account has been requested and no other order of application has been reported
to us. The amount withdrawn or transferred from the Member's Guaranteed Interest
Investments, if any, and Separate Account Investments, if any, will be based on
the relative value of each such Investment to the Member's Account. The amount
withdrawn or transferred from Guaranteed Interest Investments will be from the
current Guaranteed Interest Investment first, then from each preceding
Guaranteed Interest Investment, with the oldest Guaranteed Interest Investment
being last applied. The amount
3
<PAGE>
withdrawn or transferred from Separate Account Investments will be based on the
relative values of each Separate Account Investment.
PLAN means the Employer's retirement plan in effect on the date this contract is
executed and as amended from time to time, which the Employer has designated to
us in writing as the plan funded by this contract The name of the Plan is shown
in the Schedule.
QUALIFIED DOMESTIC RELATIONS ORDER means a Qualified Domestic Relations Order as
defined in Internal Revenue Code Section 414(p)(1)(A).
QUALIFIED PLAN means a pension plan qualified under Section 401 of the Code, a
governmental plan meeting the requirements of Section 457 of the Code, and any
other plans which we determine may appropriately invest money in this contract.
RETIREMENT DATE means the Member's early, normal or late retirement date under
the Plan.
SCHEDULE OF SPECIFICATIONS means the schedule attached to and made part of this
contract. The Schedule of Specifications lists pertinent information and will be
referred to as the Schedule in this contract.
SEPARATE ACCOUNT means one or more Separate Accounts described in the Separate
Account Investment Rider and listed on the Schedule. If no Separate Account
Rider is attached to this contract and no Separate Accounts are listed on the
Schedule, this contract may not participate in any Separate Accounts.
SEPARATE ACCOUNT INVESTMENT means the investment or investments established for
a Member as described in Article II, Section 4.
UNALLOCATED CONTRIBUTION INVESTMENT means the investment established to hold
Contributions which cannot be allocated to individual Members on the date we
accept them pursuant to Article II, Section 1 or Section 5. Unless we give you
written notice to the contrary, the Unallocated Contribution Investment will be
invested in Money Market Separate Account, if available, otherwise in a
Guaranteed Interest Investment with the shortest Guarantee Period available.
4
<PAGE>
ARTICLE II--CONTRIBUTIONS, IN VESTMENTS AND ACCOUNTS
SECTION 1--CONTRIBUTIONS.
Contributions may be accepted by us under this contract on any Business Day on
or after the Contract Date, subject to the limitations of the last paragraph of
this Section and Article VII, Section 13. Contributions may be any amount
determined or allowed by the Plan and accepted by us on behalf of a Member.
Contributions in excess of those determined or allowed by the Plan for the
current Plan year may be paid to us only with our consent. To the extent
Permitted by our then-established procedures we will maintain separate
accounting records for each type of Contribution.
All Contributions are payable directly to us at our Corporate Center.
Contributions will be credited to Member Investments or the Unallocated
Contribution Account as of the Business Day on which we accept the Contribution,
in accordance with our then-current procedure for crediting Contributions under
all contracts of this class. We will inform you in writing of our current
procedures for crediting Contributions.
We reserve the right to limit or refuse further Contributions under this
contract. We will give you written notice at least 60 days before the date after
which further Contributions will be limited or refused by us.
SECTION 2--INVESTMENT DIRECTION.
Each type of Contribution made on behalf of a Member may be directed to the
Guaranteed Interest Investments described in Section 3 of this Article, to any
number of the Separate Account Investments described in Section 4 of this
Article, or to any combination of such investments. We must have Notification of
investment direction from you or, if the Plan permits, from the Member, for the
portion of each type of Contribution to be held in each Investment. You do not
need to approve each Member investment transfer or change of investment
direction unless you have reserved the right to do so under the Plan.
Contributions will be added to each Investment in the amount or percentage
specified in the investment direction on file with us. Future Contributions may
be directed to different Investments or the amount directed to an Investment may
be changed by filing a new Notification or investment direction with us. If a
Contribution is received for a Member for whom no Notification of investment
direction is on file with us, we will direct that Contribution to the Member's
Money Market Separate Account Investment, if available, otherwise to the
Member's Guaranteed Interest Investment with the shortest Guarantee Period then
available under the contract.
SECTION 3--GUARANTEED INTEREST INVESTMENTS.
A Guaranteed Interest Investment will be established for a Member for each type
of Contribution and transfer directed to that investment for each Deposit Year.
A separate Guaranteed Interest Investment will be established for each, Deposit
Year for each Guarantee Period used to hold each type of Contribution directed
to these investments. No further Contributions or transfers will be credited to
a Guaranteed Interest Investment after the close of the Deposit Year in which it
was established.
5
<PAGE>
The value of a Guaranteed Interest Investment of a Member at any time during its
Guarantee Period will be equal to the sum of all Contributions and transfers to
it plus interest less any payments or transfers. Interest will be credited to
the investment daily and compounded annually on the last day of each Deposit
Year. The rate of interest credited will be the Composite Guaranteed Rate
determined for such Investment.
A Guaranteed Interest Investment will be paid or applied in full at the end of
its Guarantee Period as described in Section 7 of this Article.
SECTION 4--SEPARATE ACCOUNT INVESTMENTS.
The Separate Account Investment Rider attached to this contract describes each
Separate Account The Schedule lists the Separate Accounts available under this
contract. Unless you direct us otherwise, Members will be allowed to participate
in all listed investments. A Separate Account Investment will be established for
each Member for each type of Contribution directed to each Separate Account in
which this contract participates.
If no Separate Account Investment Rider is attached to the contract and no
Separate Accounts are listed on the Schedule, no Separate Account Investments
are available.
SECTION 5--NON VESTED FUNDS ACCOUNTS.
