<PAGE> 1
As Filed with the Securities and Exchange Commission on June 14, 1996
Registration No. _____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
(Exact Name of Registrant)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATON OR ORGANIZATION)
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6008
(Address of Registrant's Principal Executive Offices and Telephone Number)
(I.R.S. Employer Number) (Primary Standard Industrial
22-2265014 Classification Code Number)
6312
James D. Gallagher Copy to:
Vice President, Secretary and J. Sumner Jones, Esq.
General Counsel Jones & Blouch L.L.P.
North American Security Life 1025 Thomas Jefferson Street N.W.
Insurance Company Washington DC 20007
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6008
(Name and Address of Agent
for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following : X
---
<TABLE>
<CAPTION>
Calculation of Registration Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of Securities Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Aggregate Offering Registration Fee
Unit price
- ---------------------------------------------------------------------------------------------------------------
Deferred Fixed Annuity
Contract Non- See Note (1) See Note (1) $10,000 $3.45
Participating
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Note (1): The proposed aggregate offering price is estimated solely for
determining the registration fee. The amount to be registered and the proposed
maximum offering price per unit are not applicable since these securities are
not issued in predetermined amounts or units.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS REQUIRED BY FORM S-1
<TABLE>
<CAPTION>
Form S-1 Item No. and Caption Prospectus Heading
- ----------------------------- ------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Cover Pages
Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Cover Pages
Prospectus
3. Summary Information, Risk Factors and Ratio of Summary
Earnings to Fixed Charges
4. Use of Proceeds North American Security Life Insurance Company
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution North American Security Life Insurance Company -
Distribution of the Contract
9. Description of Securities to be Registered Description of the Contract, Reinsurance and Guarantees,
North American Security Life Insurance Company
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to the Registrant North American Security Life Insurance Company
12. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities
</TABLE>
<PAGE> 3
PART 1
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
Annuity Service Office Mailing Address
116 Huntington Avenue Post Office Box 9230
Boston, Massachusetts 02116 Boston, Massachusetts
(617) 266-6008 02205-9230
(800) 344-1029
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
DEFERRED FIXED ANNUITY
CONTRACT
NON-PARTICIPATING
This Prospectus describes Venture __________, a single payment deferred
fixed annuity contract, offered by North American Security Life Insurance
Company (the "Company"), a stock life insurance company the ultimate parent of
which is The Manufactuers Life Insurance Company ("Manulife").
The Prospectus describes both an individual deferred annuity contract
and a participating interest in a group deferred annuity contract. Both are
designed and offered to provide retirement programs for eligible individuals and
retirement plans. Participation in a group contract will be separately accounted
for by the issuance of a certificate evidencing the owner's interest under the
contract. Ownership of an individual contract is evidenced by the issuance of an
individual annuity contract. The certificate and individual annuity contract are
hereafter referred to as the "contract."
The purchase payment is paid to the Company at its Annuity Service
Office. The minimum purchase payment for a contract is $5,000. The maximum
purchase payment accepted without prior approval of the Company is $500,000. The
purchase payment is allocated to the guarantee period designated by the contract
owner. Additional purchase payments for a contract will not be accepted.
Additional contracts may, however, be purchased at the then prevailing rates and
terms.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE FIXED ACCOUNT AND THE CONTRACT THAT A PROSPECTIVE
PURCHASER SHOULD KNOW BEFORE INVESTING.
BECAUSE OF THE MARKET VALUE ADJUSTMENT PROVISION OF THE CONTRACT, THE CONTRACT
OWNER BEARS THE INVESTMENT RISK THAT THE GUARANTEED INTEREST RATES OFFERED BY
THE COMPANY AT THE TIME OF WITHDRAWAL OR THE START OF ANNUITY PAYMENTS MAY BE
HIGHER THAN THE GUARANTEED INTEREST RATE APPLIED TO THE CONTRACT WITH THE RESULT
THAT THE AMOUNT RECEIVED UPON WITHDRAWAL OR ANNUITIZATION MAY BE REDUCED BY THE
MARKET VALUE ADJUSTMENT AND MAY BE LESS THAT THE ORIGINAL INVESTMENT IN THE
CONTRACT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT DEPOSITS WITH, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR ANY AFFILIATE THEREOF, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The date of the Prospectus is ___________, 1996
<PAGE> 5
AVAILABLE INFORMATION
Commencing with the offering of the securities described in this Prospectus,
North American Security Life Insurance Company will become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "1934
Act"), as amended, and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. and at the Commission's Regional Offices located at 75 Park
Place, New York, New York and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials also
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
A registration statement has been filed with the Commission under the Securities
Act of 1933, as amended, with respect to the contracts discussed in the
Prospectus. Not all the information set forth in the registration statement,
amendments and exhibits thereto has been included in this Prospectus. Statements
contained in this Prospectus concerning the content of the contracts and other
legal instruments are only summaries. For a complete statement of the terms of
these documents, reference should be made to the instruments filed with the
Commission. The Registration Statements and the exhibits thereto may be
inspected and copied, and copies can be obtained at the prescribed rates, in the
manner set forth in the preceding paragraph.
<PAGE> 6
TABLE OF CONTENTS
SPECIAL TERMS............................................................
SUMMARY..................................................................
DESCRIPTION OF THE CONTRACT..............................................
ELIGIBLE GROUPS FOR GROUP ANNUITY CONTRACT.........................
ACCUMULATION PROVISIONS............................................
Purchase Payments..................................................
Investment Options.................................................
Transfers Among Investment Options.................................
Telephone Transactions.............................................
Renewals...........................................................
Withdrawals........................................................
Death Benefit Before Maturity Date.................................
ANNUITY PROVISIONS.................................................
General............................................................
Annuity Options....................................................
Death Benefit on or After Maturity Date............................
OTHER CONTRACT PROVISIONS..........................................
Ten Day Right to Review............................................
Ownership..........................................................
Beneficiary........................................................
Annuitant..........................................................
Modification.......................................................
Company Approval...................................................
Discontinuance of New Owners.......................................
MARKET VALUE ADJUSTMENT............................................
CHARGES AND DEDUCTIONS.............................................
Withdrawal Charge..................................................
Taxes..............................................................
Administrative Fee.................................................
REINSURANCE AND GUARANTEES...............................................
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY...........................
Description of Business............................................
Management Discussion & Analysis...................................
Selected Financial Data............................................
Officers and Directors of the Company..............................
Executive Compensation.............................................
NASL Fixed Account.................................................
Distribution of the Contract.......................................
Legal Proceedings..................................................
Legal Matters......................................................
Independent Accountants............................................
Notices and Reports to Contract Owners.............................
Contract Owner Inquiries...........................................
FEDERAL TAX MATTERS......................................................
Introduction.......................................................
Tax Status of the Company..........................................
Taxation of Annuities in General...................................
Qualified Retirement Plans.........................................
Federal Income Tax Withholding.....................................
GENERAL MATTERS
Restrictions Under the Texas Optional Retirement Program
APPENDIX A - EXAMPLES OF CALCULATION OF WITHDRAWAL Charge................
APPENDIX B - MARKET VALUE ADJUSTMENT FORMULA AND EXAMPLE
APPENDIX C - STATE PREMIUM Taxes.........................................
FINANCIAL STATEMENTS OF THE COMPANY......................................
2
<PAGE> 7
SPECIAL TERMS
Annuitant Any individual person or persons whose
life is used to determine the duration
of annuity payments involving life
contingencies. The Annuitant is as
designated on the contract or
certificate specifications page or in
the application, unless changed.
Annuity Option One of several alternative methods by
which payment of the proceeds may be
made.
Annuity Service Office The service office of the company is
P.O. Box 9230, Boston Massachusetts
02205-9230.
Beneficiary The person, persons, or entity to whom
the death benefit proceeds are payable
following the death of the owner, or in
certain circumstances, an annuitant.
Certificate For a group contract, the documents
issued to each owner which summarizes
the rights and benefits of the owner
under the contract.
Company North American Security Life Insurance
Company.
Contingent The person, persons or entity who
Beneficiary becomes the beneficiary if the
beneficiary is not alive.
Contract For an individual contract, the
individual annuity contract. For a
group contract, the certificate
evidencing a participating interest in
the group annuity contract. Any
reference in this prospectus to
contract includes the underlying group
annuity contract.
Contract For an individual contract, the
Anniversary anniversary of the contract date. For a
group contract, the anniversary of the
date of issue of a certificate
under the contract.
Contract Date In the case of an individual annuity
contract, the date of issue of the
contract as designated on the contract
specifications page. In the case of a
group annuity contract, the effective
date of participation under the group
annuity contract as designated in the
certificate specifications page.
Contract Value The contract value is the sum of the
net purchase payment and accrued
interest, less the sum of any
withdrawals and any administration fee,
adjusted for any transfer market value
adjustment.
Contract Year The period of twelve consecutive months
beginning on the contract date,
certificate date in the case of a group
contract, or any anniversary
thereafter.
Code The Internal Revenue Code of 1986, as
amended.
Debt Any amounts in the Loan Account
attributable to the contract plus any
accrued loan interest.
Due Proof of Death Due Proof of Death is required upon the
death of the owner or annuitant, as
applicable. One of the following must
be received at the Annuity Service
Office:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court
of competent jurisdiction as to the
finding of death; or
(c) Any other proof satisfactory to to
the Company.
Death benefits will be paid within 7
days of receipt of due proof of death
and all required claim forms by the
Company's Annuity Service Office.
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<PAGE> 8
Fixed Account The NASL Fixed Account, which is a
separate account of the Company.
Fixed Annuity An annuity option with payments which
are predetermined and guaranteed as
to dollar amount.
General Account All of the assets of the Company other
than assets in separate accounts.
Group Holder In the case of a group annuity
contract, the person, persons or entity
to whom the contract is issued.
Gross Withdrawal Value The portion of the contract value
specified by the owner for a full or
partial withdrawal. Such amount is
determined prior to the application of
any withdrawal charge, annual
administration fee and market value
adjustment.
Initial Guarantee Period The period of time during which the
initial guaranteed interest rate is in
effect.
Initial Guaranteed Interest The compound annual rate used to
Rate determine the interest earned on the
net purchase payment during the initial
guarantee period.
Loan Account The portion of the General Account that
is used for collateral when a loan is taken.
Market Value Adjustment An adjustment to amounts that are withdrawn
or transferred prior to the end of the
guarantee period. It may increase or
decrease the amount available for
transfer or withdrawal.
Maturity Date The date on which annuity benefits
commence. It is the date specified on
the contract specifications page,
unless changed.
Net Purchase Payment The purchase payment less the amount of
premium tax, if any, deducted from the
payment.
Non-Qualified Certificates Certificates issued under non-qualified
Contracts.
Non-Qualified Contract Contract which are not issued under
Qualified Plans.
Owner or In the case of an individual contract,
Contract Owner the person, persons or entity entitled
to the ownership rights under the
contract. In the case of agroup annuity
contract, the person, persons or entity
named in a certificate and entitled to
all of the ownership rights under the
contract not expressly reserved to the
group holder. The owner is as
designated on the contract or
certificate specifications page or in
the application, unless changed.
Payment or An amount paid by a contract owner to
Purchase Payment the Company as consideration for the
benefits provided by the contract.
Qualified Certificates Certificates issued under qualified
contracts.
Qualified Contracts Contracts issued under Qualified Plans
Qualified Plans Retirement plans which receive
favorable tax treatment under section
401, 403, 408 or 457 of the Code.
Renewal Amount The contract value at the end of the
initial guarantee period or at the end
of a renewal guarantee period.
Renewal Guarantee Period The period of time during which a
renewal guaranteed interest rate is in
effect.
Renewal Guaranteed Interest The compound annual rate used to
Rate determine the interest earned on a
renewal amount during a renewal
guarantee period. In no event shall
this rate be less than 3%.
4
<PAGE> 9
Separate Account A segregated account of the Company
that is not commingled with the
Company's general assets and
obligations.
5
<PAGE> 10
SUMMARY
DESCRIPTION OF THE CONTRACT
The Contract. The contract offered by this Prospectus is a single
purchase payment deferred fixed annuity contract. The contract provides for the
accumulation of the contract value and the payment of annuity benefits on a
fixed basis. The Prospectus describes participating interests in both group
deferred annuity contracts and individual deferred annuity contracts. For
information on eligible groups for the group deferred annuity contracts see
"ELIGIBLE GROUPS FOR GROUP ANNUITY CONTRACT."
Retirement Plans. The contract may be issued pursuant to either
non-qualified retirement plans or plans qualifying for special income tax
treatment under the Internal Revenue Code, such as individual retirement
accounts and annuities, pension and profit-sharing plans for corporations and
sole proprietorships/partnerships ("H.R. 10" and "Keogh" plans), tax-sheltered
annuities, and state and local government deferred compensation plans. (See
"QUALIFIED RETIREMENT PLANS")
Purchase Payments. Purchase payments are paid to the Company at its
Annuity Service Office. The minimum purchase payment for a contract is $5,000.
The maximum purchase payment accepted without prior approval of the Company is
$500,000. The purchase payment is allocated to the guarantee period designated
by the contract owner. Additional purchase payments for a contract will not be
accepted. Additional contracts may, however, be purchased at the then prevailing
rates and terms.
Prior to the maturity date, the Company may, at its option, cancel a
contract following the second contract anniversary if both (i) the total
purchase payment made, less any withdrawals, is less than $2,000; and (ii) the
higher of the contract value or the amount available upon total withdrawal is
less than $2,000. The cancellation of contract privileges may vary in certain
states in order to comply with the requirements of insurance laws and
regulations in such state. (See "PURCHASE PAYMENTS")
Guarantee Periods. Currently, there are ten guarantee periods under the
contract: one year through ten years. The Company may offer additional guarantee
periods for any yearly period from one to twenty years. (See "INVESTMENT
OPTIONS")
Transfers Among Guarantee Periods. Before the maturity date the
contract owner may transfer the entire contract value to a different guarantee
period at any time upon written notice to the Company or by telephone if the
contract owner authorizes the Company in writing to accept telephone transfer
requests. Amounts may only be transferred, however, once per contract year and
the entire amount of the account must be transferred. Amounts transferred will
be subject to a market value adjustment. (See "TRANSFERS AMONG INVESTMENT
OPTIONS")
Telephone Transactions. Contract owners are permitted to request
transfers or withdrawals by telephone. (See "TELEPHONE TRANSACTIONS")
Renewals. At the end of a guarantee period, the contract owner may
choose a renewal guarantee period from any of the then existing guarantee period
options, at the then current interest rates. (See "RENEWALS")
Withdrawals. Prior to the earlier of the maturity date or the death of
the contract owner, the owner may withdraw all or a portion of the contract
value. The amount withdrawn must be at least $300 or, if less, the entire
contract value. If a partial withdrawal plus any applicable withdrawal charge,
after giving effect to any market value adjustment would reduce the contract
value to less than $300, the Company will treat the partial withdrawal as a
total withdrawal of the contract value A withdrawal charge and market value
adjustment may be imposed. (See "WITHDRAWALS") A withdrawal may be subject to a
penalty tax. (See "FEDERAL TAX MATTERS")
Death Benefits. The Company will pay the death benefit to the
beneficiary if any contract owner dies before the maturity date. The death
benefit is equal to the contract value. If there is a surviving contract owner,
that contract owner will be deemed to be the beneficiary. No death benefit is
payable on the death of any annuitant, except that if any contract owner is not
a natural person, the death of any annuitant will be treated as the death of an
owner. The death benefit will be determined as of the date on which written
notice and proof of death and all required claim forms are received at the
Company's Annuity Service Office.
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<PAGE> 11
Annuity Payments. The Company offers a variety of fixed annuity
options. Periodic annuity payments will begin on the maturity date. The contract
owner may select the maturity date, frequency of payment and annuity option.
(See "ANNUITY PROVISIONS")
Ten Day Review. Within 10 days of receipt of a contract, the contract
owner may cancel the contract by returning it to the Company or its agent. (See
"TEN DAY RIGHT TO REVIEW")
Market Value Adjustment. Any amount withdrawn, loaned or transferred
prior to the end of either the initial guarantee period or a renewal guarantee
period will be adjusted by the market value adjustment factor described under
"MARKET VALUE ADJUSTMENT."
Withdrawal Charge. If a withdrawal is made from the contract before the
maturity date, a withdrawal charge (contingent deferred sales charge) may be
assessed against amounts withdrawn during the first seven contract years. There
is never a withdrawal charge with respect to certain free withdrawal amounts
described below or after seven complete contract years. The amount of the
withdrawal charge and when it is assessed is discussed under "CHARGES AND
DEDUCTION - WITHDRAWAL CHARGE."
Tax Deferral. The status of the contract as an annuity generally allows
all earnings on the underlying investments to be tax-deferred until withdrawn or
until annuity payments begin. (See "FEDERAL TAX MATTERS"). This tax deferred
treatment may be beneficial to contract owners in building assets in a long-term
investment program.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
North American Security Life Insurance Company ("the Company") is a
stock life insurance company organized under the laws of Delaware in 1979. The
Company's principal office is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. The ultimate parent of the Company is The Manufacturers
Life Insurance Company ("Manulife"), a Canadian mutual life insurance company
based in Toronto, Canada. Prior to January 1, 1996, the Company was a wholly
owned subsidiary of North American Life Assurance Company ("NAL"), a Canadian
mutual life insurance company. On January 1, 1996 NAL and Manulife merged with
the combined company retaining the Manulife name. Prior to becoming a
wholly-owned subsidairy of NAL on June 27, 1984, it was known as Chubb/Colonial
Life Insurance Company of America.
The Company issues fixed and variable annuity and variable life
contracts. Amounts invested in the fixed portion of the contracts are allocated
either to the general account of the Company or in the case of the contract
described in this Prospectus, to a separate account of the Company. Amounts
invested in the variable portion of the contracts are allocated to the separate
accounts of the Company (excluding the Fixed Account). These separate account
assets are invested in shares of NASL Series Trust, a no-load, open end
management investment company organized as a Massachusetts business trust.
Effective _______, 1996, an indemnity coinsurance agreement was entered
into between the Company and Peoples Security Life Insurance Company
("Peoples"), a subsidiary of the Providian Corporation, to reinsure fixed
annuity business written by the Company for the product described in this
prospectus. The indemnity aspects of the agreement provide that the Company
remains liable for the contractual obligations whereas Peoples agrees to
indemnify the Company for any contractual claims incurred. The coinsurance
aspects of the agreement required the Company to transfer to Peoples an agreed
upon percentage of all fixed premiums received by the Company for fixed annuity
contracts written for the product described in this prospectus. Peoples
reimburses the Company for the same agreed upon percentage of claims and
provides expense allowances to cover commission and other costs associated with
this fixed annuity business. Peoples contractual liability runs solely to the
Company, and no contract owner shall have any right of action against Peoples.
Peoples is responsible for investing the assets and is at risk for any potential
investment gains and losses. There is no recourse back to the Company if
investment losses are incurred.
The above summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus.
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DESCRIPTION OF CONTRACT
ELIGIBLE GROUPS FOR GROUP ANNUITY CONTRACT
The group deferred annuity contract may be issued to fund plans
qualifying for special income tax treatment under the Internal Revenue Code,
such as individual retirement accounts and annuities, pension and profit-sharing
plans for corporations and sole proprietorships/partnerships ("H.R. 10" and
"Keogh" plans), tax-sheltered annuities, and state and local government deferred
compensation plans. (See "QUALIFIED RETIREMENT PLANS") The group deferred
annuity contract is also designed so that it may be used with non-qualified
retirement plans, such as deferred compensation and payroll savings plans and
such other groups (trusteed or non-trusteed) as may be eligible under applicable
law. Group deferred annuity contracts have been issued to the Security Life
Trust, a trust established with United Missouri Bank, N.A., Kansas City,
Missouri, as group holder for groups comprised of persons who have brokerage
accounts with brokers having selling agreements with NASL Financial Services,
Inc., the principal underwriter of the contracts.
An eligible member of a group to which a contract has been issued may
become an owner under the contract by submitting a completed application, if
required by the Company, and a minimum purchase payment. A certificate
summarizing the rights and benefits of the owner under the contract will be
issued to an applicant acceptable to the Company. The Company reserves the right
to decline to issue a certificate to any person in its sole discretion. All
rights and privileges under the contract may be exercised by each owner as to
his or her interest unless expressly reserved to the group holder. However,
provisions of any plan in connection with which the contract was issued may
restrict an owner's ability to exercise such rights and privileges.
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
Purchase payments are paid to the Company at its Annuity Service
Office. The minimum purchase payment for a contract is $5,000. The maximum
purchase payment accepted without prior approval of the Company is $500,000. The
purchase payment is allocated to the guarantee period selected by the contract
owner. Additional purchase payments for a contract will not be accepted.
Additional contracts may, however, be purchased at the then prevailing rates and
terms.
Prior to the maturity date, the Company may, at its option, cancel a
contract following the second contract anniversary, if both (i) the total
purchase payment made, less any withdrawals, is less than $2,000; and (ii) the
higher of the contract value or the amount available upon total withdrawal is
less than $2,000. The cancellation of contract privileges may vary in certain
states in order to comply with the requirements of insurance laws and
regulations in such state. Upon cancellation the Company will pay the contract
owner the higher of the contract value less the debt and any annual
administration fee or the amount available upon total withdrawal. The amount
paid will be treated as a withdrawal for Federal tax purposes and thus may be
subject to income tax and to a 10% penalty tax. (See "FEDERAL TAX MATTERS")
GUARANTEE PERIODS
Currently, there are ten guarantee periods: one year through ten years.
The Company may offer additional guarantee periods for any yearly period from
one to twenty years. The contract provides for the accumulation of interest on
the purchase payment at guaranteed rates for the duration of the guarantee
period. The renewal guaranteed interest rate on a renewal amount allocated or
transferred to a renewal guarantee period is determined from time-to-time by the
Company in accordance with market conditions. In no event will the renewal
guaranteed interest rate be less than 3%. The interest rate is guaranteed for
the duration of the guarantee period and may not be changed by the Company.
For information on the reinsurance of the fixed accounts and guarantees
regarding the fixed accounts see "REINSURANCE AND GUARANTEES."
TRANSFERS AMONG GUARANTEE PERIODS
8
<PAGE> 13
Before the maturity date the contract owner may transfer the entire
contract value to a different guarantee period at any time upon written notice
to the Company or by telephone if the contract owner authorizes the Company in
writing to accept telephone transfer requests. Amounts may only be transferred,
however, once per contract year and the entire contract value must be
transferred. Amounts transferred, including amounts transferred to the loan
account, will be subject to a transfer market value adjustment. The amount
requested to be transferred will be multiplied by the market value adjustment
factor to determine the transferred amount. (See "MARKET VALUE ADJUSTMENT"). The
Company also reserves the right to modify or terminate the transfer privilege at
any time in accordance with applicable law.
TELEPHONE TRANSACTIONS
Contract owners are permitted to request transfers or withdrawals by
telephone. The Company will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine. To be
permitted to request transfers or withdrawals by telephone, a contract owner
must elect the option on an appropriate authorization form provided by the
Company. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and may only be liable for
any losses due to unauthorized or fraudulent instructions where it fails to
employ its procedures properly. Such procedures include the following: Upon
telephoning a request, contract owners will be asked to provide certain
identifying information. For the contract owner's and Company's protection, all
conversations with contract owners will be tape recorded. All telephone
transactions will be followed by a confirmation statement of the transaction.
RENEWALS
At the end of a guarantee period, the contract owner may choose a
renewal guarantee period from any of the then existing guarantee periods at the
then current interest rate, all without the imposition of any charge. The
contract owner may not select a guarantee period that would extend beyond the
maturity date. In the case of renewals within one year of the maturity date, the
only option available is to have interest accrued up to the maturity date at the
then current interest rate for one year guarantee periods.
If the contract owner does not specify the renewal guarantee period
desired, the Company will select the same guarantee period as has just expired,
so long as such period does not extend beyond the maturity date. In the event a
renewal would extend beyond the maturity date, the Company will select the
longest period that will not extend beyond such date, except in the case of a
renewal within one year of the maturity date in which case the Company will
credit interest up to the maturity date at the then current interest rate for
one year guarantee periods.
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the contract
owner, the owner may withdraw all or a portion of the contract value upon
written request, complete with all necessary information, to the Company's
Annuity Service Office. For certain qualified contracts, exercise of the
withdrawal right may require the consent of the qualified plan participant's
spouse under the Internal Revenue Code and regulations promulgated by the
Treasury Department.
In the case of a total withdrawal, as of the date of receipt of the
request at its Annuity Service Office, the Company will cancel the contract and
pay the following amount:
C + [ (A - B - C) x D], where:
A=the gross withdrawal value reduced by an applicable annual administration fee;
B=the withdrawal charge;
C=the free withdrawal amount;
D=the market value adjustment factor.
The above amount will be adjusted to reflect any amount in the loan account and
any debt. (See "CHARGES AND DEDUCTIONS and 'MARKET VALUE ADJUSTMENT")
In the case of a partial withdrawal, the requested withdrawal amount will be
determined in accordance with the formula specified above. Partial withdrawals
will be subject to market value adjustments and possible
9
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withdrawal charges. The Company will deduct the gross withdrawal value from the
contract value. The gross withdrawal value may not exceed the contract value.
The Company may defer the payment of a full or partial withdrawal for
not more than six months (or the period permitted by applicable state law if
shorter) from the date the Company receives the withdrawal request and the
contract. If payments are deferred thirty days or more, the amount deferred will
earn interest at a rate not less than 3% per year or at a rate determined by
applicable state law. The Company will not, however, defer payment for more than
thirty days for any withdrawal effective at the end of any guarantee period.
There is no limit on the frequency of partial withdrawals; however, the
amount withdrawn must be at least $300 or, if less, the entire contract value.
If a partial withdrawal plus any applicable withdrawal charge, after giving
effect to any market value adjustment would reduce the contract value to less
than $300, the Company will treat the partial withdrawal as a total withdrawal
of the contract value.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances. (See "FEDERAL
TAX MATTERS")
TELEPHONE REDEMPTIONS. The contract owner may request the option to
withdraw a portion of the contract value by telephone by completing the
application described under "Telephone Transactions" above. The Company reserves
the right to impose maximum withdrawal amounts and procedural requirements
regarding this privilege. For additional information on Telephone Redemptions
see "Telephone Transactions" above.
DEATH BENEFIT BEFORE MATURITY DATE
In General. The following discussion applies principally to contracts
that are not issued in connection with qualified plans, i.e., a "non-qualified
contract."
Determination of Death Benefit. The determination of the death benefit
will be made on the date written notice and proof of death, as well as all
required claims forms, are received at the Company's Annuity Service Office. No
person is entitled to the death benefit until this time.
Amount and Payment of Death Benefit. The Company will pay a death
benefit equal to the contract value less any debt to the beneficiary if any
contract owner dies before the maturity date. If there is a surviving contract
owner, that contract owner will be deemed to be the beneficiary. No death
benefit is payable on the death of any annuitant, except that if any contract
owner is not a natural person, the death of any annuitant will be treated as the
death of an owner. On the death of the last surviving annuitant, the contract
owner, if a natural person, will become the annuitant unless the contract owner
designates another person as the annuitant.
The death benefit may be taken in the form of a lump sum immediately.
If not taken immediately, the contract will continue subject to the following:
(1) The beneficiary will become the contract owner. (2) No additional purchase
payments may be made. (3) If the beneficiary is not the deceased's owner spouse,
distribution of the contract owner's entire interest in the contract must be
made within five years of the owner's death, or alternatively, distribution may
be made as an annuity, under one of the annuity options described below, which
begins within one year of the owner's death and is payable over the life of the
beneficiary or over a period not extending beyond the life expectancy of the
beneficiary. If the beneficiary dies before distributions described in "(3)"
above are completed, the entire remaining contract value must be distributed in
a lump sum immediately. (4) If the owner's spouse is the beneficiary, the spouse
continues the contract as the new owner. In such a case, the distribution rules
described in "(3)" applicable when a contract owner dies will apply when the
spouse, as the owner, dies.
If any annuitant is changed and any contract owner is not a natural
person, the entire interest in the contract must be distributed to the contract
owner within five years.
