-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P2WrNpsXx84ekEG/G1r6qrHLA0K12nHmU1CmU7bx3jwGJmWf5ZpMwp3BvJnex2T2 JgO5j2AghT4FlxwX1gs5Ag== 0000945094-99-000161.txt : 19990430 0000945094-99-000161.hdr.sgml : 19990430 ACCESSION NUMBER: 0000945094-99-000161 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHBROOK LIFE INSURANCE CO CENTRAL INDEX KEY: 0000716791 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363001527 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 033-90272 FILM NUMBER: 99604506 BUSINESS ADDRESS: STREET 1: 3100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 7084025000 MAIL ADDRESS: STREET 1: 3100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 S-1/A 1 NORTHBROOK SAM AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999 - ------------------------------------------------------------------------------ FILE NO. 033-90272 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-1 ON FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 NORTHBROOK LIFE INSURANCE COMPANY (Exact Name of Registrant) ARIZONA 36-3001527 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) 3100 SANDERS ROAD, NORTHBROOK, ILLINOIS 60062 847-402-2400 (Address and Phone Number of Principal Executive Office) MICHAEL J. VELOTTA VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL NORTHBROOK LIFE INSURANCE COMPANY 3100 SANDERS ROAD NORTHBROOK, ILLINOIS 60062 847-402-2400 (Name, Complete Address and Telephone Number of Agent for Service) COPIES TO: RICHARD T. CHOI, ESQUIRE CHRISTINE A. EDWARDS, ESQ. FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS INC. 1050 CONNECTICUT AVENUE, N.W. TWO WORLD TRADE CENTER, 74TH FLOOR SUITE 825 NEW YORK, NY 10048 WASHINGTON, D.C. 20036-5366 Approximate date of commencement of proposed sale to the public: The annuity contract covered by this registration statement is to be issued promptly and from time to time 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, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: /X/ THE SCHEDULED ANNUITY MANAGER Northbrook Life Insurance Company Prospectus dated May 1, 1999 3100 Sanders Road, Northbrook, IL 60062 Telephone Number: 1-800-654-2397 Northbrook Life Insurance Company ("Northbrook") is offering The Scheduled Annuity Manager, a group and individual flexible premium deferred annuity contract ("Contract"). This prospectus contains information about the Contract that you should know before investing. Please keep it for future reference. The Contracts are available exclusively through Dean Witter Reynolds Inc., the principal underwriter for the Contracts. The Securities and Exchange Commission has not approved or disapproved the securities described in this prospectus, nor has it passed on the accuracy or the adequacy of this prospectus. Anyone who tells you IMPORTANT otherwise is committing a federal crime. NOTICES The Contracts are not FDIC insured. TABLE OF CONTENTS - ------------------------------------------------------------------------------
Page Overview Important Terms.......................................... The Contract At A Glance................................. How the Contract Works................................... The Contract............................................. Purchases and Contract Value.................................................... Contract Features Guarantee Periods........................................ Expenses................................................. Access To Your Money..................................... Income Payments.......................................... Death Benefits........................................... More Information: Northbrook............................................. Other Information The Contract........................................... Qualified Plans........................................ Legal Matters.......................................... Year 2000.............................................. Taxes.................................................... Experts.................................................. Annual Reports and Other Documents....................... Appendix A - Market Value Adjustment ....................
IMPORTANT TERMS - ------------------------------------------------------------------------------ This prospectus uses a number of important terms that you may not be familiar with. The index below identifies the page that describes each term. The first use of each term in this prospectus appears highlighted. Page Accumulation Phase..................................... Annuitant.............................................. Automatic Payment Plan................................. Automatic Laddering Program............................ Beneficiary............................................ Cancellation Period.................................... Cash Surrender Value................................... *Contract ............................................. Contract Value......................................... Contract Owner ("You") ................................ Death Benefit.......................................... Due Proof of Death..................................... Guarantee Periods..................................... Income Plan ........................................... Issue Date ............................................ Market Value Adjustment ............................... Northbrook ("We")...................................... Payout Phase........................................... Payout Start Date .................................... Preferred Withdrawal Amount............................ Qualified Contracts.................................... Systematic Withdrawal Program.......................... *In certain states, the Contract is only available as a group Contract. In these states, we will issue you a certificate that represents your ownership and that summarizes the provisions of the group Contract. References to "Contract" in this prospectus include certificates, unless the context requires otherwise. THE CONTRACT AT A GLANCE - ------------------------------------------------------------------------------ The following is a snapshot of the Contract. Please read the remainder of this prospectus for more information. ---------------------------------- ----------------------------------------- Flexible Payments You can purchase a Contract with as little as $1,000 ($2,000 for a Qualified Contract) (we may increase the minimum to $4,000 in the future, other than for "Qualified Contracts," which are Contracts issued with qualified plans). You can add to your Contract as often and as much as you like, but each payment must be at least $1,000. You must maintain a minimum account size of $1,000. ---------------------------------- ----------------------------------------- Right to Cancel You may cancel your Contract within 20 days of receipt or any longer period your state may require ("Cancellation Period") and receive a full refund of your purchase payments. ---------------------------------- ----------------------------------------- Expenses You will bear the following expenses: o Withdrawal charge of 6% on amounts withdrawn (with exceptions) o State premium tax (if your state imposes one) ---------------------------------- ----------------------------------------- Guaranteed Interest The Contract offers fixed interest rates that we guarantee for specified periods we call "Guarantee Periods." To find out what the current rates are on the Guarantee Periods, call us at 1-800-654-2397. ---------------------------------- ----------------------------------------- Special Services For your convenience, we offer these special services: o Automatic Additions Program o Systematic Withdrawal Program ---------------------------------- ----------------------------------------- Income Payments The Contract offers three income payment plans: o life income with or without guaranteed payments (5 to 30 years) o a joint and survivor life income with or without guaranteed payments (5 to 30 years) o guaranteed payments for a specified period (5 to 30 years) ---------------------------------- ----------------------------------------- Death Benefits If you or the Annuitant dies before the Payout Start Date, we will pay the death benefit described in the Contract. ---------------------------------- ----------------------------------------- Withdrawals You may withdraw some or all of your Contract value ("Contract Value") at anytime prior to the Payout Start Date. If you withdraw Contract Value from a Guarantee Period before its maturity, a withdrawal charge, Market Value Adjustment, and taxes (including a 10% penalty tax for withdrawals before age 59 1/2) may apply. ---------------------------------- ----------------------------------------- HOW THE CONTRACT WORKS - ------------------------------------------------------------------------------ The Contract basically works in two ways. First, the Contract can help you (we assume you are the Contract owner) save for retirement because you can invest in the Contract and pay no federal income taxes on any earnings until you withdraw them. You do this during what we call the "Accumulation Phase" of the Contract. The Accumulation Phase begins on the date we issue your Contract (we call that date the "Issue Date") and continues until the Payout State Date, which is the date we apply your money to provide income payments. During the Accumulation Phase, you may allocate your purchase payments to our Fixed Account for one or more Guarantee Periods. During each Guarantee Period, your money will earn a fixed rate of interest that we declare periodically. Second, the Contract can help you plan for retirement because you can use it to receive retirement income for life and/or for a pre-set number of years, by selecting one of the income payment options (we call these "Income Plans") described on page __. You receive income payments during what we call the "Payout Phase" of the Contract, which begins on the Payout Start Date and continues until we make the last income payment provided by the Income Plan you select. During the Payout Phase, we guarantee the amount of your payments, which will remain fixed. The amount of money you accumulate under your Contract during the Accumulation Phase and apply to an Income Plan will determine the amount of your income payments during the Payout Phase. The timeline below illustrates how you might use your Contract.