Nonvested Funds Accounts will be established to hold the nonvested portion of
Inactive Member Accounts and other Plan funds which we mutually agree to include
in Nonvested Funds Accounts. Nonvested Funds which are reserves of an annuity
cancelled under Subsection (3) of Article IV, Section 2, will be invested
according to our then-current procedures. Other Nonvested Funds will be invested
as they were prior to their transfer to Nonvested Funds Accounts. However, by
giving Notice to us, you may change the investment direction of Nonvested Funds
which are not reserves.
Nonvested portions of Inactive Member's Accounts will be held in the Nonvested
Funds Accounts until a forfeiture occurs under the Plan. Nonvested Funds will be
applied according to Plan provisions on the earliest possible date. Any amounts
reallocated to a Member because of this Section will be considered a
Contribution under Section 1 of this Article, and the provisions of Sections 1
and 2 will apply.
SECTION 6--TRANSFERS BETWEEN INVESTMENTS.
In general, all or a portion of a Member's Investments may be transferred to
another Investment as of any date requested subject to the following:
a) We must receive Notification to transfer from you or the
Member, as permitted by the Plan. The Notification must
specify the amount or percentage to be transferred and may
specify the Investments involved. If a requested transfer from
a Member's Investments does not specify the Investments to be
transferred, the Order of Application will determine the
Investments to be transferred.
6
<PAGE>
b) A transfer from a Member's Guaranteed Interest Investment to a
Separate Account Investment may occur only on a Valuation Date
of such Separate Account Investment.
c) Except as provided in Section 7 of this Article, all transfers
from a Guaranteed Interest Investment are subject to charge
contained in Article VI, Section 3. All transfers are subject
to the limitations contained in Article VI, Section 4 and the
Separate Account Investment Rider.
d) All Separate Account Investment transfers are subject to the
provisions of the Separate Account Investment Rider.
Transfers will be made in accordance with our then-current procedures. Any
transfer under this Section will be an application from the Investment as of the
date of transfer.
SECTION 7--MATURING GUARANTEED INTEREST INVESTMENTS
On the day after the last day of its Guarantee Period, each Guaranteed Interest
Investment of a Member which has not been paid or transferred in full before the
end of its Guarantee Period will be transferred to a current Guaranteed Interest
Investment for that Guarantee Period, if available. If that Guarantee Period is
no longer available, then, unless otherwise directed by Notification, we will
transfer to a current Guaranteed Interest Investment with the shortest Guarantee
Period then available under the contract.
In lieu of the transfer described above, we will pay or transfer all or a part
of the Investment in accordance with any Notification received before the end of
such Guarantee Period.
SECTION 8--INVESTMENT MANAGER
As set out in Sections 2 and 6 of this Article, the right to direct the split of
Contributions between Guaranteed Interest Investments and Separate Account
Investments and to direct any transfer between these Investments is reserved to
you and/or the Member, all in accordance with provisions of the Plan.
Your application for and our issuance of this contract constitutes your
appointment of and our acceptance and affirmation that:
a) in discharging our duties under this contract we will act at
times as an "investment manager", except for the rights
described in the preceding paragraph, and
b) we meet the qualifications needed to accept that appointment
and we acknowledge that by virtue of that appointment we will
exercise fiduciary duties with respect to the Plan.
For purposes of this section, the term "investment manager" has the same meaning
as that term has under ERISA. Our role as investment manager and the acceptance
of the accompanying fiduciary duties extends only to our management of assets
which fall within the term "plan
7
<PAGE>
assets" as used in ERISA, and we undertake no other fiduciary responsibilities
required to administer or maintain the Plan.
SECTION 9--FUNDS
We are sole owner of all funds received under this contract. All Guaranteed
Interest Investments we received under this contract are and remain a part of
our general account without any duty or requirement of segregation or separate
investment on our part. Separate Account Investments will be held as stated in
the rider describing such Separate Account Investments.
8
<PAGE>
ARTICLE III--EXPENSES
SECTION 1--EXPENSES.
Expense charges will be determined by us periodically, but at least annually, in
accordance with the written service agreement we have with you. The amount of
such charges will be made up of the following:
a) Compensation paid or payable by us to the soliciting agent
named by you.
b) A general administration expense charge.
c) A recordkeeping expense charge.
d) Document charges.
e) Other charges may be made for services you ask us to do that
are not covered by (a) through (d). For example, there will be
a charge for preparing unusual material or additional
services. We will inform you of the charges for such services
before we perform them.
SECTION 2--BILLED EXPENSES.
Expenses will be paid to us directly at our Corporate Center, unless deducted
under Section 3 of this Article. We will send you a statement of these charges
periodically in accordance with our written service agreement with you. Such
charges must be paid within 31 days from the date of the statement. If the
expense charges are not paid within 31 days after the statement date, we may
deduct all outstanding expenses from the appropriate Accounts under this
contract. If this automatic deduction of expenses occurs twice in any
twenty-four month period, we may deduct expenses from the accounts as described
in Section 3 of this Article thereafter until a new written service agreement is
completed with us.
SECTION 3--DEDUCTED EXPENSES.
In your written service agreement with us (or as provided in Section 2 of this
Article), an election may be made to have some or all of the expense charges
(described in Section 1 above) deducted from Member Accounts instead of having
these charges paid separately.
SECTION 4--ALTERNATIVE EXPENSE DEDUCTIONS.
As an alternative to direct deduction of expenses from Member Accounts, you may
choose in the service agreement we have with you to have some or, within our
then-current guidelines, all expenses paid by an investment return reduction to
Member Accounts. Periodically we will determine the expense charges incurred and
reduce them by the amount recovered through the investment return reduction. Any
remaining expenses will be billed or deducted in accordance with Section 2 or 3
of this Article.