Death benefits will be paid within seven days of the date the amount of
the death benefit is determined, as described above, subject to postponement
under the same circumstances that payment of withdrawals may be postponed. (See
"WITHDRAWALS")
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<PAGE> 15
ANNUITY PROVISIONS
GENERAL
The proceeds of the contract payable on death, withdrawal or the
contract maturity date may be applied to the annuity options described below,
subject to the distribution of death benefit provisions. See "DEATH BENEFIT
BEFORE MATURITY DATE")
Generally, annuity benefits under the contract will begin on the
maturity date. The maturity date is the date specified on the contract
specifications page, unless changed. If no date is specified, the maturity date
is the maximum maturity date described below. The maximum maturity date is the
first day of the month following the later of the 85th birthday of the annuitant
or the tenth contract anniversary. The contract owner may specify a different
maturity date at any time by written request at least one month before both the
previously specified and the new maturity date. The new maturity date may not be
later than the maximum maturity date unless the Company consents. Maturity dates
which occur at advanced ages, e.g., past age 85, may in some circumstances have
adverse income tax consequences. See "FEDERAL TAX MATTERS" Distributions from
qualified contracts may be required before the maturity date.
The contract owner may select the frequency of annuity payments.
However, if the contract value at the maturity date is such that a monthly
payment would be less than $20, the Company may pay the higher of contract value
less the debt and any annual administraton fee or the amount available upon
total withdrawal in one lump sum to the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefits are available under the contract on a fixed basis.
Upon purchase of the contract, and on or before the maturity date, the contract
owner may select one or more of the annuity options described below or choose an
alternate form of settlement acceptable to the Company. If an annuity option is
not selected, the Company will provide as a default option annuity payments to
be made for a period certain of 10 years and continuing thereafter during the
lifetime of the annuitant. Treasury Department regulations may preclude the
availability of certain annuity options in connection with certain qualified
contracts.
The following annuity options are guaranteed in the contract.
Option 1(a): Non-Refund Life Annuity - An annuity with payments during
the lifetime of the annuitant. No payments are due after the death of
the annuitant. Since there is no guarantee that any minimum number of
payments will be made, an annuitant may receive only one payment if the
annuitant dies prior to the date the second payment is due.
Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the annuitant. Since payments are guaranteed for
10 years, annuity payments will be made to the end of such period if
the annuitant dies prior to the end of the tenth year.
Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with
payments during the lifetimes of the annuitant and a designated
co-annuitant. No payments are due after the death of the last survivor
of the annuitant and co-annuitant. Since there is no guarantee that any
minimum number of payments will be made, an annuitant or co-annuitant
may receive only one payment if the annuitant and co-annuitant die
prior to the date the second payment is due.
Option 2(b): Joint & Survivor Life Annuity with Payments Guaranteed for
10 Years - An annuity with payments guaranteed for 10 years and
continuing thereafter during the lifetimes of the annuitant and a
designated co-annuitant. Since payments are guaranteed for 10 years,
annuity payments will be made to the end of such period if both the
annuitant and the co-annuitant die prior to the end of the tenth year.
In addition to the foregoing annuity options which the Company is
contractually obligated to offer at all times, the Company currently offers the
following annuity options. The Company may cease offering the following annuity
options at any time and may offer other annuity options in the future.
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<PAGE> 16
Option 3: Life annuity with Payments Guaranteed for 5, 15 or 20 Years -
An Annuity with payments guaranteed for 5, 15 or 20 years and
continuing thereafter during the lifetime of the annuitant. Since
payments are guaranteed for the specific number of years, annuity
payments will be made to the end of the last year of the 5, 15 or 20
year period.
Option 4: Joint & Two-Thirds Survivor Non-Refund Life Annuity - An
annuity with full payments during the joint lifetime of the annuitant
and a designated co-annuitant and two-thirds payments during the
lifetime of the survivor. Since there is no guarantee that any minimum
number of payments will be made, an annuitant or co-annuitant may
receive only one payment if the annuitant and co-annuitant die prior to
the date the second payment is due.
Option 5: Period Certain Only Annuity for 5, 10, 15 or 20 years - An
annuity with payments for a 5, 10, 15 or 20 year period and no payments
thereafter.
DEATH BENEFIT ON OR AFTER MATURITY DATE
If annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, and the annuitant dies on or
after the maturity date, the Company will make the remaining guaranteed payments
to the beneficiary. Any remaining payments will be made as rapidly as under the
method of distribution being used as of the date of the annuitant's death. If no
beneficiary is living, the Company will commute any unpaid guaranteed payments
to a single sum (on the basis of the interest rate used in determining the
payments) and pay that single sum to the estate of the last to die of the
annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
TEN DAY RIGHT TO REVIEW
The contract owner may cancel the contract by returning it to the
Service Office or agent at any time within 10 days after receipt of the
contract. Within 7 days of receipt of the contract by the Company, the Company
will refund the payment made for the contract.
No withdrawal charge is imposed upon return of the contract within the
ten day right to review period. The ten day right to review may vary in certain
states in order to comply with the requirements of insurance laws and
regulations in such states. When the certificate is issued as an individual
retirement annuity under Internal Revenue Code section 408, during the first 7
days of the 10 day period, the Company will return the contract value if this is
greater than the amount otherwise payable.
OWNERSHIP
In the case of an individual annuity contract, the contract owner is
the person entitled to exercise all rights under the contract. In the case of a
group annuity contract, the contract is owned by the group holder; however, all
contract rights and privileges not expressly reserved to the group holder may be
exercised by each owner as to his or her interest as specified in his or her
certificate. Prior to the maturity date, the contract owner is the person
designated in the contract specifications page or as subsequently named. On and
after the maturity date, the annuitant is the contract owner. If amounts become
payable to any beneficiary under the contract, the beneficiary is the contract
owner.
In the case of non-qualified contracts, ownership of the contract may
be changed or the contract may be collaterally assigned at any time prior to the
maturity date, subject to the rights of any irrevocable beneficiary. Assigning a
contract, or changing the ownership of a contract, may be treated as a
distribution of the contract value for Federal tax purposes. (See "FEDERAL TAX
MATTERS")
Any change of ownership or assignment must be made in writing. Any
change must be approved by the Company. Any assignment and any change, if
approved, will be effective as of the date the Company receives the request at
its Annuity Service Office. The Company assumes no liability for any payments
made or actions taken before a change is approved or an assignment is accepted
or responsibility for the validity or sufficiency of any assignment. An absolute
assignment will revoke the interest of any revocable beneficiary.
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<PAGE> 17
In the case of qualified contracts, ownership of the contract generally
may not be transferred except by the trustee of an exempt employees' trust which
is part of a retirement plan qualified under Section 401 of the Internal Revenue
Code or as otherwise permitted by applicable IRS regulations. Subject to the
foregoing, a qualified contract may not be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
the Company.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the
contract specifications page or as subsequently named. However, if there is a
surviving contract owner, that person will be treated as the beneficiary. The
beneficiary may be changed subject to the rights of any irrevocable beneficiary.
Any change must be made in writing, approved by the Company and if approved,
will be effective as of the date on which written. The Company assumes no
liability for any payments made or actions taken before the change is approved.
If no beneficiary is living, the contingent beneficiary will be the beneficiary.
The interest of any beneficiary is subject to that of any assignee. If no
beneficiary or contingent beneficiary is living, the beneficiary is the estate
of the deceased contract owner. In the case of certain qualified contracts,
regulations promulgated by the Treasury Department prescribe certain limitations
on the designation of a beneficiary.
ANNUITANT
The annuitant is any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. If the
contract owner names more than one person as an "annuitant," the second person
named shall be referred to as "co-annuitant." The annuitant is as designated on
the contract specifications page or in the application, unless changed.
On the death of the annuitant, the co-annuitant, if living, becomes the
annuitant. If there is no living co-annuitant, the owner becomes the annuitant.
In the case of certain qualified contracts, there are limitations on the ability
to designate and change the annuitant and the co-annuitant.
MODIFICATION
The Company will not change or modify the contract without the owner's
or group holder's consent, as applicable, except to the extent necessary to
conform to any applicable law or regulation or any ruling issued by a government
agency. However, on 60 days' notice to the group holder, the Company may change
the withdrawal charges, administration fees, free withdrawal percentage, annuity
purchase rate and the market value adjustment as to any certificates issued
after the effective date of the modification. The provisions of the contract
shall be interepreted so as to comply with the requirements of Section 72(s) of
the Code.
COMPANY APPROVAL
The Company reserves the right to accept or reject an contract
appliction at its sole discretion.
DISCONTINUANCE OF NEW OWNERS
In the case of a group annuity contract, on thirty days' notice to the
group holder, the company may limit or discontinue acceptance of new
applications and the issuance of new certificates under a contract.
MARKET VALUE ADJUSTMENT
Any amount withdrawn, borrowed or transferred prior to the end of
either the initial guarantee period or a renewal guarantee period will be
adjusted by the market value adjustment factor described below.
The market value adjustment factor is determined by the following
formula: ((1+i)/(1+j))to the power of n/12 where:
i - The initial guaranteed interest rate or renewal guaranteed interest
rate currently being earned on the contract.
j - The guaranteed interest rate available, on the date the request is
processed by the Company, for a guarantee period with the same length
as the period remaining in the initial guarantee period or guarantee
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<PAGE> 18
period. If the guarantee period of this length is not available, the
guarantee period with the next highest duration which is maintained by
the Company will be chosen.
n - The number of complete months remaining to the end of the initial
guarantee period or renewal guarantee period.
There will be no market value adjustment on withdrawals in the
following situations: (a) death of the contract owner; (b) amounts withdrawn
within one month prior to the end of the guarantee period; and (c) amounts
withdrawn in any contract year that do not exceed (i) 10% of total purchase
payments less (ii) any prior partial withdrawals in that year.
The market value adjustment reflects the relationship between the
initial guaranteed interest rate or the renewal guaranteed interest rate
applicable to the contract and the then current renewal guaranteed interest
rate. Generally, if the initial guaranteed interest rate or the renewal
guaranteed interest rate is lower than the then current available guaranteed
interest rate, then the effect of the market value adjustment will be to reduce
the amount withdrawn, borrowed or transferred. Similarly, if the initial
guaranteed interest rate or the renewal guaranteed interest rate is higher than
the then current available guaranteed interest rate, then the effect of the
market value adjustment will be to increase the amount withdrawn, borrrowed or
transferred. The greater the difference in these interest rates the greater the
effect of the market value adjustment.
The market value adjustment is also affected by the amount of time
remaining in the guarantee period. Generally, the longer the time remaining in
the guarantee period, the greater the effect of the market value adjustment on
the amount withdrawn, borrowed or transferred. This is because the longer the
time remaining in the guarantee period, the higher the compounding factor 'n' in
the market value adjustment factor. In addition, the current available
guaranteed interest rate chosen is based upon the time remaining in the
guarantee period. Generally, though not always, at a given point in time this
current rate increases as the time remaining increases, thereby decreasing the
market value adjustment factor which in turn decreases the amount withdrawn,
borrowed or transferred beyond what would have been payable had there been less
time remaining in the guarantee period.
The cumulative effect of the market value adjustment and withdrawal
charges could result in a contract owner receiving total withdrawal proceeds of
less than the contract owner's investment in the contract.
BECAUSE OF THE MARKET VALUE ADJUSTMENT PROVISION OF THE CONTRACT, THE
CONTRACT OWNER BEARS THE INVESTMENT RISK THAT THE CURRENT AVAILABLE GUARANTEED
INTEREST RATE OFFERED BY THE COMPANY AT THE TIME OF WITHDRAWAL, BORROWING OR
TRANSFER MAY BE HIGHER THAN THE INITIAL OR RENEWAL GUARANTEE INTEREST RATE
APPLICABLE TO THE CONTRACT WITH THE RESULT THAT THE AMOUNT THE CONTRACT OWNER
RECEIVES UPON A WITHDRAWAL, LOAN OR TRANSFER MAY BE SUBSTANTIALLY REDUCED.
For more information of the market value adjustment, including examples
of its calculation, see Appendix B.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE
If a withdrawal is made from the contract before the maturity date, a
withdrawal charge (contingent deferred sales charge) may be assessed against
amounts withdrawn during the first seven contract years. There is never a
withdrawal charge with respect to certain free withdrawal amounts described
below or after seven complete contract years. The amount of the withdrawal
charge and when it is assessed is discussed below:
1. In any contract year, the free withdrawal amount for that year is
the excess of (i) over (ii), where (i) is 10% of the purchase payment and (ii)
is all prior partial withdrawals in that contract year. Withdrawals allocated to
the free withdrawal amount may be withdrawn without the imposition of a
withdrawal charge.
2. If a withdrawal is made at the end of the initial guarantee period,
no withdrawal charge will be applied provided such withdrawal occurs on or after
the end of the third contract year. If a withdrawal is made at the end of any
other guarantee period, no withdrawal charge will be applied provided such
withdrawal occurs on or after
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<PAGE> 19
the end of the fifth contract year. A request for withdrawal at the end of a
guarantee period must be received in writing during the 30 days period preceding
the end of that guarantee period.
3. The amount of the withdrawal charge is calculated by multiplying the
gross withdrawal value, less any administration fee and free withdrawal amount
by the applicable withdrawal charge percentage obtained from the table below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETED WITHDRAWAL CHARGE
CONTRACT YEARS PERCENTAGE
---------------------------------------------
<S> <C> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
</TABLE>
4. In the case of a partial withdrawal, the amount requested may not
exceed the contract value, less any applicable withdrawal charge, annual
administration fee and debt, plus or minus any market value adjustment.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the contract owner or, if applicable, the annuitant, (see
"Death Benefit Before Maturity Date - Amount of Death Benefit).
The amount collected from the withdrawal charge will be used to
reimburse the Company for the compensation paid to cover selling concessions to
broker-dealers, preparation of sales literature and other expenses related to
sales activity.
For examples of calculation of the withdrawal charge, see Appendix A.
Withdrawals may be subject to a market value adjustment in addition to the
withdrawal charge described above. (See "MARKET VALUE ADJUSTMENT.")
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGES
The amount of the withdrawal charge on a contract or the period to
which it applies may from time to time be reduced or eliminated for sales of the
contracts to certain individuals or groups of individuals in such a manner that
results in savings of sales expenses. The Company will consider such factors as
(i) the size and type of group, (ii) the amount of the single premium and/or
(iii) other transactions where sales expenses are reduced, when considering
whether to reduce or eliminate the sales charge or the period to which it
applies.
TAXES
The Company reserves the right to charge, or provide for, certain taxes
against purchase payments, contract values or annuity payments. Such taxes may
include premium taxes or other taxes levied by any government entity which the
Company determines to have resulted from the (i) establishment or maintenance of
the Fixed Account, (ii) receipt by the Company of purchase payments, (iii)
issuance of the contracts, (iv) commencement or continuance of annuity payments
under the contracts or (v) death of the owner or annuitant. In addition, the
Company will withhold taxes to the extent required by applicable law.
Except for residents in South Dakota, premium taxes will be deducted
from the contract value used to provide for annuity payments unless required
otherwise by applicable law. The amount deducted will depend on the premium tax
assessed in the applicable state. State premium taxes currently range from 0% to
3.5% depending on the jurisdiction and the tax status of the contract and are
subject to change by the legislature or other authority. (See "APPENDIX B: STATE
PREMIUM TAXES") FOR RESIDENTS OF SOUTH DAKOTA, THE FOLLOWING PREMIUM TAX
ASSESSMENT WILL APPLY: A premium tax will be assessed against all non-qualified
purchase payments received from contract owners who are residents of South
Dakota. The rate of tax is 1.25%. The state premium tax will be
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<PAGE> 20
collected upon payment of any withdrawal benefits, upon any annuitization or
payment of death benefits. In the state of South Dakota, purchase payments
received in connection with the funding of a qualified plan are exempt from
state premium tax.
ADMINISTRATION FEE
To compensate the Company for assuming certain administrative expenses,
the Company reserves the right to charge an annual administration fee. Prior to
the maturity date, the administration fee is deducted on the last day of each
contract year. If the contract is surrendered for its contract value on any date
other than the last day of any contract year, the Company will deduct the full
amount of the administration fee from the amount paid. Currently, no fee is
being assessed.
REINSURANCE AND GUARANTEES
REINSURANCE
Effective _________, 1996, an indemnity coinsurance agreement was
entered into between the Company and Peoples Security Life Insurance Company
("Peoples"), a subsidiary of the Providian Corporation, to reinsure fixed
annuity business written by the Company for the product described in this
prospectus.
The indemnity aspects of the agreement provide that the Company remains
liable for the contractual obligations whereas Peoples agrees to indemnify the
Company for any contractual claims incurred. The coinsurance aspects of the
agreement required the Company to transfer to Peoples an agreed upon percentage
of assets backing the fixed annuity obligations fixed premiums received by the
Company for fixed annuity contracts. Peoples reimburses the Company for the same
agreed upon percentage of claims and provides expense allowances to cover
commission and other costs associated with this fixed annuity business. Peoples
contractual liability runs solely to the Company, and no contract owner shall
have any right of action against Peoples.
Peoples is responsible for investing the assets and is at risk for any
potential investment gains and losses. There is no recourse back to the Company
if investment losses are incurred. Under this agreement, the Company will
continue to administer the fixed annuity business for which it will earn an
expense allowance. The Company has set up a reserve to recognize that expense
allowances received from Providian under this indemnity coinsurance agreement do
not fully reimburse the Company for overhead expenses allocated to this fixed
annuity line of business (See Note F to the Company's financial statements).
Peoples is a wholly-owned subsidiary of Louisville, Kentucky based
Providian Corporation, a diversified financial services corporation.
GUARANTEE AGREEMENT
Pursuant to a Guarantee Agreement Manulife, the ultimate parent of the
Company, unconditionally guarantees to the Company on behalf of and for the
benefit of the Company and owners of fixed annuity contracts issued by the
Company that it will, on demand, make funds available to the Company for the
timely payment of contractual claims under fixed annuity contracts. This
Guarantee covers the the contracts described by this Prospectus. This Guarantee
may be terminated by Manulife on notice to the Company. Termination will not
affect Manulife's continuing liability with respect to all fixed annuity
contracts issued prior to the termination of the Guarantee.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
DESCRIPTION OF BUSINESS
Organization and History
North American Security Life Insurance Company (the "Company") is a
stock life insurance company organized under the laws of Delaware in 1979. The
Company's principal office is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. The ultimate parent of the Company is The Manufacturers
Life Insurance Company ("Manulife"), a Canadian mutual life insurance Company
based in Toronto, Canada. Prior to January 1,
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<PAGE> 21
1996, the Company was a wholly owned subsidiary of North American Life Assurance
Company ("NAL"), a Canadian mutual life insurance company. On January 1, 1996
NAL and Manulife merged with the combined company retaining the Manulife name.
Effective January 1, 1996, immediately following the merger of NAL and
Manulife, the Company experiened a corporate restructuring which resulted in the
formation of a newly organized holding corporation, NAWL Holding Company, Inc.
("NAWL"). NAWL holds all of the outstanding shares of the Company and Wood Logan
Associates, Inc. ("WLA"). Manulife owns all class A shares of NAWL, representing
85% of the voting shares of NAWL. Certain employees of WLA own all class B
shares, which represent the remaining 15% voting interest in NAWL.
On June 19, 1992, the Company formed First North American Life
Assurance Company ("FNAL"). Subsequently, on July 22, 1992, FNA was granted a
license by the New York State Insurance Department. FNAL issues fixed and
variable annuity contract in the State of New York.
NASL Financial Services, Inc. ("NASL Financial "), a wholly-owned
subsidiary of the Company, acts as principal underwriter to the contracts issued
by the Company and FNAL. NASL Financial has entered into a promotional agent
agreement with WLA to act as the non-exclusive agent for the promotion of the
Company's insurance contract sales. (See "Distributor" below).
Product Lines
The Company issues fixed and variable annuities and variable life
contracts. Premiums received during 1995 totaled $1,090 million and included
$1.8 million from individual fixed annuities contracts, $11.45 million from
variable annuities contracts, $1,076 million from combination fixed and variable
annuities contracts and $0.15 milion from variable life contracts. Amounts
invested in the fixed portion of the Company's insurance contracts are allocated
to the general account of the Company or in the case of the contract described
in this prospectus, to a non-unitized separate account of the Company. Amounts
invested in the variable portion of the contracts are allocated to separate
accounts of the Company. The separate account assets (other than the separate
account described in this prospectus) are invested in shares of NASL Series
Trust, a no-load, open end management investment company organized as a
Massachusetts business trust.
The Company also sponsors a family of mutual funds, the North American
Funds, which is advised by a subsidiary of the Company, NASL Financial Services,
Inc. Currently, the North American Funds is comprised of thirteen portfolios.
Assets under management as of December 31, 1995 were approximately $734,315
million.
As of _____, 1996, the Company was licensed to sell fixed and variable
annuities insurance in all states except Maine, New Hampshire, New York, Rhode
Island and Vermont and was licensed to sell variable life insurance in all
states except District of Columbia, Florida, Georgia, Maine, Michigan, New
Hampshire, New York, North Carolina, Rhode Island and Vermont.
Property and Office Location
The Company's offices are located at 116 Huntington Avenue, Boston,
Massachusetts where the Company leases office space. The Company owns no real
property which is used for business purposes.
MANAGEMENT DISCUSSION & ANALYSIS
Overview
As described above under "Organization and History," effective January
1, 1996, Manulife became the ultimate parent of the Company. In addition, as
described above, immediately following this merger, there was a corporate
restructuring whereby the Company became a wholly owned subsidiary of NAWL.
A significant financial event for the Company during 1995 was the
reinsurance of a substantial portion of its fixed annuity business with Peoples
Security Life Insurance Company. This agreement and the Company's other
reinsurance agreements are described under "Reinsurance" above. Other
significant events of the Company during 1995 include the introduction of a
modified single payment variable life insurance product and the addition
17
<PAGE> 22
of several new funds to NASL Series Trust, the underyling investment medium for
the variable portion of the Company's contracts, and to the North American
Funds.
During 1994 the Company introduced several new variable annuity
insurance products which provide a death benefit that is generally more
favorable than the death benefit provided for the then existing contracts. In
addition, the Company entered into a $150 million revolving credit and term loan
agreement with the Canadian Imperial Bank of Commerce and Deutsche Bank AG as
described under "Borrowed Money" below which was paid off during 1996.
During 1993 the Company introduced a level commission annuity that was
targeted for the wrap-fee market place.
Financial Position
Financial results have been prepared on the basis of statutory
accounting practices which are currently considered by the insurance industry to
be in accordance with GAAP for all mutual life insurance companies and their
wholly-owned subsidiaries. A description of the accounting policies can be found
in Note B to the December 31, 1995 financial statements.
1995 Compared to 1994
Results of Operations
The Company incurred a net loss from operations of $7.3 million versus
a loss of $30.4 million in 1994. Although there was a significant improvement
relative to 1994 results, specific events occurred in 1995 that affected net
results:
On June 30, 1995, the Company entered into an indemnity coinsurance
agreement with Peoples for all existing and future fixed annuity business. Under
this agreement, the Company transferred all assets backing its fixed annuity
obligations to Peoples. (See "REINSURANCE AND GUARANTEES" above) General Account
assets declined from $570 million at December 31, 1994 to $47.8 million at
December 31, 1995 primarily as a result of this agreement. The financial affect
of this agreement resulted in positive income of approximately $7.2 million.
Offsetting the positive financial impact from reinsurance was the
establishment of $19 million of additional reserves required by the NAIC under
Regulation GGG. This regulation clarified how the Commissioner's Annuity Reserve
Valuation Method ("CARVM") is to be applied with the result that reserves must
be sufficient to protect the Company against the worst possible combination of
events as part of its reserve adequacy testing.
While strong sales have positioned the Company for future growth in
surplus, initially there is a loss from operations due to the expensing of
acquisition costs (commission costs) in excess of the expense allowances
provided in the reserve basis. Whenever a company experiences rapid growth
relative to the total business inforce, as the Company did from 1992 through
1995, the first year losses on new business will exceed the profits generated on
the inforce business. This result is due to the conservative nature of statutory
accounting. Eventually, as the profits on the inforce block of business become
greater than the cost of writing new business, profits will emerge.
Assets and Liabilities
At December 31, 1995 total assets of the Company were $4,962.5 million
an increase of $722.3 million or 17.0% from 1994. Total liabilities at December
31, 1995 were $4,912 million an increase of $731.5 million over 1994. The
primary factors affecting the Company's assets and liabilities were:
* Separate account assets and liabilities increased by $1,253.5 million
from 1994 due to variable sales of $823.3 million and investment gains of $826.4
million (less $396.2 million of withdrawals and other transfers).
* As discussed above, the Company entered into an indemnity coinsurance
agreement with Peoples substantially decreasing general account assets and
liabilities.
18
<PAGE> 23
Capital and Surplus
Total capital and surplus at December 31, 1995 was $50.2 million, a
decrease of $9.3 million from December 31, 1994. The change in the components of
capital and surplus were as follows:
<TABLE>
<CAPTION>
(millions)
----------
<S> <C>
Loss from operations $ (7.3)
Unrealized capital losses (.6)
Change in non-admitted assets (1.0)
Change in asset valuation reserve 2.6
Surplus adjustment on reinsurance ceded (3.0)
--------
Net decrease in capital and surplus $ (9.3)
========
</TABLE>
In general, the loss from operations is a result of the conservative
statutory basis of accounting whereby the Company does not receive credit in its
reserve basis for the full acquisition costs. Additionally, the Company was
required to increase its reserves by $19 million due to changes in CARVM
requirements as discussed above. Partially offsetting this loss was the positive
earnings from the indemnity coinsurance agreement with Peoples which resulted in
an overall net positive affect on surplus of approximately $10 million.
1994 Compared to 1993
Results of Operations
The Company incurred a net loss from operations of $30.4 million versus
a loss of ($10.7) million in 1993. The loss was the result of several items:
* The Company incurred realized capital losses of $7 million on the
sale of real estate that was acquired through foreclosure. The majority of the
loss was reflected in prior years as a direct charge to surplus as an increase
in unrealized losses.
* The Company recaptured a block of variable annuity business that was
reinsured with NAL which resulted in a one-time charge to earnings of $6.5
million.
* As interest rates increased during 1994, the Company sold a higher
portion of fixed annuity business which requires more stringent reserves.
* As a result of overall poor equity and bond market performance, the
Company realized less asset based fee income.
* While strong sales positioned the Company for future growth in
surplus, initially there was a loss due to the expensing of acquisition costs in
excess of the expense allowances provided in the reserve basis.
Assets and Liabilities
At December 31, 1994 total assets of the Company were $4,240.2 million,
an increase of $824.7 million or 24.2% over 1993. Total liabilities at December
31, 1994 were $4,180.8 million, an increase of $816.9 million over 1993. The
primary factors affecting the Company's assets and liabilities were:
* Separate account assets and liabilities increased by $723.8 million
from 1993 due to variable annuity sales of $1,119.5 million which were offset by
negative investment performance in the separate accounts of ($38.4 million) and
withdrawals and other transfers of $357.3 million.
*General account policy reserves increased by $146.6 million due to a
net increase in fixed annuity sales and accumulated credited interest on the
inforce business.
19
<PAGE> 24
*To support the need for commission financing, the Company entered into
a term and revolving credit line with the Canadian Imperial Bank and Commerce
and the Duetsche Bank AG (the "CIBC Agreement") for up to $150 million. The net
increase in borrowed funds in 1994 was $70 million.
* The Company received an additional $30 million of paid in capital
from its parent, NAL, to offset the effect on surplus from the statutory loss.
Capital and Surplus
Total capital and surplus at December 31, 1994 was $59.4 million, an
increase of $7.7 million from 1993. The change in the components of capital and
surplus were as follows:
<TABLE>
<CAPTION>
(millions)
--------
<S> <C>
Loss from operations $ (30.4)
Unrealized capital gains 3.5
Change in non-admitted assets (1.9)
Change in asset valuation reserve 2.0
Issue of common stock/paid in capital 30.0
Expense allowance on reinsurance ceded 4.5
--------
Net increase in capital and surplus $ 7.7
========
</TABLE>
The net loss from operations is a result of the conservative statutory
basis of accounting whereby the Company does not receive full credit for
acquisition costs in its reserving basis. During 1994, as interest rates rose,
the Company wrote a higher level of fixed annuity business which generated a
higher strain on surplus. The Company recaptured a block of variable annuity
business that was reinsured with NAL, its parent, which resulted in a one-time
charge to earnings of $6.5 million. Additionally, the Company realized a
shortfall in asset based fees due to the poor performance of the equity and bond
markets during 1994.
The Company incurred realized capital losses of $7 million as result of
the sale of real estate that was acquired through foreclosure. As most of these
realized losses were recognized in prior years as unrealized losses, there was
an offset to the realized losses within the capital and surplus account,
accounting for most of the change in unrealized gains.
The change in non-admitted represents primarily an increase in capital
acquisition of furniture and equipment.
The change in asset valuation reserve is directly related to the
increase in general account assets.
The Company entered into two reinsurance agreements with ITT Lyndon
Life and Paine Webber Life on selective annuity business which resulted in the
receipt of an initial expense allowance of $3.6 million.
