<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NO. 33-2625/811-4460
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-6
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 18
---------------------
PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE MONEY MARKET SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE BOND SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE MANAGED SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE ZERO COUPON BOND SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE AGGRESSIVE GROWTH SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE INTERNATIONAL SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE SEPARATE ACCOUNT
(EXACT NAME OF TRUST)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1050 WESTLAKES DRIVE
BERWYN, PA 19312
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
ADAM SCARAMELLA, ESQ.
COUNSEL
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
1050 WESTLAKES DRIVE
BERWYN, PA 19312
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPIES TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, DC 20004
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485
Title of Securities Being Registered:
Interests in Modified Premium Adjustable Variable Life Insurance Policies
================================================================================
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8N-2
ITEM CAPTION IN PROSPECTUS
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<S> <C>
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of Policies
5 The Separate Accounts
6(a) The Separate Accounts
6(b) Not Applicable
9 Legal Proceedings
10(a) and (b) Not Applicable
10(c) and (d) Withdrawal of Excess Cash Value; Surrender of the Policy;
Exchange Privilege; Transfers Between Separate Accounts;
Free-Look Provision; Loan Privilege; Accelerated Death
Benefit
10(e) Payment and Allocation of Premiums; Accelerated Death
Benefit
10(f), (g), and Voting Rights, Changes in Applicable Law, Funding and
(h) Otherwise
10(i) Other Policy Provisions
11 Provident Mutual Life Insurance Company; The Separate
Accounts; The Funds; The Stripped ("Zero") U.S. Treasury
Securities Fund, Provident Mutual Series A
12 The Separate Accounts; The Funds; The Stripped ("Zero") U.S.
Treasury Securities Fund, Provident Mutual Series A;
Distribution of Policies
13(a), (b), and Payment and Allocation of Premium; Charges and Expenses;
(c) Accelerated Death Benefit
13(d), (e), and Not Applicable
(f)
14 Availability of Policy; Payment and Allocation of Premiums;
Distribution of Policies; Accelerated Death Benefit
15 Payment and Allocation of Premiums
16 The Separate Accounts; The Funds; The Stripped ("Zero") U.S.
Treasury Securities Fund, Provident Mutual Series A
17 See items 10(c), (d), and (e)
18(a), (b), and The Separate Accounts; Death Benefit; Cash Value
(c)
18(d) Not Applicable
19 Reports
20 Not Applicable
21(a) and (b) Loan Privilege; Accelerated Death Benefit
21(c) Not Applicable
22 Not Applicable
23 Officers and Directors of PMLIC
24 Not Applicable
25 PMLIC
26 See Item 13(a), (b), and (c)
27 Provident Mutual Life Insurance Company
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8N-2
ITEM CAPTION IN PROSPECTUS
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<S> <C>
28 Officers and Directors of PMLIC
29 Provident Mutual Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33(a) Not Applicable
33(b) Distribution of Policies
34 Not Applicable
35 Provident Mutual Life Insurance Company; State Regulation;
Accelerated Death Benefit
36 Not Applicable
37 Not Applicable
38 Distribution of Policies
39 Distribution of Policies
40(a) Distribution of Policies
40(b) Market Street Fund, Inc.; Distribution of Policies
41 Distribution of Policies
42 Not Applicable
43 Not Applicable
44(a) Death Benefit; Cash Value; Accelerated Death Benefit
44(b) and (c) Not Applicable
45 Not Applicable
46(a) Death Benefit; Cash Value; Accelerated Death Benefit
46(b) Not Applicable
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 The Separate Accounts
51 Not Applicable
52(a), (b), Voting Rights, Changes in Applicable Law, Funding and
and(c) Otherwise
52(d) Not Applicable
53(a) Federal Income Tax Considerations
53(b) Not Applicable
54 Not Applicable
55 Not Applicable
</TABLE>
<PAGE> 4
(ART)
PROSPECTUS
FOR
MODIFIED PREMIUM
VARIABLE LIFE
INSURANCE
ISSUED BY
PROVIDENT MUTUAL
LIFE INSURANCE COMPANY
OPTIONS
FORM 15732 5.98
<PAGE> 5
LOGO
PROSPECTUS
- --------------------------------------------------------------------------------
MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY:
LOGO
PROVIDENT MUTUAL LIFE INSURANCE COMPANY (PMLIC)
1050 WESTLAKES DRIVE, BERWYN, PENNSYLVANIA 19312
TELEPHONE: (610) 407-1717
- --------------------------------------------------------------------------------
This Prospectus describes a modified premium variable life insurance policy
(Policy) offered by PMLIC. The purpose of the Policy is to provide lifetime
insurance coverage and to lessen the economic loss resulting from the death of
the Insured. The Policy is also designed to provide flexibility in connection
with premium payments and the potential for increased death benefits and gives
the Policyowner (Owner) the right to allocate Net Premiums among investment
alternatives with different investment objectives.
The Policy provides for the payment of scheduled premiums until age 100.
However, if certain conditions are met, the Owner may not be required to pay
scheduled premiums to keep the Policy in full force. The Owner may also, subject
to certain restrictions, make unscheduled premium payments.
The Policy's minimum Face Amount is currently $50,000. The Policy is
available to Insureds who have an Issue Age of 80 or less.
The Policy provides for a Death Benefit payable at the Insured's death. So
long as all required scheduled premiums are paid, and there are no outstanding
policy loans, the Death Benefit will never be less than the applicable
Guaranteed Minimum Death Benefit for the Policy, regardless of investment
experience.
Net Premiums are allocated to one or more of eight Separate Accounts
selected by the Owner: the Provident Mutual Variable Growth Separate Account,
the Provident Mutual Variable Money Market Separate Account, the Provident
Mutual Variable Bond Separate Account, the Provident Mutual Variable Managed
Separate Account, the Provident Mutual Variable Zero Coupon Bond Separate
Account, the Provident Mutual Variable Aggressive Growth Separate Account, the
Provident Mutual Variable International Separate Account and the Provident
Mutual Variable Separate Account (collectively, the Separate Accounts). The
Growth, Money Market, Bond, Managed, Aggressive Growth and International
Separate Accounts invest in shares of a designated corresponding mutual fund
portfolio. Each portfolio is a part of Market Street Fund, Inc. ("MS Fund"). The
Zero Coupon Bond Separate Account has one Sub Account, the assets of which are
used to purchase units of a corresponding series of The Stripped ("Zero") U.S.
Treasury Securities Fund, Provident Mutual Series A ("Zero Coupon Trust" or
"Trust"). The Provident Mutual Variable Separate Account has twenty-two
Subaccounts, the assets of which are used to purchase shares of a designated
corresponding mutual fund portfolio (each, along with the portfolios of the MS
Fund, a "Portfolio") that is part of one of the following funds: The Alger
American Fund; Neuberger & Berman Advisers Management Trust; Variable Insurance
Products Fund; Variable Insurance Products Fund II; American Fund, American
Century Variable Portfolios, Inc., Van Eck Worldwide Insurance Trust and the MS
Fund (the "Funds").
The Cash Value of the Policy will reflect the investment performance of the
Separate Accounts as well as the frequency and amount of premiums paid,
withdrawals, policy loans and the monthly charges and deductions assessed in
connection with the Policy. The Owner bears the entire investment risk for all
amounts allocated to the Separate Accounts. There is no guaranteed minimum Cash
Value.
The accompanying Prospectuses for the Funds and for the Zero Coupon Trust
describe the investment objectives and the attendant risks of the portfolios and
of the Trust.
Replacing existing insurance with the Policy described in this Prospectus
may not be to your advantage.
------------------------
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES FOR THE
FUNDS LISTED ABOVE.
------------------------
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
------------------------
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.
------------------------
Prospectus dated May 1, 1998
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Definitions................................................. 1
Summary Description of the Policy........................... 3
The Policy Offered..................................... 3
Availability of Policy................................. 3
The Death Benefit...................................... 4
Cash Value............................................. 4
Illustrations of Death Benefits and Cash Surrender
Values................................................ 4
Allocation of Net Premiums............................. 5
Charges Assessed in Connection with the Policy......... 5
Premium Expense Charge............................ 5
Surrender Charge.................................. 5
Monthly Deduction from Cash Value................. 5
Daily Charges Against the Separate Accounts....... 5
Table of Funds and Expenses....................... 6
Free-Look Provision.................................... 7
Loan Privilege......................................... 8
Withdrawal of Excess Cash Value........................ 8
Surrender of the Policy................................ 8
Accelerated Death Benefit.............................. 9
Exchange Privilege..................................... 9
Tax Treatment.......................................... 9
Unisex Policies........................................ 9
Provident Mutual Life Insurance Company, The Separate
Accounts, The Funds, The Stripped ("Zero") U.S. Treasury
Securities Fund, Provident Mutual Series A................ 10
Provident Mutual Life Insurance Company................ 10
The Separate Accounts.................................. 10
Market Street Fund, Inc................................ 10
The Stripped ("Zero") U.S. Treasury Securities Fund,
Provident Mutual Series A............................. 13
The Alger American Fund................................ 14
The Variable Insurance Products Fund and Variable
Insurance Products Fund II............................ 14
VIP Fund.......................................... 15
VIP Fund II....................................... 15
Neuberger & Berman Advisers Management Trust........... 17
Van Eck Worldwide Insurance Trust...................... 18
Termination of Participation Agreements..................... 19
Resolving Material Conflicts................................ 20
Detailed Description of Policy Provisions................... 21
Availability of the Policy............................. 21
Death Benefit.......................................... 21
Availability of Death Benefit Options............. 21
The Guaranteed Minimum............................ 21
How the Death Benefit May Vary.................... 21
Cash Value............................................. 22
How the Cash Value May Vary....................... 22
Net Investment Factor............................. 22
Payment and Allocation of Premiums..................... 22
Scheduled Premiums................................ 22
Amount of Scheduled Premiums...................... 23
Unscheduled Premiums.............................. 24
Premium Change Date............................... 24
Tax Consequences.................................. 25
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Special Premium Payment Provision................. 25
Automatic Premium Loan............................ 28
Allocation of Net Premiums........................ 28
Transfers Between Separate Accounts or
Subaccounts........................................ 28
Telephone Transfers............................... 28
Automatic Asset Rebalancing....................... 28
Grace Period for Payment of Scheduled Premiums.... 29
Reinstatement..................................... 29
Options on Lapse.................................. 29
Extended Term Insurance...................... 29
Reduced Paid Up Insurance.................... 29
Backdating of Policy................................... 29
Free-Look Provision.................................... 30
Exchange Privilege..................................... 30
Loan Privilege......................................... 30
Interest Rate..................................... 30
Variable Loan Interest Rate....................... 31
Allocation of Loans and Repayments................ 31
Effect of Loan.................................... 31
Lapse With Loans Outstanding...................... 31
Withdrawal of Excess Cash Value........................ 32
Calculation of Withdrawal Single Premium.......... 32
Effect of Withdrawal.............................. 33
Surrender of the Policy................................ 33
Accelerated Death Benefit.............................. 33
Tax Consequences of the Rider..................... 33
Amount of the Accelerated Death Benefit........... 33
Conditions for Receipt of the Accelerated Death
Benefit............................................ 34
Operation of the Rider............................ 34
Effect on Existing Policy......................... 34
Charges and Expenses........................................ 35
Premium Expense Charge................................. 35
Premium Processing Charge......................... 35
Sales Charge...................................... 35
State and Local Premium Tax Charge................ 35
Surrender Charge....................................... 35
Contingent Deferred Administrative Charge......... 35
Contingent Deferred Sales Charge.................. 35
Monthly Deductions from Cash Value of Separate
Accounts.............................................. 37
Cost of Insurance................................. 37
Administration Charge............................. 37
Minimum Death Benefit Guarantee Charge............ 37
First Year Policy Charge.......................... 37
Supplementary Benefit Charge...................... 37
Daily Charges Against the Separate Accounts............ 38
Charge for Mortality and Expense Risks............ 38
Asset Charge Against Zero Coupon Bond Separate
Account............................................ 38
Charges for Income Taxes.......................... 38
Guarantee of Certain Charges...................... 38
Other Charges..................................... 38
Federal Income Tax Considerations........................... 38
Introduction........................................... 38
</TABLE>
ii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Tax Status of the Policy............................... 39
Tax Treatment of Policy Benefits....................... 40
In General........................................ 40
Modified Endowment Contracts...................... 40
Distributions from Policies Classified as Modified
Endowment Contracts................................ 41
Distributions from Policies Not Classified as
Modified Endowment Contracts....................... 41
Policy Loan Interest.............................. 41
Investment in the Policy.......................... 41
Multiple Policies................................. 42
Other Tax Consequences............................ 42
Possible Tax Law Changes.......................... 42
Special Rules for Pension and Profit-Sharing Plans..... 42
Possible Charge for PMLIC's Taxes...................... 42
Other Policy Provisions..................................... 43
Payments............................................... 43
The Contract........................................... 43
Ownership.............................................. 43
Beneficiary............................................ 43
Change of Owner and Beneficiary........................ 44
Assignment............................................. 44
Misstatement of Age and Sex............................ 44
Suicide................................................ 44
Incontestability....................................... 44
Dividends.............................................. 44
Settlement Options..................................... 44
Proceeds at Interest Option....................... 45
Instalments of a Specified Amount Option.......... 45
Instalments for a Specified Period Option......... 45
Life Income Option................................ 45
Joint and Survivor Life Income.................... 45
Alternate Life Income Option...................... 45
Supplementary Benefits...................................... 45
Disability Waiver of Premium...................... 45
Accidental Death Benefit.......................... 45
Guaranteed Purchase Option........................ 45
Policies Issued in Conjunction with Employee Benefit
Plans..................................................... 45
Legal Developments Regarding Unisex Actuarial Tables........ 46
Voting Rights............................................... 46
Changes in Applicable Law, Funding and Otherwise............ 47
Officers and Directors of PMLIC............................. 47
Distribution of Policies.................................... 49
Policy Reports.............................................. 50
Preparing for Year 2000..................................... 50
State Regulation............................................ 51
Legal Proceedings........................................... 51
Experts..................................................... 51
Legal Matters............................................... 51
Appendix A--Illustrations of Death Benefits, Cash Surrender
Values and Accumulated Premiums........................... A-1
Appendix B--Calculation of Net Investment Factor and Cash
Value of Policy........................................... B-1
Appendix C--Long Term Market Trends......................... C-1
Financial Statements........................................ F-1
</TABLE>
iii
<PAGE> 9
------------------------
THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF
GIVEN, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED ON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE
TO AN INVESTMENT IN A MUTUAL FUND.
------------------------
DEFINITIONS
ATTAINED AGE................ The Issue Age of the Insured plus the number of
full Policy Years since the Policy Date.
BASE PREMIUM................ Total scheduled premium minus the premium
processing charge and any premium for
supplementary benefits and extra-premium class.
CASH VALUE.................. The total amount invested under the Policy. It is
the sum of the Cash Values in the Separate
Accounts. If there is an outstanding policy loan,
the Cash Value in the General Account will be
added to the Cash Value of the Separate Accounts
to determine the Cash Value of the Policy.
DEATH BENEFIT............... The greatest of: (1) the applicable Guaranteed
Minimum Death Benefit for the Policy; (2) the
Face Amount plus the amount by which the Cash
Value on the date of death exceeds the
appropriate Special Premium Payment Single
Premium; or (3) the Cash Value on the date of
death times the appropriate Death Benefit Factor.
This amount is adjusted to determine the Proceeds
at death which is paid to the beneficiary.
FACE AMOUNT................. The Face Amount is specified in the Policy. If
scheduled premiums are paid when due and there
are no outstanding policy loans, this will be the
minimum Death Benefit.
GRACE PERIOD................ The 61-day period allowed for payment of a
scheduled premium following the due date for such
premium.
GUARANTEED MINIMUM DEATH
BENEFIT.................. Under the Basic Death Benefit Option, the Face
Amount of the Policy; under the Increasing Death
Benefit Option, the Face Amount of the Policy
plus the sum of all unscheduled premiums received
by PMLIC as of the date of death.
HOME OFFICE................. PMLIC's Home Office at 1050 Westlakes Drive,
Berwyn, PA 19312.
INSURED..................... The person upon whose life the Policy is issued.
ISSUE AGE................... The age of the Insured at his or her birthday
nearest the Policy Date. The Issue Age is stated
in the Policy.
ISSUE DATE.................. The date on which the Policy is issued.
LOAN VALUE.................. The maximum amount that may be borrowed under the
Policy.
1
<PAGE> 10
NET CASH SURRENDER VALUE.... The Cash Value of the Policy minus any
outstanding policy loan and accrued interest and
minus any surrender charge.
NET PREMIUM................. The remainder of a Base Premium after deduction
of the 7 1/2% charge for sales load and state
premium tax or the remainder of an unscheduled
premium after deduction of the Premium Expense
Charge.
POLICY ANNIVERSARY.......... The same day and month as the Policy Date in each
later year.
POLICY DATE................. The date set forth in the Policy that is used to
determine Policy Years and Policy Processing
Days.
POLICY PROCESSING DAY....... The day in each calendar month which is the same
day of the month as the Policy Date.
POLICY YEAR................. A year that starts on the Policy Date or on a
Policy Anniversary.
PROCEEDS.................... The net amount paid when the Insured dies or the
Policy is surrendered.
SPECIAL PREMIUM PAYMENT
SINGLE PREMIUM........... An amount used to determine whether the Owner is
required to pay scheduled premiums to keep the
Policy in full force.
VALUATION DAY............... Any day Monday through Friday, except days when
PMLIC is closed for holidays.
VALUATION PERIOD............ The time between two successive Valuation Days.
Each Valuation Period includes a Valuation Day
and any non-Valuation Day or consecutive
non-Valuation Days immediately preceding it.
2
<PAGE> 11
SUMMARY DESCRIPTION OF THE POLICY
The following summary of Policy information should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus. Unless
otherwise stated, this summary assumes that there is no outstanding policy loan.
THE POLICY OFFERED
The Modified Premium Variable Life Insurance Policy (Policy) offered by
this Prospectus is issued by Provident Mutual Life Insurance Company (PMLIC).
The Policy is designed to provide lifetime insurance coverage and to help lessen
the economic loss resulting from the death of the Insured. It is not primarily
offered as an investment. Life insurance is not a short-term investment.
Prospective Owners should consider their need for insurance coverage and the
Policy's long-term investment potential.
In many respects the Policy is similar to a traditional fixed-benefit whole
life insurance policy with a Guaranteed Minimum Death Benefit, scheduled premium
payments, cash value, loan privileges and other features usually associated with
such insurance. Unlike a fixed-benefit life insurance policy, this Policy is
"variable" because its Death Benefit may, and its Cash Value will, vary to
reflect the investment performance of the chosen Separate Accounts, as well as
other factors.
The Policy is described as a "modified premium" policy because of the
flexibility it provides the Owner with respect to the payment of premiums. The
Policy provides for the payment of scheduled premiums. However, the Owner is
permitted, subject to certain restrictions, to make unscheduled premium
payments. Also, under certain circumstances, scheduled premiums will not be
required to keep the Policy in full force. (See "Payment and Allocation of
Premiums," Page 22.)
So long as required scheduled premiums are paid, the Policy will not lapse,
even if investment experience is unfavorable. Thus, the payment of required
scheduled premiums guarantees insurance protection at least equal to the
applicable Guaranteed Minimum Death Benefit for the Policy. There is no minimum
guaranteed Cash Value.
After the deduction of Premium Expense Charges, Net Premiums are allocated
to one or more of the Separate Accounts selected by the Owner. The assets of the
Growth, Money Market, Bond, Managed, Aggressive Growth and International
Separate Accounts are invested in a corresponding portfolio of Market Street
Fund, Inc. (the MS Fund), a series mutual fund with eleven separate investment
portfolios, each intended to meet different investment objectives. Provident
Mutual Variable Separate Account consists of twenty-two Subaccounts, the assets
of which are used to purchase shares of a designated corresponding mutual fund
portfolio (each, along with the portfolios of the MS Fund, a "Portfolio") that
is part of one of the following funds: Neuberger & Berman Advisers Management
Trust; Variable Insurance Products Fund II; The Alger American Fund; Van Eck
Worldwide Insurance Trust and the MS Fund (together, the "Funds", each, a
"Fund"). The Subaccount of the Zero Coupon Bond Separate Account invests in
units of a corresponding series of The Stripped ("Zero") U.S. Treasury
Securities Fund, Provident Mutual Series A (Zero Coupon Trust or Trust).
There is no assurance that the investment objectives of a particular
Portfolio or Trust will be met. The Owner bears the entire investment risk of
amounts allocated to the Separate Accounts.
A prospective Owner who already has life insurance coverage should consider
whether or not changing or adding to existing coverage would be advantageous.
Generally, it is not advisable to purchase another policy as a replacement for
an existing policy.
AVAILABILITY OF POLICY
Under current Company rules, PMLIC ordinarily will write Policies for
individuals with a minimum Face Amount of $50,000. PMLIC may change this minimum
at a later date. The Policy can be issued for Insureds from Issue Ages 0 to 80.
Before issuing a Policy, PMLIC will require that the Insured meet certain
medical
3
<PAGE> 12
standards satisfactory to PMLIC. The premium classes available will be Standard,
Non-Smoker, Non-Smoker with Extra-Premium and Extra-Premium.
THE DEATH BENEFIT
If the Policy is in full force on the date of the Insured's death, PMLIC
will pay the Proceeds at death to the beneficiary upon receipt of due proof of
the Insured's death.
The Death Benefit is the greatest of: (1) the applicable Guaranteed Minimum
Death Benefit for the Policy; (2) the Face Amount of the Policy plus the amount
by which the Cash Value on the date of death exceeds the appropriate Special
Premium Payment Single Premium; or (3) the Cash Value on the date of death times
the Death Benefit Factor for the Insured's sex (if applicable), Attained Age and
premium class. There are two Death Benefit Options under the Policy -- the Basic
Death Benefit Option and the Increasing Death Benefit Option. The applicable
Guaranteed Minimum Death Benefit depends upon which Death Benefit Option is
chosen. Under the Basic Death Benefit Option, the Guaranteed Minimum Death
Benefit is the Face Amount of the Policy; under the Increasing Death Benefit
Option, the Guaranteed Minimum Death Benefit is the Face Amount of the Policy
plus the sum of all unscheduled premiums received by PMLIC as of the date of
death. The Increasing Death Benefit Option is subject to certain availability
restrictions. (See "Death Benefit," Page 21.)
As long as required scheduled premiums are paid, the Death Benefit will not
be less than the applicable Guaranteed Minimum Death Benefit for the Policy. The
extent to which the Death Benefit exceeds the applicable Guaranteed Minimum
Death Benefit depends on the Cash Value of the Separate Accounts at the
Insured's death and therefore will reflect the investment results of the
Accounts to which premiums are allocated. The Proceeds payable at death will be
reduced by any outstanding policy loan and accrued interest and by any unpaid
amounts due PMLIC. (See "Death Benefit," Page 21.)
CASH VALUE
Provided there is no outstanding policy loan, the Cash Value of the Policy
is equal to the sum of the Cash Values of the Separate Accounts to which
premiums are allocated. The Cash Value of each Separate Account will reflect the
amount and frequency of premium payments, the investment experience of that
Separate Account, any policy loans and withdrawals of excess Cash Value and the
imposition of charges in connection with the Policy. There is no guaranteed
minimum Cash Value for the Policy. Although the Policy offers the possibility of
Cash Value appreciation, there is no assurance that such will occur. It is also
possible, due to poor investment experience, for the Cash Value to decline to
the point of having no value. Therefore, the Owner bears the entire investment
risk for amounts allocated to the Separate Accounts. (See "Cash Value," Page
22.)
ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER VALUES
Illustrations on Pages A-3 to A-10 in Appendix A show how Death Benefits
and cash surrender values may vary based on certain rate of return assumptions
and how these benefits compare with amounts which would accumulate if scheduled
premiums were invested to earn interest (after taxes) at 5% compounded annually.