9
<PAGE>
SECTION 5--EXPENSES FOR CERTAIN MEMBERS AND BENEFICIARIES.
Additional expenses for services provided to (i) Members and beneficiaries who
have elected the Full Flexibility Option and (ii) Inactive Members may be
recovered by an investment reduction to the Accounts of such Members and
beneficiaries covered under contracts of this class. Periodically we will
determine the amount of the reduction necessary to recover the charges incurred.
Any remaining expenses will be billed or deducted in accordance with Section 2
or 3 of this Article.
SECTION 6--ASSOCIATED CONTRACTS.
We may agree to take into account any Associated Contracts for the purpose of
determining the expenses charged under such contracts. The charges under an
Associated Contract will not be greater than if it were not an Associated
Contract.
ARTICLE IV---BENEFIT EVENTS AND OPTIONS
SECTION 1--BENEFIT EVENTS.
Benefits may be payable to a Member for whom a Benefit Event has occurred under
the Plan. You must give us Notification of the Benefit Event. A Member may elect
any one or more of the following options, as permitted by the Plan:
a) Annuity benefits.
b) Single sum payment.
c) Full Flexibility Option.
If the Member does not elect a complete distribution of the Member's Account,
the remainder of the Member's Account will remain under the contract until the
earlier of the date the Member elects to receive benefits under one or more of
the options above or the date the contract terminates. The Member's Guaranteed
Interest Investments and Separate Account Investments will continue to operate
in the same manner.
SECTION 2--ANNUITY BENEFITS.
If permitted by the Plan, a Member may elect to have an annuity benefit
purchased as long as the annuity benefit complies with Plan provisions and all
of the following:
a) All or a portion of the Member's Account may be used to
provide an annuity.
b) The Member must give us Notification to provide the annuity.
c) We will not issue an annuity unless the amount applied to
establish the annuity equals or exceeds $3,500. When
determining the $3,500 amount we will include the current
amount used to establish the annuity plus all previous amounts
applied to establish an annuity under this contract or any
other group annuity contract
10
<PAGE>
issued to you. Upon 60 days written notice to you, we may
increase the $3,500 amount. We will not increase the amount
above the maximum amount which a Qualified Plan I may
distribute to a Member or beneficiary without his or her
prior consent.
d) All annuities will be fixed dollar annuities.
e) The form of benefit and the contingent annuitant named (if
any) cannot be changed after the Annuity Purchase Date.
f) By written agreement with you, we may provide any options
permitted by the Plan.
SUBSECTION (1)--AMOUNT OF ANNUITY BENEFIT. The amount of annuity purchased under
this Article and payable to a Member will be determined by us based on:
a) I the Annuity Premium,
b) the annuity form chosen,
c) the age of the Member,
d) the Annuity Start Date,
e) the age of the contingent annuitant (if any),
f) the frequency of payments, and
g) the annuity purchase rates applicable, as described in
Subsection 2 of this Section.
SUBSECTION (2)--ANNUITY PURCHASE RATES. Annuities will be purchased using our
then-current purchase rates for contracts of this class. Such rates will not be
less favorable to the annuitant than the minimum amounts of annuity which may be
purchased using rates based on an interest rate of 2 1/2%, a load of 5% and
mortality according to the 1983 Female Table a for Individual Annuity Valuation,
projected to 1999 by Scale G.
An example of the minimum amount of annuity income that could be provided by
$10,000.00 of Annuity Premium for an immediate, life annuity with installment
refund is shown in the following table:
<TABLE>
<CAPTION>
------------------------------------------ ---------------------------------------
ATTAINED AGE AMOUNT OF
(YEARS AND MONTHS) MONTHLY INCOME
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
<S> <C>
45 $28.39
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
50 30.22
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
55 32.51
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
60 35.39
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
65 39.07
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
70 43.82
------------------------------------------ ---------------------------------------
</TABLE>
11
<PAGE>
Minimum incomes for purchases made within the five- year period beginning
January 1, 2000, will be 97% of the incomes purchased under the above basis.
Minimum incomes for purchases made within any subsequent five-year period will
be 97% of the incomes for the preceding five-year period. The minimum amounts of
annuity available at other ages and for other forms of income will be determined
by us based on the same basis as the above. We will make these available to you
on request.
SUBSECTION (3)--CANCELLATION OF ANNUITY. If, under the provisions of the Plan in
effect on the Member's Annuity Start Date, you determine and report to us that
the annuity purchased for a Member is to be reduced, then the fraction you
report will be cancelled and the amount of annuity payments paid to the member,
the beneficiary or contingent annuitant will be reduced accordingly.
The reserve for any annuity cancelled under this Section will be applied in
accordance with Article II, Section 5.
SUBSECTION (4)--MISSTATEMENTS. If the age or any other relevant fact of any
Member or contingent annuitant is found to have been misstated, the amount of
annuity payable by us will be that provided by the amount applied to provide
such annuity, determined as of the date established by the misstated information
and on the basis of the correct information. Any overpayment by us resulting
from any misstated information will be deducted from amounts thereafter payable
to a Member, the contingent annuitant or the beneficiary. Any underpayment by us
resulting from any misstatements will be paid in full with the next payment due
the Member, the contingent annuitant or beneficiary.
SUBSECTION (5)--COMMUTATION OF PAYMENTS. If any annuity payments are to be
commuted, the commuted value of the payments will be determined by us, using the
interest rate which was used as a basis for calculating the amount of the
payments at the time the annuity was purchased.
Neither the Member, the contingent annuitant nor any beneficiary who is a
natural person taking in his or her own right has the right to commute any
annuity payments under this contract
SECTION 3--SINGLE SUM PAYMENTS.
If permitted by the Plan, a Member who has reached a Benefit Event may elect a
single sum payment equal to all or a portion of the Member's Account. Any single
sum payment made under this Section will be an application of the Member's
Account on the date paid.