1993 Compared to 1992
Results of Operations
The Company incurred a net loss from operations of $10.7 million,
versus a loss of $20.3 in 1992. The current years loss was the result of the
following:
* Total annuity sales in 1993 were $1,262.2 million versus $620.5
million in 1992. This represents an increase of 103.4%.
* While strong sales positioned the Company for future growth in
surplus, initially there was a loss due to the expensing of acquisition costs in
excess of the expense allowances provided in the reserve basis.
Assets and Liabilities
20
<PAGE> 25
At December 31, 1993 total assets of the Company were $3,415.6 million,
an increase of $1,391.6 million or 68.7% over 1992. Total liabilities of the
Company at December 31, 1993 were $3,415.6 million. The primary factors
affecting the Company's assets and liabilities were:
* Separate account assets and liabilities increased by $1,266.8 million
due to variable annuity sales of $1,187.4 million and separate account
investment income of $241.7 million (which was offset by withdrawals and
transfers of $162.3 million).
*General account policy reserves increased by $5.4 million due to a net
increase in fixed annuity sales and accumulated credited interest on the inforce
business.
* The Company received $20 million from NAL in the form of a surplus
note to maintain a desired level of risk based capital.
* The Company borrowed $60 million to finance commissions on new sales,
$30 million from a third party bank and $30 million from a related party.
* The Company entered into a modified coinsurance agreement with ITT
Lyndon Life to cede a major portion of its older annuity line of business. In
connection with this agreement, the Company received $25 million in cash
representing withheld premiums of $15 million and $10 million ceding commission.
*Given the uncertainty of the mortgage and real estate market, the
Company funded the Asset Valuation Reserve at maximum which resulted in an
increase of $5.8 million over 1992.
Capital and Surplus
Total capital and surplus at December 31, 1993 was $51.7 million, an
increase of $15.9 over 1992. The change in the components of capital and surplus
are as follows:
<TABLE>
<CAPTION>
(millions)
--------
<S> <C>
Loss from operations $(10.7)
Unrealized capital losses (1.2)
Change in non-admitted assets (1.4)
Change in asset valuation reserve (5.8)
Issue of common stock/paid in capital 5.0
Issue of surplus note 20.0
Expense allowance on reinsurance ceded 10.0
------
Net increase in capital and surplus $ 15.9
======
</TABLE>
The net loss from operations is a result of the conservative statutory
basis of accounting whereby the Company does not receive full credit for
acquisition costs in its reserving basis. Sales in 1993 were $1,262.2 million
versus $620.5 million in 1992. During years of rapid sales growth there is a
surplus strain when the contracts are first issued as the commission and issue
expenses exceed the expense allowance in the reserve basis.
Unrealized capital losses represent the additional write-down of
mortgage loans in default.
The change in non-admitted assets represents primarily an increase in
capital acquisition of furniture and equipment.
The asset valuation reserve declined as the Company repositioned a
significant portion of its general account assets in Treasury securities.
The Company received additional capital and a surplus note from its
parent, NAL, to offset the loss from operations and to maintain a desired level
of risk based capital. The capital was in the form of the issuance to NAL of 458
shares of the Company at a price of $1,000 per share with the remainder as
additional paid in capital.
21
<PAGE> 26
The Company entered into a modified coinsurance agreement with ITT
Lyndon Life to cede a significant block of its annuity business. The Company
received $10 million of ceding commission as a result of the agreement.
Cashflow
The growth of the variable annuity market, particularly the substantial
increase in the Company's sales since 1993, has resulted in the Company needing
to obtain cash financing to support this growth. This is driven by the fact that
the Company must invest 100% of the variable option premiums in the separate
accounts. Prior to 1995, the Company used capital and general account assets to
finance commissions. However since 1995, under the Peoples fixed account
reinsurance agreement, the Company settles all general account obligations on a
timely basis with Peoples. Therefore, substantially all commissions costs are
financed through borrowing.
Since the commissions paid on separate account business exceed the
separate account surplus, the Company obtained external financing in 1994 by
entering into a $150 million CIBC loan agreement. This loan was collaterized by
the mortality and expense risk charges and surrender charges payable to the
General Account from the separate account, excluding any portion thereof subject
to existing reinsurance agreements. This loan was subordinated in every respect
to the claims of the Company's contractholders.
As a result of the merger with Manulife, the Company became party to a
restructured lending facility that will provide sufficient cashflow needs for
the next 3-5 years at more favorable interest rate margins.
Aside from the financing needs for funding acquisition costs, the
Company's cash flows are adequate to meet the general obligations on all annuity
contracts.
Reinsurance
Peoples Security Life Insurance Company. See "REINSURANCE AND
GUARANTEES" for a description of the reinsurance agreement with Peoples Security
Life Insurance Company.
Connecticut General Life Insurance Company and Swiss Re Life Company
America. The Company entered into treaties with Connecticut General Life
Insurance Company ("CIGNA") and Swiss Re Life Company America ("Swiss"),
effective July 1, 1995 and August 1, 1995, respectively, to reinsure its minimum
death benefit guarantee risks, with each company assuming 50% of the risk. In
addition, the Company reinsured with CIGNA 50% of its risk related to the
waiving of surrender charges at death. The Company is paying CIGNA and Swiss
under these reinsurance agreements an asset based premium, the level of which
varies with both the amount of exposure to this risk and the realized
experience.
Transamerica. Effective November 1, 1995, the Company entered into two
reinsurance agreements with Transamerica Occidental Life Insurnace Company
("Transamerica") for variable life insurance contracts. The first reinsurance
agreement provides quota-share modified-coinsurance for contract obligations
attributable to the variable account investment options. The second reinsurance
agreement provides yearly renewable term coverage for insurance amounts in
excess of the Company's retention limits.
ITT Lyndon Life. On December 31, 1993, the Company entered into a
modified coinsurance agreement with ITT Lyndon Life, to cede the Company's
variable annuity contracts. As of December 31, 1995, 95% of these contract were
ceded.
Paine Webber Life. Effective December 31, 1994, the Company entered
into an indemnity reinsurance agreement with Paine Webber Life to reinsure a
portion of its policy forms. The quota share percentage varies between 15% and
35% depending on the policy form. The form of reinsurance is modified
coinsurance and only covers the variable portion of contract written by Paine
Webber brokers. All elements of risk (including mortality, persistency and
investment performance) have been transferred with the exception of the minimum
death benefit guarantee. The Company receives an allowance to cover the expected
cost of the minimum death benefit guarantee.
22
<PAGE> 27
Under each of the reinsurance agreements, the Company remains primarily
liable for the payment of benefits to all policyholders. In the event of a
reinsurer becoming insolvent, the Company remains liable for policyholder
benefits. For further information on the Company's reinsurance, see note F to
the Company's financial statements in this Prospectus.
Reserves
In accordance with insurance laws and regulations under which the
Company operates and generally accepted accounting principles, the Company is
obligated to carry on its books, as liabilities, actuarially determined reserves
to meet its obligations on its outstanding contracts. Reserves are based on
mortality and morbidity tables in general use in the United States, adjusted for
company experience, and are computed to equal amounts that, with additions from
premiums to be received and with interest on such reserves computed annually at
certain assumed rates, will be sufficient to meet the Company's contract
obligations at their maturities or in the event of the insured's death. In the
financial statements included in this Prospectus these reserves are determined
in accordance with generally accepted accounting priciples.
For further information on the Company's reserves, see note E to the
Company's financial statements in this Prospectus.
Investments
As noted above under "REINSURANCE," all assets backing the fixed
annuity obligtions of the Company were transferred to Peoples. The Company's
assets must be invested in accordance with requirements of applicable state laws
and regulations regarding the nature and quality of investments that may be made
by insurance companies and the percentage of its assets that may be held in
certain types of investments. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in federal, state, and
municipal obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
Borrowed Money
In December 1994, the Company entered into a $150 million revolving
credit and term loan agreement (the "Loan") with the Canadian Imperial Bank of
Commerce and Deutsche Bank AG ("CIBC"). The Loan is collateralized by the
mortality and expense risk charges and surrender charges due from a separate
account (that is distinct from the separate account for the product described in
this prospectus) excluding any portion thereof subject to existing reinsurance
agreements. The Loan is subordinated in every respect to the claims of the
Company's contractholders. The Company is subject to various affirmative and
negative covenants under this Loan, whereby breach of these covenants could
cause an event of default. Such covenants required the Company to meet certain
financial ratios and place restrictions on the incurrence of additional debt,
reinsurance and capital changes.
For further information on the Company's borrowings, see note I to the
Company's financial statements in this Prospectus.
Guarantee Agreement
Manulife has unconditionally guaranteed that it will, on demand, make
funds available to the Company for the timely payment of contractual claims made
under the fixed annuity and variable life contracts issued by the Company. The
guarantee covers all outstanding fixed annuity contracts and the fixed portion
of combination contracts, including those issued prior to the date of the
guarantee agreement. See "REISURANCE AND GUARANTEES" for additional information
on the Manulife guarantee.
Competition
The Company is engaged in a business that is highly competitive because
of the large number of stock and mutual life insurance companies and other
entities marketing insurance products. There are approximatelly 2,100
23
<PAGE> 28
stock, mutual and other types of insurers in the life insurance business in the
United States, a significant number of which are substantially larger than the
Company. As of ____, 1996, the Company had ____ employees.
Government Regulation
The Company is subject to the laws of the state of Delaware governing
insurance companies and to the regulation of the Delaware Insurance Department
(FNAL is subject to the laws and regulation of the State of New York). In
addition, the Company is subject to regulation under the insurance laws of other
jurisdictions in which the Company operates. Regulation by each insurance
department includes periodic examination to determine the Company's contract
liabilities and reserves so that each insurance department may verify that these
items are correct. Regulation by supervisory agencies includes licensing to
transact business, overseeing trade practices, licensing agents, approving
policy forms, establishing reserve requiremements, fixing maximum interest rates
on life insurance policy loans and minimum rates for accumulation of surrender
values, prescribing the form and content of required financial statements and
regulation the type and amounts of investments permitted. The Company's books
and accounts are subject to review by each insurance department and other
supervisory agencies at all times, and the Company files annual statements with
these agencies. A full examination of the Company's operations is conducted
periodically by the Delaware insurance department.
In addition, several states, including Delaware and Michigan, regulate
affiliated groups of insurers, such as the Company, under insurance holding
company legislation. Manulife's state of entry for insurance regulatory purposes
is Michigan In addition, several of its insurance subsidiaries are domiciled
there. Consequently, Michigan's Insurance Bureau has jurisdiction in applying
such legislation to transactions between Manulife and its U.S. insurance company
affiliates. Under such laws, intercompany transactions transfers of assets and
dividend payment from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies. Transactions between NASL and Wood
Logan are primarily regulated by Delaware, but may also be regulated by Michigan
if the transaction involves Manulife or any of its insurance subsidiaries
domiciled in Michigan.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for policyholder
losses incurred by insolvent companies. The amount of any future assessments on
the Company under these laws cannot be reasonably estimated. Most of these laws
do provide, however, that an assesment may be excused or deferred if it would
threaten an insurer's own financial strength.
Although the federal government generally does not directly regulate
the business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Current and proposed federeal measures which may
significantly affect the insurance business include employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies and the tax
treatment of insurance products.
SELECTED FINANCIAL DATA
[to be filed by amendment]
24
<PAGE> 29
OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers of the Company, together with
their principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE PRINCIPAL OCCUPATION
COMPANY
<S> <C> <C>
William J. Atherton Director* and President Vice President, U.S. Annuities, of Manulife,
Age: _____ January 1996 to present; Director and
President of the Company.
Peter S. Hutchison Director* Senior Vice President, Corporate Taxation of
Age: _____ Manulife, January 1996 to present; Executive
Vice President and Chief Financial Officer of
North American Life, September 1994 to December
31, 1995; Senior Vice President and Chief Actuary,
North American Life, April 1992 to August 1994; Vice
President and Chief Actuary, North American Life,
September 1990 to March 1992.
Brian L. Moore Director* and Chairman of Executive Vice President, Canadian Insurance
Age: _____ the Board of Directors Operations, of Manulife, January 1996 to
present; Chief Executive Officer and
President, The North American Group Inc., and
Chief Executive Officer, North American Life,
January 1995 to December, 1995; President,
The North American Group Inc. and
Vice-Chairman and Director, North American
Life, October 1993 to December 1994,
President, North American Life Financial
Services Inc., July 1992 to October 1993,
Executive Vice President and C.F.O., North
American Life, prior to October 1988.
James D. Gallagher Vice President, Secretary Vice President, Legal Services U.S.
Age: _____ and General Counsel Operations, of Manulife, January 1996 to
present; Vice President, Secretary and General
Counsel of the Company, June 1994 to present;
Vice President and Associate General Counsel,
The Prudential Insurance Company of America,
1990-1994.
Richard C. Hirtle Senior Vice President, Vice President, Chief Financial Officer,
Age: _____ Treasurer, Chief Financial Annuities, of Manulife, January 1996 to
Officer and Chief Operating present; Senior Vice President, Treasurer,
Officer Chief Financial Officer and Chief Operating
Officer of the Company, November 1988 to
present.
Hugh C. McHaffie Vice President, Product Vice President, Product Management, of
Age: _____ Management Manulife, January 1996 to present; Vice
President and Product Actuary of the Company,
August 1994 to present; Product Development
Executive of the Company, August 1990 to August
1994.
David Rossien Assistant Vice President, Assistant Vice President, Information
Age: _____ Information Systems Systems, of the Company, March 1996 to
present; Vice President, Systems, Fidelity
</TABLE>
25
<PAGE> 30
<TABLE>
<CAPTION>
NAME POSITION WITH THE PRINCIPAL OCCUPATION
COMPANY
<S> <C> <C>
Investments, September 1994 to March 1996;
Vice President, Systems, Merrill Lynch, prior to
Septemer 1994.
Iain W. Scott Vice President, Life Vice President, Single Premium Variable Life,
Age: ____ Products of Manulife, January 1996 to present; Vice
President, Life Products of the Company, 1994
to present; Vice President of U.S. Distribution,
North American Life, 1992 to 1994; Vice President,
Marketing, M Financial Group of Portland, Oregon,
1990 to 1992.
Janet Sweeney Vice President, Human Vice President, Human Resources, of Manulife,
Age: ____ Resources January 1996 to present; Vice President,
Corporate Services of the Company,
January 1995 to January 1996; Executive,
Corporate Services of the Company, July 1989
to December 1994.
Scott L. Stolz Vice President, Annuity Vice President, Annuity Customer Service, of
Age: ___ Administration and Systems Manulife, January 1996 to present; Vice
President, Annuity Administration and Systems
of the Company, November,
1994 to present; Senior Vice President of Annuity
Administration and Corporate Services, SunAmerica
Inc., October 1991 to October 1994; Senior Vice
President and National Sales Manager, SunAmerica
Inc., August 1990 to October 1991.
John G. Vrysen Vice President and Chief Vice President and Chief Financial Officer,
Age: ____ Actuary U.S. Operations, of Manulife, January 1996 to
present; Vice President and Chief Actuary of
the Company, January 1986 to present.
</TABLE>
*Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and qualified.
EXECUTIVE COMPENSATION
The Company's officers may also serve as officers of one or more of the
Company's affiliates including FNAL and after January 1, 1996, Manulife. During
1995, the officers of the Company received no compensation for being officers of
any of the Company's affiliates. The following table shows the compensation paid
or awarded to or earned by the Company's Chief Executive Officer and its four
most highly compensated Executive Officers other than the Chief Executive
Officer.
<TABLE>
<CAPTION>
Summary Compensation Table
- --------------------------
- -----------------------------------------------------------------------------------------------------------------------
Names and Year Salary Bonus Other Annual Long Term
- --------- ---- ------ ----- ------------ ---------
Principal Compensation Compensation
- --------- ------------ ------------
Position (1)
- -------- ---
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William J. 1995
Atherton,
President and
Director
</TABLE>
26
<PAGE> 31
<TABLE>
<S> <C>
Person A 1995
Person B 1995
Person C 1995
Person D 1995
- -------------------------------------------------------------------------------
</TABLE>
(1) Other annual compensation includes car allowance, car expense reimbursement,
group term life insurance premiums and moving expense reimbursement.
No Executive Officer participates in the formulation of his or her
compensation. The compensation of Executive Officers is determined by the
individual to whom the officer reports and is approved by the Company or after
January 1, 1996, by Manulife.
In addition to cash compensation, all officers are entitled to a
standard benefit package including medical, dental, pension, basic, supplemental
and dependent life insurance, and long and short-term disability coverage.
There are no other benefit packages which currently enhance overall compensation
by more than 10%.
Executive officers participate in certain plans sponsored by the
Company. A short-term incentive plan is in place for all employees of the
Company at the executive level and above. Pay-outs under the short-term
incentive plan are based on a percentage of salary and the employee's level in
the organization. Prior to December 31, 1995, the Company also maintained a Long
Term Incentive Plan for Vice Presidents. Benefits were based on increases in the
Company's equity and market share. Effective January 1, 1996, all employees at
the Assistant Vice President level and above became eligible to participate in
the Manulife Annual and Long Term Incentive Plans. These employees are no longer
eligible for the Company Annual Incentive Plan. Effective January 1, 1996, the
Company Long Term Incentive Plan was terminated.
Prior to December 31, 1995, NAL maintained a defined benefit pension
plan for all U.S. Staff which vests at five years of service. This plan has been
continued by Manulife. Benefit pay-out is a function of years of service and
average earnings during the employee's last five years of service. Under the
Internal Revenue Code of 1986, as amended (the "Code"), the maximum yearly
pension is currently earned at a salary of $150,000. Normal retirement age is
65. Pay-out is an annuity based with either a single life with a 10 year
guarantee or joint life with a five year gurarantee. The normal retirement
benefit is a monthly pension benefit in an amount equal to the Employer Pension
Credit plus the Participant Pension Credit (The plan has been non-contributory
since January 1, 1990). The Employer Pension Credit is determined as follows:
Service prior to January 1, 1967: The Employer Pension Credit is equal
to 1.25% of salary plus 85% of any commission income earned prior to January 1,
1967 plus the average of the Pension Units B multiplied by years of service
earned after the attainment of age 25 but prior to January 1, 1967 (not to
exceed 35 years). The Pension Units B are equal to 1.5% of salary income.
Service after January 1, 1967: The employer pension credit is generally
equal to the average of the pension Units A during the employee's last five
years of employment, multiplied by the years of benefit service earned after
December 31, 1966 (not to exceed 35 years). For each yer in the average period,
the Pension Units A is equal to 1.1% of compensation plus 0.4% of compensation
in excess of the Social Security Taxable Wage Base. Pension Units A prior to
January 1, 1981 are calculated using only compensaton less than or equal to
$75,000.
Combined pension benefits at age 65 under these arrangements is as follows:
<TABLE>
<CAPTION>
Years of Service
- --------------------------------------------------------------------------------
Remuneration* 15 20 25 30 35
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 22,000 $ 29,333 $ 36,667 $ 44,000 $ 51,333
150,000 27,114 36,152 45,190 54,228 63,266
175,000 30,179 40,238 50,298 60,358 70,417
200,000 30,179 40,238 50,298 60,358 70,417
225,000 30,179 40,238 50,298 60,358 70,417
250,000 30,179 40,238 50,298 60,358 70,417
300,000 30,179 40,238 50,298 60,358 70,417
400,000 30,179 40,238 50,298 60,358 70,417
</TABLE>
27
<PAGE> 32
*Remuneration table is based on a 100% time allocation to the Company.
Effective January 1, 1996, employees of the Company with earnings
exceeding federally mandated limits and eligible for the Manulife or NAL U.S.
defined benefit pension plan, became eligible for Manulife's Supplemental
Executive Retirement Plan. This is a noncontributory, non-qualified plan
intended to provide additional pension income consistent with the executive's
pre-retirement income.
William J. Atherton, President, has 39 years and 7 months of vested
service. ______ has ___ years of vested service.
The Company offers a defined contribution plan pursuant to 401(k) of
the Code which allows employees to contribute up to 6% of their base annual
salary. The Company matches 50% of the employee contributions as well as
contributes a floor amount of 2% of base pay for each pay period. The maximum
total contribution (including employer contributions), based on the maximum
taxable wage as set forth in the Code is $16,500. Company employees are 100%
vested in the Company floor contributions and personal contributions to the
plan. Employees become 100% vested in the employer matching contributions if he
or she retire on or after age 65, becomes disabled or dies. Otherwise, employees
earn a right to employer contributions through the following vesting schedule:
<TABLE>
<CAPTION>
Years of Service Vested Portion of Company Contribution
<S> <C> <C>
Less than 3 None
At least 3 33 1/3%
At least 4 66 2/3%
5 or more 100%
</TABLE>
Directors of the Company, all of whom are also officers or employees of
the Company or its affiliates, receive no compensation in addition to their
compensation as officers or employees of the Company or its affiliates. No
shares of the Company or any of its affiliates are owned by any Executive
Officer or Director of the Comany.
NASL FIXED ACCOUNT
NASL established the Fixed Account in 1996 as a separate account under
Delaware law. It is not a registered investment company. The Fixed Account holds
assets that are segregated from all of NASL's other assets. The Fixed Account is
currently used only to support the obligations under the contracts offered by
this prospectus. These obligations are based on interest rates credited to the
contracts and do not depend on the investment performance of the Fixed Account.
Any gain or loss in the Fixed Account accrues solely to NASL and NASL assumes
any risk associated with the possibility that the value of the assets in the
Fixed Account might fall below the reserves and other liabilities that must be
maintained. Should the value of the assets in the Fixed Account fall below
reserve and other liabilities, NASL will transfer assets from its General
Account to the Fixed Account to make up the shortfall. NASL reserve the right to
transfer to its General Account any assets of the Fixed Account in excess of
such reserves and other liabilities and to maintain assets in the Fixed Account
which support any number of annuities which NASL offers or may offer. The assets
of the Fixed Account are not insulated from the claims of NASL's creditors and
may be charged with liabilities which arise from other business conducted by
NASL. Thus NASL may, at its discretion if permitted by applicable state law,
transfer existing Fixed Account assets to, or place future Fixed Account
allocation in, it General Account for purposes of administration.
The assets of the Fixed Account will be invested in those assets chosen
by NASL and permitted by applicable state laws for separate account investment.
As noted above under 'REINSURANCE AND GUARANTEES," Peoples is responsible for
investing an agreed upon percentage of the assets in the Fixed Account.
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<PAGE> 33
DISTRIBUTION OF THE CONTRACT
NASL Financial Services, Inc. ("NASL Financial"), 116 Huntington
Avenue, Boston, Massachusetts, 02116, a wholly-owned subsidiary of the Company,
is the principal underwriter of the contract. NASL Financial is a broker-dealer
registered under the Securities Exchange Act of 1934 ("1934 Act") and a member
of the National Association of Securities Dealers, Inc. (the "NASD"). NASL
Financial has entered into an non-exclusive promotional agent agreement with
Wood Logan Associates, Inc. ("Wood Logan"). Wood Logan is a broker-dealer
registered under the 1934 Act and a member of the NASD. Wood Logan is a wholly
owned subsidiary of a holding company that is 85% owned by Manulife and
approximately 15% owned by the principals of Wood Logan. Sales of the contract
will be made by registered representatives of broker-dealers authorized by NASL
Financial to sell the contracts. Such registered representatives will also be
licensed insurance agents of the Company. Under the promotional agent agreement,
Wood Logan will recruit and provide sales training and licensing assistance to
such registered representatives. In addition, Wood Logan will prepare sales and
promotional materials for the Company's approval. NASL Financial will pay
distribution compensation to selling brokers in varying amounts which under
normal circumstances are not expected to exceed ____% of purchase payments. NASL
Financial may from time to time pay additional compensation pursuant to
promotional contests. Additionally, in some circumstances, NASL Financial will
provide reimbursement of certain sales and marketing expenses. NASL Financial
will pay Wood Logan for providing marketing support for the distribution of the
contract.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation, to which either the Company or any of its subsidiaries is a
party or to which any of their property subject and, to the best knowledge of
the Company, no such proceedings are contemplated by any governmental authority.
LEGAL MATTERS
All matters of applicable state law pertaining to the contract,
including the Company's right to issue the contract thereunder, have been passed
upon by James D. Gallagher, Esq., Vice President, Secretary and General Counsel
of the Company.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company included in this Prospectus
have been examined by Coopers & Lybrand, L.L.P., certified public accountants,
as indicated in their report in this Prospectus, and are included herein in
reliance upon that report and upon the authority of those accountants as experts
in accounting and auditing.
NOTICES AND REPORTS TO CONTRACT OWNERS
At least once each contract year, the Company will send to contract
owners a statement showing the contract value of the contract as of the date of
the statement. The statement will also show premium payments and any other
information required by any applicable law or regulation.
CONTRACT OWNER INQUIRIES
All contract owner inquiries should be directed to the Company's Annuity Service
Office at P.O. Box 9230, Boston, Massachusetts 02205-9230.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the federal income tax treatment of the
Contracts is not exhaustive, does not purport to cover all situations, and is
not intended as tax advice. The federal income tax treatment of the Contracts is
unclear in certain circumstances, and a qualified tax adviser should always be
consulted with regard to the application of law to individual circumstances.
This discussion is based on the Internal Revenue Code of 1986, as
29
<PAGE> 34
amended (the "Code"), Treasury Department regulations, and interpretations
existing on the date of this Prospectus. These authorities, however, are subject
to change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences
associated with the purchase of the Contracts. In addition, THE COMPANY MAKES NO
GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -OF ANY
CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT.
TAX STATUS OF THE COMPANY
The Company is taxed as a life insurance company under the Code. The
assets in the separate account will be owned by the Company, and the income
derived from such assets will be includible in the Company's income for federal
income tax purposes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in an owner's contract value is generally not taxable to the owner or
annuitant until received, either in the form of annuity payments as contemplated
by the Contracts, or in some other form of distribution. However, this rule
applies only if the owner is an individual.
As a general rule, deferred annuity contracts held by "non-natural
persons" such as a corporation, trust or other similar entity, as opposed to a
natural person, are not treated as annuity contracts for federal tax purposes.
The income on such contracts (as defined in the tax law) is taxed as ordinary
income that is received or accrued by the owner during the taxable year. There
are several exceptions to this general rule for non-natural contract owners.
First, annuity contracts will generally be treated as held by a natural person
if the nominal owner is a trust or other entity which holds the contract as an
agent for a natural person. Thus, if a group annuity contract is held by a trust
or other entity as an agent for contract owners who are individuals, those
individuals should be treated as owning an annuity contract for federal income
tax purposes. However, this exception will not apply in the case of any employer
which is the nominal owner of an annuity contract under a non-qualified deferred
compensation arrangement for its employees.
Other exceptions to the general rule for non-natural contract owners
will apply with respect to (1) annuity contracts acquired by an estate of a
decedent by reason of the death of the decedent, (2) certain annuity contracts
issued in connection with various qualified retirement plans, (3) annuity
contracts purchased by employers upon the termination of certain qualified
retirement plans, (4) certain annuity contracts used in connection with
structured settlement agreements, and (5) annuity contracts purchased with a
single premium when the annuity starting date is no later than a year from
purchase of the annuity and substantially equal periodic payments are made, not
less frequently than annually, during the annuity period.
In addition to the foregoing, if the Contract's maturity date is
scheduled to occur at a time when the annuitant is at an advanced age, such as
over age 85, it is possible that the owner will be taxable currently on the
annual increase in the contract value.
The remainder of this discussion assumes that the contract will
constitute an annuity for federal tax purposes.
TAXATION OF PARTIAL AND TOTAL WITHDRAWALS
In the case of a partial withdrawal, amounts received generally are
includible in income to the extent the owner's contract value before the
withdrawal exceeds his or her "investment in the contract." In the case of a
total withdrawal, amounts received are includible in income to the extent they
exceed the "investment in the contract." For these purposes the investment in
the contract at any time equals the total of the purchase payments made under
the Contract to that time (to the extent such payments were neither deductible
when made nor excludable from income as, for example, in the case of certain
employer contributions to Qualified Plans) less any amounts previously received
from the Contract which were not included in income.
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<PAGE> 35
Other than in the case of Contracts issued in connection with certain
Qualified Plans (which generally cannot be assigned or pledged), any assignment
or pledge (or agreement to assign or pledge) any portion of the contract value
is treated as a withdrawal of such amount or portion. The investment in the
contract is increased by the amount includible in income with respect to such
assignment or pledge, though it is not affected by any other aspect of the
assignment or pledge (including its release). If an owner transfers a Contract
without adequate consideration to a person other than the owner's spouse (or to
a former spouse incident to divorce), the owner will be taxed on the difference
between his or her contract value and the investment in the contract at the time
of transfer. In such case, the transferee's investment in the contract will be
increased to reflect the increase in the transferor's income.