Since these illustrations are based on the payment of scheduled premiums only,
they are applicable for either Death Benefit Option. The illustrations on pages
A-11 and A-12 in Appendix A assume that unscheduled premium payments are made
and show how Death Benefits and cash surrender values vary based upon whether
the Basic Death Benefit Option or Increasing Death Benefit Option is selected.
These projections of hypothetical values may be helpful in understanding
the long-term effects of different levels of investment performance, of charges
and deductions, of electing one or the other death benefit option, and generally
comparing and contrasting this Policy to other life insurance policies.
Nonetheless, the illustrations are based on hypothetical investment rates of
return and are not guaranteed. Illustrations are illustrative only and are not a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different from those illustrated.
4
<PAGE> 13
If a Policy is surrendered in the early Policy Years, the Net Cash
Surrender Value payable will be low as compared with the premium accumulated
with interest, and consequently the insurance protection provided prior to
surrender will be costly.
ALLOCATION OF NET PREMIUMS
Net scheduled premiums will be allocated to the Separate Accounts in
accordance with the allocation percentages which are in effect when such
premiums are received at PMLIC's Home Office. These percentages will be those
indicated in the Application for the Policy, unless the Owner subsequently
changes this allocation by giving written notice to PMLIC.
Net unscheduled premiums will be allocated to the Separate Accounts in
accordance with the percentages then in effect for scheduled premiums, unless
PMLIC receives written instructions to allocate the unscheduled premium payment
in a different manner. Such instructions will only apply to that particular
unscheduled premium payment.
The Owner will bear the investment risk of Net Premiums allocated to the
Separate Accounts.
Subject to certain restrictions, the Owner may transfer amounts among
Separate Accounts and between and among subaccounts of a Separate Account. (See
"Payment and Allocation of Premiums," Page 22.)
CHARGES ASSESSED IN CONNECTION WITH THE POLICY
Premium Expense Charge. Before allocating Net Premiums to the chosen
Separate Accounts, a deduction will be made from each premium payment. The
Premium Expense Charge consists of the following: $1.00 for premium processing,
a 5% charge for sales expenses, and a 2 1/2% charge for state premium taxes.
(See "Premium Expense Charge," Page 35.)
Surrender Charge. If a Policy is surrendered or lapses during the first 9
Policy Years, a surrender charge will be deducted from the net Cash Value. The
total surrender charge is the sum of a Contingent Deferred Administration Charge
no greater than $5.00 per $1,000 of Face Amount and a Contingent Deferred Sales
Charge no greater than 25% of the scheduled Base Premium for Policy Year 1 plus
5% of the scheduled Base Premiums in Policy Years 2 through 5. (See "Surrender
Charge," Page 35.)
Monthly Deduction from Cash Value. On each Policy Processing Day (the
Policy Date and the same day of each succeeding month), the Cash Value of each
Separate Account to which Net Premiums are allocated will be reduced by its
proportional share of a monthly deduction equal to the sum of: the cost of
insurance charge based on rates that do not exceed those specified in the 1980
CSO Table; an administration charge of $3.25 plus $0.015 per $1,000 of Face
Amount; a minimum Death Benefit guarantee charge of $0.01 per $1,000 of
Guaranteed Minimum Death Benefit; and, during the first Policy Year, a policy
charge of $5.00 (See "Monthly Deductions from Cash Value of Separate Accounts,"
Page 37.)
Daily Charges Against the Separate Accounts. A daily charge for PMLIC's
assumption of certain mortality and expense risks incurred in connection with
the Policy will be imposed at an effective annual rate of 0.60% of the average
daily net assets of the Separate Accounts.
In addition, for the Zero Coupon Bond Separate Account, a deduction,
equivalent to an effective annual rate of 0.25% of the average daily net assets
of each Sub Account will be made for transaction charges associated with the
purchase of units of the Zero Coupon Trust. This 0.25% charge may be increased
in the future but in no event will it exceed an effective annual rate of 0.50%.
(See "Daily Charges Against the Separate Accounts," Page 38.)
Shares of the Portfolios are purchased by the Separate Accounts at net
asset value which reflects management fees and expenses deducted from the assets
of the Portfolios.
5
<PAGE> 14
TABLE OF FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
MARKET STREET FUND ANNUAL EXPENSES (AS A
% OF AVERAGE NET ASSETS)
Management Fees (Investment Advisory Fees
)........................................ 0.32% 0.25% 0.35% 0.41% 0.45% 0.75%
Other Expenses............................. 0.11% 0.14% 0.22% 0.17% 0.18% 0.27%
---- ---- ---- ---- ---- ----
Total Fund Annual Expenses................. 0.43% 0.39% 0.57% 0.58% 0.63% 1.02%
</TABLE>
<TABLE>
<CAPTION>
ALL PRO ALL PRO ALL PRO ALL PRO
LARGE CAP LARGE CAP SMALL CAP SMALL CAP
GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MARKET STREET FUND ANNUAL EXPENSES (AS A
% OF AVERAGE NET ASSETS )
Management Fees (Investment Advisory
Fees).................................... 0.70% 0.70% 0.90% 0.90%
Other Expenses............................. 0.40% 0.40% 0.40% 0.40%
---- ---- ---- ----
Total Fund Annual Expenses................. 1.10% 1.10% 1.30% 1.30%
</TABLE>
<TABLE>
<CAPTION>
SMALL
CAPITALIZATION
PORTFOLIO
--------------
<S> <C> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND ANNUAL EXPENSES(2)
(AS A % OF AVERAGE NET ASSETS)
Management Fees (Investment Advisory
Fees).................................... 0.85%
Other Expenses............................. 0.04%
----
Total Fund Annual Expenses................. 0.89%
</TABLE>
<TABLE>
<CAPTION>
HIGH EQUITY
INCOME INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
VARIABLE INSURANCE PRODUCT FUND
("VIP FUND") ANNUAL EXPENSES(2) (AS A %
OF AVERAGE NET ASSETS)
Management Fees (Investment Advisory
Fees).................................... 0.59% 0.49% 0.60% 0.74%
Other Expenses (after reimbursement)(1).... 0.12% 0.08% 0.07% 0.16%
---- ---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1)........................ 0.71% 0.57% 0.67% 0.90%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT
ASSET INDEX GRADE
MANAGER 500 BOND CONTRAFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
VARIABLE INSURANCE PRODUCTS FUND II
("VIP II FUND") ANNUAL EXPENSES(2) (AS
A % OF AVERAGE NET ASSETS)
Management Fees (Investment Advisory
Fees).................................... 0.55% 0.28% 0.44% 0.59%
Other Expenses (after reimbursement)(1).... 0.09% 0.00% 0.14% 0.09%
---- ---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1)........................ 0.64% 0.28% 0.58% 0.68%
</TABLE>
6
<PAGE> 15
<TABLE>
<CAPTION>
LIMITED
MATURITY
BOND
PORTFOLIO
---------
<S> <C> <C> <C> <C> <C> <C>
NEUBERGER & BERMAN ADVISERS MANAGEMENT
TRUST ANNUAL EXPENSES(2) (AS A % OF
AVERAGE NET ASSETS)
Management Fees (Investment Advisory
Fees).................................... 0.65%
Other Expenses............................. 0.12%
----
Total Fund Annual Expenses................. 0.77%
</TABLE>
<TABLE>
<CAPTION>
WORLDWIDE WORLDWIDE WORLDWIDE
WORLDWIDE HARD EMERGING REAL
BOND ASSETS MARKETS ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
VAN ECK WORLDWIDE INSURANCE TRUST ANNUAL
EXPENSES(2) (AS A % OF AVERAGE NET
ASSETS)
Management Fees (Investment Advisory
Fees).................................... 1.00% 1.00% 1.00% 1.00%
Other Expenses (after reimbursement)(1).... 0.12% 0.17% 0.00% 0.17%
---- ---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1)........................ 1.12% 1.17% 1.00% 1.17%
</TABLE>
<TABLE>
<CAPTION>
ZERO
COUPON
2006
PORTFOLIO
---------
<S> <C> <C> <C> <C> <C> <C>
MERRILL LYNCH ZERO UST SECURITIES FUND
ANNUAL EXPENSES(2) (AS A % OF AVERAGE NET
ASSETS)
Management Fees (Investment Advisory
Fees).................................... 0.00%
Other Expenses............................. 0.25%
----
Total Fund Annual Expenses................. 0.25%
</TABLE>
(1) For certain portfolios, certain expenses were reimbursed during 1997. It is
anticipated that expense reimbursement and fee waiver arrangements will
continue past the current year. Absent the expense reimbursement, the 1997
Other Expenses and Total Annual Expenses would have been 0.09%, 0.58%,
respectively, for the VIP Fund Equity Income Portfolio, 0.09%, 0.69%,
respectively, for the VIP Fund Growth Portfolio, 0.17%, 0.91%, respectively,
for the VIP II Fund Overseas Portfolio, 0.10%, 0.65%, respectively, for the
VIP II Fund Asset Manager Portfolio, 0.13%, 0.40%, respectively, for the VIP
II Fund Index 500 Portfolio, 0.11%, 0.71%, respectively, for the VIP II Fund
Contrafund Portfolio, and 0.18%, 1.18%, respectively, for the Van Eck
Worldwide Hard Assets Portfolio. Similar expense reimbursement and fee
waiver arrangements were also in place for the other Portfolios and it is
anticipated that such arrangements will continue past the current year.
However, no expenses were reimbursed or fees waived during 1997 for these
Portfolios because the level of actual expenses and fees never exceeded the
thresholds at which the reimbursement and waiver arrangements would have
become operative.
(2) The fee and expense information regarding the Funds was provided by those
Funds. The Alger American Fund, the VIP Fund, the VIP II Fund, the Neuberger
& Berman ATM Fund, the Van Eck WIT Fund and the Merrill Lynch Zero Coupon
Fund are not affiliated with PMLIC.
FREE-LOOK PROVISION
The Policy provides for a free-look period. The Owner may cancel the Policy
before the latest of: 45 days after Part I of the Application is signed; 10 days
after the Owner receives the Policy; or 10 days of the mailing
7
<PAGE> 16
of the Notice of Withdrawal Right. Upon returning the Policy to PMLIC or to an
agent of PMLIC within such time with a written request for cancellation, the
Policy will be cancelled. PMLIC will promptly pay to the Owner a refund equal to
either the total Cash Value of the Separate Accounts on the date PMLIC receives
the returned Policy plus: (1) any Premium Expense Charges which were deducted
from premiums; (2) monthly deductions made on any Policy Processing Day; and (3)
an amount reflecting other charges directly or indirectly deducted under the
Policy, or, where required by state law, the sum of premiums paid. (See
"Free-Look Provision," Page 30.)
LOAN PRIVILEGE
The Owner may obtain policy loans not exceeding: (1) for Policy Years 1
through 3, 75% of the cash surrender value; and (2) for Policy Years 4 and
thereafter, 90% of the cash surrender value. For policies issued to Virginia
residents, the policy loan available in all years will be 90% of the cash
surrender value.
At the time of Application, the Owner must elect one of two policy loan
interest rate options -- either a fixed 8% per year or variable rate which will
not exceed the greater of 5 1/2% per year or the Corporate Monthly Bond Yield
Average as published by Moody's Investors Service, Inc.
Loan interest is payable in arrears on each Policy Anniversary. If not paid
when due, it will be added to the loan balance, provided the Net Cash Surrender
Value at that point exceeds the due and unpaid interest.
Loans and loan repayments will be allocated to the Separate Accounts based
on the net Cash Value in each Separate Account on the date of the loan or
repayment. Amounts borrowed will be transferred from the Separate Accounts where
the loan is allocated to PMLIC's General Account. The amount maintained in the
General Account will not be credited with the investment earnings of the
Separate Accounts during the period the loan is outstanding. Instead, interest
will be credited at an annual rate 1.5% less than the annual rate then being
charged for loans. Therefore, the Cash Value of the Policy and the Death Benefit
above the guaranteed minimum may be permanently affected by a loan, whether or
not repaid. (See "Loan Privilege," Page 30.)
Depending upon the investment performance of Net Cash Surrender Value and
the amount of any Policy loan, such loans may cause a Policy to lapse. If a
Policy is not a Modified Endowment Contract, lapse of the Policy with Policy
loans outstanding may result in adverse tax consequences. (See "Tax Treatment of
Policy Benefits," Page 40.)
Loans from, or secured by, a Policy, may in certain circumstances be
treated as distributions under the Policy taxable under Section 7702A of the
Internal Revenue Code. Moreover, with certain exceptions, a 10% additional tax
would be imposed on the portion of any loan included in gross income. (See
"Federal Income Tax Considerations," Page 38.)
WITHDRAWAL OF EXCESS CASH VALUE
If the cash surrender value of the Policy exceeds an amount called the
Withdrawal Single Premium (which is the Attained Age net single premium for the
Face Amount of the Policy) the Owner may be able to withdraw such excess Cash
Value of the Policy, subject to certain conditions. A withdrawal will reduce the
Death Benefit, but not below the Guaranteed Minimum Death Benefit. (See
"Withdrawal of Excess Cash Value," Page 32.)
SURRENDER OF THE POLICY
The Owner may at any time surrender the Policy and receive the Net Cash
Surrender Value, if any. The Net Cash Surrender Value will equal the Cash Value
of the Policy minus any outstanding policy loan and accrued interest and minus a
surrender charge for such year no greater than the total surrender charge. (See
"Surrender of the Policy," Page 33.)
8
<PAGE> 17
ACCELERATED DEATH BENEFIT
The Accelerated Death Benefit Rider permits the Owner to receive, at his or
her request and upon approval by PMLIC, accelerated payment of part of the
Policy's Death Benefit if the Insured develops a Terminal Illness or is
permanently confined to a Nursing Care Facility. (See "Accelerated Death
Benefit," Page 33.)
EXCHANGE PRIVILEGE
Within 24 months of the Policy's Issue Date or within 6 months after the
effective date of a material change in the investment policy of any Separate
Account to which premiums are then allocated, the Policy may be exchanged for a
fixed-benefit whole life insurance policy issued by PMLIC on the life of the
Insured, subject to certain restrictions. This exchange may be made without any
requirement of insurability. The new policy will have the same Face Amount as
the original Policy. (See "Exchange Privilege," Page 30.)
TAX TREATMENT
With respect to a Policy entered into before October 21, 1988, or a Policy
entered into after October 20, 1988 that is issued on the basis of a Standard
Premium Class, PMLIC believes that the Policy will be treated as a life
insurance contract for Federal income tax purposes. For a Policy entered into
after October 20, 1988 that is issued on an Extra-premium class basis, it is not
clear whether such a Policy would qualify as a life insurance contract for
Federal income tax purposes. Assuming that a Policy qualifies as a life
insurance contract for Federal income tax purposes, as with the death benefit
payable under a fixed-benefit life insurance policy, the Proceeds at death
payable under the Policy will be excludable from the gross income of the
beneficiary. The increases in the Cash Value of the Policy will also be treated
in a manner consistent with a fixed-benefit life insurance policy.
A Policy entered into or "materially changed" after June 20, 1988, may be
treated as a "Modified Endowment Contract" depending upon the amount of premiums
paid in relation to the Death Benefit. If the policy is a Modified Endowment
Contract, then all pre-death distributions, including Policy loans and unpaid
interest thereon, will be treated first as a distribution of taxable income and
then as a return of basis or investment in the contract. In addition, prior to
age 59 1/2 the taxable income on most such distributions will be subject to a
10% additional tax.
If the policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of basis or investment in the contract and
then as disbursing taxable income. Moreover, loans will not be treated as
distributions. Finally, neither distributions nor loans from a policy that is
not a Modified Endowment Contract are subject to the 10% additional tax. (See
"Federal Income Tax Considerations," Page 38.)
UNISEX POLICIES
Policies issued in states which require "unisex" policies (currently
Montana) provide for premiums and cost of insurance charges which do not vary by
the sex of the Insured. (See "Amount of Scheduled Premiums," Page 23, and "Cost
of Insurance," Page 37.) In addition, Policies issued in conjunction with
employee benefit plans provide for premiums and cost of insurance charges which
do not vary by the sex of the Insured. (See "Policies Issued in Conjunction with
Employee Benefit Plans," Page 45.) Thus, references in this Prospectus to
sex-distinct premiums and cost of insurance charges that vary by the sex of the
Insured are not applicable to Policies issued in states which require "unisex"
policies or to Policies issued in conjunction with employee benefit plans.
Illustrations of the effect of these unisex rates on premiums, cash surrender
values, and Death Benefits are available from PMLIC on request.
9
<PAGE> 18
PROVIDENT MUTUAL LIFE INSURANCE COMPANY, THE SEPARATE ACCOUNTS, THE FUNDS, THE
STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND, PROVIDENT MUTUAL SERIES A
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
PMLIC, a mutual life insurance company chartered in 1865 under Pennsylvania
law, is authorized to transact life insurance and annuity business in
Pennsylvania and in 50 other jurisdictions. PMLIC assumes all insurance risks
under the Policy and its assets support the Policy's benefits. On December 31,
1997, PMLIC's assets were over $7.9 billion. (See "Financial Statements," Page
F-1.)
PMLIC is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
THE SEPARATE ACCOUNTS
The Growth, Money Market, Bond, Managed and Zero Coupon Bond Separate
Accounts were established by PMLIC on October 21, 1985 under the provisions of
the Pennsylvania Insurance Law; the Aggressive Growth Separate Account was
established on February 21, 1989, the International Separate Account on July 15,
1991 and the Variable Separate Account on June 3, 1993. Each is a separate
investment account to which assets are allocated to support the benefits payable
under the Policies as well as other variable life insurance policies PMLIC may
issue.
Each Separate Account's assets are the property of PMLIC. Each Policy
provides that the portion of the Separate Account's assets equal to the reserves
and other liabilities under the Policies with respect to the Separate Account
will not be chargeable with liabilities arising out of any other business that
PMLIC may conduct. In addition to the net assets and other liabilities for the
Policies, the Separate Account's net assets include amounts held to support
other variable life insurance policies issued by PMLIC and amounts derived from
expenses charged to the Accounts by PMLIC which it currently holds in the
Separate Accounts (see "Daily Charges Against the Separate Accounts," Page 38).
From time to time these additional amounts will be transferred in cash by PMLIC
to its General Account. Before making any such transfer, PMLIC will consider any
possible adverse impact the transfer might have on an Account.
The Separate Accounts are registered as a unit investment trust type of
investment company with the Securities and Exchange Commission (SEC) under the
Investment Company Act of 1940 (1940 Act), but such registration does not
involve any supervision of the management or investment practices or policies of
the Separate Accounts by the SEC. Each Separate Account meets the definition of
a "Separate Account" under Federal securities laws.
MARKET STREET FUND, INC.
The Growth, Money Market, Bond, Managed, Aggressive Growth and
International Separate Accounts invest in shares of Market Street Fund, Inc., a
"series" type of mutual fund which is registered with the SEC under the 1940 Act
as a diversified open-end management investment company. The MS Fund currently
issues eleven "series" or classes of shares, each of which represents an
interest in a separate portfolio within the MS Fund. Shares of the Growth, Money
Market, Bond, Managed, Aggressive Growth, International, All Pro Large Cap
Growth, All Pro Large Cap Value, All Pro Small Cap Growth and All Pro Small Cap
Value Portfolios currently are purchased and redeemed by the corresponding
Separate Accounts or Subaccount of the Variable Separate Account. The Fund sells
and redeems its shares at net asset value; it does not impose a sales charge.
The MS Fund serves as an investment medium for other variable life and
variable annuity contracts issued by PMLIC and by Providentmutual Life and
Annuity Company of America ("PLACA"), a wholly-owned subsidiary of PMLIC. At
some later date, the MS Fund may serve as an investment medium for other
10
<PAGE> 19
variable life policies and variable annuity contracts issued by PMLIC and may be
made available as an investment medium for variable contracts issued by other
insurance companies, including affiliated and unaffiliated companies of PMLIC.
PMLIC currently does not foresee any disadvantages to Owners arising out of the
fact that the MS Fund will offer its shares to fund products other than PMLIC's
Policies. However, the MS Fund's Board of Directors intends to monitor events in
order to identify any material irreconcilable conflicts that possibly may arise
and to determine what action, if any, should be taken in response to those
events or conflicts.
The investment objectives of the MS Fund's portfolios are set forth below.
The investment experience of each of the Separate Accounts depends on the
investment performance of the corresponding portfolio. There is no assurance
that any portfolio will achieve its stated objective.
The Growth Portfolio. This portfolio seeks intermediate and long-term
growth of capital by investing in common stocks of companies believed to offer
above-average growth potential over both the intermediate and the long-term.
Current income is a secondary consideration.
The Money Market Portfolio. The Money Market Portfolio seeks to provide
maximum current income consistent with capital preservation and liquidity by
investing in high-quality money market instruments.
The Bond Portfolio. The Bond Portfolio seeks to generate a high level of
current income consistent with prudent investment risk by investing in a
diversified portfolio of marketable debt securities.
The Managed Portfolio. The Managed Portfolio seeks to realize as high a
level of long-term total rate of return as is consistent with prudent investment
risk by investing in stocks, bonds, money market instruments or a combination
thereof.
The Aggressive Growth Portfolio. The Aggressive Growth Portfolio seeks to
achieve a high level of long-term capital appreciation by investing in
securities of a diverse group of smaller emerging companies.
The International Portfolio. The International Portfolio seeks long-term
growth of capital principally through investments in a diversified portfolio of
marketable equity securities of established non-United States companies.
All Pro Large Cap Growth Portfolio. The All Pro Large Cap Growth Portfolio
seeks to achieve long-term capital appreciation. The Portfolio pursues its
objective by investing primarily in common stock and other equity securities of
companies among the 750 largest by market capitalization at the time of
purchase, which the Advisers believe show potential for growth in future
earnings.
All Pro Small Cap Growth Portfolio. The All Pro Small Cap Growth Portfolio
seeks to achieve long-term capital appreciation. The Portfolio pursues its
objective by investing primarily in common stock and other equity securities of
companies that rank between 751 and 1,750 in size measured by market
capitalization at the time of purchase, which the Advisers believe show
potential for growth in future earnings.
All Pro Large Cap Value Portfolio. The All Pro Large Cap Value Portfolio
seeks to provide long-term capital appreciation. The Portfolio attempts to
achieve this objective by investing primarily in undervalued common stock and
other equity securities of companies among the 750 largest by market
capitalizations at the time of purchase that the Advisers believe offer
above-average potential for growth in future earnings.
All Pro Small Cap Value Portfolio. The All Pro Small Cap Value Portfolio
seeks to provide long-term capital appreciation. The Portfolio pursues this
objective by investing primarily in undervalued common stock and other equity
securities of companies that rank between 751 and 1,750 in size measured by
market capitalization at the time of purchase, which the Advisers believe offer
above-average potential for growth in future earnings.
With respect to the Growth, Money Market, Bond, Managed and Aggressive
Growth Portfolios, the MS Fund is advised by Sentinel Advisors Company (SAC)
which is registered with the SEC as an investment
11
<PAGE> 20
adviser under the Investment Advisers Act of 1940. As compensation for its
services, SAC receives monthly compensation as follows:
Growth Portfolio -- 0.50% of the first $20 million of the average
daily net assets of the Growth Portfolio, 0.40% of the next $20 million of
the average daily net assets of the portfolio, and 0.30% of the average
daily net assets in excess of $40 million.
Money Market -- 0.25% of the average daily net assets of the
Portfolio.
Bond Portfolio -- 0.35% of the first $100 million of the average daily
net assets of the portfolio and 0.30% of the average daily net assets in
excess of $100 million.
Managed Portfolio -- 0.40% of the first $100 million of the average
daily net assets of the portfolio and 0.35% of the average daily net assets
in excess of $100 million.
Aggressive Growth Portfolio -- 0.50% of the first $20 million of the
average daily net assets of the portfolio, 0.40% of the next $20 million of
the average daily net assets of the portfolio and 0.30% of the average
daily net assets in excess of $40 million.