Any single sum payment to a Member is subject to the delay of payment and
limitation provisions of Article VI, Section 4 and the Separate Account
Investment Rider, if any. Such amount may also be subject to the charge in
Article VI, Section 3, unless such payment is made within:
a) 60 days after we send notification to the Member of the
options available under the contract upon reaching the first
Benefit Event under the Plan, other than death, or
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<PAGE>
b) 60 days after a Member's Normal Retirement Date, if such date
is later than the date in (a) above, or
c) 120 days after we send notification to the beneficiary of the
options available under the contract, in the event of the
death of the Member.
SECTION 4--FULL FLEXIBILITY OPTION.
This option provides scheduled installment payments, starting within twelve
months of the date of the Notification and continuing until the date the Account
is exhausted. Payments to the Member or beneficiary are subject to the
distribution rules contained in the Code and the regulations thereunder.
We will pay a portion of such Account on the date or dates requested each
calendar year and continuing until the entire Account has been paid. This amount
is the scheduled amount. The unpaid portion of the Account will continue to be
credited with separate account performance under the terms of the Separate
Account Investment Rider or the interest rate otherwise available and as may be
reduced as provided in Article III, Section 5.
The Order of Application will determine from which Investments payments will be
made. However, a Member or beneficiary may give us Notification of a different
order if a different order is desired. If we receive such Notification, payments
from Guaranteed Interest Investments will be subject to the charge in Article
VI, Section 3, and the delay of payment and limitation provisions of Article VI,
Section 4 and the Separate Account Investment Rider.
If scheduled payments in any calendar year exceed the maximum amount, the excess
amount will be subject to the charge in Article VI, Section 3, and the delay of
payment and limitation provisions of Article VI, Section 4 and the Separate
Account Investment Rider. For any calendar year, the maximum amount is the
greatest of:
a) 13% of the Account balance at the beginning of the current
calendar year.
b) the Account balance at the beginning of the current calendar
year divided by the number of years of the Member's or
beneficiary's life expectancy.
c) the amount withdrawn in the preceding calendar year which was
not subject to the charge in Article VI, Section 3.
In addition to the scheduled payments, nonscheduled payments may be requested.
We may establish a minimum dollar amount for nonscheduled payments. Nonscheduled
payments may be subject to a transaction fee. Nonscheduled payments will be
subject to the charge in Article VI, Section 3, and the delay of payment and
limitation provisions of Article VI, Section 4 and the Separate Account
Investment Rider.
The Member or beneficiary may request termination of the Full Flexibility Option
by one or more of the following methods: (i) requesting an excess payment equal
to the remaining balance of the Account, (ii) requesting the remaining balance
be used to purchase an annuity for such Member or beneficiary in accordance with
one of the other options of this Section, or (iii)
13
<PAGE>
requesting that the Full Flexibility Option be cancelled and leaving the
remaining balance under this contract.
SECTION 5--MODIFICATION IN MODE OF PAYMENT OF INCOME.
If, at any time after a Member's Annuity Start Date or the date benefits begin
under the Full Flexibility Option, the monthly amount of income payable under
this contract to such Member or to the beneficiary or contingent annuitant would
be less than $20, we may, at our option, pay such amount less frequently, but
not less frequently than annually.
SECTION 6--FACILITY OF PAYMENT.
If any Member, alternate payee, contingent annuitant or beneficiary becomes
physically, mentally or legally incapable of accepting any payment and the
person has no legal representative or guardian who can accept the payment on the
person's behalf, we may, in the absence of Notification from you, at our option,
make such payment to the person or persons as have, in our opinion, assumed the
care and principal support of the Member, contingent annuitant or beneficiary.
However, any payment due a minor will be paid at a rate not exceeding the
greater of (i) $100.00 per month or (ii) the maximum amount permitted by the
laws of the state of issue of this contract In no event will any such payment
exceed the maximum amount allowed under applicable law of the state of issue of
this contract. In no event will any such payment exceed the maximum amount
allowed under applicable law of the state in which this contract is delivered.
Any such payment made by us will fully discharge us to the extent of the
payment.
SECTION 7--ASSIGNMENT.
Except for an assignment to an alternate payee required by a Qualified Domestic
Relations Order, no benefits payable under this contract to any Member,
beneficiary or contingent annuitant are assignable, and all such benefits are
exempt from the claims of creditors to the maximum extent permitted by law.
14
<PAGE>
ARTICLE V--OTHER BENEFITS
SECTION 1--WITHDRAWAL BENEFITS.
Upon appropriate Notification, we will pay to a Member any portion of that
Member's Account, subject to the following:
a) The Plan must allow the Member to receive the withdrawal.
b) The Notification must be on a form we either furnish or
approve and will be accompanied (at our I request) by the
Member's certificate, if any, issued as described in Article
VII, Section 1.
c) Any amount withdrawn under this Section will be subject to
both the delay of payment and limitation provisions of Article
VI, Section 4 and the Separate Account Investment Rider, if
any, and the charge of Article VI, Section 3.
d) We reserve the right to limit the number of withdrawals and
the right to charge for processing such withdrawals.
We will determine the amount available as of the date we receive the
Notification at our Corporate Center, or at some later date specified in the
Notification. The amount available will be that portion of the Member's Account
in which the Member is vested under the Plan. If the withdrawal is for the
purposes of a loan under the Plan, the amount of the loan will be determined by
the provisions of the Plan.
If a portion of a Member's Account is to be withdrawn, the Notification may
specify which Investments are to be applied. If no order is specified, the Order
of Application will apply.
Any payment under this Section will be an application of the Member's Account on
the date paid.
15
<PAGE>
ARTICLE VI--TRANSFER TO ANOTHER FUNDING AGENT; CESSATION; CHARGES
SECTION 1--TRANSFER TO ANOTHER FUNDING AGENT.
