<PAGE>
DRAFT 01/25/96
As filed with the SEC on ________________ Registration No. 33-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
____________
THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2
(Exact Name of Trust)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)
Prudential Plaza
Newark, New Jersey 07102-3777
(201) 802-6000
(Address and telephone number of principal executive offices)
____________
Thomas C. Costano
Assistant General Counsel
The Prudential Insurance Company of America
213 Washington Street
Newark, New Jersey 07102-2992
(Name and address of agent for service)
Copy to:
Jeffrey C. Martin
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
____________
Group Variable Universal Life Insurance Certificates. The Registrant
hereby elects to register an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940. The required fee of $500 is
submitted herewith.
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
____________
This filing is being made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940.
____________
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the
Investment Company Act of 1940 with respect to the Certificates described in the
prospectus.
<PAGE>
CROSS REFERENCE SHEET
[as required by Form N-8B-2]
N-8B Item Number Location
- ---------------- --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Communications
5. The Prudential Variable Contract Account GI-2
6. The Prudential Variable Contract Account GI-2
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Group Contract and
Certificates; Issuance of a Certificate; Short-
Term Cancellation or "Free Look"; Procedures;
Premiums; Allocation of Premiums; Transfers;
Dollar Cost Averaging; Death Benefits; Changes in
Face Amount; Cash Surrender Value; Full
Surrenders; Partial Withdrawals; Loans; Lapse;
Termination of the Contractholder's Participation
in Group Contracts; Participants Who Are No Longer
Eligible Group Members; Options on Termination of
Coverage; When Proceeds are Paid; Voting Rights;
Substitution of Series Fund Shares; Additional
Insurance Benefits
11. Brief Description of the Group Contract and
Certificate; The Prudential Variable Contract
Account GI-2; The Prudential Series Fund, Inc.
12. Cover Page; Brief Description of the Group
Contract and Certificate; The Prudential Series
Fund, Inc.; Sale of the Contract and Sales
Communications
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-2-
N-8B Item Number Location
- ---------------- --------
13. Brief Description of the Group Contract and
Certificate; Premiums; Reduction of Charges; Sale
of the Contract and Sales Communications
14. Brief Description of the Group Contract and
Certificate; Issuance of a Certificate; Procedures
15. Brief Description of the Group Contract and
Certificate; Procedures; Allocation of Premiums;
Transfers;
16. Brief Description of the Group Contract and
Certificate; Detailed Information About the
Variable Universal Life Insurance Certificates
17. Death Benefits; Full Surrenders; Partial
Withdrawals; Loans; When Proceeds are Paid
18. The Prudential Variable Contract Account GI-2; The
Prudential Series Fund, Inc.
19. Reports
20. Not Applicable
21. Loans
22. Not Applicable
23. Not Applicable
24. Incontestability, Misstatement of Age; Suicide
Exclusion; Assignment
25. The Prudential Insurance Company of America
26. The Prudential Series Fund, Inc.; Charges and
Expenses
27. General Information About The Prudential; The
Prudential Variable Contract Account GI-2 and the
Variable Investments Under the Certificates
28. The Prudential Insurance Company of America;
Directors and Officers
<PAGE>
-3-
N-8B Item Number Location
- ---------------- --------
29. The Prudential Insurance Company of America
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. The Prudential Insurance Company of America
36. Not Applicable
37. Not Applicable
38. Sale of the Contract and Sales Communications
39. Sale of the Contract and Sales Communications
40. Not Applicable
41. Sale of the Contract and Sales Communications
42. Not Applicable
43. Not Applicable
44. Brief Description of the Group Contract and
Certificate; The Prudential Series Fund, Inc.;
Premiums; Cash Surrender Value
45. Not Applicable
46. Brief Description of the Group Contract and
Certificate; The Prudential Variable Contract
Account GI-2; The Prudential Series Fund, Inc.;
Death Benefits; Full Surrenders; Partial
Withdrawals
47. The Prudential Variable Contract Account GI-2; The
Prudential Series Fund, Inc.
<PAGE>
-4-
N-8B Item Number Location
- ---------------- --------
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Brief Description of the Group Contract and
Certificates; Detailed Information About the
Variable Universal Life Insurance Certificates
52. Substitution of Series Fund Shares
53. Tax Treatment of Certificate Benefits
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements; Consolidated Financial
Statements of The Prudential Insurance Company of
America and Subsidiaries
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
___________, 1996
The Prudential Insurance Company of America
The Prudential Variable Contract Account GI-2
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
This prospectus describes group variable universal life insurance contracts
offered by The Prudential Insurance Company of America ("The Prudential") which
are designed for use in group-sponsored insurance programs.
Each group member who elects to obtain coverage under the Group Contract
("Participant") will receive a Certificate describing the coverage. Certain
Group Contracts may also permit a Participant to apply for separate insurance
coverage and receive a separate Certificate for his or her spouse.
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The Group Contracts and Certificates provide life insurance protection with
flexible premium payments and a choice of underlying investment options. The
Death Benefit and Cash Surrender Value of a Certificate will vary daily with the
performance of the investment options selected, but the Death Benefit will not
be less than the Face Amount of the Certificate. Subject to certain
requirements and limitations, surrenders, partial withdrawals and loans are
available.
The Prudential currently is offering seven variable investment options to
Group Contractholders, each of which corresponds to a Subaccount of the
Prudential Variable Contract Account GI-2 (the "Separate Account"). The assets
of each Subaccount of the Separate Account will be invested in a corresponding
portfolio of The Prudential Series Fund, Inc. ("Series Fund"). The Series Fund
portfolios available to the Separate Account are: Aggressively Managed Flexible
Portfolio, Common Stock Portfolio, High Dividend Stock Portfolio, Growth Stock
Portfolio, Global Equity Portfolio, Bond Portfolio and Money Market Portfolio.
The attached prospectus for the Series Fund describes the investment objectives
and policies, and the risks, of investing in these seven portfolios. (Other
portfolios described in the Series Fund prospectus are not available in
connection with these contracts). Participants will also have the option of
allocating all or a portion of Net Premiums to the Fixed Account, an investment
option under which The Prudential guarantees an annual interest rate of at least
4%.
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REPLACING EXISTING INSURANCE WITH A Certificate DESCRIBED IN THE PROSPECTUS
MAY NOT BE TO YOUR ADVANTAGE. MOREOVER, IF YOU CURRENTLY OWN A LIFE INSURANCE
CONTRACT OR Certificate, THE BENEFITS AND COSTS OF PURCHASING ADDITIONAL LIFE
INSURANCE UNDER THE EXISTING POLICY SHOULD BE COMPARED WITH THE BENEFITS AND
COSTS OF PURCHASING THE Certificate DESCRIBED IN THIS PROSPECTUS. IN MAKING
THIS COMPARISON, YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISOR.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. ATTACHED IS
A CURRENT PROSPECTUS FOR THE PRUDENTIAL Series Fund, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone (201) 802-2000
[DATE]
END COVER
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TABLE OF CONTENTS
Page
----
PART I INFORMATION REQUIRED IN PROSPECTUS
BRIEF DESCRIPTION OF THE GROUP CONTRACT AND
CERTIFICATES. . . . . . . . . . . . . . . . . . . . 8
HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS
AND CASH SURRENDER VALUES . . . . . . . . . . . . . 17
GENERAL INFORMATION ABOUT THE PRUDENTIAL, THE
PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2, AND
THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER
THE CERTIFICATES. . . . . . . . . . . . . . . . . . 21
The Prudential Insurance Company of America . . . . 21
The Prudential Variable Contract Account GI-2 . . . 21
The Prudential Series Fund, Inc.. . . . . . . . . . 23
The Fixed Account . . . . . . . . . . . . . . . . . 27
DETAILED INFORMATION ABOUT THE VARIABLE UNIVERSAL
LIFE INSURANCE CERTIFICATES . . . . . . . . . . . . 29
Issuance of a Certificate . . . . . . . . . . . . . 29
Short-Term Cancellation Right or "Free Look". . . . 30
Procedures. . . . . . . . . . . . . . . . . . . . . 30
Premiums . . . . . . . . . . . . . . . . . . . . . 31
Effective Date of Insurance . . . . . . . . . . . . 33
Allocation of Premiums. . . . . . . . . . . . . . . 33
1. Initial Premiums . . . . . . . . . . . . . . . 33
2. Subsequent Premium Payments. . . . . . . . . . 33
3. Changing Premium Allocations . . . . . . . . . 34
Transfers . . . . . . . . . . . . . . . . . . . . . 34
Dollar Cost Averaging. . . . . . . . . . . . . 35
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Page
----
Death Benefits. . . . . . . . . . . . . . . . . . . 37
Changes in Face Amount. . . . . . . . . . . . . . . 39
Charges and Expenses. . . . . . . . . . . . . . . . 40
A. Front-End Premium Charges. . . . . . . . . . . 40
1. Charges for Taxes Attributable to
Premiums. . . . . . . . . . . . . . . . . 40
2. Processing Fee. . . . . . . . . . . . . . 41
3. Sales Charge. . . . . . . . . . . . . . . 41
B. Monthly Certificate Fund Charges . . . . . . . 41
1. Cost of Insurance . . . . . . . . . . . . 41
2. Charge for Additional Insurance Benefits. 43
3. Administrative Charge . . . . . . . . . . 43
4. Other Taxes . . . . . . . . . . . . . . . 44
C. Daily Deduction From the Certificate Fund. . . 44
D. Transaction Charges. . . . . . . . . . . . . . 44
E. Series Fund Expenses . . . . . . . . . . . . . 45
Reduction of Charges. . . . . . . . . . . . . . . . 45
Dividends . . . . . . . . . . . . . . . . . . . . . 46
Cash Surrender Value. . . . . . . . . . . . . . . . 46
Full Surrenders . . . . . . . . . . . . . . . . . . 47
Partial Withdrawals . . . . . . . . . . . . . . . . 48
Loans . . . . . . . . . . . . . . . . . . . . . 48
Lapse . . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
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Page
----
Termination of the Contractholder's
Participation in Group Contracts . . . . . . . 52
Participants Who Are No Longer Eligible Group
Members. . . . . . . . . . . . . . . . . . . . 53
Options on Termination of Coverage. . . . . . . . . 54
1. Conversion . . . . . . . . . . . . . . . . . . 55
2. Paid-Up Insurance. . . . . . . . . . . . . . . 56
3. Payment of Cash Surrender Value. . . . . . . . 57
Tax Treatment of Certificate Benefits . . . . . . . 57
Treatment as Life Insurance. . . . . . . . . . 57
Pre-Death Distributions. . . . . . . . . . . . 59
Withholding. . . . . . . . . . . . . . . . . . 62
Other Tax Considerations . . . . . . . . . . . 63
When Proceeds Are Paid. . . . . . . . . . . . . . . 64
Beneficiary . . . . . . . . . . . . . . . . . . . . 65
Incontestability. . . . . . . . . . . . . . . . . . 65
Misstatement of Age . . . . . . . . . . . . . . . . 65
Suicide Exclusion . . . . . . . . . . . . . . . . . 66
Assignment. . . . . . . . . . . . . . . . . . . . . 66
Voting Rights . . . . . . . . . . . . . . . . . . . 67
Substitution of Series Fund Shares. . . . . . . . . 69
Additional Insurance Benefits . . . . . . . . . . . 70
Accelerated Death Benefit. . . . . . . . . . . 70
Accidental Death and Dismemberment Benefit . . 72
Extended Death Protection During Total
Disability . . . . . . . . . . . . . . . . . . 72
<PAGE>
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Page
----
Reports . . . . . . . . . . . . . . . . . . . . . 72
Sale of the Contract and Sales Communications . . . 73
State Regulation. . . . . . . . . . . . . . . . . . 74
Experts . . . . . . . . . . . . . . . . . . . . . 75
Litigation. . . . . . . . . . . . . . . . . . . . . 76
Additional Information. . . . . . . . . . . . . . . 76
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS . . 76
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . 82
Directors of The Prudential . . . . . . . . . . . . 82
Other Executive Officers Who Are Not Directors. . . 86
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 87
CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES . . . 87
PART II OTHER INFORMATION
UNDERTAKING TO FILE REPORTS. . . . . . . . . . . . . . . II-1
UNDERTAKING WITH RESPECT TO INDEMNIFICATION. . . . . . . II-1
CONTENTS OF REGISTRATION STATEMENT . . . . . . . . . . . II-4
SIGNATURES . . . . . . . . . . . . . . . . . . . . . II-7
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . II-12
<PAGE>
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BRIEF DESCRIPTION OF THE GROUP CONTRACT AND CERTIFICATES
The following section provides brief answers to some common questions about
the more significant features of the contracts and Certificates. More detailed
information is provided in the subsequent sections of this prospectus and in the
Group Contract and Certificate themselves.
WHAT IS A GROUP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT?
It is an insurance contract issued by The Prudential to an employer or
other sponsoring organization that sets forth the terms under which eligible
members of the group can obtain life insurance protection for themselves and,
under some contracts, their spouses as well. Group members who obtain such
insurance ("Participants") receive a Certificate describing their coverage.
Certificates will provide for a Death Benefit and a Cash Surrender Value. Both
the Death Benefit and the Cash Surrender Value of a Certificate will vary daily
with the performance of the investment options chosen by the Participant.
HOW IS THE DEATH BENEFIT UNDER A CERTIFICATE COMPUTED?
A Participant will choose a Face Amount of insurance for his or her
Certificate, within certain limits. The Death Benefit as of any date will
generally be that Face Amount plus the value of
<PAGE>
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the Participant's Certificate Fund as of that date. The Certificate Fund
initially consists of the Net Premiums (after deduction of applicable charges)
invested in the investment options chosen by the Participant. The value of the
Certificate Fund will vary daily to reflect the investment performance of the
selected options and the deduction of charges by The Prudential. Under certain
circumstances, the Death Benefit will be increased above the value of the Face
Amount plus the Certificate Fund to assure that the Certificate continues to
meet the definition of "life insurance" under the Internal Revenue Code. Any
Death Benefit otherwise payable will be reduced by any Certificate Debt or
unpaid charges. See DEATH BENEFITS, p. ___.
HOW IS THE CASH SURRENDER VALUE OF A CERTIFICATE COMPUTED?
The Cash Surrender Value of a Certificate as of any date is equal to the
value of the Certificate Fund as of that date, reduced by any Certificate Debt
and a processing fee of no more than $20. See CASH SURRENDER VALUE, p. ___.
WHAT PREMIUMS MUST BE PAID?
A Participant generally has flexibility to select the frequency and amount
of premium payments, and the insurance will remain in force so long as the
balance in the Certificate Fund is sufficient to pay the monthly charges under
the Certificate. There may be an initial minimum premium required to enroll as
a
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Participant. If the balance in the Certificate Fund is not sufficient to pay
any month's charges, and the Participant fails to make premium payments
sufficient to bring the balance above this minimum amount during a grace period,
the Participant's insurance will lapse. See PREMIUMS, p. ___.
Some contracts may provide that if a Participant pays certain specified
premiums during the first two Certificate Years, the Certificate will not lapse
even if the Certificate Fund balance is insufficient to pay monthly charges.
See LAPSE, p. ____.
WHAT INVESTMENT OPTIONS ARE AVAILABLE?
Currently, there are a maximum of eight investment options available.
Seven are various Subaccounts of the Separate Account that each invest in the
shares of a corresponding portfolio of The Prudential Series Fund, Inc. (the
"Series Fund"), a series mutual fund to which The Prudential acts as the
investment adviser. For more information about the Series Fund and the
different investment objectives of the Series Fund portfolios available under
these Group Contracts, see THE PRUDENTIAL SERIES FUND, INC., p. _________, and
the attached prospectus for the Series Fund. Additional investment options may
be made available in the future, including options managed by advisers not
affiliated with The Prudential.
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DO CERTIFICATES PROVIDE PARTICIPANTS WITH CHOICE AND FLEXIBILITY IN ADDRESSING A
RANGE OF DIFFERENT INSURANCE PROTECTION AND INVESTMENT OBJECTIVES?
Yes. Because the Cash Surrender Value of a Participant's insurance will
vary with the investment experience of the investment options, a Certificate
under the Group Contract offers an opportunity for the Cash Surrender Value to
appreciate more rapidly than it would under comparable insurance without
variable investment options. It is also possible, however, for the Cash
Surrender Value to decrease in value if the investment experience of the
investment options chosen perform unfavorably. The variable investment options
vary in their risks, and Participants can choose to direct the amounts in their
Certificate Fund to more aggressive or more conservative variable investment
options as their personal circumstances may dictate over time.
Participants who prefer to avoid or reduce the risks involved in any of the
variable options may elect to allocate all or a portion of Net Premiums to the
other investment option, the Fixed Account. The Prudential guarantees that the
part of the Certificate Fund allocated to this option will accrue interest daily
at a rate that The Prudential declares periodically. Although this rate will
change from time to time, it may not be less than an annual rate of 4%. See THE
FIXED ACCOUNT p. ___.
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In short, the Certificate's investment options and premium flexibility can
be used flexibly to meet the changing needs of Participants over time.
WHAT CHARGES ARE MADE?
The Prudential deducts certain charges from each premium payment and from
the amounts held in the designated investment option(s). All of these charges,
which are largely designed to cover insurance costs and risks, as well as
administrative expenses, are fully described under CHARGES AND EXPENSES, p.
_____. The following diagram briefly outlines the charges that may be made:
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Premium Payment
|
|
less the sum of
- 1) a charge (currently 2.5%)
for taxes attributable to
premiums
- 2) a processing fee of up
to $2
- 3) a sales charge of up
to 3 1/2%, which may be
reduced or waived under certain
circumstances
|
|
Net Premium Amount
- To be invested in one or a combination of the investment
portfolio options available to the Group.
|
|
Daily Charges
- A daily charge is deducted from the assets of the
Subaccounts of the Separate Account for mortality and
expense risks. The current daily charge is equivalent to
an annual effective rate of .45%. The charge is
guaranteed not to exceed an annual effective rate of
.90%.
- Management fees and expenses are deducted from the assets
of the Series Fund |
|
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Monthly Charges
- An administrative expense charge may be deducted each
month from the Certificate Fund. The charge is currently
up to $4 per month and is guaranteed not to exceed $6 per
month.
- A charge for the cost of insurance is deducted.
- Charges for any supplemental insurance benefits not
already taken into account in the cost of insurance
charge are deducted.
|
|
Possible Additional Charges
- For each surrender or partial withdrawal, there is an
administrative processing charge of the lesser of $20 and
2% of the amount surrendered or withdrawn.
- An administrative processing charge of up to $20 may be
made in connection with each loan or additional statement
request.
- No charge is currently assessed in connection with
transfers, but certain Group Contracts may reserve the
right to assess a charge of up to $20 for each transfer
after the twelfth with respect to the same Certificate in
the same Certificate Year.
- No charge is currently made for any other taxes imposed
upon the operations of the Separate Account, but The
Prudential reserves the right to impose such a charge.
WHAT WITHDRAWAL OR LOAN RIGHTS DO PARTICIPANTS HAVE?
At any time that a Certificate is in effect, a Participant may elect to
surrender his or her insurance and receive its Cash Surrender Value. A
Participant may also request a partial withdrawal from the Certificate Fund.
See FULL SURRENDER, p. ___, and PARTIAL WITHDRAWALS, p.____.
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A Participant who has held a Certificate for at least one year may borrow
(before any applicable transaction charge) a total amount up to the Loan Value
of his or her Certificate, which is determined by multiplying the Certificate
Fund by 85% and then subtracting the next month's charges. When a loan is
taken, an amount equal to the loan is transferred from the investment options to
a Loan Account that remains part of the Certificate Fund. This Loan Account
earns interest at an annual rate that is generally 1.5% less than the interest
charged on the loan (unless state law specifies a lower spread). Any
outstanding Certificate Debt will be deducted from proceeds payable at the
Covered Person's death or upon surrender. See LOANS, p. ____.
HOW IS A PARTICIPANT'S INSURANCE AFFECTED IF HE OR SHE IS NO LONGER A MEMBER OF
THE GROUP?
Depending on the terms of any particular Group Contract, a Participant who
is no longer included in the group of eligible members may be able to elect to
continue the insurance provided by the Group Contract on a Portable basis. He
or she may also surrender the insurance for its Cash Surrender Value, elect to
use the Cash Surrender Value of the insurance to purchase paid-up insurance, or
convert the insurance to an individual life insurance policy. See OPTIONS ON
TERMINATION OF COVERAGE, p. ____.
<PAGE>
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WHAT IS THE FEDERAL INCOME TAX STATUS OF AMOUNTS RECEIVED UNDER A CERTIFICATE?
Variable life insurance contracts such as those offered by this Prospectus
receive the same federal income taxation treatment as conventional fixed benefit
life insurance. This means, first, that any Death Benefit paid would generally
be excluded from the gross income of the beneficiary. Second, any annual
increases in the value of the Certificate Fund, whether from income or capital
appreciation, would not be included in the taxable income of a Participant.
Third, assuming that premiums are not paid above levels that would make a
Certificate a "modified endowment contract" as defined in the Internal Revenue
Code, pre-death distributions, whether in the form of surrenders or partial
withdrawals, would be treated first as a return on the Participant's investment
in the Certificate and then as a distribution of taxable income, and loans would
not be treated as distributions at the time the loan was made. See TAX
TREATMENT OF CERTIFICATE BENEFITS, p. ___.
<PAGE>
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HYPOTHETICAL ILLUSTRATIONS OF
DEATH BENEFITS AND CASH SURRENDER VALUES
The two tables that follow show how the Death Benefit and Cash Surrender
Value change with the investment experience of the Separate Account. They are
not projections of values; they are intended to show how a Certificate works.
They are "hypothetical" because they are based upon several assumptions, as
described below. Both tables assume that a Certificate with a Face Amount of
$100,000 has been bought by a 40-year old group member. The tables assume that
a premium of $1,200 is paid at issuance and annually on each Certificate
Anniversary. They also assume that a charge of 2.5% is deducted from premiums
for taxes attributable to premiums, and that no charges are currently made
against the Separate Account for federal or state taxes.
The first table assumes that current sales, cost of insurance, mortality
and expense risk and administrative charges will continue for the indefinite
future. It assumes that the Covered Person is in a risk classification class
that has current standardized cost of insurance charges equal to rates equal to
Table I under Section 79 of the Internal Revenue Code. It assumes a monthly
administrative charge of $2, which applies to Certificates that do not involve
any direct billing by The Prudential. See ADMINISTRATIVE CHARGE, page ____.
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The second table is based upon the same assumptions except it is assumed
that the maximum sales, cost of insurance, mortality and expense risk and
administrative charges permitted by the particular Certificate have been made
from the beginning. It assumes that the Covered Person is in a risk class that
has maximum guaranteed cost of insurance charges equal to the maximum rates that
could be charged, which are approximately 130% of the 1980 CSO Table.
Although The Prudential may under some Contracts pay dividends to Group
Contractholders, who may distribute those dividends to Participants in the Group
Contract, neither table reflects dividends. See DIVIDENDS, page ___.
Another assumption is that the Certificate Fund has been invested in equal
amounts in each of the seven available portfolios of the Series Fund. Finally,
there are four assumptions, shown separately, about the average investment
performance of the portfolios. The first is that there will be a uniform zero
percent gross rate of return, that is, that the average value of the Certificate
Fund will uniformly be adversely affected by very unfavorable investment
performance. The other three assumptions are that investment performance will
be at a uniform gross annual rate of 4%, 8% and 12%. These, of course, are
merely assumptions, and actual returns will fluctuate from year to year.
Nevertheless, these tables help show how Certificate Funds will change with
investment experience.
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The first column in the following tables shows the contract year. The
second column, to provide context, shows what the aggregate amount would be if
the assumed premiums had been invested in a savings account paying 4% compounded
interest. Of course, if that were done, there would be no life insurance
protection. The next four columns show the Death Benefit payable in each of the
years shown for the four different assumed investment returns. Note that a
gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of income and capital
appreciation of the portfolios before any reduction is made for investment
advisory fees or other Series Fund expenses. The net return reflects an average
total annual expense ratio of the seven portfolios of 0.66%, and the daily
deduction from the Certificate Fund of 0.45% per year for the first table, which
is based on current charges, and 0.90% for the second table, which is based on
maximum charges. Thus, assuming maximum charges, gross returns of 0%, 4%, 8%
and 12% are the equivalent of net returns of (-1.56%), 2.44%, 6.44%, and 10.44%
respectively. The Death Benefits and Cash Surrender Value shown reflect the
deduction of all expenses and charges for both the Series Fund and under the
Certificate.
The amounts shown assume that there is no loan or partial withdrawal.
<PAGE>
- 20 -
Upon request, The Prudential will provide comparable hypothetical
illustrations for a Certificate reflecting the proposed Covered Person's age,
risk class, proposed Face Amount of insurance, and proposed premium payments.
<PAGE>
ILLUSTRATIONS
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME PAYMENT OF $1,200 ANNUAL PREMIUMS FOR ALL YEARS
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
--------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Annual Investment Return of Annual Investment Return of
End of Premiums --------------------------------------------------- ---------------------------------------------------
Certificate Accumulated 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year at 4% per year (-1.11% Net) (2.89% Net) (6.89% Net) (10.89% Net) (-1.11% Net) (2.89% Net) (6.89% Net) (10.89% Net)
---- -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,248 $100,907 $100,948 $100,989 $101,031 $888 $929 $970 $ 1,011
2 2,546 101,803 101,923 102,047 102,174 1,783 1,903 2,027 2,154
3 3,896 102,689 102,927 103,177 103,441 2,669 2,907 3,157 3,421
4 5,300 103,566 103,959 104,385 104,847 3,546 3,939 4,365 4,827
5 6,760 104,433 105,021 105,677 106,405 4,413 5,001 5,657 6,385
6 8,278 105,147 105,968 106,908 107,981 5,127 5,948 6,888 7,961
7 9,857 105,853 106,942 108,223 109,728 5,833 6,922 8,203 9,708
8 11,499 106,552 107,944 109,630 111,666 6,532 7,924 9,610 11,646
9 13,207 107,242 108,975 111,133 113,815 7,222 8,955 11,113 13,795
10 14,984 107,925 110,036 112,740 116,198 7,905 10,016 12,720 16,178
15 24,989 110,119 114,592 121,239 131,117 10,099 14,572 21,219 31,097
20 37,163 110,619 118,101 131,169 154,000 10,599 18,081 31,149 53,980
25(age 65) 51,974 108,642 119,436 142,026 189,053 8,622 19,416 42,006 89,033
30 69,994 0 (2) 114,972 150,534 240,486 0 (2) 14,952 50,514 140,466
35 91,918 0 0 (2) 150,553 313,622 0 0 (2) 50,533 213,602
40 118,592 0 0 139,454 424,214 0 0 39,434 324,194
</TABLE>
(1) ASSUMES NO LOAN OR PARTIAL WITHDRAWAL HAS BEEN MADE.