With respect to the International Portfolio, the MS Fund is advised by
Providentmutual Investment Management Company ("PIMC") which receives monthly
compensation at an effective annual rate of 0.75% of the first $500 million of
the average daily net assets of the portfolio and 0.60% of the average daily net
assets in excess of $500 million. PIMC has employed The Boston Company Asset
Management, Inc. (TBC) to provide investment advisory services in connection
with the portfolio. As compensation for the investment advisory services
rendered, PIMC pays TBC a monthly fee at an effective annual rate of 0.375% of
the first $500 million of the average daily net assets of the portfolio and
0.30% of the average daily net assets in excess of $500 million.
With respect to the All Pro Portfolios, the MS Fund is advised by PIMC. As
compensation for its services, PIMC receives .70% of the daily net assets of the
All Pro Large Cap Growth and All Pro Large Cap Value Portfolios, and .90% of the
daily net assets of the All Pro Small Cap Growth and All Pro Small Cap Value
Portfolios. PIMC uses a "manager of managers" approach for the All Pro
Portfolios under which PIMC allocates each Portfolio's assets among one or more
"specialist" investment sub-advisers.
Additionally, PIMC has retained Wilshire Associates Incorporated
("Wilshire") to assist it in identifying potential sub-advisers and performing
the quantitative analysis necessary to assess such sub-advisers' styles and
performance. As compensation for these services, PIMC pays Wilshire from its
investment advisory fees, .05% of the average daily net assets of the All Pro
Portfolios.
All Pro Large Cap Growth. As of the date of this prospectus, the assets of
the All Pro Large Cap Growth Portfolio are managed in part by Cohen,
Klingenstein & Marks, Inc. ("CKM"); in part by Geewax, Terker & Co. ("Geewax");
and in part by Oak Associates, Ltd. ("Oak"); pursuant to separate investment
sub-advisory agreements. As compensation for their services PIMC pays from its
investment advisory fees the following percentages of the daily net assets of
the Portfolio: CKM -- .35%; Geewax -- .30%; Oak -- .35%.
All Pro Small Cap Growth. As of the date of this prospectus, the assets of
the All Pro Small Cap Growth Portfolio are managed in part by Standish, Ayer &
Wood ("SAW"), and in part by Husic Capital Management ("Husic"), pursuant to
separate investment sub-advisory agreements. As compensation for their services,
PIMC pays from its investment advisory fees the following percentages of the
daily net assets of the Portfolio: SAW -- .50%; Husic -- .50%.
All Pro Large Cap Value. As of the date of this prospectus, the assets of
the All Pro Large Cap Value Portfolio are managed in part by Equinox Capital
Management, Inc. ("Equinox"); in part by Harris Associates, Inc. ("Harris"); and
in part by Mellon Equity Associates ("Mellon"), pursuant to separate investment
subadvisory agreements. As compensation for their services PIMC pays from its
investment advisory fees the following percentages of the daily net assets of
the Portfolio: Equinox -- .30% of the first $50 million of assets and .25% of
the remaining assets; Haris -- .65% of the first $50 million of assets, .60% of
the next $50 million of assets and .55% of the remaining assets; Mellon -- .30%.
12
<PAGE> 21
All Pro Small Cap Value. As of the date of this prospectus, the assets of
the All Pro Small Cap Value Portfolio are managed in part by 1838 Investment
Advisors ("1838") and in part by Denver Investment Advisors ("DIA"), pursuant to
separate investment sub-advisory agreements. As compensation for their services,
PIMC pays from its investment advisory fees the following percentages of the
daily net assets of the Portfolio: 1838 -- .55%; DIA -- .75% of the first $25
million of assets and .65% on the remaining assets.
In addition to the fee for the investment advisory services, the MS Fund
pays its own expenses generally, including brokerage costs, administrative
costs, custodian costs, and legal, accounting and printing costs. However, PMLIC
has entered into an agreement with the MS Fund whereby it will reimburse the MS
Fund for all ordinary operating expenses, excluding advisory fees, in excess of
an annual rate of 0.40% of the average daily net assets of each portfolio except
the International Portfolio and 0.75% for the International Portfolio. It is
anticipated that this agreement will continue; if it is terminated, MS Fund
expenses may increase.
A more extensive description of the MS Fund, its investment objectives and
policies, its risks, expenses, and all other aspects of its operation is
contained in the Prospectus for the MS Fund, which accompanies this Prospectus.
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND, PROVIDENT MUTUAL SERIES A
The Zero Coupon Bond Separate Account invests in units of The Stripped
("Zero") U.S. Treasury Securities Fund, Provident Mutual Series A, a unit
investment trust registered with the SEC as such under the 1940 Act. The Zero
Coupon Trust consists of one series with a maturity date of February 15, 2006.
The objective of the Trust is to provide safety of capital and a high yield to
maturity through investment in a fixed series consisting primarily of debt
obligations issued by the United States of America that have been stripped of
their unmatured interest coupons, coupons stripped from debt obligations of the
United States, and receipts and certificates for such stripped debt obligations
and coupons. A brief summary of the securities purchased by the Trust is set
forth below.
Since the U.S. Treasury securities have been stripped of their unmatured
interest coupons, they are purchased at a deep discount. If held to maturity,
the amounts invested by the Zero Coupon Trust would grow to the face value of
the U.S. Treasury securities and therefore, a compound rate of growth to
maturity could be determined for the Trust units at the time of purchase. The
units, however, are held in Sub Accounts of the Zero Coupon Bond Separate
Account, and certain charges described under "Daily Charges Against the Separate
Accounts" on Page 35, specifically the charge for mortality and expense risks
and the transaction charge against the Zero Coupon Bond Separate Account, must
be reflected in the determination of a net return. The net rate of return to
maturity thus depends on the compound rate of growth in the units and these
underlying charges, and on the units being held to maturity. It does not,
however, reflect the applicable Monthly Deductions from Cash Value (see "Monthly
Deductions," Page 37) or the Premium Expense Charge (see "Premium Expense
Charge," Page 35) or any Surrender Charge (see "Surrender Charges," Page 35),
which would affect the actual yield to an Owner. Since the value of the Trust's
units will vary daily to reflect the market value of the underlying securities,
the compound rate of growth to maturity and, hence, the net rate of return to
maturity will correspondingly vary on a daily basis. The rate of return to
maturity will differ for each Net Premium allocated to the Zero Coupon Bond
Separate Account, depending upon the rate in effect when the premium is
received.
The fluctuation in the value of units of the Zero Coupon Trust prior to
maturity is more volatile than that of units of a unit investment trust
containing unstripped U.S. Treasury securities of comparable maturities, and
because the value of units of the Zero Coupon Trust will affect the Death
Benefit (subject to the guaranteed minimum) and Cash Value of the Policy, the
Cash Value and Death Benefit will fluctuate accordingly.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPFS) serves as
Sponsor for the Zero Coupon Trust. Because the series invests in a fixed
portfolio, there is no investment manager. As Sponsor, MLPFS sells units of the
Zero Coupon Trust to the Zero Coupon Bond Separate Account. The price of these
units includes a transaction charge which is not paid by the Separate Account
upon acquisition. Rather, the transaction charge is paid directly by PMLIC to
MLPFS out of PMLIC's General Account assets. The
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amount of the transaction charge paid is limited by agreement between PMLIC and
MLPFS and will not be greater than that ordinarily paid by a dealer for similar
securities. PMLIC is reimbursed for the transaction charge paid through a daily
asset charge which is made against the assets of the Sub Accounts. (See "Asset
Charge Against Zero Coupon Bond Separate Account," Page 38.)
Units of the Zero Coupon Trust are disposed of to the extent necessary for
PMLIC to provide benefits and make reallocations under the Policies. MLPFS
intends, but is not contractually obligated, to maintain a secondary market in
Trust units. As long as a secondary market exists, PMLIC will sell such units to
MLPFS at the Sponsor's repurchase price. Otherwise, units will be redeemed at
the Trust's redemption price, which is typically a lower amount.
Thirty days prior to the maturity date of the securities contained in a
series of the Trust, an Owner who has allocated Net Premiums to the Sub Account
of the Separate Account investing in that series will be notified and given the
opportunity to select the Separate Account or Sub Account into which the Cash
Value so allocated should be reallocated. If no instructions are received from
the Owner by PMLIC within the 30 day period, the Cash Value will be allocated to
the Money Market Separate Account.
More detailed information may be found in the current Prospectus for The
Stripped ("Zero") U.S. Treasury Securities Fund, Provident Mutual Series A which
accompanies this Prospectus.
THE ALGER AMERICAN FUND
Provident Mutual Variable Separate Account (the "Variable Account") has one
Subaccount that invests exclusively in shares of a Portfolio of The Alger
American Fund ("Alger American"). Alger American is a "series" type mutual fund
registered with the SEC as a diversified open-end management investment company
issuing a number of series or classes of shares, each of which represents an
interest in a Portfolio of Alger American.
The Alger American Small Capitalization Subaccount of the Variable Account
invests in shares of the Alger American Small Capitalization Portfolio of Alger
American. (Alger American has other investment portfolios that are not offered
to the Variable Account or under the Policies.) Shares of the Alger American
Small Capitalization Portfolio are purchased and redeemed by the Variable
Account at net asset value without a sales charge. The Variable Account
purchases shares of Alger American Small Capitalization Portfolio from Alger
American in accordance with a participation agreement between Alger American and
PMLIC. The termination provisions of this participation agreement is described
below.
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation by focusing on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace.
The investment adviser for the Alger American Small Capitalization
Portfolio is Fred Alger Management, Inc. ("Alger Management"), which is
registered with the SEC as an investment adviser under the Investment Advisors
Act of 1940. As compensation for its services, Alger Management receives a fee
at the end of each month at an annual rate of .85% of the average net assets of
the Alger American Small Capitalization Portfolio.
A more extensive description of Alger American and the Alger American Small
Capitalization Portfolio, including the Portfolio's investment objectives and
policies, risks, expenses and other aspects of its operations are contained in
the Prospectus for Alger American which accompanies this Prospectus.
THE VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
The Variable Account has eight Subaccounts that invest exclusively in
shares of Portfolios of the Variable Insurance Products Fund (the "VIP Fund") or
of the Variable Insurance Products Fund II (the "VIP II Fund"). Like the MS
Fund, the VIP Fund and the VIP II Fund are each "series" type mutual funds
registered with the SEC as diversified open-end management investment companies
issuing a number of series or classes of shares, each of which represents an
interest in a Portfolio of the Fund.
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<PAGE> 23
The Fidelity Equity-Income Subaccount, Fidelity Growth Subaccount, Fidelity
High Income Subaccount and Fidelity Overseas Subaccount of the Variable Account
invest in shares of the VIP Equity-Income Portfolio, VIP Growth Portfolio, VIP
High Income Portfolio and VIP Overseas Portfolio, respectively, of the VIP Fund.
The Fidelity Asset Manager Subaccount, The Fidelity Contrafund Subaccount,
Fidelity Index 500 Subaccount and Fidelity Investment Grade Bond Subaccount of
the Variable Account invest in shares of the VIP II Asset Manager Portfolio, VIP
II Contrafund Portfolio, VIP II Index 500 Portfolio and VIP II Investment Grade
Bond Portfolio, respectively, of the VIP II Fund. (The VIP Fund and VIP II Fund
have other investment portfolios that are not offered to the Variable Account or
under the Policies.) Shares of these Portfolios are purchased and redeemed by
the Variable Account at net asset value without a sales charge. The Variable
Account purchases shares of the Portfolios from the VIP Fund and the VIP II Fund
in accordance with a participation agreement between each Fund and PMLIC. The
termination provisions of these participation agreements are described below.
The investment objectives of the Portfolios of the VIP Fund and the VIP II
Fund in which the Subaccounts invest are set forth below. The investment
experience of each Subaccount depends upon the investment performance of the
corresponding Portfolio. There is no assurance that any Portfolio will achieve
its stated objective.
VIP Fund
VIP Equity-Income Portfolio. This Portfolio seeks reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the VIP Equity-Income Portfolio considers the potential for capital
appreciation. The Portfolio's goal is to achieve a yield which exceeds the
composite yield of the securities comprising the Standard and Poor's 500
Composite Stock Price Index.
VIP Growth Portfolio. This Portfolio seeks to achieve capital
appreciation. The VIP Growth Portfolio normally purchases common stocks,
although its investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
VIP High Income Portfolio. This Portfolio seeks to obtain a high level of
current income by investing primarily in high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital.
VIP Overseas Portfolio. This Portfolio seeks long term growth of capital
primarily through investments in foreign securities. The VIP Overseas Portfolio
provides a means for diversification by participating in companies and economies
outside of the United States.
VIP II Fund
VIP II Asset Manager Portfolio. This Portfolio seeks to obtain high total
return with reduced risk over the long-term by allocating its assets among
stocks, bonds and short-term money market instruments.
VIP II Contrafund Portfolio. This Portfolio seeks capital appreciation by
investing in securities of companies where value isnot fully recognised by the
public.
VIP II Index 500 Portfolio. This Portfolio seeks to provide investment
results that correspond to the total return (i.e., the combination of capital
changes and income) a broad range of common stocks publicly traded in the United
States. In seeking this objective, the VIP II Index 500 Portfolio attempts to
duplicate the composition and total return of the Standard and Poor's 500
Composite Stock Price Index while keeping transaction costs and other expenses
low. The Portfolio is designed as a long-term investment option.
VIP II Investment Grade Bond Portfolio. This Portfolio seeks as high a
level of current income as is consistent with the preservation of capital by
investing in a broad range of investment-grade fixed-income securities. The
Portfolio will maintain a dollar-weighted average portfolio maturity of ten
years or less.
The VIP Equity-Income, VIP Growth, VIP High Income, and VIP Overseas
Portfolios of the VIP Fund and the VIP II Asset Manager, VIP II Contrafund, VIP
II Index 500 and VIP II Investment Grade Bond Portfolios of the VIP II Fund are
managed by Fidelity Management & Research Company ("FMR"). For managing its
investments and business affairs, each Portfolio pays FMR a monthly fee.
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<PAGE> 24
For the VIP Equity-Income, VIP Growth, VIP Overseas and VIP II Asset
Manager Portfolios, the annual fee rate is the sum of two components:
1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52% and it
drops (to as low as a marginal rate of 0.30% when average group assets
exceed $174 billion) as total assets in all these funds rise.
2. An individual fund fee rate of 0.20% for the VIP Equity-Income
Portfolio, 0.30% for the VIP II Contrafund, VIP Growth and VIP II
Asset Manager Portfolio and 0.45% for the VIP Overseas Portfolio.
One-twelfth of the combined annual fee rate is applied to each Portfolio's
net assets averaged over the most recent month, giving a dollar amount which is
the fee for that month.
The VIP II Index 500 Portfolio pays FMR a monthly management fee at the
annual rate of 0.28% of the Portfolio's average net assets. One-twelfth of this
annual fee rate is applied to the net assets averaged over the most recent
month, giving a dollar amount which is the fee for that month.
For the VIP High Income and VIP II Investment Grade Bond Portfolios, the
annual fee rate is the sum of two components:
1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops (to as low as a marginal rate of 0.14%) as total assets in all
these funds rise.
2. An individual fund fee rate of 0.45% for the High Income Portfolio and
0.30% for the VIP II Investment Grade Bond Portfolio.
One-twelfth of the combined annual fee rate is applied to the
Portfolio's net assets averaged over the most recent month, giving a dollar
amount which is the fee for that month.
On behalf of the VIP II Asset Manager Portfolio and the VIP II
Contrafund Portfolio, FMR has entered into sub-advisory agreements with
Fidelity Management & Research (U.K.) Inc. ("FMR (U.K.)") and Fidelity
Management & Research (Far East) Inc. ("FMR Far East"), pursuant to which
these entities provide research and investment recommendations with respect
to companies based outside the United States. FMR (U.K.) primarily focuses
on companies based in Europe while FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR and not the Portfolios pay FMR (U.K.) and FMR Far East fees
equal to 110% and 105%, respectively, of each sub-advisor's costs incurred
in connection with its sub-advisory agreement.
On behalf of the VIP Overseas Portfolio, FMR has entered into
sub-advisory agreements with FMR (U.K.), FMR Far East, and Fidelity
International Investment Advisors (FIIA). Under the sub-advisory
agreements, FMR may receive investment advice and research services with
respect to companies based outside the U.S. and may grant them investment
management authority as well as the authority to buy and sell securities if
FMR believes it would be beneficial to the Portfolio. FIIA, in turn, has
entered into a sub-advisory agreement with its wholly owned subsidiary
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Currently, FMR (U.K.), FMR Far East, FIIA and FIIAL U.K. each focus on
investment opportunities in countries other than the U.S., including
countries in Europe, Asia and the Pacific Basin.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR
Far East, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K.
For providing investment advice and research services the sub-advisors
are compensated as follows:
- FMR pays FMR (U.K.) and FMR Far East fees equal to 110% and 105%,
respectively, of FMR U.K.'s and FMR Far East's costs incurred in
connection with providing investment advice and research services.
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<PAGE> 25
- FMR pays FIIA 30% of its monthly management fee with respect to the
average market value of investments held by the Portfolio for which FIIA
has provided FMR with investment advice.
- FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs incurred
in connection with providing investment advice and research services.
For providing investment management services, the sub-advisors are
compensated according to the following formulas:
- FMR pays FMR (U.K.), FMR Far East, and FIIA 50% of its monthly management
fee with respect to the Portfolio's average net assets managed by the
sub-advisor on a discretionary basis.
- FIIA pays FIIAL U.K. 110% of FIIAL U.K.'s costs incurred in connection
with providing investment management.
Each Portfolio utilizes Fidelity Investments Institutional Operations
Company ("FIIOC"), an affiliate of FMR, to maintain the master accounts of the
participating insurance companies. Under the transfer agent agreement with
FIIOC, each Portfolio pays fees based on the type, size, and number of accounts
in each Portfolio and the number of transactions made by shareholders of each
Portfolio.
Each Portfolio also has an agreement with Fidelity Service Co. ("Service"),
an affiliate of FMR under which each Portfolio pays Service to calculate its
daily share prices and to maintain the portfolio and general accounting records
of each Portfolio and to administer each Portfolio's securities lending program.
The fees for pricing and bookkeeping services are based on each Portfolio's
average net assets but must fall within a range of $45,000 to $750,000. The fees
for securities lending services are based on the number and duration of
individual securities loans.
FMR may, from time to time, agree to reimburse a Portfolio for management
fees and other expenses above a specified percentage of average net assets.
Reimbursement arrangements, which may be terminated at any time without notice,
will increase a Portfolio's yield. If FMR discontinues a reimbursement
arrangement, each Portfolio's expenses will go up and its yield will be reduced.
FMR retains the right to be repaid by a Portfolio for expense reimbursements if
expenses fall below the limit prior to the end of a fiscal year. Repayment by a
Portfolio will lower its yield. FMR has voluntarily agreed to reimburse the
management fees and all other expenses (excluding taxes, interest and
extraordinary expenses) in excess of 1.50% of the average net assets of the VIP
Equity-Income and VIP Growth Portfolios, 1.25% of the average net assets of the
Asset Manager Portfolio and 0.28% of the average net assets of the VIP II Index
500 Portfolio.
A more extensive description of the VIP Fund and the VIP II Fund, the
investment objectives and policies of the Portfolios, the risks, expenses and
all other aspects of their operation is contained in the prospectuses for the
VIP and VIP II Funds which accompany this Prospectus. You should note that the
VIP Fund and VIP II Fund have other investment portfolios that are not available
with the variable life insurance policies issued by PMLIC.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
The Variable Account has one Subaccount that invests exclusively in shares
of Portfolios of the Neuberger & Berman Advisers Management Trust ("AMT") for
new business. Like the MS fund, the AMT is a "series" type mutual fund
registered with the SEC as a diversified open-end management investment company
issuing a number of series or classes of shares, each of which represents an
interest in a Portfolio of AMT.
The Neuberger & Berman Limited Maturity Bond Subaccount of the Variable
Account invest in shares of the Limited Maturity Bond Portfolio of AMT. (AMT has
other investment portfolios that are not offered to the Variable Account or
under the Policies.) Shares of the Portfolio are purchased and redeemed by the
Variable Account at net asset value without a sales charge. The Variable Account
purchases shares of the Portfolio from AMT in accordance with a participation
agreement between AMT and PMLIC. The termination provisions of the participation
agreement are described below.
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Each Portfolio of AMT invests all of its net investable assets in its
corresponding Series (each, a "Series") of Advisers Managers Trust ("Managers
Trust"), an open-end management investment company. Each Series invests in
securities in accordance with an investment objective, policies and limitations
identical to those of its corresponding Portfolio. This "master/feeder fund"
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities. For more
information regarding this structure, see the prospectus for AMT.
In that the investment objective of each Portfolio matches that of its
corresponding Series, the following describes the investment objective of the
Series underlying the Portfolio of AMT in which the Subaccount will invest. The
investment experience of the Subaccount depends upon the investment performance
of its corresponding Portfolio. There is no assurance that any Portfolio (or the
corresponding Series) will achieve its stated objective.
Limited Maturity Bond Portfolio. The Series corresponding to this
Portfolio seeks the highest current income consistent with low risk to principal
and liquidity and secondarily, total return, through investment in short to
intermediate term debt securities, primarily investment grade.
The Investment Adviser for the Series of Managers Trust corresponding to
the Limited Maturity Bond Portfolio of AMT is Neuberger & Berman Management
Incorporated ("N & B Management"). As compensation for its services, N & B
Management receives a monthly fee from AMT at the following percentages of daily
net assets of the Limited Maturity Bond Portfolio -- 0.25% of first $500
million, 0.225% of next $500 million, 0.20% of next $500 million, 0.175% of next
$500 million and 0.15% of over $2 billion.
A more extensive description of AMT, the investment objectives of the
available Portfolio, the risks, expenses and all other aspects of their
operation is contained in the prospectuses for the Limited Maturity Bond
Portfolio of AMT which accompanies this Prospectus.
VAN ECK WORLDWIDE INSURANCE TRUST
The Variable Account has four Subaccounts that invest exclusively in shares
of Portfolios of Van Eck Worldwide Insurance Trust (the "Van Eck Trust"). Like
the MS Fund, the Van Eck Trust is a "series" type mutual fund registered with
the SEC as a diversified open-end management investment company issuing a number
of series or classes of shares, each of which represents an interest in a
Portfolio of Van Eck Trust.
The Van Eck Worldwide Bond, Van Eck Worldwide Hard Assets, Van Eck
Worldwide Emerging Markets and Van Eck Worldwide Real Estate Subaccounts of the
Variable Account invest in shares of the Van Eck Worldwide Bond, Van Eck
Worldwide Hard Assets, Van Eck Worldwide Emerging Markets, and Van Eck Worldwide
Real Estate Portfolios, respectively, of the Van Eck Trust. Shares of the Van
Eck Worldwide Bond, Worldwide Hard Assets, Worldwide Emerging Markets and Van
Eck Worldwide Real Estate Portfolios are purchased and redeemed by the Variable
Account at net asset value without a sales charge. The Variable Account
purchases shares of the Portfolios from the Van Eck Trust in accordance with a
participation agreement between the Van Eck Trust and PMLIC. The termination
provisions of this participation agreement are described below.
The investment objectives of the Portfolios of Van Eck Trust are set forth
below. The investment experience of each Subaccount depends upon the investment
performance of its corresponding Portfolio. There is no assurance that these
Portfolios will achieve their stated objectives.
Van Eck Worldwide Hard Assets Portfolio seeks long-term capital
appreciation by investing globally, primarily in "Hard Assets Securities." Hard
Assets Securities include equity securities of Hard Asset Companies and
securities, including structured notes, whose value is linked to the price of a
Hard Asset commodity or a commodity index. Hard Asset Companies include
companies that are directly or indirectly engaged to a significant extent in the
exploration, development, production or distribution of one or more of the
following (together, Hard Assets); (i) precious metals, (ii) ferrous and
non-ferrous metals, (iii) gas,
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petroleum, petrochemicals or other hydrocarbons, (iv) forest products, (v) real
estate and (vi) other basic non-agricultural commodities. Income is a secondary
consideration.
Van Eck Worldwide Bond Portfolio seeks high total return through a flexible
policy of investing globally, primarily in debt securities.
Van Eck Worldwide Emerging Markets Portfolio seeks long-term capital
appreciation by investing primarily in equity securities in emerging markets
around the world.