Upon Notification to us at our Corporate Center, payment of the aggregate of all
of the Guaranteed Interest Investments and Separate Account Investments will be
transferred to another Funding Agent. Subject to the charge provided for in
Section 3 of this Article, and the limitations provided in Section 4 of this
Article and the Separate Account Investment Rider, if any, the amount of any
Guaranteed Interest Investments and Separate Account Investments will be
determined and transferred within seven Business Days after the date we receive
your Notification. If you request payment as of some later date, the amounts to
be paid out will be determined and paid as Of that date.
SECTION 2--CESSATION OF CONTRIBUTIONS.
Cessation of Contributions will be effective as of any of the following dates:
a) On the date you give us written Notification that
Contributions will cease.
b) On the date the Plan terminates.
c) On or after the date on which the Internal Revenue Service or
a court makes a final determination that the Plan no longer
meets the requirements to remain a Qualified Plan, if we have
given you written notice that cessation will occur on that
date or at some later date.
d) On the date no Accounts remain under this contract.
Upon cessation of Contributions, no employees will become Members and no further
Contributions will be accepted.
All provisions of this contract will remain effective as to any Accounts which
have not been paid or applied in full.
Once all Accounts have been paid or applied in full, we will have no further
obligation under this Contract as to those Accounts.
SECTION 3--CHARGES FOR EARLY SURRENDER OF A GUARANTEED INTEREST INVESTMENT.
If a Member transfers or withdraws all or a part of a Guaranteed Interest
Investment before the end of its Guarantee Period, the transfer or withdrawal is
a surrender of that amount. Transfer or withdrawal of an Investment refers to
transactions from Guaranteed Interest Investments under any of the following
contract provisions:
a) 1 Transfer between Investments, Article II, Section 6.
16
<PAGE>
b) A single sum payment under Article IV, Section 3, after the
periods specified in such Section.
c) A withdrawal under Article V, Section 1.
d) A transfer to another Funding Agent under Article VI,
Section 1.
We reserve the right to waive this charge for certain withdrawals. Any
such waiver will be applied in a uniform manner to all such withdrawals
from contracts of this class.
If all or a portion of a Guaranteed Interest Investment is surrendered
early and the Guaranteed Interest Rate in effect for contracts of this
class for the date of surrender is greater than the Composite
Guaranteed Rate for the Investment, the amount available will be
reduced by a surrender charge equal to the following:
e) The difference between such Guaranteed Interest Rate in effect
for new Contributions for the date of surrender and the
Composite Guaranteed Rate of the Investment being surrendered,
multiplied by
f) The number of years (including fractional parts of a year)
remaining in the Guarantee Period for the Guaranteed Interest
Investment, multiplied by
g) The amount being surrendered.
If the entire Guaranteed Interest Investment is surrendered, the Guaranteed
Interest Investment will be reduced on the date of surrender and the remainder
will be paid or transferred.
If a portion of the Guaranteed Interest Investment is surrendered, the
Guaranteed Interest Investment will be reduced by the amount being surrendered
plus the surrender charge, if any.
If the Guaranteed Interest Rate in effect for contracts of this class for the
date of surrender is equal to or less than the Composite Guaranteed Rate for
such account, there is no surrender charge.
SECTION 4--LIMITATIONS ON TRANSFERS AND PAYMENTS FROM GUARANTEED INTEREST
INVESTMENTS.
a) In general, payments and transfers from the Guaranteed
Interest Investments will be made in full within seven
Business Days after the requested date of payment. However, we
reserve the right to defer any payment or transfer under this
contract up to 270 days. These delay rights will not apply to
payments to the beneficiary named by the Member, payments to a
Member due to disability or retirement under the Plan or to
purchases of annuity under Article IV, Section 2.
Such deferment will be based on unstable or disorderly market
or investment conditions which, in our opinion, do not allow
for an orderly investment transfer. This deferment may
include, but not be I limited to, situations where regular
banking has been suspended or when an emergency or other
circumstances
17
<PAGE>
beyond our control do not allow for the orderly
disposal and liquidation of securities or other assets.
b) We reserve the right to make the portion of the requested
payment or transfer in excess of the greater of
i) 25% of the aggregate Guaranteed Interest
Investments under the contract on the date 12
months prior to such determination date, or
ii) $25,000,000 in the 12 month period which ends on
the date of requested payment or transfer,
in substantially equal monthly installments over a period not
to exceed 36 months. For purposes of this limitation, payments
and transfers at investment value from our general account
from any other contracts or polices we issued in connection
with the Plan will be included as a payment or transfer from
the Guaranteed Interest Investments under this contract
If this limitation is imposed by us, we will make the first
installment one month after the date of request, or on the
date specified in your Notification.
These delay rights will not apply to payments to the
beneficiary named by the Member, payments to a Member due to
disability or retirement under the Plan or to purchases of
annuity under Article IV, Section 2.
If we defer any payment or transfer under this Section, we will determine the
amount to be paid or transferred on the actual date of payment or transfer. We
will notify you if the deferment will be more than 30 days. During any
deferment, requested funds will continue to earn interest at the same rate.
18
<PAGE>
ARTICLE VII--GENERAL PROVISIONS
SECTION 1--CERTIFICATES.
If a Member contributes under the Plan and the state of issue so requires, we
will prepare, for delivery to each such Member, an individual certificate
setting out a statement of the benefits to which that Member is entitled and to
whom death benefits are payable. If benefits become payable to a Member under
one of the options of Article IV, we will issue an individual certificate
setting forth the amount, form and period of payment of the annuity benefits.
SECTION 2--BENEFICIARY.