Issue Payout Start Date Accumulation Phase Date Payout Phase - ------------------------------------------------------------------------------------------------------------------ You save for retirement | | | ? You buy You elect to receive income You can receive Or you can a Contract payments or receive a lump sum income payments receive income payment for a set period payments for life
As the Contract owner, you exercise all of the rights and privileges provided by the Contract. If you die, any surviving Contract owner or if there is none, the Beneficiary will exercise the rights and privileges provided by the Contract. See "The Contract." In addition, if you die before the Payout Start Date, we will pay a death benefit to any surviving Contract owner or, if there is none, to your Beneficiary. See "Death Benefits." Please call us at 1-800-654-2397 if you have any question about how the Contract works. THE CONTRACT - ------------------------------------------------------------------------------ CONTRACT OWNER The Scheduled Annuity Manager is a contract between you, the Contract owner, and Northbrook, a life insurance company. As the Contract owner, you may exercise all of the rights and privileges provided to you by the Contract. That means it is up to you to select or change (to the extent permitted): o the amount and timing of your purchase payments and withdrawals, o the programs you want to use to invest or withdraw money, o the income payment plan you want to use to receive retirement income, o the Annuitant (either yourself or someone else) on whose life the income payments will be based, o the Beneficiary or Beneficiaries who will receive the benefits that the Contract provides when you die, and o any other rights that the Contract provides. If you die, any surviving Contract owner or, if none, the Beneficiary may exercise the rights and privileges provided to them by the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. You can use the Contract with or without a qualified plan. A qualified plan is a personal retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the requirements of the Internal Revenue Code. Qualified plans may limit or modify your rights and privileges under the Contract. We use the term "Qualified Contract" to refer to a Contract issued with a qualified plan. See "Qualified Plans" on page __. ANNUITANT The Annuitant is the individual whose life determines the amount and duration of income payments (other than under Income Plans with guaranteed payments for a specified period). The Contract requires that there be an Annuitant at all times during the Accumulation Phase and on the Payout Start Date. The Annuitant must be a natural person. You initially designate an Annuitant in your application. If the Contract owner is a natural person, you may change the Annuitant at any time prior to the Payout Start Date. Once we receive your change request, any change will be effective at the time you sign the written notice. We are not liable for any payment we make or other action we take before receiving any written request from you. You may designate a joint Annuitant, who is a second person on whose life income payments depend. If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be the youngest Contract owner, unless the Contract owner names a different annuitant. BENEFICIARY The Beneficiary is the person who may elect to receive the death benefit or become the new Contract owner if the sole surviving Contract owner dies before the Payout Start Date. If the sole surviving Contract owner dies after the Payout Start Date, the Beneficiary will receive any guaranteed income payments scheduled to continue. You may name one or more Beneficiaries when you apply for a Contract. You may change or add Beneficiaries at any time, unless you have designated an irrevocable Beneficiary. We will provide a change of Beneficiary form to be signed and filed with us. Any change will be effective at the time you sign the written notice. Until we receive your written notice to change a Beneficiary, we are entitled to rely on the most recent Beneficiary information in our files. We will not be liable as to any payment or settlement made prior to receiving the written notice. Accordingly, if you wish to change your Beneficiary, you should deliver your written notice to us promptly. If the Contract owner is a natural person, we will determine the Beneficiary from the most recent request of the Contract owner. If the Contract owner is a grantor trust, then the Beneficiary will be that same trust. If the Contract owner is a non-natural person other than a grantor trust, the Contract owner is also the Beneficiary, unless a different Beneficiary is named. If you did not name a Beneficiary or if the named Beneficiary is no longer living, the Beneficiary will be: o your spouse or, if he or she is no longer alive, o your surviving children equally, or if you have no surviving children, o your estate. If more than one Beneficiary survives you, we will divide the death benefit among your Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the death benefit in equal amounts to the surviving Beneficiaries. MODIFICATION OF THE CONTRACT Only a Northbrook officer may approve a change in or waive any provision of the Contract. Any change or waiver must be in writing. None of our agents has the authority to change or waive the provisions of the Contract. We may not change the terms of the Contract, without your consent, except to conform the Contract to applicable law or changes in the law. If a provision of the Contract is inconsistent with state law, we will follow state law. ASSIGNMENT You may assign an interest in your Contract. No Beneficiary may assign benefits under the Contract until they are due. We will not be bound by any assignment until you sign it and file it with us. We are not responsible for the validity of any assignment. Federal law prohibits or restricts the assignment of benefits under many types of retirement plans and the terms of such plans may themselves contain restrictions on assignments. An assignment may also result in taxes or tax penalties. You should consult with an attorney before assigning your Contract. PURCHASES AND CONTRACT VALUE - ------------------------------------------------------------------------------ MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least $1,000 (2,000 for a Qualified Contract). We may increase the minimum to $4,000 in our sole discretion. (The higher minimum would not apply to Qualified Contracts that are issued under plans that qualify for special federal income tax treatment.) Each subsequent purchase payment must be at least $1,000. You may make purchase payments at any time prior to the Payout Start Date. We reserve the right to limit the maximum amount and number of purchase payments we will accept. AUTOMATIC ADDITIONS PROGRAM You may make subsequent purchases payments by automatically transferring money from your bank account. Please call or write us for an enrollment form. ALLOCATION OF PURCHASE PAYMENTS For each purchase payment, you must select a Guarantee Period. A Guarantee Period is a period of years during which you will earn a guaranteed interest rate on your money. You must allocate at least $1,000 to any one Guarantee Period at the time you make your purchase payment or select a renewal Guarantee Period. We will apply your purchase payment to the Guarantee Period you select within 7 days of the receipt of the payment. If you do not select a Guarantee Period for a purchase payment, we will allocate the purchase payment to the same period used for the most recent purchase payment. RIGHT TO CANCEL You may cancel your Contract within the Cancellation Period, which is 20 days of receipt or any longer period your state may require. You may return it by delivery it or mailing it to us. If you exercise this right to cancel, the Contract terminates and we will pay you the full amount of your purchase payments or any greater amount that your state may require. CONTRACT VALUE Your Contract Value at any time during the Accumulation Phase is equal to the purchase payments you have invested in the Guarantee Periods, plus earnings thereon, and less any amounts previously withdrawn. GUARANTEE PERIODS - ------------------------------------------------------------------------------ Each payment allocated to a Guarantee Period earns interest at a specified rate that we guarantee. We are currently offering Guarantee Periods of 5 years in length. In the future we may offer Guarantee Periods of different lengths ranging from 1 to 10 years or stop offering some Guarantee Periods. Amounts allocated to Guarantee Periods become part of our general account, which supports our insurance and annuity obligations. The general account consists of our general assets other than those in segregated asset accounts. We have sole discretion to invest the assets of the general account, subject to applicable law. Any money you allocate to a Guarantee Period does not entitle you to share in the investment experience of the general account. You must allocate at least $1,000 to a Guarantee Period at the time you make a purchase payment or select a renewal Guarantee Period. INTEREST RATES We will tell you what interest rates and Guarantee Periods we are offering at a particular time. We will not change the interest rate that we credit to a particular investment until the end of the relevant Guarantee Period. We may declare different interest rates for Guarantee Periods of the same length that begin at different times. We have no specific formula for determining the rate of interest that we will declare initially or in the future. We will set those interest rates based on investment returns available at the time of the determination. In addition, we may consider various other factors in determining interest rates including regulatory and tax requirements, sales commissions and administrative expenses, general economic trends, and competitive factors. We determine the interest rates to be declared in our sole discretion. We can neither predict nor guarantee what those rates will be in the future. For current interest rate information, please contact your sales representative or Northbrook at 1-800-654-2397. The interest rate will never be less than the minimum guaranteed rate stated in the Contract. HOW WE CREDIT INTEREST We will credit interest to your initial purchase payment from the Issue Date. We will credit interest to your additional purchase payments from the date we receive them. We will credit interest daily to each amount allocated to a Guarantee Period at a rate that compounds to the annual interest rate that we declared at the beginning of the applicable Guarantee Period. The following example illustrates how a purchase payment would grow, given an assumed Guarantee Period and annual interest rate: Purchase Payment..............................$10,000 Guarantee Period..............................5 years Annual Interest Rate........................... 4.50%