There is some uncertainty regarding the treatment of the market value
adjustment for purposes of determining the amount includible in income as a
result of any partial withdrawal or transfer without adequate consideration.
There is legislation currently pending in Congress which would grant regulatory
authority to the Internal Revenue Service (the "IRS") to address this
uncertainty.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary
income is equal to the excess of the payment over the exclusion amount. The
exclusion amount is the amount determined by multiplying (1) the payment by (2)
the ratio of the investment in the contract, adjusted for any period certain or
refund feature, to the total expected value of annuity payments for the term of
the Contract (determined under Treasury Department regulations).
Once the total amount of the investment in the contract is excluded
using this ratio, annuity payments will be fully taxable. If annuity payments
cease because of the death of the annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant in his last taxable year.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person or are not married. For example,
where the owner and the annuitant are not the same person and are not married,
the owner may be taxed on the maturity date on the difference between the
contract value and the investment in the contract.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an
owner or the annuitant. Such death benefit proceeds are includible in income as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a total withdrawal, as described above, or (2) if distributed under an annuity
option, they are taxed in the same manner as annuity payments, as described
above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
Where a Contract has not been issued in connection with a Qualified
Plan, there generally is a 10% penalty tax on the taxable amount of any payment
from the Contract unless the payment is: (a) received on or after the owner
reaches age 59-1/2; (b) attributable to the owner's becoming disabled (as
defined in the tax law); (c) made on or after the death of the owner or, if the
owner is not an individual, on or after the death of the primary annuitant (as
defined in the tax law); (d) made as a series of substantially equal periodic
payments (not less frequently than annually) for the life (or life expectancy)
of the annuitant or the joint lives (or joint life expectancies) of the
annuitant and a "designated beneficiary" (as defined in the tax law), or (e)
made under a Contract purchased with a single premium when the maturity date is
no later than a year from purchase of the Contract and substantially equal
periodic payments are made, not less frequently than annually, during the
annuity period.
There is also a 10% penalty tax on the taxable amount of any payment
from certain qualified contracts (but not section 457 plans). There are
exceptions to this penalty tax which vary depending on the type of Qualified
Plan. In the case of an "Individual Retirement Annuity" ("IRA"), exceptions
provide that the penalty tax does not apply to a payment: (a) received on or
after the contract owner reaches age 59-1/2; (b) received on or after the
owner's death or because of the owner's disability (as defined in the tax law);
or (c) made as a series of substantially
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<PAGE> 36
equal periodic payments (not less frequently than annually) for the life (or
life expectancy) of the owner or the joint lives (or joint life expectancies) of
the owner and "designated beneficiary" (as defined in the tax law). These
exceptions, as well as certain others not described herein, generally apply to
taxable distributions from other Qualified Plans (although, in the case of plans
qualified under sections 401 and 403, exception "c" above for substantially
equal periodic payments applies only if the owner has separated from service).
AGGREGATION OF CONTRACTS
In certain circumstances, the IRS may determine the amount of an
annuity payment or a withdrawal from a Contract that is includible in income by
combining some or all of the annuity contracts owned by an individual which are
not issued in connection with a Qualified Plan. For example, if a person
purchases a Contract offered by this Prospectus and also purchases at
approximately the same time an immediate annuity, the Service may treat the two
contracts as one contract.
In addition, if a person purchases two or more deferred annuity
contracts from the same insurance company (or its affiliates) during any
calendar year, all such contracts will be treated as one contract for purposes
of determining whether any payment not received as an annuity (including
withdrawals prior to the maturity date) is includible in income. Thus, if during
a calendar year a person buys two or more of the Contracts offered by this
Prospectus (which might be done, for example, in order to invest amounts in
different guarantee periods), all of such Contracts would be treated as one
Contract in determining whether withdrawals from any of such Contracts are
includible in income.
The effects of such aggregation are not clear and depend on the
circumstances. However, aggregation could affect the amount of a withdrawal that
is taxable and the amount that might be subject to the 10% penalty tax described
above.
QUALIFIED RETIREMENT PLANS
IN GENERAL
The Contracts are also designed for use in connection with certain
types of qualified retirement plans which receive favorable treatment under the
Code. Numerous special tax rules apply to participants in Qualified Plans and to
the Contracts used in connection with Qualified Plans. These tax rules vary
according to the type of plan and the terms and conditions of the plan itself.
For example, for both withdrawals and annuity payments under certain Contracts
issued in connection with Qualified Plans, there may be no "investment in the
contract" and the total amount received may be taxable. Also, special rules
apply to the time at which distributions must commence and the form in which the
distributions must be paid. For example, failure to comply with minimum
distribution requirements applicable to Qualified Plans will result in the
imposition of an excise tax. This excise tax generally equals 50% of the amount
by which a minimum required distribution exceeds the actual distribution from
the Qualified Plan. In the case of IRAs and certain other Qualified Plans,
distributions of minimum amounts (as specified in the tax law) must generally
commence by April 1 of the calendar year following the calendar year in which
the owner attains age 70-1/2. For these reasons, no attempt is made to provide
more than general information about the use of Contracts with the various types
of Qualified Plans.
When issued in connection with a Qualified Plan, a Contract will be
amended as generally necessary to conform to the requirements of the plan.
However, owners, annuitants, and beneficiaries are cautioned that the rights of
any person to any benefits under Qualified Plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract. In addition, the Company shall not be bound by terms and
conditions of Qualified Plans to the extent such terms and conditions contradict
the Contract, unless the Company consents.
QUALIFIED PLAN TYPES
Following are brief descriptions of various types of Qualified Plans in
connection with which the Company may issue a Contract.
Individual Retirement Annuities. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA." IRAs are subject to limits on the
amounts that may be contributed, the persons who may be eligible and on the time
when distributions may
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<PAGE> 37
commence. Also, distributions from certain Qualified Plans may be "rolled over"
on a tax-deferred basis into an IRA.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code
allows employers to establish simplified employee pension plans for their
employees, using the employees' IRAs for such purposes, if certain criteria are
met. Under these plans the employer may, within specified limits, make
deductible contributions on behalf of the employees to IRAs. Employers intending
to use the Contract in connection with such plans should seek competent advice.
Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and
Profit-Sharing Plans. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax-favored retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed
individuals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
Contract in order to provide benefits under the plans. Employers intending to
use the Contract in connection with such plans should seek competent advice.
Tax-Sheltered Annuities. Section 403(b) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code to have
their employers purchase annuity contracts for them and, subject to certain
limitations, to exclude the amount of purchase payments from gross income for
tax purposes. These annuity contracts are commonly referred to as "tax-sheltered
annuities." Purchasers of the Contracts for such purposes should seek competent
advice as to eligibility, limitations on permissible amounts of purchase
payments and other tax consequences associated with the Contracts.
Section 403(b) Policies contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years beginning
after December 31, 1988, (ii) earnings on those contributions, and (iii)
earnings in such years on amounts held as of the last year beginning before
January 1, 1989. These amounts can be paid only if the employee has reached age
59-1/2, separated from service, died, become disabled, or in the case of
hardship. Amounts permitted to be distributed in the event of hardship are
limited to actual contributions; earnings thereon cannot be distributed on
account of hardship. (These limitations on withdrawals do not apply to the
extent the Company is directed to transfer some or all of the contract value to
the issuer of another tax-sheltered annuity or into a Section 403(b)(7)
custodial account.)
Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations. Section 457 of the Code permits employees of state and
local governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants in
an eligible deferred compensation plan. To the extent the Contract is used in
connection with an eligible plan, employees are considered general creditors of
the employer and the employer as owner of the Contract has the sole right to the
proceeds of the Contract. Generally, a contract purchased by a state or local
government or a tax-exempt organization will not be treated as an annuity
contract for federal income tax purposes. Those who intend to use the Contracts
in connection with such plans should seek competent advice.
DIRECT ROLLOVER RULES
In the case of Contracts used in connection with a pension,
profit-sharing, or annuity plan qualified under Sections 401(a) or 403(a) of the
Code, or in the case of a Section 403(b) tax sheltered annuity, any "eligible
rollover distribution" from the Contract will be subject to direct rollover and
mandatory withholding requirements. An eligible rollover distribution generally
is any taxable distribution from a qualified pension plan under Section 401(a)
of the Code, qualified annuity plan under Section 403(a) of the Code, or Section
403(b) tax sheltered annuity or custodial account, excluding certain amounts
(such as minimum distributions required under Section 401(a)(9) of the Code and
distributions which are part of a "series of substantially equal periodic
payments" made for life or a specified period of 10 years or more).
Under these requirements, withholding at a rate of 20% will be imposed
on any eligible rollover distribution. In addition, the participant in these
qualified retirement plans cannot elect out of withholding with respect to an
eligible rollover distribution. However, this 20% withholding will not apply if,
instead of receiving the eligible rollover distribution, the participant elects
to have amounts directly transferred to certain qualified retirement plans (such
as to an Individual Retirement Annuity).
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<PAGE> 38
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the U.S. government a part of
the taxable portion of each distribution made under a Contract unless the
distributee notifies the Company at or before the time of the distribution that
he or she elects not to have any amounts withheld. In certain circumstances, the
Company may be required to withhold tax. The withholding rates applicable to the
taxable portion of periodic annuity payments are the same as the withholding
rates generally applicable to payments of wages. The withholding rate applicable
to the taxable portion of non-periodic payments (including withdrawals prior to
the maturity date) is 10%. As described above, the withholding rate applicable
to eligible rollover distributions is 20%.
GENERAL MATTERS
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in
the Texas Optional Retirement Program ("ORP") to withdraw their interest in a
deferred annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2) retirement,
(3) death, or (4) the participant's attainment of age 70 1/2. Accordingly,
before any amounts may be distributed from the contract, proof must be furnished
to the Company that one of the four events has occurred. The foregoing
restrictions on withdrawal do not apply in the event a participant in the ORP
transfers his or her contract value to another contract or another qualified
custodian during the period of participation in the ORP. Loans are not available
under contracts issued under the ORP.
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APPENDIX A
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE
EXAMPLE 1 - Assume a single payment of $50,000 is made into the contract, no
transfers are made and there are no partial withdrawals. The table below
illustrates three examples of the withdrawal charges that would be imposed if
the contract is completely withdrawn during the contract year shown, based on
hypothetical contract values and assuming no market value charge.
<TABLE>
<CAPTION>
CONTRACT HYPOTHETICAL FREE AMOUNT SUBJECT TO WITHDRAWAL
YEAR CONTRACT WITHDRAWAL WITHDRAWAL CHARGE
VALUE AMOUNT CHARGE
---------------------
PERCENT AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2 55,000 5,000(a) 50,000 6% 3,000
6 60,000 5,000(b) 55,000 2% 1,100
8 70,000 5,000 0(c) 0% 0
</TABLE>
- ----------
(a) During any contract year the free withdrawal amount is 10% of the
single payment made under the contract less any prior partial
withdrawals in that contract year. Ten percent of payments less prior
withdrawals equals $5,000. Consequently, on total withdrawal $5,000 is
withdrawn free of the withdrawal charge and the withdrawal charge is
assessed against the remaining balance of $50,000 (contract value less
free withdrawal amount).
(b) The free withdrawal amount is again equal to $5,000 and the withdrawal
charge is applied to the remaining balance of $55,000 (contract value
less free withdrawal amount).
(c) There is no withdrawal charge after 7 contract years.
EXAMPLE 2 - Assume a single payment of $50,000 is made into the contract and
that no transfers are made. The table below illustrates two partial withdrawals
made during the third contract year of $2,000 and $7,000 and assumes no market
value adjustment applies.
<TABLE>
<CAPTION>
HYPOTHETICAL PARTIAL WITHDRAWAL FREE AMOUNT SUBJECT TO WITHDRAWAL
CONTRACT REQUESTED WITHDRAWAL WITHDRAWAL CHARGE CHARGE
VALUE AMOUNT -----------------------------
PERCENT AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
65,000 2,000 2,000(a) 0 5% 0
63,000 7,000 3,000(b) 4,000 5% 200
</TABLE>
- ----------
(a) The free withdrawal amount during any contract year is 10% of the
single payment made under the contract less any prior withdrawals in
that contract year. Ten percent of the payment less prior withdrawals
equals $5,000 ($5,000-0). The amount requested ($2,000) is less than
the free withdrawal amount; therefore, no withdrawal charge applies.
(b) Since $2,000 has already been withdrawn in the current contract year,
the remaining free withdrawal amount during the third contract year is
$3,000. The $7,000 partial withdrawal will consist of $3,000 free of
withdrawal charge, and the remaining $4,000 will be subject to a
withdrawal charge.
Withdrawals may be subject to a market value adjustment in addition to the
withdrawal charge described above (see "MARKET VALUE ADJUSTMENT."
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<PAGE> 40
APPENDIX B
MARKET VALUE ADJUSTMENT EXAMPLES
The market value adjustment factor is determined by the following formula:
((1+i)/(1+j)) exponent (n/12) where:
i - The initial guaranteed interest rate or renewal guaranteed interest
rate currently being earned on the contract.
j - The guaranteed interest rate available, on the date the request is
processed by the Company, for a guarantee period with the same length
as the period remaining in the initial guarantee period or guarantee
period. If the guarantee period of this length is not available, the
guarantee period with the next highest duration which is maintained by
the Company will be chosen.
n - The number of complete months remaining to the end of the initial
guarantee period or renewal guarantee period.
Market Value Adjustment
Example 1
Payment $100,000
Initial guarantee period 5 years
Initial guaranteed interest
rate 5.00% per annum
Transfer to a different
guarantee period year 3, middle of contract
Contract value at middle of
contract year 3 =$100,000 x 1.05 exponent (2.5)=$112,972.63
Amount transferred to a
different guarantee period =$112,972.63 x market value adjustment
factor
Market value adjustment =((1+i)/(1+j)) exponent (n/12)
factor
i = .05
j = .06
n = 30
=(1.05/1.06) exponent (30/12)
=0.9765817
Amount transferred to a
different guarantee period =$112,972.63 x 0.9765817
=$110,327.00
Example 2
Payment $100,000
Initial guarantee period 5 years
Initial guaranteed interest 5.00% per annum
rate
Transfer to a different
guarantee period year 3, middle of contract
Contract value at middle of =$100,000 x 1.05 exponent (2.5)=$112,972.63
contract year 3
Amount transferred to a
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<PAGE> 41
different guarantee period =$112,972.63 x market value adjustment
factor
Market value adjustment
factor =((1+i)/(1+j)) exponent (n/12)
i = .05
j = .04
n = 30
=(1.05/1.04) exponent (30/12)
=1.0242121
Amount transferred to a
different guarantee period =$112,972.63 x 1.0242121=$115,707.93
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APPENDIX C
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In
many jurisdictions there is no tax at all. For current information, a tax
adviser should be consulted.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA........................................... .50% 2.35%
DISTRICT OF COLUMBIA................................. 2.25% 2.25%
KANSAS .............................................. .00 2.00%
KENTUCKY ............................................ 2.00% 2.00%
MAINE ............................................... .00 2.00%
MICHIGAN ............................................ .00075% .00075%
NEVADA .............................................. .00 3.50%
PUERTO RICO.......................................... 1.00% 1.00%
SOUTH DAKOTA......................................... .00 1.25%
TEXAS................................................ .04% .04%
WEST VIRGINIA........................................ 1.00% 1.00%
WYOMING .00 1.00%
</TABLE>
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FINANCIAL STATEMENTS OF THE COMPANY
[To be filed by amendment]
39
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<PAGE> 45
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $3.45
Printing *
Accounting fees and expenses *
Legal fees and expenses *
Miscellaneous *
</TABLE>
*To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 9 of the Articles of Incorporation of the Company provides as follows:
NINTH: A director of this corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Article XIV of the By-laws of the Company provides as follows:
Each Director or officer, whether or not then in office, shall be
indemnified by the Company against all costs and expenses reasonably incurred by
or imposed upon him or her, including legal fees, in connection with or
resulting from any claim, action, suit or proceeding, whether civil, criminal or
administrative, in which he or she may become involved as a party or otherwise,
by reason of his or her being or having been a Director or officer of the
Company.
(1) Indemnity will not be granted to any Director or officer with
respect to any claim, action, suit or proceeding which shall be brought against
such Director or officer by or in the right of the Company, and
(2) Indemnification for amounts paid and expenses incurred in settling
such action, claim, suit or proceeding, will not be granted, until
it shall be determined by a disinterested majority of the Board of Directors or
by a majority of any disinterested committee or group of persons to whom the
question may be referred by the Board, that said Director or officer did indeed
act in good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonably cause to believe that his or her
conduct was legal, and that the payment of such costs, expenses,
<PAGE> 46
penalties or fines is in the interest of the Company, and not contrary to public
policy or other provisions of law.
The termination of any action, suit or proceeding by judgement, order,
settlement, conviction or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in, or not adverse, to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnification shall be made by the corporation upon determination by a
disinterested majority of the Board of Directors or of a majority of any
disinterested committee or group or persons to whom the question may be referred
to by said Board, that the person did indeed act in good faith and in a manner
he or she reasonably believed to be in, or not adverse, to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonably cause to believe that his or her conduct was legal.
The foregoing right to indemnity shall not be exclusive of any other
rights to which such Director or officer may be entitled as a matter of law.
The foregoing right to indemnity shall also extend to the estate of any
deceased Director or officer with respect to any such claim, action, suit or
proceeding in which such Director or officer or his or her estate may become
involved by reason of his or her having been a Director or officer of the
Company, and subject to the same conditions outlined above.
Section IX, paragraph D of the Promotional Agent Agreement among the Company,
NASL Financial Services, Inc. ("NASL Financial") and Wood Logan Associates, Inc.
(referred to therein as "Promotional Agent") provides as follows:
a. NASL Financial and the Company agree to indemnify and hold harmless
Promotional Agent, its officers, directors and employees against any
and all losses, claims, damages or liabilities to which they may become
subject under the Securities Act of 1933 ("1933 Act"), the 1934 Act or
other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any
omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in any
registration statement for the Contracts filed pursuant to the 1933 Act
or any prospectus included as a part thereof, as from time to time
amended and supplemented, or any advertisement or sales literature
approved in writing by NASL Financial or Security Life pursuant to
Section VI, paragraph B of this Agreement.
<PAGE> 47
b. Promotional Agent agrees to indemnify and hold harmless NASL Financial
and the Company, their officers, directors and employees against any
and all losses, claims, damages or liabilities to which they may become
subject under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any oral or written
misrepresentation by Promotional Agent or its officers, directors,
employees or agents unless such misrepresentation is contained in any
registration statement for the Contracts or Fund shares, any prospectus
included as a part thereof, as from time to time amended and
supplemented, or any advertisement or sales literature approved in
writing by NASL Financial pursuant to Section VI, paragraph B of this
Agreement or, (ii) the failure of Promotional Agent or its officers,
directors, employees or agents to comply with any applicable provisions
of this Agreement.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company currently sells Venture Group Annuity, a flexible premium payment
deferred variable unallocated group annuity, to retirement plans that qualify
for special tax treatment under Section 401(a) of the Internal Revenue Code.
Sales of these securities are not required to be registered under the Securities
Act of 1933 (Section 3(a)(2) of this Act). NASL Financial Services, Inc., a
wholly owned subsidiary of the Company is the principal underwriter of the
contracts and Wood Logan Associates, Inc., an affiliate of the Company, is the
promotional agent. There are no maximum or minimum purchase payments required to
establish a contract. The value of a contract will vary according to the
investment performance, charges and expenses of the subaccounts in which the
<PAGE> 48
contract is invested. As of May 15, 1996, the total assets in the Venture Group
Annuity was $33,657,863.00
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
Exhibit No. Description
- ----------- -----------
1(a) Underwriting Agreement between North American
Security Life Insurance Company (the "Company") and
NASL Financial Services, Inc. (Underwriter)1/
1(b) Promotional Agent Agreement between NASL Financial
Services, Inc. (Underwriter), the Company and Wood
Logan Associates, Inc. (Promotional Agent) 2/
2 Not Applicable
3(i) Article of Incorporation of the Company 3/
3(ii) By-Laws of the Company 4/
4(i) Form of Individual Single Payment Deferred Fixed
Annuity Non-ParticipatingContract - Filed herewith
4(ii) Form of Group Single Payment Deferred Fixed Annuity
Non-Participating Contract - Filed herewith
4(iii) Individual Retirement Annuity Endorsement - Filed
herewith
4(iv) ERISA Tax-Sheltered Annuity Endorsement - Filed
herewith
4(v) Tax-Sheltered Annuity Endorsement - Filed herewith
4(vi) Section 401 Plans Endorsement - Filed herewith
5 Opinion and Consent of James D. Gallagher, Esq. -
[to be filed by amendment]
6 Not Applicable
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Form of broker-dealer agreement beetween the
Company, NASL Financial Serices, Inc.
(underwriter), Wood Logan Associates, Inc.
(Promotional Agent) and broker-dealers 5/
11 Not Applicable
12 Not Applicable
13 Not Applicable
14 Not Applicable
15 Not Applicable
16 Not Applicable
17 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
21 The Company has the following wholly owned
<PAGE> 49
subsidiaries: NASL Financial Services, Inc. and
First North American Life Assurance Company
22 Not Applicable
23 Consent of Coopers & Lybrand L.L.P. - [to be filed
by amendment]
24 (i) Power of Attorney (Principal Financial and
Accounting Officer of the Company) 6/
24(ii) Power of Attorney (Directors of the Company) 7/
25 Not Applicable
26 Not Applicable
27 Not Applicable
28 Not Applicable
1/ Incorporated by reference to Exhibit (A)(3)(a) to Form S-6, file number
2-93435, filed September 24, 1984 on behalf of the NASL Variable Account of the
Company
2/Incorporated by reference to Exhibit 3(ii) to Form N-4, file number 33-28455,
filed February 15, 1991 on behalf of the NASL Variable Account of the Company
3/ Incorporated by reference to Exhibit (A)(6) to Form S-6, file number 2-93435,
filed September 24, 1984 on behalf of the NASL Variable Account of the Company
4/ Incorporated by reference to Exhibit (b)(6)(ii) to to Form N-4, file number
33-9960, filed November 4, 1986 on behalf of the NASL Variable Account of the
Company
5/ Incorporated by reference to Exhibit (b)(3)(iii) to pre-effective amendment
no. 1 to Form N-4, file number 33-9960, filed February 2, 1987 on behalf of the
NASL Variable Account of the Company
6/ Incorporated by reference to Exhibit (b)(14)(b) to Registration Statement on
Form N-4, file number 33-28455, filed April 2, 1993 on behalf of the NASL
Variable Account of the Company
7/ Incorporated by reference to Exhibit (7)(a) to Registration Statement on Form
S-6, file number 33-92466, filed May 18, 1995 on behalf of the NASL Variable
Life Account of the Company
(b) FINANCIAL STATEMENT SCHEDULES
[to be filed by amendment]
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
<PAGE> 50
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has caused this Registration Statement to be signed on its behalf, by
the undersigned, thereunto duly authorized in the City of Boston and
Commonwealth of Massachusetts on this 13th day of June, 1996.
NORTH AMERICAN SECURITY
LIFE INSURANCE COMPANY
(Registrant)
By: /s/ William J. Atherton
------------------------------
William J. Atherton, President
Attest:
/s/ James D. Gallagher
- -----------------------------
James D. Gallagher, Secretary
<PAGE> 52
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities with the
Registrant and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William J. Atherton Director and President June 13, 1996
- ----------------------- (Principal Executive -------------
William J. Atherton Officer) (Date)
* Director June 13, 1996
- ----------------------- -------------
Peter S. Hutchison (Date)
* Director and Chairman June 13, 1996
- ----------------------- of the Board -------------
Brian L. Moore (Date)
* Vice President and June 13, 1996
- ----------------------- Treasurer (Principal -------------
Richard C. Hirtle Financial and Accounting (Date)
Officer)
*By: /s/ William J. Atherton June 13, 1996
----------------------- -------------
William J. Atherton (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
</TABLE>
<PAGE> 53
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4(i) Form of Individual Single Payment Deferred Fixed
Annuity Non-Participating Contract
4(ii) Form of Group Single Payment Deferred Fixed
Annuity Non-Participating Contract
4(iii) Individual Retirement Annuity Endorsement
4(iv) ERISA Tax Sheltered Annuity Endorsement
4(v) Tax Sheltered Annuity Endorsement
4(vi) Section 401 Plans Endorsement
<PAGE> 1
EXHIBIT 4(i)
<PAGE> 2
[GRAPHIC OMITTED]
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: ANNUITY SERVICE OFFICE: HOME OFFICE
116 Huntington Avenue P.O. Box 9230 GMF Dover, Delaware
Boston, MA 02116 Boston, MA 02205-9230
1-800-344-1029
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY.
WE AGREE to pay the benefits of this Contract in accordance with its terms.
THIS CONTRACT is issued in consideration of the Payment.
TEN DAY RIGHT TO REVIEW
THE CONTRACT OWNER MAY CANCEL THE CONTRACT BY RETURNING IT TO OUR ANNUITY
SERVICE OFFICE OR AGENT AT ANY TIME WITHIN 10 DAYS AFTER RECEIPT OF THE
CONTRACT. WITHIN 7 DAYS OF RECEIPT OF THE CONTRACT BY US, WE WILL REFUND THE
PAYMENT MADE TO THE CONTRACT OWNER.
WHEN THE CONTRACT IS ISSUED AS AN INDIVIDUAL RETIREMENT ANNUITY, DURING THE
FIRST 7 DAYS OF THIS 10 DAY PERIOD, WE WILL RETURN THE GREATER OF (I) THE
CONTRACT VALUE OR (II) THE PAYMENT.
SIGNED FOR THE COMPANY at its Executive Office, Boston, Massachusetts,
on the Contract Date.
RICHARD HIRTLE WILLIAM J. ATHERTON
VICE PRESIDENT PRESIDENT
SINGLE PAYMENT DEFERRED FIXED ANNUITY
NON-PARTICIPATING
AMOUNTS PAYABLE UNDER THIS CONTRACT ARE SUBJECT TO A MARKET VALUE ADJUSTMENT
PRIOR TO A DATE OR DATES SPECIFIED IN THIS CONTRACT.
<PAGE> 3
INTRODUCTION
This is a single payment deferred fixed annuity. This Contract provides that
prior to the Maturity Date, the Contract Value for an Owner will accumulate
based on interest rates guaranteed by the Company for the period selected.
Amounts withdrawn prior to the end of the selected period are subject to a
market value adjustment and possible withdrawal charges which could reduce the
withdrawal amount below original payment.
You must allocate the Payment to one Initial Guarantee Period.
On the Maturity Date, if the Annuitant and Owner are still living, the Contract
will provide for annuity payments to the Annuitant based upon the Annuity Option
selected. Fixed annuity dollar amounts are guaranteed by the Company.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Specifications Page Page
<S> <C>
PART 1 - DEFINITIONS 1
PART 2 - GENERAL PROVISIONS 2
PART 3 - OWNERSHIP 3
PART 4 - BENEFITS 4
PART 5 - PAYMENTS 5
PART 6 - INVESTMENT PROVISIONS 5
PART 7 - ANNUITY PROVISIONS 6
PART 8 - TRANSFERS 7
PART 9 - WITHDRAWAL PROVISIONS 7
PART 10 - FEES AND DEDUCTIONS 9
PART 11 - LOAN PROVISION 10
PART 12 - PAYMENT OF CONTRACT BENEFITS 10
</TABLE>
<PAGE> 4
CONTRACT SPECIFICATIONS PAGE
TYPE OF CONTRACT: [QUALIFIED] PLAN TYPE: [403B]
CONTRACT DATE: [01/07/1994] MATURITY DATE: [01/07/2044]
PAYMENT: [$ 10,000.00] CONTRACT NUMBER: [000000001]
GOVERNING LAW: [APPLICABLE STATE] ADMINISTRATION FEE: [$0]
INITIAL GUARANTEED [5.05%] INITIAL GUARANTEE [5 YEARS]
INTEREST RATE: PERIOD:
INITIAL GUARANTEE [01/07/1999]
PERIOD EXPIRES:
THIS PLAN IS INTENDED TO QUALIFY UNDER THE INTERNAL REVENUE CODE FOR TAX-FAVORED
STATUS. LANGUAGE CONTAINED IN THIS CONTRACT REFERRING TO FEDERAL TAX STATUS OR
RULES IS INFORMATIONAL AND INSTRUCTIONAL AND THIS LANGUAGE IS NOT SUBJECT TO
APPROVAL OR DISAPPROVAL BY THE STATE IN WHICH THE CONTRACT IS ISSUED FOR
DELIVERY. PLEASE SEEK THE ADVICE OF YOUR OWN TAX ADVISOR REGARDING YOUR
INDIVIDUAL TAX TREATMENT.