(2) ZERO VALUE IN CASH VALUE AND DEATH BENEFIT INDICATES LAPSE OF INSURANCE
COVERAGE IN THE ABSENCE OF A SUFFICIENT ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATE OF RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS.
NO REPRESENTATIONS CAN BE MADE BY THE PRUDENTIAL OR THE SERIES FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD
OF TIME.
<PAGE>
ILLUSTRATIONS
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME PAYMENT OF $1,200 ANNUAL PREMIUMS FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
--------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Annual Investment Return of Annual Investment Return of
End of Premiums --------------------------------------------------- ---------------------------------------------------
Certificate Accumulated 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year at 4% per year (-1.56% Net) (2.44% Net) (6.44% Net) (10.44% Net) (-1.56% Net) (2.44% Net) (6.44% Net) (10.44% Net)
---- -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,248 $100,724 $100,761 $100,798 $100,834 $710 $746 $782 $818
2 2,546 101,410 101,513 101,619 101,728 1,390 1,493 1,599 1,708
3 3,896 102,057 102,254 102,463 102,683 2,037 2,234 2,443 2,663
4 5,300 102,662 102,981 103,328 103,705 2,642 2,961 3,308 3,685
5 6,760 103,225 103,692 104,215 104,799 3,205 3,672 4,195 4,779
6 8,278 103,742 104,383 105,120 105,967 3,722 4,363 5,100 5,947
7 9,857 104,213 105,051 106,044 107,217 4,193 5,031 6,024 7,197
8 11,499 104,636 105,695 106,985 108,554 4,616 5,675 6,965 8,534
9 13,207 105,008 106,309 107,941 109,984 4,988 6,289 7,921 9,964
10 14,984 105,327 106,889 108,908 111,512 5,307 6,869 8,888 11,492
15 24,989 105,891 108,983 113,662 120,723 5,871 8,963 13,642 20,703
20 37,163 104,153 108,859 117,422 132,853 4,133 8,839 17,402 32,833
25 (age 65) 51,974 0 (2) 104,901 118,371 148,187 0 (2) 4,881 18,351 48,167
30 69,994 0 0 (2) 112,867 165,908 0 0 (2) 12,847 65,888
35 91,918 0 0 0 (2) 183,162 0 0 0 (2) 83,142
40 118,592 0 0 0 192,240 0 0 0 92,220
</TABLE>
(1) ASSUMES NO LOAN OR PARTIAL WITHDRAWAL HAS BEEN MADE.
(2) ZERO VALUE IN CASH VALUE AND DEATH BENEFIT INDICATES LAPSE OF
INSURANCE COVERAGE IN THE ABSENCE OF A SUFFICIENT ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING
THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL
AND STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH
SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATE OF RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS.
NO REPRESENTATIONS CAN BE MADE BY THE PRUDENTIAL OR THE SERIES FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD
OF TIME.
<PAGE>
- 21 -
GENERAL INFORMATION ABOUT THE PRUDENTIAL, THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT GI-2, AND THE
VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CERTIFICATES
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA. The Prudential Insurance
Company of America ("The Prudential") is a mutual insurance company, founded in
1875 under the laws of the State of New Jersey. It is licensed to sell life
insurance and annuities in all states, in the District of Columbia, and in all
United States territories and possessions. The Prudential's consolidated
financial statements begin on page A-___ and should be considered only as
bearing upon The Prudential's ability to meet its obligations under the Group
Contracts and the insurance provided thereunder.
THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2. The Prudential Variable
Contract Account GI-2 (the "Separate Account") was established on June 14, 1988
under New Jersey law as a separate investment account. The Separate Account
meets the definition of a "Separate Account" under the federal securities laws.
The Separate Account holds assets that are segregated from all The Prudential's
other assets.
The obligations arising under the Group Contracts and the Certificates are
general corporate obligations of The Prudential. The Prudential is also the
legal owner of the assets in the Separate Account. The Prudential will at all
times maintain assets in the Separate Account with a total market value at least
<PAGE>
- 22 -
equal to the liabilities relating to the benefits attributable to the Separate
Account. These assets may not be charged with liabilities which arise from any
other business The Prudential conducts. In addition to these assets, the
Separate Account's assets may include funds contributed by The Prudential to
commence operation of the Separate Account and may include accumulations of the
charges The Prudential makes against the Separate Account. From time to time
these additional assets will be transferred to The Prudential's general account.
Before making any such transfer, The Prudential will consider any possible
adverse impact the transfer might have on the Separate Account.
The Separate Account is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act") as a
unit investment trust, which is a type of investment company. This does not
involve any supervision by the SEC of the management or investment policies or
practices of the Separate Account. For state law purposes, the Separate Account
is treated as a part or division of The Prudential. There are currently seven
Subaccounts within the Separate Account, each of which invests in a single
corresponding portfolio of the Series Fund. Additional Subaccounts may be added
in the future, including ones which invest in funds managed by an adviser not
affiliated with The Prudential. The Prudential reserves the right to take all
actions in connection with the operation of the
<PAGE>
- 23 -
Separate Account that are permitted by applicable law (including those permitted
upon regulatory approval).
THE PRUDENTIAL SERIES FUND, INC. The Prudential Series Fund, Inc. (the
"Series Fund") is registered under the 1940 Act as an open-end diversified
management investment company, commonly known as a "Mutual Fund." The Separate
Account will purchase and redeem shares from the Series Fund at net asset value.
Any distributions received from a portfolio of the Series Fund will be
reinvested immediately at net asset value in shares of that portfolio and
retained as assets of the corresponding Subaccount.
The Prudential is the investment adviser for the assets of each of the
portfolios of the Series Fund. The Prudential's principal business address is
Prudential Plaza, Newark, New Jersey 07102-3777. By agreement, The Prudential's
wholly-owned subsidiaries, The Prudential Investment Corporation ("PIC"), and
Jennison Associates Capital Corp. ("Jennison") furnish, under The Prudential's
supervision, investment advisory services in connection with the management of
the Series Fund and its Growth Stock Portfolio respectively. Further detail is
provided in the prospectus and statement of additional information for the
Series Fund. The Prudential, PIC and Jennison are registered as investment
advisers under the Investment Advisers Act of 1940.
<PAGE>
- 24 -
The seven portfolios of the Series Fund in which the Account may currently
invest are as follows:
The Money Market Portfolio is invested in short-term debt
obligations similar to those purchased by money market
funds.
The Bond Portfolio is invested primarily in high quality
medium-term corporate and government debt securities.
The Common Stock Portfolio is invested primarily in common
stocks.
The High Dividend Stock Portfolio is invested primarily in
common stocks and convertible securities that provide
favorable prospects for investment income returns above
those of the Standard & Poor's 500 Stock Index or the NYSE
Composite Index.
The Global Equity Portfolio is invested in common stocks and
common stock equivalents (such as convertible debt
securities) of foreign and domestic issuers.
<PAGE>
- 25 -
The Aggressively Managed Flexible Portfolio is invested in a
mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by the investment
manager to be appropriate for an investor desiring
diversification of investment who is willing to accept a
relatively high level of loss in an effort to achieve
greater appreciation.
The Growth Stock Portfolio is invested primarily in equity
securities of established companies believed to have above-
average growth prospects.
The other portfolios described in the attached Series Fund prospectus are
not available in connection with these Group Contracts.
As an investment adviser, The Prudential charges the Series Fund a daily
investment management fee as compensation for its services. In addition to the
investment management fee, each portfolio incurs certain expenses, such as
accounting and custodian fees, which affect each portfolio's overall expense
ratio. See the attached prospectus for the Series Fund. The following table
shows the investment management fee charged for each available portfolio of the
Series Fund.
<PAGE>
- 26 -
- -------------------------------------------------------------------------
Annual Investment
Portfolio Management Fee
as a Percentage of
Average Daily Net Assets
- -------------------------------------------------------------------------
Money Market Portfolio 0.40%
Bond Portfolio 0.40%
High Dividend Stock Portfolio 0.40%
Common Stock Portfolio 0.45%
Aggressively Managed
Flexible Portfolio 0.60%
Growth Stock Portfolio 0.60%
Global Equity Portfolio 0.75%
- -------------------------------------------------------------------------
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract Separate Accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Series Fund nor the Series Fund currently foresee any such
disadvantage, the Series Fund's Board of Directors intends to monitor events in
order to identify any material conflict between variable life insurance and
variable annuity contract owners and to determine what action, if any, should be
taken in response thereto. Material conflicts could result from such things as:
(1) changes in state insurance law; (2) changes in federal income tax law; (3)
changes in the investment management of any portfolio of the Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES,
MANAGEMENT, POLICIES, AND RESTRICTIONS, ITS EXPENSES,
<PAGE>
- 27 -
THE RISKS ATTENDANT TO INVESTMENT THEREIN, AND ALL OTHER ASPECTS OF ITS
OPERATION IS CONTAINED IN THE ATTACHED PROSPECTUS FOR THE SERIES FUND AND IN ITS
STATEMENT OF ADDITIONAL INFORMATION, WHICH SHOULD BE READ IN CONJUNCTION WITH
THIS PROSPECTUS. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE
MET.
THE FIXED ACCOUNT. As explained earlier, a Participant may elect to
allocate all or part of the amount in his or her Certificate Fund to the Fixed
Account. The amount so allocated or transferred becomes part of The
Prudential's general assets, commonly referred to as the general account.
Subject to applicable law, The Prudential has sole discretion over the
investment of the assets of the general account, and Participants do not share
in the investment experience of those assets. Instead, The Prudential
guarantees that the part of the Certificate Fund allocated to the Fixed Account
will accrue interest daily at a rate that The Prudential declares periodically.
This rate may not be less than an effective annual rate of 4%, but The
Prudential may in its sole discretion periodically declare a higher rate. At
least annually and on request, a Participant will be advised of the interest
rates that currently apply to his or her Certificate.
By making allocations to the Fixed Account in amounts sufficient to cover
the monthly charges under a Certificate, a Participant can use the Certificate
as a way to obtain life insurance coverage, with little or no accumulation of
Cash
<PAGE>
- 28 -
Surrender Value. Even such a Participant retains, of course, the option to
build a Cash Surrender Value by paying larger premiums and applying the excess
amount to any of the investment options available under the Certificate.
Transfers from the Fixed Account are subject to strict limits. See
TRANSFERS, page ___. The payment of any Cash Surrender Value attributable to
the Fixed Account may be delayed for up to 6 months. See WHEN PROCEEDS ARE
PAID, page ___.
Because of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933 and The
Prudential has not been registered as an investment company under the Investment
Company Act of 1940. Accordingly, interests in the Fixed Account are not
subject to the provisions of these Acts, and The Prudential has been advised
that the staff of the Securities and Exchange Commission has not reviewed the
disclosure in this Prospectus relating to the Fixed Account. Disclosures
concerning the Fixed Account may, however, be subject to certain provisions of
the federal securities laws relating to the accuracy of statements made in a
prospectus.
<PAGE>
- 29 -
DETAILED INFORMATION ABOUT THE CERTIFICATES
ISSUANCE OF A CERTIFICATE. Eligible Group Members wishing to obtain
insurance coverage through the Group Contract must complete the appropriate
application and undergo any required medical underwriting, including in some
cases a medical examination. If the application is accepted, The Prudential
will issue a Certificate to that individual (the "Participant") which will
describe the rights, benefits, coverage, and obligations with respect to the
coverage. The minimum Face Amount for a Certificate is $10,000. The maximum
age at which a Certificate may initially be issued is 74. The maximum age
beyond which a person may no longer be covered under a Certificate is 95. At
age 95, the Participant will receive the Cash Surrender Value of the
Certificate. The Prudential believes such a distribution will be subject to the
same tax treatment as other surrenders. See TAX TREATMENT OF CERTIFICATE
BENEFITS, p. ___ below.
Generally, the Participant is the Covered Person under a Certificate. Some
Group Contracts, however, may permit an eligible group member who has a
Certificate naming himself or herself as the Covered Person to also apply for a
second Certificate naming his or her spouse as the Covered Person. Under each
Certificate the Participant is the only person eligible to exercise the rights
provided under the Certificate.
<PAGE>
- 30 -
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK". Generally, a Certificate may
be returned for a refund within 30 days after it is received by the Participant,
or 45 days after mailing, whichever is earlier. Some states allow a longer
period of time during which a Certificate may be returned for a refund. A
refund can be requested by mailing or delivering the Certificate to The
Prudential at the address specified in the Certificate. The Participant will
then receive a refund of all premium payments made, plus or minus any change due
to investment experience in the value of the invested portion of the premiums,
calculated as if no charges had been made against the Separate Account or Series
Fund. However, if applicable law so requires, the Participant who exercises his
or her short-term cancellation right will receive a refund of all premium
payments made, with no adjustment for investment experience. The Prudential
reserves the right to limit contributions during the Free Look period. During
the first 30 days following the Certificate Date, premium payments will be
invested in the Fixed Account.
PROCEDURES. The procedures for submitting applications, premium payments,
transfer orders, reallocations, loan or withdrawal requests or other
communications relating to the Participant's insurance will depend on the
specific terms of the particular Group Contract. Under some Group Contracts,
communications relating to a Participant's insurance may be submitted to the
Contractholder or its agent who then passes the communications on to The
Prudential. Under some Group Contracts,
<PAGE>
- 31 -
the Participant may communicate directly with The Prudential with respect to
certain types of transactions. Each Group Contract and the Certificates issued
thereunder will set forth the applicable procedures, so a Participant should
consult those documents in determining how to submit a payment or document, make
transfers, request loans or reallocate premium payments. In all cases,
applications and other documents, payments, orders and other communications will
be deemed received by The Prudential when received at the address specified in
the Certificate, not when received by the Contractholder or any broker or
administrator.
PREMIUMS. Participants will generally have flexibility in determining the
amount and timing of premium payments, although a Participant may be required to
pay an appropriate specified initial premium in order to become a Participant.
A Certificate will remain in force so long as the Certificate Fund is sufficient
to cover monthly charges. In general, if the Certificate Fund minus Certificate
Debt on any Monthiversary is insufficient to cover the charges for that month,
then the coverage will be in default and a grace period will begin. See LAPSE
p. ___. Some Contracts may provide that if a Participant pays certain specified
premiums during the first two Certificate Years, the Certificate will not go
into default even if the Certificate Fund is insufficient to cover monthly
charges.
<PAGE>
- 32 -
In addition to any premium paid on a routine basis, for example through
salary deduction, a Participant may make additional premium payments at any
time, subject to any applicable charges. Any such payment must be at least
$100. The Prudential reserves the right to limit the amount of such premiums.
The method by which premiums will be paid will be set forth in the Group
Contract. Some Participants will make payments to the Contractholder (or its
agent), which will then remit them to The Prudential as premium payments. The
Prudential will then allocate premium payments it receives to individual
Certificate Funds according to the instructions received. Other Participants
will make payments directly to The Prudential at the address specified in their
Certificate. There may be higher monthly administrative charges when premium
payments are made directly to The Prudential. See CHARGES AND EXPENSES, p. ___.
Due to the payment of additional premiums, or investment growth, the total
amount of insurance may have to be increased for the insurance to continue to
qualify as life insurance for federal tax purposes. In addition, if a
Participant makes premium payments in excess of certain limits, the tax status
of the insurance may change to that of a "modified endowment contract" under
Section 7702A of the Internal Revenue Code, which could be significantly
disadvantageous from a tax standpoint. See TAX TREATMENT OF CERTIFICATE
BENEFITS, page ____. The
<PAGE>
- 33 -
Prudential reserves the right not to accept or to return any premium payment
which would cause a Participant's insurance to fail to qualify as life insurance
under applicable tax laws, or which would increase the Death Benefit by more
than it increases the Certificate Fund.
EFFECTIVE DATE OF INSURANCE. A Participant's insurance will go into effect
on the first contract Monthiversary after his or her application for
participation under the Group Contract, including underwriting, if any, is
approved. That effective date is the Certificate Date.
ALLOCATION OF PREMIUMS. 1. INITIAL PREMIUMS. All premium payments
received on or before the Certificate Date will be applied to the Certificate
Fund as of the Certificate Date. After the deduction of any applicable charges,
see CHARGES AND EXPENSES, page ___, the remainder of the premiums will be
invested as of the Certificate Date in the Fixed Account for 30 days and will
thereafter be allocated to the investment options specified by the Participant.
To the extent that The Prudential receives premiums prior to the Certificate
Date, there will be a period during which the premiums will not be invested.
2. SUBSEQUENT PREMIUM PAYMENTS. Premiums paid after the Certificate Date
will be reduced by any applicable charges. See CHARGES AND EXPENSES, p. ___.
The entire remaining portion of such premiums will be allocated to the
investment options
<PAGE>
- 34 -
selected by the Participant as of the end of the Valuation Period in which The
Prudential receives such premium payments.
3. CHANGING PREMIUM ALLOCATIONS. If his or her insurance is not in
default, a Participant may change the way in which premiums are allocated among
the selected investment option(s). The minimum amount that a Participant may
allocate to any Subaccount or the Fixed Account is 10% and all allocations must
be in whole percentages. There is no charge for reallocating future premiums.
TRANSFERS. If his or her insurance is not in default, a Participant may
transfer amounts from one Subaccount to another Subaccount, or to the Fixed
Account. There is no limit on the number of transfers among Subaccounts or to
the Fixed Account. The Prudential may, however, reserve under certain Group
Contracts the right to impose a charge of up to $20 for each transfer in a
Certificate Year after the twelfth transfer in that Certificate Year.
Transfers will take effect as of the end of the Valuation Period in which a
proper transfer request is received by The Prudential at the address specified
in the transfer request form. The request may be in terms of dollars, such as a
request to transfer $10,000 from one Subaccount to another, or may be in terms
of a percentage reallocation among Subaccounts. The minimum amount that may be
transferred from any one investment
<PAGE>
- 35 -
option is $250 or the entire balance in that investment option, whichever is
less. For transfer requests in percentage terms, as with premium reallocations,
the percentages must be in whole numbers and no allocation may be less than 10%.
Transfers from the Fixed Account to the Subaccounts are currently permitted
once each Certificate Year. The amount of that transfer cannot exceed $5,000 or
25 percent of the balance in the Fixed Account, whichever is greater. Such
transfer requests will take effect as of the end of the Valuation Period in
which a proper transfer request is received at the address specified in the
transfer request forms. These limits are subject to change in the future.
Some Group Contracts permit a Participant to transfer amounts by telephone
provided he or she is enrolled to use The Prudential's telephone transfer
system. The Prudential cannot guarantee that Participants will be able to get
through to complete a telephone transfer during peak periods such as periods of
drastic economic or market change.
DOLLAR COST AVERAGING. Some contracts may permit a Participant to elect a
Dollar Cost Averaging feature. Dollar Cost Averaging enables a Participant to
systematically transfer specified dollar amounts from the Money Market
Subaccount to the other Subaccounts at regular intervals. By allocating an
identified sum on a regularly scheduled basis as opposed to
<PAGE>
- 36 -
reallocating the total amount at one particular time, a Participant may be less
susceptible to the impact of market fluctuations.
Dollar Cost Averaging may be selected by establishing a Money Market
Subaccount value of at least $3,000. The minimum transfer amount is $250. All
Dollar Cost Averaging transfers will be made effective as of the end of the
first Valuation Period following the first of the month. Election of this
arrangement may occur at any time by properly completing the Dollar Cost
Averaging election form, returning it to the address specified on the form so it
is received by the tenth of the month, to be effective the following month, and
ensuring that sufficient value is in the Money Market Subaccount.
Dollar Cost Averaging will terminate when any of the following occurs: (1)
the number of designated transfers has been completed; (2) the Money Market
Subaccount value is insufficient to complete the next transfer; (3) The
Prudential receives a written request for termination by the tenth of the month
in order to cancel the transfer scheduled to take effect the following month; or
(4) the Certificate is lapsed, surrendered or otherwise terminated.
There is currently no charge for Dollar Cost Averaging. The Prudential
reserves the right to charge for this program. The Prudential does not intend
to profit from any such charge.
<PAGE>
- 37 -
The main objective of Dollar Cost Averaging is to shield investments from
short term price fluctuations. Since the same dollar amount is transferred to a
Subaccount with each transfer, more Subaccount units are purchased if the
Subaccount Unit Value is low, and fewer Subaccount units are purchased if the
Unit Value is high. Therefore, a lower than average cost per unit may be
achieved over the long term. This plan of investing allows investors to take
advantage of market fluctuations but does not assure a profit or protect against
a loss in declining markets.
DEATH BENEFITS. A Death Benefit is payable upon the death of the Covered
Person. The Death Benefit is generally the Face Amount of the Certificate, PLUS
the value of the Certificate Fund. The Death Benefit otherwise payable will be
reduced by any Certificate Debt outstanding and any past due monthly charges.
If the insurance is kept in force for several years and/or substantial premium
payments are made, the Certificate Fund may grow to a point where it is
necessary to increase the Death Benefit in order to ensure that the insurance
will satisfy the Internal Revenue Code's definition of life insurance. In that
case, the Death Benefit (before the subtraction of Certificate Debt and unpaid
charges) must at least equal the following "corridor percentage" of the
Certificate Fund based on the insured's Attained Age:
<PAGE>
- 38 -
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
___ __ ___
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
___ __ ___
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
___ __ ___
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
___ __ ___
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
___ __ ___
65 120
66 119
67 118
68 117
69 116
___
<PAGE>
- 39 -
The Death Benefit will be paid in a lump sum, unless the Participant or the
beneficiary has arranged with The Prudential for the Death Benefit to be paid in
another mode of settlement.
CHANGES IN FACE AMOUNT. Some Group Contracts may allow Participants to
elect to increase the Face Amount of their insurance at certain times. Other
Group Contracts may provide for increasing Face Amounts based on factors such as
salary increases. Additional underwriting requirements may have to be satisfied
in either case.
Some Group Contracts may also permit Participants to decrease the Face
Amount of their insurance at certain times. In no event, however, may the Face
Amount be decreased below $10,000 or below the minimum amount required to
maintain the insurance's status as life insurance under the federal tax laws.
An increase or decrease in Face Amount, or the addition or removal of
certain additional insurance benefits, may create the potential for the
insurance to be treated as a modified endowment contract under the Internal
Revenue Code. This is particularly true of decreases in Face Amount during the
first seven years that insurance is in force. See TAX TREATMENT OF CERTIFICATE
BENEFITS, page ___. In addition, a decrease in coverage may limit the amount of
premiums that a Participant may contribute in the future.
<PAGE>
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CHARGES AND EXPENSES. The maximum deductions and charges described below
will not be increased by The Prudential with respect to any Certificate in
effect regardless of any changes in mortality and expense experience. Where
current charges are lower than maximum charges, The Prudential reserves the
right to increase the current charges, although it has no present intention to
do so.
A. FRONT-END PREMIUM CHARGES. The following charges are deducted from
premium payments before they are invested in the Separate Account or Fixed
Account.
1. CHARGES FOR TAXES ATTRIBUTABLE TO PREMIUMS. A charge for taxes
attributable to premiums is deducted from each premium payment. For these
purposes, "taxes attributable to premiums" shall include any federal, state or
local income, premium, excise, business or any other type of tax (or component
thereof) measured by or based on the amount of premium received by The
Prudential. That charge is currently made up of two parts. The first part is
for state and local premium taxes and is currently equal to 2.25% of the premium
received by The Prudential. The second part is for federal income taxes
measured by premiums and is currently equal to 0.25% of premiums received. The
Prudential believes that this second charge is a reasonable estimate of the
increased cost for premium-based federal income taxes resulting from a 1990
change in the Internal Revenue Code. These charges may be increased if
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the cost of The Prudential's taxes related to premium payments are increased.
2. PROCESSING FEE. A charge of up to $2 may be deducted from each
premium payment from a Participant to cover the costs of collecting and
processing premiums.
3. SALES CHARGE. A sales charge may be deducted to pay part of the
costs The Prudential incurs in selling the contracts and the coverage under the
contracts, including commissions, advertising and the printing and distribution
of prospectuses and sales literature. The maximum charge is equal to 3.5% of
each premium payment. This charge may be reduced or eliminated on certain
contracts. See REDUCTION IN CHARGES, page ____.
B. MONTHLY CERTIFICATE FUND CHARGES. The following charges are deducted
from the Certificate Fund on each contract Monthiversary.
1. COST OF INSURANCE. On each contract Monthiversary, The
Prudential will deduct a charge for the cost of the Participant's insurance.
When a Covered Person dies, the amount paid to the beneficiary is larger than
the Certificate Fund. The cost of insurance charges are designed to enable The
Prudential to pay this larger Death Benefit. The charge is determined by
multiplying the "net amount at risk" under a
<PAGE>
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Certificate (the amount by which the Certificate's Death Benefit, computed as if
there was no Certificate Debt, exceeds the Certificate Fund) by the cost of
insurance rate applicable to the Covered Person. The cost of insurance rates
are based on the age and rate class of the Covered Person, mortality
characteristics of the group, and particular aspects of the Group Contract, such
as the rate class structure and portability of the coverage. Under some Group
Contracts, any supplemental insurance benefits provided may be taken into
account in determining the cost of insurance rates. The rate classes for a
particular Group Contract may include classes for smokers and nonsmokers, active
and retired Participants, Portable Certificates, and other criteria agreed to by
The Prudential and the group sponsor.