END OF CONTRACT YEAR YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ------ ------ ------ ------ ------ Beginning Contract Value $10,000.00 X (1 + Annual Interest Rate) X 1.045 $10,450.00 Contract Value at end of Contract Year $10,450.00 X (1 + Annual Interest Rate) X 1.045 $10,920.25 Contract Value at end of Contract Year $10,920.25 X (1 + Annual Interest Rate) X 1.045 $11,411.66 Contract Value at end of Contract Year $11,411.66 X (1 + Annual Interest Rate) X 1.045 $11,925.19 Contract Value at end of Contract Year $11,925.19 X (1 + Annual Interest Rate) X 1.045 $12,461.82 Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period. If you were to make a partial withdrawal, you may be required to pay a withdrawal charge. In addition, the amount withdrawn may be increased or decreased by a Market Value Adjustment that reflects changes in interest rates since the time you invested the amount withdrawn. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given Guarantee Period may be more or less than shown above but will never be less than the guaranteed minimum rate stated in the Contract. RENEWALS Prior to the end of each Guarantee Period, we will mail you a notice asking you what to do with your money. During the 30-day period after the end of the Guarantee Period, you may: 1) take no action. We will automatically apply your money to a new Guarantee Period of the same length as the expired Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for a Guarantee Period of that length; or 2) instruct us to apply your money to one or more new Guarantee Periods that may be available. The new Guarantee Period(s) will begin on the day the previous Guarantee Period ends. The new interest rate will be our then current declared rate for those Guarantee Periods; or 3) withdraw all or a portion of your money without incurring a withdrawal charge or a Market Value Adjustment. In this case, the amount withdrawn will be deemed to have been renewed at the shortest Guarantee Period then being offered with current interest credited from the date the Guarantee Period expired. Amounts not withdrawn will be applied to a new Guarantee Period of the same length as the previous Guarantee Period. The new Guarantee Period will begin on the day the previous Guarantee Period ends. Under our Automatic Laddering Program, you may choose, in advance, to use Guarantee Periods of the same length for all renewals. You can select this Program at any time during the Accumulation Phase, including on the Issue Date. We will apply renewals to Guarantee Periods of the selected length until you direct us in writing to stop. We may stop offering this Program at any time. For additional information on the Automatic Laddering Program, please call our customer support unit at 1-800-654-2397. MARKET VALUE ADJUSTMENT All withdrawals from a Guarantee Period, other than those taken within the first 30 days of a renewal Guarantee Period, are subject to a Market Value Adjustment. A Market Value Adjustment also applies upon payment of a death benefit under Contracts and when you apply amounts currently invested in a Guarantee Period to an Income Plan (other than during the 30-day period described above). We will not apply the Market Value Adjustment to withdrawals you make: o to satisfy IRS minimum distribution rules for the Contract, or o within the "Preferred Withdrawal Amount," described under "Expenses" below. We apply the Market Value Adjustment to reflect changes in interest rates from the time you first allocate money to a Guarantee Period to the time you remove it from that Guarantee Period. We calculate the Market Value Adjustment by comparing the Treasury Rate for a period equal to the Guarantee Period at its inception to the Treasury Rate for a period equal to the time remaining in the Guarantee Period when you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be positive or negative, depending on changes in interest rates. If interest rates increase significantly from the time you make a purchase payment, the Market Value Adjustment, withdrawal charge, premium taxes, and income tax withholding (if applicable) could reduce the amount you receive upon full withdrawal of your Contract Value to an amount that is less than the purchase payments plus interest at the minimum guaranteed interest rate under the Contract. Generally, if the Treasury Rate at the time you allocate money to a Guarantee Period is lower than the applicable current Treasury Rate for a period equal to the time remaining in the Guarantee Period, then the Market Value Adjustment will result in a lower amount payable to you. Conversely, if the Treasury Rate at the time you allocate money to a Guarantee Period is higher than the applicable current Treasury Rate, then the Market Value Adjustment will result in a higher amount payable to you. For example, assume that you purchase a Contract and select an initial Guarantee Period of 5 years and the Treasury Rate for that duration is 4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at that later time, the current Treasury Rate for a 2 year period is 4.00%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to you. Conversely, if the current Treasury Rate for the 2 year period is 5.00%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to you. The formula for calculating Market Value Adjustments is set forth in Appendix A to this prospectus, which also contains additional examples of the application of the Market Value Adjustment. EXPENSES - ------------------------------------------------------------------------------ As a Contract owner, you will bear the charges and expenses described below. WITHDRAWAL CHARGE We may assess a withdrawal charge equal to 6% of the amounts you withdraw. However, each year you may withdraw up to 10% of the funds initially allocated to the Guarantee Period from which you are making the withdrawal without paying a withdrawal charge. We measure each year from the commencement of the relevant Guarantee Period. Unused portions of this 10% "Preferred Withdrawal Amount" are not carried forward to future years or other Guarantee Periods. We will deduct withdrawal charges, if applicable, from the amount paid unless you instruct otherwise. We do not apply a withdrawal charge in the following situations: o on the Payout Start Date; o the death of the Contract owner or the Annuitant; o withdrawals taken to satisfy IRS minimum distribution rules for the Contract; or o withdrawals made within 30 days of their renewal Guarantee Periods. Withdrawals may be subject to tax penalties, income tax, and a Market Value Adjustment. You should consult your own tax counsel or other tax advisers regarding any withdrawals. PREMIUM TAXES Some states and other governmental entities (e.g., municipalities) charge premium taxes or similar taxes. We are responsible for paying these taxes and will deduct them from your Contract Value. Some of these taxes are due when the Contract is issued, others are due when income payments begin or upon surrender. Our current practice is not to charge anyone for these taxes until income payments begin or when a total withdrawal occurs, including payment upon death. We may discontinue this practice some time in the future, and deduct premium taxes from the purchase payments. Premium taxes generally range from 0% to 4%, depending on the state. At the Payout Start Date, we deduct the charge for premium taxes from the total Contract Value before applying the Contract Value to an Income Plan. ACCESS TO YOUR MONEY - ------------------------------------------------------------------------------ You can withdraw some or all of your money at any time prior to the Payout Start Date. You may not make any withdrawals or surrender your Contract once the Payout Phase has begun. You must specify the Guarantee Period from which you would like to withdraw your money. If the amount you withdraw reduces the amount invested in any Guarantee Period to less than $1,000, we will treat the withdrawal request as a request to withdraw the entire amount in that Guarantee Period. The amount you receive may be reduced by a withdrawal charge, income tax withholding, 10% tax penalty, and any premium taxes. The amount you receive may be increased or reduced by a Market Value Adjustment. If you request a total withdrawal, you must return your Contract to us. SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual basis at any time prior to the Payout Start Date. The minimum amount of each systematic withdrawal is $100. We will deposit systematic withdrawal payments into the Contract owner's bank account or Morgan Stanley Dean Witter Active Assets(TM) Account. Please consult with your Morgan Stanley Dean Witter Financial Advisor for details. Income taxes may apply to systematic withdrawals. Please consult your tax advisor before taking any withdrawal. We may modify or suspend the Systematic Withdrawal Program and charge a processing fee for the service. If we modify or suspend the Systematic Withdrawal Program, existing systematic withdrawal payments will not be affected. POSTPONEMENT OF PAYMENTS We may defer payment of withdrawals for up to six months from the date we receive your withdrawal request. MINIMUM CONTRACT VALUE If a withdrawal would reduce your Contract Value to less than $1,000, we will treat the request as a request to withdraw the entire Contract Value. Your Contract will terminate if you withdraw all of your Contract Value. We will, however, ask you to confirm your withdrawal request before terminating your Contract. If you surrender your Contract, we will pay you its Contract Value adjusted by any applicable Market Value Adjustment, less any applicable withdrawal charges and taxes. INCOME PAYMENTS - ------------------------------------------------------------------------------ PAYOUT START DATE You select the Payout Start Date in your application. The Payout Start Date is the day that we apply your Contract Value, adjusted by the Market Value Adjustment, less any applicable taxes, to an Income Plan. The Payout Start Date must be: o at least one month after the Issue Date; and o no later than the Annuitant's 90th birthday, or the 10th Contract anniversary, if later. You may change the Payout Start Date at any time by notifying us in writing of the change at least 30 days before the scheduled Payout Start Date. Absent a change, we will use the Payout Start Date as stated in your Contract. INCOME PLANS An Income Plan is a series of scheduled payments to you or someone you designate. You may choose and change your choice of Income Plan until 30 days before the Payout Start Date. If you do not select an Income Plan, we will make income payments in accordance with Income Plan 1 with guaranteed payments for 10 years. After the Payout Start Date, you may not make withdrawals or change your choice of Income Plan. The three Income Plans available under the Contract are: Income Plan 1 -- Life Income With or Without Guaranteed Payments. Under this plan, we make periodic income payments for as long as the Annuitant lives. In addition, for plans with guaranteed income payments, if the Annuitant dies before we have made all of the guaranteed income payments, we will continue to pay the remainder of such payments as required by the Contract. Income Plan 2 -- Joint and Survivor Life Income With or Without Guaranteed Payments. Under this plan, we make periodic income payments for at least as long as either the Annuitant or the joint Annuitant is alive. In addition, for plans with guaranteed income payments, if both the Annuitant and the joint Annuitant die before we have made all of the guaranteed income payments, we will continue to pay the remainder of such payments as required by the Contract. Income Plan 3 -- Guaranteed Payments for a Specified Period. Under this plan, we make periodic income payments for the period you have chosen. These payments do not depend on the Annuitant's life. You may elect to receive guaranteed payments under each of the above Income Plans for periods ranging from 5 to 30 years. The length of any guaranteed payment period under your selected Income Plan generally will affect the dollar amounts of each income payment. As a general rule, longer guarantee periods result in lower income payments, all other things being equal. For example, if you choose an Income Plan with payments that depend on the life of the Annuitant but with no minimum specified period for guaranteed payments, the income payments generally will be greater than the income payments made under the same Income Plan with a minimum specified period for guaranteed payments. We may make other Income Plans available, including ones that you and we agree upon. You may obtain information about them by writing or calling us. If you choose Income Plan 1 or 2, or, if available, another Income Plan with payments that continue for the life of the Annuitant or joint Annuitant, we may require proof of age and sex of the Annuitant or joint Annuitant before starting income payments, and proof that the Annuitant or joint Annuitant is still alive before we make each payment. Please note that under such Income Plans, if you elect to take no minimum guaranteed payments, it is possible that the payee could receive only 1 income payment if the Annuitant and any joint Annuitant both die before the second income payment, or only 2 income payments if they die before the third income payment, and so on. We will apply your Contract Value, adjusted by a Market Value Adjustment, less applicable taxes, to your Income Plan on the Payout Start Date. If the amount available to apply under an Income Plan is not enough to provide an initial payment of at least $20, and state law permits, we may: o pay you the Contract Value, adjusted by any Market Value Adjustment and less any applicable taxes, in a lump sum instead of the periodic payments you have chosen, or o we may reduce the frequency of your payments so that each payment will be at least $20. INCOME