Van Eck Worldwide Real Estate Portfolio seeks to maximize total return by
investing primarily in equity securities of domestic and foreign companies which
are principally engaged in the real estate industry or which own significant
real estate assets.
The investment adviser for the Van Eck Worldwide Hard Assets, Van Eck
Worldwide Bond and Van Eck Worldwide Real Estate Portfolios is Van Eck
Associates Corporation ("Van Eck Associates"). The investment adviser for the
Van Eck Worldwide Emerging Markets Portfolio is Van Eck Global Asset Management
(Asia) Limited, a wholly-owned investment adviser subsidiary of Van Eck
Associates. As compensation for its services to the Worldwide Hard Assets and
Worldwide Bond Portfolios, Van Eck Associates receives a monthly fee at an
annual rate of 1.0% of the first $500 million of the average daily net assets of
the Portfolios, 0.90% of the next $250 million of the daily net assets of the
Portfolios, and 0.70% of the average daily net assets of the Portfolios in
excess of $750 million. As compensation for its services to the Worldwide
Emerging Markets Portfolio and Van Eck Worldwide Real Estate Portfolio, Van Eck
Associates or its affiliate receives a monthly fee at an annual rate of 1.00% of
the Portfolio's average daily net assets.
A more extensive description of Van Eck Trust, and Van Eck Worldwide Hard
Assets Portfolio, Van Eck Worldwide Bond Portfolio, Van Eck Worldwide Emerging
Markets Portfolio and Van Eck Worldwide Real Estate Portfolio, including each
Portfolio's investment objectives and policies, risks, expenses and other
aspects of its operations are contained in the Prospectus for the Trust that
accompanies this Prospectus.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares
to Subaccounts of the Variable Account contain varying provisions regarding
termination. The following summarizes those provisions:
The Alger American Fund. The Agreement with The Alger American Fund
provides for termination: 1) by either party on 60 days written notice to
the other; 2) by Alger if the Policies cease to qualify as annuity
contracts or life insurance policies under the Code or the Policies are not
registered, issued or sold in accordance with applicable laws; 3) by any
party in the event of a material irreconcilable conflict; 4) by PMLIC in
the event that formal proceedings are initiated against Alger or the
distributor by the SEC or another regulator; 5) by PMLIC in the event the
Portfolio or trust fails to meet the diversification requirements; 6) by
PMLIC if shares are not reasonably available; 7) by PMLIC if shares of the
Portfolio are not registered, issued or sold in accordance with applicable
laws or applicable law precludes the use of such shares; 8) by PMLIC if
Alger fails to qualify as a regulated investment company under Subchapter M
of the Code; or 9) by Alger's principal underwriter if it determines that
PMLIC has suffered a material adverse change in its business, operation,
financial condition or prospects.
Fidelity Variable Insurance Products Fund and Variable Insurance
Products Fund II. The Agreements provide for termination 1) upon six
months' advance notice by either party, 2) at PMLIC's option if shares of
the Fund are not reasonably available to meet requirements of the policies,
3) at PMLIC's option if shares of the Fund are not registered, issued, or
sold in accordance with applicable laws, if the Fund ceases to qualify as a
regulated investment company under the Code or for a Portfolio of the Fund
in the event such Portfolio fails to meet diversification requirements
under the Code, 4) at the option of the Fund or its principal underwriter
if it determines that PMLIC has suffered material adverse
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changes in its business or financial condition or is subject to material
adverse publicity, 5) at the option of PMLIC if the Fund has suffered
material adverse changes in its business or financial condition or is a
subject of material adverse publicity, or 6) at the option of the Fund or
its principal underwriter if PMLIC decides to make another mutual fund
available as a funding vehicle for its policies.
Neuberger & Berman Advisers Management Trust. This Agreement may be
terminated by either party on six months' written notice to the other.
Van Eck Worldwide Insurance Trust. The agreement with Van Eck Trust
provides for termination 1) by PMLIC, Van Eck Trust or Van Eck Trust's
distributor upon six months prior written notice or in the event that
formal proceedings are initiated against the other party by the SEC or
another regulator, 2) by PMLIC or Van Eck Trust in the event that shares of
Van Eck Trust subject to the agreement are not registered, offered or sold
in conformity with applicable law or such law precludes the use of Trust
shares, 3) by PMLIC upon reasonable notice if shares of one of the then
available Portfolios of Van Eck Trust are no longer available or upon sixty
days notice if PMLIC should substitute shares of another fund or Fund for
those of Van Eck Trust, 4) by PMLIC if a Portfolio fails to meet the
diversification and other requirements of the Internal Revenue Code, or
PMLIC reasonably believes it may fail to do so, 5) upon assignment of the
agreement unless both parties agree to the assignment in writing.
Should an agreement between PMLIC and a Fund terminate, the Subaccounts
that invest in that Fund will not be able to purchase additional shares of such
Fund. In that event, Owners will no longer be able to allocate cash values or
net premiums to Subaccounts investing in Portfolios of such Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to a Subaccount despite the
fact that the participation agreement between the Fund and PMLIC has not been
terminated. Should a Fund or portfolio of such Fund decide not to sell its
shares to PMLIC, PMLIC may not be able to honor requests by Owners to allocate
cash values or net premiums to Subaccounts investing in shares of that Fund or
portfolio.
The Company has entered into agreements with the investment advisers of
several of the Funds pursuant to which each such investment adviser will pay the
Company a servicing fee based upon an annual percentage of the average aggregate
net assets invested by the Company on behalf of the Variable Account. These
agreements reflect administrative services provided to the Funds by the Company.
Payments of such amounts by an adviser will not increase the fees paid by the
Funds or their shareholders.
RESOLVING MATERIAL CONFLICTS
The MS Fund, Alger American, VIP Fund, VIP Fund II, AMT, and Van Eck Trust
are used as investment vehicles for variable life insurance policies and
variable annuity contracts issued by PMLIC and PLACA, as well as registered
separate accounts of other insurance companies offering variable life and
annuity contracts. As a result, there is a possibility that a material conflict
may arise between the interests of Owners whose policy values are allocated to
the Variable Account and the owners of life insurance policies and variable
annuities issued by such other companies whose values are allocated to one or
more other separate accounts investing in any one of the Funds.
In addition, certain Funds may sell shares to certain retirement plans
qualifying under Section 401 of the Code (including cash or deferred
arrangements under Section 401(k) of the Code). As a result, there is a
possibility that a material conflict may arise between the interests of Owners
of policies generally, or certain classes of Owners, and such retirement plans
or participants in such retirement plans.
In the event of a material conflict, PMLIC will take any necessary steps,
including removing the Variable Account from that Fund, to resolve the matter.
The Board of Directors or Trustees of the Funds intend to monitor events in
order to identify any material conflicts that possibly may arise and to
determine what action, if any, should be taken in response to those events or
conflicts. See the Individual Fund Prospectuses for more information.
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DETAILED DESCRIPTION OF POLICY PROVISIONS
AVAILABILITY OF THE POLICY
Under current Company rules, the minimum Face Amount for the Policy is
$50,000. However, PMLIC reserves the right to revise its rules to specify a
different minimum Face Amount for subsequently issued Policies. The Policy will
be issued for Insureds from 0-80 years old.
DEATH BENEFIT
Insurance coverage ordinarily begins on the Issue Date of the Policy, which
is the time the Application for insurance has been approved by PMLIC, provided
that the entire first scheduled premium has been paid. Under certain
circumstances, however, limited insurance coverage will begin prior to the
approval of the Application. If the Policy is in full force on the date of the
Insured' death, PMLIC will pay the Proceeds at death to the beneficiary upon
receipt of due proof of the Insured's death (and fulfillment of certain other
requirements).
There are two Death Benefit Options under the Policy. Under the Basic Death
Benefit Option, the Death Benefit is equal to the greatest of: (1) the Face
Amount of the Policy; (2) the Face Amount of the Policy plus the amount by which
the Cash Value of the Policy on the date of death exceeds the appropriate 7 1/2%
Special Premium Payment Single Premium (see "Special Premium Payment Provision,"
Page 23); or (3) the Cash Value of the Policy on the date of death times the
Death Benefit Factor shown in the Policy for the Insured's sex (if applicable),
Attained Age and premium class. Under the Increasing Death Benefit Option, the
Death Benefit is equal to the greatest of: (1) the Face Amount of the Policy
plus the sum of all unscheduled premiums received by PMLIC as of the date of
death; (2) the Face Amount of the Policy plus the amount by which the Cash Value
of the Policy on the date of death exceeds the appropriate 7 1/2% Special
Premium Payment Single Premium (see "Special Premium Payment Provision," Page
23); or (3) the Cash Value of the Policy on the date of death times the Death
Benefit Factor shown in the Policy for the Insured's sex (if applicable),
Attained Age and premium class.
The Death Benefit will be increased by the portion of any scheduled premium
payment which applies to a period of time beyond the date of death. The amount
payable will be reduced by any policy loans and accrued interest and, if the
Insured dies during the Grace Period, by that part of any required but unpaid
scheduled premium which applies to a period prior to the date of death. The
amount remaining after these adjustments is the Proceeds at death paid to the
beneficiary at the Insured's death.
Availability of Death Benefit Options. The Death Benefit Option is chosen
at the time of application for the Policy. If the Policy is issued with the
Basic Death Benefit, the Owner may change to the Increasing Death Benefit only
during the first Policy Year. (For a Policy issued more than one year prior to
the date the Increasing Death Benefit Option is first available in a particular
jurisdiction, the Owner may change to the Increasing Death Benefit Option only
during the 60-day period commencing with the date the Increasing Death Benefit
Option is first made available by PMLIC in such jurisdiction.) Once the
Increasing Death Benefit has been chosen, the Owner may not subsequently change
to the Basic Death Benefit. The Increasing Death Benefit Option is not yet
available in New Jersey.
The Guaranteed Minimum. As long as required scheduled premiums are paid,
the Death Benefit is guaranteed never to be less than the applicable Guaranteed
Minimum Death Benefit for the Policy. For a Policy with the Basic Death Benefit,
the Guaranteed Minimum Death Benefit is equal to the Face Amount of the Policy.
For a Policy with the Increasing Death Benefit, the Guaranteed Minimum Death
Benefit is equal to the Face Amount of the Policy plus the sum of all
unscheduled premiums received by PMLIC as of the date of death.
How the Death Benefit May Vary. For purposes of determining the cost of
insurance charge, the Death Benefit is determined on each Policy Processing Day
based on the Cash Value of the Policy (see "How the Cash Value May Vary,"
below). The Death Benefit will be adjusted to the date of death. The Death
Benefit and the Proceeds payable at the Insured's death, therefore, depend on
the Cash Value of the Policy when the
21
<PAGE> 30
Insured dies. Favorable investment experience and premium payments in excess of
scheduled premiums may result in an increase in the Death Benefit. Unfavorable
investment experience may result in decreases in the Death Benefit, but never
less than the Face Amount of the Policy. The Death Benefit will also vary
depending upon whether the Basic Death Benefit or the Increasing Death Benefit
applies.
CASH VALUE
The Cash Value is not guaranteed. Unless there is an outstanding policy
loan, the total Cash Value of the Policy at any time is the sum of the Cash
Values of the Separate Accounts. If there is an outstanding loan, the total Cash
Value equals the Cash Value in the General Account attributable to the loan plus
the Cash Values of the Separate Accounts.
As described below, the Cash Value of each Separate Account may increase or
decrease daily depending on the investment experience of the chosen Separate
Accounts and the deduction of charges from the Cash Value.
Although the Policy offers the possibility of Cash Value appreciation,
there is no assurance that such will occur. It is also possible, due to poor
investment experience, for the Cash Value to decline to the point of having no
value. Therefore, the Owner bears all the investment risk on the Cash Value.
How the Cash Value May Vary. The Cash Value of each Separate Account on
the Policy Date is the portion of the Net Premium allocated to that Separate
Account reduced by the portion of the monthly deduction on the first Policy
Processing Day allocated to that Separate Account. Thereafter, the Cash Value of
each Separate Account changes on each Valuation Day.
The Cash Value of each Separate Account reflects a number of factors,
including the investment performance of the underlying portfolio or series (see
"Net Investment Factor," below), the receipt of scheduled and unscheduled
premium payments, transfers from and to other Separate Accounts, transfers to
and from the General Account for a policy loan and repayment, any withdrawal of
excess Cash Value, the monthly deductions from Cash Value, and the daily charges
against the Separate Accounts. For a Policy having the Increasing Death Benefit
where unscheduled premiums are paid, the Cash Value may be slightly lower than
that of the same Policy having the Basic Death Benefit.
Net Investment Factor. Each Separate Account or Sub Account of a Separate
Account has its own Net Investment Factor. The Net Investment Factor measures
the daily investment performance of a Separate Account or Sub Account. The
factor will increase to reflect investment income and capital gains, realized
and unrealized, for the securities of the underlying portfolio or series. The
Factor will decrease to reflect any capital losses, realized and unrealized, for
the securities of the underlying portfolio or series.
The asset charge for mortality and expense risks (see "Charge for Mortality
and Expense Risks," Page 38), and the transaction charge for the Zero Coupon
Bond Separate Account (see "Asset Charge Against Zero Coupon Bond Separate
Account," Page 38) will be deducted in determining the applicable Net Investment
Factor.
A description of how the Net Investment Factor is determined and how it is
reflected in the Cash Value of the Policy is set forth in Appendix B on Page
B-1.
PAYMENT AND ALLOCATION OF PREMIUMS
Scheduled Premiums. Scheduled premiums are payable during the Insured's
lifetime on an annual basis or, if elected, more frequently. The scheduled
premium is a level amount that does not change until the Premium Change Date
(see "Premium Change Date," Page 24). If all required scheduled premiums are
paid when due, the Policy will not lapse, even if adverse investment experience
results in no Cash Value. If the Special Premium Payment Provision is in effect,
scheduled premiums do not have to be paid for the policy to stay in full force.
(See "Special Premium Payment Provision," Page 25.) If that provision is not in
effect, scheduled premiums must be paid to keep the Policy in full force. (See
"Grace Period for Payment of Scheduled Premiums," Page 29.)
22
<PAGE> 31
Amount of Scheduled Premiums. The amount of scheduled premiums depends on
the Face Amount of the Policy, the age of the Insured, the Insured's sex and
premium class and the frequency of premium payments. The amount of scheduled
premiums payable on Policies issued in states which require "unisex" policies
(currently Montana) or in conjunction with employee benefit plans depends on all
of the preceding factors except for the sex of the Insured.
For purposes of calculating premium rates, there are three groupings or
"bands" of Face Amount. Each band has a different set of premium rates per
$1,000 of Face Amount. The bands are: $50,000 -- 99,999; $100,000 -- 249,999;
$250,000 and over. Generally, the premium rates per $1,000 of Face Amount will
be lower for Policies in a higher Face Amount band. Premiums generally are
higher for Policies issued for older Insureds. Premiums also are generally
higher for male Insureds than comparable female Insureds. The premium classes
available are Standard, Non-Smoker, Non-Smoker with Extra-Premium and Extra-
Premium. Lower premiums are charged to non-smokers who are at least 22 years of
age (21 years of age for policies issued to residents of Texas). Since there is
no Non-Smoker class for Insureds under the age of 22, shortly before an Insured
attains age 22 (21 in Texas), PMLIC will notify the Insured about possible
classification as a Non-Smoker and send the Insured an Application for Change in
Premium Class. If the Insured does not qualify for the Non-Smoker class or does
not return the application form, the Insured's premium class will remain
Standard and the monthly deduction for cost of insurance will be based on Smoker
Mortality Tables (see "Cost of Insurance," Page 37). If the Insured returns the
application and qualifies as a Non-Smoker, the scheduled premium for the Policy
will be reduced and the monthly deduction for cost of insurance will be based on
Non-Smoker Mortality Tables. Additional premiums are charged for a Policy with
an extra-premium class and for any supplementary insurance benefits. In certain
situations, such as term conversions, where less than normal underwriting
expenses are incurred, PMLIC may allow a credit toward the first scheduled
premium.
Representative annual Base Premium amounts payable from the Policy Date
until the Premium Change Date for Non-Smoker and Standard premium classes are
shown in the following table:
<TABLE>
<CAPTION>
$50,000 FACE AMOUNT $100,000 FACE AMOUNT
--------------------- ---------------------
NON-SMOKER STANDARD NON-SMOKER STANDARD
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Male, Issue Age 25.................................. 395.50 503.50 765.00 982.00
Female, Issue Age 35................................ 508.50 594.00 991.00 1,163.00
Male, Issue Age 45.................................. 905.00 1,216.00 1,783.00 2,405.00
Female, Issue Age 55................................ 1,236.50 1,442.00 2,445.00 2,856.00
</TABLE>
Premiums are payable on an annual, semi-annual or quarterly basis. Premiums
are payable monthly under the Automatic Payment Plan where the Owner authorizes
PMLIC to withdraw premiums from the Owner's checking account each month. If
premiums are payable under the Automatic Payment Plan and such plan is
terminated, the premium payment frequency will be changed to quarterly. The
Owner may make deposits into a Premium Deposit Fund Account (PDF Account). If
the Owner has a PDF Account, PMLIC will automatically apply the amount in such
account toward payment of the scheduled premium due on the premium due date. Any
amounts held in a PDF Account earn interest at a fixed rate which will be
declared by the Company from time to time.
If scheduled premiums are paid more often than annually, the aggregate
yearly premium will be higher. Although it is not guaranteed that Owners who pay
premiums annually and those who pay more frequently than annually will achieve
the same Cash Values, the higher premium for those who pay premiums more
frequently is intended to decrease the likelihood that the Cash Values for such
Owners will be significantly different than those of annual payors.
Since PMLIC deducts a premium processing charge of $1.00 from each premium
payment, Policies for which premiums are paid more frequently than annually will
incur higher aggregate premium processing charges than Policies with premiums
paid annually (see "Premium Processing Charge," Page 35).
23
<PAGE> 32
The following table compares annual and monthly premiums for Insureds who
are in the Non-Smoker premium class. Note that in these examples the sum of 12
monthly premiums for a particular Policy is approximately 106% of the annual
premium for the Policy.
<TABLE>
<CAPTION>
$50,000 FACE AMOUNT $100,000 FACE AMOUNT
------------------- ---------------------
MONTHLY ANNUAL MONTHLY ANNUAL
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Male, Issue Age 25.................................. 34.80 395.50 67.32 765.00
Female, Issue Age 35................................ 44.75 508.50 87.21 991.00
Male, Issue Age 45.................................. 79.64 905.00 156.90 1,783.00
Female, Issue Age 55................................ 108.81 1,236.50 215.16 2,445.00
</TABLE>
Unscheduled Premiums. The Owner may make unscheduled premium payments at
any time, subject to certain minimum and maximum limitations. The minimum
unscheduled premium payment is $25. The maximum unscheduled premium which PMLIC
will accept in any Policy Year, without prior approval, is a multiple of the
scheduled annual Base Premium, based on the Attained Age of the Insured, as
shown in the following table.
<TABLE>
<CAPTION>
MULTIPLE OF SCHEDULED
ATTAINED AGE BASE PREMIUM
- ------------ ---------------------
<S> <C>
0-59 10
60-65 8
66-70 6
71-75 5
76-80 4
81-85 3
86+ 2
</TABLE>
The Owner may plan to pay on a regular basis a premium amount in excess of the
scheduled premium. PMLIC will show this additional amount as payable on the
premium notice. However, only the required scheduled premium shown on such
notice must be paid to keep the Policy in full force.
The Cash Value of the Policy will immediately increase as of the date an
unscheduled premium payment is received. This will increase the likelihood that
the Special Premium Provision will go into effect earlier than it otherwise
would (see "Special Premium Payment Provision," Page 25). If unscheduled premium
payments are made, the Special Premium Payment Option may go into effect
slightly later for a Policy with the Increasing Death Benefit than it would for
the same Policy with the Basic Death Benefit. Of course, the Cash Value may
subsequently increase or decrease depending upon the investment experience of
the Separate Accounts to which the net unscheduled premium is allocated.
Depending upon the circumstances, the Death Benefit may or may not increase when
an unscheduled premium payment is received (see "Death Benefit," Page 21). If
the Special Premium Payment Provision has been in effect (see "Special Premium
Payment Provision," Page 25) and scheduled premiums have been skipped, then
payment of unscheduled premiums increases the total premiums paid and therefore
can increase the amount of the surrender charge (see "Contingent Deferred Sales
Charge," Page 35).
Premium Change Date. Each Policy sets forth a scheduled premium amount
payable on the Policy Date and on each subsequent premium due date until the
Premium Change Date. Each Policy also sets forth a higher premium amount payable
on and after the Premium Change Date. The Premium Change Date is the Policy
Anniversary nearest the Insured's Attained Age 70 or the 15th Policy Year, if
later. Because of the premium change feature, the scheduled premiums payable
before the Premium Change Date are lower than would otherwise be available and
PMLIC is able to provide a Guaranteed Minimum Death Benefit, as long as
scheduled premiums are paid when due.
24
<PAGE> 33
The higher premium amount specified in the Policy which is payable
beginning on the Premium Change Date is based on the following assumptions:
(1) no unscheduled premium payments are made;
(2) maximum cost of insurance charges are deducted in all Policy Years;
and
(3) the net rate of return for the chosen Separate Accounts is 4 1/2%.
Two months prior to the Premium Change Date, PMLIC will recompute the
scheduled premium amount payable on and after such date, assuming all scheduled
premiums due before the Premium Change Date are paid. If the Owner has made
unscheduled premium payments, if the cost of insurance charges deducted are less
than the maximum charges, if the chosen Separate Accounts have a net rate of
return greater than 4 1/2%, or if any appropriate combination of these factors
occurs, the amount of scheduled premiums payable on and after the Premium Change
Date will usually be less than the premium amount payable on and after such date
as shown in the Policy; in no event will the premium be greater than that shown
in the Policy. If unscheduled premium payments are made, for a Policy with the
Increasing Death Benefit, the premium payable on and after the Premium Change
Date may be slightly higher than it would be for the same Policy with the Basic
Death Benefit.
The illustrations in Appendix A show how the premium amount payable on and
after the Premium Change Date compares with the premium amount payable before
such date for Policies issued to persons of different ages and for different
investment experience assumptions.
Tax Consequences. The amount and frequency of premium payments may affect
the tax consequences of distributions from a Policy (See "Tax Treatment of
Policy Benefits," Page 40).
Special Premium Payment Provision. If the "Special Premium Payment
Provision" is in effect, the Owner will not be required to pay scheduled
premiums to keep the Policy in full force. Generally, this provision will take
effect when the Cash Value exceeds a particular amount as described in more
detail below.
The Special Premium Payment Provision operates on an annual basis. PMLIC
will notify the Owner if this provision goes into effect and each year that it
stays in effect. To determine whether this provision will take effect for a
Policy Year, PMLIC will calculate whether the Cash Value on the Policy
Processing Day 2 months before each Policy Anniversary, plus any scheduled but
unpaid premiums due before the Policy Anniversary, exceeds an amount called the
Special Premium Payment Single Premium. This is an amount which if paid as one
sum, and given certain assumptions, which are described in the following
paragraph, would be sufficient to purchase a single premium life insurance
policy at the Insured's Attained Age with a face amount equal to the Policy's
Face Amount. If the Cash Value exceeds this amount and if the required scheduled
premiums due before the Policy Anniversary are paid, then the Special Premium
Payment Provision goes into effect on that Policy Anniversary and remains in
effect for one year. The Policy will remain in force for that year, regardless
of whether the Owner makes premium payments or the Cash Value remains greater
than the Special Premium Payment Single Premium (the "SPPSP"). If any premium
payments are paid while the Special Premium Payment Provision is in effect, they
will be considered unscheduled premium payments. Therefore, any premiums for
supplemental benefits and extra-premium class will not be deducted from such
premium payments. Instead, while the Special Premium Payment Provision is in
effect, a portion of the premiums for supplemental benefits and extra-premium
class will be deducted from the Cash Value at the premium frequency in effect
(see "Supplementary Benefit Charge," Page 37).