The actual cost of insurance rates will be set by The Prudential based on
its expectations as to future experience in mortality and total expenses
(including, in some instances, those for supplemental insurance benefits) and
may be adjusted periodically, based on a number of factors including the number
of Certificates in force, the number of Certificates surrendered or becoming
Portable and the actual mortality and expense experience. Any change in the
cost of insurance rates will apply to all persons of the same age, rate class,
and group. The cost of insurance rate applicable to a Participant may not,
however, be greater than the guaranteed cost of insurance rate set forth in his
or her Certificate. That guaranteed rate will be no higher than a rate based
upon the Commissioner's Extended Term
<PAGE>
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Mortality Table (Male), Age Last Birthday, which is approximately 130% of the
1980 Commissioners' Standard Ordinary Table (The "1980 CSO Table"). The maximum
guaranteed rates are higher than the 1980 CSO Table because The Prudential uses
simplified underwriting and guaranteed issue procedures that may not require a
medical examination of a prospective Covered Person and may provide coverage to
groups with substandard risk characteristics from an underwriting standpoint.
The current cost of insurance charges are generally lower than 100% of the 1980
CSO Table.
2. CHARGE FOR ADDITIONAL INSURANCE BENEFITS. Under certain
contracts, Participants may obtain certain additional insurance benefits. See
ADDITIONAL INSURANCE BENEFITS, p. ___. Where such additional insurance benefits
are not taken into account in determining the cost of insurance charge as
discussed above, a separate charge for any such additional insurance benefits
obtained under a Certificate will be deducted each month from the Participant's
Certificate Fund.
3. ADMINISTRATIVE CHARGE. An administrative charge may be deducted
on each contract Monthiversary. It is intended to pay for maintaining records,
and communicating with Contractholders and Participants. The charge is
currently not more than $4 per month and is guaranteed not to exceed $6 per
month.
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4. OTHER TAXES. The Prudential reserves the right to deduct a
charge to cover federal, state or local taxes (other than "taxes attributable to
premiums" described above) that are imposed upon the operations of the Separate
Account. Currently, no such charges are made.
C. DAILY DEDUCTION FROM THE CERTIFICATE FUND. Each day a charge is
deducted from the assets of each of the Subaccounts in an amount currently equal
to an effective annual rate of 0.45%. The charge is guaranteed not to exceed an
effective annual rate of 0.90%. This charge is intended to compensate The
Prudential for assuming the mortality and expense risks of the insurance
provided through the Group Contract. The mortality risk assumed is that Covered
Persons may live for shorter periods of time than The Prudential estimated when
it determined what mortality charge to make. The expense risk assumed is that
expenses incurred in issuing and administering the insurance will be greater
than The Prudential estimated in fixing its administrative charges. The
Prudential will realize a profit from this risk charge to the extent it is not
needed to provide benefits and pay expenses under the Certificates. This charge
is not assessed on amounts allocated to the Fixed Account.
D. TRANSACTION CHARGES. There may be charges associated with surrenders,
partial withdrawals, loans, transfers and additional statement requests. These
charges are described in the prospectus section dealing with the transaction
itself.
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E. SERIES FUND EXPENSES. The Separate Account purchases shares of the
Series Fund at net asset value. The net asset value of those shares reflects
management fees and expenses already deducted from the assets of the Series
Fund. The fees and expenses for the Series Fund are briefly discussed under THE
PRUDENTIAL SERIES FUND, INC. on page ___. More detailed information is
contained in the attached Series Fund prospectus.
REDUCTION OF CHARGES. The Prudential may reduce or waive the sales charges
and/or other charges under certain Group Contracts, where it is expected that
the Group Contract will involve reduced sales or administrative expenses. The
Prudential determines both the eligibility for such reduced or waived charges,
as well as the amount of such reductions, by considering the following factors:
(1) the size of the group; (2) the total amount of premium payments expected to
be received; (3) the expected persistency of the individual Certificates; (4)
the purpose for which the Group Contract is purchased and whether that purpose
makes it likely that expenses will be reduced; and (5) any other circumstances
which The Prudential believes to be relevant in determining whether reduced
sales or administrative expenses may be expected. Some of the reductions in or
waivers of charges for these sales may be contractually guaranteed; other
reductions or waivers may be discontinued or modified by The Prudential. The
Prudential's reductions in, or waivers of, charges for these sales will not be
unfairly discriminatory to the interests of any individual Participants.
<PAGE>
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DIVIDENDS. Because the contract is issued by The Prudential, a mutual
life insurance company, it is a participating contract. This means it is
eligible to be credited with part of The Prudential's divisible surplus
attributable to the contract ("dividends"), as determined annually by The
Prudential's Board of Directors. Most of these contracts are expected to be
priced such that there will be no source of distributable surplus attributable
to these contracts. The Prudential may, however, issue these contracts in
certain cases on terms such that dividends may be declared.
The method of distribution of any dividends may vary depending on the terms
of a particular Group Contract. Dividends that are reinvested as premiums will
be subject to the charges made for premium payments. If an individual
Participant becomes a Portable Certificate holder, he or she will no longer be
entitled to receive any dividends under the Group Contract.
CASH SURRENDER VALUE. The Cash Surrender Value of the Certificate is equal
to the Participant's Certificate Fund, reduced by any Certificate Debt and any
applicable transaction charge. The Certificate Fund on any day equals the sum
of the amounts in the Subaccounts, the amount invested in the Fixed Account, and
the Loan Account. See LOANS, page ___. Cash Surrender Value will change daily,
reflecting the Net Premiums paid, withdrawals made, the increases or decreases
in the value of the Series Fund shares in which the assets of the Subaccounts
<PAGE>
- 47 -
have been invested, interest credited on any amounts allocated to the Fixed
Account and on the Loan Account, interest accrued on any loan, and by the daily
asset charge for mortality and expense risks assessed against the variable
investment options. Cash Surrender Value will also reflect monthly charges.
Upon request, The Prudential will tell a Participant the Cash Surrender Value of
his or her Certificate. There is no guaranteed minimum Cash Surrender Value and
it is possible for the Cash Surrender Value of a Certificate to decline to zero.
The tables on pages _____ of this prospectus illustrate approximately what
the Cash Surrender Values would be for selected Certificates with the specified
premium payments (assuming uniform hypothetical investment results in the
selected Series Fund portfolios).
FULL SURRENDERS. A Participant may surrender his or her Certificate for
its Cash Surrender Value at any time. All insurance will end at this time. The
Prudential will pay the Cash Surrender Value as of the end of the Valuation
Period during which The Prudential received the Participant's written request in
a form satisfactory to The Prudential. There is a transaction charge equal to
the lesser of $20 or 2% of the amount received upon surrender. A surrender may
have tax consequences. See TAX TREATMENT OF CERTIFICATE BENEFITS, p. __ below.
<PAGE>
- 48 -
PARTIAL WITHDRAWALS. A Participant may withdraw a portion of the Cash
Surrender Value of his or her Certificate during the lifetime of the insured and
while the Certificate is not in default. There is no limit on the number of
partial withdrawals a Participant can take each year, but there is a transaction
fee for each withdrawal equal to the lesser of $20 or 2% of the amount of the
withdrawal. A withdrawal of a portion of the Cash Surrender Value of a
Certificate may have tax consequences. See TAX TREATMENT OF CERTIFICATE
BENEFITS, p. __ below.
The minimum amount of any partial withdrawal is $250. The maximum amount
of any partial withdrawal is the amount that would reduce the Certificate Fund
(less any Certificate Debt) to an amount equal to the next month's charges. Any
withdrawal greater than that amount will not be permitted because it will cause
the Certificate to default. Upon request, The Prudential (or, under certain
contracts, the Contractholder) will tell a Certificate owner how much may be
withdrawn.
An amount withdrawn may not be repaid except as a premium payment subject
to applicable charges.
LOANS. A Participant who has held a Certificate under the Group Contract
for at least one year may borrow up to the Loan Value of the Certificate from
The Prudential. The Loan Value of a Certificate (before any applicable
transaction charge) is determined by multiplying the Certificate Fund by 85% and
then
<PAGE>
- 49 -
subtracting the next month's charges. The minimum amount that may be borrowed
at any one time is $250. A loan will not be permitted if Certificate Debt
exceeds the Loan Value. The Prudential reserves the right to charge up to a $20
fee for each loan made.
Interest charged on any loan will accrue daily at an annual rate determined
each year by The Prudential, which rate is currently 5.5%. Interest payments on
any loan are due at the end of each contract year. If interest is not paid when
due, it will be added to the principal amount of the loan. The Prudential will
notify a Participant 31 days before the interest on the loan becomes due.
When a loan is made, an amount equal to the loan will be taken out of each
of the Participant's investment options on a pro-rata basis. At the same time,
a Loan Account will be started for the Participant and will be credited with an
amount equal to the loan. The Prudential will generally credit the amount in
the Loan Account at an annual rate of 1.5% less than the interest rate on the
loan (unless a lower spread is required by state law). Interest credited
because of the Loan Account will be allocated to the Participant's investment
options on each Contract Anniversary in accordance with the Participant's
existing premium allocation instruction.
<PAGE>
- 50 -
A Participant may repay a part or all of the loan at any time. The minimum
amount of any repayment is $250 or the principal amount of the loan plus
outstanding interest, whichever is less. Loans may be repaid by payment or by
withdrawing amounts from the Certificate Fund. Participants should designate
whether a payment is intended as a premium payment or as a loan repayment. If
no such designation made, the payment will be treated as a loan repayment. If a
loan is repaid by using the Certificate Fund, The Prudential will treat such
repayment as a partial withdrawal from the Certificate Fund and will charge a
fee equal to the lesser of $20 or 2% of the amount of the withdrawal. The
balance in a Participant's Loan Account will be reduced by the amount of any
loan repayment.
A Participant's Loan Account plus accrued interest ("Certificate Debt") may
not exceed the value of the Certificate Fund. If the Certificate Debt equals
this amount the Certificate will go into default. See LAPSE p. ___.
If Certificate Debt is still outstanding when the Certificate is
surrendered or allowed to lapse, the borrowed amount may become taxable. In
addition, loans from modified endowment contracts may be treated for tax
purposes as distributions of income. See TAX TREATMENT OF CERTIFICATE BENEFITS,
p. __ below.
<PAGE>
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Should a Death Benefit become payable while a loan is outstanding, or
should the Certificate be surrendered while a loan is outstanding, any proceeds
otherwise payable will be reduced to reflect the amount of the loan and any
accrued interest.
A loan will have a permanent effect on a Certificate's Cash Surrender Value
and may have a permanent effect on the Death Benefit. This is because the
investment results of the selected investment options will apply only to the
amount remaining in those investment options after the loan amount is
transferred to the Loan Account. The longer the loan is outstanding, the
greater the effect is likely to be. The effect could be favorable or
unfavorable. If investment results are greater than the rate being credited
upon the amount of the loan while the loan is outstanding, Cash Surrender Values
will not be as high as they would have been if no loan had been made.
LAPSE. In general, a Certificate will remain in force so long as the
balance in the Certificate Fund is sufficient to pay the monthly charges when
due. If it is not, the Participant's insurance is in default and will lapse if
a grace period expires without a sufficient payment being made. Certain
Contracts may provide that if a Participant pays certain specified premiums
during the first two Certificate Years, the Certificate will not go into default
even if the Certificate Fund is insufficient to cover monthly charges. A
Certificate that lapses with
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outstanding Certificate Debt may result in tax consequences. See TAX TREATMENT
OF CERTIFICATE BENEFITS, p. __ below.
The Prudential will send a notice to a Participant in default at the last
known address on file with The Prudential, specifying the amount of premium
required to keep the Certificate in force and the date the payment is due. The
grace period expires on the later of 61 days from the date of default or 30 days
from the date notice was mailed. If The Prudential does not receive the
required amount within the grace period, the Participant's insurance will lapse
and have no remaining value.
If the Covered Person dies during the grace period, the Death Benefit will
be reduced by any past due monthly charges and any Certificate Debt.
TERMINATION OF THE CONTRACTHOLDER'S PARTICIPATION IN GROUP CONTRACTS. The
Contractholder may decide to terminate the Group Contract with The Prudential.
In addition, The Prudential may terminate the Group Contract if the aggregate
Face Amount of all Certificates, or the number of Certificates, issued under the
Contract falls below the minimum permissible levels established by The
Prudential or the Contractholder fails to timely remit premiums to The
Prudential.
Whichever party terminates participation in the Group Contract must provide
ninety days written notice to the other
<PAGE>
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party, as well as to all Participants before terminating participation in the
Group Contract. Termination of participation in the Group Contract means that
the Contractholder will no longer remit premiums to The Prudential under the
Group Contract and that no new Certificates will be issued under the Group
Contract. The effects on Participants of termination of the Contractholder's
participation in the Group Contract are described in OPTIONS ON TERMINATION OF
COVERAGE below. The options available to Participants from The Prudential may
depend on what other insurance options are available to them.
PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS. The terms of each
Group Contract will determine the effect on a Participant's insurance coverage
if the Participant is no longer an eligible group member. Some Group Contracts
may provide that insurance coverage will continue even if the Participant is no
longer an eligible member of the group. Under such contracts, within 61 days
after The Prudential receives written notice that the Participant is no longer
eligible under the Group Contract, The Prudential will notify the Participant
that The Prudential will now mail quarterly premium reminders directly to the
Participant, who will remit premium payment directly to The Prudential.
Continuation of insurance may be subject to certain conditions and limitations
specified in the Group Contract, such as the repayment of any outstanding
Certificate Debt. The notice will also explain the Participant charges
applicable to Portable Certificates. These charges may be higher than those
paid by the
<PAGE>
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Participant while he or she was still an eligible group member, but will not
exceed the maximum charges described in this Prospectus. Continuation as a
Portable Certificate holder may be conditioned on maintenance of a specified
minimum Certificate Fund value.
Under other Group Contracts the portability privileges described above will
not be available. Participants under those Group Contracts will have the
options described in the next section.
OPTIONS ON TERMINATION OF COVERAGE. Insurance coverage obtained through a
Group Contract will terminate when the Group Contract itself terminates. Some
Group Contracts also provide that coverage purchased by an individual
Participant will terminate when the Participant is no longer an eligible group
member.
In the case when the Contractholder's participation in the Group Contract
terminates, the effect on individual Participants depends on whether the
Contractholder replaces the Group Contract with another life insurance
contract(s) that provides for accumulation of cash value. If the Contractholder
does enter into such a contract, Certificates with less than $1,000 of Cash
Surrender Value will be terminated and the Cash Surrender Value of each such
Certificate will be directly transferred to the new contract. If a Certificate
has $1,000 or more of Cash Surrender
<PAGE>
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Value, the Participant must elect to transfer Cash Surrender Value to the new
carrier or will be treated as having elected portability on contracts which
permit portability.
If the sponsoring entity does not enter into a new life insurance
contract(s) that provides for accumulation of cash value, Participants will have
the following options. Participants who are no longer Eligible Group Members
will also have the following options under contracts that do not contain the
portability features discussed above.
1. CONVERSION. A Participant may elect to convert the Certificate
to an individual life insurance policy without showing evidence of insurability.
If a Participant elects this option, he or she must apply for the individual
contract and pay the first premium within 31 days after the coverage under the
Group Contract ends. The Participant may select any form of individual life
insurance (other than term insurance) that The Prudential normally makes
available to insureds who are the same age and requesting the same amount of
insurance. Premiums will be based on the form and amount of insurance elected
by the Participant, as well as the Covered Person's risk class and age.
If the insurance is ending because the Participant is no longer eligible to
participate in the Group Contract, the amount
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of insurance under the individual policy cannot be more than the Face Amount of
the Certificate under the Group Contract. If the insurance is ending because
the Group Contract is terminating, the amount of individual insurance may,
depending on applicable state law, be limited to the lesser of (a) $10,000 or
(b) the Face Amount of the Certificate under the Group Contract less the amount
of any group insurance the Participant becomes eligible for in the next 45 days.
If a Covered Person dies within 31 days after the insurance ends under the
Group Contract, and the Participant had the right to convert to an individual
policy, a Death Benefit equal to the amount of individual insurance on the
Covered Person the Participant could have purchased upon conversion will be
payable by The Prudential.
2. PAID-UP INSURANCE. The Participant may elect to purchase fixed
paid-up insurance on the Covered Person with the Cash Surrender Value of the
Certificate. The Participant must have at least $1,000 of Cash Surrender Value
for this option to be available. The insurance amount will depend on the Cash
Surrender Value on the date of termination, and the age of the Covered Person
but cannot exceed the Death Benefit immediately before the paid-up purchase.
The Participant must elect this option within 31 days of the date on which the
Certificate coverage would end. The election will take effect immediately after
the date on which the Certificate coverage ends.
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Acquisition of reduced paid-up insurance may result in that insurance becoming a
modified endowment contract. See TAX TREATMENT OF CERTIFICATE BENEFITS, page
____.
3. PAYMENT OF CASH SURRENDER VALUE. The Participant may receive the
Cash Surrender Value by surrendering the Certificate and making a proper written
request.
The above options apply whether the Participant or a spouse is the Covered
Person under the Certificate. A Participant who does not choose any of the
above options within 61 days will be provided with Paid-Up Insurance, if his or
her Certificate has at least $1000 of Cash Surrender Value and, if not, will be
paid the Cash Surrender Value.
TAX TREATMENT OF CERTIFICATE BENEFITS. Each prospective Participant is
urged to consult a qualified tax advisor. The following discussion is not
intended as tax advice, and it is not a complete statement of what the effect of
federal income taxes will be under all circumstances. Rather, it provides
information about how The Prudential believes the federal income tax laws apply
in the most commonly occurring circumstances. There is no guarantee, however,
that the current federal income tax laws and regulations or interpretations will
not change.
TREATMENT AS LIFE INSURANCE. The Certificate will be treated as "life
insurance," as long as it satisfies certain
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definitional tests set forth in section 7702 of the Internal Revenue Code (the
"Code") and as long as the underlying investments for the Certificate satisfy
diversification requirements under section 817(h) of the Code. (For further
detail on diversification requirements, see DIVIDENDS, DISTRIBUTIONS, AND TAXES
in the attached prospectus for the Series Fund.)
The Prudential believes that it has taken adequate steps under the Code and
existing regulations under it to cause the Certificates to be treated as life
insurance for tax purposes. This means that: (1) except as noted below, the
Participant should not be taxed on any part of the Certificate Fund, including
additions attributable to interest, dividends or appreciation; and (2) the Death
Benefit should be excludable from the gross income of the beneficiary under
section 101(a) of the Code.
Although The Prudential believes the Certificate should qualify as "life
insurance" for federal tax purposes, there are uncertainties, particularly
because the Secretary of the Treasury has not yet issued final regulations under
Section 7702 that bear on this question. Moreover, in connection with the
issuance of temporary regulations under section 817(h), the Treasury Department
announced that such regulations do not provide guidance concerning the extent to
which Participants or Contractholders may direct their investments to particular
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divisions of a Separate Account. Such guidance will be included in regulations
or rulings under Section 817(d) relating to the definition of a variable
contract.
The Prudential intends to comply with final regulations issued under
Sections 7702 and 817. Therefore, it reserves the right to make such changes as
it deems necessary to assure that the Certificate continues to qualify as life
insurance for tax purposes. Any such changes will apply uniformly to affected
Participants and will be made only after advance written notice to the
Contractholder.
PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends
on whether the Certificate is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Certificates not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Certificate may have tax consequences.
Under surrender, the Participant will not be taxed on the Cash
Surrender Value except for the amount, if any, that exceeds the gross
premiums paid less the untaxed portion of any prior withdrawals. The
amount of any unpaid Certificate Debt will, upon surrender or lapse,
be added to the Cash Surrender Value and treated, for this purpose, as
if it had been received. Any loss incurred upon surrender
<PAGE>
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is generally not deductible.
A withdrawal generally is not taxable unless it exceeds total premiums
paid to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the
first 15 Certificate Years all or a portion of a withdrawal may be
taxable if the Certificate Fund exceeds the total premiums paid less
the untaxed portions of any prior withdrawals, even if total
withdrawals do not exceed total premiums paid to date.
Extra premiums for additional insurance benefits generally do not
count in computing gross premiums paid, which in turn determines the
extent to which a withdrawal might be taxed.
Loans received under the Certificate will ordinarily be treated as
indebtedness of the Participant and will not be considered to be
distributions subject to tax. However, if a loan is still outstanding
when the Certificate is surrendered or allowed to lapse, the
outstanding Certificate Debt will be taxable at that time to the
extent the Cash Surrender Value exceeds
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gross premiums paid less the untaxed portion of any prior withdrawals.
2. Some of the above rules are changed if the Certificate is classified
as a Modified Endowment Contract under Section 7702A of the Code. It
is possible for this Certificate to be classified as a Modified
Endowment Contract under at least two circumstances: premiums in
excess of the 7-pay premiums allowed under Section 7702A are paid or a
decrease in the Death Benefit or a removal of certain additional
insurance benefits is made during the first 7 Certificate Years.
Moreover, the addition of certain additional insurance benefits or an
increase in the Death Benefit) after the Certificate Date may have an
impact on the Certificate's status as a Modified Endowment Contract.
Participants contemplating any of these steps should first consult a
qualified tax advisor and their Prudential representative.
If the Certificate is classified as a Modified Endowment Contract,
then pre-death distributions, including loans, assignments and pledges
are includible in income to the extent that the Certificate Fund
exceeds the gross premiums paid for the Certificate increased by the
amount of any loans previously includible in income and reduced by any
untaxed amounts
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previously received other than the amount of any loans excludible from
income. These rules may also apply to pre-death distributions,
including loans, made during the two year period prior to the
Certificate becoming a Modified Endowment Contract.
In addition, pre-death distributions from such Certificates (including
full surrenders) will be subject to a penalty of 10 percent of the
amount includible in income unless the amount is distributed on or
after age 59 1/2, on account of the taxpayer's disability or as a life
annuity. It is presently unclear how the penalty tax provisions apply
to contracts owned by non-natural persons such as trusts.
Under certain circumstances, multiple Modified Endowment Contracts
issued to the same Participant during any calendar year will be
treated as a single contract for purposes of applying the above rules.
WITHHOLDING
The taxable portion of any amounts received under the Certificate will be
subject to withholding to meet federal income tax obligations, if the
Participant fails to elect that no taxes be withheld. The Prudential will
provide the Participant with forms
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and instructions concerning the right to elect that no taxes be withheld from
the taxable portion of any payment. All recipients may be subject to penalties
under the estimated tax payment rules if withholding and estimated tax payments
are not sufficient. Participants who do not provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding. Special withholding rules apply to payments to non-resident
aliens.
OTHER TAX CONSIDERATIONS. Transfer of the Certificate to a new owner or
assignment of the Certificate may have tax consequences depending on the
circumstances. In the case of a transfer of the Certificate for valuable
consideration, the Death Benefit may be subject to federal income taxes under
section 101(a)(2) of the Code. In addition, a transfer of the Certificate to or
the designation of a beneficiary who is either 37 1/2 years younger than the
Participant or a grandchild of the Participant may have Generation Skipping
Transfer tax consequences under Section 2601 of the Code.
As a general rule deductions for interest paid or accrued on Certificate Debt or
on other loans that are incurred or continued to purchase or carry the
Certificate may be denied under sections 163 of the Code as personal interest or
under section 264 of the Code. Participants should consult a tax advisor
regarding the application of these provisions to their circumstances.
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The individual situation of each Participant or beneficiary will determine the
federal estate taxes and the state and local estate, inheritance and other taxes
due if the Participant or insured dies.
WHEN PROCEEDS ARE PAID. The Prudential will generally pay any Death
Benefit, Cash Surrender Value, partial withdrawal or loan proceeds supported by
the Separate Account within 7 days after receipt at The Prudential office
specified in the Certificate of all the documents required for such a payment.
Other than the Death Benefit, which is determined as of the date of death, the
amount will be determined as of the end of the Valuation Period in which the
necessary documents are received. However, The Prudential may delay payment of
proceeds from the Subaccount(s) and the variable portion of the Death Benefit
due under a Participant's insurance if the disposal or valuation of the Separate
Account's assets is not reasonably practicable because the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC, or the SEC declares that an emergency exists.
With respect to the amount of any Cash Surrender Value allocated to the
Fixed Account, and with respect to a Certificate in force as paid-up insurance
or as extended term insurance, The Prudential expects to pay the Cash Surrender
Value promptly upon request. However, The Prudential has the right to delay
payment of such Cash Surrender Value for up to six months (or a shorter
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period if required by applicable law). The Prudential will pay interest of at
least 3% a year if it delays such a payment for more than 30 days (or a shorter
period if required by applicable law).
BENEFICIARY. The Participant has the right to designate and name a
beneficiary to receive Death Benefits under the Certificate. The Participant
must designate a beneficiary in writing on a form approved by The Prudential. A
Participant may change the beneficiary at any time without the consent of the
present beneficiary in accordance with the terms of the Group Contract. If
there is more than one beneficiary at the death of the Covered Person, each will
receive equal payments unless otherwise specified by the Participant.
INCONTESTABILITY. After a Participant's Certificate has been in force
during a Covered Person's lifetime for two years or, with respect to any change
in the Certificate that requires The Prudential's approval and could increase
its liability, after the change has been in effect during the insured's lifetime
for two years from the effective date of the change, The Prudential will not
contest its liability under the Certificate in accordance with its terms.
MISSTATEMENT OF AGE. If a Covered Person's stated age is incorrect in the
Certificate, The Prudential will adjust the
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Death Benefit payable, as required by law, to reflect the correct age.