PAYMENTS We guarantee income payment amounts for the duration of the Income Plan. We calculate income payments by: 1) adjusting the value of your Contract on the Payout Start Date by any applicable Market Value Adjustment; 2) deducting any applicable premium tax; and 3) applying the resulting amount to the greater of (a) the appropriate value from the income payment table in your Contract or (b) such other value as we are offering at that time. We may defer making fixed income payments for a period of up to 6 months or such shorter time state law may require. If we defer payments for 30 days or more, we will pay interest as required by law from the date we receive the withdrawal request to the date we make payment. CERTAIN EMPLOYEE BENEFIT PLANS The Contracts offered by this prospectus contain income payment tables that provide for different payments to men and women of the same age, except in states that require unisex tables. We reserve the right to use income payment tables that do not distinguish on the basis of sex to the extent permitted by applicable law. In certain employment-related situations, employers are required by law to use the same income payment tables for men and women. Accordingly, if the Contract is to be used in connection with an employment-related retirement or benefit plan and we do not offer unisex annuity tables in your state, you should consult with legal counsel as to whether the purchase of a Contract is appropriate. DEATH BENEFITS - ------------------------------------------------------------------------------ We will pay a death benefit prior to the Payout Start Date on: 1) the death of any Contract owner, or 2) the death of the Annuitant, if the Contract owner is not the same person as the Annuitant. We will pay the death benefit to the new Contract owner as determined immediately after the death. The new Contract owner would be a surviving Contract owner or, if none, the Beneficiary. DEATH BENEFIT AMOUNT Prior to the Payout Start Date, the death benefit is equal to the greater of: (1) the Contract Value, and (2) the "Cash Surrender Value," which is the Contract Value, adjusted by any Market Value Adjustment, less withdrawal charges and premium taxes. We will calculate the death benefit as of the date we receive a complete request for payment of the death benefit. A claim for a distribution on death must include "Due Proof of Death." We will accept the following documentation as Due Proof of Death: o a certified original copy of the death certificate; or o a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or o any other proof acceptable to us. DEATH BENEFIT OPTIONS Upon death of the Contract owner, the new Contract owner generally has the following 3 options: 1) receive the Cash Surrender Value within 5 years of the date of death; 2) receive the Death Benefit in a lump sum. The "Death Benefit" is equal to the greater of the Contract Value and the Cash Surrender Value computed as of the date we receive a complete request for payment of Death Benefit; or 3) apply the Death Benefit to an Income Plan, with income payments beginning within one year of the date of death. Income payments must be made over the life of the new Contract owner, or a period not to exceed the life expectancy of the new Contract owner. Options 2 and 3 above are not available if we do not receive notice of death within 180 days of the date of death. We are currently waiving the 180 day limitation but may enforce it in the future. Please refer to your Contract for more details on the above options, including terms that apply to grantor trusts. If the new Contract owner is a non-natural person (other than a grantor trust), the new Contract owner must elect to receive the Death Benefit in a lump sum. If the surviving spouse of the deceased Contract owner is the new Contract owner, then the spouse may elect Options 2 or 3 listed above or may continue the Contract in the Accumulation Phase as if the death had not occurred. If the Contract is continued in the Accumulation Phase, the surviving spouse may make a single withdrawal of any amount within 1 year of the date of death without incurring a withdrawal charge. However, any applicable Market Value Adjustment, determined as of the date of the withdrawal, will apply. The single withdrawal amount is in addition to the annual Preferred Withdrawal Amount. If the Contract owner is not the Annuitant and the Annuitant dies, then the Contract owner has the following 3 options: 1) continue the Contract as if the death had not occurred; 2) receive the Death Benefit in a lump sum; or 3) apply the Death Benefit to an Income Plan, which must begin within 1 year of the date of death and must be for a period equal to or less than the life expectancy of the Contract owner. For Options 1 and 3, the new Annuitant will be the youngest Contract owner unless the Contract owner names a different Annuitant. Options 1 and 3 are not available if the Contract owner is a non-natural person (other than a grantor trust). Options 2 and 3 above are not available if we do not receive notice of death within 180 days of the date of death. We are currently waiving the 180 day limitation but may enforce it in the future. Please refer to your Contract for more details on the above options, including terms that apply to grantor trusts. MORE INFORMATION - ------------------------------------------------------------------------------ NORTHBROOK Northbrook is the issuer of the Contract. Northbrook is a stock life insurance company organized under the laws of the State of Arizona in 1998. Previously, Northbrook was organized under the laws of the State of Illinois in 1978. Northbrook is currently licensed to operate in the District of Columbia and all states except New York. We intend to offer the Contract in those jurisdictions in which we are licensed. Our home office is located at 3100 Sanders Road, Northbrook, Illinois, 60062. Northbrook is a wholly owned subsidiary of Allstate Life Insurance Company ("Allstate Life"), a stock life insurance company incorporated under the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a stock property-liability insurance company incorporated under the laws of Illinois. All of the outstanding capital stock of Allstate Insurance Company is owned by The Allstate Corporation. Northbrook and Allstate Life entered into a reinsurance agreement effective December 31, 1987. Under the reinsurance agreement, Allstate Life reinsures all of Northbrook's liabilities under its various insurance Contracts. The reinsurance agreement provides us with financial backing from Allstate Life. However, it does not create a direct contractual relationship between Allstate Life and you. In other words, the obligations of Allstate Life under the reinsurance agreement are to Northbrook; Northbrook remains the sole obligor under the Contract to you. Several independent rating agencies regularly evaluate life insurers' claims-paying ability, quality of investments, and overall stability. A.M. Best Company assigns A+ (Superior) to Allstate Life which automatically reinsures all net business of Northbrook. A.M. Best Company also assigns Northbrook the rating of A+(r) because Northbrook automatically reinsures all net business with Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very Strong) financial strength rating and Moody's assigns an Aa2 (Excellent) financial strength rating to Northbrook. Northbrook shares the same ratings of its parent, Allstate Life. We may from time to time advertise these ratings in our sales literature. THE CONTRACT Dean Witter Reynolds Inc. ("Dean Witter"), located at Two World Trade Center, 74th Floor, New York, NY 10048, serves as distributor of the Contracts. Dean Witter is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. Dean Witter is a registered broker-dealer under the Securities Exchange Act of 1934, as amended ("Exchange Act") and is a member of the National Association of Securities Dealers. Dean Witter is also registered with the Securities and Exchange Commission ("SEC") as an investment adviser. We may pay broker-dealers up to a maximum sales commission of 8% both upon sale of the Contract and upon renewal of a Guarantee Period. In addition, sale of the Contract may count toward incentive program awards for broker-dealers. The underwriting agreement with Dean Witter provides that we will reimburse Dean Witter for any liability to Contract owners arising out of services rendered or Contracts issued. QUALIFIED PLANS If you use the Contract with a qualified plan, the plan may impose different or additional conditions or limitations on withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates, income payments, and other Contract features. In addition, adverse tax consequences may result if qualified plan limits on distributions and other conditions are not met. Please consult your qualified plan administrator for more information. LEGAL MATTERS Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Northbrook on certain federal securities law matters. All matters of state insurance law pertaining to the Contracts, including the validity of the Contracts and Northbrook's right to issue such Contracts under state insurance law, have been passed upon by Michael J. Velotta, General Counsel of Northbrook. YEAR 2000 Northbrook is heavily dependent upon complex computer systems for all phases of its operations, including customer service, and policy and contract administration. Since many of Northbrook's older computer software programs recognize only the last two digits of the year in any date, some software may fail to operate properly in or after the year 1999, if the software is not reprogrammed or replaced ("Year 2000 Issue"). Northbrook believes that many of its counterparties and suppliers also have Year 2000 Issues which could affect Northbrook. In 1995, Allstate Insurance Company commenced a plan intended to mitigate and/or prevent the adverse effects of Year 2000 Issues. These strategies include normal development and enhancement of new and existing systems, upgrades to operating systems already covered by maintenance agreements and modifications to existing systems to make them Year 2000 compliant. The plan also includes Northbrook actively working with its major external counterparties and suppliers to assess their compliance efforts and Northbrook's exposure to them. Northbrook presently believes that it will resolve the Year 2000 Issue in a timely manner, and the financial impact will not materially affect its results of operations, liquidity or financial position. Year 2000 costs are and will be expensed as incurred. TAXES - ------------------------------------------------------------------------------ The following discussion is general and is not intended as tax advice. We make no guarantee regarding the tax treatment of any Contract or transaction involving a Contract. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on your individual circumstances. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax advisor. TAXATION OF NORTHBROOK Northbrook is taxed as a life insurance company under Part I of Subchapter L of the Internal Revenue Code ("Tax Code"). TAXATION OF ANNUITIES IN GENERAL Tax Deferral. Generally, you are not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where the owner is a natural person. As a general rule, annuity contracts owned by non-natural persons such as corporations, trusts, or other entities are not treated as annuity contracts for federal income tax purposes. The income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. Contracts will generally be treated as held by a natural person if the nominal owner is a trust that holds the Contract for the benefit of a natural person. Please see a competent tax advisor to discuss other possible exceptions to the nonnatural owner rule. Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under a non-Qualified Contract, amounts received are taxable to the extent the Contract Value, without regard to surrender charges, exceeds the investment in the Contract. The investment in the Contract is the gross premium paid for the Contract minus any amounts previously received from the Contract if such amounts were properly excluded from your gross income. If you make a partial withdrawal under a Qualified Contract, the portion of the payment that is not taxable is equal to the payment times the ratio of the investment in the contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) to the Contract Value. You should contact a competent tax advisor about the potential tax consequences of a Market Value Adjustment, as no definitive guidance exists on the proper tax treatment of Market Value Adjustments. If you make a full withdrawal under a non-Qualified Contract or a Qualified Contract, the amount received will be taxable only to the extent it exceeds the investment in the Contract. "Nonqualified distributions" from Roth IRAs are treated as made from contributions first and are taxable only to the extent that distributions exceed contributions. "Qualified distributions" from Roth IRAs are not taxable. "Qualified distributions" are any distributions made more than 5 taxable years after the taxable year of the first contribution to any Roth IRA and which are: o made on or after the date the individual attains age 59 1/2, o made to a beneficiary after the Contract owner's death, o attributable to the Contract owner being disabled, or o for a first time home purchase (first time home purchases are subject to a lifetime limit of $10,000). If you transfer a non-Qualified Contract without full and adequate consideration to a person other than your spouse (or to a former spouse incident to a divorce), you will be taxed on the difference between the Contract Value and the investment in the Contract at the time of transfer. Except for certain Qualified Contracts, any amount you receive as a loan under a Contract, and any assignment or pledge (or agreement to assign or pledge) of the Contract Value is treated as a withdrawal of such amount or portion. Taxation of Annuity Payments. Generally, the rule for income taxation of annuity payments received from a non-Qualified Contract provides for the return of your investment in the Contract in equal tax-free amounts over the payment period. The balance of each payment received is taxable. The amount excluded from income is determined by multiplying the payment by the ratio of the investment in the Contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the Contract. The annuity payments will be fully taxable after the total amount of the investment in the Contract is excluded using these ratios. If you die, and annuity payments cease before the total amount of the investment in the Contract is recovered, the unrecovered amount will be allowed as a deduction for your last taxable year. Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the Annuitant if the Contract is owned by a non-natural person, will cause a distribution of death benefits from a Contract. Generally, such amounts are included in income as follows: 1) if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal, or 2) if distributed under an Income Plan, the amounts are taxed in the same manner as an annuity payment. IRS Required Distribution at Death Rules. To qualify as an annuity contract for federal income tax purposes, a non-Qualified Contract must provide: 1) if any Contract owner dies on or after the Payout Start Date, but before the entire interest in the Contract has been distributed, the remaining portion of such interest must be distributed at least as rapidly as under the method of distribution being used as of the date of the owner's death; 2) if any Contract owner dies prior to the Payout Start Date, the entire interest in the Contract must be distributed within 5 years after the date of the owner's death. The 5-year requirement is satisfied if: o any portion of the Contract owner's interest which is payable to a designated Beneficiary is distributed over the life of such Beneficiary (or over a period not extending beyond the life expectancy of the Beneficiary), and o the distributions begin within 1 year of the Contract owner's death. If the Contract owner's designated Beneficiary is a surviving spouse, the Contract may be continued with the surviving spouse as the new Contract owner. If the owner of the Contract is a non-natural person, the Annuitant is treated as the Contract owner for purposes of applying the distribution at death rules. In addition, a change in the Annuitant on a Contract owned by a non-natural person is treated as the death of the Contract owner. Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable amount of any premature distribution from a non-Qualified Contract. The penalty tax generally applies to any distribution made prior to the date you attain age 59 1/2. However, no penalty tax is incurred on distributions: o made on or after the date the Contract owner attains age 59 1/2; o made as a result of the Contract owner's death or disability; o made in substantially equal periodic payments over the Contract owner's life or life expectancy, o made under an immediate annuity; or o attributable to investment in the Contract before August 14, 1982. You should consult a competent tax advisor to determine if any other exceptions to the penalty apply to your situation. Similar exceptions may apply to distributions from Qualified Contracts. Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts issued by Northbrook (or its affiliates) to the same owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. TAX QUALIFIED CONTRACTS The Contract may be used with several types of qualified plans. The tax rules applicable to participants in qualified plans vary according to the type of plan and the terms and conditions of the plan. Qualified plan participants, and Contract owners, Annuitants and Beneficiaries under the Contract may be subject to the terms and conditions of the qualified plan regardless of the terms of the Contract. TYPES OF QUALIFIED PLANS IRAs. Section 408 of the Code permits eligible individuals to contribute to an individual retirement plan known as an IRA. IRAs are subject to limitations on the amount that can be contributed and on the time when distributions may commence. Certain distributions from other types of qualified plans may be "rolled over" on a tax-deferred basis into an IRA. An IRA generally may not provide life insurance, but it may provide a death benefit that equals the greater of the premiums paid or the Contract value. The Contract provides a death benefit that in certain situations, may exceed the greater of the payments or the contract value. If the IRS treats the death benefit as violating the prohibition on investment in life insurance contracts, the Contract would not qualify as an IRA. Roth IRAs. Section 408A of the Code permits eligible individuals to make nondeductible contributions to an individual retirement plan known as a Roth IRA. Roth IRAs are subject to limitations on the amount that can be contributed. In certain instances, distributions from Roth IRAs are excluded from gross income. Subject to certain limits, a traditional Individual Retirement Account or Annuity may be converted or "rolled over" to a Roth IRA. The taxable portion of a conversion or rollover distribution is included in gross income, but is exempt from the 10% penalty tax on premature distributions. Simplified Employee Pension Plans. Section 408(k) of the Code allows employers to establish simplified employee pension plans for their employees using the employees' IRAs if certain criteria are met. Under these plans the employer may, within limits, make deductible contributions on behalf of the employees to their individual retirement annuities. Employers intending to use the contract in connection with such plans should seek competent advice. Savings Incentive Match Plans for Employees (SIMPLE Plans). Sections 408(p) and 401(k) of the Tax Code allow employers with 100 or fewer employees to establish SIMPLE retirement plans for their employees. SIMPLE plans may be structured as a SIMPLE retirement account using an employee's IRA to hold the assets, or as a Section 401(k) qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a salary deferral program for eligible employees and matching or nonelective contributions made by employers. Employers intending to use the Contract in conjunction with SIMPLE plans should seek competent tax and legal advice. Tax Sheltered Annuities. Section 403(b) of the Tax Code permits public school employees and employees of certain types of tax-exempt organizations (specified in Section 501(c)(3) of the Code) to have their employers purchase Contracts for them. Subject to certain limitations, a Section 403(b) plan allows an employer to exclude the purchase payments from the employees' gross income. A Contract used for a Section 403(b) plan must provide that distributions attributable to salary reduction contributions made after 12/31/88, and all earnings on salary reduction contributions, may be made only: 1) on or after the date the employee: o attains age 59 1/2, o separates from service, o dies, or o becomes disabled; or 2) on account of hardship (earnings on salary reduction contributions may not be distributed for hardship). These limitations do not apply to withdrawals where Northbrook is directed to transfer some or all of the Contract Value to another 403(b) plan. Corporate and Self-Employed Pension and Profit Sharing Plans. Sections 401(a) and 403(a) of the Tax Code permit corporate employers to establish various types of tax favored retirement plans for employees. The Tax Code permits self-employed individuals to establish tax favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of Contracts to provide benefits under the plans. State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. 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 income taxes. The employees must be participants in an eligible deferred compensation plan. Employees with Contracts under the plan are considered general creditors of the employer. The employer, as owner of the Contract, has the sole right to the proceeds of the Contract. Under these plans, contributions made for the benefit of the employees will not be taxable to the employees until distributed from the plan. However, all compensation deferred under a 457 plan must remain the sole property of the employer. As property of the employer, the assets of the plan are subject only to the claims of the employer's general creditors, until such time as the assets become available to the employee or a beneficiary. INCOME TAX WITHHOLDING Northbrook is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless you elect to make a "direct rollover" of such amounts to an IRA or eligible retirement plan. Eligible rollover distributions generally include all distributions from Qualified Contracts, excluding IRAs, with the exception of: o required minimum distributions, o a series of substantially equal periodic payments made over a period of at least 10 years, or, o over the life (joint lives) of the participant (and beneficiary). Northbrook may be required to withhold federal and state income taxes on any distributions from non-Qualified Contracts, or Qualified Contracts that are not eligible rollover distributions, unless you notify us of your election to not have taxes withheld. EXPERTS - ----------------------------------------------------------------------------- The financial statements and the related financial statement schedule of Northbrook incorporated in this prospectus by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. ANNUAL REPORTS AND OTHER DOCUMENTS - ------------------------------------------------------------------------------ Northbrook's annual report on Form 10-K for the year ended December 31, 1998 ("Form 10-K Annual Report") is incorporated herein by reference, which means that it is legally a part of this prospectus. After the date of this prospectus and before we terminate the offering of the securities under this prospectus, all documents or reports we file with the SEC under the Exchange Act are also incorporated herein by reference, which means that they also legally become a part of this prospectus. Statements in this prospectus, or in documents that we file later with the SEC and that legally become a part of this prospectus, may change or supersede statements in other documents that are legally part of this prospectus. Accordingly, only the statement that is changed or replaced will legally be a part of this prospectus. We file our Exchange Act documents and reports, including our annual and quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR" system using the identifying number CIK No. 0000716791. The SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. You also can review these materials at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For more information on the operations of