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE ANNUITANT AGE: 35
CO-ANNUITANT: BENEFICIARY: JANE DOE
<PAGE> 5
CONTRACT SPECIFICATIONS PAGE
TYPE OF CONTRACT: [NON-QUALIFIED] PLAN TYPE:
CONTRACT DATE: [01/07/1994] MATURITY DATE: [01/07/2044]
PAYMENT: [$ 10,000.00] CONTRACT NUMBER: [000000001]
GOVERNING LAW: [APPLICABLE STATE] ADMINISTRATION FEE: [$0]
INITIAL GUARANTEED [5.05%] INITIAL GUARANTEE [5 YEARS]
INTEREST RATE: PERIOD:
INITIAL GUARANTEE [01/07/1999]
PERIOD EXPIRES:
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE ANNUITANT AGE: 35
CO-ANNUITANT: BENEFICIARY: JANE DOE
<PAGE> 6
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
WE AND YOU "We", "us" and "our" means North American Security
Life Insurance Company. "You" or "your" means the
Owner of this Contract.
ANNUITANT Any individual person or persons whose life is
used to determine the duration of annuity payments
involving life contingencies. The Annuitant is as
designated on the Contract Specifications Page and
application, unless changed.
ANNUITY OPTION The method selected by you for annuity payments
made by us.
ANNUITY SERVICE OFFICE Any office designated by us for the receipt of
Payments and processing of Contract Owner
requests.
BENEFICIARY The person, persons or entity to whom certain
benefits are payable following the death of an
Owner, or in certain circumstances, an Annuitant.
CONTINGENT BENEFICIARY The person, persons or entity who becomes the
Beneficiary if the Beneficiary is not alive.
CONTRACT ANNIVERSARY The anniversary of the Contract Date.
CONTRACT DATE The date of issue of this Contract as specified on
the Contract Specifications Page.
CONTRACT VALUE The value of the Contract which is the sum of the
Net Payment and accrued interest, less the sum of
any Gross Withdrawal Values and any annual
Administration Fees deducted, adjusted for any
Transfer Market Value Adjustments.
CONTRACT YEAR The period of twelve consecutive months beginning
on the Contract Date or any anniversary
thereafter.
DEBT Any amounts in the Loan Account attributable to
the Contract plus any accrued loan interest. The
loan provision is applicable to certain Qualified
Contracts only.
FIXED ACCOUNT The NASL Fixed Account, which is a Separate
Account of the North American Security Life
Insurance Company.
GENERAL ACCOUNT All the assets of North American Security Life
Insurance Company other than assets in separate
accounts.
GROSS WITHDRAWAL VALUE The portion of the Contract Value specified by you
for a full or partial withdrawal. Such amount is
determined prior to the application of any
withdrawal charge, annual Administration Fee and
Market Value Adjustment.
INITIAL GUARANTEE PERIOD The period of time during which the Initial
Guaranteed Interest Rate is in effect.
INITIAL GUARANTEED INTEREST The compound annual rate used to determine the
RATE interest earned on the Net Payment during the
Initial Guarantee Period.
ISSUE DATE The date on which the Contract becomes effective.
INTERNAL REVENUE CODE The Internal Revenue Code of 1986, as amended from
(IRC) time to time, and any successor statute of similar
purposes.
LOAN ACCOUNT The portion of the General Account that is used
for collateral when a loan is taken.
MARKET VALUE ADJUSTMENT An adjustment to amounts that are withdrawn or
transferred prior to the end of the Initial
Guarantee Period or Renewal Guarantee Period. It
may increase or decrease the amount available for
transfer or withdrawal.
1
<PAGE> 7
MATURITY DATE The date on which annuity benefits commence. It is
the date specified on the Contract Specifications
Page, unless changed.
NET PAYMENT The Payment less the amount of premium tax, if
any, deducted from the Payment.
NON-QUALIFIED CONTRACTS Contracts which are not issued under Qualified
Plans.
OWNER OR CONTRACT OWNER The person, persons or entity entitled to the
ownership rights under this Contract. The Owner is
as designated on the Contract Specifications Page
and application, unless changed.
PAYMENT An amount paid to us by you as consideration for
the benefits provided by this Contract.
QUALIFIED CONTRACTS Contracts issued under Qualified Plans.
QUALIFIED PLANS Retirement plans which receive favorable tax
treatment under section 401, 403, 408 or 457, of
the Internal Revenue Code of 1986, as amended.
RENEWAL AMOUNT The Contract Value as of the end of the Initial
Guarantee Period or at the end of a Renewal
Guarantee Period.
RENEWAL GUARANTEE PERIOD The period of time during which a Renewal
Guaranteed Interest Rate is in effect.
RENEWAL GUARANTEED The compound annual rate used to determine the
INTEREST RATE interest earned on a Renewal Amount during a
Renewal Guarantee Period. In no event shall this
rate be less than 3%.
SEPARATE ACCOUNT A segregated account of North American Security
Life Insurance Company that is not commingled with
our general assets and obligations.
2
<PAGE> 8
PART 2 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ENTIRE CONTRACT The entire contract consists of this Contract, any
Contract endorsements, and a copy of the
application if one is attached to this Contract
when issued. Only our President, Vice-President or
Secretary may agree to change or waive any
provisions of this Contract. The change or waiver
must be in writing.
We will not change or modify this Contract without
your consent except as may be required to make it
conform to any applicable law or regulation or any
ruling issued by a government agency.
The benefits and values available under this
Contract are not less than the mini- mum required
by any statute of the state in which this Contract
is issued. We have filed a detailed statement of
the method used to calculate the benefits and
values with the Department of Insurance in the
state in which this Contract is issued, if
required by law.
BENEFICIARY The Beneficiary is as designated in the Contract
Specifications Page and application, unless
changed. However, if there is a surviving Owner,
that person will be treated as the Beneficiary. If
no such Beneficiary is living, the Beneficiary is
the "Contingent Beneficiary". If no Beneficiary or
Contingent Beneficiary is living, the Beneficiary
is the estate of the deceased Owner.
CHANGE OF MATURITY DATE Prior to the Maturity Date, you may request in
writing a change of the Maturity Date. Any
extension of the Maturity Date will be subject to
our prior approval and any Governing Law
regulations.
ASSIGNMENT You may assign this Contract at any time prior to
the Maturity Date. No assignment will be binding
on us unless it is written in a form acceptable to
us and received at the Annuity Service Office. We
will not be liable for any payments made or
actions we take before the assignment is accepted
by us. An absolute assignment will revoke the
interest of any revocable Beneficiary. We will not
be responsible for the validity of any assignment.
CLAIMS OF CREDITORS To the extent permitted by law, no benefits
payable under this Contract will be subject to the
claims of your, the Beneficiary's or the
Annuitant's creditors.
MISSTATEMENT AND PROOF We may require proof of age, sex or survival of
OF AGE, SEX OR SURVIVAL any person upon whose age, sex or survival any
payments depend. If the age or sex of the
Annuitant has been misstated, the benefits will be
those which the payment would have provided for
the correct age and sex. If we have made
incorrect annuity payments, the amount of any
underpayment will be paid immediately. The amount
of any overpayment will be deducted from future
annuity payments.
NON-PARTICIPATING Your Contract is non-participating and will not
share in our profits or surplus earnings. We will
pay no dividends on your Contract.
REPORTS At least once each year we will send you a report
containing information required by the applicable
state law.
CURRENCY AND PLACE OF All payments made to or by us shall be made in the
PAYMENTS lawful currency of the United States of America at
the Annuity Service Office or elsewhere if we
consent.
NOTICES AND ELECTIONS To be effective, all notices and elections you
make under this Contract must be in writing,
signed by you and received by us at the Annuity
Service Office. Unless otherwise provided in
this Contract, all notices, requests and elections
will be effective when received by us, complete
with all necessary information and your signature,
at the Annuity Service Office.
3
<PAGE> 9
GOVERNING LAW This Contract will be governed by the laws of the
jurisdiction indicated on the Contract
Specifications Page.
SECTION 72(s) The provisions of this Contract shall be
interpreted so as to comply with the requirements
of Section 72(s) of the Internal Revenue Code.
PART 3 OWNERSHIP
- --------------------------------------------------------------------------------
GENERAL Before the Maturity Date, the Owner of this
Contract shall be the person, persons or entity
designated on the Contract Specifications Page and
application or the latest change filed with us. On
the Maturity Date, the Annuitant becomes the Owner
of the Contract. If amounts become payable to the
Beneficiary under the Contract, the Beneficiary
becomes the Owner of the Contract.
CHANGE OF OWNER, Subject to the rights of an irrevocable
ANNUITANT, BENEFICIARY Beneficiary, you may change the Owner, Annuitant,
or Beneficiary by written request in a form
acceptable to us and which is received at the
Annuity Service Office. The Annuitant may not be
changed after the Maturity Date. You need not send
us the Contract unless we request it. Any change
must be approved by us. If approved, any change in
Beneficiary will take effect on the date you
signed the request. If approved, any change in
Owner or Annuitant will take effect on the date we
received the request at the Annuity Service
Office. We will not be liable for any payments or
actions taken before the change is approved.
If any Annuitant is changed and any Owner is not
an individual, the entire interest in the Contract
must be distributed to the Owner within five years
of the change.
PART 4 BENEFITS
- --------------------------------------------------------------------------------
ANNUITY BENEFITS
We will pay a monthly income to the Annuitant, if
living, on the Maturity Date. Annuity benefits
will commence on the Maturity Date and continue
for the period of time provided for under the
Annuity Option selected.
We may pay the higher of Contract Value less the
Debt and any annual Administration Fee or the
amount available upon total withdrawal on the
Maturity Date in one lump sum if the monthly
income is less than $20.
On or before the Maturity Date you must select how
the Contract Value will be used to provide the
monthly income. Unless you indicate otherwise, we
will provide a fixed annuity with guaranteed fixed
annuity payments continuing for 10 years or the
lifetime of the Annuitant, if longer.
The portion of the Contract Value adjusted by the
Transfer Market Value Adjustment used to effect a
fixed annuity will be applied to the appropriate
guaranteed fixed annuity payment table contained
in this Contract. If the table in use by us on the
Maturity Date is more favorable to you, we will
use that table. We guarantee the dollar amount of
fixed annuity payments.
DEATH BENEFIT BEFORE A Death Benefit will be determined as of the date
MATURITY DATE on which written notice and proof of death and all
required claim forms are received at the Company's
Annuity Service Office.
4
<PAGE> 10
DEATH OF ANNUITANT: On the death of the last
surviving Annuitant, the Owner becomes the new
Annuitant, if the Owner is an individual. If any
Owner is not an individual the death of any
Annuitant is treated as the death of an Owner and
the Death Benefit will be determined by
substituting the Annuitant for the Owner as
described below.
DEATH OF OWNER: We will pay a Death Benefit equal
to the Contract Value to the Beneficiary if any
Owner dies prior to the Maturity Date. If there is
any Debt, the Death Benefit equals the amount
described above less the Debt under the Contract.
The Death Benefit may be taken in one sum
immediately, in which case the Contract will
terminate. If the Death Benefit is not taken in
one sum immediately, the Contract will continue
subject to the following provisions:
(a) The Beneficiary becomes the Contract Owner.
(b) No additional Payments may be applied to the
Contract.
(c) If the Beneficiary is not the deceased Owner's
spouse, the entire interest in the Contract
must be distributed under one of the following
options:
(i) The entire interest in the Contract must
be distributed over the life of the
Beneficiary, or over a period not
extending beyond the life expectancy of
the Beneficiary, with distributions
beginning within one year of the Owner's
death; or
(ii) the entire interest in the Contract must
be distributed within 5 years of the
Owner's Death.
If the Beneficiary dies before the
distributions required by (i) or (ii) are
complete, the entire remaining Contract Value
must be distributed in a lump sum immediately.
(d) If the Beneficiary is the deceased Owner's
spouse, the Contract will continue with the
surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary
(and, if no Beneficiary is so named, the
surviving spouse's estate will be the
Beneficiary). Upon the death of the surviving
spouse, the Death Benefit will equal the
Contract Value at the time of the surviving
spouse's death, and the entire interest in the
Contract must be distributed to the new
Beneficiary in accordance with the provisions
of (c) (i) or (c) (ii) above.
If there is more than one Beneficiary, the
foregoing provisions will independently apply to
each Beneficiary.
DEATH BENEFIT ON OR If annuity payments have been selected based on an
AFTER MATURITY DATE Annuity Option providing for payments for a
guaranteed period, and the Annuitant dies on or
after the Maturity Date, we will make the
remaining guaranteed payments to the Beneficiary.
Any remaining payments will be made as rapidly as
under the method of distribution being used as of
the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid
guaranteed payments to a single sum (on the basis
of the interest rate used in determining the
payments) and pay that single sum to the estate of
the last to die of the Annuitant and the
Beneficiary.
PROOF OF DEATH Proof of death is required upon the death of the
Annuitant or the Owner. Proof of death is one of
the following received at the Annuity Service
Office:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death.
5
<PAGE> 11
(c) Any other proof satisfactory to us.
PART 5 PAYMENTS
- --------------------------------------------------------------------------------
GENERAL
The Payment under this Contract is payable at the
Annuity Service Office or such other place as we
may designate.
The minimum Payment will be $5,000 and must be
paid at the time of application. The maximum
Payment without prior approval will be $500,000.
Payments may not be made subsequent to issue.
Following the second Contract Anniversary and
prior to the Maturity Date, if both:
(a) the Payment made, less any partial
withdrawals, is less than $2,000; and
(b) the higher of the Contract Value or the amount
available upon total withdrawal is less than
$2,000;
We may cancel the Contract and pay you the higher
of Contract Value less the Debt and any annual
Administration Fee or the amount available upon
total withdrawal.
ALLOCATION OF NET PAYMENT When we receive the Payment, the Net Payment will
be allocated to the Initial Guarantee Period as
shown on the Contract Specifications Page.
PART 6 INVESTMENT PROVISIONS
- --------------------------------------------------------------------------------
GUARANTEE PERIODS You may allocate the Net Payment into any one of
the Initial Guaranteed Periods offered under this
Contract.
The Initial Guarantee Period and Renewal Guarantee
Period are measured from the date either a Net
Payment or Renewal Amount is allocated to the
guarantee period. Amounts cannot be allocated to a
guarantee period that would extend beyond the
Maturity Date.
During the Initial Guarantee Period, amounts will
earn interest, compounded annually, at the Initial
Guaranteed Interest Rate.
RENEWALS
We will automatically renew the Renewal Amount
into the same guarantee period that it is renewing
from, unless you specify otherwise in writing. If
a particular Renewal Guarantee Period would extend
beyond the Maturity Date, the Renewal Amount may
not be renewed in that Renewal Guarantee Period.
The Renewal Amount will be applied to the longest
Renewal Guarantee Period that does not extend
beyond the Maturity Date.
During the Renewal Guarantee Period, amounts will
earn interest, compounded annually, at the Renewal
Guaranteed Interest Rate.
6
<PAGE> 12
MARKET VALUE ADJUSTMENT Any amounts withdrawn, loaned or transferred from
the Contract at any other date other than the end
of either the Initial Guarantee Period or a
Renewal Guarantee Period will be adjusted by the
Market Value Adjustment Factor described below.
The Market Value Adjustment Factor is determined
by the following formula:
((1+i)/(1+j))exponent (n/12)
Where i, j and n are defined as follows:
i - The Initial Guaranteed Interest Rate or
Renewal Guaranteed Interest Rate currently
being earned on this Contract.
j - The guaranteed interest rate available, on the
date the request is processed, for a guarantee
period with the same length as the period
remaining in the Initial Guarantee Period or
Renewal Guarantee Period. If a guarantee
period of this length is not available, the
guarantee period with the next highest
duration which is maintained by the Company
will be chosen.
n - The number of complete months remaining to the
end of the Initial Guarantee Period or Renewal
Guarantee Period.
The amount of Market Value Adjustment, if any,
upon transfer or loan is specified in Part 8,
Transfer Provisions, and upon withdrawal as
specified in Part 9, Withdrawal Provisions.
PART 7 ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENTS The amount of each fixed annuity payment is
determined by applying the portion of the Contract
Value adjusted by the Transfer Market Value
Adjustment used to effect such payments measured
as of a date not more than 10 business days prior
to the Maturity Date (minus any applicable premium
taxes) to the appropriate table contained in this
Contract. If the table in use by us on the
Maturity Date is more favorable to you, we will
use that table.
We guarantee the dollar amount of fixed annuity
payments.
PART 8 TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS
Before the Maturity Date you may transfer the
entire Contract Value to a different guarantee
period then being offered by the Company. There is
no transaction charge for transfers, however,
Contract Value transferred prior to the end of a
guaranteed period will be subject to a Transfer
Market Value Adjustment.
The maximum number of transfers you may make per
Contract Year is one.
You must transfer the entire Contract Value each
time you make a transfer. In addition, the entire
amount must be transferred into one guarantee
period.
TRANSFER MARKET VALUE Amounts transferred, including transfers to the
ADJUSTMENT Loan Account pursuant to a loan request, will be
subject to a Market Value Adjustment. The amount
requested to be transferred will be multiplied by
the Market Value Adjustment Factor to determine
the actual transferred amount.
7
<PAGE> 13
PART 9 WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
PAYMENT OF WITHDRAWALS You may withdraw part or all of the Contract
Value, less any Debt, at any time before the
earlier of your death or the Maturity Date, by
sending us a written request. We will pay all
withdrawals within seven days of receipt at the
Annuity Service Office subject to postponement in
certain circumstances, as specified below.
SUSPENSION OF PAYMENTS We may defer the payment resulting from a request
for total or partial withdrawal for not more than
six months, or for the period permitted by
applicable state law if shorter, from the day we
receive written request and the Contract, if
required. If such payments are deferred 30 days or
more, the amount deferred will earn interest at a
rate not less than 3% per year or at a rate
determined by applicable state law.
TOTAL WITHDRAWAL Upon receipt of your request to withdraw all of
your Contract Value, we will terminate the
Contract and pay you the following amount:
C + [ ( A - B - C) x D ] , where:
A = the Gross Withdrawal Value reduced by any
applicable annual Administration Fee;
B = the Withdrawal Charge;
C = the Free Withdrawal Amount;
D = the Market Value Adjustment Factor. The above
amount will be adjusted to reflect any amount
in the Loan Account and any Debt in accordance
with the Qualified Plan Endorsement, if
attached.
PARTIAL WITHDRAWAL Partial withdrawals will use the formula specified
in Part 9 Total Withdrawal above and the Gross
Withdrawal Value to determine the amount payable
to you. Partial withdrawals will be subject to
Market Value Adjustments and possible withdrawal
charges. We will deduct the Gross Withdrawal Value
from the Contract Value. The Gross Withdrawal
Value may not exceed the Contract Value.
WITHDRAWAL CHARGE
If a withdrawal is made from the Contract before
the Maturity Date, a Withdrawal Charge (contingent
deferred sales charge) may be assessed during the
first 7 Contract Years. No Withdrawal Charge will
be applied after the 7th Contract Year. The amount
of the Withdrawal Charge and when it is assessed
are discussed below:
1. The Free Withdrawal Amount is defined the
excess of (a) over (b), where:
(a) equals 10% of Payment,
(b) equals 100% of all prior partial withdrawals,
in that Contract Year.
The Free Withdrawal Amount may be withdrawn free
of a Withdrawal Charge and is not subject to a
Market Value Adjustment.
8
<PAGE> 14
2. If a withdrawal is made at the end of the
Initial Guarantee Period, no withdrawal charge
will be applied provided such withdrawal occurs
on or after the end of the third Contract Year.
If a withdrawal is made at the end of any other
guarantee period, no withdrawal charge will be
applied provided such withdrawal occurs on or
after the end of the fifth Contract Year. A
request for withdrawal at the end of a
guarantee period must be received in writing
during the 30 day period preceding the end of
that guarantee period.
3. The Withdrawal Charge is determined by
multiplying the Gross Withdrawal Value less any
annual Administration Fee and Free Withdrawal
Amount by the applicable Withdrawal Charge
Percentage obtained from the table below.
<TABLE>
<CAPTION>
Number of Complete Contract Withdrawal Charge
Years Percentage
----- ----------
<S> <C>
0 7%
1 6
2 5
3 4
4 3
5 2
6 1
7+ 0
</TABLE>
WITHDRAWAL MARKET VALUE Amounts withdrawn will be subject to a Market
ADJUSTMENT Value Adjustment. The Market Value Adjustment
will be determined in accordance with the formula
specified in Part 9 Total Withdrawal above.
There will be no Market Value Adjustment on
withdrawals in the following situations: (a) death
of the Owner, (b) amounts withdrawn within one
month prior to the end of the guarantee period,
and (c) the Free Withdrawal Amount.
FREQUENCY AND AMOUNT OF You may make as many partial withdrawals as you
PARTIAL WITHDRAWAL wish. Any withdrawal from the Contract must be at
least $300 or the entire balance of the Contract
Value if less. If a partial withdrawal would
reduce the Contract Value to less than $300, then
we will treat the partial withdrawal request as a
total withdrawal of the Contract Value.
PART 10 FEES AND DEDUCTIONS
- --------------------------------------------------------------------------------
ADMINISTRATION FEE To compensate us for assuming certain
administrative expenses, we reserve the right to
charge an annual Administration Fee. This
Administration Fee will be the amount listed on
the Contract Specifications Page. Prior to the
Maturity Date, the Administration Fee is deducted
on the last day of each Contract Year. If the
Contract is surrendered for its Contract Value on
any date other than the last day of any Contract
Year, we will deduct the full amount of the
Administration Fee from the amount paid.
9
<PAGE> 15
TAXES We reserve the right to charge certain taxes
against your Payment (either at the time of
payment or liquidation), Contract Value, payment
of Death Benefit or annuity payments, as
appropriate. Such taxes may include any premium
taxes or other taxes levied by any government
entity which we, in our sole discretion, determine
to have resulted from the establishment or
maintenance of the Separate Account, or from the
receipt by us of Payments, or from the issuance of
this Contract, or from the commencement or
continuance of annuity payments under this
Contract.
PART 11 LOAN PROVISION (CERTAIN QUALIFIED CONTRACTS ONLY)
- --------------------------------------------------------------------------------
GENERAL This loan provision applies only to certain
Qualified Contracts. All provisions and terms of a
loan are included in the Qualified Plan
Endorsement, if attached.
PART 12 PAYMENT OF CONTRACT BENEFITS
- --------------------------------------------------------------------------------
GENERAL Benefits payable under this Contract may be
applied in accordance with one or more of the
Annuity Options described below, subject to any
restrictions of Internal Revenue Code section
72(s).
ALTERNATE ANNUITY Instead of settlement in accordance with the
OPTIONS Annuity Options described below, you may choose an
alternate form of settlement acceptable to us.
DESCRIPTION OF ANNUITY Option 1: Life Annuity
OPTIONS
(a) Life Non-Refund. We will make payments during
the lifetime of the Annuitant. No payments are
due after the death of the Annuitant.
(b) Life 10-Year Certain. We will make payments
for 10 years and after that during the
lifetime of the Annuitant. No payments are due
after the death of the Annuitant or, if later,
the end of the 10-year period certain.
Option 2: Joint and Survivor Life Annuity
The second Annuitant named shall be referred to as
the Co-Annuitant.
(a) Joint and Survivor Non-Refund. We will make
payments during the joint lifetime of the
Annuitant and Co-Annuitant. Payments will then
continue during the remaining lifetime of the
survivor. No payments are due after the death
of the last survivor of the Annuitant and
Co-Annuitant.
(b) Joint and Survivor with 10-Year Certain. We
will make payments for 10 years and after that
during the joint lifetime of the Annuitant and
Co- Annuitant. Payments will then continue
during the remaining lifetime of the survivor.
No payments are due after the death of the
survivor of the Annuitant and Co-Annuitant or,
if later, the end of the 10-year period
certain.
10
<PAGE> 16
ANNUITY PAYMENT RATES The annuity payment rates on the attached tables
show, for each $1,000 applied, the dollar amount
of the monthly fixed annuity payment. These rates
are based on the 1983 Table A projected at Scale G
with interest at the guaranteed rate of 3% per
annum and assume births in year 1942. The amount
of each annuity payment will depend upon the sex
and adjusted age of the Annuitant, the
Co-Annuitant, if any, or other payee. The adjusted
age is determined from the actual age nearest
birthday at the time the first monthly annuity
payment is due, as follows:
<TABLE>
<CAPTION>
Calendar Adjustment Calendar Adjustment
Year of Birth to Actual Age Year of Birth to Actual Age
<S> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1986 -6
1939-1945 0 1987+ -7
</TABLE>
The dollar amount of annuity payment for any age
or combination of ages not shown, for any other
form of Annuity Option agreed to by us, or for
payments made on a less frequent basis (quarterly,
semiannual or annual) will be quoted on request.
11
<PAGE> 17
AMOUNT OF MONTHLY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<TABLE>
<CAPTION>
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
- ----------------------------------- ------------------------------------
Adjusted Age Adjusted Age
of Annuitant Male Female of Annuitant Male Female
- ----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
55 4.23 3.83 55 4.19 3.82
60 4.64 4.15 60 4.57 4.12
65 5.20 4.57 65 5.05 4.51
70 5.94 5.13 70 5.65 5.02
75 6.91 5.91 75 6.35 5.67
80 8.21 6.98 80 7.13 6.45
85 9.94 8.47 85 7.90 7.29
</TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
Option 2(A): Non-Refund
<TABLE>
<CAPTION>
Age of Co-Annuitant
----------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.61
70 3.88 4.19 4.53 4.88 5.20
75 4.23 4.64 5.10 5.57 6.00
80 4.70 5.26 5.88 6.51 7.06
85 5.34 6.09 6.94 7.76 8.43
</TABLE>
Option 2(B): 10 Year Certain
<TABLE>
<CAPTION>
Age of Co-Annuitant
----------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.59
70 3.88 4.18 4.52 4.86 5.16
75 4.23 4.63 5.07 5.50 5.86
80 4.68 5.21 5.78 6.30 6.69
85 5.27 5.95 6.62 7.18 7.56
----------------------------------------------------------------------------------
</TABLE>
Monthly installments for ages not shown will be furnished on request.
12
<PAGE> 18
This page left intentionally blank.
13
<PAGE> 19
- --------------------------------------------------------------------------------
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 4(ii)
<PAGE> 2
[NORTH AMERICAN CONTINENT GRAPHIC]
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: ANNUITY SERVICE OFFICE: HOME OFFICE
116 Huntington Avenue P.O. Box 9230 GMF Dover, Delaware
Boston, MA 02116 Boston, MA 02205-9230
1-800-344-1029
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY.
North American Security Life Insurance Company will pay an annuity commencing on
the Maturity Date to the Annuitant, if then living, in accordance with the
Benefits and the Payment of Contract Benefits provisions. If the Owner dies
while the Contract is in effect and the Owner's Certificate is in force and
before the Maturity Date, the Company will pay a Death Benefit to the
Beneficiary upon receipt of all required claim forms and proof of death of the
Owner at the Annuity Service Office.
THIS CONTRACT is issued in consideration of the Contract Application and the
Payment. Provisions and endorsements printed or written by the Company on the
following pages form part of the Contract.
SIGNED FOR THE COMPANY at its Executive Office, Boston, Massachusetts,
on the Contract Date.
Richard Hirtle William J. Atherton
VICE PRESIDENT PRESIDENT
DEFERRED FIXED ANNUITY NON-PARTICIPATING
AMOUNTS PAYABLE UNDER THIS CONTRACT ARE SUBJECT TO A MARKET VALUE ADJUSTMENT
PRIOR TO A DATE OR DATES SPECIFIED IN THIS CONTRACT.
<PAGE> 3
INTRODUCTION
This is a deferred fixed group annuity contract. This Contract provides that
prior to the Maturity Date, the Contract Value for an Owner will accumulate
based on interest rates guaranteed by the Company for the period selected.
Amounts withdrawn prior to the end of the selected period are subject to a
market value adjustment and possible withdrawal charges which could reduce the
withdrawal amount below original payment.
The Owner must allocate the Payment to one Initial Guarantee Period.