SUICIDE EXCLUSION. Generally, if a Covered Person, whether sane or insane,
dies by suicide within two years from the effective date of the Certificate, The
Prudential will pay no more under the Certificate than the sum of the premiums
paid.
If a Covered Person, whether sane or insane, dies by suicide within two
years from the effective date of an increase in the Face Amount of insurance
that was requested after issue and required approval, The Prudential will pay,
with respect to the amount of the increase, no more than the sum of the monthly
charges attributable to the increase.
ASSIGNMENT. A Participant may assign the insurance coverage and all
rights, benefits or privileges that he or she has under a Certificate. The
Prudential will be bound by an assignment of insurance or the rights, benefits
or privileges under the insurance only if: (a) it is in writing; (b) it is
signed by the Participant; and (c) The Prudential receives a copy of the
assignment at The Prudential Group Insurance Office specified in the
Certificate. The Prudential is not responsible for determining the validity or
legality of any assignment. References in this prospectus to rights that a
Participant may exercise shall include exercise of such rights by any person to
whom the Participant has validly assigned such rights.
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Assignment of a Certificate that is a Modified Endowment Contract could have
adverse federal income tax consequences. See TAX TREATMENT OF CERTIFICATE
BENEFITS, p. ___.
VOTING RIGHTS. As stated above, all of the assets held in the Subaccounts
of the Separate Account will be invested in shares of the corresponding
portfolios of the Series Fund. The Prudential is the legal owner of those
shares and as such has the right to vote on any matter voted on at Series Fund
shareholders meetings. However, The Prudential will, as required by law, vote
the shares of the Series Fund at any regular and special shareholders meetings
it is required to hold in accordance with voting instructions received from
Participants. The Series Fund will not hold annual shareholders meetings when
not required to do so under Maryland law or the Investment Company Act of 1940.
Series Fund shares for which no timely instructions from Participants are
received, and any shares attributable to general account investments of The
Prudential, will be voted in the same proportion as shares in the respective
portfolios for which instructions are received. Should the applicable federal
securities laws or regulations, or their current interpretation, change so as to
permit The Prudential to vote shares of the Series Fund in its own right, it may
elect to do so.
Matters on which Participants may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant
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of the Series Fund; (3) approval of the investment advisory agreement for a
portfolio of the Series Fund corresponding to the Participant's selected
Subaccount(s); (4) any change in the fundamental investment policy of a
portfolio corresponding to the Participant's selected Subaccount(s); and (5) any
other matter requiring a vote of the shareholders of the Series Fund. With
respect to approval of the investment advisory agreement or any change in a
portfolio's fundamental investment policy, Participants participating in such
portfolios will vote separately by portfolio on the matter, pursuant to the
requirements of Rule 18f-2 under the 1940 Act.
The number of Series Fund shares for which instructions may be given by a
Participant is determined by dividing the portion of the value of the
Certificate derived from participation in a Subaccount, by the value of one
share in the corresponding portfolio of the Series Fund. The number of votes
for which each Participant may give The Prudential instructions will be
determined as of the record date chosen by the Board of Directors of the Series
Fund. The Prudential will furnish Participants with proper forms and proxies to
enable them to give these instructions. The Prudential reserves the right to
modify the manner in which the weight to be given voting instructions is
calculated where such a change is necessary to comply with current federal
regulations or interpretations of those regulations.
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The Prudential may, if required by state insurance regulations, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment objectives of one or
more of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, The Prudential itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that The Prudential reasonably disapproves such changes in accordance
with applicable federal regulations. If The Prudential does disregard voting
instructions, it will advise Participants of that action and its reasons for
such action in the next annual or semi-annual report to Participants.
Participants also share with the owners of all Prudential contracts and
policies the right to vote in elections for members of the Board of Directors of
The Prudential.
SUBSTITUTION OF SERIES FUND SHARES. Although The Prudential believes it to
be unlikely, it is possible that in the judgment of its management, one or more
of the portfolios of the Series Fund may become unsuitable for investment by
Participants because of investment policy changes, tax law changes, or the
unavailability of shares for investment. In that event, The Prudential may seek
to substitute the shares of another portfolio of the Series Fund or shares of an
entirely different mutual
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fund. Before this can be done, the approval of the SEC, and possibly one or
more state insurance departments, will be required. Group Contractholders and
Participants will be notified of such substitution.
ADDITIONAL INSURANCE BENEFITS. Depending on the terms of the Group
Contract, one or more of the following additional benefits may be available to
Participants through their Group Contract. Under some Group Contracts, some or
all of these benefits may be provided to all Participants while under other
Group Contracts, individual Participants may elect whether to receive some or
all of these benefits for an additional charge.
ACCELERATED DEATH BENEFIT. The Accelerated Death Benefit allows the
Participant to elect to receive an accelerated payment of part of the
Certificate's Death Benefit, adjusted to reflect current value, if the
Participant is diagnosed as terminally ill with a life expectancy of 6 months
(12 months in some states) or less. The adjusted Death Benefit will always be
less than the Death Benefit, but will generally be greater than the contract's
Cash Surrender Value. The Accelerated Death Benefit may be discounted for
interest under certain Group Contracts and where permitted by law. The
Accelerated Death Benefit is only available for insurance on the Participant and
not for insurance on the Participant's spouse.
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When satisfactory evidence that the person is terminally ill is provided,
The Prudential will provide an accelerated payment, in a lump sum, of the
portion of the Death Benefit selected by the Participant as an Accelerated Death
Benefit. The Prudential may charge a fee not to exceed $350 for payment of an
Accelerated Death Benefit.
No benefit will be payable if the Participant is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. The
Prudential can furnish details about the amount of Accelerated Death Benefit
that is available to an eligible Participant. A Participant who has elected to
receive an Accelerated Death Benefit can no longer request an increase in the
Face Amount of his or her Certificate, and the amount of future premium payments
he or she can make will be limited.
Adding the Accelerated Death Benefit to the Certificate has no adverse tax
consequences; however, electing to use it could. Participants should consult a
qualified tax advisor before electing to receive this benefit. Unlike a Death
Benefit received by a beneficiary after the death of an insured, receipt of an
Accelerated Death Benefit payment may give rise to a federal or state income
tax. Receipt of an Accelerated Death Benefit payment may also affect a
Participant's eligibility for certain government benefits or entitlements.
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ACCIDENTAL DEATH AND DISMEMBERMENT BENEFIT. Under some contracts,
Participants may be provided an accidental death and dismemberment benefit that
provides insurance for accidental loss of life, sight, hand, or foot. This
benefit will exclude losses due to suicide or attempted suicide, diseases and
infirmities, medical or surgical treatments, and acts of war. It may be subject
to other exclusions from coverage, age limitations, and benefit limitations set
forth in the Group Contract.
EXTENDED DEATH PROTECTION DURING TOTAL DISABILITY. Under some Group
Contracts, Participants will be provided with extended death protection during
their total disability. Under this provision, even if a Participant's insurance
(or that of a spouse) has otherwise ended, insurance in the Face Amount of the
Certificate will continue if the Participant became totally disabled at less
than age 60. The extended death protection will continue for successive one-
year periods, until age 95, so long as the Participant provides satisfactory
proof of continued total disability.
REPORTS. At least once each contract year, Participants will be sent
statements that provide certain information pertinent to their own insurance.
These statements detail values and transactions made and specific insurance data
that apply only to each Participant. On request, a Participant will be sent a
current statement in a form similar to that of the annual statement described
above, but The Prudential may limit the
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number of such requests or impose a reasonable charge not to exceed $20 if such
requests are made too frequently.
The Contractholder and each Participant will also be sent an annual and
semi-annual report for the Separate Account and a list of the securities held in
each available portfolio of the Series Fund, as required by the 1940 Act.
SALE OF THE CONTRACT AND SALES COMMUNICATIONS. Prudential Retirement
Services, Inc. ("PRSI"), an indirect wholly-owned subsidiary of The Prudential,
acts as the principal underwriter of the Group Contracts and Certificates.
PRSI, organized in 1988 under New Jersey law, is registered as a broker and
dealer under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. PRSI's principal business address is
751 Broad Street, Newark, New Jersey 07102. The Group Contracts and
Certificates are sold by registered representatives of PRSI who are also
authorized by state insurance departments to do so. The Group Contracts and
Certificates may also be sold through other broker-dealers authorized by PRSI
and applicable law to do so. The representative will generally receive a
commission of no more than 10% of the cost of insurance charge for the period
that the premium payment is intended to cover. The commission percentage will
depend on factors such as the size of the group involved and the amount of sales
and administrative effort required in connection with the particular Group
Contract.
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Sales expenses in any year are not equal to the sales charge in that year.
The Prudential may not recover its total sales expenses for some or all Group
Contracts over the periods the Certificates for such Group Contracts are in
effect. To the extent that the sales charges are insufficient to cover total
sales expenses, the sales expenses will be recovered from The Prudential's
surplus, which may include amounts derived from the mortality and expense risk
charge and the monthly cost of insurance charge. See CHARGES AND EXPENSES, page
___.
The Prudential is rated by independent financial rating services, including
Moody's, Standard & Poors, Duff & Phelps and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength of claims-paying ability of
The Prudential and rate the investment experience or financial strength of the
Separate Account. The Prudential may advertise these ratings from time to time.
Furthermore, The Prudential may include in advertisements comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
STATE REGULATION. The Prudential is subject to regulation and supervision
by the Department of Insurance of the State of New Jersey, which periodically
examines its operations and financial condition. It is also subject to the
insurance laws
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and regulations of all jurisdictions in which it is authorized to do business.
The Prudential is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business to determine solvency and compliance
with local insurance laws and regulations.
In addition to the annual statements referred to above, The Prudential is
required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
EXPERTS. The financial statements included in this prospectus have been
audited by Deloitte & Touche, LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing. Deloitte
& Touche's principal business address is Two Hilton Court, Parsippany, New
Jersey, 07054-0319. Actuarial matters included in this prospectus have been
examined by Stuart L. Liebeskind, FSA, MAAA, whose opinion is filed as an
exhibit to the registration statement.
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LITIGATION. No litigation is pending that would have a material effect
upon the Separate Account or the Series Fund.
ADDITIONAL INFORMATION. A registration statement has been filed with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933,
relating to the offering described in this prospectus. This prospectus does not
include all the information set forth in the registration statement. Certain
portions have been omitted pursuant to the rules and regulations of the SEC.
The omitted information may, however, be obtained from the SEC's principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from The Prudential's office. The
address and telephone number are set forth on the cover of this prospectus.
DEFINITIONS OF SPECIAL TERMS
USED IN THIS PROSPECTUS
Attained Age - A person's age as of each Contract Anniversary.
Cash Surrender Value - The amount payable to the Participant upon surrender of
the Certificate. The Cash Surrender Value is equal to the Participant's
Certificate Fund on the date of surrender, less any Certificate Debt and any
applicable transaction charge.
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Certificate - A document issued to an eligible group member under a Group
Contract, setting forth or summarizing the Participant's rights and benefits.
Certificate Anniversary - The same date each year as the Certificate Date.
Certificate Date - The effective date of coverage under a Certificate.
Certificate Debt - The principal amount of any outstanding loans to the
Participant under his or her Certificate plus any interest accrued thereon.
Certificate Fund - The total amount credited to a Participant under his or her
Certificate. On any date it is equal to the sum of the amounts under that
Certificate allocated to: (1) the Subaccounts, (2) the Fixed Account, and (3)
the Loan Account.
Certificate Year - The year from the Certificate Date to the first Certificate
Anniversary or from one Certificate Anniversary to the next.
Contract Anniversary - The same date each year as specified in the contract.
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Contract Date - The date as of which the Group Contract is issued.
Contractholder - The employer, association, sponsoring organization or trust
that is issued a Group Contract.
Covered Person - The person whose life is insured under the Group Contract. The
Covered Person is generally the Participant. Some Group Contracts may permit a
Participant to apply for insurance under a second Certificate naming the
Participant's spouse as the Covered Person.
Death Benefit - The amount payable upon the death of the Covered Person (before
the deduction of any outstanding Certificate Debt or any past due monthly
charges).
Eligible Group Members - The persons specified in the Group Contract as eligible
to apply for insurance protection under the Group Contract.
Face Amount - The amount of life insurance in a Participant's Certificate. The
Face Amount will be the minimum Death Benefit as long as the Participant's
Certificate remains in force.
Fixed Account - An investment option under which The Prudential guarantees that
interest will be added to the amount deposited at a rate declared periodically
in advance.
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Group Contract - A group variable universal life insurance contract issued to
the Contractholder by The Prudential.
Issue Age - The Covered Person's Attained Age on the date that the insurance on
that Covered Person goes into effect as defined by the Group Contract.
Loan Account - An account within The Prudential's general account to which is
transferred from the Separate Account and/or the Fixed Account an amount equal
to the amount of any loan.
Loan Value - The maximum amount (before any applicable transaction charge) that
a Participant may borrow under his or her Certificate. The Loan Value is
determined by multiplying the Certificate Fund by 85% and then subtracting the
next month's charges.
Monthiversary - The Contract Date and the first day of each succeeding month,
except that whenever the contract Monthiversary falls on a date other than a
Valuation Date the Monthiversary will be the next Valuation Date.
Net Premium - A Participant's premium payment minus any charges for taxes
attributable to premiums, any processing fee, and any sales charge. Net
Premiums are the amounts available for allocation to the Separate Account and/or
the Fixed Account.
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Participant - An eligible group member under a Group Contract who obtains
insurance under the Group Contract and is eligible to exercise the rights
described in the Certificate. The Participant will be the person entitled to
exercise all rights under a Certificate, regardless of whether the Covered
Person under the Certificate is the Participant or his or her spouse.
References to rights that a Participant may exercise under a Certificate shall
include exercise of such rights by any person to whom the Participant has
validly assigned such rights.
Portable - A status that may occur when a Participant is no longer an eligible
group member under the Group Contract because of the occurrence of an event
specified in the Group Contract or the Certificate. Such events may include
termination of the Participant's employment or other relationship with the
Contractholder or retirement of the Participant. Cost of insurance rates and
charges may increase under a Portable Certificate since the Covered Person under
a Portable Certificate may no longer be considered to be a member of the
Contractholder's group for purposes of determining those rates and charges.
Separate Account - The Prudential Variable Contract Account GI-2, a separate
investment account registered as a unit investment trust under the Investment
Company Act of 1940 and established by The Prudential to receive and invest the
Net Premiums paid under the Certificates.
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Series Fund - The Prudential Series Fund, Inc., a mutual fund with separate
portfolios, one or more of which may be used as an underlying investment for the
Group Contracts.
Subaccount - A division of the Separate Account, the assets of which are
invested in shares of an underlying open-end investment company, commonly known
as a mutual fund. The Subaccounts in existence as of the date of this
Prospectus each invest their assets in the corresponding portfolios of the
Series Fund. Other Subaccounts may be added in the future including Subaccounts
that invest in funds managed by persons unaffiliated with The Prudential.
Valuation Date - Each day on which the value of the amount invested in a
Subaccount is determined, which is generally each day that the New York Stock
Exchange is open for trading.
Valuation Period - The period of time from one determination of the value of the
amount invested in a Subaccount to the next. Such determinations are made when
the net asset values of the portfolios of the Series Fund are calculated, which
is generally at 4:15 p.m. New York City time on each day that the New York Stock
Exchange is open for trading.
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DIRECTORS AND OFFICERS
The directors and certain officers of The Prudential, listed with their
principal occupations during the past 5 years, are shown below.
DIRECTORS OF THE PRUDENTIAL
FRANKLIN E. AGNEW, DIRECTOR -- Business Consultant and former Senior Vice
President of H.J. Heinz. Address: One Mellon Bank Center, Suite 2120,
Pittsburgh, PA 15219.
FREDERIC K. BECKER, DIRECTOR -- President of Wilentz, Goldman, and Spitzer (law
firm). Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.
WILLIAM W. BOESCHENSTEIN, DIRECTOR -- Director, Owens-Corning Fiberglas
Corporation. Address: Fiberglas Tower, Toledo, OH 43659.
LISLE C. CARTER, JR., DIRECTOR -- Former Senior Vice President and General
Counsel, United Way of America. Address: 1307 Fourth Street, S.W., Washington,
D.C. 20024.
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JAMES G. CULLEN, DIRECTOR -- President, Bell Atlantic Corporation since 1993;
Prior to 1993: President, New Jersey Bell. Address: 1301 North Court House
Road, 11th floor, Alexandria, VA 22201.
CAROLYNE K. DAVIS, DIRECTOR -- Health Care Advisor, Ernst & Young. Address:
1200 Nineteenth Street, N.W., 4th floor, Washington, D.C. 20024.
ROGER A. ENRICO, DIRECTOR -- Vice Chairman, PepsiCo., Inc. since 1993; 1991 to
1993: Chairman and Chief Executive Officer, Pepsi Co. Worldwide Foods; Prior to
1991: President and Chief Executive Officer, Pepsi Co. Worldwide Beverages.
Address: 7701 Legacy Drive, Plano, TX 75024.
ALLAN D. GILMOUR, DIRECTOR -- Former Vice Chairman, Ford Motor Company.
Address: Prudential Plaza, Newark, NJ 07102-3777.
WILLIAM H. GRAY, III, DIRECTOR -- President and Chief Executive Officer, United
Negro College Fund, Inc. since 1991; Prior to 1991: United States
Representative for Pennsylvania's 2nd District. Address: 500 East 62nd Street,
New York, NY 10021.
JON F. HANSON, DIRECTOR -- Chairman, Hampshire Management Co. Address: 235
Moore Street, Suite 200, Hackensack, NJ 07601.
CONSTANCE J. HORNER, DIRECTOR -- Guest Scholar, The Brookings Institution since
1993; 1991 to 1993: Assistant to the President
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and Director of Presidential Personnel, U.S. Government; Prior to 1991: Deputy
Secretary, Department of Health and Human Services. Address: 1775
Massachusetts Avenue, N.W., Washington, D.C. 20036-2188.
ALLEN F. JACOBSON, DIRECTOR -- Former Chairman and Chief Executive Officer,
Minnesota Mining & Manufacturing Co. Address: 30 Seventh Street East, St.
Paul, MN 55101-4901.
GARNETT L. KEITH, JR., DIRECTOR AND VICE CHAIRMAN -- Vice Chairman of The
Prudential. Address: Prudential Plaza, Newark, NJ 07102-3777.
BURTON G. MALKIEL, DIRECTOR -- Chemical Bank Chairman's Professor of Economics,
Princeton University. Address: Princeton University, Department of Economics,
110 Fisher Hall, Prospect Avenue, Princeton, NJ 08544-1021.
JOHN R. OPEL, DIRECTOR -- Prior to 1994: Chairman of the Executive Committee,
International Business Machines Corporation. Address: 590 Madison Avenue, New
York, NY 10022.
ARTHUR F. RYAN, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER --
Chairman of the Board, President and Chief Executive Officer, The Prudential
since 1994; Prior to 1994: President and Chief Operating Officer, Chase
Manhattan Corporation. Address: 751 Broad Street, Newark, NJ 07102-3777.
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CHARLES R. SITTER, DIRECTOR -- President and Director, Exxon Corporation since
1993; Prior to 1993: Director, Exxon Corporation. Address: 225 John W.
Carpenter Freeway, Irving, TX 75062.
DONALD L. STAHELI, DIRECTOR -- Chairman and Chief Executive Officer, Continental
Grain Company since 1994; Prior to 1994: Chairman Continental Grain Company.
Address: 277 Park Avenue, New York, NY 10172.
RICHARD M. THOMSON, DIRECTOR -- Chairman of the Board and Chief Executive
Officer, The Toronto-Dominion Bank. Address: P.O. Box 1, Toronto-Dominion
Centre, Toronto, Ontario, M5K 1A2, Canada.
P. ROY VAGELOS, M.D., DIRECTOR -- Chairman, Regeneron Pharmaceuticals since
1995; Prior to 1995: Chairman, President and Chief Executive Officer, Merck &
Co., Inc. Address: 126 East Lincoln Avenue, Rahway, NJ 07065.
STANLEY C. VAN NESS, DIRECTOR -- Attorney, Picco Mack Herbert Kennedy Jaffe
Perrella and Yoskin (law firm). Address: One State Street Square, Suite 1000,
Trenton, NJ 08607-1388.
PAUL A. VOLCKER, DIRECTOR -- Chairman, James D. Wolfensohn, Inc. Address: 599
Lexington Avenue, New York, NY 10022.
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JOSEPH H. WILLIAMS, DIRECTOR -- Chairman of the Board, The Williams Companies
since 1994; Prior to 1994: Chairman and Chief Executive Officer, The Williams
Companies. Address: P.O. Box 2400, Tulsa, OK 74102.
OTHER EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
MARK B. GRIER, CHIEF FINANCIAL OFFICER -- Chief Financial Officer of The
Prudential since 1995. Prior to 1995: Executive Vice President and Head of
Global Markets, Chase Manhattan Corporation.
SUSAN L. BLOUNT, VICE PRESIDENT AND SECRETARY -- Vice President and Secretary of
The Prudential since 1995; Prior to 1995: Assistant General Counsel for
Prudential Residential Services Company.
MARTIN PFINSGRAFF, VICE PRESIDENT AND TREASURER -- Vice President and Treasurer
of The Prudential since 1991; Prior to 1991: Senior Vice President, Mellon
Bank.
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FINANCIAL STATEMENTS. The consolidated financial statements of The
Prudential and subsidiaries included herein should be distinguished from the
financial statements of the Separate Account, and should be considered only as
bearing upon the ability of The Prudential to meet its obligations under the
Certificates. Financial statements of the Separate Account are not included in
this Prospectus because the Separate Account had not yet commenced operations as
of the date of this Prospectus.
CONSOLIDATED FINANCIAL STATEMENTS
OF THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA AND SUBSIDIARIES
[To be filed by pre-effective amendment.]
<PAGE>
SUPPLEMENT TO THE
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
PROSPECTUS REGARDING
THE CPA VARIABLE UNIVERSAL LIFE INSURANCE PLAN
As described more fully in the prospectus, the particular features of each
group contract issued by The Prudential may vary. This supplement provides
additional information about certain features that are specific to the group
variable universal life insurance contract issued to Bankers Trust Company, as
Trustee of the American Institute of Certified Public Accountants ("AICPA")
Insurance Trust. The contract is referred to as the CPA Variable Universal
Life Insurance Plan. This supplement should be read in connection with the
prospectus itself.
1. SPOUSAL INSURANCE. A Participant in the CPA Variable Universal Life
Insurance Plan will also be permitted to obtain insurance under the contract on
his or her spouse.
2. ISSUANCE OF A CERTIFICATE. Coverage under the CPA Variable
Universal Life Insurance Plan will be issued on an underwritten basis.
Coverage under the CPA Variable Universal Life Insurance plan ends at age 75.
At age 75, the Participant will receive the cash surrender value of the
Certificate. A Participant whose coverage ends because he or she is no
longer a member of the eligible group may elect any of the options described
under OPTIONS ON TERMINATION OF COVERAGE at p. ____ of the prospectus.
3. PROCEDURES. All communications relating to a Participant's insurance
under the CPA Variable Universal Life Insurance Plan, including but not limited
to, applications for
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insurance, premium payments, transfer orders, allocation orders, and loan
requests, must be submitted to the Plan Agent for the AICPA Insurance Trust who
will then transmit the communication to The Prudential. All communications will
be deemed received by The Prudential when received at the Prudential address
specified in the Certificate, not when received by the Plan Agent for the AICPA
Insurance Trust.
4. PREMIUMS. The CPA Variable Universal Life Insurance Plan does not
provide for a specified premium level that will assure continuation of life
insurance protection for a period of two years.
5. TRANSFERS. The CPA Variable Universal Life Insurance
Plan offers telephone transfers, but does not currently offer Dollar Cost
Averaging.
6. DEATH BENEFIT. In order to assure that the insurance will satisfy the
Internal Revenue Code's definition of life insurance, the death benefit (before
the subtraction of Certificate Debt and unpaid charges) must at least equal the
Certificate Fund divided by the Net Single Premium per dollar of insurance for
the covered person's attained age. Net Single Premiums are based on the 1980
Commissioners Standard Ordinary mortality table (Male, Age Last Birthday) at
4.0%.
<PAGE>
-3-
7. CHANGES IN FACE AMOUNT. Participants in the CPA Variable Universal
Life Insurance Plan will be permitted to increase or decrease the face amount of
their insurance, at certain times each year, to a scheduled amount available at
their attained age at the time of the change.
8. CHARGES AND EXPENSES
A. FRONT-END PREMIUM CHARGES. In the CPA Variable Universal Life
Insurance Plan, The Prudential has agreed to waive the 3 1/2% sales charge
and the $2 premium payment processing fee described in the prospectus.
Thus, the only deductions to be made from Participants' premium payments
before investment of the net premium amounts in the Account will be the
charges of 2.25% of each premium payment for state and local premium taxes
and 0.25% of each premium payment for federal taxes measured by premium.
These charges may be increased if the costs of The Prudential's taxes related
to premium payments are increased.
B. MONTHLY CERTIFICATE FUND CHARGES. On each contract monthiversary,
the Prudential will deduct only the Cost of Insurance charge. This charge
covers the charge for any Additional Insurance Benefits. No other monthly
Certificate Fund Charges apply.
C. TRANSACTION CHARGES. Transaction charges will apply to
<PAGE>
-4-
various transactions as follows:
Withdrawal: $20, or 2% of the amount withdrawn if
less
Surrender: $20, or 2% of the amount received if
less
Loans: $20 per loan
Additional Fund Statement: $20 per additional
statement
Transfers: $20 per transfer after
the first 12 in a
Certificate year.
Accelerated Death Benefits: No charge
9. LOANS. In all states, The Prudential will credit the amount in the
Loan Account at an annual rate of 1.0% less than the interest rate on the loan.