The assumptions on which the SPPSP is based are:
(1) Current cost of insurance rates;
(2) Expense charges described herein;
(3) A Death Benefit equal to the applicable Guaranteed Minimum Death
Benefit for the Policy;
25
<PAGE> 34
(4) An amount sufficient to cover the cost of any supplementary
benefits and extra-premium class; and
(5) An assumed interest rate.
The assumed interest rate is 7.5% if the Special Premium Payment Provision
was not in effect for the prior Policy Year, and is 9% if the provision was in
effect for the prior Policy Year. Since the 7.5% assumed interest rate results
in a higher Special Premium Payment Single Premium than when the 9% assumed
interest rate is used, it is possible for the provision to stay in effect when
the factors affecting Cash Value are less favorable than necessary initially to
trigger the provision.
Since the effectiveness of the Special Premium Payment Provision depends on
the amount of Cash Value, it depends upon all the factors that affect Cash
Value, such as the investment experience, the amount and frequency of
unscheduled premium payments, and the level of actual cost of insurance and
other charges. Greater investment performance, payment of unscheduled premiums,
and lower cost of insurance and other charges will each tend to increase the
likelihood that the provision will go into effect. The provision also depends on
the relationship between the Cash Value and the SPPSP, and the SPPSP increases
with the Insured's Attained Age. Therefore, for older Insureds the Cash Value
must be correspondingly higher to trigger this provision.
The time that the Special Premium Payment Provision goes into effect may
also depend upon whether the Policy has the Basic or Increasing Death Benefit
Option. Assuming that unscheduled premium payments have been made, for a Policy
with the Increasing Death Benefit, the Cash Value may be slightly lower and the
SPPSP higher than for the same Policy with the Basic Death Benefit. Therefore,
where unscheduled premium payments have been made, the Special Premium Payment
Provision may go into effect later for a Policy with the Increasing Death
Benefit than it would for the same Policy with the Basic Death Benefit.
For Policies issued to residents of New York State, the determination of
whether the Special Premium Payment Provision will take effect is based on
whether the Cash Value exceeds the greater of the SPPSP and the Special Premium
Payment Tabular Value (the SPPTV).
For a Policy with the Basic Death Benefit, the SPPTV is calculated like the
Cash Value of the Policy except that it is based on the following assumptions:
(1) Guaranteed (maximum) cost of insurance rates;
(2) Expense charges described herein;
(3) A net investment return of 4 1/2%;
(4) Payment of all scheduled premiums when due; and
(5) No unscheduled premium payments or policy loans.
Because these assumptions are more conservative than the assumptions used to
calculate the SPPSP, for New York Policies it is somewhat less likely, under
certain circumstances, that the Special Premium Payment Provision will go into
effect as early as it will for other Policies and New York Policies may require
a higher net rate of return in order for the Special Premium Payment Provision
to remain in effect for a subsequent year.
The examples shown below illustrate when the Special Premium Payment
Provision would first go into effect in certain representative situations. The
examples are for a Policy with a $100,000 Face Amount with a Non-Smoker premium
class, under which premiums are paid annually, with no policy loans taken or
cash withdrawals made, and current cost of insurance rates and expense charges
stated in the Policy. When the Special Premium Payment Provision goes into
effect it remains in effect for one year, until the following Policy
Anniversary. For each Policy Year thereafter, a recalculation is made to
determine if the Special Premium Payment Provision remains in effect for that
year. Since no unscheduled premiums are paid in these examples, they apply to a
Policy with either the Basic Death Benefit or the Increasing Death Benefit.
26
<PAGE> 35
Example A: A male Insured, age 25 at issue, where only the annual
scheduled premium payments of $765.00 are made (this Policy is illustrated more
completely in Appendix A, at page A-3). With a 6% investment return the earliest
the Special Premium Payment Provision would go into effect is Policy Year 20;
with a 12% investment return, the earliest the provision would go into effect is
Policy Year 12.
Example B: A female Insured, age 55 at issue, where only the annual
scheduled premiums of $2,445.00 are paid (this Policy is illustrated more
completely in Appendix A, page A-6). With a 6% investment return the earliest
the Special Premium Payment Provision would go into effect is Policy Year 22;
with a 12% investment return, the earliest it goes into effect is Policy Year
12.
Since the Special Premium Payment Provision depends largely on the Cash
Value, and since making unscheduled premium payments increases the Cash Value,
making one or more unscheduled premium payments would bring the Special Premium
Payment Provision into effect sooner than shown in the above examples. Under
Example A (male Insured, age 25), if a single unscheduled premium of $3,000 is
paid when the Policy with the Basic Death Benefit is purchased, and thereafter
only the annual scheduled premiums are paid, then with a 6% investment return
the Special Premium Payment Provision would first go into effect for Policy Year
8 (instead of Policy Year 20); with a 12% investment return, the Provision would
first go into effect for Policy Year 6 (instead of Policy Year 12). Similarly,
under Example B (female Insured, age 55), if a single unscheduled premium of
$8,600 is paid when the Policy with the Basic Death Benefit is purchased and
thereafter only the annual scheduled premiums are paid, then with a 6% return
the Special Premium Payment Provision would first go into effect for Policy Year
10 (instead of 22); with a 12% return the provision would first go into effect
for Policy Year 7 (instead of 12).
Assuming unscheduled premium payments are made, if the Policy has the
Increasing Death Benefit, then the Special Premium Payment Provision may go into
effect slightly later than it would for the same Policy with the Basic Death
Benefit. Using Example A, for a Policy with the Increasing Death Benefit, where
a single unscheduled premium of $3,000 is paid when the Policy is purchased with
annual scheduled premiums only paid thereafter, with a 6% investment return the
Special Premium Payment Provision would first go into effect for Policy Year 9
(instead of Policy Year 8); with a 12% return, the provision would first go into
effect for Policy Year 6 (the same Policy Year). Using Example B, for a Policy
with the Increasing Death Benefit, where a single unscheduled premium of $8,600
is paid when the Policy is purchased with annual scheduled premiums only paid
thereafter, with a 6% return the Special Premium Payment Provision would first
go into effect for Policy Year 12 (instead of 10); with a 12% return, the
provision would first go into effect for Policy Year 7 (the same Policy Year).
Under either Death Benefit Option, if several unscheduled premiums are
paid, (as opposed to one larger unscheduled premium as illustrated in the prior
examples) then the Special Premium Payment Provision may also go into effect
sooner than with the payment of scheduled premiums only (given the assumptions
stated above). Under Example A (male Insured, age 25), if, in addition to the
scheduled premiums, unscheduled premium payments of $700 each are made at the
beginning of each of the first 5 Policy Years, then for a Policy with the Basic
Death Benefit, with a 6% return the provision would first go into effect for
Policy Year 8; with a 12% return, the provision would first go into effect for
Policy Year 6. Under Example B (female Insured, age 55), if, in addition to the
scheduled premiums, unscheduled premium payments of $2,550 each are made at the
beginning of each of the first 5 Policy Years, then for a Policy with Basic
Death Benefit, with a 6% return the provision would first go into effect for
Policy Year 7; with a 12% return the provision would first go into effect for
Policy Year 6.
These examples are based on current cost of insurance rates. If guaranteed
(maximum) rates are used, the Special Premium Payment Provision may go into
effect under either Death Benefit Option in a later Policy Year than with
current rates. Under Example A (male Insured, age 25), with the Basic Death
Benefit Option, using guaranteed cost of insurance rates, the provision would
first go into effect for Policy Year 22 (instead of 20 using current rates) if
there is a 6% return and for Policy Year 12 (same as with current rates) if
there is a 12% return; for Example B (female Insured, age 55), with the Basic
Death Benefit Option, using guaranteed cost of insurance rates, the provision
would first go into effect for Policy Year 34 (instead of 22) if there is a 6%
return and for Policy Year 14 (instead of 12) if there is a 12% return (Appendix
A includes an illustration
27
<PAGE> 36
of each of these examples using both current and guaranteed (maximum) cost of
insurance rates, see pages A-3 and A-7 and A-6 and A-10, respectively).
Automatic Premium Loan. The Owner may elect the Automatic Premium Loan
(APL) provision in the Application for the Policy or by written request after
the Policy is issued. The APL provision will be operative only when premiums are
payable other than monthly. If the APL provision is operative, any scheduled
premium which has not been paid by the end of the Grace Period will be paid by a
policy loan within 7 days after the end of such Grace Period, provided the
Policy has sufficient loan value and the Special Premium Payment Provision is
not in effect.
Allocation of Net Premiums. In the Application for the Policy, the
Applicant elects to have net scheduled premiums (scheduled Base Premiums less
7 1/2% for sales charge and state premium tax charge, see "Premium Expense
Charge," Page 35) allocated to the Growth Account, the Money Market Account, the
Bond Account, the Managed Account, the Aggressive Growth Account, the
International Account, the Zero Coupon Bond Sub Account, Subaccounts of the
Variable Accounts or any combination of them. No less than 5% of a Net Premium
may be allocated to any chosen Account or Sub Account. The allocation
percentages for the chosen Accounts must be in whole numbers. This initial
allocation will remain in effect until changed by written notification to PMLIC.
The allocation percentages in effect for net scheduled premiums will also
apply to net unscheduled premium payments (unscheduled premium payment less
Premium Expense Charges, see "Premium Expense Charge," Page 35) unless PMLIC is
notified that a different allocation is to be used for that particular
unscheduled premium. PMLIC must be notified with each unscheduled premium
payment of the allocation or the percentages for scheduled premiums will be
used.
PMLIC will allocate the first Net Premium to the Separate Accounts on the
later of the Issue Date of the Policy or the date PMLIC receives the payment at
its Home Office. PMLIC will allocate subsequent Net Premiums to the Separate
Accounts as of the date it receives the payment at its Home Office. For premiums
paid under the Automatic Payment Plan (pre-authorized check or Electronic Funds
Transfer), such will be allocated to the Separate Accounts on the date PMLIC
receives credit for the funds.
Transfers Between Separate Accounts or Subaccounts. The Owner may
redistribute the amounts between and among in the Separate Accounts and the
Subaccounts of the Variable Account up to 4 times in each Policy Year. The
redistribution will be without charge and will be effective as of the date of
receipt of the transfer request by PMLIC's Home Office. PMLIC requires the
amount transferred to be at least $100 (or the entire balance if smaller). If a
transfer would leave less than $100 in the Separate Account (or Subaccount),
PMLIC reserves the right to transfer the entire balance. Transfers between and
among the Separate Accounts (and/or Subaccounts) are made as of the Valuation
Day that the request for transfer is received at the Home Office.
Telephone Transfers. Transfers will be made based upon instructions given
by telephone, provided the appropriate election has been made at the time of
application or proper authorization is provided to PMLIC. PMLIC reserves the
right to suspend telephone transfer privileges at any time, for any class of
policies, for any reason.
PMLIC will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it follows such procedures it will
not be liable for any losses due to unauthorized or fraudulent instructions.
PMLIC, however, may be liable for such losses if it does not follow those
reasonable procedures. The procedures PMLIC will follow for telephone transfers
include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction and making a tape-recording of the instructions given by telephone.
Automatic Asset Rebalancing. Automatic asset rebalancing is a feature
which, if elected, authorizes periodic transfers of policy values among the
separate accounts or subaccounts in order to maintain the allocation of such
values in percentages that match the then current premium allocation
percentages. Election of this feature may occur at the time of application or at
any time after the policy is issued by properly completing the election form and
returning it to PMLIC. The election may be revoked at any time.
28
<PAGE> 37
Rebalancing may be done annually. Rebalancing will not occur when the total
value in the separate accounts or subaccounts is less than $1,000. PMLIC
reserves the right to suspend automatic asset rebalancing at any time, for any
class of policies, for any reason.
Grace Period for Payment of Scheduled Premiums. A Grace Period of 61 days
from the due date is allowed for payment of scheduled premiums after the first
scheduled premium. If scheduled premiums are paid on or before their due dates
or within the Grace Period, the Policy will remain in full force even if the
investment experience of the Separate Accounts designated by the Owner has been
so unfavorable that the Cash Value has no value. When the Special Premium
Payment Provision is not in effect and the Automatic Premium Loan provision is
not operative, the failure to pay a scheduled premium by the expiration of the
Grace Period will cause the Policy to lapse as of the date the unpaid premium
was due. If the Policy lapses, the Owner can surrender the Policy for its Net
Cash Surrender Value (see "Surrender of the Policy," Page 33), apply for
reinstatement (see "Reinstatement," below) or continue the insurance as Extended
Term Insurance or Reduced Paid Up Insurance (see "Options on Lapse," below).
Reinstatement. The Policy may be reinstated within three years from the
date the unpaid premium was due if it was not surrendered and the Owner provides
evidence of insurability. Payment of a premium will be required equal to the
greater of:
(a) all unpaid scheduled premiums with interest at 6% per year
compounded annually, plus any policy loan and accrued interest as of the
end of the Grace Period; or
(b) 110% of the increase in the cash surrender value resulting from
reinstatement plus all overdue premiums for supplementary insurance
benefits with interest at 6% compounded annually.
Upon reinstatement the Policy will have the same Cash Value and Death Benefit as
if it had not lapsed. The date of reinstatement will be the date PMLIC approves
the application for reinstatement.
Options on Lapse.
Extended Term Insurance (ETI). The Net Cash Surrender Value as of the date
this Option is applied, plus monthly deductions made on any Policy Processing
Day on or after the date of lapse, will be used as a single premium to buy
fixed-benefit Extended Term Insurance for the Insured. The amount of insurance
will equal the Death Benefit on the date of lapse minus any loan and accrued
interest as of that date. The term period will be that which the single premium
will provide for the Insured's Attained Age and sex. ETI has a Cash Value but no
loan value. ETI will not be available if the premium class is Non-Smoker with
Extra-Premium or Extra-Premium or the amount of paid up insurance would be
greater than the amount of the ETI.
Reduced Paid Up Insurance (RPU). The Net Cash Surrender Value as of the
date the Option is applied, plus monthly deductions made on any Policy
Processing Day on or after the date of lapse, will be used as a single premium
to buy that amount of fixed-benefit insurance which will continue for the
Insured's lifetime based on the Insured's Attained Age and sex. Reduced Paid Up
Insurance has a loan privilege the same as that available for premium paying
policies.
PMLIC will apply ETI automatically unless it is not available or the Owner
selects another Option. If ETI is not available, RPU will be automatic. A
selected Option will be applied on the date PMLIC receives written request at
its Home Office; PMLIC will apply an automatic Option three months after the
date of lapse. The Option will be effective as of the date of lapse.
BACKDATING OF POLICY
PMLIC will allow a Policy to be "back-dated" but only to a Policy Date not
more than six months prior to the date of the Application for the Policy. It may
be advantageous to have a Policy back-dated if the Insured's lower insurance age
will result in lower scheduled premiums. In order to back-date a Policy, PMLIC
will require that all scheduled premiums be paid from the Policy Date. When a
back-dated Policy is issued, the initial Net Premiums are allocated to the
Separate Accounts on the later of the Issue Date or the date the
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<PAGE> 38
premium is received. At that time all monthly deductions for the period from the
Policy Date to the Issue Date will be deducted from the Cash Value of the
Separate Accounts to which the Net Premium is allocated.
FREE-LOOK PROVISION
The Owner has a limited right to cancel and return the Policy to PMLIC. The
Owner may examine the Policy and at any time within: 10 days after receipt of
the Policy; 45 days after completion of Part I of the Application for the
Policy; or 10 days after the mailing of the Notice of Withdrawal Right,
whichever is later, may return it to PMLIC, or to an agent of PMLIC, with a
written request for cancellation. Immediately upon mailing or delivery of the
Policy to PMLIC (or to an agent of PMLIC), it shall be deemed void from the
beginning.
The Owner will receive a refund equal to either the total Cash Value of the
Separate Accounts on the date PMLIC receives the returned Policy, plus: (1) any
Premium Expense Charges which were deducted from premiums; (2) monthly
deductions made on any Policy Processing Day; and (3) amounts reflecting daily
charges against the Separate Accounts and fees and expenses for the Fund or,
where required by state law, the amount of the premiums paid. The Policy will
specify which refund amount is applicable.
EXCHANGE PRIVILEGE
Within 24 months after the Issue Date shown in the Policy or within 6
months after the effective date of a material change in the investment policy of
any chosen Separate Account or Sub Account, the Owner may exchange the Policy
for a fixed-benefit whole life insurance policy offered by PMLIC on the life of
the Insured.
No evidence of insurability is required to exercise this privilege. The new
policy will have a face amount equal to the Face Amount of the Policy and the
same issue age, issue date and premium class for the Insured as the Policy.
Premiums for the new policy will be based on the rates which were in effect for
the new policy on the Policy Date for the Policy.
The exchange will be subject to an equitable adjustment to reflect
variances, if any, in the Cash Values and dividends of the Policy and the new
policy. The method of calculating the adjustment is filed by PMLIC with the
appropriate state insurance regulatory authorities. Any policy loan and loan
interest must be repaid on or before the effective date of the exchange.
LOAN PRIVILEGE
The Owner may borrow from PMLIC using the Policy as sole security for the
loan. The Owner may borrow up to the difference between the Policy's current
loan value and any outstanding policy loan and accrued interest. The minimum
amount of any policy loan is $300 ($200 for Policies issued to residents of
Connecticut), unless used to pay a scheduled premium. During Policy Years 1
through 3, the loan value of the Policy will be 75% of the cash surrender value;
during Policy Year 4 and thereafter it will be 90% of the cash surrender value.
(90% in all years for Policies issued to residents of Virginia).
If on a Policy Anniversary the outstanding policy loan and accrued interest
exceeds the cash surrender value, the Policy will terminate 31 days after PMLIC
mails notice to the Owner and any assignee of record at their last known
addresses, unless a payment of the amount of such excess is made within that
period. In no event will the required payment exceed the amount of the accrued
loan interest plus all due and unpaid scheduled premiums.
While the Insured is living, the Owner may repay all or a portion of a loan
and accrued interest. The amount of any outstanding policy loan and accrued
interest will be deducted in determining the Net Cash Surrender Value or
Proceeds at death.
Interest Rate. The interest rate charged on policy loans will be either a
fixed annual rate of 8%, or a variable loan interest rate. The Owner must select
one of these rates in the Application for the Policy. If the fixed rate is
selected, the Owner may later change to the variable rate. Such change will be
effective as of the
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<PAGE> 39
Policy Anniversary following receipt of written notice by PMLIC at its Home
Office. The Owner is not permitted to change from the variable rate to the fixed
rate.
Interest is due at the end of each Policy Year, on the Policy Anniversary.
If not paid when due, the interest will be added to the loan and bear interest
at the applicable policy loan interest rate.
Variable Loan Interest Rate. The variable loan interest rate will be
determined by PMLIC to be effective as of the first day of each January, April,
July and October, unless the state in which this Policy is delivered requires
the determination to be made less frequently, such as yearly. The maximum
interest rate will be the greater of 5 1/2% or the Moody's Corporate Bond Yield
Average-Monthly Average Corporates as published by Moody's Investors Service,
Inc., (if this Average is no longer published, a maximum rate set by state law
or by the insurance supervisory official of the state in which the Policy is
delivered will apply), for the calendar month ending two months prior to the
date of change. If the maximum interest rate for the new period is at least
1/2% lower than the loan interest rate currently being charged, the rate for
the new period will be decreased such that it is equal to or less than the
maximum interest rate allowed for such period. If the maximum interest rate for
the new period is at least 1/2% higher than the loan interest rate currently
being charged, PMLIC may, at its discretion, increase the rate for the new
period to a rate that is no higher than the maximum interest rate allowed for
such period. Any decrease in the variable loan rate is required; any increase in
the rate is optional. PMLIC will not necessarily charge the maximum variable
loan interest rate.
Allocation of Loans and Repayments. When a loan is made, a portion of the
Cash Value equal to the amount of the loan is transferred from the Separate
Accounts (and Subaccounts) to PMLIC's General Account. Repayment of a loan will
result in a transfer back to the Separate Accounts (and Subaccounts). A loan and
any repayment will be allocated among the Separate Accounts (and Subaccounts)
based upon the net Cash Value of each Separate Account (and Subaccounts) as of
the date the loan or the repayment is made.
Effect of Loan. A loan taken from, or secured by, a Policy may, in certain
circumstances, have Federal income tax consequences (see "Federal Income Tax
Considerations," Page 38).
The amount maintained in the General Account will not reflect the
investment experience of the Separate Accounts (or Subaccounts) during the
period the loan is outstanding. Instead, interest will be credited on each
Policy Processing Day on the loaned amount at an annual rate 1.50% below the 8%
or variable interest rate charged on the policy loan.
A loan, whether or not repaid, will have a permanent effect on the Cash
Value of the Policy and any Death Benefit in excess of the guaranteed minimum.
The effect could be favorable or unfavorable. This is because the investment
experience of the Separate Accounts (or Subaccounts) will only apply to the
amount remaining in the Separate Accounts (or Subaccounts) and not to the amount
transferred to the General Account. If the investment experience of the Separate
Accounts (or Subaccounts) is better than the amount being credited on loaned
amounts, the Cash Value and hence Death Benefit in excess of the guaranteed
minimum, will not increase as rapidly as they would have if no loan had been
made. However, if the investment experience of the Separate Accounts (or
Subaccounts) is not as good as the rate being credited on loaned amounts, the
Cash Value and excess Death Benefit will be higher than they would have been if
no loan had been made. The longer a loan is outstanding, the greater the effect
is likely to be.
For a male Insured, age 45 (illustrated in Appendix A at Page A-5),
assuming current cost of insurance charges, consider the following example. A
loan of $2,000 with interest payable at the fixed 8% loan interest rate is made
at the end of Policy Year 10 and repaid at the end of Policy Year 12. Loan
interest is paid when due. Upon repayment the Cash Value will be $28,025. This
amount will be less than the amount shown in the illustration for the end of
Policy Year 12 ($28,210) because the loan amount is credited with a 6 1/2% rate
of return (8% loan interest rate minus 1 1/2%) rather than the 12% gross
investment return illustrated.
Lapse With Loans Outstanding. The amount of an outstanding loan under a
Policy plus any accrued interest on outstanding loans is not part of Net Cash
Surrender Value. Therefore, the larger the amount of an outstanding loan, the
more likely it is that the Policy could lapse. In addition, if the Policy is not
a Modified
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<PAGE> 40
Endowment Policy, lapse of the Policy with outstanding loans may result in
adverse tax consequences. (See "Tax Treatment of Policy Benefits," Page 40.)
WITHDRAWAL OF EXCESS CASH VALUE
The Owner may withdraw excess Cash Value from the Policy if two conditions
are met. First, a cash withdrawal may be made only to the extent that the cash
surrender value (the Cash Value minus any applicable surrender charge) is at
least $300 more than an amount called the "Withdrawal Single Premium" (See
"Calculation of Withdrawal Single Premium," below), which depends on the
Insured's Attained Age. Second, a cash withdrawal may be made only if the amount
withdrawn does not reduce the Policy's net loan value (loan value less existing
policy loan and accrued interest) to zero. (See "Loan Privilege," Page 30.) Upon
request, PMLIC will tell the Owner how much may be withdrawn.
No more than four withdrawals may be made in a Policy Year. A withdrawal
cannot be made for less than $300. Withdrawals cannot be repaid except as
premium payments, subject to Premium Expense Charges (see "Premium Expense
Charge," Page 35), and any applicable limits on premium payments (see "Payment
and Allocation of Premiums," Page 22). If the Owner does not specify an
allocation for the withdrawal, it will be allocated among the Separate Accounts
(or any Subaccount) based upon the net Cash Value of each Separate Account on
the date of the withdrawal.
Calculation of Withdrawal Single Premium. The Withdrawal Single Premium is
based on:
(1) Current cost of insurance rates;
(2) Expense charges described herein;
(3) A Death Benefit equal to the applicable Guaranteed Minimum Death
Benefit for the Policy;
(4) An interest rate of 7 1/2%; and
(5) An amount sufficient to cover the cost of additional premiums for
supplementary benefits and extra-premium class.