On the Maturity Date, if the Annuitant and Owner are still living, the Contract
will provide for annuity payments to the Annuitant based upon the Annuity Option
selected. Fixed annuity dollar amounts are guaranteed by the Company.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Contract Specifications Page Page
PART 1 - DEFINITIONS 1
PART 2 - GENERAL PROVISIONS 3
PART 3 - OWNERSHIP 4
PART 4 - BENEFITS 5
PART 5 - PAYMENTS 6
PART 6 - INVESTMENT PROVISIONS 7
PART 7 - ANNUITY PROVISIONS 8
PART 8 - TRANSFERS 8
PART 9 - WITHDRAWAL PROVISIONS 8
PART 10 - FEES AND DEDUCTIONS 10
PART 11 - LOAN PROVISION 10
PART 12 - PAYMENT OF CONTRACT BENEFITS 10
<PAGE> 4
CONTRACT SPECIFICATIONS PAGE
GROUP HOLDER: [ABC WIDGET, INC.]
POLICY NUMBER: [AB123456]
ISSUE DATE: [01/07/1994]
GOVERNING LAW: [APPLICABLE STATE]
ADMINISTRATION FEE: [$0]
FREE WITHDRAWAL [10.00%]
PERCENTAGE:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE WITHDRAWAL CHARGE
CERTIFICATE YEARS PERCENTAGE
<S> <C>
[0] [7]%
[1] [6]%
[2] [5]%
[3] [4]%
[4] [3]%
[5] [2]%
[6] [1]%
[7+] [0]%
</TABLE>
QUALIFIED CONTRACT PROVISIONS ENDORSEMENT ATTACHED. THE PROVISIONS IN THIS
ENDORSEMENT SHALL APPLY WITH RESPECT TO THE INTEREST OF AN OWNER AS FOLLOWS:
<TABLE>
<CAPTION>
TYPE OF CONTRACT APPLICABLE SECTION
(AS INDICATED ON OWNERS CERTIFICATE) OF ENDORSEMENT
- ------------------------------------ --------------
<S> <C>
(A) PROFIT SHARING PLAN SECTION 401 PLANS
(B) MONEY PURCHASE PENSION PLAN SECTION 401 PLANS
(C) KEOGH (HR-10) SECTION 401 PLANS
(D) PENSION PLAN SECTION 401 PLANS
(E) 401(K) SECTION 401 PLANS
(F) 403(B) ERISA TAX SHELTERED ANNUITY ERISA TAX SHELTERED ANNUITY
(G) 403 (B) TAX SHELTERED ANNUITY TAX SHELTERED ANNUITY
(H) IRA, SEP-IRA INDIVIDUAL RETIREMENT ANNUITY
(I) TEXAS OPTIONAL RETIREMENT PROGRAM TEXAS OPTIONAL RETIREMENT PROGRAM AND TAX
SHELTERED ANNUITY
</TABLE>
<PAGE> 5
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
WE, US, OUR "We", "us" and "our" means North American Security
Life Insurance Company.
ANNUITANT . Any individual person or persons whose life is
used to determine the duration of annuity payments
involving life contingencies. The Annuitant is as
designated on the Certificate Specifications Page
and Application, unless changed.
ANNUITY OPTION The method selected by the Owner for annuity
payments made by us.
ANNUITY SERVICE OFFICE Any office designated by us for the receipt of
Payments and processing of Group Holder and Owner
requests.
APPLICATION The document signed by the Owner that serves as
his or her application for participation under
this Contract, a copy of which is attached to the
Certificate.
BENEFICIARY The person, persons or entity to whom certain
benefits are payable following the death of an
Owner, or in certain circumstances, an Annuitant.
CERTIFICATE The document for each Owner which summarizes the
rights and benefits of the Owner under the
Contract.
CERTIFICATE ANNIVERSARY The anniversary of the Certificate Date.
CERTIFICATE DATE The date of issue of a Certificate under this
Contract as specified on the Certificate
Specifications Page.
CERTIFICATE YEAR The period of twelve consecutive months beginning
on the Certificate Date or any anniversary
thereafter.
CONTINGENT BENEFICIARY The person, persons or entity who becomes the
Beneficiary if the Beneficiary is not alive.
CONTRACT APPLICATION The document signed by the Group Holder that
evidences the Group Holder's application for this
Contract.
CONTRACT DATE The date of issue of this Contract as designated
on the Contract Specifications Page.
CONTRACT VALUE The value of an Owner's Certificate which is the
sum of the Net Payment and accrued interest, less
the sum of any Gross Withdrawal Values and any
annual Administration Fees deducted, adjusted for
any Transfer Market Value Adjustments,
attributable to that Owner.
DEBT Any amounts in the Loan Account attributable to an
Owner plus any accrued loan interest on that
amount. The loan provision is applicable to
certain Qualified Contracts only.
FIXED ACCOUNT The NASL Fixed Account, which is a Separate
Account of the North American Security Life
Insurance Company.
GENERAL ACCOUNT All the assets of North American Security Life
Insurance Company other than assets in separate
accounts.
GROSS WITHDRAWAL VALUE The portion of the Contract Value specified by an
Owner for a full or partial withdrawal. Such
amount is determined prior to the application of
any withdrawal charge, annual Administration Fee
and Market Value Adjustment.
GROUP HOLDER The person, persons or entity entitled to the
ownership rights under this Contract. The Group
Holder is as designated on the Contract
Specifications Page and the Contract Application.
INITIAL GUARANTEE PERIOD The period of time during which the Initial
Guaranteed Interest Rate is in effect.
1
<PAGE> 6
INITIAL GUARANTEED INTEREST The compound annual rate used to determine the
RATE interest earned on the Net Payment during the
Initial Guarantee Period.
INTERNAL REVENUE CODE The Internal Revenue Code of 1986, as amended from
(IRC) time to time, and any successor statute of
similar purposes.
LOAN ACCOUNT The portion of the General Account that is used
for collateral when a loan is taken.
MARKET VALUE ADJUSTMENT An adjustment to amounts that are withdrawn or
transferred prior to the end of the Initial
Guarantee Period or Renewal Guarantee Period. It
may increase or decrease the amount available for
transfer, loan or withdrawal.
MATURITY DATE The date on which annuity benefits commence. It is
the date specified on the Certificate
Specifications Page, unless changed.
NET PAYMENT The Payment less the amount of premium tax, if
any, deducted from the Payment.
NON-QUALIFIED CONTRACTS Contracts which are not issued under Qualified
Plans.
OWNER The person, persons or entity named in each
Certificate. The Owner is as designated on the
Certificate Specifications Page and Application,
unless changed.
PAYMENT An amount paid to us by or on behalf of an Owner
as consideration for the benefits provided by this
Contract.
QUALIFIED CONTRACTS Contracts issued under Qualified Plans.
QUALIFIED PLANS Retirement plans which receive favorable tax
treatment under section 401, 403, 408 or 457, of
the Internal Revenue Code of 1986, as amended.
RENEWAL AMOUNT The Contract Value as of the end of the Initial
Guarantee Period or at the end of a Renewal
Guarantee Period.
RENEWAL GUARANTEE PERIOD The period of time during which a Renewal
Guaranteed Interest Rate is in effect.
RENEWAL GUARANTEED The compound annual rate used to determine the
INTEREST RATE interest earned on a Renewal Amount during a
Renewal Guarantee Period. In no event shall this
rate be less than 3%.
SEPARATE ACCOUNT
A segregated account of North American Security
Life Insurance Company that is not commingled with
our general assets and obligations.
2
<PAGE> 7
PART 2 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ENTIRE CONTRACT This Contract is issued in consideration of the
Contract Application and receipt of Payment. This
Contract, Contract Endorsements, if any, the
Contract Application, a copy of which is attached,
and the Application of each Owner, if one is
attached to the Certificate, constitute the entire
Contract. Only the President, a Vice-President or
the Secretary of the Company has authority to
agree on our behalf to any alteration of the
Contract or any Certificate, or to any waiver of
our rights or requirements. The change or waiver
must be in writing.
The benefits and values available under this
Contract are not less than the mini- mum required
by any statute of the state in which this Contract
is issued. We have filed a detailed statement of
the method used to calculate the benefits and
values with the Department of Insurance in the
state in which this Contract is issued, if
required by law.
MODIFICATION We will not change or modify this Contract or any
Certificate without the consent of the Group
Holder or any Owner, as applicable, except as may
be required to make it conform to any applicable
law or regulation or any ruling issued by a
government agency.
In addition, upon 60 days prior written notice to
the Group holder, the Contract may be modified by
us to change the Withdrawal Charges, annual
Administration Fees, Free Withdrawal Percentage,
the tables used to determine the amount of the
first monthly annuity payment and the formula used
to calculate the Market Value Adjustment, provided
that such modification shall apply only to the
Owner's Certificate established after the
effective date of any such modification.
TEN DAY RIGHT TO REVIEW If not satisfied with the Certificate, an Owner
may, within 10 days after receipt of his or her
Certificate, return it by delivering or mailing it
to the Annuity Service Office or our agent, and it
shall be deemed void from the beginning. Within 7
days of receipt of the Certificate by us, we will
pay the Owner's Payment to the Owner. When the
Certificate is issued as an individual retirement
annuity, during the first 7 days of this 10 day
period, we will return the greater of (i) the
Contract Value or (ii) the Payment.
BENEFICIARY The Beneficiary is as designated in the
Certificate Specifications Page and Application,
unless changed. However, if there is a surviving
Owner, that person will be treated as the
Beneficiary. If no such Beneficiary is living, the
Beneficiary is the "Contingent Beneficiary". If no
Beneficiary or Contingent Beneficiary is living,
the Beneficiary is the estate of the deceased
Owner.
CHANGE OF MATURITY DATE Prior to the Maturity Date, an Owner may request
in writing a change of the Maturity Date. Any
extension of the Maturity Date will be subject to
our prior approval and any Governing Law
regulations.
ASSIGNMENT The Group Holder may assign his or her interest in
this Contract at any time. An Owner may assign
this Contract at any time prior to the Maturity
Date. No assignment will be binding on us unless
it is written in a form acceptable to us and
received at the Annuity Service Office. We will
not be liable for any payments made or actions we
take before the assignment is accepted by us. An
absolute assignment by an Owner will revoke the
interest of any revocable Beneficiary. We will not
be responsible for the validity of any assignment.
3
<PAGE> 8
DISCONTINUANCE OF NEW By giving 30 days prior written notice to the
OWNERS Group Holder, we may limit or discontinue the
acceptance of new Applications and the issuance of
new Certificates under this Contract. Such
limitation or discontinuance shall have no effect
on rights or benefits with respect to any Owner's
Certificate established prior to the effective
date of such limitation of discontinuance.
CLAIMS OF CREDITORS To the extent permitted by law, no benefits
payable under this Contract will be subject to the
claims of the Group Holder's, an Owner's, the
Beneficiary's or the Annuitant's creditors.
MISSTATEMENT AND PROOF We may require proof of age, sex or survival of
OF AGE, SEX OR SURVIVAL any person upon whose age, sex or survival any
payments depend. If the age or sex of the
Annuitant has been misstated, the benefits will be
those which the payment would have provided for
the correct age and sex. If we have made incorrect
annuity payments, the amount of any underpayment
will be paid immediately. The amount of any
overpayment will be deducted from future annuity
payments.
NON-PARTICIPATING The Contract is non-participating and will not
share in our profits or surplus earnings. We will
pay no dividends on the Contract.
REPORTS At least once each year we will send the Group
Holder and each Owner a report containing
information required by the applicable state law.
CURRENCY AND PLACE OF All payments made to or by us shall be made in the
PAYMENTS lawful currency of the United States of America at
the Annuity Service Office or elsewhere if we
consent.
NOTICES AND ELECTIONS To be effective, all notices and elections the
Group Holder or an Owner make under this Contract
must be in writing, signed by them and received by
us at the Annuity Service Office. Unless otherwise
provided in this Contract, all notices, requests
and elections will be effective when received by
us, complete with all necessary information and
the signature of the Group Holder and/or the
Owner, as appropriate, at the Annuity Service
Office.
GOVERNING LAW This Contract and all Certificates issued in
connection with it will be governed by the laws of
the jurisdiction indicated on the Contract
Specifications Page.
SECTION 72(s)
The provisions of this Contract shall be
interpreted so as to comply with the requirements
of Section 72(s) of the Internal Revenue Code.
PART 3 OWNERSHIP
- --------------------------------------------------------------------------------
EXERCISE OF CONTRACT The Contract shall belong to the Group Holder.
RIGHTS All Contract rights and privileges not expressly
reserved by the Group Holder, may be exercised by
the Owner as to his or her interest. Such rights
and privileges can be exercised without the
consent of the Beneficiary (subject to the rights
of an irrevocably designated beneficiary) or any
other person.
CHANGE OF OWNER, Subject to the rights of an irrevocable
ANNUITANT, BENEFICIARY Beneficiary, each Owner may change the Owner,
Annuitant, or Beneficiary by written request in a
form acceptable to us and which is received at the
Annuity Service Office. The Annuitant may not be
changed after the Maturity Date. The Owner's
Certificate need not be sent to us unless we
request it. Any change must be approved by us. If
approved, any change in Beneficiary will take
effect on the date the request is signed. If
approved, any change in Owner or Annuitant will
take effect on the date we received the request at
the Annuity Service Office. We will not be liable
for any payments or actions taken before the
change is approved.
4
<PAGE> 9
If any Annuitant is changed and any Owner is not
an individual, the entire interest in the Contract
must be distributed to the Owner within five years
of the change.
PART 4 BENEFITS
- --------------------------------------------------------------------------------
ANNUITY BENEFITS
We will pay a monthly income to the Annuitant, if
living, on the Maturity Date. Annuity benefits
will commence on the Maturity Date and continue
for the period of time provided for under the
Annuity Option selected.
We may pay the higher of Contract Value for an
Owner less the Debt and any annual Administration
Fee or the amount available upon total withdrawal
on the Maturity Date in one lump sum if the
monthly income is less than $20.
On or before the Maturity Date an Owner must
select how the Contract Value will be used to
provide the monthly income. Unless indicated
otherwise, we will provide a fixed annuity with
guaranteed fixed annuity payments continuing for
10 years or the lifetime of the Annuitant, if
longer.
The portion of the Contract Value adjusted by the
Transfer Market Value Adjustment used to effect a
fixed annuity will be applied to the appropriate
guaranteed fixed annuity payment table contained
in this Contract. If the table in use by us on the
Maturity Date is more favorable to an Owner, we
will use that table. We guarantee the dollar
amount of fixed annuity payments.
DEATH BENEFIT BEFORE A Death Benefit will be determined as of the date
MATURITY DATE on which written notice and proof of death and all
required claim forms are received at the Company's
Annuity Service Office.
DEATH OF ANNUITANT: On the death of the last
surviving Annuitant, the Owner becomes the new
Annuitant, if the Owner is an individual. If any
Owner is not an individual the death of any
Annuitant is treated as the death of an Owner and
the Death Benefit will be determined by
substituting the Annuitant for the Owner as
described below.
DEATH OF OWNER: We will pay the Death Benefit
equal to the Contract Value to the Beneficiary if
any Owner dies prior to the Maturity Date. If
there is any Debt, the Death Benefit equals the
amount described above less the Debt under the
Certificate. The Death Benefit may be taken in one
sum immediately, in which case the Certificate
will terminate. If the Death Benefit is not taken
in one sum immediately, the Certificate will
continue subject to the following provisions:
(a) The Beneficiary becomes the Owner.
(b) No additional Payments may be applied to the
Certificate by or on behalf of the Owner.
(c) If the Beneficiary is not the deceased Owner's
spouse, the entire interest in the Contract
must be distributed under one of the following
options:
(i) The entire interest in the Contract must
be distributed over the life of the
Beneficiary, or over a period not
extending beyond the life expectancy of
the Beneficiary, with distributions
beginning within one year of the Owner's
death; or
(ii) the entire interest in the Contract must
be distributed within 5 years of the
Owner's Death.
5
<PAGE> 10
If the Beneficiary dies before the
distributions required by (i) or (ii) are
complete, the entire remaining Contract
Value must be distributed in a lump sum
immediately.
(d) If the Beneficiary is the deceased Owner's
spouse, the Certificate will continue with
the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary
(and, if no Beneficiary is so named, the
surviving spouse's estate will be the
Beneficiary). Upon the death of the surviving
spouse, the Death Benefit will equal the
Contract Value at the time of the surviving
spouse's death, and the entire interest in
the Certificate must be distributed to the
new Beneficiary in accordance with the
provisions of (c) (i) or (c) (ii) above.
If there is more than one Beneficiary, the
foregoing provisions will independently apply to
each Beneficiary.
DEATH BENEFIT ON OR If annuity payments have been selected based on an
AFTER MATURITY DATE Annuity Option providing for payments for a
guaranteed period, and the Annuitant dies on or
after the Maturity Date, we will make the
remaining guaranteed payments to the Beneficiary.
Any remaining payments will be made as rapidly as
under the method of distribution being used as of
the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid
guaranteed payments to a single sum (on the basis
of the interest rate used in determining the
payments) and pay that single sum to the estate of
the last to die of the Annuitant and the
Beneficiary.
PROOF OF DEATH Proof of death is required upon the death of the
Annuitant or the Owner. Proof of death is one of
the following received at the Annuity Service
Office:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death.
(c) Any other proof satisfactory to us.
PART 5 PAYMENTS
- --------------------------------------------------------------------------------
GENERAL The Payment under this Contract is payable at the
Annuity Service Office or such other place as we
may designate.
The minimum Payment for any Certificate will be
$5,000 and must be paid at the time of
application. The maximum Payment for any
Certificate without prior approval will be
$500,000. Payments may not be made subsequent to
issue.
Following the second Certificate
Anniversary and prior to the Maturity Date, if
both:
(a) the Payment made, less any partial
withdrawals, is less than $2,000; and
(b) the higher of the Contract Value for an Owner
or the amount available upon total withdrawal
is less than $2,000;
We may cancel the Certificate and participation
under the Contract and pay the Owner the higher of
Contract Value less the Debt and any annual
Administration Fee or the amount available upon
total withdrawal.
ALLOCATION OF NET PAYMENT When we receive the Payment, the Net Payment will
be allocated to the Initial Guarantee Period as
shown on the Certificate Specifications Page.
6
<PAGE> 11
PART 6 INVESTMENT PROVISIONS
- --------------------------------------------------------------------------------
GUARANTEE PERIODS An Owner may allocate the Net Payment into any one
of the Initial Guaranteed Periods offered under
this Contract.
The Initial Guarantee Period and Renewal Guarantee
Period are measured from the date either a Net
Payment or Renewal Amount is allocated to the
guarantee period. Amounts cannot be allocated to a
guarantee period that would extend beyond the
Maturity Date.
During the Initial Guarantee Period, amounts will
earn interest, compounded annually, at the Initial
Guaranteed Interest Rate.
RENEWALS We will automatically renew the Renewal Amount
into the same guarantee period that it is renewing
from, unless an Owner specifies otherwise in
writing. If a particular Renewal Guarantee Period
would extend beyond the Maturity Date, the Renewal
Amount may not be renewed in that Renewal
Guarantee Period. The Renewal Amount will be
applied to the longest Renewal Guarantee Period
that does not extend beyond the Maturity Date.
During the Renewal Guarantee Period, amounts will
earn interest, compounded annually, at the Renewal
Guaranteed Interest Rate.
MARKET VALUE ADJUSTMENT Any amounts withdrawn, loaned or transferred at
FACTOR any other date other than the end of either the
Initial Guarantee Period or a Renewal Guarantee
Period will be adjusted by the Market Value
Adjustment Factor described below.
The Market Value Adjustment Factor is determined
by the following formula:
((1+i)/(1+j))Exponent(n/12)
Where i, j and n are defined as follows:
i - The Initial Guaranteed Interest Rate or
Renewal Guaranteed Interest Rate currently
being earned.
j - The guaranteed interest rate available, on the
date the request is processed, for a guarantee
period with the same length as the period
remaining in the Initial Guarantee Period or
Renewal Guarantee Period. If a guarantee
period of this length is not available, the
guarantee period with the next highest
duration which is maintained by the Company
will be chosen.
n - The number of complete months remaining to the
end of the Initial Guarantee Period or Renewal
Guarantee Period.
The amount of Market Value Adjustment, if any,
upon transfer or loan is specified in Part 8,
Transfer Provisions, and upon withdrawal as
specified in Part 9, Withdrawal Provisions.
7
<PAGE> 12
PART 7 ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENTS The amount of each fixed annuity payment is
determined by applying the portion of the Contract
Value adjusted by the Transfer Market Value
Adjustment used to effect such payments measured
as of a date not more than 10 business days prior
to the Maturity Date (minus any applicable premium
taxes) to the appropriate table contained in this
Contract. If the table in use by us on the
Maturity Date is more favorable to the Owner, we
will use that table. We guarantee the dollar
amount of fixed annuity payments.
PART 8 TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS Before the Maturity Date an Owner may transfer the
entire Contract Value to a different guarantee
period then being offered by the Company. There is
no transaction charge for transfers, however,
Contract Value transferred prior to the end of a
guaranteed period will be subject to a Transfer
Market Value Adjustment.
The maximum number of transfers an Owner may make
per Certificate Year is one.
An Owner must transfer the entire Contract Value
each time the Owner makes a transfer. In addition,
the entire amount must be transferred into one
guarantee period.
TRANSFER MARKET VALUE Amounts transferred, including transfers to the
ADJUSTMENT Loan Account pursuant to a loan request, will be
subject to a Market Value Adjustment. The amount
requested to be transferred will be multiplied by
the Market Value Adjustment Factor to determine
the actual transferred amount.
PART 9 WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
PAYMENT OF WITHDRAWALS An Owner may withdraw part or all of the Contract
Value, less any Debt, at any time before the
earlier of the Owner's death or the Maturity Date,
by sending us a written request. We will pay all
withdrawals within seven days of receipt at the
Annuity Service Office subject to postponement in
certain circumstances, as specified below.
SUSPENSION OF PAYMENTS We may defer the payment resulting from a request
for total or partial withdrawal for not more than
six months, or for the period permitted by
applicable state law if shorter, from the day we
receive written request and the Certificate, if
required. If such payments are deferred 30 days or
more, the amount deferred will earn interest at a
rate not less than 3% per year or at a rate
determined by applicable state law.
TOTAL WITHDRAWAL Upon receipt of an Owner's request to withdraw all
of the Owner's Contract Value, we will terminate
the Certificate and pay the Owner the following
amount:
C + [ ( A - B - C) x D ] , where:
A = the Gross Withdrawal Value reduced by any
applicable annual Administration Fee;
8
<PAGE> 13
B = the Withdrawal Charge;
C = the Free Withdrawal Amount;
D = the Market Value Adjustment Factor.
The above amount will be adjusted to reflect any
amount in the Loan Account and any Debt in
accordance with the Qualified Plan Endorsement, if
attached.
PARTIAL WITHDRAWAL Partial withdrawals will use the formula specified
in Part 9 Total Withdrawal above and the Gross
Withdrawal Value to determine the amount payable
to you. Partial withdrawals will be subject to
Market Value Adjustments and possible withdrawal
charges. We will deduct the Gross Withdrawal Value
from the Contract Value. The Gross Withdrawal
Value may not exceed the Contract Value.
WITHDRAWAL CHARGE If a withdrawal is made from the Contract by the
Owner before the Maturity Date, a Withdrawal
Charge (contingent deferred sales charge) may be
assessed during the first 7 Certificate Years. No
Withdrawal Charge will be applied after the 7th
Certificate Year. The amount of the Withdrawal
Charge and when it is assessed are discussed
below:
1. The Free Withdrawal Amount is defined the
excess of (a) over (b), where:
(a) equals the Free Withdrawal Percentage as
set forth on the Contract Specification
Page multiplied by the Payment made by
or on behalf of the Owner,
(b) equals the sum of of all prior partial
withdrawals, in that Certificate Year.
The Free Withdrawal Amount may be withdrawn free
of a Withdrawal Charge and is not subject to a
Market Value Adjustment.
2. If a withdrawal is made at the end of the
Initial Guarantee Period, no withdrawal charge
will be applied provided such withdrawal occurs
on or after the end of the third Certificate
Year. If a withdrawal is made at the end of any
other guarantee period, no withdrawal charge
will be applied provided such withdrawal
occurs on or after the end of the fifth
Certificate Year. A request for withdrawal at
the end of a guarantee period must be received
in writing during the 30 day period preceding
the end of that guarantee period.
3. The Withdrawal Charge is determined by
multiplying the Gross Withdrawal Value less any
annual Administration Fee and Free Withdrawal
Amount by the applicable Withdrawal Charge
Percentage obtained from the Contract
Specifications Page.
WITHDRAWAL MARKET VALUE Amounts withdrawn will be subject to a Market
ADJUSTMENT Value Adjustment. The Market Value Adjustment will
be determined in accordance with the formula
specified in Part 9 Total Withdrawal above.
There will be no Market Value Adjustment on
withdrawals in the following situations: (a) death
of the Owner, (b) amounts withdrawn within one
month prior to the end of the guarantee period,
and (c) the Free Withdrawal Amount.
FREQUENCY AND AMOUNT OF An Owner may make as many partial withdrawals as
PARTIAL WITHDRAWAL desired. Any withdrawal from the Certificate must
be at least $300 or the entire balance of the
Contract Value if less. If a partial withdrawal
would reduce the Contract Value to less than $300,
then we will treat the partial withdrawal request
as a total withdrawal of the Contract Value.
9
<PAGE> 14
PART 10 FEES AND DEDUCTIONS
- --------------------------------------------------------------------------------
ADMINISTRATION FEE To compensate us for assuming certain
administrative expenses, we reserve the right to
charge an annual Administration Fee. This
Administration Fee will be the amount listed on
the Contract Specifications Page. Prior to the
Maturity Date, the Administration Fee is deducted
on the last day of each Certificate Year. If the
Certificate is surrendered for its Contract Value
on any date other than the last day of any
Certificate Year, we will deduct the full amount
of the Administration Fee from the amount paid.
TAXES We reserve the right to charge certain taxes
against the Payment for an Owner (either at the
time of payment or liquidation), Contract Value of
an Owner, payment of Death Benefit or annuity
payments, as appropriate. Such taxes may include
any premium taxes or other taxes levied by any
government entity which we, in our sole
discretion, determine to have resulted from the
establishment or maintenance of the Separate
Account, or from the receipt by us of Payments, or
from the issuance of this Contract and an Owner's
Certificate, or from the commencement or
continuance of annuity payments under this
Contract.
PART 11 LOAN PROVISION (CERTAIN QUALIFIED CONTRACTS ONLY)
- --------------------------------------------------------------------------------
GENERAL This loan provision applies only to certain
Qualified Contracts and Certificates. All
provisions and terms of a loan are included in the
Qualified Plan Endorsement, if attached.
PART 12 PAYMENT OF CONTRACT BENEFITS
- --------------------------------------------------------------------------------
GENERAL Benefits payable under this Contract may be
applied in accordance with one or more of the
Annuity Options described below, subject to any
restrictions of Internal Revenue Code section
72(s).
ALTERNATE ANNUITY OPTIONS Instead of settlement in accordance with the
Annuity Options described below, an Owner may
choose an alternate form of settlement acceptable
to us.
DESCRIPTION OF ANNUITY Option 1: Life Annuity
OPTIONS
(a) Life Non-Refund. We will make payments during
the lifetime of the Annuitant. No payments are
due after the death of the Annuitant.
(b) Life 10-Year Certain. We will make payments
for 10 years and after that during the
lifetime of the Annuitant. No payments are due
after the death of the Annuitant or, if later,
the end of the 10-year period certain.
Option 2: Joint and Survivor Life Annuity
The second Annuitant named shall be referred to as
the Co-Annuitant.
(a) Joint and Survivor Non-Refund. We will make
payments during the joint lifetime of the
Annuitant and Co-Annuitant. Payments will then
continue during the remaining lifetime of the
survivor. No payments are due after the death
of the last survivor of the Annuitant and
Co-Annuitant.
10
<PAGE> 15
(b) Joint and Survivor with 10-Year Certain. We
will make payments for 10 years and after
that during the joint lifetime of the
Annuitant and Co- Annuitant. Payments will
then continue during the remaining lifetime
of the survivor. No payments are due after
the death of the survivor of the Annuitant
and Co-Annuitant or, if later, the end of the
10-year period certain.
ANNUITY PAYMENT RATES The annuity payment rates on the attached tables
show, for each $1,000 applied, the dollar amount of
the monthly fixed annuity payment. These rates are
based on the 1983 Table A projected at Scale G with
interest at the guaranteed rate of 3% per annum and
assume births in year 1942. The amount of each
annuity payment will depend upon the sex and
adjusted age of the Annuitant, the Co-Annuitant, if
any, or other payee. The adjusted age is determined
from the actual age nearest birthday at the time
the first monthly annuity payment is due, as
follows:
<TABLE>
<CAPTION>
Calendar Adjustment Calendar Adjustment
Year of Birth to Actual Age Year of Birth to Actual Age
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1986 -6
1939-1945 +0 1987+ -7
</TABLE>
The dollar amount of annuity payment for any age or
combination of ages not shown, for any other form
of Annuity Option agreed to by us, or for payments
made on a less frequent basis (quarterly,
semiannual or annual) will be quoted on request.