10. TERMINATION OF COVERAGE UPON LEAVING THE ELIGIBLE GROUP. In the event
that a Participant is no longer a member of the group eligible to participate in
the CPA Variable Universal Life Insurance Plan that Participant will not be
eligible to continue insurance under his or her Certificates. A Participant
whose coverage ends because he or she is no longer a member of the eligible
group may elect any of the options described under OPTIONS ON TERMINATION OF
COVERAGE at p. ____ of the prospectus.
11. ADDITIONAL INSURANCE BENEFITS. The CPA Variable Universal Life
Insurance Plan makes the following additional benefits available to
Participants: the Accelerated Death
<PAGE>
-5-
Benefit; the Accidental Death Benefit; Extended Death Protection During Total
Disability; and Dependent Child Coverage. Except as noted below, these
additional benefits and the effect of electing to receive these benefits are
described in ADDITIONAL INSURANCE BENEFITS at p. of the prospectus.
The costs of the additional insurance benefits are paid from the monthly
deduction for cost of insurance. The Accelerated Death Benefit and Accidental
Death Benefit are provided to all Participants.
Dependent Child Coverage and Extended Death Protection During Total Disability
are optional. In years when dividends are paid, Participants who have elected
Dependent Child Coverage or Extended Death Protection During Total Disability
will receive a lower dividend than those not electing such benefits.
ACCELERATED DEATH BENEFIT. The Accelerated Death Benefit is available
without charge or interest discount. It is available to spouses.
EXTENDED DEATH PROTECTION DURING TOTAL DISABILITY. Extension of coverage
will not continue beyond age 75, when coverage under the CPA Variable Universal
Life Insurance Plan would normally end.
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Program, purchased by The Prudential from Aetna Casualty & Surety Company, CNA
Insurance Company, Lloyds of London, Great American Insurance Company, Reliance
Insurance Company, Corporate Officers & Directors Assurance Ltd., A.C.E.
Insurance Company, Ltd., XL Insurance Company, Ltd., and Zurich-American
Insurance Company, provides coverage for "Loss" (as defined in the policies)
arising from any claim or claims by reason of any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties solely in their capacities as directors or
officers of The Prudential, any of its subsidiaries, or certain investment
companies affiliated with The Prudential. Coverage is also provided to the
individual directors or officers for such Loss, for which they shall not be
indemnified. Loss essentially is the legal liability on claims against a
director or officer, including adjudicated damages, settlements and reasonable
and necessary legal fees and expenses incurred in defense of adjudicatory
proceedings and appeals therefrom. Loss does not include punitive or exemplary
damages or the multiplied portion of any multiplied damage award, criminal or
civil fines or penalties imposed by law, taxes or wages, or matters which are
II-1
<PAGE>
insurable under the law pursuant to which the policies are construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal or deliberate fraudulent acts of a director or officer, and (2)
claims arising from actual or alleged performance of, or failure to perform,
services as, or in any capacity similar to, an investment adviser, investment
banker, underwriter, broker or dealer, as those terms are defined in the
Securities Act of 1933, the Securities Exchange Act of 1934, the Investment
Advisers Act of 1940, the Investment Company Act of 1940, any rules or
regulations thereunder, or any similar federal, state or local statute, rule or
regulation.
The limit of coverage under the Program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of The Prudential,
can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The text
of The Prudential's by-law 27, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A.(6)(b) to this
Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the
II-2
<PAGE>
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of _____ pages.
A Prospectus Supplement Consisting of _____ pages.
The undertaking to file reports.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
Consent of Stuart L. Liebeskind FSA, MAAA (Included in Exhibit 6 filed
herewith)
Consent of Counsel (To be included in Exhibit 2 to be filed by pre-
effective amendment)
Consent of Deloitte & Touche, LLP (to be filed by pre-effective amendment)
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of Board of Directors of The Prudential Insurance
Company of America establishing The Prudential Variable
Contract Account GI-2. (Note 3)
(2) Not Applicable.
II-4
<PAGE>
(3) Distributing Contracts:
(a) Distribution Agreement between Prudential Retirement
Securities, Inc. and The Prudential Insurance Company
of America. (Note 4)
(b) Proposed form of Agreement between Prudential
Retirement Securities, Inc. and independent brokers
with respect to the Sale of the Group Contracts and
Certificates. (Note 4)
(c) Schedules of Sales Commissions. (Note 4)
(4) Not Applicable.
(5) (a) Group Contract. (Note 3)
(b) Individual Certificate. (Note 3)
(6) (a) Charter of The Prudential Insurance Company of America,
as amended February 26, 1988. (Note 1)
(b) By-laws of The Prudential Insurance Company of America,
as amended January 10, 1995. (Note 2)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Group Contract. (Note 5)
(b) Enrollment Form for Certificate. (Note 4)
2. Opinion and Consent of _________________ as to the legality of the
securities being registered. (Note 4)
3. None.
4. Not Applicable.
II-5
<PAGE>
5. Not Applicable.
6. Opinion and Consent of Stuart L. Liebeskind, FSA, MAAA, as to
actuarial matters pertaining to the securities being registered.
(Note 3)
7. The Prudential's representations regarding mortality and expense
risks, sales loads, and distribution financing arrangements. (Note 3)
8. Powers of Attorney.
[list which are filed herewith and which will be filed by amendment]
9. Memorandum describing The Prudential's issuance, transfer, and
redemption procedures for the Certificates pursuant to Rule
6e-3(T)(b)(12)(iii) (Note 3)
10. Available Contract Riders and Endorsements. (Note 5)
(Note 1) Incorporated by reference to Post-Effective Amendment No. 2 to Form S-
6, Reg. No. 33-20000, filed March 2, 1989, on behalf of The Prudential
Variable Appreciable Account.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 26 to Form
N-3, Reg. No. 2-76580, filed May 1, 1995, on behalf of The Prudential
Variable Contract Account-10.
(Note 3) Filed herewith.
(Note 4) To be filed by Pre-Effective Amendment.
(Note 5) Included in Exhibit 1A(5)(B).
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Prudential Variable Contract Account GI-2, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this ______ day of _____________________,
1996.
(Seal)
THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2
(Registrant)
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Depositor)
Attest:____________________________ By:_________________________
[name]
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on this ______ day of __________________________, 1996.
SIGNATURE AND TITLE
- ------------------------------------
Arthur F. Ryan
Chairman of the Board, President
and Chief Executive Officer
- ------------------------------------
Garnett L. Keith, Jr.
Vice Chairman and Director
- ------------------------------------
Mark B. Grier By: _________________________
Executive Vice President and Chief [NAME]
Financial Officer (Attorney-in-Fact)
II-7
<PAGE>
- ------------------------------------
Martin Berkowitz
Senior Vice President and Comptroller
- ------------------------------------
Franklin A. Agnew
Director
- ------------------------------------
Frederic K. Becker
Director
- ------------------------------------
William W. Boeschenstein
Director
- ------------------------------------
Lisle C. Carter, Jr.
Director
By:
- ------------------------------------ -------------------------
James G. Cullen [NAME]
Director (Attorney-in-Fact)
- ------------------------------------
Carolyne K. Davis
Director
- ------------------------------------
Roger A. Enrico
Director
- ------------------------------------
Allan D. Gilmour
Director
II-8
<PAGE>
- ------------------------------------
William H. Gray, III
Director
- ------------------------------------
Jon F. Hanson
Director
- ------------------------------------
Constance J. Horner
Director
- ------------------------------------
Allen F. Jacobson
Director
- ------------------------------------
Burton G. Malkiel
Director
By:
- ------------------------------------ -------------------------
John R. Opel [NAME]
Director (Attorney-in-Fact)
- ------------------------------------
Charles R. Sitter
Director
- ------------------------------------
Donald L. Staheli
Director
II-9
<PAGE>
- ------------------------------------
Richard M. Thomson
Director
- ------------------------------------
P. Roy Vagelos, M.D.
Director
- ------------------------------------
Stanley C. Van Ness
Director
By:
- ------------------------------------ -------------------------
Paul A. Volcker [NAME]
Director (Attorney-in-Fact)
- ------------------------------------
Joseph H. Williams
Director
II-10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
1A(1) Resolution of Board of Directors of
The Prudential Insurance Company of
America establishing The Prudential
Variable Contract Account GI-2
1A(5)(a) Group Contract
1A(5)(b) Individual Certificate
1A(10)(a) Application Form for Group Contract
6 Opinion and Consent of Stuart L.
Liebeskind, FSA, MAAA, as to
actuarial matters pertaining to the
securities being registered
7 The Prudential's representations
regarding mortality and expense
risks, sales loads, and distribution
financing arrangements
[8.1
8.2 [list power of attorneys]
etc.]
9 Memorandum describing The
Prudential's issuance, transfer,
and redemption procedures for the
Certificates pursuant to Rule
6e-3(T)(b)(12)(iii)
II-12
<PAGE>
Exhibit 1A(1)
[THE PRUDENTIAL LETTERHEAD]
August 31, 1988
I hereby certify that the following is a true extract of the minutes of the
meeting of the Board of Directors of The Prudential Insurance Company of America
held on June 14, 1988, at which meeting a quorum was present, and that said
minute has not since been altered or rescinded:
"Vice President Morgan, National Accounts Operations, reviewed a proposal
to establish four new commingled separate accounts for use with the group
variable life insurance contracts and certain non-life products. After
discussion, and upon motion duly made and seconded, the Board adopted the
following resolutions:
ESTABLISHMENT OF THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-GI-2
RESOLVED, that, subject to the approval of the Commissioner of
Insurance of the State of New Jersey and to such conditions as said Commissioner
may impose, pursuant to Section 17B:28-7 of the Revised Statutes of New Jersey,
the Company hereby establishes a new commingled Variable Contract Account to be
designated The Prudential Variable Contract Account-GI-2 ("VCA-GI-2"), to be
primarily invested in shares of a management investment company registered under
the Investment Company Act of 1940, as hereinafter provided, and to be used for
contracts under which values or payments, or portions thereof, vary to reflect
the investment results of said account; and
FURTHER RESOLVED, that the Company shall receive and hold in VCA-GI-2
amounts arising from (i) group variable life insurance contracts and (ii) such
other assets of the Company as the proper officers of the Company may deem
prudent and appropriate to have invested in the same manner as the assets
applicable to its reserve liability under variable contracts funded in VCA-GI-2,
and such amounts, together with the dividends, interest and gains produced
thereby shall be invested and reinvested, subject to the rights of the holders
of such variable contracts, in shares of The Prudential Series Fund, Inc., an
open-end diversified management investment company of the series type, at the
net asset value of such shares at the time of acquisition; and
<PAGE>
Page 2
FURTHER RESOLVED, that VCA-GI-2 shall be registered as a unit
investment trust under the Investment Company Act of 1940, and that the proper
officers of the Company be, and they hereby are, authorized to sign and file, or
cause to be filed, a registration statement on behalf of VCA-GI-2, as
registrant, under the Investment Company Act of 1940, and to sign and file, or
cause to be filed, an exemption application, including any amendments thereto,
seeking an order under Section 6(c) of the Investment Company Act of 1940, which
shall grant such exemptions from the provisions of that Act as may be necessary
or desirable."
* * * *
"GENERAL AUTHORITY
RESOLVED, that the proper officers of the Company be and they
hereby are authorized, in the name and on behalf of the Company, to execute and
deliver such corporate documents and certificates and to take such further
action as may be necessary or desirable, including but not limited to the
payment of applicable fees, in order to effectuate the purposes of the foregoing
resolutions or any of them."
/s/ Dorothy K. Light
Secretary
<PAGE>
THE PRUDENTIAL (LOGO)
GROUP INSURANCE CONTRACT
CONTRACT HOLDER: [THE A.B.C. COMPANY, INC.]
GROUP CONTRACT NO.: [GV-XXXXX]
Prudential will provide or pay the benefits described in the Group Insurance
Certificate(s) listed in the Schedule of Plans of the Group Contract, subject to
the Group Contract's terms. This promise is based on the Contract Holder's
application and payment of the required premiums.
All of the provisions of the Group Insurance Certificate(s), attached to and
made a part of the Group Contract, apply to the Group Contract as fully set
forth in the Group Contract.
The Group Contract takes effect on the Contract Date, if it is duly attested
under the Group Contract Schedule. It continues as long as the required premiums
are paid, unless it ends as described in its General Rules.
The Group Contract is delivered and is governed by the laws of the Governing
Jurisdiction.
Secretary President
89759 [A]
COV 8000
<PAGE>
GROUP CONTRACT SCHEDULE
CONTRACT DATE: [January 1, 19XX]
CONTRACT ANNIVERSARIES: [January 1 of each year, beginning in 19XX]
PREMIUM DUE DATES: The Contract Date, and the first Business Day of each
Contract Month beginning with [February, 19XX]
GOVERNING JURISDICTION: The State of New York
[ASSOCIATED COMPANIES: The D.E.F. Company]
___________________________________
TABLE OF CONTENTS (AS OF CONTRACT DATE): The Group Contract includes these forms
with a 89759 prefix: [COV 8000, GCS 8000, SPR 8000, GR 8000, SCH 8000, APP
8000].
ATTEST:___________________________
89759 [A]
GCS 8000
<PAGE>
[INCLUDED EMPLOYERS
Included Employers under the Group Contract are the Contract Holder and its
Associated Companies, if any.
Associated Companies are employers who are the Contract Holder's subsidiaries or
affiliates and are listed in the Group Contract Schedule.
An Employee of more than one Included Employer will be considered an Employee of
only one if those employers for the purpose of this Insurance. That Employee's
service with all other Included Employers will be treated as service with that
one.
On any date when an employer ceases to be an Included Employer, the Group
Contract will be considered to end for Employees of that employer. This applies
to all of those Employees except those who, on the next day, are still within
the Covered Classes of one or more Schedules of Benefits of the Group Contract
as Employees of another Included Employer.
The Contract Holder must let Prudential know, in writing, when an employer
listed as an Associated Company is no longer one of its subsidiaries or
affiliates.]
89759 [B]
GCS 8000
<PAGE>
MORTALITY TABLE
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE (COI) PER $1,000 OF NET AMOUNT AT
RISK BY ATTAINED AGE
1980 Commissioners Extended Term - Male - Age Last Birthday
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Attained Attained Attained
Age COI/1000 Age COI/1000 Age COI/1000
0 $0.285 34 $0.233 67 $3.444
1 $0.148 35 $0.243 68 $3.754
2 $0.145 36 $0.256 69 $4.096
3 $0.143 37 $0.270 70 $4.482
4 $0.140 38 $0.290 71 $4.922
5 $0.136 39 $0.314 72 $5.425
6 $0.132 40 $0.342 73 $5.995
7 $0.128 41 $0.371 74 $6.619
8 $0.125 42 $0.402 75 $7.286
9 $0.124 43 $0.437 76 $7.984
10 $0.125 44 $0.473 77 $8.707
11 $0.130 45 $0.513 78 $9.460
12 $0.139 46 $0.555 79 $10.266
13 $0.152 47 $0.599 80 $11.152
14 $0.166 48 $0.647 81 $12.143
15 $0.181 49 $0.700 82 $13.261
16 $0.195 50 $0.758 83 $14.499
17 $0.206 51 $0.827 84 $15.830
18 $0.214 52 $0.903 85 $17.223
19 $0.219 53 $0.989 86 $18.656
20 $0.221 54 $1.084 87 $20.121
21 $0.221 55 $1.188 88 $21.616
22 $0.219 56 $1.297 89 $23.150
23 $0.216 57 $1.413 90 $24.747
24 $0.213 58 $1.536 91 $26.445
25 $0.208 59 $1.671 92 $28.322
26 $0.206 60 $1.820 93 $30.564
27 $0.205 61 $1.989 94 $33.580
28 $0.204 62 $2.180 95 $38.118
29 $0.206 63 $2.393 96 $45.608
30 $0.208 64 $2.629 97 $58.608
31 $0.213 65 $2.884 98 $80.725
32 $0.218 66 $3.156 99 $83.333
33 $0.225
</TABLE>
89759 [A]
SPR 8000
<PAGE>
GENERAL RULES
A. PREMIUMS - GRACE PERIOD.
Premiums are to be paid by [the Contract Holder] to Prudential. Each may be paid
at the Prudential Office listed below, or to one of its authorized agents.
Premiums are due on each Premium Due Date stated in the Group Contract Schedule.
The [Contract Holder] may pay each premium, other than the first, within 31 days
of the Premium Due Date without being charged interest. Those days are known as
the grace period.
All notices and payments to Prudential under this Group Contract will be
deemed received when they are received at the following address:
The Prudential
[56 Livingston Ave.
Roseland, New Jersey 07068]
B. PREMIUM AMOUNTS.
All premiums for the Insurance are due on each Premium Due Date while this
Contract is in force. The premium due on each Premium Due Date is the sum of all
contribution amounts made by [Employees] for Covered Persons under the
Insurance.
C. CHANGES IN CHARGES AND INVESTMENT OPTIONS.
Mortality Charges, Expense Charges, Administration Charges and Investment
Charges in effect on the Contract Date and Investment Options available to
[Employees] on the Contract Date are shown in the Specifications Page of the
Certificate applicable to the Covered Classes. Prudential has the right to make
the following changes:
(1) Prudential may change the Mortality Charges, Expense Charges and
Administration Charges, as of these dates:
(a) Any Premium Due Date; and
(b) Any date that an [employer] becomes or ceases to be an Included
[Employer]; and
89759 [A]
GR 8000
<PAGE>
(c) Any date that the extent or nature of the risk under the Group
Contract is changed: (i) by amendment; or (ii) by reason of any
provision of law or any governmental program or regulation; or (iii)
by termination of, or any change in, benefits not in this Group
Contract, but considered in determining the Charges for this Group
Contract.
But, unless an amendment to the Group Contract states otherwise, (a) above
will not be used to change Mortality Charges, Expense Charges or
Administration Charges before the first Contract Anniversary.
(2) Prudential may change any of the the limits that apply to transfers,
partial withdrawals, surrenders and loans. These changes may apply to
contributions to investment options made both before and after the change
takes effect. These changes must be at least 90 days apart. Before
Prudential makes any of these changes, it will give the Contract Holder at
least 90 days advance notice.
Prudential may also change the Investment Service Fee at any time.
D. DIVIDENDS.
Prudential will determine the share, if any, of its divisible surplus allocable
to this Group Contract as of each Contract Anniversary, if the Group Contract
stays in force by the payment of all required premiums to that date. The share
will be credited to this Group Contract as a dividend as of that date. If this
Group Contract ends on a date other than a Contract Anniversary, the share, if
any, will be determined and credited to this Group Contract as a dividend as of
that date.
Each dividend will be paid to the Contract Holder in cash, unless the Contract
Holder asks that it be applied toward the premium then due.
Prudential's sole liability as to any dividend is as set forth above.
NON-PROFIT CLAUSE: This applies if the aggregate dividends under this Group
Contract and any other group contract(s) of the Contract Holder exceed the
aggregate payments toward their cost made from the Contract Holder's own funds.
The Contract Holder will see that an amount equal to the excess is applied for
the benefit of insured persons.
89759 [B]
GR 8000
<PAGE>
E. END OF THIS GROUP CONTRACT.
DURING OR AT END OF GRACE PERIOD - FAILURE TO PAY PREMIUM: If any premium for
the Insurance is not paid by the end of its grace period, this Group Contract
will end when that period ends. But, the Contract Holder may write to
Prudential[, at least 90 days in advance, to ask that this Group Contract be
ended at the end of a period of time for which premiums have been paid.] Then
this Group Contract will end on the date requested.
ON A PREMIUM DUE DATE - FAILURE TO MAINTAIN INSURING CONDITIONS: On any Premium
Due Date, Prudential may end the Group Contract if: [(1) the aggregate Face
Amount of insurance under all Certificates issued to covered Employees; or (2)
the number of Certificates issued; falls below the minimum set by Prudential.
But, to do so, Prudential must give the Contract Holder and insured Employees
notice at least 90 days in advance.]
F. [EMPLOYEE'S] CERTIFICATE.
Prudential will give the Contract Holder an individual Certificate to be given
to each [Employee]. It will describe the extent of the [Employee's and the
Employee's dependents] coverage under this Group Contract. It will include (1)
to whom Prudential pays benefits, (2) any protection and rights when insurance
ends, and (3) claim rights and requirements.
G. RECORDS - INFORMATION TO BE FURNISHED.
Either the Contract Holder or Prudential , as they agree, will keep a record of
the [Employees] covered under the Insurance. It will contain the key facts about
their insurance.
At the times set by Prudential, the Contract Holder will send the data required
by Prudential to perform its duties under the Group Contract, and to determine
the charges due. All records of the Contract Holder which bear on the insurance
must be open to Prudential for its inspection at any reasonable time.
Prudential will not have to perform any duty that depends on such data before it
is received in a form that satisfies Prudential. The Contract Holder may correct
wrong data given to Prudential, if
89759 [C]
GR 8000
<PAGE>
Prudential has not been harmed by acting on it. [An Employee's or Employee's
dependents] insurance will not be made invalid by failure of the Contract
Holder, due to clerical error, to record or report the [Employee] for that
insurance.
H. THE CONTRACT - INCONTESTABILITY OF THE CONTRACT.
The entire Group Contract consists of: (1) the forms shown in the Table of
Contents as of the Contract Date; (2) any amendments or endorsements to the
Group Contract; (3) the Contract Holder's application, a copy of which is
attached to the Group Contract; and (4) the individual applications of the
persons insured. All statements made by the Contract Holder will be deemed
representations and not warranties.
There will be no contest of the validity of the Group Contract, except for not
paying premiums, after it has been in force for one year.
The Group Contract may be amended, at any time, without the consent of the
insured [Employees] or of anyone else with a beneficial interest in it. This can
be done through written request made by the Contract Holder and agreed to by
Prudential. But an amendment will not affect a claim incurred before the date of
change.
Only an officer of Prudential has authority: to waive any conditions or
restrictions of the Group Contract; or to extend the time in which charges may
be paid; or to make or change a contract; or to bind Prudential by a promise or
representation or by information given or received. An agent of Prudential is
not an officer.
No change in this Group Contract is valid unless shown in:
(1) an endorsement on it signed by an officer of Prudential; or
(2) an amendment to it signed by the Contract Holder and by an officer of
Prudential.
However, if the Group Contract is changed automatically in accordance with
Section J., the change may be made in an amendment to the Group Contract that is
signed only by an officer of Prudential.
I. AGE ADJUSTMENT.
If an age is used to determine the Mortality Charges for [an Employee's or
dependent's] Insurance, and the age is found to be in error, the Mortality
Charge for that amount of insurance
89759 [D]
GR 8000
<PAGE>
will then be adjusted to reflect the correct age. If this adjustment results in
a change in the amount of Mortality Charge, any difference between the premium
paid to cover that Mortality Charge and the amount required to cover that
Mortality Charge on the basis of the correct age will be paid as follows:
(1) If the adjustment results in an increased premium, the difference will be
paid by the Contract Holder when notified by Prudential.
(2) If the adjustment results in a decreased premium, the difference will be
refunded by Prudential.
J. CONFORMITY WITH LAW.
To receive tax treatment accorded to life insurance under federal law, the
Insurance must qualify under Internal Revenue Code or successor law. To make
sure the Insurance qualifies, Prudential reserves the right: (a) to refuse
contributions which would cause the Group Contract to fail to so qualify; and
(b) to make changes in the Group Contract or to make distributions from the
Contract Funds to [Employees] to the extent needed to continue to qualify as
life insurance.
If the provisions of the Group Contract do not conform to the requirements of
any state or federal law or regulation that applies to it, the Group Contract is
automatically changed to conform to the requirements of that law or regulation.
The Contract Holder will be given written notice of such changes.
89759 [E]
GR 8000
<PAGE>
COMBINATION OF EXPERIENCE
Group Contract [GV-XXXXX, and Group Policy No. G-XXX
(Called "Group Contracts" below)]
The Group Contracts [will be] treated as one, [GT-XXXXX], for this purpose: to
determine the share, if any, of Prudential's divisible surplus allocable to the
Group Contracts.
--------------------------------------------------------------
89759
CMB 8000
<PAGE>
AMENDMENT TO GROUP CONTRACT NO [GV-XXXXX]
Effective Date: [January 1, 19XX]
[By their signatures below, the] Contract Holder and Prudential agree that the
Group Contract is changed as follows:
[The Schedule of Plans (Form 89759 SCH 8000) is replaced by the Schedule of
Plans attached hereto and bearing an effective date of January 1, 19XX.]
[THE A.B.C. COMPANY, INC.
-------------------------------------------
(FULL OR CORPARATE NAME OF CONTRACT HOLDER
JANUARY 22, 19XX BY JOHN DOE, VICE PRESIDENT
------------------------ -----------------------------------------
Witness Richard Roe
---------------------------
Roseland, N. J. January 28, 19XX THE PRUDENTIAL INSURANCE COMPANY OF
- ---------------------------------- AMERICA
Attest: Mary Poe By
--------------------------- -----------------------------------
Assistant Secretary]
89759
AMD 8000
<PAGE>
APPLICATION TO
The Prudential Insurance Company of America (Prudential)
For Group Contract No. [GV-XXXXX]
Applicant: [THE A.B.C. COMPANY, INC.],
Address: [New York, New York]
The Group Contract is approved and its term are accepted.
This Application is made in duplicate. One is attached to the Group Contract.
The other is to be returned to Prudential.
It is agreed that this Application replaces any prior application for the Group
Contract.
[THE A.B.C. COMPANY, INC.]
--------------------------------------
(Full or Corporate Name of Applicant)
Dated at [New York, New York] By
------------------------- -----------------------------------
(Signature and Title)
On Witness
------------------------------- -------------------------------
(To be signed by Resident Agent, where
required by law)
89759 [A]
APP 8000
<PAGE>
SCHEDULE OF PLANS
EFFECTIVE: [January 1, 19XX]
GROUP CONTRACT NO.: [GV-XXXXX]
This Schedule of Plans sets forth the Plan of Benefits that applies to each
Covered Class under the Group Contract listed below as of the Effective Date.