the SEC's Public Reference Room, call 1-800-SEC-0330. If you have received a copy of this prospectus, and would like a free copy of any document incorporated herein by reference (other than exhibits not specifically incorporated by reference into the text of such documents) , please write or call us at 3100 Sanders Road, Northbrook, Illinois 60062 (telephone : 1-800-654-2397). ANNUAL STATEMENTS At least once a year prior to the Payout Start Date, we will send you a statement containing information about your Contract Value. For more information, please contact your Morgan Stanley Dean Witter Financial Advisor or call our customer support unit at 1-800-654-2397. APPENDIX A MARKET VALUE ADJUSTMENT The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Guarantee Period for the week preceding the establishment of the Guarantee Period. N = the number of complete days from the date we receive the withdrawal request to the end of the Guarantee Period; and J = the Treasury Rate for a maturity of N days for the week preceding the receipt of the withdrawal request on the date we determine the Market Value Adjustment. If a Treasury Rate for a maturity of N days is not available, we will use a weighted average. If N is less than or equal to 365 days, J will be the 1-year Treasury Rate. The Market Value Adjustment factor is determined from the following formula: .9 X (I - J) X N/365 To determine the Market Value Adjustment, we will multiply the Market Value Adjustment factor by the amount withdrawn (in excess of the Preferred Withdrawal Amount) or applied to an Income Plan, from a Guarantee Period other than amounts withdrawn or applied from a renewal Guarantee Period during the first 30 days thereof. A-1 EXAMPLES OF MARKET VALUE ADJUSTMENT Purchase Payment: $10,000 Guarantee Period: 5 years Interest Rate: 4.50% Full Surrender: End of Contract Year 3 NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (Assumes declining interest rates) Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.0450)(3) = $11,411.66 Step 2. Calculate the Amount in excess of Preferred Withdrawal Amount (.10 X 10,000) = $1,000 the Preferred Withdrawal Amount: Amount in Excess: $11,411.66 - 1,000 = $10,411.66 Step 3. Calculate the Withdrawal Charge: .06 X $10,411.66 = $624.70 Step 4. Calculate the Market Value Adjustment: I = 4.5% J = 4.2% N = 730 days Market Value Adjustment Factor: .9 X (I-J) X N/365 = .9 X (.045 - .042) X (730/365) = .0054 Market Value Adjustment = Market Value Adjustment Factor X Amount Subject to Market Value Adjustment: = .0054 X $10,411.66 = $56.22 Step 5. Calculate the amount received by a Contract owner as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $624.70 + $56.22 = $10,843.18
A-2
EXAMPLE 2: (Assumes rising interest rates) Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.045)(3) = $11,411.66 Step 2. Calculate the Amount in excess of Preferred Withdrawal Amount (.10 X 10,000) = $1,000 the Preferred Withdrawal Amount: Amount in Excess: $11,411.66 - 1,000 = $10,411.66 Step 3. Calculate the Withdrawal Charge: .06 X $10,411.66 = $624.70 Step 4. Calculate the Market Value Adjustment: I = 4.5% J = 4.8% N = 730 Market Value Adjustment Factor: .9 X (I-J) X N/365 = .9 X (.045 - .048) X (730/365) = -.0054 Market Value Adjustment = Market Value Adjustment Factor X Amount Subject to Market Value Adjustment = -.0054 X $10,411.66 = - $56.22 Step 5. Calculate the amount received by a Contract owner as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $624.70 - $56.22 = $10,730.74
A-3 back cover This prospectus does not constitute an offering in any jurisdiction in which such offering may not lawfully be made. We do not authorize anyone to provide any information or representations regarding the offering described in this prospectus other than as contained in this prospectus. PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The By-laws of Northbrook Life Insurance Company ("Registrant") provide that Registrant will indemnify its officers and directors for certain damages and expenses that may be incurred in the performance of their duty to Registrant. No indemnification is provided, however, when such person is adjudged to be liable for negligence or misconduct in the performance of his or her duty, unless indemnification is deemed appropriate by the court upon application. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. Exhibit No. Description (1) Form of Underwriting Agreement (Incorporated herein by reference to Post-Effective Amendment No. 13 to the Form N-4 Registration Statement of Northbrook Variable Annuity Account II of Northbrook Life Insurance Company (File No. 033-35412) dated December 31, 1996.) (2) None (4) Form of Northbrook Life Insurance Company Flexible Premium Deferred Annuity Certificate and Application (5)(a) Opinion of General Counsel re: Legality (Previously filed in initial filing to this Registration Statement (File No. 033-90272) dated March 13, 1995.) (5)(b) Opinion and Consent of General Counsel re: Legality (8) None (11) None (12) None (15) None (23)(a) Independent Auditors' Consent (23)(b) Consent of Attorneys (24)(a) Powers of Attorney for Louis G. Lower, II and Casey J. Sylla (Previously filed in Post-Effective Amendment No. 1 to this Registration Statement (File No. 033-90272) dated April 2, 1996.) (24)(b) Powers of Attorney for Michael J. Velotta, Peter H. Heckman, John R. Hunter, Kevin R. Slawin and Keith A. Hauschildt (Previously filed in Post-Effective Amendment No. 2 to this Registration Statement (File No. 033-90272) dated April 1, 1997.) (24)(c) Power of Attorney for Thomas J. Wilson, II (25) None (26) None (27) Not applicable (99) Form of Resolution of Board of Directors (Incorporated herein by reference to the Post-Effective Amendment No. 3 to Registrant's Registration Statement (File No. 033-84480) dated April 1, 1997.) ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement: (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (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; (iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, Northbrook Life Insurance Company, pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by 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 Securities Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Registrant certifies that it has reasonable grounds to believe that it will meet all of the requirements for filing on Form S-3 and has duly caused this amended registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, in the Township of Northfield, State of Illinois on the 27th day of April, 1999. NORTHBROOK LIFE INSURANCE COMPANY (REGISTRANT) (SEAL) Attest: /s/BRENDA D. SNEED By: /s/MICHAEL J. VELOTTA ------------------ ---------------------- Brenda D. Sneed Michael J. Velotta Assistant Secretary Vice President, Secretary and And Assistant General Counsel General Counsel Pursuant to the requirements of the Securities Act of 1933, this amended registration statement has been signed by the following persons in the capacities indicated and on the 27th day of April, 1999. */LOUIS G. LOWER, II Chairman of the Board, Chief Louis G. Lower, II Executive Officer and Director (Principal Executive Officer) */THOMAS J. WILSON, II Vice Chairman and Director Thomas J. Wilson, II (Principal Operating Officer) /s/MICHAEL J. VELOTTA Vice President, Secretary, General Michael J. Velotta Counsel and Director */PETER H. HECKMAN President, Chief Operating Officer Peter H. Heckman and Director */JOHN R. HUNTER Director John R. Hunter */KEVIN R. SLAWIN Vice President and Director Kevin R. Slawin (Principal Financial Officer) */CASEY J. SYLLA Chief Investment Officer and Director Casey J. Sylla */KEITH A. HAUSCHILDT Assistant Vice President and Controller Keith A. Hauschildt (Principal Accounting Officer) */ By Michael J. Velotta, pursuant to Powers of Attorney previously filed or filed herewith. EXHIBIT LIST The following exhibits are filed herewith: Exhibit No. Description (4) Form of Northbrook Life Insurance Company Flexible Premium Deferred Annuity Certificate and Application (5)(b) Opinion of General Counsel re: Legality (23)(a) Independent Auditors' Consent (23)(b) Consent of Attorneys (24)(b) Power of Attorney for Thomas J. Wilson, II EX-4 2 FORM OF CERT AND APP FLEXIBLE PREMIUM DEFERRED ANNUITY CERTIFICATE This Certificate is issued according to the terms of Master Policy Number 64890011 issued by Northbrook Life Insurance Company to Dean Witter Reynolds Inc. Dean Witter Reynolds Inc. is called the Master Policyholder. This Certificate is governed by the laws of the Commonwealth of Puerto Rico. Throughout this Certificate, "you" and "your" refer to the Certificate's owner(s). "We", "us" and "our" refer to Northbrook Life Insurance Company. Certificate Summary ------------------- o The first phase of this Certificate is the accumulation phase which begins on the issue date of the Certificate. The primary feature of this phase is the accumulation of interest, at guaranteed rates for guaranteed periods of time, on all purchase amounts. Additional features of this phase include a partial withdrawal option, a full surrender option, and death benefit options. The partial withdrawal and surrender benefits may be subject to an upward or downward Market Value Adjustment. o The second phase of this Certificate is the payout phase which begins on the Payout Start Date. The primary feature of this phase is the exchange of the Adjusted Account Value for a series of periodic income payments to be made under an Income Plan. Various types of Income Plans are offered in this Certificate. This page of the Certificate is only a summary of the Certificate terms. The detailed provisions of this Certificate, that follow, will control. This Certificate and the Master Policy do not pay dividends. PLEASE READ YOUR CERTIFICATE CAREFULLY. Return Privilege If you are not satisfied with this Certificate for - ---------------- any reason, you may return it to us within 20 days after you receive it. We will refund any purchase payments to you. We appreciate that, through the services of your Dean Witter Reynolds Account Executive, you chose Northbrook Life Insurance Company to help you achieve your long-term financial goals. We value our relationship with you. Michael J. Velotta Louis G. Lower, II Secretary President FLEXIBLE PREMIUM DEFERRED ANNUITY NLU634A Page 1 - ------------------------------------------------------------------------------ TABLE OF CONTENTS - ------------------------------------------------------------------------------ General Definitions....................................................2 People Involved........................................................4 Accumulation Phase.....................................................5 Death Benefit Options During Accumulation Phase........................7 Payout Phase...........................................................8 General Provisions....................................................10 - ------------------------------------------------------------------------------ GENERAL DEFINITIONS - ------------------------------------------------------------------------------ Account Value The sum of the Sub-Account values. Adjusted Account Value The Account Value adjusted by the Market Value Adjustment, less any applicable taxes. Cash Surrender Value The Account Value adjusted by the Market Value Adjustment, less any applicable withdrawal charges and taxes. Death Benefit The greater of the Account Value and the Cash Surrender Value. We will calculate the Death Benefit as of the date we receive a complete request for payment of the Death Benefit. Death Benefit provisions are described in detail on page 7. Guarantee Period A period of years for which a specified interest rate is guaranteed. Guarantee Periods will be offered at our discretion and may range from one to ten years. Income Plan An Income Plan distributes payments on a scheduled basis during the payout phase. Market Value Adjustment An increase or decrease in a partial withdrawal, full surrender, Death Benefit or Income Plan payment to you, reflecting changes in the level of interest rates since the Sub-Account was established. The method of calculation is explained on pages 6 and 7. Payout Start Date The date the Adjusted Account Value is applied to an Income Plan. The anticipated date is shown on page 3. You may change the Payout Start Date by writing to us at least 30 days prior to this date. The Payout Start Date must be on or before the later of: o the