11
<PAGE> 16
AMOUNT OF MONTHLY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<TABLE>
<CAPTION>
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
- ------------------------------------- ------------------------------------
Adjusted Age Adjusted Age
of Annuitant Male Female of Annuitant Male Female
- ------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
55 4.23 3.83 55 4.19 3.82
60 4.64 4.15 60 4.57 4.12
65 5.20 4.57 65 5.05 4.51
70 5.94 5.13 70 5.65 5.02
75 6.91 5.91 75 6.35 5.67
80 8.21 6.98 80 7.13 6.45
85 9.94 8.47 85 7.90 7.29
</TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
Option 2(A): Non-Refund
<TABLE>
<CAPTION>
Age of Co-Annuitant
- --------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.61
70 3.88 4.19 4.53 4.88 5.20
75 4.23 4.64 5.10 5.57 6.00
80 4.70 5.26 5.88 6.51 7.06
85 5.34 6.09 6.94 7.76 8.43
</TABLE>
Option 2(B): 10 Year Certain
<TABLE>
<CAPTION>
Age of Co-Annuitant
- --------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.59
70 3.88 4.18 4.52 4.86 5.16
75 4.23 4.63 5.07 5.50 5.86
80 4.68 5.21 5.78 6.30 6.69
85 5.27 5.95 6.62 7.18 7.56
- --------------------------------------------------------------------------------
</TABLE>
Monthly installments for ages not shown will be furnished on request.
12
<PAGE> 17
This page left intentionally blank.
13
<PAGE> 18
- --------------------------------------------------------------------------------
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
<PAGE> 19
[NORTH AMERICAN CONTINENT GRAPHIC]
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: ANNUITY SERVICE OFFICE: HOME OFFICE
116 Huntington Avenue P.O. Box 9230 GMF Dover, Delaware
Boston, MA 02116 Boston, MA 02205-9230
1-800-344-1029
This is a Certificate which evidences the interest of the Owner named in the
Certificate Specifications Page in the Deferred Fixed Group Annuity Contract
issued by North American Security Life Insurance Company.
North American Security Life Insurance Company will pay an annuity commencing on
the Maturity Date to the Annuitant, if then living, in accordance with the
Benefits and the Payment of Contract Benefits provisions. If the Owner dies
while the Contract is in effect and the Owner's Certificate is in force and
before the Maturity Date, the Company will pay a Death Benefit to the
Beneficiary upon receipt of all required claim forms and proof of death of the
Owner at the Annuity Service Office.
The Contract is the legal contract. This Certificate is merely a summary of the
rights, duties and benefits of that Contract. A copy of the Contract may be
obtained by requesting it in writing from us at our Annuity Service Office. If
there is any conflict, the Contract is the controlling document.
All payments under this Certificate will be made to the persons and in the
manner set forth in the Contract.
TEN DAY RIGHT TO REVIEW
THE OWNER MAY CANCEL THE CERTIFICATE BY RETURNING IT TO OUR ANNUITY SERVICE
OFFICE OR AGENT AT ANY TIME WITHIN 10 DAYS AFTER RECEIPT OF THE CERTIFICATE.
WITHIN 7 DAYS OF RECEIPT OF THE CERTIFICATE BY US, WE WILL REFUND THE PAYMENT
MADE TO THE OWNER.
WHEN THE CERTIFICATE IS ISSUED AS AN INDIVIDUAL RETIREMENT ANNUITY, DURING THE
FIRST 7 DAYS OF THIS 10 DAY PERIOD, WE WILL RETURN THE GREATER OF (i) THE
CONTRACT VALUE OF (ii) THE PAYMENT.
SIGNED FOR THE COMPANY at its Executive Office, Boston, Massachusetts,
on the Date of Coverage.
RICHARD HIRTLE WILLIAM J. ATHERTON
VICE PRESIDENT PRESIDENT
SINGLE PAYMENT DEFERRED FIXED ANNUITY
NON-PARTICIPATING
AMOUNTS PAYABLE UNDER THE CONTRACT ARE SUBJECT TO A MARKET VALUE ADJUSTMENT
PRIOR TO A DATE OR DATES SPECIFIED IN THIS CERTIFICATE.
<PAGE> 20
INTRODUCTION
This certificate evidences the interest of the Owner in the deferred fixed group
annuity contract. This Contract provides that prior to the Maturity Date of this
Certificate, the Contract Value for an Owner will accumulate based on interest
rates guaranteed by the Company for the period selected. Amounts withdrawn prior
to the end of the selected period are subject to a market value adjustment and
possible withdrawal charges which could reduce the withdrawal amount below
original payment.
You must allocate the Payment to one Initial Guarantee Period.
On the Maturity Date, if the Annuitant and Owner are still living, the Contract
will provide for annuity payments to the Annuitant based upon the Annuity Option
selected. Fixed annuity dollar amounts are guaranteed by the Company.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Certificate Specifications Page Page
PART 1 - DEFINITIONS 1
PART 2 - GENERAL PROVISIONS 3
PART 3 - OWNERSHIP 4
PART 4 - BENEFITS 4
PART 5 - PAYMENTS 6
PART 6 - INVESTMENT PROVISIONS 6
PART 7 - ANNUITY PROVISIONS 7
PART 8 - TRANSFERS 7
PART 9 - WITHDRAWAL PROVISIONS 8
PART 10 - FEES AND DEDUCTIONS 9
PART 11 - LOAN PROVISION 9
PART 12 - PAYMENT OF CONTRACT BENEFITS 10
<PAGE> 21
CERTIFICATE SPECIFICATIONS PAGE
GROUP HOLDER: [SECURITY LIFE TRUST]
TYPE OF CONTRACT: [QUALIFIED] PLAN TYPE: [403B]
CERTIFICATE DATE: [01/07/1994] MATURITY DATE: [01/07/2044]
PAYMENT: [$ 10,000.00] CERTIFICATE NUMBER: [000000001]
GOVERNING LAW: [APPLICABLE STATE] ADMINISTRATION FEE: [$0]
INITIAL GUARANTEED [5.05%] INITIAL GUARANTEE [5 YEARS]
INTEREST RATE: PERIOD:
FREE WITHDRAWAL [10.00%] INITIAL GUARANTEE [01/07/1999]
PERCENTAGE: PERIOD EXPIRES:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE WITHDRAWAL CHARGE
CERTIFICATE YEARS PERCENTAGE
<S> <C>
[0] [7]%
[1] [6]%
[2] [5]%
[3] [4]%
[4] [3]%
[5] [2]%
[6] [1]%
[7+] [0]%
</TABLE>
THIS PLAN IS INTENDED TO QUALIFY UNDER THE INTERNAL REVENUE CODE FOR TAX-FAVORED
STATUS. LANGUAGE CONTAINED IN THIS CONTRACT REFERRING TO FEDERAL TAX STATUS OR
RULES IS INFORMATIONAL AND INSTRUCTIONAL AND THIS LANGUAGE IS NOT SUBJECT TO
APPROVAL OR DISAPPROVAL BY THE STATE IN WHICH THE CONTRACT IS ISSUED FOR
DELIVERY. PLEASE SEEK THE ADVICE OF YOUR OWN TAX ADVISOR REGARDING YOUR
INDIVIDUAL TAX TREATMENT.
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE ANNUITANT AGE: 35
CO-ANNUITANT: BENEFICIARY: JANE DOE
<PAGE> 22
CERTIFICATE SPECIFICATIONS PAGE
GROUP HOLDER: [SECURITY LIFE TRUST]
TYPE OF CONTRACT: [NON-QUALIFIED] PLAN TYPE:
CERTIFICATE DATE: [01/07/1994] MATURITY DATE: [01/07/2044]
PAYMENT: [$ 10,000.00] CERTIFICATE NUMBER: [000000001]
GOVERNING LAW: [APPLICABLE STATE] ADMINISTRATION FEE: [$0]
INITIAL GUARANTEED [5.05%] INITIAL GUARANTEE [5 YEARS]
INTEREST RATE: PERIOD:
FREE WITHDRAWAL [10.00%] INITIAL GUARANTEE [01/07/1999]
PERCENTAGE: PERIOD EXPIRES:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE WITHDRAWAL CHARGE
CERTIFICATE YEARS PERCENTAGE
<S> <C>
[0] [7]%
[1] [6]%
[2] [5]%
[3] [4]%
[4] [3]%
[5] [2]%
[6] [1]%
[7+] [0]%
</TABLE>
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE ANNUITANT AGE: 35
CO-ANNUITANT: BENEFICIARY: JANE DOE
<PAGE> 23
PART 1 DEFINITIONS
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WE AND YOU "We", "us" and "our" means North American Security
Life Insurance Company. "You" or "your" means the
Owner of this Certificate.
ANNUITANT Any individual person or persons whose life is used
to determine the duration of annuity payments
involving life contingencies. The Annuitant is as
designated on the Certificate Specifications Page
and Application, unless changed.
ANNUITY OPTION The method selected by you for annuity payments
made by us.
ANNUITY SERVICE OFFICE Any office designated by us for the receipt of
Payments and processing of Group Holder and Owner
requests.
APPLICATION The document signed by the Owner that serves as his
or her application for participation under this
Contract, a copy of which is attached to the
Certificate.
BENEFICIARY The person, persons or entity to whom certain
benefits are payable following the death of an
Owner, or in certain circumstances, an Annuitant.
CERTIFICATE The document for each Owner which summarizes the
rights and benefits of the Owner under the
Contract.
CERTIFICATE ANNIVERSARY The anniversary of the Certificate Date.
CERTIFICATE DATE The date of issue of a Certificate under this
Contract as specified on the Certificate
Specifications Page.
CERTIFICATE YEAR The period of twelve consecutive months beginning
on the Certificate Date or any anniversary
thereafter.
CONTINGENT BENEFICIARY The person, persons or entity who becomes the
Beneficiary if the Beneficiary is not alive.
CONTRACT APPLICATION The document signed by the Group Holder that
evidences the Group Holder's application for this
Contract.
CONTRACT DATE The date of issue of this Contract as specified on
the Contract Specifications Page.
CONTRACT VALUE The sum of the Net Payment and accrued interest,
less the sum of any Gross Withdrawal Values and any
annual Administration Fees deducted, adjusted for
any Transfer Market Value Adjustments, attributable
to that Owner.
DEBT Any amounts in the Loan Account attributable to an
Owner plus any accrued loan interest. The loan
provision is applicable to certain Qualified
Contracts only.
FIXED ACCOUNT The NASL Fixed Account, which is a Separate Account
of the North American Security Life Insurance
Company.
GENERAL ACCOUNT All the assets of North American Security Life
Insurance Company other than assets in separate
accounts.
GROSS WITHDRAWAL VALUE The portion of the Contract Value specified by you
for a full or partial withdrawal. Such amount is
determined prior to the application of any
withdrawal charge, annual Administration Fee and
Market Value Adjustment.
GROUP HOLDER The person, persons or entity entitled to the
ownership rights under this Contract. The Group
Holder is as designated on the Contract
Specifications Page and the Contract Application.
INITIAL GUARANTEE PERIOD The period of time during which the Initial
Guaranteed Interest Rate is in effect.
INITIAL GUARANTEED INTEREST The compound annual rate used to determine the
RATE interest earned on the Net Payment during the
Initial Guarantee Period.
1
<PAGE> 24
INTERNAL REVENUE CODE The Internal Revenue Code of 1986, as amended from
(IRC) time to time, and any successor statute of
similar purposes.
LOAN ACCOUNT The portion of the General Account that is used for
collateral when a loan is taken.
MARKET VALUE ADJUSTMENT An adjustment to amounts that are withdrawn or
transferred prior to the end of the Initial
Guarantee Period or Renewal Guarantee Period. It
may increase or decrease the amount available for
transfer, loan or withdrawal.
MATURITY DATE The date on which annuity benefits commence. It is
the date specified on the Certificate
Specifications Page, unless changed.
NET PAYMENT The Payment less the amount of premium tax, if any,
deducted from the Payment.
NON-QUALIFIED CONTRACTS Contracts which are not issued under Qualified
Plans.
OWNER The person, persons or entity named in each
Certificate. The Owner is as designated on the
Certificate Specifications Page and Application,
unless changed.
PAYMENT An amount paid to us by you as consideration for
the benefits provided by this Contract.
QUALIFIED CONTRACTS Contracts issued under Qualified Plans.
QUALIFIED PLANS Retirement plans which receive favorable tax
treatment under section 401, 403, 408 or 457, of
the Internal Revenue Code of 1986, as amended.
RENEWAL AMOUNT The Contract Value as of the end of the Initial
Guarantee Period or at the end of a Renewal
Guarantee Period.
RENEWAL GUARANTEE PERIOD The period of time during which a Renewal
Guaranteed Interest Rate is in effect.
RENEWAL GUARANTEED The compound annual rate used to determine the
INTEREST RATE interest earned on a Renewal Amount during a
Renewal Guarantee Period. In no event shall this
rate be less than 3%.
SEPARATE ACCOUNT A segregated account of North American Security
Life Insurance Company that is not commingled with
our general assets and obligations.
2
<PAGE> 25
PART 2 GENERAL PROVISIONS
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ENTIRE CONTRACT The Contract, Contract Endorsements, if any, the
Contract Application, and the Application, if one
is attached to this Certificate, constitute the
entire contract. Only the President, a
Vice-President or the Secretary of the Company has
authority to agree on our behalf to any alteration
of the Contract or any Certificate, or to any
waiver of our rights or requirements. The change or
waiver must be in writing.
The benefits and values available under this
Contract are not less than the minimum required by
any statute of the state in which this Contract is
issued. We have filed a detailed statement of the
method used to calculate the benefits and values
with the Department of Insurance in the state in
which this Contract is issued, if required by law.
MODIFICATION We will not change or modify this Certificate
without the consent of the Owner except as may be
required to make it conform to any applicable law
or regulation or any ruling issued by a government
agency.
TEN DAY RIGHT TO REVIEW If not satisfied with the Certificate, an Owner
may, within 10 days after receipt of his or her
Certificate, return it by delivering or mailing it
to the Annuity Service Office or our agent, and it
shall be deemed void from the beginning. Within 7
days of receipt of the Certificate by us, we will
pay the Owner's Payment to the Owner. When the
Certificate is issued as an individual retirement
annuity, during the first 7 days of this 10 day
period, we will return the greater of (i) the
Contract Value or (ii) the Payment.
BENEFICIARY The Beneficiary is as designated in the Certificate
Specifications Page and Application, unless
changed. However, if there is a surviving Owner,
that person will be treated as the Beneficiary. If
no such Beneficiary is living, the Beneficiary is
the "Contingent Beneficiary". If no Beneficiary or
Contingent Beneficiary is living, the Beneficiary
is the estate of the deceased Owner.
CHANGE OF MATURITY DATE Prior to the Maturity Date, you may request in
writing a change of the Maturity Date. Any
extension of the Maturity Date will be subject to
our prior approval and any Governing Law
regulations.
ASSIGNMENT You may assign your interest in this Contract at
any time prior to the Maturity Date. No assignment
will be binding on us unless it is written in a
form acceptable to us and received at the Annuity
Service Office. We will not be liable for any
payments made or actions we take before the
assignment is accepted by us. An absolute
assignment will revoke the interest of any
revocable Beneficiary. We will not be responsible
for the validity of any assignment.
DISCONTINUANCE OF NEW By giving 30 days prior written notice to the Group
OWNERS Holder, we may limit or discontinue the acceptance
of new Applications and the issuance of new
Certificates under this Contract. Such limitation
or discontinuance shall have no effect on rights or
benefits with respect to any Owner's Certificate
established prior to the effective date of such
limitation of discontinuance.
CLAIMS OF CREDITORS To the extent permitted by law, no benefits payable
under this Contract will be subject to the claims
of your, the Beneficiary's or the Annuitant's
creditors.
MISSTATEMENT AND PROOF We may require proof of age, sex or survival of any
OF AGE, SEX OR SURVIVAL person upon whose age, sex or survival any payments
depend. If the age or sex of the Annuitant has been
misstated, the benefits will be those which the
payment would have provided for the correct age and
sex. If we have made incorrect annuity payments,
the amount of any underpayment will be paid
immediately. The amount of any overpayment will be
deducted from future annuity payments.
3
<PAGE> 26
NON-PARTICIPATING The Contract is non-participating and will not
share in our profits or surplus earnings. We will
pay no dividends on the Contract.
REPORTS At least once each year we will send you a report
containing information required by the applicable
state law.
CURRENCY AND PLACE OF All payments made to or by us shall be made in the
PAYMENTS lawful currency of the United States of America at
the Annuity Service Office or elsewhere if we
consent.
NOTICES AND ELECTIONS To be effective, all notices and elections you make
under this Contract must be in writing, signed by
you and received by us at the Annuity Service
Office. Un- less otherwise provided in this
Contract, all notices, requests and elections will
be effective when received by us, complete with all
necessary information and your signature, at the
Annuity Service Office.
GOVERNING LAW The Contract and all Certificates issued in
connection with it will be governed by the laws of
the jurisdiction indicated on the Contract
Specifications Page.
SECTION 72(s) The provisions of this Contract shall be
interpreted so as to comply with the requirements
of Section 72(s) of the Internal Revenue Code.
PART 3 OWNERSHIP
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EXERCISE OF CONTRACT The Contract shall belong to the Group Holder. All
RIGHTS Contract rights and privileges not expressly
reserved by the Group Holder, may be exercised by
the Owner as to his or her interest. Such rights
and privileges can be exercised without the consent
of the Beneficiary (subject to the rights of an
irrevocably designated beneficiary) or any other
person.
CHANGE OF OWNER, Subject to the rights of an irrevocable
ANNUITANT, BENEFICIARY Beneficiary, you may change the Owner, Annuitant,
or Beneficiary by written request in a form
acceptable to us and which is received at the
Annuity Service Office. The Annuitant may not be
changed after the Maturity Date. You need not send
us the Certificate unless we request it. Any change
must be approved by us. If approved, any change in
Beneficiary will take effect on the date you signed
the request. If approved, any change in Owner or
Annuitant will take effect on the date we received
the request at the Annuity Service Office. We will
not be liable for any payments or actions taken
before the change is approved.
If any Annuitant is changed and any Owner is not an
individual, the entire interest in the Contract
must be distributed to the Owner within five years
of the change.
PART 4 BENEFITS
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ANNUITY BENEFITS We will pay a monthly income to the Annuitant, if
living, on the Maturity Date. Annuity benefits will
commence on the Maturity Date and continue for the
period of time provided for under the Annuity
Option selected.
We may pay the higher of Contract Value less the
Debt and any annual Administration Fee or the
amount available upon total withdrawal on the
Maturity Date in one lump sum if the monthly income
is less than $20.
On or before the Maturity Date you must select how
the Contract Value will be used to provide the
monthly income. Unless you indicate otherwise, we
will provide a fixed annuity with guaranteed fixed
annuity payments continuing for 10 years or the
lifetime of the Annuitant, if longer.
4
<PAGE> 27
The portion of the Contract Value adjusted by the
Transfer Market Value Adjustment used to effect a
fixed annuity will be applied to the appropriate
guaranteed fixed annuity payment table contained in
this Certificate. If the table in use by us on the
Maturity Date is more favorable to you, we will use
that table. We guarantee the dollar amount of fixed
annuity payments.
DEATH BENEFIT BEFORE A Death Benefit will be determined as of the date
MATURITY DATE on which written notice and proof of death and all
required claim forms are received at the Company's
Annuity Service Office.
DEATH OF ANNUITANT: On the death of the last
surviving Annuitant, the Owner becomes the new
Annuitant, if the Owner is an individual. If any
Owner is not an individual the death of any
Annuitant is treated as the death of an Owner and
the Death Benefit will be determined by
substituting the Annuitant for the Owner as
described below.
DEATH OF OWNER: We will pay the Death Benefit equal
to the Contract Value to the Beneficiary if any
Owner dies prior to the Maturity Date. If there is
any Debt, the Death Benefit equals the amount
described above less the Debt under the
Certificate. The Death Benefit may be taken in one
sum immediately, in which case the Certificate will
terminate. If the Death Benefit is not taken in one
sum immediately, the Certificate will continue
subject to the following provisions:
(a) The Beneficiary becomes the Owner.
(b) No additional Payments may be applied to the
Certificate.
(c) If the Beneficiary is not the deceased
Owner's spouse, the entire interest in the
Contract must be distributed under one of the
following options:
(i) The entire interest in the Contract
must be distributed over the life of
the Beneficiary, or over a period not
extending beyond the life expectancy
of the Beneficiary, with distributions
beginning within one year of the
Owner's death; or
(ii) the entire interest in the Contract
must be distributed within 5 years of
the Owner's Death.
If the Beneficiary dies before the
distributions required by (i) or (ii) are
complete, the entire remaining Contract Value
must be distributed in a lump sum
immediately.
(d) If the Beneficiary is the deceased Owner's
spouse, the Certificate will continue with
the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary
(and, if no Beneficiary is so named, the
surviving spouse's estate will be the
Beneficiary). Upon the death of the surviving
spouse, the Death Benefit will equal the
Contract Value at the time of the surviving
spouse's death, and the entire interest in
the Certificate must be distributed to the
new Beneficiary in accordance with the
provisions of (c) (i) or (c) (ii) above.
If there is more than one Beneficiary, the
foregoing provisions will independently apply to
each Beneficiary.
5
<PAGE> 28
DEATH BENEFIT ON OR If annuity payments have been selected based on an
AFTER MATURITY DATE Annuity Option providing for payments for a
guaranteed period, and the Annuitant dies on or
after the Maturity Date, we will make the remaining
guaranteed payments to the Beneficiary. Any
remaining payments will be made as rapidly as under
the method of distribution being used as of the
date of the Annuitant's death. If no Beneficiary is
living, we will commute any unpaid guaranteed
payments to a single sum (on the basis of the
interest rate used in determining the payments) and
pay that single sum to the estate of the last to
die of the Annuitant and the Beneficiary.
PROOF OF DEATH Proof of death is required upon the death of the
Annuitant or the Owner. Proof of death is one of
the following received at the Annuity Service
Office:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death.
(c) Any other proof satisfactory to us.
PART 5 PAYMENTS
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GENERAL The Payment under this Certificate is payable at
the Annuity Service Office or such other place as
we may designate.
The minimum Payment for any Certificate will be
$5,000 and must be paid at the time of application.
The maximum Payment for any Certificate without
prior approval will be $500,000. Payments may not
be made subsequent to issue.
Following the second Certificate Anniversary and
prior to the Maturity Date, if both:
(a) the Payment made, less any partial
withdrawals, is less than $2,000; and
(b) the higher of the Contract Value or the
amount available upon total withdrawal is
less than $2,000;
We may cancel the Certificate and participation
under the Contract and pay you the higher of
Contract Value less the Debt and any annual
Administration Fee or the amount available upon
total withdrawal.
ALLOCATION OF NET PAYMENT When we receive the Payment, the Net Payment will
be allocated to the Initial Guarantee Period as
shown on the Certificate Specifications Page.
PART 6 INVESTMENT PROVISIONS
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GUARANTEE PERIODS You may allocate the Net Payment into any one of
the Initial Guaranteed Periods offered under the
Contract.
The Initial Guarantee Period and Renewal Guarantee
Period are measured from the date either a Net
Payment or Renewal Amount is allocated to the
guarantee period. Amounts cannot be allocated to a
guarantee period that would extend beyond the
Maturity Date.
During the Initial Guarantee Period, amounts will
earn interest, compounded annually, at the Initial
Guaranteed Interest Rate.
6
<PAGE> 29
RENEWALS We will automatically renew the Renewal Amount into
the same guarantee period that it is renewing from,
unless you specify otherwise in \ writing. If a
particular Renewal Guarantee Period would extend
beyond the Maturity Date, the Renewal Amount may
not be renewed in that Renewal Guarantee Period.
The Renewal Amount will be applied to the longest
Renewal Guarantee Period that does not extend
beyond the Maturity Date.
During the Renewal Guarantee Period, amounts will
earn interest, compounded annually, at the Renewal
Guaranteed Interest Rate.
MARKET VALUE ADJUSTMENT Any amounts withdrawn, loaned or transferred at any
FACTOR other date other than the end of either the Initial
Guarantee Period or a Renewal Guarantee Period will
be adjusted by the Market Value Adjustment Factor
described below.
The Market Value Adjustment Factor is determined by
the following formula:
((1+i)/(1+j)) exponent (n/12)
Where i, j and n are defined as follows:
i - The Initial Guaranteed Interest Rate or Renewal
Guaranteed Interest Rate currently being
earned.
j - The guaranteed interest rate available, on the
date the request is processed, for a guarantee
period with the same length as the period
remaining in the Initial Guarantee Period or
Renewal Guarantee Period. If a guarantee period
of this length is not available, the guarantee
period with the next highest duration which is
maintained by the Company will be chosen.
n - The number of complete months remaining to the
end of the Initial Guarantee Period or Renewal
Guarantee Period.
The amount of Market Value Adjustment, if any, upon
transfer or loan is specified in Part 8, Transfer
Provisions, and upon withdrawal as specified in
Part 9, Withdrawal Provisions.
PART 7 ANNUITY PROVISIONS
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FIXED ANNUITY PAYMENTS The amount of each fixed annuity payment is
determined by applying the portion of the Contract
Value adjusted by the Transfer Market Value
Adjustment used to effect such payments measured as
of a date not more than 10 business days prior to
the Maturity Date (minus any applicable premium
taxes) to the appropriate table contained in this
Certificate. If the table in use by us on the
Maturity Date is more favorable to you, we will use
that table. We guarantee the dollar amount of fixed
annuity payments.
PART 8 TRANSFERS
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TRANSFERS Before the Maturity Date you may transfer the
entire Contract Value to a different guarantee
period then being offered by the Company. There is
no transaction charge for transfers, however,
Contract Value transferred prior to the end of a
guaranteed period will be subject to a Transfer
Market Value Adjustment.
The maximum number of transfers you may make per
Certificate Year is one.
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<PAGE> 30
You must transfer the entire Contract Value each
time you make a transfer. In addition, the entire
amount must be transferred into one guarantee
period.
TRANSFER MARKET VALUE Amounts transferred, including transfers to the
ADJUSTMENT Loan Account pursuant to a loan request, will be
subject to a Market Value Adjustment. The amount
requested to be transferred will be multiplied by
the Market Value Adjustment Factor to determine the
actual transferred amount.
PART 9 WITHDRAWAL PROVISIONS
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PAYMENT OF WITHDRAWALS You may withdraw part or all of the Contract Value,
less any Debt, at any time before the earlier of
your death or the Maturity Date, by sending us a
written request. We will pay all withdrawals within
seven days of receipt at the Annuity Service Office
subject to postponement in certain circumstances,
as specified below.
SUSPENSION OF PAYMENTS We may defer the payment resulting from a request
for total or partial withdrawal for not more than
six months, or for the period permitted by
applicable state law if shorter, from the day we
receive written request and the Certificate, if
required. If such payments are deferred 30 days or
more, the amount deferred will earn interest at a
rate not less than 3% per year or at a rate
determined by applicable state law.
TOTAL WITHDRAWAL Upon receipt of your request to withdraw all of
your Contract Value, we will terminate the
Certificate and pay you the following amount:
C + [ ( A - B - C) x D ] , where:
A = the Gross Withdrawal Value reduced by any
applicable annual Administration Fee;
B = the Withdrawal Charge;
C = the Free Withdrawal Amount;
D = the Market Value Adjustment Factor.
The above amount will be adjusted to reflect any
amount in the Loan Account and any Debt in
accordance with the Qualified Plan Endorsement, if
attached.
PARTIAL WITHDRAWAL Partial withdrawals will use the formula specified
in Part 9 Total Withdrawal above and the Gross
Withdrawal Value to determine the amount payable to
you. Partial withdrawals will be subject to Market
Value Adjustments and possible withdrawal charges.
We will deduct the Gross Withdrawal Value from the
Contract Value. The Gross Withdrawal Value may not
exceed the Contract Value.