The Withdrawal Single Premium is the same as the Special Premium Payment
Single Premium ("SPPSP") using the 7.5% assumed rate (examples of the 7.5% SPPSP
are listed in Examples A and B on page 24), which is used to calculate whether
the Special Premium Payment Provision goes into effect (see discussion beginning
at page 23). Generally a withdrawal of excess cash cannot be made unless the
Special Premium Payment Provision is in effect. There may be limited situations,
however, where a cash withdrawal can be made although the Special Premium
Payment Provision is not in effect, because the cash surrender value may have
increased since the SPPSP was last calculated. In addition, the Special Premium
Payment Provision may be in effect during periods when cash withdrawals may not
be made, for several reasons including: (1) the withdrawal provision depends on
whether the cash surrender value exceeds the Withdrawal Single Premium, whereas
the Special Premium Payment Provision depends on whether a larger amount, the
Cash Value, exceeds the SPPSP; (2) the withdrawal provision is based on the 7.5%
SPPSP, whereas a smaller amount, the 9% SPPSP, is used to determine if the
Special Premium Payment Provision will remain in effect for another year once it
is in effect; and (3) since the minimum cash withdrawal is $300, cash
withdrawals are permitted only if the cash surrender value is at least $300
greater than the Withdrawal Single Premium.
For Policies issued to residents of New York State, the amount that may be
withdrawn is based on whether the cash surrender value is at least $300 more
than the greater of the Withdrawal Single Premium and the Withdrawal Tabular
Value.
For a Policy with the Basic Death Benefit, the Withdrawal Tabular Value is
calculated like the Cash Value of the Policy except that it is based on the
following assumptions:
(1) Guaranteed (maximum) cost of insurance rates;
(2) Expense charges described herein;
(3) A net investment return of 4 1/2%;
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<PAGE> 41
(4) Payment of all scheduled premiums when due; and
(5) No unscheduled premium payments or policy loans.
Because these assumptions are more conservative than the calculations used to
calculate the Withdrawal Single Premium, for New York Policies, it is somewhat
less likely under certain circumstances that there can be a Withdrawal of Excess
Cash Value.
Effect of Withdrawal. Whenever a withdrawal is made, the Death Benefit
will immediately be recalculated to take into account the reduction in Cash
Value (see "Death Benefit," Page 21). This will not change the Guaranteed
Minimum Death Benefit or the amount of scheduled premiums payable before the
Premium Change Date. The amount of scheduled premiums after the Premium Change
Date may be affected by withdrawals but in no event will they be greater than
the amount set forth in the Policy. (See "Premium Change Date," Page 24.) A
withdrawal may, under certain circumstances, have Federal income tax
consequences. (See "Federal Income Tax Considerations," Page 38.)
SURRENDER OF THE POLICY
The Policy may be surrendered at any time while the Insured is living for
its Net Cash Surrender Value. The Net Cash Surrender Value is the net Cash Value
(Cash Value minus any policy loan and accrued interest) less any surrender
charge. (See "Surrender Charge," Page 35). PMLIC will determine the Net Cash
Surrender Value on the date it receives at its Home Office a surrender request
signed by the Owner. Coverage under the Policy will end on the day the Owner
mails or otherwise sends the surrender request to PMLIC.
ACCELERATED DEATH BENEFIT
Applicants residing in states that have approved the Accelerated Death
Benefit Rider (the "ADBR") may elect to add it to their Policy at issue, subject
to PMLIC receiving satisfactory additional evidence of insurability. The ADBR is
not yet available in all states and the terms under which it is available may
vary from state-to-state. There is no assurance that the ADBR will be approved
in all states or that it will be approved under the terms described herein.
The ADBR permits the Owner to receive, at his or her request and upon
approval by PMLIC, an accelerated payment of part of the Policy's Death Benefit
when one of the following two events occurs:
1. Terminal Illness. The Insured develops a non-correctable medical
condition which is expected to result in his or her death within 12
months; or
2. Permanent Confinement to a Nursing Care Facility. The Insured has been
confined to a Nursing Care Facility for 180 days and is expected to
remain in such a facility for the remainder of his or her life.
There is no charge for adding the ADBR to a Policy. However, an
administrative charge, currently $100 and not to exceed $250, will be deducted
from the accelerated death benefit at the time it is paid.
Tax Consequences of The Rider. The Federal income tax consequences
associated with adding the ADBR or receiving the accelerated death benefit are
uncertain. Accordingly, we urge you to consult a tax adviser before adding the
ADBR to your Policy or requesting an accelerated death benefit.
Amount of the Accelerated Death Benefit. The ADBR provides for a minimum
accelerated death benefit payment of $10,000 and a maximum benefit payment equal
to 75% of the Eligible Death Benefit less 25% of any outstanding policy loans
and accrued interest. The ADBR also restricts the total of the accelerated death
benefits paid from all life insurance policies issued to an Owner by PMLIC and
its subsidiaries to
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<PAGE> 42
$250,000. This $250,000 maximum may be increased, as provided in the ADBR, to
reflect inflation. The term Eligible Death Benefit under the ADBR means:
The Insurance Proceeds payable under a Policy if the Insured died at the
time a claim for an accelerated death benefit is approved by PMLIC, minus:
1. any dividend accumulations;
2. any dividends due and not paid;
3. any dividend payable at death if the Insured died at such time;
4. any Premium Refund payable at death if the Insured died at such
time; and
5. any insurance payable under the terms of any other rider attached
to a Policy.
An Owner may request only one accelerated death benefit payment (except to
pay premiums and policy loan interest) and there are no restrictions on the
Owner's use of the benefit. An Owner may elect to receive the accelerated death
benefit payment in a lump sum or in 12 or 24 equal monthly installments. If
installments are elected and the Insured dies before all of the payments have
been made, the present value (at the time of the Insured's death) of the
remaining payments and the remaining Insurance Proceeds at Death under the
Policy will be paid to the Beneficiary in a lump sum.
Conditions for Receipt of the Accelerated Death Benefit. In order to
receive an accelerated death benefit payment, a Policy must be in force other
than as Extended Term Insurance and an Owner must submit Due Proof of
Eligibility and a completed claim form to PMLIC at its Home Office. Due Proof of
Eligibility means a written certification (described more fully in the ADBR), in
a form acceptable to PMLIC, from a treating physician stating that the Insured
has a Terminal Illness or is expected to be permanently confined in a Nursing
Care Facility.
PMLIC may request additional medical information from an Owner's physician
and/or may require an independent physical examination (at its expense) before
approving the claim for payment of the accelerated death benefit. PMLIC will not
approve a claim for an accelerated death benefit payment if a Policy is assigned
in whole or in part, if the Terminal Illness or Permanent Confinement is the
result of intentionally self-inflicted injury or if the Owner is required to
elect it in order to meet the claims of creditors or to obtain a government
benefit.
Operation of the Rider. The ADBR provides that the accelerated death
benefit be made in the form of a policy loan up to the amount of the maximum
loan available under a Policy at the time the claim is approved. Therefore, a
request for an accelerated death benefit payment in an amount less than or equal
to the maximum loan available at that time will result in a policy loan being
made in the amount of the requested benefit. This policy loan operates as would
any loan under the Policy.
To the extent that the amount of a requested accelerated death benefit
payment exceeds the maximum available loan amount, the benefit will be advanced
to the Owner and a lien will be placed on the Death Benefit payable under the
Policy (the "death benefit lien") in the amount of this advance. Under the ADBR,
interest will accrue daily, at a rate determined as described in the ADBR, on
the amount of this advance and upon the death of the Insured the amount of the
advance and accrued interest thereon is subtracted from the amount of Insurance
Proceeds at Death.
Effect on Existing Policy. The Insurance Proceeds at Death otherwise
payable under a Policy at the time of an Insured's death will be reduced by the
amount of any death benefit lien and accrued interest thereon. If the Owner
makes a request for a surrender, a policy loan or a withdrawal, the Policy's Net
Cash Surrender Value and Loan Value will be reduced by the amount of any
outstanding death benefit lien plus accrued interest. Therefore, depending upon
the size of the death benefit lien, this may result in the Net Cash Surrender
Value and the Loan Value being reduced to zero.
Premiums and policy loan interest must be paid when due. However, if
requested with the accelerated death benefit claim, future premiums and policy
loan interest may be paid through additional accelerated death benefits.
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<PAGE> 43
In addition to lapse under the applicable provisions of the Policy, a
Policy will also terminate on any Policy Anniversary when the death benefit lien
exceeds the Insurance Proceeds at Death.
The foregoing description of Policy provisions is qualified by reference to
a specimen of the Policy which has been filed with the SEC as an exhibit to the
Registration Statement. General Provisions of the Policy, including Settlement
Options, are discussed under "Other Policy Provisions," Page 43.
CHARGES AND EXPENSES
PREMIUM EXPENSE CHARGE
The amounts allocated to the Separate Accounts selected by the Owner are
Net Premiums. A net scheduled premium is a scheduled Base Premium (total
scheduled premium minus the premium processing charge and premiums for any
supplementary benefits and for extra-premium class) less the sales charge and
state premium tax charge described below. A net unscheduled premium is an
unscheduled premium payment less the Premium Expense Charge. The Premium Expense
Charge consists of the following:
Premium Processing Charge. PMLIC will deduct a charge of $1.00 from each
premium payment to cover the cost of collecting and processing premium payments.
Policies for which premiums are paid annually will therefore incur lower
aggregate premium processing charges than Policies with premiums paid more
frequently.
Sales Charge. A sales charge is deducted from each premium payment. This
sales charge is equal to 5% of each scheduled Base Premium or unscheduled
premium remaining after the premium processing charge has been deducted. This
charge is deducted to partially compensate PMLIC for the cost of selling the
Policy. These costs include agents' commissions, advertising, printing of
prospectuses and sales literature. (There also is a Contingent Deferred Sales
Charge which is deducted only if the Policy is surrendered or lapses in the
first 9 Policy Years. See "Contingent Deferred Sales Charge," Page 36.)
The amount of the sales charge in any Policy Year cannot be specifically
related to sales expenses for that year. To the extent that sales expenses are
not recovered over the life of the Policy from sales charges, PMLIC will recover
its distribution costs from sources other than the sales charge, including any
profit derived from the mortality and expense risk charge.
State and Local Premium Tax Charge. A charge is deducted from each premium
payment to compensate PMLIC for paying state premium taxes. This charge is equal
to 2 1/2% of each scheduled Base Premium or unscheduled premium remaining after
the premium processing charge has been deducted. Premium taxes vary from state
to state and the 2 1/2% rate is the average rate expected to be paid on premiums
received in most states. This charge may be increased in certain localities when
substantial additional premium taxes are assessed.
SURRENDER CHARGE
If the Policy is surrendered or lapses in the first 9 Policy Years, PMLIC
will deduct a surrender charge from the net Cash Value before paying the Net
Cash Surrender Value pursuant to a surrender request or applying it to a
Settlement Option. There is no surrender charge if the Policy is surrendered or
lapses during Policy Year 10 or thereafter. The total surrender charge consists
of the Contingent Deferred Administrative Charge and the Contingent Deferred
Sales Charge.
Contingent Deferred Administrative Charge. The Contingent Deferred
Administrative Charge is to compensate PMLIC for expenses, other than sales
expenses, incurred in connection with the issuance of the
35
<PAGE> 44
Policy. Such expenses include medical examinations; insurance underwriting costs
and costs incurred in processing applications and establishing permanent Policy
records. This charge is as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED ADMINISTRATIVE
POLICY YEAR CHARGE PER $1,000 FACE AMOUNT
- ----------- ----------------------------------
<S> <C>
1-5 $5.00
6 4.00
7 3.00
8 2.00
9 1.00
10 Zero
</TABLE>
Contingent Deferred Sales Charge. The Contingent Deferred Sales Charge is
to partially compensate PMLIC for the cost of selling the Policy.
If the Special Premium Payment Provision has never been in effect as of the
date of surrender or lapse, then the Contingent Deferred Sales Charge is a
percentage of the lesser of:
(i) the total premiums paid, less premium processing charges, to the date
of surrender or lapse; and
(ii) the scheduled Base Premiums payable up to such date (scheduled Base
Premiums are total scheduled premiums less premium processing charges
and premiums for supplementary benefits and for extra-premium class);
If the Special Premium Payment Provision has been in effect prior to the
date of surrender or lapse, then the Contingent Deferred Sales Charge is a
percentage of the lesser of:
(i) the total premiums paid, less premium processing charges, to the date
of surrender or lapse; and
(ii) the scheduled Base Premiums that would have been payable up to such
date if the Special Premium Payment Provision had never been in
effect.
The maximum Contingent Deferred Sales Charge is an amount equal to 25% of
the first year's scheduled Base Premiums, plus 5% of the scheduled Base Premiums
for Policy Years 2, 3, 4 and 5. Expressed differently, this equals 9% of the
total scheduled Base Premiums for Policy Years 1 through 5. The maximum
Contingent Deferred Sales Charge will be applied to Policies that lapse or are
surrendered during Policy Year 5. Thereafter, the Contingent Deferred Sales
Charge will be reduced each year until it becomes zero in Policy Year 10 and
thereafter.
The following table shows the rates that will apply when Policies with
premiums payable annually (and for Insureds with an Issue Age of 65 or less) are
surrendered or lapse.
<TABLE>
<CAPTION>
FOR POLICIES THE CONTINGENT DEFERRED SALES CHARGE WHICH IS EQUAL TO THE
WHICH ARE RATES WILL BE THE FOLLOWING PERCENTAGE OF
SURRENDERED FOLLOWING PERCENTAGE OF THE SCHEDULED PREMIUMS
OR LAPSE DURING ONE SCHEDULED ANNUAL UP TO THE DATE OF
POLICY YEAR PREMIUM SURRENDER OR LAPSE
- --------------- ------------------------------------ -----------------------
<S> <C> <C>
1 25% 25.00%
2 30% 15.00%
3 35% 11.66%
4 40% 10.00%
5 45% 9.00%
6 40% 6.66%
7 30% 4.28%
8 20% 2.50%
9 10% 1.11%
10 and later Zero Zero
</TABLE>
For Insureds whose Issue Age is above 65, the rates that will apply when
Policies with premiums payable annually are surrendered or lapse will be less
than or equal to those shown in the table above.
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<PAGE> 45
For Policies with premiums payable more frequently than annually, the
maximum Contingent Deferred Sales Charge is also 25% of the first year's
scheduled Base Premiums due on or before the date of surrender or lapse plus 5%
of the scheduled Base Premiums for Policy Years 2, 3, 4 and 5 which are payable
on or before the date of surrender or lapse (or the same percentages of total
premiums paid, if less). The charge declines uniformly in Policy Years 6 through
9 until it becomes zero for Policy Years 10 and thereafter. Although the rate of
the Contingent Deferred Sales Charge is the same for annual premium Policies and
Policies with premiums paid more frequently than annually, for Policies
surrendered at the end of a Policy Year, the dollar amount of this charge will
be higher for Policies with premiums paid more frequently than for annual
premium Policies because the total amount of the scheduled premiums is higher.
MONTHLY DEDUCTIONS FROM CASH VALUE OF SEPARATE ACCOUNTS
On each Policy Processing Day (the Policy Date and the same day of each
succeeding month) PMLIC will deduct the following charges from the Cash Value of
the Separate Accounts.
Cost of Insurance. PMLIC deducts a cost of insurance charge to cover
anticipated mortality costs. This charge is calculated by multiplying the net
amount at risk under a Policy (the extent by which the Death Benefit as
calculated on the Policy Processing Day, discounted at an annual rate of 5%,
exceeds the Cash Value on the Policy Processing Day), by the mortality rate for
the Insured's premium class, sex and Attained Age. If any unscheduled premium
payments are made, this charge may be slightly higher for a Policy with the
Increasing Death Benefit than for the same Policy with the Basic Death Benefit.
For Policies issued in states which require "unisex" policies (currently
Montana) or in conjunction with employee benefit plans, the cost of insurance
charge depends only on the Insured's premium class and Attained Age.
Except with respect to Policies issued in states which require "unisex"
policies, or in conjunction with employee benefit plans (see "Policies Issued in
Conjunction with Employee Benefit Plans"), the maximum mortality rates are based
on the 1980 Commissioners' Standard Ordinary Mortality Table with Smoker/Non-
Smoker modifications (1980 CSO Table). Under this Table, mortality rates
generally are lower for Non-Smokers than for comparable Insureds who use
tobacco. For Insureds under Attained Age 22 (21 in Texas) the 1980 CSO Table
without modification is used. If PMLIC determines that a lesser amount than that
called for by the 1980 CSO Table will be adequate to cover future anticipated
mortality costs, a smaller deduction may be made. Currently, PMLIC has
determined to charge less than the full cost of insurance charges specified in
the 1980 CSO Table, but reserves the rights to make full cost of insurance
charges based on the 1980 CSO Table.
Administration Charge. This is a charge to compensate PMLIC for expenses
incurred in the administration of the Policy such as processing claims, paying
Cash Values, making Policy changes, keeping records and communicating with the
Owner.
The monthly charge will be equal to $3.25 per Policy and $0.015 per $1,000
of Face Amount. Thus, for a Policy with the minimum $50,000 Face Amount, the
deduction will be $4.00 per month ($3.25 plus $0.75) or $48 per year.
Minimum Death Benefit Guarantee Charge. This charge compensates PMLIC for
the risk it assumes by guaranteeing that, no matter how unfavorable investment
experience may be, as long as required scheduled premiums are paid when due the
Death Benefit will never be less than the Face Amount of the Policy if the Basic
Death Benefit applies and the Face Amount of the Policy plus the sum of
unscheduled premiums received by PMLIC as of the date of death if the Increasing
Death Benefit applies. This charge is equal to $0.01 per $1,000 of the
applicable Guaranteed Minimum Death Benefit. For a Policy with a Guaranteed
Minimum Death Benefit of $50,000, the deduction will be $0.50 per month or $6.00
per year.
First Year Policy Charge. A charge of $5.00 will be deducted on each of
the first 12 Policy Processing Days. This charge in conjunction with the
Contingent Deferred Administrative Charge compensates PMLIC for expenses, other
than sales expenses, incurred in conjunction with issuance of the Policy.
Supplementary Benefit Charge. If the Special Premium Payment Provision is
in effect (See "Special Premium Payment Provision," Page 25) charges for any
supplementary benefits or for extra-premium class
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will be deducted on each Policy Processing Day a scheduled premium otherwise
would be due. These charges will be 92.5% of the premiums otherwise payable for
these benefits.
The total monthly deduction will be allocated among the Separate Accounts
in the same proportion as the Cash Value of each Separate Account bears to the
total Cash Value of the Policy. PMLIC will allocate the monthly deduction for
any Policy Processing Day prior to receipt of the first premium among the
Separate Accounts based on the Cash Value in the Separate Accounts on the later
of the Issue Date or the date the first premium is received.
DAILY CHARGES AGAINST THE SEPARATE ACCOUNTS
Charge for Mortality and Expense Risks. A charge is made to compensate
PMLIC for assuming mortality and expense risks. A daily deduction is made from
the assets of each of the Separate Accounts equivalent to an effective annual
rate of 0.60% (this amounts to a daily charge of approximately .001644% per day)
of the average daily net assets of each Separate Account.
The mortality risk assumed is that Insureds may live for a shorter period
of time than estimated and, therefore, greater Death Benefits than expected will
be payable in relation to the amount of premiums received. The expense risk
assumed is that expenses incurred in issuing and administering the Policies will
be greater than estimated.
If the mortality and expense risk charge proves insufficient, PMLIC will
provide for all Death Benefits and expenses and any loss will be borne by PMLIC.
Conversely, PMLIC will realize a gain from this charge to the extent all money
collected from this charge is not needed to provide for benefits and expenses
under the Policies.
Asset Charge Against Zero Coupon Bond Separate Account. PMLIC makes a
daily asset charge against the assets of the Zero Coupon Bond Separate Account.
This charge is to reimburse PMLIC for transaction charges paid directly by PMLIC
to Merrill Lynch, Pierce, Fenner & Smith on the sale of Zero Coupon Trust units
to the Separate Account. PMLIC pays these amounts from General Account assets.
The amount of the asset charge currently is equivalent to an effective annual
rate of 0.25% (.000685% per day) of the average daily net assets of each Sub
Account. This amount may be increased in the future, but in no event will it
exceed an effective annual rate of 0.50% (.001370% per day).
Charges for Income Taxes. PMLIC currently does not charge any Separate
Account for its corporate Federal income taxes. However, PMLIC may make such a
charge in the future, if there are any taxes that are attributable to that
Account. Charges for other applicable taxes attributable to the Account also may
be made. (See "Possible Charge for PMLIC's Taxes, Page 42.")
Guarantee of Certain Charges. PMLIC guarantees that it will not increase
the charges deducted from premiums, and the charge to the Separate Accounts for
mortality and expense risks.
Other Charges. The Separate Accounts purchase shares of the Funds at net
asset value. The net asset value of those shares reflects management fees and
expenses already deducted from the assets of the Funds' Portfolios. The fees and
expenses for the Funds and their Portfolios are described briefly in connection
with a general description of each Fund.
More detailed information is contained in the Funds and the Zero Coupon
Trust Prospectuses which are attached to or accompany this Prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete
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information. This discussion is based upon PMLIC's understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of continuation
of the present Federal income tax laws or of the current interpretations by the
Internal Revenue Service.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
sets forth a definition of a life insurance contract for Federal tax purposes.
For Policies entered into after October 20, 1988, the requirements with respect
to mortality (i.e., cost of insurance) and other expense charges that are to be
used in determining compliance with Section 7702 are different from the
requirements for mortality and other expense charges that apply to Policies
entered into before October 21, 1988. The Secretary of the Treasury (the
"Treasury") has issued proposed regulations that specify what will be considered
reasonable mortality charges under Section 7702 for Policies entered into after
October 20, 1988. Overall, however, guidance as to how Section 7702 is to be
applied is limited. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, such Policy would not provide the tax
advantages normally provided by a life insurance policy.
With respect to a Policy entered into before October 21, 1988, although
there are no regulations interpreting the manner in which the tests under
Section 7702 are to be applied to such a Policy, PMLIC believes that such a
Policy should meet the definition of a life insurance contract for Federal tax
purposes. However, any change to a Policy entered into before October 21, 1988,
including an exchange thereof, might cause such a Policy to be treated as
entered into after October 20, 1988, and, in such circumstances, the Policy
would be subject to the mortality and other expense charge requirements
prescribed for Policies entered into after October 20, 1988. Accordingly, the
Owner of a Policy entered into before October 21, 1988, should contact a
competent tax adviser before exchanging, or making any other change, to such
Policy to determine whether the exchange or change would cause the Policy to be
treated as entered into after October 20, 1988.
With respect to a Policy entered into after October 20, 1988 that is issued
on the basis of a standard rate class, while there is some uncertainty due to
the limited guidance under Section 7702, PMLIC nonetheless believes that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy entered into after October 20, 1988 that is issued
on a substandard basis (i.e., a premium class involving higher than standard
mortality risk), there is even less guidance, in particular as to how the new
mortality and other expense requirements are to be applied in determining
whether such a Policy meets the Section 7702 definition of a life insurance
contract. Thus, it is not clear whether or not such a Policy would satisfy
Section 7702, particularly if the Owner pays the full amount of premiums
permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section
7702, PMLIC may take whatever steps are appropriate and necessary to attempt to
cause such a Policy to comply with Section 7702. For these reasons, PMLIC
reserves the right to modify the Policy as necessary to attempt to qualify it as
a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of each of the
Separate Accounts must be "adequately diversified" in accordance with Treasury
regulations in order for the Policy to qualify as a life insurance contract
under Section 7702 of the Code (discussed above). The Separate Accounts, through
the Fund and the Zero Coupon Trust, intend to comply with the diversification
requirements prescribed in Treas. Reg. sec.1.817-5, which affect how the Fund's
and Trust's assets are to be invested. PMLIC believes that the Separate Accounts
will, thus, meet the diversification requirements, and PMLIC will monitor
continued compliance with this requirement.