The beneficiary is the person or persons named by the Member to whom benefits
(other than any annuity payable to a contingent annuitant under the provisions
of Article IV, Section 2) are payable under this contract upon the death of the
Member, subject to the provisions of Article IV, Section 7. A Member will name
or change a beneficiary by filing a written beneficiary designation to that
effect with us in a form acceptable to us. Any beneficiary designation will not
have any effect until we receive it. When we receive the designation, it will be
effective as of the date it is executed by the Member, but any payments we made
before receipt of the designation will discharge us to the extent of such
payments. We reserve the right to require the Member's certificate for
endorsement of any change of beneficiary. Unless prohibited by the Plan or by a
prior beneficiary designation, any person receiving benefits or payments which
might continue beyond that person's life time may designate a beneficiary to
receive any remaining payments.
Unless otherwise specified by the Member with our consent,
a) if any beneficiary dies before the Member, any payment which
would have become payable to such beneficiary, if living, will
be payable when due to the beneficiary or beneficiaries
surviving the Member in the order provided.
b) if any beneficiary survives the Member but dies before
receiving all of the payments which would have been payable to
such beneficiary, if living, payment will be paid when due to
the surviving beneficiary or beneficiaries in the order
provided.
c) if the last survivor of all named beneficiaries dies after the
death of the Member (and the contingent annuitant, if any) and
before all payments due the beneficiary have been made, the
remaining payments will be commuted and the commuted value
paid to the executor or administrator of the estate of such
last survivor.
If no named beneficiary survives the Member (and the contingent annuitant, if
any), or no beneficiary has been named, any amount which would have become
payable to a beneficiary will be commuted and the commuted value paid to the
executor or administrator of the estate of the Member (the executor or
administrator of the estate of any contingent annuitant, if he survives the
Member). If no formal estate is created, we may pay out any benefits In
accordance with any state or federal law which permits us to make payments to
specific persons without the creation
19
<PAGE>
of a formal estate. If state or federal law requires that we make any payments
only to a formally established estate, we will make payments in accordance with
that law.
If required by the facts surrounding a particular death or deaths, we may use
the appropriate state statute dealing with simultaneous or nearly simultaneous
deaths to determine who will be treated as a survivor entitled to receive
benefits. If no state law applies, then we may rely upon the most current
version of the uniform Simultaneous Death Act to make that determination.
If the beneficiary is not a natural person taking in his or her own right (that
is, a trust or an estate), any monthly or other periodic payments will be
commuted and the commuted value paid to the beneficiary in a single sum.
However, if the beneficiary is a trust established for the benefit of a natural
person and if the payment period is at least 24 months and not more than 60
months, monthly or other periodic payments may be continued to such beneficiary
for any period which is not prohibited by the Code.
SECTION 3--DIVIDENDS.
Because of the direct crediting of investment return to both Guaranteed Interest
Investments and Separate Account Investments, it is not anticipated that there
will be any surplus accruing on this contract from which dividends may be
apportioned to this contract. However, if a dividend is declared, any portion of
the divisible surplus that we determine to accrue on this contract will be
determined annually by us and will be credited to this contract on the first day
of each Deposit Year after the Contract Date. Any dividend will be applied as
directed by you in accordance with Plan provisions.
SECTION 4--PLAN AND PLAN AMENDMENTS.
You agree to furnish us with a copy of the Plan in effect on the Contract Date
and any subsequent amendments to it. No amendment to the Plan or interpretation
of the Plan language which affects our duties and obligations will have any
effect on the terms of this contract, unless: (i) we have received timely notice
of the amendment or interpretation, and (ii) we have not sent you a written
notice that we do not accept the amendment or interpretation within 60 days of
our receipt of the amendment or interpretation.
SECTION 5--CONTRACT.
This contract and your application are the entire contract between the parties.
A copy of your application is attached to this contract We are obligated only as
provided in this contract and are not a party to nor bound by any trust or plan.
SECTION 6--CONTRACT AMENDMENTS.
We reserve the right to amend or change this contract as follows, subject to the
limitations of item (g):
a) Any or all of the contract provisions may be changed at any
time, including retroactive changes, to the extent necessary
to meet the requirements of any law
20
<PAGE>
or regulation issued by any governmental agency to which we
are subject We will give you written notice of any such
change.
b) Any or all of the contract provisions may be changed at any
time, including retroactive changes, to the extent necessary
to keep the Plan in compliance with the Code or ERISA. We will
give you written notice of any such change.
c) As of any date after the Contract Date, we may amend or change
the length of the Guarantee Period; the Order of Application;
the provisions for transferring values between accounts; the
percentage in item (a) of Article IV, Section 4; the charge
contained in Article VI, Section 3; and the items included in
the Operating Expenses for Separate Accounts under the
Separate Account Investment Rider (if such a rider is attached
to this contract). We will give you 60 days written notice of
any such change.
d) We may amend or change the annuity purchase basis shown in
Article IV, Section 2, as follows:
i) For Account values accumulated during the five year
period beginning on the Contract Date, no change will
be made in such purchase rate basis.
ii) For Account values accumulated after the date which
is five years after the Contract Date, we may amend
or change such basis on any date which is later than
(I) five years after the Contract Date or (ii) five
years after the latest date of amendment or change.
We will give you 60 days written notice of any such change.
e) By agreement between you and us, this contract may be amended
or changed at any time as to any of its provisions, including
those in regard to coverage, benefits and the participation
privileges, without the consent of any Member, beneficiary or
contingent annuitant We will propose amendments to the
contract to you by written notification which will also
indicate how you may agree to the proposed amendment.
Generally, we will indicate that you use one or more of the
following methods to agree to our proposed amendments:
i) By signing the amendment and returning a copy to us.
ii) By making Contributions after 60 days have elapsed
from the date of our written notice to you.
iii) By not declining the amendment in a written Notice to
us. We will usually propose the use of this method
for procedural amendments or amendments which
increase your rights rather than changes which limit
your rights under this contract.
iv) By any other method allowed by law.