annuitant's 90th birthday; or o the 10th anniversary of the Certificate's issue date. Sub-Account A portion of this Certificate which is identified by the Guarantee Period and the date the guarantee begins. A Sub-Account(s) is created when: o a purchase payment is made; or o a new Guarantee Period is selected after the prior Guarantee Period expires. A Sub-Account continues until the end of the Guarantee Period. Sub-Account Value The funds allocated to a Sub-Account plus the interest credited, less any withdrawals. Page 2 - ------------------------------------------------------------------------------ PEOPLE INVOLVED - ------------------------------------------------------------------------------ Owner The person named at the time of enrollment is the owner of this Certificate unless subsequently changed. As owner, you will receive any periodic income payments, unless you have directed us to pay them to someone else. You may exercise all rights stated in this Certificate, subject to the rights of any irrevocable beneficiary. You may change the owner or beneficiary at any time. If you are a natural person or a grantor trust, you may change the annuitant prior to the Payout Start Date. Once we have received a satisfactory written request for an owner, beneficiary or annuitant change, the change will take effect as of the date you signed it. We are not liable for any payment we make or other action we take before receiving any written request from you. We are not responsible for the tax consequences of an owner, beneficiary or annuitant change. You may assign an interest in this Certificate. No beneficiary may assign benefits under the Certificate until they are due to them. We are not bound by an assignment unless it is signed by you and filed with us. We are not responsible for the validity or tax consequences of an assignment. If the owner is more than one person, then: o owner as used in this Certificate is defined as all people named as owners, unless otherwise indicated; and o any request to exercise ownership rights must be signed by all owners. On the death of the owner (or if multiple owners, on the death of the first owner to die), a Death Benefit option must be elected. A Death Benefit option must also be elected if the owner is a grantor trust and one of the grantors dies prior to the Payout Start Date. See page 7 for more details. Annuitant The annuitant must be a natural person. The owner ( or if multiple owners, the youngest owner) is the annuitant unless a different annuitant has been named. If the annuitant dies prior to the Payout Start Date, a Death Benefit option must be elected. See page 7 for details. Beneficiary If the owner is a natural person: o we will determine the beneficiary from the most recent written request we have received from you; o if you do not name a beneficiary or if the beneficiaries named are no longer living, the beneficiary will be: o your spouse if living; o otherwise, your children equally if living; o otherwise, your estate. If the owner is a grantor trust, then the beneficiary will be that same grantor trust. If the owner is a non-natural person other than a grantor trust, the owner is also the beneficiary, unless a different beneficiary has been named. The beneficiary becomes the new owner if the sole surviving owner dies prior to the Payout Start Date. If the sole surviving owner dies after the Payout Start Date, the beneficiary will receive any guaranteed income payments scheduled to continue. Page 4 ACCUMULATION PHASE - ------------------------------------------------------------------------------ Purchase Payments Purchase payments may be made at any time during the accumulation phase. Purchase payments after the initial purchase payment are not required. We may limit the number of additional purchase payments. Any such limit is on page 3. We may also set a maximum acceptable size for each purchase payment. You will be required to designate a Guarantee Period(s) for each purchase payment made. Interest Credited Interest will be credited daily during the accumulation phase using the effective annual interest rate declared by us for that particular Guarantee Period at the time the Sub-Account is established. Interest will be credited to the initial purchase payment from the issue date. Interest will be credited to subsequent purchase payments from the date of receipt. "Effective annual rate" is defined as the yield resulting when interest credited at the underlying daily rate has compounded for a full year. Interest rates will be declared periodically for each Guarantee Period then being offered. Renewal of a A notice will be mailed prior to the expiry Guarantee Period of each Sub-Account allowing youto select a renewal Guarantee Period(s). If we do not receive a selection by theexpiry of the Sub-Account, a renewal Guarantee Period of the same duration as the previous Guarantee Period will automatically be established. If a renewal Guarantee Period selection is made within the 30 calendar days following the Sub-Account expiry, a Sub-Account will be established according to that selection as of the Sub-Account expiry date. If a full surrender is made within 30 days following the expiry of any Sub-Account or if a partial withdrawal of an entire Sub-Account is made within 30 days following that Sub-Account's expiry, then the affected Sub-Account will be deemed to have been renewed at the shortest Guarantee Period then being offered. No less than $1,000 may be allocated to any one Guarantee Period at the time a purchase payment is made or a renewal Guarantee Period is selected. Partial Withdrawals You have the right to make a partial withdrawal at any time during the accumulation phase. You must specify the Sub-Account(s) from which you wish to make a withdrawal. If a partial withdrawal would leave a Sub-Account Value of less than $1,000, we will treat the request as a withdrawal of that Sub- Account's entire value. If any partial withdrawal reduces the Account Value of your Certificate to less than $1,000, we will treat the request as full surrender of the entire Account Value and the Certificate will terminate. The amount of any partial withdrawal you request, plus any applicable withdrawal charge and taxes, will reduce your Sub-Account Value. During the first 30 calendar days of a Sub-Account's renewal Guarantee Period, amounts withdrawn from that Sub-Account will not incur withdrawal charges or Market Value Adjustments. After the first 30 calendar days of a Sub-Account's renewal Guarantee Period, amounts withdrawn from that Sub-Account in excess of the remaining preferred withdrawal amount will incur withdrawal charges and Market Value Adjustments. In addition, the amount you receive will reflect the deduction of any applicable taxes. Page 5 Withdrawal charges and Market Value Adjustments will be waived on partial withdrawals taken to satisfy qualified plan required minimum distribution rules as described in the Internal Revenue Code. This waiver is permitted only for withdrawals which satisfy distributions resulting from this Certificate. We reserve the right to defer payment of any partial withdrawal for up to six months after the date you request it. Full Surrender Upon a full surrender, the Certificate will terminate. You have the right to make a full surrender at any time during the accumulation phase. If you surrender your Certificate, a withdrawal charge and Market Value Adjustment will be applied to: o The Account Value less: o The total Sub-Account Value for all Sub-Accounts which are within the first 30 calendar days of their Guarantee Periods, and o The remaining preferred withdrawal amount for any Sub-Accounts which are not within the first 30 days of their Guarantee Periods. In addition, the amount you receive will reflect the deduction of any applicable taxes. We reserve the right to defer payment of any full surrender for up to six months after the date you request it. Preferred Withdrawal A withdrawal amount free of withdrawal Amount charges and Market Value Adjustments will be available in each Sub-Account year for each Sub-Account. The preferred withdrawal amount is 10% of the amount of the Sub-Account's purchase payment or funds allocated to the Sub-Account. Any preferred withdrawal amount not withdrawn in a Sub-Account Year may not be carried over to increase the preferred withdrawal amount in a subsequent Sub- Account Year. Similarly, the preferred withdrawal amount not withdrawn from one Sub-Account may not be transferred to increase the preferred withdrawal amount in another Sub-Account. Withdrawal Charge Unless otherwise waived by provisions of this Certificate, a withdrawal charge will be applied to any partial withdrawals or a full surrender of the certificate. The withdrawal charge will be 6% multiplied by the amount defined in the Partial Withdrawal and Full Surrender sections above. Taxes Any premium taxes or other applicable taxes imposed on us for amounts relating to this Certificate may be deducted from the purchase payments or the Account Value when the tax is incurred or at a later time. In addition, personal federal and state income tax withholding may be deducted from partial withdrawal and full surrender payments. Amounts withheld for personal taxes do not necessarily represent your entire tax liability. Market Value Adjustment Unless otherwise waived by provisions of this Certificate, the Market Value Adjustment will be applied to any partial withdrawals or full surrender of this Certificate. As used in this provision, "Treasury Rate" means the U.S. Treasury Note Constant Maturity weekly yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment may be either positive or negative and will be based on the following: I = the X-year Treasury Rate for the week preceding the issue date of this Certificate, where X is the Sub-Account Guarantee Period chosen. If a Note with a maturity of X years is not available, a weighted average will be used. N = the number of complete days from the date we receive the withdrawal request to the end of the Xth year since the Sub-Account was established J = the Treasury Rate for a maturity of N days for the week preceding Page 6 the receipt of the withdrawal request. If a Note with a maturity of N days is not available, a weighted average will be used. If N is one year or less, J will be the 1-year Treasury Rate. The Market Value Adjustment will be the result of [.9 x (I - J) x (N/365)] multiplied by the amount defined in the Partial Withdrawal and Full Surrender sections above. - ------------------------------------------------------------------------------ DEATH BENEFIT OPTIONS DURING ACCUMULATION PHASE - ------------------------------------------------------------------------------ Owner's Death - ------------- If any owner dies prior to the Payout Start Date, the new owner (any surviving joint owner(s) or if none, the beneficiary) must elect an applicable option listed below. If the owner is a grantor trust and one of the grantors dies prior to the Payout Start Date, the trustee must elect an applicable option listed below. If the option selected is 1(a), 1(b)(ii), 2(a) or 2(b)(ii) below, and the deceased owner was also the annuitant, the new annuitant will be the youngest new owner, unless the new owner names a different annuitant. 1. If the new owner is a natural person and is not the spouse of the deceased owner. If in a grantor trust situation, the surviving grantor, or if none, the beneficiary of the trust, is a natural person and is not the spouse of the deceased grantor: a. The new owner or trustee may choose to receive the Cash Surrender Value in a lump sum not later than five years from the date of the owner's death; or b. If we receive due proof of death within 180 days of the date of the owner's death, then the new owner or trustee may alternatively choose to: i. Receive the Death Benefit in a lump sum; or ii. Apply the Death Benefit to an Income Plan which must begin within one year of the date of death and must be for a period equal to or less than the life expectancy of the new owner. In a grantor trust situation, the period must be equal to or less than the life expectancy of a surviving grantor (or if none, the beneficiary) selected by the trustee. 