The Plan of Benefits for a Covered Class is determined by: (1) the Group
Insurance Certificates that apply to the Covered Class; and (2) any modification
to those Certificates, provided the modification is included in an amendment to
the Group Contract. A copy of each Certificate and any modification to it are
attached to the Group Contract and are made a part of it.
[(1) COVERED CLASS:
All Employees of the A.B.C. Company who are less than age 75.
PLAN OF BENEFITS THAT APPLIES TO THIS CLASS:
The Variable Universal Life Coverage described in the Group Certificate:
(a) Prepared for Group Contract No. GV-XXXXX;
(b) With the Program Date of January 1, 19XX.]
89750 [A]
SCH 8000
<PAGE>
Exhibit 1A(5)(b)
THE PRUDENTIAL (LOGO)
CERTIFICATE OF COVERAGE
PRUDENTIAL CERTIFIES THAT THE [EMPLOYEE] NAMED BELOW IS INSURED UNDER GROUP
CONTRACT NO. [GV-XXXXX] ON THE EFFECTIVE DATE OF THE CERTIFICATE.
CONTRACT HOLDER: [THE A.B.C. COMPANY, INC.]
[DEPENDENTS
EFFECTIVE COVERAGE
[EMPLOYEE] DATE APPLIES
[John A. Doe] [January 1, 19XX] Yes]
[BENEFICIARY FOR EMPLOYEE'S DEATH BENEFITS -- Mary K. Doe, wife.]
VARIABLE UNIVERSAL LIFE INSURANCE
The terms of the Group Contract that mainly affect the insurance are summarized
in this Certificate. A Certificate issued to the [Employee] replaces any
Certificate(s) issued before for the Coverage summarized. All benefits are
subject in every way to the Group Contract. It alone forms the agreement under
which payment of insurance is made.
RIGHT TO EXAMINE THIS CERTIFICATE: You may return this Certificate to
Prudential, for any reason, within 30 days after you receive it or 45 days
after we mail it to you, whichever is earlier. If you return it within this
period, the insurance will be void from its effective date, and we will refund
your contributions. Unless otherwise required by law, the amount refunded will
depend on the performance of the investments as if no charges had been made.
During that period, Prudential reserves the right to limit contributions to the
minimum amount shown in the Specifications Page. During the thirty days
following the Effective Date of this Certificate, Prudential will allocate all
contributions to the Fixed Account.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
89759 [A]
CTC 8000
<PAGE>
TABLE OF CONTENTS
[Cover Page.......................................................... x
Specifications Page.................................................. x
Table of Corridor Percentages........................................ x
Schedule of Charges.................................................. x
Who is Eligible to Become Insured.................................... x
When You Become Insured.............................................. x
Variable Universal Life Coverage..................................... xx
Option to Acclerate Payment of Certain Death Benefits................ xx
Dependents Term Life Coverage........................................ xx
Accidental Death and Dismemberment Coverage.......................... xx
General Information
Beneficiary Rules............................................... xx
Mode of Settlement Rules........................................ xx
Incontestability................................................ xx
Claim Rules..................................................... xx
Limits on Assignments........................................... xx
Definitions..................................................... xx
When Your Insurance Ends............................................. xx]
89759
BTC 8000
<PAGE>
SPECIFICATIONS PAGE (Made a part of the Certificate)
COVERED CLASSES: [All Employees of the A.B.C. Company, Inc.who are less than age
75.]
YOU SHOULD KNOW...
- -- The Variable Universal Life Coverage described in this Certificate is
available to you if you are included in the Covered Classses named above.
The Group Contract's rules for becoming insured are summarized in the When
You Become Insured Section.
- -- The Variable Universal Life Coverage is described more fully on later pages
of this Certificate. Please read those pages carefully. They show when
benefits are or are not payable under the Group Contract. They also outline
when your insurance ends and the conditions, limitations and exclusions
that apply to the Coverage[s].
- -- A Definitions section is included in this Certificate. Many of the terms
used in this Certificate are defined in that section.
- -- This Certificate provides life insurance with flexible premium payments
[after the first two years].
- -- Cash values may increase or decrease, based on performance of the
investments. No guarantee applies to cash values, except those in the Fixed
Account.
- -- [This Certificate includes the following additional insurance benefits:
Option to Accelerate Payment of Certain Death Benefits under Variable
Universal Life Insurance, Dependents Term Life Coverage and Accidental
Death and Dismemberment Coverage].
VARIABLE UNIVERSAL LIFE COVERAGE
FACE AMOUNT OF INSURANCE:
[Employee's Face Amount $XX,XXX
Dependent's Face Amount $XX,XXX
Maximum Increase in Face Amount -- $XX,XXX
Minimum Face Amount -- $XX,XXX]
[DEPENDENT SPOUSE -- Mary K. Doe]
89759 [A]
BSB 8000
<PAGE>
SPECIFICATIONS PAGE (Continued)
[INITIAL] MONTHLY CONTRIBUTION -- [$XX.XX]
MINIMUM LUMP SUM CONTRIBUTION -- [$XXX.XX]
LIST OF INVESTMENT OPTIONS --
Fund
Option Portfolio Valuation Date
- ------ --------- --------------
[Prudential Series Fund, Inc. Money Market
Bond
High Dividend Stock
Common Stock
Aggressively Managed
Flexible The Valuation Date
for all portfolios
is the
Growth Stock end of each
Global Equity Business
Day.]
ALLOCATION OF CONTRIBUTION AMOUNTS --
Option Percentage
- ------ ----------
[The Prudential Series Fund, Inc,:
Money Market 50%
High Dividend Stock 20%
Aggressively Managed Flexible 30%]
ASSIGNMENTS: [All assignments are allowed.]
[BURIAL EXPENSES: If it appears to Prudential that a person incurs expenses in
connection with your burial, that person may receive part of your Insurance
under the Variable Universal Life Coverage. Prudential, at its option, may pay
that person up to $250.00. If the amount is so paid, Prudential will not have to
pay that part of your Insurance again.]
89759 [B]
BSB 8000
<PAGE>
SPECIFICATIONS PAGE (Continued)
[DEPENDENTS TERM LIFE COVERAGE
AMOUNT OF INSURANCE:
Covered spouse: $XX,XXX
ASSIGNMENTS: All assignments are allowed.
ACCIDENTAL DEATH AND DISMEMBERMENT COVERAGE
AMOUNT OF INSURANCE: An amount equal to the person's Face Amount of Variable
Universal Life Insurance.
ASSIGNMENTS: All assignments are allowed.]
*********************
CONTRACT DATE: [January 1, 19XX]
PREMIUM DUE DATE: [The first day of each month after January 1, 19XX]
CONTRACT ANNIVERSARY: [January 1 of each year, beginning in 19XX]
PRUDENTIAL'S ADDRESS: The Prudential Insurance Company of America
[56 Livingston Avenue
Roseland, New Jersey 07068]
[WHEN YOU HAVE A CLAIM
Each time a claim is made, it should be made without delay. Use a claim form and
follow the instructions on the form. If you do not have a claim form, contact
your employer or Prudential.]
----------------------------------
[THIS SPECIFICATIONS PAGE REPLACES, AS OF JULY 1, 19XX, ANY PRIOR SPECIFICATIONS
PAGE ISSUED TO YOU WITH RESPECT TO THE COVERAGE SUMMARIZED.]
89759 [C]
BSB 8000
<PAGE>
SCHEDULE OF CHARGES
EXPENSE CHARGES -- From each contribution paid by you, Prudential deducts the
sum of:
(1) state premium taxes; and
(2) an amount equal to [X.X%] of the contribution to cover the deferred
acquisition cost tax[; and
(3) a charge equal to X.X of the contribution.
From the balance, Prudential deducts a per-payment processing charge of up to
$X.XX].
MONTHLY ADMINISTRATION CHARGE -- The monthly administration charge will not be
more than [$X.XX].
89759 [A]
CHS 8000
<PAGE>
WHO IS ELIGIBLE TO BECOME INSURED
FOR [EMPLOYEE] INSURANCE
YOU ARE ELIGIBLE FOR [EMPLOYEE] INSURANCE WHILE:
- -- [You are a full-time Employee of the Employer and less than age 75; and
- -- You are in a Covered Class.
YOU ARE FULL-TIME if you are regularly working for the Employer at least the
number of hours in the Employer's normal full-time work week for your class, but
not less than 30 hours per week.
YOUR CLASS is determined by the Contract Holder. This will be done under its
rules, on dates it sets. The Contract Holder may not discriminate among persons
in like situations. You cannot belong to more than one class for insurance under
the Coverage. "Class" means Covered Class, Benefit Class or anything related to
work, such as position or earnings which affects the insurance available.
THIS APPLIES IF YOU ARE AN EMPLOYEE OF MORE THAN ONE EMPLOYER INCLUDED UNDER THE
GROUP CONTRACT: For the insurance, you will be considered an Employee of only
one of those employers. Your service with the others will be treated as service
with that one.
The rules for obtaining Employee insurance are in the When You Become Insured
section.]
[FOR DEPENDENTS INSURANCE
YOU ARE ELIGIBLE FOR DEPENDENTS INSURANCE while:
- -- You are eligible for [Employee] Insurance; and
- -- You have a Qualified Dependent who is less than age 75.]
WHEN YOU BECOME INSURED
FOR [EMPLOYEE] INSURANCE
Your [Employee] Insurance will begin [on the first day of the Contract Month
which coincides with or next follows the date on which you meet all of these
requirements:
89759 [A]
BEL 8000
<PAGE>
- -- You are eligible for the insurance
- -- You are in a Covered Class for the insurance.
- -- You have met any evidence requirement for the insurance.
- -- Your insurance is not being delayed under the Delay of Effective Date
section below
- -- You enrolled on a form approved by Prudential and agreed to pay the
required contributions
[FOR DEPENDENTS INSURANCE
Your Dependents Insurance for a person will begin on the first day of the
Contract Month which coincides with or next follows the date on which the person
is a Qualified Dependent and you meet all of these requirements:
- -- You are eligible for the insurance, and are covered for [Employee]
Insurance.
- -- You are in a Covered Class for the insurance.
- -- You have met any evidence requirement for that Qualified Dependent.
- -- Your insurance for that Qualified Dependent is not being delayed under the
Delay of Effective Date section.
- -- You enrolled on a form approved by Prudential and agreed to pay the
required contributions.]
[WHEN EVIDENCE IS REQUIRED TO BECOME INSURED FOR EMPLOYEE OR DEPENDENTS
INSURANCE: In any of these situations you must give evidence of insurability.
The requirement will be met when Prudential decides the evidence is
satisfactory.
(1) You enroll the person more than 31 days after the person could first be
covered for the insurance.
(2) You enroll the person after the person's insurance under the Group Contract
ended because you did not pay a required contribution and you did not
reinstate the person's Coverage within the 12 months after it ended.
89759 [B]
BEL 8000
<PAGE>
(3) The person has not met a previous evidence requirement. The evidence was
required for that person to become covered as a dependent or an Employee.
The insurance is or was under a Prudential Group Contract Covering
Employees of the Employer.]
[DELAY OF EFFECTIVE DATE
FOR EMPLOYEE INSURANCE: Your Employee Insurance under the Coverage will be
delayed if you do not meet the Active Work Requirement on the day your Insurance
would otherwise begin. Instead, it will begin on the first day of the Contract
Month that coincides with or next follows the first day on which you meet the
Active Work Requirement and other requirements for the insurance. The same rule
will apply to any change in your Face Amount of Insurance that is subject to
this section if you do not meet the Active Work Requirement on the day on which
that change would take effect.
FOR DEPENDENTS INSURANCE: If the Qualified Dependent is confined for medical
care or treatment at home or elsewhere on the day your Dependents Insurance
under the Coverage, or any change in that Insurance that is subject to this
section, would take effect, it will not take effect until the Qualified
Dependent's final medical release from such confinement. The other requirements
for the Insurance must also be met.]
89759 [C]
BEL 8000
<PAGE>
VARIABLE UNIVERSAL LIFE COVERAGE
FOR [EMPLOYEES AND THEIR DEPENDENTS]
This Coverage provides insurance on the lives of Covered Persons.
A. DEATH BENEFIT.
If a person dies:
(a) while a Covered Person under this Coverage; or
[(b) while under the extension for this Coverage; or]
[(c)] during the conversion period after all or part of the person's
insurance under this Coverage ends;
a death benefit is payable when Prudential receives written proof of death.
Unless the Insurance is in default, the amount of the death benefit on any date
is the Insurance Amount less any Certificate Debt. The Insurance Amount is [ the
greater of:
(1) the Face Amount plus Certificate Fund; or
(2) the Certificate Fund times the percent for the person's attained age in the
Table of Corridor Percentages.]
The Face Amount is described in the Specifications Page. The amount of death
benefit will depend on the contributions made by or for the person, the
investment experience of the Separate Account (described in Section D. of the
Coverage), any excess interest credited to the Fixed Account (described in
Section E. of the Coverage) and the level of charges made. When all or part of
the insurance has ended, the amount of the death benefit payable includes any
amount available under the provisions of [Sections K. and M.]of this Coverage.
B. CONTRIBUTIONS.
[The contribution for the first month that this Coverage is in force for a
Covered Person must be at least equal to the Initial Monthly Contribution
applicable to that person. After that, you may change the frequency and amount
of the monthly contribution, so long as the amount in the person's Certificate
Fund, less any Certificate Debt, is enough to make the monthly deductions from
the Certificate Fund.]
89759 [A]
GVUL R 8000
<PAGE>
ALTERNATE WORDING FOR FIRST PARAGRAPH OF SECTION B. CONTRIBUTIONS.
[During the first two years this Coverage is in force for a Covered Person, each
monthly contribution must be at least equal to the Minimum Monthly Contribution
applicable to that person. But, you may make contributions for the person at a
higher amount each month.]
<PAGE>
You may also make lump sum contributions for the person at any time. But
Prudential reserves the right to not accept a lump sum contribution less than
the Minimum Lump Sum Contribution. After the Expense Charges are deducted from
each contribution, the balance goes into the person's Certificate Fund. The
balance is the Net Contribution.The Minimum Monthly Contribution, Minimum Lump
Sum Contribution and the Expense Charges are shown in the Specifications Page.
Prudential reserves the right not to accept or to return contributions which
would cause this Coverage to fail to qualify as life insurance under applicable
tax laws, or which would increase the Insurance Amount by more than it increases
the Certificate Fund.
DEFAULT: On the first day of each Contract Month Prudential will determine if a
person's insurance is in default. To do so, Prudential will add the credits to
the person's Certificate Fund and deduct the charges from the Certificate Fund,
as described under Section C. of the Coverage. If the amount in the Certificate
Fund, less any Certificate Debt, is less than the amount needed to make the
monthly deduction from the Certificate Fund, the person's insurance is in
default.
The person's insurance is also in default if there is excess debt, as provided
under Section J., or if the person has not paid any Minimum Monthly Contribution
when due, as provided under Section B.
GRACE PERIOD: You will be granted a grace period equal to the greater of: (a) 61
days from the date the Insurance goes into default; or (b) 30 days from the date
Prudential mails you a notice of default, to make the minimum premium
contribution required to keep the person's insurance in force. Prudential will
continue to accept contributions and make the charges it has set during the
grace period. If the person dies within the grace period, the death benefit
payable will be reduced by the amount needed to pay the monthly charges for
mortality and administration expenses due to the end of the month in which death
occurs. If the minimum contribution is not made by the end of the grace period,
the person's insurance will end without value.
[REINSTATEMENT: If a person's insurance is still in default after the grace
period ends, it may be reinstated. To do so, these conditions must be met:
(1) The insurance must not have been in default for more than twelve months.
(2) The insurance must not have been surrendered for its Cash Surrender Value.
(3) You have given evidence of the person's insurability that satisfies
Prudential.
(4) The Cash Surrender Value must not have been used to buy paid-up insurance .
89759 [B]
GVUL R 8000
<PAGE>
(5) You must pay a contribution at least equal to the amount needed to bring
the person's Certificate Fund up to zero, plus an amount sufficient to make
that month's deduction from the Certificate Fund. From this amount, the
Expense Charges specified in the Schedule of Benefits, plus any other
charges with 4% interest will be deducted. The Certificate Fund will be
equal to the rest, plus the Cash Surrender Value of the insurance just
before it was reinstated.
If Prudential approves, the reinstatement will be effective on the first day of
the month coinciding with or following the the date on which the contribution
described in (5) is paid.]
C. THE CERTIFICATE FUND.
ALLOTMENTS: You may allot all or part of the Net Contributions for the person to
one or more of the variable investment options of the Separate Account shown in
the List of Investment Options or to the Fixed Account. Any allotment made by
the [Employee] for the person must be at least [10%] of each Net Contribution
and a fractional percent may not be chosen. The total must be 100%. You may
change the person's allotment for future Net Contributions at any time while
this Coverage is in force. You must notify Prudential in writing on a form
acceptable to Prudential. The change will take effect on the date Prudential
receives the notice.
On the date on which a person becomes a Covered Person for this Coverage, the
Certificate Fund is equal to the Net Contributions credited on that date, less
any applicable charges in items (8)[, (9) and (10)] below. On any other date,
the Certificate Fund is equal to what it was on the prior day plus these items:
(1) any Net Contribution credited on that day;
(2) any increase due to investment results in the value of the variable
investment options;
(3) guaranteed interest at an effective rate of [4%] a year on that part of the
Certificate Fund that is not in a variable investment option; and
(4) any excess interest on that part of the Certificate Fund that is not in a
variable investment option;
and less these items applicable as of that date:
(5) any decrease due to investments results in the value of the variable
investment options;
89759 [C]
GVUL R 8000
<PAGE>
(6) a charge against the variable investment options at a rate not more than
[.00245 % a day (0.90% a year)] for mortality and expense risk;
(7) any amount charged against the variable investment options for state income
or federal taxes;
(8) a charge for the cost of insurance;
(9) any charges for administration;
[(10) charges for any additional insurance benefits;]
[(11)] any partial withdrawals;
[(12) any administrative charges that may result from a partial withdrawal,
loan, transfer or a decrease in the Face Amount.]
GUARANTEED INTEREST: Prudential will credit interest each day on that part of
the Certificate Fund invested in the Fixed Account. The interest credited will
be [.01074598 % a day (4% a year)].
EXCESS INTEREST: Prudential may credit interest in addition to the guaranteed
interest on that part of the Certificate Fund not in a variable investment
option. The rate of any excess interest will be determined from time to time.
Prudential may credit a different rate of interest to different parts of the
Certificate Fund.
CHARGE FOR COST OF INSURANCE: On the first day of each Contract Month,
Prudential will deduct a charge for the cost of insurance from the Certificate
Fund. This charge will include the cost of expected mortality. This charge may
also include the cost associated with supplemental benefits. The amount deducted
is computed as the applicable monthly rate times the Net Amount at Risk. The Net
Amount at Risk is equal to the Insurance Amount less the Certificate Fund. The
monthly rate is based on the person's age, rate class and other features of the
Coverage. In no event will the monthly rate be higher than [a rate based on the
Commissioner's Extended Term Mortality Table (Male, last birthday), which is
close to130% of the 1980 Commissioners' Standard Ordinary (Male) Mortality
Table.]
CHARGE FOR ADMINISTRATION: On the first day of each Contract Month, Prudential
may deduct a charge for administration. The amount of this charge is shown in
the Specifications Page under Monthly Administration Charge.
Any charges deducted from the person's Certificate Fund will be charged against
the Fixed Account and against the variable investment options of the Separate
Account on a proportional basis.
89759 [D]
GVUL R 8000
<PAGE>
D. SEPARATE ACCOUNT.
This Coverage provides that certain values and payments will vary to reflect the
investment results of the Separate Account.
SEPARATE ACCOUNT: The words "Separate Account" where they are used without
qualification, mean The Prudential Variable Contract Account - GI-2 (VCA-GI-2).
Prudential established VCA - GI-2 to support group contracts, such as this one,
which participate in the Separate Account.
Prudential owns the assets of the Separate Account; it keeps them separate from
the assets of its general account. Pursuant to Section 17B:28-9(c) of the New
Jersey Insurance Code, assets held in the Separate Account shall not be
chargeable with liabilities arising out of any other business of Prudential. For
this purpose, "assets" means only those assets held in the Separate Account
needed to satisfy Prudential's obligation under contracts that participate in
the Separate Account. Assets held in each investment option of VCA-GI-2 shall
not be chargeable with liabilities arising in connection with any other
investment option of VCA-GI-2.
Prudential will keep the total market value of the assets at least equal to the
part of the Certificate Fund invested in the Separate Account or investment
option. Prudential will have sole control of the amount, if any, by which such
value exceeds the part of the Certificate Fund invested in the Separate Account
or investment option. Prudential may, from time to time, transfer cash among
the Separate Account, its other investment accounts and the investment options
of VCA-GI-2 as, in its judgement, experience warrants. No such transfer will
affect Prudential's liability under this Group Contract.
VARIABLE INVESTMENT OPTIONS: VCA-GI-2 has several variable investment options.
The options are listed in the List of Investment Options. The Participant
allots, using percentages, the Net Contributions for the person among the
various options. Prudential may establish additional options.
THE FUND: The word Fund, where it is used without qualification, means [The
Prudential Series Fund, Inc. The Fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The Fund has several portfolios; there is a portfolio that corresponds
to each of the options in VCA-GI-2. These portfolios are listed in the List of
Investment Options.]
89759 [E]
GVUL R 8000
<PAGE>
SEPARATE ACCOUNT INVESTMENTS: Prudential uses assets of VCA-GI-2 to buy shares
in the Fund. Each option of VCA-GI-2 is invested in a specific portfolio. Income
and realized and unrealized gains and losses from assets in each of these
options are credited to, or charged against, that option. This is without regard
to income, gains or losses in Prudential's other investment accounts.
Prudential will determine the value of the assets in each option of VCA-GI-2 on
the Valuation Date for that option, as shown in the List of Investment Options.
If that date is not a Business Day, Prudential will use the value of the assets
as of the end of the last prior Business Day on which trading took place.
CHANGE IN INVESTMENT POLICY: A portfolio of the Fund might make a material
change in its investment policy. In that case, Prudential will send you a notice
of the change. Within 61 days after receipt of the notice, or within 61 days
after the effective date of the change, if later, you may transfer to the
person's Fixed Account any amount in the option investing in that portfolio.
CHANGE OF FUND: A portfolio of the Fund might, in Prudential's judgment, become
unsuitable for investment. This might happen because of a change in investment
policy, or a change in laws or regulations, or because the shares are no longer
available for investment, or for some other reason. If that occurs, Prudential
has the right to substitute another portfolio of the Fund, or to invest in a
fund other than The Prudential Series Fund, Inc. But Prudential would first seek
any required consent of the insurance regulator where the Group Contract is
delivered.
E. FIXED ACCOUNT.
THE FIXED ACCOUNT: You may choose to allot all or part of the person's Net
Contribution to the Fixed Account. The Fixed Account is funded by the General
Account of Prudential. The Fixed Account is credited with interest as described
in Section C. under Guaranteed Interest and Excess Interest.
F. INVESTMENT MANAGER.
Prudential is the named fiduciary with respect to the management and control of
amounts held in the Separate Account. As named fiduciary, Prudential has the
sole authority to manage investments for the Separate Account. Prudential may,
in its sole discretion, delegate all or part of this authority to manage
investments for the Separate Account as follows:
89759 [F]
GVUL R 8000
<PAGE>
(a) To one of its subsidiaries ("Subsidiary", for the purpose of this Section
F., means a company a majority of whose outstanding voting stock is owned,
directly or indirectly, by Prudential.
(b) To a person or entities which are not subsidiaries of Prudential. However,
those persons or entities must qualify as investment managers as defined in
Section 3(38) of ERISA. (ERISA means the Employee Retirement Income
Security Act of 1974, as amended).
Prudential shall not be liable for any act or omission of any person or entity
which is not a subsidiary of Prudential to whom Prudential delegates its
authority to manage Separate Account investments. When using its discretion to
delegate its authority, Prudential may, but need not, consider the
recommendations of the Contract Holder.
G. TRANSFERS.
You may transfer a person's amounts among investment options of the Separate
Account and into the Fixed Account [as often as twelve times during a
Certificate Year without charge], unless the insurance is in default. [The
minimum amount that can be transferred is $250, or the entire value of the
option if less.Transfer requests in percent terms may not be a fractional
percent and must be at least 10%.] To make a transfer, you must notify
Prudential in writing in a form acceptable to it. The transfer will take effect
on the Valuation Date on which Prudential receives the notice.
You may also transfer a person's amounts from the Fixed Account and into the
variable investment options, subject to the following limitations:
(1) Only [one transfer] from the Fixed Account can be made each Certificate
Year[ (a transfer of the any contribution made during the first 30 days the
Coverage is in force will not count as a transfer)];
(2) The transfer request may be made at any time during the year;
(3) The maximum amount that can be transferred is [the greater of $5,000 or 25%
of the amount in the Fixed Account].
[Prudential reserves the right to deduct from the person's Certificate Fund, on
a pro-rata basis, an administrative fee of up to $20.00 for each transfer
request exceeding twelve in any Certificate Year.]
89759 [G]
GVUL R 8000
<PAGE>
DELAYED TRANSFERS: Prudential usually transfers the person's amounts on the date
it receives the Participant's request. But Prudential has the right to defer
making a transfer if (i) the New York Stock Exchange is closed; or (2) the SEC
requires that trading be restricted or declares an emergency.
H. SURRENDER.
You may surrender the person's insurance for its Cash Surrender Value at any
time. To surrender the person's insurance, you must ask Prudential in writing
on a form acceptable to Prudential. You may ask Prudential what the cash value
of the person's Certificate Fund is prior to electing to surrender. Prudential
will pay the surrender value as of the Valuation Date on which Prudential
receives your request. The proceeds may be paid to you either in a lump sum or
in periodic instalments.