21
<PAGE>
f) After 60 days notice to you, we may amend or change any term
of the contract if such amendment or change increases the
options available to you or a Member. Any amendment or change
will not become effective if you give us written Notification
that you do not accept the amendment.
g) Any amendment or change under this Section 6 is binding and
conclusive on each Member, beneficiary, or contingent
annuitant, but is limited by the following:
i) No amendment or change will apply to annuities purchased under
Article IV before the effective date of the amendment or
change except to the extent necessary in making changes in
accordance with item (a) or (b) above.
ii) No amendment or change under (c) above will affect Guaranteed
Interest Investments established prior to the date of the
amendment or change.
iii) Any change in the general administration expense charge
referred to in (b) of Section 1, Article III, will not take
effect as to any Guaranteed Interest Investments and Separate
Account Investments to be transferred to another Funding
Agent, if, prior to the date the amendment or change is to
take effect, we receive Notification from you for payment of
all such Guaranteed Interest Investments and Separate Account
Investments to the other Funding Agent in accordance with
Article VI, Section 1, and such Notification is not revoked.
SECTION 7--WAIVER AND MODIFICATION.
Only our Officers may agree to (i) change any of our obligations or duties under
this contract, or (ii) waive any of your obligations or duties under this
contract.
SECTION 8--INFORMATION, PROOFS AND DETERMINATION OF FACTS.
You agree to furnish to us evidence of the age of each Member and his contingent
annuitant, if any, on or before his earliest Annuity Purchase Date and other
records, data, proofs or additional information which, in our opinion, is
necessary for the administration of this contract.
For the purposes of this contract, the determination by you as to any facts
(except age) relating to any employee is conclusive, except for fraud or willful
misstatement of fact
SECTION 9--RELIANCE ON INSTRUCTIONS.
We are not obligated to question or refuse to follow any apparently valid
instructions which we in good faith believe are valid, if we receive such
instructions from you, a Plan trustee, a Plan administrator, a Plan fiduciary,
or, if the Plan permits, a Member, alternate payee, contingent annuitant or
beneficiary. If we follow such instructions, we will have no further obligations
with respect to the amounts paid out or the actions taken. If we believe in good
faith that the law requires us not to follow an apparently valid instruction, we
are not required to act on any instruction.
22
<PAGE>
SECTION 10--SINGLE PAYMENT.
We will make any payment to a Member, contingent annuitant, alternate payee or
beneficiary in accordance with any withdrawal or payment option available under
the contract only once. Any payment we make in accordance with any withdrawal or
payment option will be in lieu of any other benefit or withdrawal option and
will extinguish any claim by any Member, contingent annuitant, alternate payee
or beneficiary to receive the amount paid out.
SECTION 11--OVERPAYMENT.
In the event that we make an overpayment of any amount payable to a Funding
Agent, Member, contingent annuitant, alternate payee or beneficiary, we will
have the option to seek reimbursement of that overpayment from the individual
receiving the overpayment. If the overpayment resulted from any action by you
and we suffered a loss as a result of our good faith reliance upon your action,
you will pay us an amount equal to the overpayment
SECTION 12--OWNERSHIP.
You are the owner of this contract. However, if the Plan is trusteed and this
contract is issued to the trustee(s), the trustee(s) of the Plan is sole owner
of all the payments, rights, options, and privileges herein granted or made
payable to any Member, beneficiary, or contingent annuitant under this contract.
This includes, without limitation, the right to distribute all or a portion of
the Member's Account, or ownership of these rights in respect of such Account,:
on or after the Member's termination of employment. However, this does not
include the right to designate a Member's beneficiary unless such right has been
granted to the trustee by the Plan or trust. The trustee(s) of the Plan is
entitled to exercise all such rights, options, and privileges and to receive all
such payments at the time or times specified in this contract that such
payments, rights, options, and privileges are available to a Member. Such
exercise by the trustee(s) may be made without the consent or participation of
any Member, beneficiary or contingent annuitant.
SECTION 13--TERMINATION AND CASH OUT OF CONTRACT.
We may begin cash out proceedings with regards to the funds held under this
contract on or after the date we have announced we will refuse all further
contributions under contracts of this class, subject to the following:
a) We have announced our intention to refuse further
Contributions and that we will no longer write or accept
applications for contracts of this class.
b) Once we determine we wish to cash out contracts of this class,
we will cash out all contracts of this class without
exception.
c) Amounts held in any of our Separate Accounts will be available
for payment or transfer in accordance with the contract
provisions or riders making such Separate Accounts available
hereunder.
d) For funds held in our general account, the following will
apply:
23
<PAGE>
i) You may choose to transfer such funds to another
Funding Agent. No charge will be made under Article
VI, Section 3, for any funds so transferred.
ii) If no other Notification is received by us, at the
end of any Guarantee Period, we will treat the funds
held in our general account as if they are being held
under the group annuity contract then offered by us
which, in our opinion, most closely parallels the
provisions of this contract Thereafter, the
provisions of this contract will no longer apply.
iii) There will be no charge made for payment from this
contract of single sum amounts at recognized benefit
events, even if the group annuity contract described
in item (d) (ii) above would not permit such pay out
without charge.
e) The annuity purchase rate guarantees in effect under this
contract on the day before the provisions of item (d) (ii) of
this Section are instituted will remain the purchase rate
guarantees for any general account funds handled in accordance
with item (d) (ii).
Such purchase rate guarantees will also remain in effect for
any Separate Account funds held hereunder until paid or
transferred.
f) We will not change any Composite Guaranteed Rate for amounts
held in our general account before the end of the Guarantee
Period for such amounts.
g) Your right to transfer funds held hereunder to another Funding
Agent will not be changed.
h) If we choose to make another group annuity contract available
to other contractholders of this type of contract, we will
make such a group annuity contract available to you.
i) We will give you 60 days advance written notice before we
will enforce the provisions of this Section.