In certain circumstances, owners of variable life insurance contracts may
be considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be
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considered the owner of separate account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The Treasury Department has also announced,
in connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the Policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the Owner has additional flexibility in allocating premium payments and
Policy Values and the investment objective of certain Portfolios (i.e. Van Eck
Worldwide Hard Assets Portfolio) may be narrower. These differences could result
in an Owner being treated as the owner of a pro rata portion of the assets of
the Separate Accounts. In addition, PMLIC does not know what standards will be
set forth, if any, in the regulations or rulings which the Treasury Department
has stated it expects to issue. PMLIC therefore reserves the right to modify the
Policy as necessary to attempt to prevent an Owner from being considered the
owner of a pro rata share of the assets of the Separate Accounts.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
In General. PMLIC believes that the proceeds and cash value increases of a
Policy should be treated in a manner consistent with a fixed-benefit life
insurance policy for Federal income tax purposes. Thus, the Death Benefit under
the Policy should be excludable from the gross income of the beneficiary under
Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option (i.e., a change from the Basic Death Benefit
Option to the Increasing Death Benefit Option), a change in the Policy's face
amount, a Policy loan, an unscheduled premium payment, a Policy lapse with an
outstanding loan, a withdrawal of excess cash value, a surrender, the addition
of an Accelerated Death Benefit Rider, the receipt of an Accelerated Death
Benefit, or an assignment of the Policy may have tax consequences. In addition,
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
Generally, the Owner will not be deemed to be in constructive receipt of
the Cash Value, including increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from, and loans taken from
or secured by, a Policy depend on whether the Policy is classified as a
"Modified Endowment Contract". Whether a Policy is or is not a Modified
Endowment Contract, upon a complete surrender or lapse of a Policy, or when
benefits are paid at such a Policy's maturity date, if the amount received plus
the amount of indebtedness exceeds the total investment in the Policy, the
excess will generally be treated as ordinary income subject to tax.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988. A Policy
entered into before June 21, 1988, may be treated as a Modified Endowment
Contract if a "material change" is made to such a Policy after June 20, 1988.
Due to the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven policy years exceeds the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
Death
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Benefit and Cash Value at the time of such change and the additional premiums
paid in the seven years following the material change. At the time a premium is
credited which would cause the Policy to become a Modified Endowment Contract,
PMLIC will notify the Owner that unless a refund of the excess premium is
requested by the Owner, the Policy will become a Modified Endowment Contract.
The Owner will have 30 days after receiving such notification to request the
refund. The excess premium paid (with either the 4% interest or positive
Separate Account earnings, if any) will be returned to the Owner upon receipt by
PMLIC of the refund request. The amount to be refunded will be deducted from the
Cash Value in the Separate Accounts in the same proportion as the premium
payment was allocated to the Separate Accounts. In the event that earnings on
such excess premium is not at least 4%, the premium plus an amount equal to
interest at an annual rate of 4% will be returned.
The rules relating to whether a Policy will be treated as a Modified
Endowment Contract are complex. Therefore, a current or prospective Owner should
consult with a competent advisor to determine whether a policy transaction will
cause the Policy to be treated as a Modified Endowment Contract.
Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a Policy are treated as
ordinary income subject to tax up to the amount equal to the excess (if any) of
the Cash Value immediately before the distribution over the investment in the
Policy at such time. Second, loans taken from or secured by, such a Policy are
treated as distributions from such a Policy and taxed accordingly. Past due loan
interest that is added to the loan amount is treated as a loan for this purpose.
Third, a 10 percent additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, such a Policy that is
included in income except where the distribution or loan is made on or after the
Owner attains age 59 1/2, is attributable to the Owner's becoming disabled, or
is part of a series of substantially equal periodic payments for the life (or
life expectancy) of the Owner or the joint lives (or joint life expectancies) of
the Owner and the Owner's beneficiary. If a Policy becomes a modified endowment
contract after it is issued, distributions made during the policy year in which
it becomes a modified endowment contract, distributions in any subsequent policy
year and distributions within two years before the Policy becomes a modified
endowment contract will be subject to the tax treatment described above. This
means that a distribution from a Policy that is not a modified endowment
contract could later become taxable as a distribution from a modified endowment
contract.
Distributions From Policies Not Classified as Modified Endowment
Contracts. Distributions from a Policy that is not a Modified Endowment
Contract, are generally treated as first recovering the investment in the Policy
and then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15-years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment
Contract are not treated as distributions. Instead, such loans are treated as
indebtedness of the Owner.
Finally, neither distributions (including distributions upon surrender or
lapse) nor loans from, or secured by, a Policy that is not a Modified Endowment
Contract are subject to the 10 percent additional tax.
Policy Loan Interest. Interest paid on any loan under a Policy generally
is not deductible. An Owner should consult a tax adviser to determine whether
policy loan interest is deductible.
Investment in the Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any loan (including an assignment) from,
or secured by, a Policy that is a Modified Endowment Contract, to the extent
such amount is excluded from gross income, will be disregarded), plus (iii) the
amount of any loan (including an assignment) from, or
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secured by, a Policy that is a Modified Endowment Contract to the extent that
such amount is included in the gross income of the Owner.
Multiple Policies. All Modified Endowment Contracts that are issued by
PMLIC (or its affiliates) to the same Owner during any calendar year are treated
as one Modified Endowment Contract for purposes determining the amount
includible in gross income under Section 72(e) of the Code.
Other Tax Consequences. The Policy may be used in various arrangements,
including nonqualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
advisor regarding the tax attributes of the particular arrangement.
In recent years, Congress has adopted new rules relating to life insurance
owned by businesses. Any business contemplating the purchase of a new Policy or
a change in an existing Policy should consult a tax adviser.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Policy could change by
legislation or otherwise. For instance, the President's 1999 Budget Proposal
recommended legislation that, if enacted, would adversely modify the federal
taxation of this Policy. It is possible that any legislative change could be
retroactive (that is, effective prior to the date of the change). A tax adviser
should be consulted with respect to legislative developments and their effect on
the Policy.
SPECIAL RULES FOR PENSION AND PROFIT-SHARING PLANS
If Policies are purchased by a trust forming part of a pension or
profit-sharing plan meeting the qualification requirements of Section 401(a) of
the Code, various special tax rules will apply. Because these rules are
extensive and complicated, it is not possible to describe all of them here.
Accordingly, counsel or other competent tax advisors familiar with qualified
plan matters should be consulted in connection with any such purchase.
Generally, a plan participant on whose behalf a Policy is purchased will be
treated as having annual imputed income based on a cost of insurance factor
multiplied by the net amount at risk under the Policy. This imputed income is to
be reported by the employer to the employee and the Service annually and
included in the employee's gross income. In the event of the death of a plan
participant while covered by the plan, policy proceeds paid to the participant's
beneficiary generally will not be completely excludable from the beneficiary's
gross income under Section 101(a) of the Code. Any Death Benefit in excess of
the Cash Value will be excludable. The portion of the Death Benefit equal to the
Cash Value, however, generally will be subject to Federal income tax to the
extent it exceeds the participant's "investment in the contract" as defined in
the Code, which will include the imputed income noted above. Special rules may
apply in certain circumstances (e.g., to owner-employees or participants who
have borrowed from the plan).
The Service has interpreted the plan qualification provisions of the Code
to require that non-retirement benefits, including death benefits, payable under
a qualified plan be "incidental to" retirement benefits provided by the plan.
These interpretations, which are primarily set forth in a series of Revenue
Rulings issued by the Service, should be considered in connection with any
purchase of life insurance policies to provide benefits under a qualified plan.
POSSIBLE CHARGE FOR PMLIC'S TAXES
At the present time, the Company makes no charge for any Federal, state or
local taxes (other than premium taxes) that the Company incurs which may be
attributable to the Separate Accounts or to the Policies. The Company, however,
reserves the right in the future to make a charge for any such tax or other
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economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Accounts or to the Policies.
If any tax charges are made in the future, they will be accumulated daily
and transferred from the applicable Separate Account to PMLIC's General Account.
Any investment earnings on tax charges accumulated in a Separate Account will be
retained by PMLIC.
OTHER POLICY PROVISIONS
PAYMENTS
Payment of the amount payable upon surrender of the Policy, policy loan or
withdrawal of excess Cash Value generally will be made within 7 days after
receipt of PMLIC's Home Office of a written request signed by the Owner.
For Policies sold in New York State, if the amount payable as a result of
surrender, withdrawal of excess Cash Value or a policy loan is not mailed or
delivered to the Owner within 10 working days of receipt by PMLIC of the
request, interest will be added to such amount at the rate required by New York
law.
Payment of the Proceeds at death will generally be made within 7 days after
PMLIC receives at its Home Office proof of the Insured's death and all other
documents required for such payment. Interest at the annual rate of 3% or any
higher rate declared by PMLIC or required by law is paid on the Proceeds at
death from the date of death until payment is made.
Generally, the amount of a payment will be determined as of the date of
receipt by PMLIC of all required documents. However, PMLIC may defer the
determination or payment of such amounts if the effective date for determining
such amounts falls within any period during which: (1) the disposal or valuation
of a Separate Account's assets is not reasonably practicable because the New
York Stock Exchange is closed or conditions are such that, under the SEC's rules
and regulations, trading is restricted or an emergency is deemed to exist; or
(2) the SEC by order permits postponement of such actions for the protection of
PMLIC policyholders.
THE CONTRACT
The Policy and copy of the Applications attached thereto are the entire
contract. Only statements made in the Applications can be used to void the
Policy or deny a claim. The statements are considered representations and not
warranties. Only the President or a Vice President of PMLIC can agree to change
or waive any provisions of the Policy and only in writing. As a result of
differences in applicable state laws, certain provisions of the Policy may vary
from state to state.
OWNERSHIP
The Owner is the Insured unless a different Owner is indicated in the
Application or thereafter named. While the Insured is living, the Owner is
entitled to exercise any of the rights stated in the Policy or otherwise granted
by PMLIC. If the Insured and Owner are not the same, and the Owner dies before
the Insured, these rights will vest in the estate of the Owner, unless otherwise
provided.
BENEFICIARY
The beneficiary is as designated in the Application for the Policy, unless
thereafter changed by the Owner during the Insured's lifetime by written notice
to PMLIC. Any Proceeds for which there is not a designated beneficiary surviving
at the Insured's death are payable in a single sum to the Insured's executors or
administrators.
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CHANGE OF OWNER AND BENEFICIARY
As long as the Policy is in force, the Owner or beneficiary may be changed
by written request in a form acceptable to PMLIC. The change will take effect as
of the date it is signed, whether or not the Insured is living when the request
is received by PMLIC. PMLIC will not be responsible for any payment made or
action taken before it receives the written request. A change in the Policy's
ownership may have tax consequences (See "Tax Treatment of Policy Benefits,"
Page 40).
ASSIGNMENT
The Owner may assign the Policy and all rights thereunder except the right
to change the beneficiary and to make an election under the Settlement Options.
No assignment binds PMLIC unless in writing and received by PMLIC. A payee who
is not also the Owner may not assign or encumber Policy benefits, and to the
extent permitted by applicable law, such benefits are not subject to any legal
process for the payment of any claim against the payee.
MISSTATEMENT OF AGE AND SEX
If the Insured's age or sex has been misstated in the Application, any
benefits will be such as the premiums paid would have purchased at the correct
age and sex.
SUICIDE
In the event of the Insured's suicide within two years from the Issue Date
of the Policy (except where state law requires a shorter period) PMLIC's
liability is limited to the payment to the beneficiary of a sum equal to the
premiums paid less any loan and accrued interest and any withdrawals of excess
Cash Value.
INCONTESTABILITY
The Policy will be incontestable after it has been in force during the
Insured's lifetime for two years from the Issue Date (or such other date as
required by state law). Before such time, however, PMLIC may contest the
validity of the Policy (or changes) based on material misstatements in the
initial or any subsequent application.
DIVIDENDS
The Policy is participating; however, no dividends are being paid on the
Policy at this time.
If dividends are ever declared, they will be paid under one of the
following options:
(a) Paid in cash;
(b) Used to reduce a scheduled premium payment, or
(c) Applied as an unscheduled premium payment.
The Owner must choose an option at the time the Application for the Policy
is signed. If no option is chosen, any dividend will be applied as an
unscheduled premium payment. The Owner may change the option by giving written
notice to PMLIC.
For Policies sold in New York State, if dividends are ever declared they
will be paid under one of the options above, or left to accumulate at interest
or used to buy paid-up additions, as chosen by the Owner.
SETTLEMENT OPTIONS
In lieu of a single sum payment of Policy Proceeds on death or surrender,
an election may be made to apply the Proceeds under any one of the fixed-benefit
Settlement Options provided in the Policy. The options are stated below.
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Proceeds at Interest Option. Left on deposit to accumulate with PMLIC with
interest payable at a rate of at least 3% per year.
Instalments of a Specified Amount Option. Payable in equal instalments
until Proceeds applied under the Option and interest on the unpaid balance at 3%
per year and any additional interest are exhausted.
Instalments for a Specified Period Option. Payable in the number of equal
monthly instalments set forth in the election. Payments may be increased by
additional interest which would increase the instalments certain. The guaranteed
interest rate is 3% per year.
Life Income Option. Payable in equal monthly instalments during the
payee's life. Payments will be made either with or without a guaranteed minimum
number. If there is to be a minimum number of payments, they will be for either
120 or 240 months or until the Proceeds applied under the Option are exhausted,
as elected.
Joint and Survivor Life Income. Payable in equal monthly instalments
during the joint lives of the payee and one other person and during the life of
the survivor. The minimum number of payments will be for either 120 or 240
months, as elected.
Alternate Life Income Option. Proceeds may be taken as a life income with
the amount of the payments depending on the non-participating single premium
immediate annuity rates at the time payments begin.
SUPPLEMENTARY BENEFITS
On payment of an additional premium and subject to certain age and
insurance underwriting requirements, one or more of the following supplementary
benefits, which are subject to the restrictions and limitations set forth
therein, may be included in a Policy.
Disability Waiver of Premium. Providing that in the event of the Insured's
total disability before the Policy Anniversary nearest the Insured's 60th
birthday and continuing for at least 90 days (where permitted), PMLIC will waive
all scheduled premiums after the commencement and during the continuance of such
disability. PMLIC may offer a 180 day extended waiting period for certain
Insureds who do not qualify for the normal 90 day period.
Accidental Death Benefit. Providing for an additional fixed amount of
Death Benefit in the event the Insured dies from accidental bodily injury before
the Policy Anniversary nearest the Insured's 70th birthday.
Guaranteed Purchase Option. Providing that the Owner may purchase
additional insurance on the Insured's life at specified times without evidence
of insurability and under certain other circumstances.
POLICIES ISSUED IN CONJUNCTION WITH EMPLOYEE BENEFIT PLANS
Policies may be acquired in conjunction with employee benefit plans,
including the funding of qualified pension plans meeting the requirements of
Section 401 of the Code.
The amount of scheduled premiums for Employee Benefit Series policies ("EBS
Policies") depends on the Face Amount, the Insured's age and premium class, and
the frequency of premium payments. For EBS Policies having the same Face
Amounts, scheduled premiums will be the same for male and female Insureds of a
particular age and premium class. (See "Amount of Scheduled Premiums," Page 23).
For EBS Policies, the maximum mortality rates used to determine the monthly
cost of insurance charge are based on the Commissioners' 1980 Standard Ordinary
Mortality Table B with Smoker/Non-Smoker modifications. Under this Table,
mortality rates are the same for male and female Insureds of a particular
Attained Age and premium class. (See "Cost of Insurance," Page 37).
Illustrations reflecting the premiums and charges for EBS Policies will be
provided to purchasers of such Policies.
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There is no provision for misstatement of sex in the EBS Policies. (See
"Misstatement of Age and Sex," Page 44). Also, the rates used to determine the
amount payable under a particular Settlement Option will be the same for male
and female Insureds. (See "Settlement Options," Page 44).
LEGAL DEVELOPMENTS REGARDING UNISEX ACTUARIAL TABLES
In 1983, the United States Supreme Court held in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employee's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women on the basis of sex. In that case, the Court
applied its decision only to benefits derived from contributions made on or
after August 1, 1983. Subsequent decisions of lower federal courts indicate that
in other factual circumstances the Title VII prohibition of sex-distinct
benefits may apply at an earlier date. In addition, legislative, regulatory, or
decisional authority of some states may prohibit use of sex-distinct mortality
tables under certain circumstances. The Policies offered by this Prospectus
(other than Policies issued in states which require "unisex" policies (currently
Montana) and EBS Policies (see "Policies Issued in Conjunction with Employee
Benefit Plans," Page 45)) are based upon actuarial tables which distinguish
between men and women and, thus, the Policy provides different benefits to men
and women of the same age. Accordingly, employers and employee organizations
should consider, in consultation with legal counsel, the impact of these
authorities on any employment-related insurance or benefits program before
purchasing the Policy and in determining whether an EBS Policy is appropriate.
VOTING RIGHTS
All of the assets held in the Growth, Money Market, Bond, Managed,
Aggressive Growth and International Separate Accounts and the Subaccounts of the
Variable Account will be invested in shares of corresponding portfolios of the
Funds. (The organizational documents governing the Trust do not contemplate
meetings of holders of Trust units nor any action taken by vote of such
holders.) The Funds do not hold routine annual shareholders' meetings.
Shareholders' meetings will be called whenever each Fund believes that it is
necessary to vote to elect the Board of Directors of the Fund and to vote upon
certain other matters that are required by the 1940 Act to be approved or
ratified by the shareholders of a mutual fund. PMLIC is the legal owner of Fund
shares and as such has the right to vote upon any matter that may be voted upon
at a shareholders' meeting. However, in accordance with its view of present
applicable law, PMLIC will vote the shares of the Funds at meetings of the
shareholders of the appropriate Fund or Portfolio in accordance with
instructions received from Owners. Fund shares held in each Separate Account or
Subaccount for which no timely instructions from Owners are received will be
voted by PMLIC in the same proportion as those shares in that Separate Account
or Subaccount for which instructions are received.
Each Owner having a voting interest will be sent proxy material and a form
for giving voting instructions. Owners may vote, by proxy or in person, only as
to the Portfolios that correspond to the Separate Accounts or Subaccounts in
which their Policy values are allocated. The number of shares held in each
Separate Account or Subaccount attributable to a Policy for which the Owner may
provide voting instructions will be determined by dividing the net Cash Value
attributable to that Account by the net asset value of one share of the
corresponding Portfolio as of the record date for the shareholder meeting.
Fractional shares will be counted. For each share of a Portfolio for which
Owners have no interest, PMLIC will cast votes, for or against any matter, in
the same proportion as Owners vote.
If required by state insurance officials, PMLIC may disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the investment objectives or policies of one or more of the
Portfolios, or to approve or disapprove an investment policy or investment
adviser of one or more of the Portfolios. In addition, PMLIC may disregard
voting instructions in favor of changes initiated by an Owner or the Fund's
Board of Directors provided that PMLIC's disapproval of the change is reasonable
and is based on a good faith determination that the change would be contrary to
state law or otherwise inappropriate, considering the portfolio's objectives and
purposes, and the effect the change would have on PMLIC.
46
<PAGE> 55
If PMLIC does disregard voting instructions, it will advise Policyholders
of that action and its reasons for such action in the next semi-annual report to
Owners.
At some later time, MS Fund shares may be held by separate accounts of
insurance companies not affiliated with PMLIC. PMLIC expects that those shares
will be voted in accordance with instructions of the owners of insurance
policies and contracts issued by those other insurance companies. This will
dilute the effect of voting instructions of Owners of Policies.
Shares of the Funds other than the MS Fund are currently being offered to
variable life insurance and variable annuity separate accounts of life insurance
companies other than PMLIC that are not affiliated with PMLIC. PMLIC understands
that shares of these Funds also will be voted by such other life insurance
companies in accordance with instructions from their policyowners invested in
such separate accounts. This will dilute the effect of voting instructions of
policyowners of the Policies.
CHANGES IN APPLICABLE LAW, FUNDING AND OTHERWISE
The voting rights described in this Prospectus are created under applicable
Federal securities laws. To the extent that such laws or regulations promulgated
thereunder eliminate the necessity to solicit voting instructions from Owners or
restrict such voting rights, PMLIC reserves the right to proceed in accordance
with any such laws or regulations.
PMLIC also reserves the right, subject to compliance with applicable law,
including approval of Owners if so required, (1) to transfer assets determined
by PMLIC to be associated with the class of policies to which the Policies
belong from one Separate Account to another Separate Account by withdrawing the
same percentage of each investment in the Account with appropriate adjustments
to avoid odd lots and fractions, (2) to create additional separate investment
accounts, to create divisions (or Subaccounts) from, or combine or remove
divisions (or Subaccounts) from, Separate Accounts, or to combine any two or
more accounts including the Separate Accounts, (or Subaccounts) (3) to operate
one or more of the Separate Accounts (or Subaccounts) as a management investment
company under the 1940 Act, or in any other form permitted by law, (4) to
deregister the unit investment trust under the 1940 Act, and (5) to modify the
provisions of the Policies to comply with applicable laws. PMLIC has reserved
all rights in respect of its corporate name and any part thereof, including
without limitation the right to withdraw its use and to grant its use to one or
more other separate accounts and other entities.
Although PMLIC believes it to be highly unlikely, it is possible that in
the judgment of its management, one or more of the Portfolios or series or
Subaccount of the Zero Coupon Trust may become unsuitable for investment by the
corresponding Separate Account because of a change in investment policy, or a
change in the tax laws, or because the shares or units are no longer available
for investment or for any other reasonable cause. In that event, PMLIC may seek
to substitute the shares of another portfolio or series or of an entirely
different mutual fund or trust. Before this would be done, the approval of the
SEC and possibly one or more state insurance departments would be obtained, to
the extent legally required.
OFFICERS AND DIRECTORS OF PMLIC
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND POSITION* DURING THE PAST FIVE YEARS
------------------ --------------------------
<S> <C>
Robert W. Kloss.............................. 1996 to present -- President and Chief Executive
President and Chief Executive Officer of PMLIC; 1994 to 1996 -- President and Chief
Officer Operating Officer of PMLIC; 1986 to
Director 1994 -- President and Chief Executive Officer of
Covenant Life Insurance Company.
</TABLE>
47
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND POSITION* DURING THE PAST FIVE YEARS
------------------ --------------------------
<S> <C>
Edward R. Book............................... 4/96 to present -- President of USA National Tourism
Director Organization, Inc.; 1/95 to 3/96 -- Past-President
1100 New York Avenue, N.W., Suite 450 and Consultant of Travel Industry Association of
Washington, DC 20005 America; 9/89 to 12/94 -- President of Travel
Industry Association of America.
Dorothy M. Brown............................. 1992 to present -- Acting President of the
Director Pennsylvania Academy of the Fine Arts.
16 Meredith Road
Wynnewood, PA 19096
Robert J. Casale............................. 1988 to present -- Group President/Brokerage
Director Information Services Group of Automatic Data
2 Journal Square Processing Inc.
Jersey City, NJ 07306
Nicholas DeBenedictus........................ 1993 to present -- Chairman, President and Chief
Philadelphia Suburban Corp. Executive Officer of Philadelphia Suburban
762 Lancaster Avenue Corporation; 1989 to 1992 -- Senior Vice President
Bryn Mawr, PA 19010 of Philadelphia Electric Company.
Philip C. Herr, II........................... 1961 to present -- Partner -- Herr, Potts & Herr.
Director
Herr, Potts & Herr
100 Matsonford Road
Suite 446
Radnor, PA 19087
J. Richard Jones............................. 1981 to present -- President and Chief Executive
Director Officer of Jackson-Cross Company.
100 North 20th Street
Philadelphia, PA 19103
John P. Neafsey.............................. 1993 to present -- President of JN Associates; 1990 to
Director 1993 -- President of Greenwich Capital Markets, Inc.
13 Valley Road
So. Norwalk, CT 06854
Charles L. Orr............................... 1993 to present -- President and Chief Executive
Director Officer of Shaklee Corporation; 1990 to
Shaklee Corporation 1993 -- President of Shaklee U.S., Inc.
Shaklee Terraces
444 Market Street
San Francisco, CA 94111
Donald A. Scott.............................. 1964 to present -- Senior Partner -- Morgan, Lewis and
Director Bockius.