Prudential will make a transaction charge equal to the lesser of (a) $20, or (b)
2% of the amount paid upon surrender.
DELAYED SURRENDER: Prudential usually pays any Cash Surrender Value within 7
days of the date it receives your request. But Prudential has the right to defer
paying the part of the proceeds that is to come from the variable investment
options if: (1) the New York Stock Exchange is closed; or (2) the SEC requires
that trading be restricted or declares an emergency. Prudential also has the
right to defer paying the rest of the proceeds for up to six months. If
Prudential does so for more than 30 days, it will pay interest at the rate of
[3%] a year.
89759 [H]
GVUL R 8000
<PAGE>
I. PARTIAL WITHDRAWALS.
You may make partial withdrawals from the person's Certificate Fund. Any partial
withdrawals are subject to all of these terms:
(1) The person's Insurance is in force and not in default.
(2) You must ask for the partial withdrawal in writing on a form acceptable to
Prudential.
(3) The amount withdrawn may not be more than the Cash Surrender Value before
withdrawal minus the amount needed to make [the next monthly deductions
from the Certificate Fund].
(4) The amount withdrawn must be at least [$250].
(5) The amount withdrawn will be taken from the person's Certificate Fund
accounts on a pro-rata basis, unless you select specific accounts.
[Prudential reserves the right to deduct from the person's Certificate Fund an
administrative charge equal to the lesser of (a) $20.00 or (b) 2% of the amount
withdrawn, with respect to each partial withdrawal.]
DELAYED WITHDRAWALS: Prudential will usually pay any partial withdrawals within
seven days of the date it receives the request. But Prudential has the right to
defer paying the part of the proceeds that is to come from the person's variable
investment options if : (1) the New York Stock Exchange is closed; or (2) the
SEC requires that trading be restricted or declares an emergency. Prudential
also has the right to defer paying the rest of the proceeds for up to six
months. If Prudential does so for more that 30 days, it will pay interest at
the rate of [3%] a year.
An amount withdrawn may not be repaid except as a contribution subject to
charges.
You may ask Prudential how much may be withdrawn from the person's Certificate
Fund.
89759 [I]
GVUL R 8000
<PAGE>
J. LOANS.
You may make a request to borrow from a person's Certificate Fund[, but only
after the person has been a Covered Person for at least one year.]
LOAN REQUIREMENTS: Loans are subject to these terms:
(1) The person's insurance is in force and not in default.
(2) The person's Certificate Debt is not more than the Loan Value minus [the
amount needed to make the next month's deductions from the Certificate
Fund].
(3) The amount borrowed from the person's Certificate Fund at any one time
must be at least [$250].
If there is already Certificate Debt when you take out the loan, the new amount
borrowed will be added to that debt.
LOAN VALUE: The Loan Value is equal to [85%] of the Certificate Fund, minus the
amount needed to make [the next monthly deductions from the Certificate Fund].
If the insurance is in default, the Loan Value during the grace period is what
it was on the date of default.
INTEREST CHARGE: Prudential charges interest daily on any loan. Interest is due
on each Contract Anniversary, or when the loan or any part of it is paid back,
if that comes first. If interest is not paid when due, it becomes part of the
loan. Then interest is charged on it, too. Prudential will notify the [Employee
31] days before the interest on the loan becomes due.
The loan interest rate is the annual rate Prudential sets from time to time. The
rate will never be greater than that permitted by law. It will change only on a
Contract Anniversary. Before the start of each Contract Year, Prudential will
determine the loan interest rate to be charged for that year.
When a you take out a loan, Prudential will tell the you the initial interest
rate for the loan. Prudential will notify you if the rate is to be changed.
EFFECT OF A LOAN: A Loan Account that is part of a person's Certificate Fund
will be set up when you take out a loan. The amount of the loan taken by the you
will be credited to the person's Loan Account. Prudential will reduce the part
of the person's Certificate Fund allotted to the Fixed Account and the Separate
Account on a pro-rata basis by the amount of the loan.
89759 [J]
GVUL R 8000
<PAGE>
Prudential will credit interest to the person's Loan Account at the loan
interest rate for the Contract Year, less [1 1/2%]. On each Contract
Anniversary, if there is a loan outstanding, Prudential will increase the
person's Certificate Fund allotted to the Fixed Account and the Separate Account
by interest credits accrued on the loan since the last Contract Anniversary.
Prudential will not increase the person's Certificate Fund allotted to the
person's Loan Account by loan interest that is paid before it is made part of
the loan.
REPAYMENT: You may pay back all or part of any Certificate Debt at any time
while the person is living. The minimum amount that may be paid back is [$250],
or the Certificate Debt, if less. Repayment will be allocated among the person's
Fixed Account and the Separate Account investment options on a pro-rata basis.
When Prudential pays a death benefit, or when the person's insurance is
surrendered, the Certificate Debt is due. If there is Certificate Debt at the
end of the grace period when the person's insurance is in default, it will be
deducted from the Certificate Fund to determine the Cash Surrender Value.
Prudential will make this adjustment so that the proceeds will not include the
amount of that debt.
EXCESS CERTIFICATE DEBT: If Certificate Debt ever becomes equal to or more than
the Certificate Fund value minus an amount equal to that needed to make [the
next month's deductions], the Insurance is in default. Prudential will send you
a notice at your last known address stating the minimum contribution that, if
paid to Prudential, will keep this coverage from ending. The person's insurance
under this Coverage will end at the end of the grace period described in Section
B. if the minimum contribution is not made.
DELAYED LOANS: Prudential usually makes a loan within seven days of the date it
receives the Participant's request. But Prudential has the right to defer making
the part of the loan that is to come from the person's variable investment
options if (1) the New York Stock Exchange is closed; or (2) the SEC requires
that trading be restricted or declares an emergency. Prudential also has the
right to defer paying the rest of the proceeds of a loan for up to six months.
[Prudential reserves the right to withdraw from the person's Certificate Fund an
administrative fee of up to $20.00 with respect to each loan made.]
[K. EXTENDED DEATH PROTECTION DURING TOTAL DISABILITY.
Extended death protection can replace a person's amount of insurance when it
ends, but only with respect to the Face Amount. If you meet the conditions
below, your death benefit protection, and that of any covered dependents will be
extended after your insurance under this Coverage ends while the you are Totally
Disabled. The conditions are:
- -- You become Totally Disabled while insured under this Coverage.
89759 [K]
GVUL R 8000
<PAGE>
- -- You are less than age 60 when your Total Disability starts.
Total Disability: You are "Totally Disabled" when:
(1) You are not working at any job for wage or prifit; and
(2) Due to Sickness, Injury or both, you are not able to perform for wage or
profit the material and substantial duties of any job for which you are
reasonably fitted by your education, training and experience.
The extension ends one year after your Total Disability starts, unless, within
one year, you give Prudential proof that:
(a) You have met the above conditions; and
(b) You are still Totally Disabled; and
(c) The Total Disability has continued for at least nine months.
Prudential will then further extend your death protection, and that of the your
covered dependents for successive one year periods. The first of these periods
will start on the date Prudential receives this proof. After that first period,
you must give written proof when and as required by Prudential once each year
that Total Disability continues.
If you or your dependent die while the death protection is being extended, the
Death Benefit payable to the Beneficiary will be the Amount of Extended Death
Protection when Prudential receives written proof that:
(a) Your Total Disability continued until your death; and
(b) All of the above conditions have been met.
If you or your dependent die within one year your Total Disability starts and
before proof of Total Disability is given to Prudential, written notice of the
person's death must be given to Prudential within one year after the death.
This extended death protection ends if and when:
(1) Your Total Disability ends; or
(2) You [(or your Dependent)] attain[s] age [95]; or
89759 [L]
GVUL R 8000
<PAGE>
(3) You fail to submit any required proof that Total Disability continues; or
(4) You fail to submit to a medical exam by Doctors named by Prudential when
and as often as Prudential requires. After two full years of this
protection, Prudential will not require an exam more than once a year.
If extended death protection ends after you have given the first proof of
continued Total Disability, the same rights under Sections A. and M. apply as
if the person had ceased to be a member of the Coverage Classes for the
insurance. But this does not apply if the person becomes covered again within
31 days after this protection ends.
AMOUNT OF EXTENDED DEATH PROTECTION: The amount of the Face Amount on the
person's life when the insurance ended.
But the amount is reduced by any amount payable under any Prudential group life
insurance that replaces this Coverage for your class.
EFFECT OF CONVERSION: An individual contract issued under Section M. will be in
place of all rights under this Section K. But if all the requirements of this
Section K. have been met, these rights may be obtained in exchange for all
benefits of the individual contract. Premiums paid under the individual contract
will be refunded.]
[L.] PAID-UP INSURANCE.
When a person's[: (a)] insurance ends (for reasons other than default or
attainment of age 95), [or (b) extended death protection ends (and the person
does not again become covered during the next 31 days) as provided under Section
K;] you may elect to provide paid-up insurance for the person, in lieu of
continuing the insurance on a direct-bill basis[, if the Cash Surrender Value of
the person's Certificate Fund is at least $1,000.] You must elect this option
within 31 days of the date on which insurance would end. The election will take
effect on the first day following the date on which the person's insurance ends.
[This option will apply automatically if you do not choose any of the options
available upon termination of the the person's Coverage within 61 days after
Coverage ends.]
The amount of paid-up insurance under this option is the amount which the
person's current Cash Surrender Value will provide when used as a net single
premium, but it may not be less than the Face Amount of the person's Insurance.
The maximum premium will be based on the 1980 Commissioners' Standard Ordinary
Mortality Table, Male Mortality, at 4%. It will be determined by the person's
attained age.
89759 [M]
GVUL R 8000
<PAGE>
Paid-up insurance may be surrendered for its cash value at any time. The cash
value will be the net single premium at the person's attained age for the amount
of insurance, using the same basis which determined that amount. [If only part
of the person's paid-up insurance is to be surrendered, its cash value must be
at least $500.] Prudential may not defer a surrender for more than six months.
[Paid-up insurance provided because a person's insurance ends may be voided, and
the Certificate Fund restored as stated in Extended Death Protection During
Total Disability.]
DIVIDENDS: Prudential will determine that part of the dividend derived from your
paid-up insurance. That part will be applied to increase your paid-up insurance.
That part will not be considered in determining the disposition or effect of
dividends under any other provisions of the Group Contract.
CHANGE IN BENEFICIARY: If you make a Beneficiary change after a person's
insurance under this Coverage ends, a Beneficiary change form must be filed with
Prudential and not as stated in the Beneficiary Rules.
[M.] CONVERSION PRIVILEGE.
If all or part of your Face Amount of Insurance under this Group Contract ends
for one of the reasons stated below, you may convert to an individual life
insurance contract. Evidence of insurability is not required. The reasons are:
(1) The balances in your Certificate Fund accounts have been reduced to zero
and your membership in the Covered Class ends.
(2) All insurance of this Group Contract for your class ends by amendment or
otherwise. But, on the date it ends, you must have been insured for five
years under this Group Contract (or under this Group Contract and any other
Prudential rider or Group Contract replaced by this insurance).
[This privilege also applies if you cease to be insured for the Face Amount of
Insurance under this Coverage with respect to a Dependent. It also applies if
your Face Amount of Insurance with respect to a dependent is reduced by reason
of your age, the end of your membership in a Covered Class, or an amendment to
the Group Contract that changes the benefits for your class. That dependent may
have the Face Amount of Insurance on the dependent under this coverage
89759 [N]
GVUL R 8000
<PAGE>
that then ends converted to an individual life insurance contract. Evidence of
insurability is not required. However, conversion is not available to a
dependent if the insurance ends because you fail to make any required
contribution for the insurance under the Group Contract.]
Any such conversion[s are] subject to the rest of this Section [M].
AVAILABILITY: A person must apply for the individual contract and pay the first
premium within 31 days after the insurance ends for that person.
INDIVIDUAL CONTRACT RULES: the individual contract must conform to the
following:
Amount: Not more than the Face Amount of the insurance on the person then
ending. But, if it ends because all insurance under this Group Contract ends,
the total amount of individual insurance which the person may get in place of
the insurance then ending under this Group Contract will not exceed the lesser
of the following:
(1) The Face Amount of the person's insurance then ending under this Group
Contract, reduced by the amount of group life insurance from any carrier
for which the person is or becomes eligible within the next 45 days.
(2) [$10,000.]
Death During Conversion Period: The amount a person had a right to convert to an
individual contract is included in the Death Benefit if the person dies:
(1) Within 31 days after all or a part of the person's insurance ends; and
(2) While the person has the right to convert the insurance to an individual
contract.
It is included even if the person did not apply for conversion. [But it is
reduced by the amount of any extended death benefit protection which applies.]
Form: Any form of a life insurance contract that:
(1) conforms to Title VII of the Civil Rights Act of 1964, as amended, having
no distinction based on sex; and
(2) is one that Prudential usually issues at the age and amount applied for.
89759 [O]
GVUL R 8000
<PAGE>
This does not include term insurance or a contract with disability or
supplementary benefits. But the contract may be issued with preliminary term
insurance that lasts for one year starting with its effective date.
Premium: Based on Prudential's rate as it applies to the form and amount, and to
the person's risk class (other than gender) and age at the time.
Effective Date: The end of the 31 day period during which the covered person may
apply for it.
[N.] GENERAL PROVISIONS.
SUICIDE: If you die because of suicide this applies:
(1) If death because of suicide occurs within one year from the date you
became a Covered Person, Prudential will pay the Beneficiary no more than
the sum of the contributions paid, less any Certificate Debt and less
partial withdrawals.
(2) With respect to the amount of any increase in the Face Amount for which you
enrolled, if death occurs within one year from the date of the increase in
the Face Amount, Prudential will pay the Beneficiary no more than the sum
of the contributions that were paid for that increase.
ANNUAL REPORT: Prudential will send you a detailed report of your [and your
covered dependents] Certificate Fund. It will be sent within three months after
the end of each Contract Year. You may request a report at other times, subject
to a fee of [$20.00] for its cost.
PAYMENT OF DEATH CLAIM: If Prudential pays a death claim in a lump sum, it will
usually pay the proceeds within seven days of the date it receives written proof
of loss. But Prudential has the right to defer paying any part of the death
benefit that is to come from the variable investment options if: (1) the New
York Stock Exchange is closed; or (2) the SEC requires that trading be
restricted or declares an emergency.
BENEFICIARY; MODE OF SETTLEMENT: Any death benefit under a section of this
Coverage is payable according to that section and the Beneficiary and Mode of
Settlement Rules.
89759 [P]
GVUL R 8000
<PAGE>
OPTION TO ACCELERATE PAYMENT OF CERTAIN
DEATH BENEFITS UNDER VARIABLE UNIVERSAL LIFE COVERAGE
FOR [EMPLOYEES] ONLY
These provisions change the Variable Universal Life Coverage (called Coverage
below) to provide an option to accelerate payments of portions of the Insurance
amount . [The option is available only with respect to the Insurance amount on
your life. It is not available with respect to the Insurance amount on the life
of your Qualified Dependent spouse.]
ELECTION OF THIS OPTION MAY AFFECT OTHER BENEFITS OR ENTITLEMENTS FOR WHICH YOU
MAY BE ELIGIBLE. IT MAY ALSO AFFECT YOUR INCOME TAX LIABILITY. READ THESE NOTES
CAREFULLY:
(1) IF YOU ELECT THIS OPTION, YOUR INSURANCE AMOUNT UNDER THE VARIABLE
UNIVERSAL LIFE COVERAGE IS REDUCED BY THE TERMINAL ILLNESS PROCEEDS AND
ACCELERATED PAYMENT FEE DESCRIBED BELOW.
(2) ANY PAYMENT MADE UNDER THIS OPTION MAY BE TAXABLE. YOU ARE ADVISED TO SEEK
THE HELP OF A PROFESSIONAL TAX ADVISOR FOR ASSISTANCE WITH ANY QUESTIONS
THAT YOU MAY HAVE.
(3) IF YOU ELECT THIS OPTION, YOU ELIGIBILITY FOR MEDICAID OR OTHER GOVERNMENT
PROGRAMS MAY BE AFFECTED. YOU ARE ADVISED TO SEEK THE HELP OF A
PROFESSIONAL LEGAL ADVISOR FOR ASSISTANCE WITH ANY QUESTIONS THAT HE OR SHE
MAY HAVE.
As used here:
"Certificate Fund Amount" means the Cash Surrender Value of your Certificate
Fund on the day Prudential receives proof that you are a Terminally Ill
[Employee]. [It does not include any amount of your Certificate Fund for your
Qualified Dependent Spouse.]
"Face Amount" means your Face Amount of Insurance under the Variable Universal
Life Coverage on the day Prudential receives proof that you are a Terminally Ill
[Employee].
"Terminally Ill [Employee]" means [an Employee] whose life expectancy is 6
months or less.
"Terminally Ill Proceeds" means the amount of Variable Universal Life Insurance
amount placed under this option.
89759 [A]
GVUL T 1001
<PAGE>
The Terminal Illness Proceeds are equal to:
(a) a portion of your Face Amount of Insurance, as determined under (1)
below; plus
(b) a portion of your Certificate Fund, as determined under (2) below[;
minus
(c) an Accelerated Payment Fee not to exceed $350.00].
(1) You must elect the portion of the Face Amount that you want to place under
this option. [You may elect any portion of the Face Amount, but it may not
exceed the lesser of: (i) 50% of the Face Amount; or (ii) $50,000.]
[However, such portion may be reduced if, within 6 months after the date
Prudential receives proof that you are Terminally Ill, a reduction on
account of age would have applied to the Face Amount. In that case, the
portion of the Face Amount placed under this option will not exceed the
Face Amount after applying the reduction.]
Based on your election[, and any reduction on account of age that may
apply,] Prudential will determine the Accelerated Payment Factor. The
Accelerated Payment Factor is equal to:
(i) the portion of the your Face Amount that is placed over this option;
over
(ii) your entire Face Amount.
(2) The portion of your Certificate Fund that may be placed under this option
is equal to:
(i) your total Certificate Fund Amount times the Accelerated Payment
Factor; minus
(ii) the sum of any outstanding loan balance plus any interest due on loans
times the Accelerated Payment Factor.
CHANGES MADE IN THE COVERAGE:
If you become Terminally Ill while a Covered Person under the Coverage [or
while death benefit protection is being extended under the Coverage,] you may
elect to have the Terminal Illness Proceeds placed under this option. That
election is subject to the "Conditions" set forth below. The Insurance amount
under the Coverage is affected as described in the "Effect on Coverage" section.
Contributions are affected as described in the "Effect on Contributions"
section.
89759 [B]
GVUL T 1001
<PAGE>
CONDITIONS: Your right to be paid under this option is subject to these terms:
(1) You may elect this option only once while a Covered Person.
(2) You must choose this option in writing, in a form that satisfies
Prudential.
(3) You must furnish proof that satisfies Prudential that your life expectancy
is 6 months or less, including a certification by a [Doctor].
(4) The Variable Universal Life Coverage must not be assigned.
(5) Terminal Illness Proceeds will be made available to you on a voluntary
basis only. Therefore:
(a) If you are required by law to use this option to meet the claims of
creditors, whether in bankrupcy or otherwise, you are not eligible for
this benefit.
(b) If you are is required by a government agency to use this option in
order to apply for, get or keep a government benefit or entitlement,
you are not eligible for this option.
(6) Once you elect this option, you may no longer: (a) request an increase in
the Face Amount of the Insurance; (b) make a lump sum contribution to the
Certificate Fund, except for contributions required to keep the insurance
from going into default; or (c) increase the amount of contribution to the
Certificate Fund, except to the extent an increase is needed to reflect an
increase in the Mortality Charges.
EFFECT ON COVERAGE: When you elect this option, the Variable Universal Life
Coverage Insurance Amount payable upon death[, including any amount under an
extended death benefit,] will be reduced by the Terminal Illness Proceeds. Also,
you may not convert the Terminal Illness Proceeds to an individual contract.
Prudential reserves the right to make a distribution from your Certificate Fund
when benefits under this option are paid. Any such distribution will be made
only to the extent needed to continue to qualify the Variable Universal Life
Coverage as insurance under the Internal Revenue Code.
EFFECT ON CONTRIBUTIONS: The amount of your contribution will be adjusted based
on the Face Amount remaining in force.
89759 [C]
GVUL T 1001
<PAGE>
METHOD OF PAYMENT: If you elect this option, Prudential will pay the Terminal
Illness Proceeds to you in one lump sum when it receives proof that you are
Terminally Ill. When Prudential pays an accelerated death benefit under this
option, Prudential will send you a statement that shows the effect of the
payment on your Insurance Amount and your contributions.
--------------------------------------------------------------
89759 [D]
GVUL T 1001
<PAGE>
DEPENDENTS TERM LIFE COVERAGE
FOR YOUR DEPENDENTS ONLY
A. DEATH BENEFIT WHILE A COVERED PERSON.
If a dependent dies while a Covered Person, the amount of insurance on that
dependent under this Coverage is payable when Prudential receives written proof
of death.
B. DEATH BENEFIT DURING A CONVERSION PERIOD.
A death benefit is payable under this section B. if a dependent dies:
(1) within 31 days after ceasing to be a Covered Person; and
(2) while entitled (under Section C) to a conversion of the insurance under
this Coverage to an individual contract.
C. CONVERSION PRIVILEGE.
This privilege applies if you cease to be insured for the Dependents Term Life
Coverage of the Group Contract with respect to a dependent. That dependent may
have your insurance on the dependent under this Coverage, which then ends,
converted to an individual life insurance contract. Evidence of insurability is
not required. However, conversion is not available if the insurance ends because
you fail to make any required contributions for insurance under the Group
Contract.
Any such conversion is subject to the rest of this Section C.
AVAILABILITY: The individual contract must conform to the following:
Amount: Not more than the amount of Dependents Term Life Coverage on the
dependent ending under this Coverage. But, if it ends because all of the
Dependents Term Life Coverage of the Group Contract for your class ends, the
total amount of individual insurance which may be obtained in place of all the
Dependents Term Life Coverage on the dependent then ending under the Group
Contract will not exceed the total amount of all of your Dependents Term Life
Coverage on the dependent then ending under the Group Contract reduced by the
amount of
89759 [A]
DPL R 8000
<PAGE>
C. CONVERSION PRIVILEGE (Continued)
group life insurance from any carrier for which you are or become eligible with
respect to the dependent within the next 31 days.
Form: Any form of a life insurance contract that Prudential usually issues at
the age and amount applied for. [This does not include term insurance or a
contract with disability or supplementary benefits.] But, the contract may be
issued with preliminary term insurance that lasts for one year, starting with
its effective date.
Premium: Based on Prudential's rate as it applies to the form and amount, and to
the dependent's class of risk and age at the time.
Effective Date: The end of the 31 day period during which it may be applied for.
----------------------------------------------------
89759 [B]
DPL R 8000
<PAGE>
Any death benefit provided under a section of this Coverage is payable to [you.
If you are not living at the death of a dependent, the death benefit is payable
to the dependent's estate, or, at Prudential's option, to any one or more of
these surviving relatives of the dependent: wife; husband; mother; father;
children; brothers; sisters.]
--------------------------------------------------
ACCIDENTAL DEATH AND DISMEMBERMENT COVERAGE
FOR [EMPLOYEES AND THEIR DEPENDENTS]
This Coverage pays benefits for accidental loss of life, sight, hand or foot.
Loss of sight means total and permanent loss of sight. Loss of hand or foot
means loss by severance at or above the wrist or ankle.
Those benefits are payable only if all of these conditions are met:
- -- The person sustains an accidental bodily Injury while a Covered Person.
- -- The loss results directly from that Injury and from no other cause.
- -- The person suffers the loss within [90 days] after the accident.
BENEFIT AMOUNT PAYABLE: The amount payable depends on the type of loss as shown
in this table. [All benefits are subject to the Limitation Per Accident below.
For loss of:
Life
Both Hands
Both Feet
Sight of Both Eyes The person's Amount of Insurance under
One Hand and One Foot this Coverage
One Hand and Sight of One Eye
One Foot and Sight of One Eye
One Hand
One Foot One-half the person's Amount of Insurance
Sight of One Eye under this Coverage
LIMITATION PER ACCIDENT: No more than the person's amount of insurance under
this Coverage is payable for all losses resulting from Injuries sustained in the
same accident.]
LOSSES NOT COVERED: A loss is not covered if it results from any of these:
(1) Suicide or attempted suicide.
89759 [A]
ADD R 8000
<PAGE>
(2) Sickness, whether the loss results directly or indirectly from Sickness.
(3) Medical or surgical treatment of Sickness, whether the loss results
directly or indirectly from the treatment.
(4) Any infection, unless it is pyogenic and occurs through and at the time of
an accidental cut or wound.
(5) War, or any act of war. "War" means declared or undeclared war and includes
resistance to armed aggression.
[(6) Travel or other movement by means of an aircraft, or descent from or with a
moving aircraft. This (6) applies only if the person is not a fare paying
passenger on a scheduled or charter flight operated by a scheduled airline.
"Aircraft" means any kind of vehicle or device designed for travel or other
movement in or beyond the earth's atmosphere.
(7) Injury arising out of, or in the course of, any work for wage or profit
(whether or not with the Employer).]
-------------------------------------------------------------
Each benefit of this Coverage is payable to the Covered Person. Any benefit
unpaid at the Covered Person's death will be paid [to the Employee, if the
Covered Person is the Employee's Dependent, otherwise] in accordance with the
Beneficiary Rules. The Claim Rules apply to the payment of the benefits.
-------------------------------------------------------------
89759 [B]
ADD R 8000
<PAGE>
WHEN YOUR INSURANCE ENDS
[EMPLOYEE AND DEPENDENTS] INSURANCE
Your [Employee's or Dependents] Insurance under the Coverage will end [on the
first of these to occur:
- -- On the last day of the month in which you cease to be in the Covered
Classes for the Insurance for any reason.