SECTION 14--TERM AND TERMINATION.
Except as provided in Section 13 of this Article, or by any amendment to this
contract, this contract will continue in force as long as we hold assets for you
or are making annuity payments. If you transfer all of the assets under this
contract not associated with any annuity payments to a Funding Agent, our
obligations under this contract will cease, except to the extent that we are
making annuity payments. However, if we discover that we underpaid the Funding
Agent, we will have the obligation to pay the appropriate amount to the Funding
Agent.
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<PAGE>
SECTION 15--QUALIFICATION OF PLANS.
We assume no responsibility for ensuring that the Plan remains a Qualified Plan
or meets any of the requirements of the Code or ERISA. While we will undertake
those duties described in this contract or in the service agreement in a manner
which should help you to meet the requirements of the Code and ERISA, you agree
and acknowledge that we do not have final responsibility for making sure that
you take all appropriate steps needed to keep the Plan in compliance with the
Code and ERISA.
Notwithstanding any other provision in this contract or in any other agreement
between you and us, if the Internal Revenue Service or a court makes a final
determination that the Plan no longer qualifies as a Qualified Plan, we may
require that you transfer all assets invested in this contract to another
Funding Agent. If we decide that you must transfer assets from this contract, we
will send you a written notice describing you options. If we do not receive an
acceptable response Notice from you within five Business Days, we will return
the money held under this contract to you, or if appropriate, to a Plan trustee.
We will not accept any Notice under this Section unless the Notice dearly
specifies the Funding Agent to receive the assets.
SECTION 16-OUR RELATIONSHIP TO THE PLAN.
Notwithstanding any other provision in this contract or in any other agreement
between you and us, with respect to the Plan (i) except as described in Article
II, Section 8, we act only as a service provider, and (ii) we do not act as a
Plan trustee, Plan fiduciary, or Plan administrator under ERISA or any state
law. In addition, we do not practice law and do not give any individual legal
advice to you or your Plan.
Nothing in this contract shall amend any provision of the Plan nor shall any
provision of the Plan act as an amendment to this contract. Moreover, no
provision or option available under this contract shall be available unless that
provision or option is permissible under the Plan.
25
<PAGE>
APPLICATION FOR GROUP ANNUITY CONTRACT
Application is made to: PRINCIPAL LIFE INSURANCE COMPANY
711 High Street
Des Moines, Iowa 50392-0001
(515) 247-5111
IF VARIABLE ANNUITY IS AVAILABLE UNDER THE CONTRACT, IT IS UNDERSTOOD THAT ANY
SUCH ANNUITY WILL PROVIDE CHANGING DOLLAR AMOUNTS OF PAYMENTS, WITH THE AMOUNT
OF CHANGE DEPENDENT UPON THE INVESTMENT PERFORMANCE OF THE FUNDS PROVIDING SUCH
VARIABLE ANNUITY; THAT SUCH FUNDS ARE HELD IN A SEPARATE ACCOUNT; AND THAT
PRINCIPAL LIFE INSURANCE COMPANY MAKES NO GUARANTEE AS TO THE INVESTMENT
PERFORMANCE THEREOF.
It is agreed that acceptance of any contract issued shall constitute approval by
the applicant of the provisions in such contract as being in accord with this
application.
FOR RESIDENTS OF ALL STATES EXCEPT FL, NE, NJ, NY, OK, OR, PA, AND VA:
Any person who knowingly and with intent to defraud any insurance company or
other person, submits a statement or claim or any application form 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. Such actions may be considered felonies and subject to
criminal and civil penalties, including imprisonment and fines.
26
<PAGE>
Application is made to: PRINCIPAL LIFE INSURANCE COMPANY
INSTRUCTIONS: Fill in the appropriate information in the
blanks and boxes below.
TRUSTEES OF GENAISSANCE PHARMACEUTICALS, INC. 401(k) RETIREMENT PLAN
--------------------------------------------------------------------
NEW HAVEN, CT
-------------
Select the contract type below:
/X/ Flexible Investment Annuity (FIA-Full)
/ / Flexible Investment Annuity - 1 (FIA-1)
/ / Flexible Investment Annuity with Set Crediting Rate (FIA-SCR)
/ / Accumulation Group Annuity Group Contract (PRO)
State of delivery of this contract is CT
----
Advance payment of $0 is submitted with this application to be applied under
--
this contract.
The effective date of this contract shall be OCTOBER 1, 1999
---------------
Does the applicant intend that the plan covered by this contract (including any
pending changes) will operate in a manner consistent with qualification under
Section 401(a) of the Internal Revenue Code, as amended? (Principal Life
Insurance Company reserves the right to request a copy of the plan's IRS
determination letter.)
/ X / Yes / / No
The state of issue may require countersignature by a licensed resident agent. If
no agent, enter N/A. The designated agent(s) for this group contract is (are):
ABRAHAMS LIFE SERVICES / KEVIN KUBALA
--------------------------------------------------------------------------------
Agent's Name (Please Print or Type) (If more than one Agent, list all)
(If FL, include State License Number)
/S/ KEVIN KUBALA
--------------------------------------------------------------------------------
Agent's Signature (Please Print or Type) (If more than one, all must sign)
Signed at NEW HAVEN, CT this 9TH day of SEPTEMBER, 1999
------------- ----- ---------------
(City, State)
/s/ Kevin Rakin Trustee: Executive Vice President
------------------------------- ------------------------------
Applicant's Signature Title (Trustee, if applicable)
Kevin Rakin Contract #:
------------------------------- ------------------------------
Print or Type Applicant's Name
27