2. If the new owner is the surviving spouse of the deceased owner. If in a grantor trust situation, the spouse is the sole surviving grantor (or, if there is no surviving grantor, the sole beneficiary of the trust): a. The surviving spouse may choose to continue the Certificate as if the death had not occurred. If the Certificate is continued as if the death had not occurred, the surviving spouse may make a single withdrawal of any amount within one year of the date of death without incurring a withdrawal charge. However, a Market Value Adjustment, determined at the date of the withdrawal, will apply. The single withdrawal amount is in addition to the annual preferred withdrawal amount; or b. If we receive due proof of death within 180 days of the date of the owner's death, then the surviving spouse may alternatively choose to: i. Receive the Death Benefit in a lump sum; or ii. Apply the Death Benefit to an Income Plan which must begin within one year of the date of death and must be for a period equal to or less than the life expectancy of the new owner or, in a grantor trust situation, the life expectancy of the surviving spouse. Page 7 3. If the new owner is a non-natural person (other than a grantor trust): The new owner must receive the Death Benefit in a lump sum. Annuitant's If the annuitant dies and the Death annuitant is not also an owner, the owner must elect an applicable option listed below. If the option selected is 1(a) or 1(b)(ii) below, the new annuitant will be the youngest owner, unless the owner names a different annuitant. 1. If the owner is a natural person or a grantor trust: a. The owner may choose to continue the Certificate as if the death had not occurred; or b. If we receive due proof of death within 180 days of the date of the annuitant's death, then the owner may alternatively choose to: i. Receive the Death Benefit in a lump sum; or ii. Apply the Death Benefit to an Income Plan which must begin within one year of the date of death and must be for a period equal to or less than the life expectancy of the owner, or in a grantor trust situation, the life expectancy of a grantor. 2. If the owner is a non-natural person (other than a grantor trust): The owner must receive the Death Benefit in a lump sum. Proof of Death We may require that this Certificate be returned to us prior to any settlement. We must receive due proof of death of the owner prior to settlement of a death claim. Due proof of death is one of the following: o a certified copy of a death certificate; or o a certified copy of a decree of a court of competent jurisdiction as to a finding of death; or o any other proof acceptable to us. - ------------------------------------------------------------------------------ PAYOUT PHASE - ------------------------------------------------------------------------------ Payment Amount The Adjusted Account Value on the Payout Start Date, will be exchanged for a series of periodic income payments under an Income Plan. The periodic income payment amount will be calculated by multiplying the Adjusted Account Value on the Payout Start Date, by the greater of: o Payment plan rates declared by us. These rates will provide at least as much income as would our then current Single Premium Immediate Annuity certificate rates; or o Guaranteed payment plan rates. These rates are calculated using the following assumptions for the Income Plan and payment frequency selected: o Interest rate of 3% per year; and o No loading. For Income Plans which include life income, the following additional assumptions will be used: o Mortality rates from the 1983 Table a Annuity Mortality Tables; o Age(s) of the annuitant and joint annuitant (if applicable) on the Payout Start Date set back one year for each six full years between January 1, 1983 and the Payout Start Date; and Page 8 o Sex(es) of the annuitant and joint annuitant (if applicable) on the Payout Start Date, unless the Certificate was issued under an employer-sponsored program or in a jurisdiction requiring unisex rates (in which case, a 80% female, 20% male blend of the mortality rates will be used). Income Plans Available Income Plans are listed below: 1. Life Income with or without Guaranteed Payments. For plans without guaranteed payments, we will make payments only for as long as the annuitant is living. For plans with guaranteed payments, we will make payments for the guaranteed period and thereafter as long as the annuitant is living. The number of months guaranteed range from 60 to 360. 2. Joint and Survivor Life Income with or without Guaranteed Payments. For plans without guaranteed payments, we will make payments only for as long as either the annuitant or joint annuitant is living. For plans with guaranteed payments, we will make payments for the guaranteed period and thereafter as long as either the annuitant or joint annuitant is living. The number of months guaranteed range from 60 to 360. 3. Guaranteed Payments for a Specified Period. We will make payments beginning on the Payout Start Date for a specified period. These payments do not depend on the annuitant's life. The number of months guaranteed may range from 60 to 360. We reserve the right to accept other Income Plans. Payout Terms The income payments are subject to the following terms and conditions: and Conditions o If the Adjusted Account Value is not enough to provide an initial payment of at least $20, we reserve the right to: o change the payment frequency to make the payment at least $20; or o terminate the Certificate and pay you the Adjusted Account Value in a lump sum. o If we do not receive a written choice of an Income Plan from you at least 30 days before the Payout Start Date, the Income Plan will be life income with 120 months guaranteed. o If you choose an Income Plan which depends on any person's life, we may require proof of age and sex before income payments begin and we may require proof that the annuitant or joint annuitant is still alive before we make each payment. o After the Adjusted Account Value has been applied to an Income Plan on the Payout Start Date, the Income Plan cannot be changed, the exchange of the Adjusted Account Value for an Income Plan can not be reversed and no withdrawals can be made. o If any owner dies during the payout phase, income payments will continue as scheduled. - ------------------------------------------------------------------------------ GENERAL PROVISIONS - ------------------------------------------------------------------------------ The Entire Contract The entire contract consists of the Master Policy, the Master Policy application, any written enrollments, and any endorsements. All statements made in written enrollments are representations and not warranties. No statement will be used by us in defense of a claim or to void a Certificate unless it is included in a written enrollment. Only our officers may change the Master Policy or Certificate or waive a right or requirement. No other individual may do this. Page 9 The Master Policy may be amended by us, terminated by us, or terminated by the Master Policyholder without the consent of any other person. No termination completed after the issue date of this Certificate will adversely affect your rights under this Certificate. We may not modify this Certificate without your consent, except to make it comply with any changes in the Internal Revenue Code, or as required by any other applicable law. Incontestability We will not contest the validity of this Certificate after the issue date. Misstatement of If any age or sex has been misstated, we will Age or Sex pay the amounts which would have been paid at the correct age or sex. If we find the misstatement of age or sexafter the income payments begin, we will: o pay all amounts underpaid including due interest; or o stop payments until the total payments are equal to the corrected amount plus due interest. For purposes of the Misstatement of Age or Sex provision, due interest will be calculated at an effective annual rate of 3% or as required by state law. The misstatement of sex provision described above does not apply to Certificates issued under employer-sponsored programs or Certificates issued in jurisdictions which require unisex rates. Annual Statement At least once a year, prior to the Payout Start Date, we will send you a statement containing Account Value information. The information presented will comply with any applicable law. Page 10 Northbrook Life Insurance Company (herein called "we" or "us") Certificate Amendment for Minimum Surrender Value The following is added to the Full Surrender provision of the Certificate. If you surrender a Certificate prior to the anniversary of the Certificate following the annuitant's 70th birthday or ten years after the issue date if later, the amount we pay you will not be less than the Account Value at the time of the surrender: o accumulated at the guaranteed interest rate to the end of the current guarantee period and thereafter at 3% until the later of the anniversary of the Certificate following the annuitant's 70th birthday or ten years after the issue date, and o discounted back to the date of surrender at an interest rate(s) one percent higher than the rate(s) used for the projected accumulation. If you surrender a Certificate on or after the anniversary of the Certificate following the annuitant's 70th birthday or ten years after the issue date if later, the amount we pay you will not be less than the Account Value at the time of the surrender. Secretary Chief Executive Officer NLU833-1 EX-5 3 OPINION OF GENERAL COUNSEL NORTHBROOK LIFE INSURANCE COMPANY LAW AND REGULATION DEPARTMENT 3100 Sanders Road, J5B Northbrook, Illinois 60062 Direct Dial Number 847-402-2400 Facsimile 847-402-4371 Michael J. Velotta Please direct reply to: Vice President, Secretary Post Office Box 3005 and General Counsel Northbrook, Illinois 60065-3005 April 14, 1999 TO: NORTHBROOK LIFE INSURANCE COMPANY NORTHBROOK, ILLINOIS 60062 FROM: MICHAEL J. VELOTTA VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL RE: FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FILE NO. 033-90272 With reference to the Registration Statement on Form S-3 filed by Northbrook Life Insurance Company (the "Company") with the Securities and Exchange Commission covering the Flexible Premium Deferred Annuity Contracts, I have examined such documents and such law as I have considered necessary and appropriate, and on the basis of such examination, it is my opinion that as of December 28, 1998: 1. The Company is duly organized and existing under the laws of the State of Arizona and has been duly authorized to do business by the Director of Insurance of the State of Arizona. 2. The securities registered by the above Registration Statement when issued will be valid, legal and binding obligations of the Company. I hereby consent to the filing of this opinion as an exhibit to the above referenced Registration Statement and to the use of my name under the caption "Legal Matters" in the Prospectus constituting a part of the Registration Statement. Sincerely, /s/ MICHAEL J. VELOTTA - ------------------------- Michael J. Velotta Vice President, Secretary and General Counsel EX-23 4 INDEPENDENT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Post-Effective Amendment No. 4 to Registration Statement No. 033-90272 of Northbrook Life Insurance Company to Form S-1 on Form S-3 of our report dated February 19, 1999, appearing in the Annual Report on Form 10-K of Northbrook Life Insurance Company for the year ended December 31, 1998, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statement. /s/ DELOITTE & TOUCHE LLP Chicago, Illinois April 26, 1999 EX-23 5 CONSENT OF ATTORNEYS Freedman, Levy, Kroll & Simonds CONSENT OF FREEDMAN, LEVY, KROLL & SIMONDS We hereby consent to the reference to our firm under the caption "Legal Matters" in the prospectus contained in Post-Effective Amendment No. 4 to Form S-1 on the Form S-3 Registration Statement of Northbrook Life Insurance Company (File No. 033-90272). /s/FREEDMAN, LEVY, KROLL & SIMONDS Washington, D.C. April 26, 1999 EX-24 6 POWER OF ATTORNEY POWER OF ATTORNEY WITH RESPECT TO NORTHBROOK LIFE INSURANCE COMPANY Know all men by these presents that Thomas J. Wilson, II, whose signature appears below, constitutes and appoints Louis G. Lower, II and Michael J. Velotta, each acting individually, his attorney-in-fact, with power of substitution and in any and all capacities, to sign any registration statements and amendments thereto for the Northbrook Life Insurance Company and related Contracts and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. April 23, 1999 Date /s/Thomas J. Wilson, II Thomas J. Wilson, II Vice Chairman and Director -----END PRIVACY-ENHANCED MESSAGE-----