- -- On the last day of the month in which your class has been removed from the
Covered Classes for the Insurance.]
- -- If the Group Contract ends or if the Insurance ends for all [Employees].
- -- [When the person attains age 95.
- -- If you fail to pay, when due: (a) any contribution that is required to keep
the Coverage in force; or (b) if the person's insurance is in default, the
minimum premium contribution required to keep the person's insurance in
force, during the grace period.
- -- If the person's insurance is Variable Universal Life and you surrender it
for its Cash Surrender Value.
Your Dependents Insurance will end on the last day of the month during which the
person ceases to be your Qualified Dependent.]
[END OF EMPLOYMENT: Your employment will end when you are no longer a full-time
employee actively at work for the employer. But, for insurance purposes, the
Contract Holder may consider you as still employed in the Covered Classes during
certain absences from full-time work. The Contract Holder decides which
Employees with those types of absences are to be considered employer, and for
how long. In doing so, the Contract Holder must not discriminate among persons
in like situations.
If you stop active work for any reason, you should contact the employer at once
to see what arrangements, if any, have been made to continue your insurance
during such absences.
CONTINUATION OF INSURANCE: If a person's Variable Universal Life Coverage under
the Group Contract ends because you are no longer in the Covered Class for the
Insurance, you may elect to continue the person's insurance (including any
additional insurance benefits) on a direct-billing basis.
89759 [A]
BTE 8000
<PAGE>
Prudential will give you a written election notice of the right to continue the
insurance. If you wish to continue the insurance, the election notice must be
completed and returned to Prudential, along with any required contribution,
within 61 days of the later of: (a) the date the insurance would have ended; or
(b) the date of the notice informing you of the right to continue the person's
insurance. Contributions will be payable directly to Prudential.
This continuation of insurance will not apply if the insurance ends because the
Contract Holder replaces the Group Universal Life Coverage under this Group
Contract with another group life insurance coverage, issued by another carrier,
that provides for the accumulation of cash value. In that case, Prudential will
pay to the succeeding carrier the Cash Surrender Value of the person's
Certificate Fund. If you are not eligible for such coverage, or if you choose
not to be covered for such coverage, Prudential will pay to you the Cash
Surrender Value of the person's Certificate Fund. However, if the Cash Surrender
Value of the person's Certificate Fund is $1,000 or more, you may elect to
continue the person's insurance on a direct-billing basis, as described above.]
89759 [B]
BTE 8000
<PAGE>
GENERAL INFORMATION
BENEFICIARY RULES
The rules in this section apply to the amount of Insurance payable on account of
a person's death, when the Insurance states that they do. But these rules are
modified by the burial expense rules in the Specifications Page. If there is an
assignment, these rules are modified by the Limits on Assignments section.
"Beneficiary" means a person chosen, on a form approved by Prudential, to
receive the Insurance benefits.
You have the right to choose a Beneficiary [for Employee Insurance. The
Dependents Variable Universal Life Insurance is payable to you.]
If there is a Beneficiary for the amount of [Employee] Insurance, it is payable
to that Beneficiary. [Any amount of Insurance for which there is no Beneficiary
at your death will be payable to your estate.]
You may change the Beneficiary at any time without the consent of the present
Beneficiary. The Beneficiary change form must be filed through the Contract
Holder. The change will take effect on the date the form is signed. But it will
not apply to any amount paid by Prudential before it receives the form.
If there is more than one Beneficiary, but the Beneficiary form does not specify
their respective shares, they will share equally. If a Beneficiary dies before
you, that Beneficiary's intertest will end. It will be shared equally by any
remaining Beneficiaries, unless the Beneficiary form states otherwise.
MODE OF SETTLEMENT RULES
(Applies to your [Employee's] amount of Insurance)
"Mode of Settlement" means payment other than a lump sum.
The amount of Variable Universal Life Insurance is normally paid to the
Beneficiary in one sum. But a mode of settlement may be arranged with Prudential
for all or part of the amount of Insurance, as stated below.
89759 [A]
BBN 8000
<PAGE>
GENERAL INFORMATION (Continued)
ARRANGEMENT FOR MODE OF SETTLEMENT: You may arrange a Mode of Settlement by
proper written request to Prudential. If, at your death, no Mode of Settlement
has been arranged for an amount of Insurance, the Beneficiary and Prudential may
mutually agree on a Mode of Settlement for that amount.
CONDITIONS FOR MODE OF SETTLEMENT: The Beneficiary must be a natural person
taking in the Beneficiary's own right. A Mode of Settlement will apply to
secondary Beneficiaries only if Prudential agrees in writing. Each installment
to a person must not be less that $20.00. A change of Beneficiary will void any
Mode of Settlement arranged before the change.
CHOICE BY BENEFICIARY: A Beneficiary being paid under a Mode of Settlement may,
if Prudential agrees, choose (or change the Beneficiary's choice) of a payee or
payees to receive, in one sum, any amount which would otherwise be payable to
the Beneficiary's estate.
Prudential has prepared information about Modes of Settlement available.
INCONTESTABILITY OF INSURANCE
This limits Prudential's use of your statements in contesting the amount of
Insurance for which you are insured. These are statements made to persuade
Prudential to accept you for Insurance. They will be considered to be made to
the best of your knowledge and belief. These rules apply to each statement:
(1) It will not be used in the contest unless:
(a) It is in a written instrument signed by you; and
(b) A copy of that instrument is or has been furnished to the Beneficiary.
(2) If it relates to your [or your Qualified Dependent's] insurability, it will
not be used to contest the validity of the Insurance which has been in
force, before the contest, for at least two years during the person's
lifetime.
_______________________________
89759 [B]
BBN 8000
<PAGE>
CLAIM RULES
These rules apply to the payment of benefits under the Accidental Death and
Dismemberment Coverage.
PROOF OF LOSS: Prudential must be given proof of loss for which claim is made
under the Coverage. This proof must cover the ocurrence, character and extent of
that loss. It must be furnished within 90 days after the date of the loss.A
claim will not be considered valid unless the proof is furnished within this
time limit. However, it may not be possible to do so. In that case, the claim
will still be considered valid if proof is furnished as soon as possible.
WHEN BENEFITS ARE PAID: Benefits are paid when Prudential receives written proof
of the loss.
PHYSICAL EXAM: Prudential, at its own expense, has the right to examine the
person whose loss is the basis of claim. Prudential may do this when and as
often as is reasonable while the claim is pending.
LEGAL ACTION: No action at law or in equity will be brought to recover on the
Group Contract until 60 days after the written proof described above is
furnished. No such action will be brought more than [three] years after the end
of the time period within which proof of loss is required.
89759 [A]
CLM 8000
<PAGE>
LIMITS ON ASSIGNMENTS
Unless not allowed in the Specifications Page, you may assign your [Employee or
Dependents] Insurance under the Coverage. Any rights, benefits or privileges
that you have may be assigned. This includes any right to choose a Beneficiary
or to convert to another contract of insurance. Prudential will not decide if an
assignment does what it is intended to do. Prudential will not be held to know
that one has been made unless it or a copy is filed with Prudential through the
Contract Holder.
This paragraph applies only to Insurance for which you have the right to name a
Beneficiary, when that right has been assigned. If an assigned amount of
Insurance become payable on account of the person's death, and at the person's
death there is no Beneficiary chosen by the assignee, it will be payable to:
(1) the assignee, if living; or
(2) the estate of the assignee, if the assignee is not living.
It will not be payable as stated in the Beneficiary Rules.
[EFFECT OF GIFT ASSIGNMENT OF RIGHTS OF GROUP LIFE INSURANCE UNDER ANOTHER GROUP
CONTRACT
If you are eligible for the Variable Universal Life Insurance Coverage of the
Group Contract on the Contract Date, you will have no rights, benefits or
privileges under such Coverage if, on the day before the Contract Date, all of
the following are true:
(1) You were insured for group life insurance under another group contract, and
that contract was issued by Prudential to cover Employees of the Employer.
(2) Your group life insurance under the other group contract ended.
(3) An irrevocable and absolute assignment previously made by you: (a) was in
effect; and (b) was made before the other group contract ended; and (c)
was of all of your rights, benefits and privileges of the group life
insurance under the other group contract.
(4) Those rights, benefits and privileges were owned by the assignee or the
assignee's successor.
89759 [A]
BAS 8000
<PAGE>
The owner of such rights of the group life insurance under the other group
contract on the day before the Contract Date will be the owner of the rights,
benefits and privileges you would have had under the Variable Universal Life
Insurance Coverage if this section did not apply. This includes, but is not
limited to, any right of assignment you would have had under the Limits on
Assignments section above. The term "assignee" as used in that section includes
such an owner.]
DEFINITIONS
[ACTIVE WORK REQUIREMENT: A requirement that you be actively at work at the
Employer's place of business, or at any other place that the Employer's business
require you to go.]
ATTAINED AGE: The person's age [as of each Contract Anniversary.]
BUSINESS DAY: A day on which the New York Stock Exchange is open and the
Securities and Exchange Commission has not restricted trading or declared an
emergency.
CASH SURRENDER VALUE: The Cash Surrender Value of your Certificate Fund is equal
to the Certificate Fund less a surrender transaction charge equal to the lesser
of: (a) $20.00; or (b) 2% of the amount surrendered. The Certificate Fund value
changes daily to reflect increases or decreases in the value of the investments,
interest credited to the Fixed Account. It will also reflect net contributions
paid by you, transfers, partial withdrawals, loans and interest accrued, and
mortality and mortality and expense charges deducted by Prudential.
CERTIFICATE DEBT: The sum of all loans under this Certificate, plus the interest
charged that is not yet due and has not been added to the loans.
CERTIFICATE FUND: The total amount credited with respect to each Covered Person
under this Certificate. On any date, it is equal to the sum of the amounts
allocated to: (a) the Separate Account; (b) the Fixed Account; and (c) the Loan
Account. Section C of the Variable Universal Life Coverage describes the credits
to and deductions from each person's Certificate Fund.
CERTIFICATE YEAR: A period of one year measured from the effective date of your
Certificate and from each successive anniversary of that date.
CONTRIBUTORY INSURANCE: Insurance for which the Contract Holder may establish
required contributions from [Employees].
CONTRACT MONTH: A period of one month measured from the Contract Date and from
each successive monthly anniversary.
89759 [B]
BAS 8000
<PAGE>
DEFINITIONS (Continued)
CONTRACT YEAR: A period of one year measured from the Contract Date and from
each successive Contract Anniversary.
COVERED CLASS: Under a Coverage, the classes of [Employee] Insurance [; a
Qualified Dependent with respect to whom the Employee is insured for Dependents
Insurance.]
[DEPENDENTS INSURANCE: Insurance on the person of a dependent.]
[EARNINGS: This is the gross amount of money paid to you by the employer in cash
for performing the duties required by your job. Bonuses overtime pay, Earnings
for more that 40 hours per week and other benefits are excluded.]
[EMPLOYER: Collectively, all Included Employers.]
[EMPLOYEE: A person employed by the Employer.]
[EMPLOYEE] INSURANCE: Insurance pertaining to the person of [an Employee.]
[INJURY: Injury to the body of a Covered Person.]
INSURANCE: Variable Universal Life Coverage [(and any additional insurance
benefits)] provided under this Certificate.
NET CONTRIBUTIONS: Contributions made for the Insurance by the [Employees], less
the expense charges and administration charges deducted by Prudential.
[QUALIFIED DEPENDENT: A Qualified Dependent is the Employee's spouse.
Exception: A spouse is not a Qualified Dependent while: (a) on active duty
in the armed forces of any country; (b) insured or eligible for Employee
Insurance under the Group Contract, or (c) age 75 or more.]
PRUDENTIAL: The Prudential Insurance Company of America
[SICKNESS: Any disorder of the body or mind of a Covered Person, but not an
Injury.]
YOU: [An Employee.]
89759 [C]
BAS 8000
<PAGE>
[PRUDENTIAL LETTERHEAD]
December 15, 1995
The Prudential Insurance
Company of America
Prudential Plaza
Newark, New Jersey 07102-3777
To The Prudential:
This opinion is furnished in connection with the registration by The Prudential
Insurance Company of America of certain Group Variable Universal Life insurance
contracts and certificates ("Contracts") under the Securities Act of 1933. I
have reviewed the Contract form and I have participated in the preparation and
review of the Registration Statement and Exhibits thereto. In my opinion:
(1) The illustrations of cash surrender values and death benefits included
in the section of the prospectus entitled "Hypothetical Illustrations
of Death Benefits and Cash Surrender Values based on the assumptions
stated in this section, are consistent with the provisions of the
respective forms of the Contracts. The rate structure of the
Contracts has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Contract issued on an
individual age 40, than to prospective purchasers of a Contract for
other ages.
(2) The deduction from premium payments for federal taxes in an amount
equal to .25% of each premium is a reasonable charge for these
contracts in relation to the additional income tax burden imposed upon
The Prudential Insurance Company of America as the result of the
enactment of Section 848 of the Internal Revenue Code. In reaching
that conclusion a number of factors were taken into account that, in
my opinion, were appropriate and which resulted in a projected after-
tax rate of return that is a reasonable rate to use in discounting the
tax benefit of the deductions allowed in Section 848 in taxable years
subsequent to the year in which the premiums are received.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/ Stuart L. Liebeskind
Stuart L. Liebeskind, FSA,MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America
<PAGE>
Exhibit 7
The Prudential Insurance Company of America ("Prudential") makes the
following representations with regard to the Contracts offered pursuant to this
Registration Statement:
(1) Prudential is relying on Rule 6e-3(T)(b)(13)(iii)(F) under the
Investment Company Act of 1940 (the "Act") with respect to the risk charges
under the Contracts;
(2) The risk charges are within the range of industry practice for
comparable flexible contracts;
(3) Prudential has determined that the risk charges are within the
range of industry practice by comparing the risk charges under the Contracts
with those under group variable universal life insurance contracts offered by
other issuers in light of the risks assumed under the various contracts and it
undertakes to keep and make available to the Commission on request the documents
used to support the representation;
(4) Prudential has concluded that there is a reasonable likelihood
that the distribution financing arrangement of the separate account will benefit
the separate account and contractholders and will keep and make available to the
Commission on request a memorandum setting forth the basis for this
representation; and
(5) The separate account will invest only in management investment
companies which have undertaken to have a board of directors, a majority of whom
are not interested persons of the company, formulate and approve any plan under
Rule 12b-1 under the Act to finance distribution expenses.
<PAGE>
Exhibit 9
Description of The Prudential's Issuance, Transfer
and Redemption Procedures for Group
Variable Universal Life Insurance Contracts
Pursuant to Rule 6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be
followed by The Prudential Insurance Company of America ("The Prudential") in
connection with the issuance of Certificates ("Certificates") to persons
participating in its Group Variable Universal Life Insurance Contract
("Contract"), the transfer of assets held thereunder, and the redemption by
Participants of their interests in Certificates.
I. PROCEDURES RELATING TO ISSUANCE OF THE CERTIFICATES
A. PREMIUMS AND UNDERWRITING STANDARDS
Premiums for a Certificate under a Contract will not be the same for
all Participants that purchase such a Certificate. Insurance is based on the
principle of pooling and distribution of mortality risks, which assumes that the
owner of each Certificate pays a premium commensurate with the mortality risk of
Participants in the Contract as actuarially determined utilizing factors such as
age, smoking status (in some cases), prior experience of the group, and
occupation. A uniform premium for all insureds under all Contracts would
discriminate unfairly in favor of those insureds representing greater risks.
However, under a given contract for a given face amount of insurance,
Certificates issued with respect to insureds in a given risk classification will
have the same premium.
<PAGE>
- 2 -
The underwriting standards and premium processing practices followed
by The Prudential are similar to those followed in connection with the offer and
sale of fixed-benefit life insurance, modified where necessary to meet the
requirements of the federal securities laws.
B. APPLICATION AND INITIAL PREMIUM PROCESSING
Once an application for a group contract is approved by Prudential,
Prudential will issue a contract to the employer or other contractholder as of
the Contract Date. The same date in each month as the Contract Date is the
Contract Monthiversary, and Prudential will make monthly deductions for the cost
of insurance and administrative charges on each Contract Monthiversary.
Upon receipt of a completed application form from a prospective
Participant, The Prudential may follow certain insurance underwriting (I.E.,
evaluation of risk) procedures designed to determine whether the proposed
Insured is insurable. In some cases this will involve only evaluation of the
answers to the questions on the application and will not include a medical
examination. In other cases, the process may involve such verification
procedures as medical examinations and may require that further information be
provided about the proposed Insured before a determination can be made.
Insurance coverage under a Certificate will become effective on the next
Contract Monthiversary after this underwriting procedure has been completed and
the application has been approved.
The Certificate Date marks the date
<PAGE>
- 3 -
as of which the insurance age of the proposed Insured is determined based upon
the rules in the Contract. It also represents the commencement of the suicide
and contestable periods for purposes of the Certificate.
If the initial premium is paid with the application and no medical
examination is required the Certificate Date will ordinarily be the next
Contract Monthiversary following the date of the application unless otherwise
defined in the group Contract. If a medical examination is required, the
Contract Date will ordinarily be the next Contract Monthiversary following the
date on which the medical underwriting is completed and the application
approved, again unless otherwise defined in the group contract. If the initial
premium is not paid with the application, the Certificate Date will be the
Certificate Date stated in the Contract, which will generally be the next
Contract Monthiversary following the approval of any medical underwriting and
receipt of the initial premium. On the Certificate Date, the invested portion
of the initial premium will be invested in the Fixed Account for 30 days and
will then be allocated to the investment options selected by the participant.
C. PREMIUM PROCESSING
Whenever a premium after the initial premium is received, unless the
Certificate is in default past its days of grace, The Prudential will subtract
the front-end premium charges. What is left will be invested in the selected
investment option(s) on the date
<PAGE>
- 4 -
received (or, if that is not a business day, on the next business day). There
is an exception if the Certificate is in default within its days of grace.
Then, to the extent necessary overdue monthly charges will be deducted, and
premiums greater than this amount will be credited when received.
D. REINSTATEMENT
The Certificate may be reinstated unless the Certificate has been
surrendered for its cash surrender value or used to purchase paid-up insurance.
A Certificate will be reinstated upon receipt by The Prudential of a written
application for reinstatement, production of evidence of insurability
satisfactory to The Prudential and payment of the amount required to bring the
Certificate out of default.
The Prudential will treat the amount paid upon reinstatement as a
premium. It will deduct the front-end premium charges, plus any charges in
arrears. The Certificate fund of the Reinstated Certificate will, immediately
upon reinstatement, be equal to this net premium payment, plus the cash
surrender value of the Certificate immediately before reinstatement. The
reinstatement will take effect as of the date the required proof of insurability
and payment of the reinstatement amount have been received by The Prudential.
<PAGE>
- 5 -
E. REPAYMENT OF LOANS
A loan made under a Certificate may be fully repaid with an amount
equal to the monies borrowed plus interest which accrues daily, at a fixed rate
determined each year by The Prudential.
When a loan is made, The Prudential will transfer an amount equal to
the contract loan from the investment option(s). Under the fixed-rate loan
provision, the amount of Certificate fund attributable to the outstanding
contract loan will be credited with interest at an annual rate of up to 1.5%
less than the interest rate on the loan, and The Prudential thus will realize
the difference between that rate and the fixed loan interest rate, which will be
used to cover the loan investment expenses, income taxes, if any, and processing
costs.
Upon repayment of Certificate debt, the repayment of the loan
principal will be added to the investment option(s) according to the
Participant's existing investment allocation instructions. The balance of a
Certificate's loan account will be reduced by the amount of any loan repayment.
II. TRANSFERS
The Prudential Variable Contract Account GI-2 ("Account") currently
has 7 subaccounts, each of which is invested in shares of a corresponding
portfolio of The Prudential Series Fund, Inc. ("Fund"), which is registered
under the 1940 Act as an open-end diversified management investment company. In
addition, a fixed-rate option is available for investment by Participants.
Provided the Certificate is not in default the participant may transfer amounts
from one subaccount to another subaccount or to the fixed-rate option subject
<PAGE>
- 6 -
to possible transfer charges as provided in the Contract. All or a portion of
the amount credited to a subaccount may be transferred. A Certificate owner who
wishes to convert his or her variable Certificate to a fixed-benefit contract
must request a complete transfer of funds to the fixed-rate option and should
also change his or her allocation instructions regarding any future premiums.
Transfers among subaccounts will take effect at the end of the
valuation period during which a proper transfer request is received at The
Prudential. The request may be in terms of dollars, such as a request to
transfer $10,000 from one account to another, or may be in terms of a percentage
reallocation among subaccounts. In the latter case, as with premium
reallocations, the percentages must be in whole numbers.
Transfers from the fixed-rate option to other investment options are
currently permitted only once each Certificate year. The maximum amount which
may currently be transferred out of the fixed-rate option each year is the
greater of: (a) 25% of the amount in the fixed-rate option, and (b) $5,000.
III. "REDEMPTION" PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. SURRENDER FOR CASH SURRENDER VALUE
If the insured party under a Certificate is alive, The Prudential will
pay, within seven days, the Certificate's cash surrender value as of the date of
receipt of a signed request for surrender, except that The Prudential reserves
the right to delay for up to six months the payment of the amount of any cash
surrender value allocated to the Fixed Account or with respect to a Certificate
in
<PAGE>
- 7 -
force as paid-up insurance or as extended term insurance. The Certificate's
cash surrender value is computed as follows:
1. If the Certificate has not lapsed: The cash surrender value is
the Certificate fund.
2. If the Certificate has lapsed, there will be no cash surrender
value.
B. WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
A withdrawal may be made if the amount withdrawn is at least $250.
There is a fee of the lesser of $20 and 2% of the amount withdrawn for each such
withdrawal. An amount withdrawn may not be repaid except as a premium subject
to the Contract charges.
Whenever a withdrawal is made, the death benefit payable will
immediately be reduced by at least the amount of the withdrawal. This will not
change the face amount of insurance. The Certificate fund is reduced by the sum
of the cash withdrawn and the fee for the withdrawal. An amount equal
<PAGE>
- 8 -
to the reduction in the Certificate fund will be withdrawn from the investment
options.
C. DEATH CLAIMS
The Prudential will pay a death benefit to the beneficiary within
seven days after receipt of due proof of death of the Insured and all other
requirements necessary to make payment. State Insurance laws impose various
requirements, such as receipt of a tax waiver, before payment of the death
benefit may be made. In addition, payment of the death benefit is subject to
the provisions of the Contract regarding suicide and incontestability. In the
event The Prudential should contest the validity of a death claim, an amount up
to the portion of the Contract fund in the variable investment options will be
withdrawn, if appropriate, and held in The Prudential's general account.
The following describes the death benefit if the Certificate is not in
default. The death benefit is the face amount, plus the Certificate fund, less
any Certificate debt and overdue monthly charges. There may be an additional
amount payable from an extra benefit added to the Contract by rider.
The death benefit will be increased as necessary to comply with the
Internal Revenue Code's definition of "life insurance" under the "corridor
percentages" test. Any death benefit so computed will be adjusted for
Certificate debt and any extra benefits in the same manner as above.
<PAGE>
- 9 -
The proceeds payable on death also will include interest (at a rate
determined by The Prudential from time to time) from the date that the death
benefit is computed (the date of death) until the date of payment.
The Prudential will make payment of the death benefit out of its
general account, and will transfer assets, if appropriate, from the Account to
the general account in an amount up to the Certificate fund.
In lieu of payment of the death benefit in a single sum, an election
may be made to apply all or a portion of the proceeds under one of the fixed
benefit settlement options described in the Certificate or, with the approval of
The Prudential, a combination of options. The election may be made by the owner
during the Insured's lifetime, or, at death, by the beneficiary. An option in
effect at death may not be changed to another form of benefit after death. An
option is available only if the proceeds to be applied are $1,000 or more or
would result in periodic payments of at least $20.00. The fixed benefit
settlement options are subject to the restrictions and limitations set forth in
the Contract.
D. DEFAULT AND OPTIONS ON LAPSE
A Certificate is generally in default on any Contract Monthiversary on
which the Certificate Fund is insufficient to pay the monthly cost of insurance
and administrative charges. Some Group Contracts may, however, provide that the
Certificates issued under such contracts will not lapse within the first two
Certificate
<PAGE>
- 10 -
years if specified premiums are paid. The Contracts provide for a grace period
commencing on the Contract Monthiversary on which the Certificate goes into
default and extending to the later of 61 days from the date of default or 30
days from the mailing date of the notice of default. The insurance coverage
continues in force during the grace period, but if the Insured dies during the
grace period, any charges due during the grace period are deducted from the
amount payable to the beneficiary.
<PAGE>
- 11 -
E. LOANS
The Certificate provides that an owner may take out a loan at any time
a loan value is available. The owner may borrow money on completion of a form
satisfactory to The Prudential. The Certificate is the only security for the
loan. Disbursement of the amount of the loan will be made upon receipt of the
form at The Prudential. The investment options will be debited in the amount of
the loan on the date the form is received. The percentage of the loan withdrawn
from each investment option will normally be equal to the percentage of the
value of such assets held in the investment option. An owner may borrow up to
the Certificate's full loan value, which is 85% of the Certificate Fund less the
next month's charges. The loan provision is described in the prospectus.
A loan does not affect the amount of any premiums due. When a loan is
made, the Certificate fund is not reduced, but the value of the assets relating
to the Certificate held in the investment option(s) is reduced. Accordingly,
the daily changes in the cash surrender value will be different from what they
would have been had no loan been taken. Cash surrender values and the death
benefit are thus permanently affected by any Certificate debt, whether or not
repaid.
<PAGE>
- 12 -
The face amount is not affected by the Certificate debt if premiums
are duly paid. However, on settlement the amount of any Certificate debt is
subtracted from the insurance proceeds. If Certificate debt ever becomes equal
to or more than what the cash surrender value would be if there was no
Certificate debt, the Certificate will go into default and will lapse unless
payment of an amount sufficient to end the default is made within the grace
period.