WITHDRAWAL CHARGE If a withdrawal is made from the Contract Value by
you and prior to the Maturity Date, a Withdrawal
Charge (contingent deferred sales charge) may be
assessed during the first 7 Certificate Years. No
Withdrawal Charge will be applied after the 7th
Certificate Year. The amount of the Withdrawal
Charge and when it is assessed are discussed below:
1. The Free Withdrawal Amount is defined the
excess of (a) over (b), where:
(a) equals the Free Withdrawal Percentage as
set forth on the Certificate
Specification Page multiplied by the
Payment made by or on behalf of the
Owner,
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<PAGE> 31
(b) equals the sum of all prior partial
withdrawals, in that Certificate Year.
The Free Withdrawal Amount may be withdrawn
free of a Withdrawal Charge and is not
subject to a Market Value Adjustment.
2. If a withdrawal is made at the end of the
Initial Guarantee Period, no withdrawal
charge will be applied provided such
withdrawal occurs on or after the end of the
third Certificate Year. If a withdrawal is
made at the end of any other guarantee
period, no withdrawal charge will be applied
provided such withdrawal occurs on or after
the end of the fifth Certificate Year. A
request for withdrawal at the end of a
guarantee period must be received in writing
during the 30 day period preceding the end of
that guarantee period.
3. The Withdrawal Charge is determined by
multiplying the Gross Withdrawal Value less
any annual Administration Fee and Free
Withdrawal Amount by the applicable
Withdrawal Charge Percentage obtained from
the Certificate Specifications Page.
WITHDRAWAL MARKET VALUE Amounts withdrawn will be subject to a Market Value
ADJUSTMENT Adjustment. The Market Value Adjustment will be
determined in accordance with the formula specified
in Part 9 Total Withdrawal above.
There will be no Market Value Adjustment on
withdrawals in the following situations: (a) death
of the Owner, (b) amounts withdrawn within one
month prior to the end of the guarantee period, and
(c) the Free Withdrawal Amount.
FREQUENCY AND AMOUNT OF You may make as many partial withdrawals as you
PARTIAL WITHDRAWAL wish. Any withdrawal from the Certificate must be
at least $300 or the entire balance of the Contract
Value if less. If a partial withdrawal would reduce
the Contract Value to less than $300, then we will
treat the partial withdrawal request as a total
withdrawal of the Contract Value.
PART 10 FEES AND DEDUCTIONS
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ADMINISTRATION FEE To compensate us for assuming certain
administrative expenses, we reserve the right to
charge an annual Administration Fee. This
Administration Fee will be the amount listed on the
Certificate Specifications Page. Prior to the
Maturity Date, the Administration Fee is deducted
on the last day of each Certificate Year. If the
Certificate is surrendered for its Contract Value
on any date other than the last day of any
Certificate Year, we will deduct the full amount of
the Administration Fee from the amount paid.
TAXES We reserve the right to charge certain taxes
against your Payment (either at the time of payment
or liquidation), Contract Value, payment of Death
Benefit or annuity payments, as appropriate. Such
taxes may include any premium taxes or other taxes
levied by any government entity which we, in our
sole discretion, determine to have resulted from
the establishment or maintenance of the Separate
Account, or from the receipt by us of Payments, or
from the issuance of the Contract and an Owner's
Certificate, or from the commencement or
continuance of annuity payments under the Contract.
PART 11 LOAN PROVISION (CERTAIN QUALIFIED CONTRACTS ONLY)
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GENERAL This loan provision applies only to certain
Qualified Contracts. All provisions and terms of a
loan are included in the Qualified Plan
Endorsement, if attached.
9
<PAGE> 32
PART 12 PAYMENT OF CONTRACT BENEFITS
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GENERAL Benefits payable under the Contract may be applied
in accordance with one or more of the Annuity
Options described below, subject to any
restrictions of Internal Revenue Code section
72(s).
ALTERNATE ANNUITY OPTIONS Instead of settlement in accordance with the
Annuity Options described below, you may choose an
alternate form of settlement acceptable to us.
DESCRIPTION OF ANNUITY Option 1: Life Annuity
OPTIONS
(a) Life Non-Refund. We will make payments during
the lifetime of the Annuitant. No payments are
due after the death of the Annuitant.
(b) Life 10-Year Certain. We will make payments for
10 years and after that during the lifetime of
the Annuitant. No payments are due after the
death of the Annuitant or, if later, the end of
the 10-year period certain.
Option 2: Joint and Survivor Life Annuity
The second Annuitant named shall be referred to as
the Co-Annuitant.
(a) Joint and Survivor Non-Refund. We will make
payments during the joint lifetime of the
Annuitant and Co-Annuitant. Payments will then
continue during the remaining lifetime of the
survivor. No payments are due after the death
of the last survivor of the Annuitant and
Co-Annuitant.
(b) Joint and Survivor with 10-Year Certain. We
will make payments for 10 years and after that
during the joint lifetime of the Annuitant and
Co- Annuitant. Payments will then continue
during the remaining lifetime of the survivor.
No payments are due after the death of the
survivor of the Annuitant and Co-Annuitant or,
if later, the end of the 10-year period
certain.
ANNUITY PAYMENT RATES The annuity payment rates on the attached tables
show, for each $1,000 applied, the dollar amount of
the monthly fixed annuity payment. These rates are
based on the 1983 Table A projected at Scale G with
interest at the guaranteed rate of 3% per annum and
assume births in year 1942. The amount of each
annuity payment will depend upon the sex and
adjusted age of the Annuitant, the Co-Annuitant, if
any, or other payee. The adjusted age is determined
from the actual age nearest birthday at the time
the first monthly annuity payment is due, as
follows:
<TABLE>
<CAPTION>
Calendar Adjustment Calendar Adjustment
Year of Birth to Actual Age Year of Birth to Actual Age
<S> <C> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1986 -6
1939-1945 0 1987+ -7
</TABLE>
The dollar amount of annuity payment for any age or
combination of ages not shown, for any other form
of Annuity Option agreed to by us, or for payments
made on a less frequent basis (quarterly,
semiannual or annual) will be quoted on request.
10
<PAGE> 33
AMOUNT OF MONTHLY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<TABLE>
<CAPTION>
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
- ------------------------------------- -------------------------------------
Adjusted Age Adjusted Age
of Annuitant Male Female of Annuitant Male Female
- ------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
55 4.23 3.83 55 4.19 3.82
60 4.64 4.15 60 4.57 4.12
65 5.20 4.57 65 5.05 4.51
70 5.94 5.13 70 5.65 5.02
75 6.91 5.91 75 6.35 5.67
80 8.21 6.98 80 7.13 6.45
85 9.94 8.47 85 7.90 7.29
</TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
Option 2(A): Non-Refund
<TABLE>
<CAPTION>
Age of Co-Annuitant
- -------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.61
70 3.88 4.19 4.53 4.88 5.20
75 4.23 4.64 5.10 5.57 6.00
80 4.70 5.26 5.88 6.51 7.06
85 5.34 6.09 6.94 7.76 8.43
</TABLE>
Option 2(B): 10 Year Certain
<TABLE>
<CAPTION>
Age of Co-Annuitant
- -------------------------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.59
70 3.88 4.18 4.52 4.86 5.16
75 4.23 4.63 5.07 5.50 5.86
80 4.68 5.21 5.78 6.30 6.69
85 5.27 5.95 6.62 7.18 7.56
- -------------------------------------------------------------------------------
</TABLE>
Monthly installments for ages not shown will be furnished on request.
11
<PAGE> 34
- --------------------------------------------------------------------------------
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
A stock life insurance company the ultimate parent of which is The Manufacturers
Life Insurance Company
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 4(iii)
<PAGE> 2
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Certificate
to which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be one individual and the Annuitant. Neither the Owner
nor the Annuitant can be changed.
NONFORFEITABLE
2. The Owner's interest in the Contract is established for the exclusive
benefit of the Owner or his or her Beneficiaries and the interest of
the Owner is nonforfeitable.
NONTRANSFERABLE
3. The Owner may not assign, sell, transfer, discount or pledge his
interest in the Contract as collateral for a loan or as security for
the performance of any obligation or for any other purpose (other than
a transfer incident to a divorce or separation instrument in accordance
with IRC Section 408(d)(6)) to any person other than us.
MAXIMUM PAYMENTS
4. The maximum annual payment to an IRA shall not exceed the lesser of
$2,000 or 100% of compensation unless (a) such payment qualifies as a
rollover contribution described in IRC Sections 408(d)(3), 402(c),
403(a)(4) or 403(b)(8); or (b) such payment qualifies as a contribution
made in accordance with a Simplified Employee Pension Program as
described in IRC Section 408(k).
To the extent necessary to preserve qualification under the Internal
Revenue Code, we may refund a payment. Any refund of a payment (other
than those attributable to excess contributions) will be applied,
before the close of the calendar year following the refund, toward the
purchase of additional benefits.
DISTRIBUTIONS DURING OWNER'S LIFE
5. The Owner's entire interest in the Contract shall be distributed as
required under IRC Section 408(b)(3) and applicable regulations. Unless
deferral is otherwise permitted under applicable regulations, the
Owner's entire interest shall be distributed no later than the
"required beginning date," or shall be distributed beginning no later
than the "required beginning date" over (a) the life of the Owner or
the joint lives of the Owner and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the Owner,
or joint life and last survivor expectancy of the Owner and the
designated beneficiary.
The "required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Owner attains age 70 1/2.
If the Owner's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall
be determined in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
ANNUITY OPTIONS
6. Only Annuity Options 1 and 2 shall be offered unless we consent to the
use of an additional option. Annuity Option 1(b) is not available for
an Owner whose life expectancy is less than 10 years. Under Annuity
Options 2(a) and 2(b) the designated Co-Annuitant must be the Owner's
spouse. Annuity Option 2(b) is not available for an Owner and his or
her spouse where the life expectancy of the Owner and such spouse is
less than 10 years.
1
<PAGE> 3
DISTRIBUTIONS AFTER OWNER'S DEATH
7. If an Owner dies on or after the required beginning date and after
distribution of his or her interest has begun (or if distributions have
begun before the required beginning date as irrevocable annuity
payments), the remaining portion of the Owner's interest (if any) shall
be distributed at least as rapidly as under the method of distribution
in effect as of the Owner's death.
If the Owner dies before the required beginning date and an irrevocable
annuity distribution has not begun, the Owner's entire interest shall
be distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except that
(a) if the interest is payable to an individual who is the
Owner's designated beneficiary, the designated beneficiary may
elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Owner died; or
(b) if the designated beneficiary is the Owner's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Owner died,
and
(ii) December 31 of the calendar year in which the
Owner would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Owner. An
irrevocable election of the method of distribution by
a designated beneficiary who is the surviving spouse
must be made no later than the earlier of December 31
of the calendar year containing the fifth anniversary
of the Owner's death or the date distributions are
required to begin pursuant to this provision (b).
If the designated beneficiary is the Owner's
surviving spouse, the spouse may irrevocably elect to
treat the Owner's interest in the Contract as his or
her own individual retirement arrangement (IRA). This
election will be deemed to have been made if such
surviving spouse (i) fails to elect that his or her
interest will be distributed in accordance with one
of the preceding provisions, or (ii) makes a rollover
from the Contract.
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Owner's death, and if no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Owner's death.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Certificate, (a) the provision entitled "Death of Annuitant" is
deleted; and (b) in the "Death of Owner" provision, the distribution
requirements of provisions "(c)" and "(d)" are deleted. If, after the
Owner's death, the designated beneficiary dies before the Maturity
Date, no Death Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Owner, or (b) for purposes of
distributions beginning after the Owner's death, by the surviving
spouse. Such an election shall be irrevocable as to the Owner or the
surviving spouse, and shall apply to all subsequent years.
2
<PAGE> 4
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
CANCELLATION FOR NONPAYMENT
9. Following the second Certificate Anniversary and prior to the Maturity
Date, if both (a) the Payment made, less any partial withdrawals, is
less than $2,000; and (b) the higher of the Contract Value or the
amount available upon total withdrawal is less than $2,000; and if the
paid-up annuity benefit at the Maturity Date at the end of such period
would be less than $20 per month, We may cancel the Certificate and
participation under the Contract and pay you the higher of Contract
Value less the Debt and any annual Administration Fee or the amount
available upon total withdrawal.
IRC SECTION 72(S)
10. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Certificate Date of this Certificate.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Richard Hirtle
Vice-President
3
<PAGE> 1
EXHIBIT 4(iv)
<PAGE> 2
ERISA TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Certificate
to which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract.
NONTRANSFERABLE
2. The interest of the Employee in the Contract is non-transferable within
the meaning of IRC Section 401(g) and applicable regulations and is
nonforfeitable. In particular, the Employee's interest in the Contract
may not be sold, assigned, discounted, or pledged as collateral for a
loan or as security for the performance of any obligation or for any
other purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in the Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
the Employee attains age 70 1/2. For an Employee who attains age 70 1/2
before January 1, 1988, or for an Employee in a governmental plan or a
church plan (as defined in IRC Section 401(a)(9)(C)), the required
beginning date shall mean April 1 of the calendar year following the
later of (i) the calendar year in which the Employee attains age 70
1/2, or (ii) the calendar year in which the Employee retires.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the
Employee, or the joint life and last survivor expectancy of the
Employee and the designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in
1
<PAGE> 3
accordance with the requirements of IRC Section 401(a)(9), including
the incidental death benefit requirements of IRC Section 401(a)(9)(G),
and the regulations thereunder, including the minimum distribution
incidental benefit requirement of Proposed Treasury Regulation Section
1.401(a)(9)-2.
DEATH BENEFIT
6. If, in the event of the Employee's death prior to the Maturity Date,
the Death Benefit is not paid to the employer plan, it shall be paid to
(1) the surviving spouse of the Employee in the form required by
section 205 of the Employee Retirement Income Security Act of 1974
(ERISA), unless the spouse elects otherwise in accordance with the
requirements of such section 205 or applicable regulations; or (2) if
there is no surviving spouse, or if the surviving spouse has consented
in the manner required by section 205 of ERISA, or if the applicable
regulations otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Certificate, the first sentence of the paragraph "Death of Annuitant"
is deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
7. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the Employee's entire
interest shall be distributed by December 31 of the calendar year
containing the fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later
of:
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
2
<PAGE> 4
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Certificate, the distribution requirements of
provisions "(c)" and "(d)" are deleted. If, after the Employee's death,
the designated beneficiary dies before the Maturity Date, no Death
Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
9. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an Employee and his or her spouse
where the life expectancy of the Employee and such spouse is less than
10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Employee. A married Employee may elect another Annuity
Option, provided his or her spouse consents in accordance with the
requirements of section 205 of ERISA (and applicable regulations), or
provided such election is otherwise permitted under such applicable
regulations. An unmarried Employee will be deemed to have elected
annuity Option 1(a) unless he or she makes a different election in the
manner required under section 205 of ERISA (and applicable
regulations).
ELECTIONS AND CONSENTS
10. Elections and consents required by ERISA may be revoked in the form,
time, and manner prescribed in section 205 of ERISA (and applicable
regulations). All elections and consents required by ERISA shall adhere
to the requirements of the applicable regulations interpreting section
205 of ERISA (or any other applicable law), including the requirements
as to the timing of any elections or consents.
If a withdrawal is permitted by the employer's plan, no withdrawal,
partial or total, may be made without consent of the Employee and the
Employee's spouse in the manner required by section 205 of ERISA (and
applicable regulations), except to the extent that such consent is not
required under such applicable regulations. Any withdrawal made must be
made in the form required under section 205 of ERISA (and applicable
regulations), unless the Employee (and spouse, if applicable) makes an
election in the form and manner permitted under such regulations, to
receive the benefit in another form.
3
<PAGE> 5
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
11. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
12. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59 1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts
attributable to contributions made under the custodial account pursuant
to a salary reduction agreement, encounters financial hardship;
provided, that such amounts permitted to be paid or made available in
the event of financial hardship shall be limited to amounts
attributable to actual salary deferral contributions made under the
custodial account (excluding earnings thereon); and provided further
that amounts may be distributed pursuant to a qualified domestic
relations order to the extent permitted by IRC Section 414(p).
MATURITY VALUE
13. If the Employee's Contract Value is greater than $3,500, as determined
on the first day of the month preceding the Maturity Date, in
accordance with section 205 of ERISA (and applicable regulations), we
will not exercise our right to pay the Contract Value of an Employee on
the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
14. A distributee may elect, at the time and in the manner prescribed by
us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative payee
under a qualified domestic relations order, as defined in IRC Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
4
<PAGE> 6
A direct rollover is a payment by the plan administrator or us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
15. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Certificate Date of this Certificate.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Richard Hirtle
Vice-President
5
<PAGE> 1
EXHIBIT 4(v)
<PAGE> 2
TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Certificate
to which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract. In the "Death Benefit
Before Maturity Date" section of part 4 of the Certificate, the first
sentence of the paragraph "Death of Annuitant" is deleted, and the
second sentence is modified to read as follows: "If any Owner is not an
individual, the death of the Annuitant (but not of the Co-Annuitant) is
treated as the death of an Owner."
NONTRANSFERABLE
2. The interest of the Employee in the Contract is non-transferable within
the meaning of IRC Section 401(g) and applicable regulations and is
nonforfeitable. In particular, the Employee's interest in the Contract
may not be sold, assigned, discounted, or pledged as collateral for a
loan or as security for the performance of any obligation or for any
other purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in the Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
the Employee attains age 70 1/2. For an Employee who attains age 70 1/2
before January 1, 1988, or for an Employee in a governmental plan or a
church plan (as defined in IRC Section 401(a)(9)(C)), the required
beginning date shall mean April 1 of the calendar year following the
later of (i) the calendar year in which the Employee attains age 70
1/2, or (ii) the calendar year in which the Employee retires.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the
Employee, or the joint life and last survivor expectancy of the
Employee and the designated beneficiary.
1
<PAGE> 3
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
6. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the Employee's entire
interest shall be distributed by December 31 of the calendar year
containing the fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later
of:
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Certificate, the distribution requirements of
provisions "(c)" and "(d)" are deleted. If, after the Employee's death,
the designated beneficiary dies before the Maturity Date, no Death
Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
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spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an Employee and his or her spouse
where the life expectancy of the Employee and such spouse is less than
10 years.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
9. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
10. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59 1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts attrib-
utable to contributions made under the custodial account pursuant to a
salary reduction agreement, encounters financial hardship; provided,
that such amounts permitted to be paid or made available in the event
of financial hardship shall be limited to amounts attributable to
actual salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by IRC Section 414(p).
LOANS
11. While this Contract is in force with respect to an Employee, an
Employee may borrow using his or her interest in the Contract as the
sole security for the loan. We will usually make a loan within seven
days after we receive the request, subject to suspension of payment as
set forth in part 10 of the Contract.
The maximum loan value is 80% of the Contract Value for an Employee. An
Employee may borrow an amount up to the lesser of:
a. the maximum loan value less any existing Debt, or
b. an amount which, when added to any existing Debt, does not
exceed the lesser of:
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i. $50,000 (reduced by any excess of the highest
outstanding Debt during the one year period ending on
the day before the date on which the current loan is
made, over the outstanding Debt on the date the
current loan is made), or
ii. $10,000 or, if greater, one-half of the Contract
Value.
An Employee's investment in the Initial Guarantee Period or the Renewal
Guarantee Period will be reduced by the amount withdrawn from that
guarantee period in connection with the loan and such amount will be
transferred to the Loan Account, subject to a Market Value Adjustment
as described in Part 8 Transfer Market Value Adjustment of the
Contract. On each Certificate Anniversary, the excess of the Debt over
the amount in the Loan Account attributable to the Employee will be
transferred from the current guarantee period to the Loan Account. Any
amounts in the Loan Account will earn interest at 4% per annum.
Since the amount of a loan is removed from the current guarantee
period, a loan will have a permanent effect on the Contract Value. The
longer the loan is outstanding, the greater the effect is likely to be.
The loan interest rate will be 6% per annum. Interest will be payable
in arrears on each Certificate Anniversary. Any interest not paid when
due will be added to the Debt and bear interest in the same manner.
An Employee may repay any Debt in whole or in part while the Contract
is in force. Loans must be repaid within 5 years, except for loans to
acquire a principal residence for the Employee. Repayment must be in
level amounts made at least quarterly.
If, on any date, the Debt of an Employee exceeds the Contract Value,
then the Contract will be in default as to that Employee. In such case
we will send the Employee a notice of default and tell him what payment
is needed to cure the default. The Employee will have a 31-day grace
period from the date of mailing of such notice during which to pay the
default amount. If the required payment is not paid within the grace
period, the Employee's interest in the Contract may be foreclosed
(terminated without value).
DIRECT ROLLOVERS
12. A distributee may elect, at the time and in the manner prescribed by
us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative payee
under a qualified domestic relations order, as defined in IRC Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
A direct rollover is a payment by the plan administrator or us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
13. All references in the Contract to IRC Section 72(s) are deleted.
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Endorsed on the Certificate Date of this Certificate.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Richard Hirtle
Vice-President
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EXHIBIT 4(vi)
<PAGE> 2
SECTION 401 PLANS ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Certificate
to which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either a trustee of a qualified retirement plan under
IRC Sections 401(a) or 403(a) or an employee covered by such a plan. If
the Owner is a trustee, the term "Participant" as used in this
Endorsement shall mean the individual employee for whose benefit the
employer has established the plan. If the Owner is an employee, the
term "Participant" shall mean the employee.
In all cases, the Annuitant shall be the Participant and the Annuitant
cannot be changed. Prior to the Maturity Date, the Co-Annuitant can be
changed, but such change shall not require any distributions under the
Contract.
NONTRANSFERABLE
2. An Owner may not transfer his interest in the Contract except: (1) to
the Participant; (2) to a trustee or successor trustee of a retirement
plan qualified under IRC Sections 401(a) or 403(a); or (3) as otherwise
permitted by applicable regulations of the Internal Revenue Service.
If the Owner is the Participant, he may not assign, sell, transfer, or
discount his interest in the Contract, or pledge it as collateral for a
loan or as security for the performance of an obligation or for any
other purpose, other than to us.
REQUIRED BEGINNING DATE
3. The Participant's entire interest in the Contract shall be distributed
as required by IRC Section 401(a)(9), and the regulations thereunder,
including the minimum distribution incidental benefit requirement of
Prop. Treas. Reg. Section 1.401(a)(9)-2.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
(1) the Participant reaches age 70 1/2, or (2) the Participant retires
from the employment of the employer sponsoring the retirement plan with
respect to which the Contract was purchased, whichever is later. Clause
(2) shall only apply to a Participant who has attained age 70 1/2
before January 1, 1988, and is not a "5- percent owner" (within the
meaning of IRC Section 416(i)) at any time during the plan year ending
with or within the calendar year in which such owner attained age 66
1/2, and any subsequent plan year. If the Participant becomes a
"5-percent owner" in a year after the year in which he or she attains
age 70 1/2, the required beginning date shall be April 1 of the
calendar year following the calendar year in which such subsequent plan
year ends.
For a Participant in a governmental plan or a church plan (as defined
in IRC Section 401(a)(9)(C)), the required beginning date shall be
April 1 of the calendar year following the later of (1) the calendar
year in which the Participant attains age 70 1/2, or (2) the calendar
year in which the Participant retires.
The requirements of Sections 3,4, and 6 of this Endorsement do not
apply with respect to a benefit to which a proper designation is in
effect under section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
DISTRIBUTIONS DURING PARTICIPANT'S LIFE
4. The Participant's entire interest shall be distributed no later than
the required beginning date, or shall be distributed, beginning no
later than the required beginning date over (a) the life of the
Participant or the joint lives of the Participant and an individual who
is his or her designated beneficiary (within the meaning of IRC Section
401(a)(9)), or (b) a period not extending beyond the life expectancy of
the Participant, or the joint life and last survivor expectancy of the
Participant and the designated beneficiary.
If the Participant's interest is to be distributed over a period
greater than one year, then the amount to be distributed by December 31
of each year (including the year in which the required beginning date
occurs) shall be determined
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in accordance with the requirements of IRC Section 401(a)(9), including
the incidental death benefit requirements of IRC Section 401(a)(9)(G),
and the regulations thereunder, including the minimum distribution
incidental benefit requirements of Proposed Treasury Regulation Section
1.401(a)(9)-2.
DEATH BENEFIT
5. If, in the event of the Participant's death prior to the Maturity Date,
the Death Benefit is not paid to the trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a), it shall be paid to (1)
the surviving spouse of the Participant in the form required by IRC
Section 417(c), unless the spouse elects otherwise in accordance with
the requirements of IRC Section 417 or regulations promulgated
thereunder, or (2) if there is no surviving spouse, or if the surviving
spouse has consented in the manner required by IRC Section 417, or if
regulations promulgated by the Treasury Department under IRC Section
417 otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Certificate, the first sentence of the paragraph "Death of Annuitant"
is deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER PARTICIPANT'S DEATH
6. If the Participant dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the
Participant's interest (if any) shall be distributed at least as
rapidly as under the method of distribution in effect as of the
Participant's death.
If the Participant dies before the required beginning date and an
irrevocable annuity distribution has not begun, the Participant's
entire interest shall be distributed by December 31 of the calendar
year containing the fifth anniversary of the Participant's death,
except that
(a) if the interest is payable to an individual who is the
Participant's designated beneficiary, the designated
beneficiary may elect to receive the entire interest over the
life of the designated beneficiary or over a period not
extending beyond the life expectancy of the designated
beneficiary, commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died; or
(b) if the designated beneficiary is the Participant's
surviving spouse, the surviving spouse may elect to receive
the entire interest over the life of the surviving spouse or
over a period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later
of:
(i) December 31 of the calendar year immediately
following the calendar year in which the Participant
died, and
(ii) December 31 of the calendar year in which the
Participant would have attained age 70 1/2. If the
surviving spouse dies before distributions begin, the
limitations of this section shall be applied as if
the surviving spouse were the Participant.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Participant's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Participant's death. If no
election is made, the entire interest will be distributed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Certificate, the distribution requirements of
provisions "(c)" and "(d)" are deleted. If, after the Participant's
death, the designated beneficiary dies before the Maturity Date, no
Death Benefit is payable.
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LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Participant, or (b) for purposes of
distributions beginning after the Participant's death, by the surviving
spouse. Such an election shall be irrevocable as to the Participant or
the surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us and are stated in the
employer's plan, only Annuity Options 1 and 2 shall be available to the
Participant. All Annuity Options must meet the requirements of IRC
Section 401(a)(9), including the requirement of IRC Section
401(a)(9)(G) that payments to persons other than Participants are
incidental.
Annuity Option 1(b) is not available for a Participant whose life
expectancy is less than 10 years. Under Annuity Option 2(a) and 2(b)
the designated Co-Annuitant must be the Participant's spouse. Annuity
Option 2(b) is not available for a Participant and his or her spouse
where the joint life expectancy of the Participant and such spouse is
less than 10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Participant. A married Participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of IRC Section 417 or provided such election is
otherwise permitted under Treasury Regulations. An unmarried
Participant will be deemed to have elected Annuity Option 1(a) unless
he or she makes a different election in the manner required under IRC
Section 417 (and applicable regulations).
ELECTIONS AND CONSENTS
9. Elections and consents made pursuant to the Contract may be revoked in
the form, time, and manner prescribed in IRC Section 417 (and
applicable regulations). All elections and consents required by the
Contract shall adhere to the requirements of the applicable regulations
interpreting IRC Section 417 (or any other applicable law), including
the requirements as to the timing of any elections or consents.
No amount may be paid from the Contract in a lump sum unless such
payment is allowed under both the retirement plan with regard to which
the Contract is purchased and the Internal Revenue Code and related
regulations. A Participant who is married must have the consent of his
or her spouse to withdraw all or part of the Contract Value.
MATURITY VALUE
10. If the Contract Value is greater than $3,500, as determined on the
first day of the month preceding the Maturity Date, in accordance with
the requirements of IRC Sections 411(a)(11) and 417 (and applicable
regulations), we will not exercise our right to pay the Contract Value
on the Maturity Date in one lump sum in lieu of annuity benefits.
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DIRECT ROLLOVERS
11. Notwithstanding any provision of the Contract to the contrary that
would otherwise limit a distributee's election under this Section 11, a
distributee may elect, at the time and in the manner prescribed by us,
to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the distributee in a direct
rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under IRC Section 401(a)(9); and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an individual retirement account
described in IRC Section 408(a), an individual retirement annuity
described in IRC Section 408(b), an annuity plan described in IRC
Section 403(a), or a qualified trust described in IRC Section 401(a),
that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account
or individual retirement annuity.
A distributee includes a Participant. In addition, the Participant's
surviving spouse and the Participants's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in IRC Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
A direct rollover is a payment by us to the eligible retirement plan
specified by the distributee.
IRC SECTION 72(S)
12. All references in the Contract to IRC Section 72(s) are deleted from
the Contract.
Endorsed on the Certificate Date of this Certificate.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Richard Hirtle
Vice President
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