2000 One Logan Square
Philadelphia, PA 19103
John J. F. Sherrerd.......................... 1969 to present -- Partner -- Miller, Anderson &
Director Sherrerd.
One Tower Bridge
West Conshohocken, PA 19428
</TABLE>
48
<PAGE> 57
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND POSITION* DURING THE PAST FIVE YEARS
------------------ --------------------------
<S> <C>
Harold A. Sorgenti........................... 1996 to present -- Partner -- Sorgenti Investment
Director Partners; 1991 to 1996 -- Partner -- The Freedom Group
Mellon Center, Suite 3905 Partners.
1735 Market Street
Philadelphia, PA 19103
Alan F. Hinkle............................... 1996 to present -- Executive Vice President and Chief
Executive Vice President and Actuary of PMLIC; 1974 to 1996 -- Vice President and
Chief Actuary Individual Actuary
James G. Potter, Jr.......................... 12/97 to present -- Executive Vice President, General
Executive Vice President, Counsel and Secretary of PMLIC; 6/89 to
General Counsel and Secretary 11/97 -- Chief Legal Officer, Prudential Banks.
Joan C. Tucker............................... 1996 to present -- Executive Vice President, Insurance
Executive Vice President, Operations at PMLIC; 1996 -- Senior Vice President,
Insurance Operations Insurance Operations of PMLIC; 1993 to 1996 -- Vice
President Individual Insurance Operations at PMLIC;
1989 to 1993 -- Assistant Vice President, Agency
Administration at PMLIC.
Mary Lynn Finelli............................ 1996 to present -- Executive Vice President and Chief
Executive Vice President and Financial Officer of PMLIC; 1986 to 1996 -- Vice
Chief Financial Officer President and Controller of PMLIC.
Craig L. Snyder.............................. 1979 to present -- Vice President, Mortgage Loans and
Vice President -- Real Estate of PMLIC.
Mortgage Loans and
Real Estate
Linda M. Springer............................ 1996 to present -- Vice President and Controller of
Vice President PMLIC; 1995 to 1996 -- Assistant Vice President and
and Controller Actuary of PMLIC; 1992 to 1995 -- Actuary of PMLIC.
Rosanne Gatta................................ 1994 to present -- Vice President and Treasurer of
Vice President PMLIC; 1985 to 1994 -- Assistant Vice President and
and Treasurer Treasurer of PMLIC.
1205 Westlakes Drive
Berwyn, PA 19312
</TABLE>
- ---------------
* Unless otherwise indicated, the address is 1050 Westlakes Drive, Berwyn,
Pennsylvania 19312.
A Fidelity Bond in the amount of $10 million covering PMLIC's officers and
employees has been issued by Aetna Casualty and Surety Company.
DISTRIBUTION OF POLICIES
Applications for the Policies are solicited by agents who are licensed by
state insurance authorities to sell PMLIC's variable life insurance policies,
and who are also registered representatives of 1717 Capital Management Company
("1717") or registered representatives of broker/dealers who have sales
agreements with 1717. 1717, whose address is Christiana Executive Campus, P.O.
Box 15626 Wilmington, Delaware 19850, is a registered broker/dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. 1717 is an indirect wholly-owned subsidiary of PMLIC.
1717 acts as the principal underwriter, as defined in the 1940 Act, of the
Policies (as well as other variable life policies) for the Separate Accounts
pursuant to a Distribution Agreement to which the Accounts, 1717 and PMLIC are
parties. 1717 is also the principal underwriter of variable annuity contracts
issued by PMLIC and variable life
49
<PAGE> 58
and annuity contracts issued by Providentmutual Life and Annuity Company of
America, a wholly-owned subsidiary of PMLIC. 1717 receives no compensation as
principal underwriter of the Policies.
During fiscal years 1995, 1994 and 1993 no amounts were paid by PMLIC to
1717 pursuant to the Distribution Agreement. The principal underwriter may not
be changed if such change is disapproved by PMLIC, which disapproval may not be
unreasonable. In the event that PMLIC disapproves a proposed change, the proxy
statement for the next shareholder meeting of the Fund will include a summary of
the proposed change and the reasons given by PMLIC for its disapproval. The
Policies are sold in those states where their sale is lawful.
The insurance underwriting and the determination of a proposed Insured's
premium class and whether to accept or reject an application for a Policy is
done by PMLIC. PMLIC will refund any premiums paid if a Policy ultimately is not
issued or will refund the applicable amount if the Policy is returned under the
"free-look" provision.
The agents who are both registered representatives of 1717 and career
agents of PMLIC are compensated for sales of the Policies on a commission and
service fee basis and with other forms of compensation. The maximum percent of
the first scheduled yearly premium which is payable to an agent for selling a
Policy is 50%; the maximum percent of scheduled yearly premiums is 7% for year 2
and 5% for years 3 through 10. If the Special Premium Payment Provision is in
effect, the maximum percent of an unscheduled premium payment which is payable
to the agent is 7% for such premiums received during Policy Year 2 and 5% for
those received during Policy Years 3 through 10; for unscheduled premium
payments greater than an amount equal to two years' scheduled premiums, the
maximum percent of such excess amount which is payable to the agent is 2%. If
the Special Premium Payment Provision is not in effect, the maximum percent of
an unscheduled premium payment which is payable to the agent is 2%. Agents may
also receive expense allowances.
Agents with less than three years of service with PMLIC may be paid on a
different basis. Agents who meet certain productivity and/or persistency
standards with respect to the sale of policies issued by PMLIC may be eligible
for additional compensation.
POLICY REPORTS
In each Policy Year a statement will be sent to the Owner describing the
status of the Policy, including setting forth the current Death Benefit, any
policy loans and accrued interest, the current Cash Value, scheduled and
unscheduled premiums paid since the last report, charges deducted since the last
report, and any withdrawals since the last report. In addition, a statement will
be sent to an Owner showing the status of the Policy following the transfer of
amounts from one Separate Account or Sub Account of a Separate Account to
another, the taking out of a loan, a repayment of a loan, the withdrawal of
excess Cash Value, and the payment of any unbilled premium payments (except
those paid by Automatic Payment Plan).
An Owner will be sent a semi-annual report containing the financial
statements of the Separate Accounts and the Funds and Trust as required by the
1940 Act.
PREPARING FOR YEAR 2000
Like all financial services providers, Provident Mutual Life Insurance
Company and its affiliates (collectively "Provident Mutual") utilize systems
that may be affected by Year 2000 transition issues and they rely on service
providers, including banks, custodians, administrators, and investment managers
that also may be affected. Provident Mutual have developed, and are in the
process of implementing, a Year 2000 transition plan, and are confirming that
its service providers are also so engaged. The resources that are being devoted
to this effort are substantial. It is difficult to predict with precision
whether the amount of resources ultimately devoted, or the outcome of these
efforts, will have any negative impact on Provident Mutual. However, as of the
date of this prospectus, it is not anticipated that Owners will experience
negative effects on their investment, or on the services provided in connection
therewith, as a result of Year 2000 transition implementation. Provident Mutual
currently anticipate that their systems will be Year 2000 compliant on or
50
<PAGE> 59
about January 1, 1999 but there can be no assurance that Provident Mutual will
be successful, or that interaction with other service providers will not impair
Provident Mutual's services at that time.
STATE REGULATION
PMLIC is subject to regulation and supervision by the Insurance Department
of the Commonwealth of Pennsylvania which periodically examines its affairs. It
is also subject to the insurance laws and regulations of all jurisdictions where
it is authorized to do business. A copy of the form of Policy has been filed
with, and where required approved by, insurance officials in each jurisdiction
where the Policies are sold. PMLIC 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 for the purposes of
determining solvency and compliance with local insurance laws and regulations.
LEGAL PROCEEDINGS
PMLIC and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, PMLIC believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Separate Account or PMLIC.
EXPERTS
The Financial Statements listed on Page F-1 have been included in this
Prospectus, in reliance on the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
Actuarial matters included in the Prospectus have been examined by Scott V.
Carney, FSA, MAAA, Vice President and Actuary of PMLIC.
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided
advice on legal matters relating to certain aspects of Federal securities law
applicable to the issue and sale of the Policies. Adam Scaramella, Esq., Counsel
of PMLIC, has provided advice on certain matters relating to the laws of
Pennsylvania regarding the Policies and PMLIC's issuance of the Policies.
51
<PAGE> 60
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS
Tables on Pages A-3 to A-12 illustrate the Death Benefit and cash surrender
value of the Policy and are provided to assist in the comparison of the Policy
with other variable life policies issued by PMLIC or other companies. The
illustrations show how the Death Benefit and the cash surrender value
(reflecting the deduction of the Premium Expense Charge and the Surrender
Charge, if any), may vary over an extended period of time for different issue
ages and premium classes, assuming hypothetical rates of investment return for
the Separate Accounts equivalent to constant gross annual rates of 0%, 6% and
12%. The tables on Pages A-3 to A-10 are for males and females at certain ages,
for various Face Amounts and Non-Smoker premium class. These illustrations
assume the payment of scheduled premiums only and thus are applicable for
Policies with either the Basic Death Benefit or Increasing Death Benefit.
The amounts shown are as of the end of each Policy Year. The tables on
Pages A-3 to A-6 assume that the current monthly cost of insurance rates and the
current transaction charge for the Zero Coupon Bond Separate Account will be
charged for the entire period illustrated while the tables on Pages A-7 to A-12
are based on guaranteed (maximum) cost of insurance rates and the maximum
transaction charge for the Zero Coupon Bond Separate Account. The amounts shown
in all tables reflect daily charges for mortality and expense risks equivalent
to an effective annual charge of 0.60%, and in addition, reflect an averaging of
certain other asset charges that may be assessed under the Policy, depending
upon how premiums are allocated. The total of the asset charges reflected in the
illustrations, including the 0.60% mortality and expense risk charge listed
above, is 1.39% for the illustrations on Pages A-3 to A-6 and 1.40% for the
Illustrations on Pages A-7 to A-12. The total charge is based on an assumption
that an Owner allocates the Policy values equally among the Growth, Money
Market, Bond, Managed, Aggressive Growth and International Separate Accounts and
among each Sub-Account of the Variable Separate Account and of the Zero Coupon
Bond Separate Account.
These asset charges reflect an investment advisory fee of 0.62% which
represents an average of the fees incurred by the Portfolios during the most
recent fiscal year and expenses of 0.17% which is based on an average of the
actual expenses incurred by the Portfolios during the most recent fiscal year.
For all of the Portfolios, the annual expenses used in the illustrations are net
of certain reimbursements that may or may not continue.
Currently there is an expense reimbursement agreement between PMLIC and MS
Fund pursuant to which PMLIC reimburses MS Fund expenses, excluding investment
advisory fees, in excess of 0.40% for all Portfolios except the International
Portfolio and 0.75% for the International Portfolio. There was no reimbursement
in 1997. The Fund expenses, excluding advisory fees, during 1997 were 0.11% for
the Growth Portfolio, 0.14% for the Money Market Portfolio, 0.22% for the Bond
Portfolio, 0.17% for the Managed Portfolio, 0.18% for the Aggressive Growth
Portfolio and 0.27% for the International Portfolio. It is anticipated that this
agreement will continue past the current year. If it does not continue, Fund
expenses may increase.
Absent reimbursements, the investment advisory fees and other expenses
during the most recent fiscal year for the portfolios were:
VIP Fund Equity Income Portfolio 0.58%, VIP Fund Growth Portfolio 0.69%,
VIP Fund Overseas Portfolio 0.91%, VIP Fund II Asset Manager Portfolio 0.65%,
VIP Fund II Index 500 Portfolio 0.40%, VIP Fund II Investment Grade Bond
Portfolio 0.58%, VIP Fund II Contrafund Portfolio 0.71% and Van Eck Worldwide
Hard Assets Portfolio 1.18%.
The tables also reflect the fact that no charges for Federal or state
income taxes are currently made against the Separate Accounts. If such a charge
is made in the future, it would take a higher gross annual rate of return to
produce the same Policy values.
The second column of each table shows the amount to which the premiums
would accumulate if an amount equal to those premiums were invested to earn
interest, after taxes, at 5% compounded annually.
A-1
<PAGE> 61
The illustrations also provide information about the premiums payable on
and after the Premium Change Date. The tables illustrate the Policy values that
would result if scheduled premiums are paid when due and the year, if any, in
which the Special Premium Payment Provision initially goes into effect. That
year is shown by use of an asterisk (*). If the Special Premium Payment
Provision goes into effect for a Policy Year not shown in the illustration, the
asterisk is shown for the first Policy Year illustrated after it goes into
effect.
The Tables on Pages A-11 and A-12 illustrate the Death Benefit and cash
surrender value of the Policy with the Basic Death Benefit and the Increasing
Death Benefit, respectively. In addition to the assumptions regarding
hypothetical rates of investment return for the Separate Accounts and charges
and expenses, these illustrations are for a male, age 35 having a Policy with a
$100,000 Face Amount and an unscheduled premium of $10,000 when the Policy is
purchased. The year in which the Special Premium Payment Provision goes into
effect under each Death Benefit Option is also shown.
PMLIC will furnish upon request an illustration reflecting the proposed
Insured's age, sex, if applicable, premium class, and the Face Amount and
frequency of premium payments requested. This illustration will assume a
hypothetical rate of investment return for the Separate Accounts equivalent to a
constant gross annual rate of 0% and at least one other rate between 0% and 12%
as chosen by the applicant. In addition, an illustration will be included at the
delivery of a Policy.
For Policies issued in states requiring "unisex" policies (currently
Montana) or in conjunction with employee benefit plans, PMLIC will furnish upon
request illustrations based on unisex cost of insurance rates, the proposed
Insured's age, and the Face Amount requested. PMLIC reserves the right to charge
a reasonable fee for this service to persons who request more than one policy
illustration during a policy year.
A-2
<PAGE> 62
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$765 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
- ------ -------------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 803 100,000 100,000 100,000 0 0 0
2 1,647 100,000 100,000 100,000 170 264 363
3 2,532 100,000 100,000 100,000 606 793 996
4 3,462 100,000 100,000 100,000 1,038 1,350 1,703
5 4,438 100,000 100,000 100,000 1,464 1,936 2,488
6 5,464 100,000 100,000 100,000 2,061 2,727 3,538
7 6,540 100,000 100,000 100,000 2,688 3,583 4,719
8 7,670 100,000 100,000 100,000 3,306 4,469 6,004
9 8,857 100,000 100,000 100,000 3,914 5,383 7,401
10 10,103 100,000 100,000 100,248 4,511 6,326 8,923
11 11,412 100,000 100,000 101,300 4,919 7,121 10,402
12 12,785 100,000 100,000 102,473 5,315 7,946 12,028*
13 14,228 100,000 100,000 103,780 5,695 8,799 13,815
14 15,743 100,000 100,000 105,236 6,060 9,682 15,778
15 17,333 100,000 100,000 106,858 6,407 10,594 17,935
16 19,003 100,000 100,000 108,664 6,737 11,536 20,304
17 20,756 100,000 100,273 110,672 7,047 12,506 22,905
18 22,597 100,000 100,650 112,907 7,336 13,506 25,763
19 24,530 100,000 101,023 115,392 7,603 14,534 28,903
20 26,560 100,000 101,394 118,156 7,849 15,593* 32,354
25 38,337 100,000 103,146 150,145 8,666 21,316 55,404
30 53,367 100,000 104,564 212,243 8,551 27,680 91,484
35 72,550 100,000 105,409 293,959 6,892 34,399 146,979
40 97,032 100,000 105,372 405,221 2,863 41,216 231,555
45 128,279 100,000 104,101 555,967 0 47,549 358,688
50 175,144 100,000 107,537 766,990 0 59,144 547,849
55 234,957 100,000 110,581 1,065,157 0 70,231 825,702
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$393.98 semiannually, $200.43 quarterly, or $67.32 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,105
assuming a 0 pct. rate of return; $1,962 assuming a 6 pct. rate of return;
and $765 assuming a 12 pct. rate of return.
(2) The premiums accumulated a 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-3
<PAGE> 63
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 35
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$991 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
- ------ -------------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,041 100,000 100,000 100,000 0 0 0
2 2,133 100,000 100,000 100,000 509 641 779
3 3,280 100,000 100,000 100,000 1,115 1,378 1,662
4 4,485 100,000 100,000 100,000 1,702 2,139 2,633
5 5,750 100,000 100,000 100,000 2,267 2,925 3,697
6 7,078 100,000 100,000 100,000 3,010 3,936 5,065
7 8,472 100,000 100,000 100,000 3,779 5,019 6,595
8 9,936 100,000 100,000 100,000 4,524 6,127 8,249
9 11,474 100,000 100,000 100,000 5,246 7,262 10,043
10 13,088 100,000 100,000 100,429 5,945 8,425 11,991
11 14,783 100,000 100,000 101,805 6,423 9,417 13,907
12 16,563 100,000 100,000 103,342 6,879 10,443 16,009*
13 18,431 100,000 100,000 105,056 7,316 11,503 18,318
14 20,393 100,000 100,000 106,966 7,732 12,600 20,854
15 22,454 100,000 100,000 109,094 8,127 13,733 23,641
16 24,617 100,000 100,000 111,461 8,499 14,905 26,704
17 26,888 100,000 100,140 114,095 8,848 16,115 30,069
18 29,273 100,000 100,617 117,023 9,171 17,362 33,769
19 31,777 100,000 101,090 120,277 9,465 18,645 37,833
20 34,407 100,000 101,561 123,895 9,732 19,967* 42,302
25 49,662 100,000 103,812 162,447 10,571 27,166 72,198
30 69,133 100,000 105,645 232,224 10,268 35,320 119,089
35 93,983 100,000 106,733 324,850 7,684 43,959 191,088
40 128,506 100,000 109,183 450,836 4,817 55,295 300,557
45 172,568 100,000 110,621 624,069 0 66,034 462,273
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$510.37 semiannually, $259.64 quarterly, or $87.21 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $1,767
assuming a 0 pct. rate of return; $1,475 assuming a 6 pct. rate of return;
and $991 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-4
<PAGE> 64
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 45
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$1,783 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,872 100,000 100,000 100,000 230 313 397
2 3,838 100,000 100,000 100,000 1,337 1,579 1,831
3 5,902 100,000 100,000 100,000 2,405 2,883 3,401
4 8,069 100,000 100,000 100,000 3,432 4,226 5,121
5 10,345 100,000 100,000 100,000 4,416 5,606 7,004
6 12,734 100,000 100,000 100,000 5,634 7,304 9,347
7 15,243 100,000 100,000 100,000 6,891 9,127 11,975
8 17,877 100,000 100,000 100,000 8,095 10,982 14,817
9 20,643 100,000 100,000 100,000 9,240 12,869 17,894
10 23,548 100,000 100,000 100,000 10,321 14,781 21,227
11 26,597 100,000 100,000 100,349 11,054 16,439 24,567
12 29,799 100,000 100,000 102,857 11,716 18,122 28,210
13 33,161 100,000 100,000 105,662 12,309 19,833 32,186*
14 36,692 100,000 100,000 108,792 12,830 21,574 36,528
15 40,398 100,000 100,000 112,279 13,271 23,342 41,270
16 44,290 100,000 100,000 116,163 13,627 25,133 46,448
17 48,377 100,000 100,000 120,487 13,888 26,945 52,106
18 52,668 100,000 100,000 125,294 14,044 28,774 58,287
19 57,174 100,000 100,000 130,636 14,082 30,613 65,039
20 61,904 100,000 100,000 136,571 13,987 32,457 72,415
25 89,352 100,000 100,000 187,230 11,086 41,694 120,793
30 129,559 100,000 103,936 270,645 7,726 55,543* 193,318
35 180,874 100,000 109,822 387,075 0 69,471 300,058
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$918.25 semiannually, $467.15 quarterly, or $156.90 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,947
assuming a 0 pct. rate of return; $2,675 assuming a 6 pct. rate of return;
and $1,783 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-5
<PAGE> 65
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$2,445 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,567 100,000 100,000 100,000 485 599 713
2 5,263 100,000 100,000 100,000 1,969 2,298 2,641
3 8,093 100,000 100,000 100,000 3,403 4,053 4,758
4 11,065 100,000 100,000 100,000 4,792 5,871 7,090
5 14,186 100,000 100,000 100,000 6,135 7,755 9,659
6 17,462 100,000 100,000 100,000 7,772 10,048 12,833
7 20,903 100,000 100,000 100,000 9,474 12,525 16,415
8 24,515 100,000 100,000 100,000 11,110 15,059 20,306
9 28,308 100,000 100,000 100,000 12,667 17,641 24,534
10 32,291 100,000 100,000 100,000 14,134 20,264 29,130
11 36,472 100,000 100,000 102,692 15,162 22,585 33,782
12 40,863 100,000 100,000 106,303 16,090 24,948 38,854*
13 45,474 100,000 100,000 110,337 16,919 27,359 44,393
14 50,315 100,000 100,000 114,839 17,650 29,827 50,451
15 55,398 100,000 100,000 119,857 18,277 32,356 57,083
16 60,991 100,000 100,000 125,438 19,339 35,183 64,341
17 66,864 100,000 100,000 131,638 20,264 38,077 72,279
18 73,031 100,000 100,000 138,519 21,024 41,026 80,950
19 79,506 100,000 100,000 146,153 21,582 44,021 90,412
20 86,304 100,000 100,925 154,621 21,903 47,037 100,733
25 125,750 100,000 106,736 225,721 18,924 62,149* 167,201
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$1,259.18 semiannually, $640.59 quarterly, or $215.16 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $3,039
assuming a 0 pct. rate of return; $2,689 assuming a 6 pct. rate of return;
and $2,445 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED OVER OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-6
<PAGE> 66
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$765 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING GUARANTEED MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 803 100,000 100,000 100,000 0 0 0
2 1,647 100,000 100,000 100,000 168 262 361
3 2,532 100,000 100,000 100,000 603 790 993
4 3,462 100,000 100,000 100,000 1,035 1,347 1,698
5 4,438 100,000 100,000 100,000 1,460 1,931 2,482
6 5,464 100,000 100,000 100,000 2,056 2,720 3,530
7 6,540 100,000 100,000 100,000 2,682 3,576 4,709
8 7,670 100,000 100,000 100,000 3,299 4,460 5,992
9 8,857 100,000 100,000 100,000 3,906 5,372 7,386
10 10,103 100,000 100,000 100,000 4,502 6,313 8,904
11 11,412 100,000 100,000 100,896 4,908 7,106 10,380
12 12,785 100,000 100,000 102,038 5,303 7,928 12,003*
13 14,228 100,000 100,000 103,310 5,682 8,779 13,786
14 15,743 100,000 100,000 104,729 6,045 9,659 15,745
15 17,333 100,000 100,000 106,309 6,391 10,568 17,896
16 19,003 100,000 100,000 108,071 6,720 11,506 20,259
17 20,756 100,000 100,000 110,031 7,027 12,473 22,854
18 22,597 100,000 100,000 112,215 7,315 13,469 25,705
19 24,530 100,000 100,302 114,643 7,580 14,495 28,836
20 26,560 100,000 100,619 117,345 7,824 15,552 32,278
25 38,337 100,000 102,031 149,742 8,629 21,265* 55,255
30 53,367 100,000 102,961 211,549 8,499 27,635 91,185
35 72,550 100,000 103,076 292,543 6,737 34,346 146,271
40 97,032 100,000 101,962 401,256 2,168 40,963 229,289
45 128,279 100,000 100,000 545,003 0 46,669 351,614
50 175,742 100,000 100,984 739,187 0 57,532 527,991
55 236,318 100,000 102,059 1,001,100 0 67,159 776,046
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$393.98 semiannually, $200.43 quarterly, or $67.32 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,105
assuming a 0 pct. rate of return; $2,072 assuming a 6 pct. rate of return;
and $765 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED OVER OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-7
<PAGE> 67
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 35
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$991 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING GUARANTEED MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,041 100,000 100,000 100,000 0 0 0
2 2,133 100,000 100,000 100,000 507 639 777
3 3,280 100,000 100,000 100,000 1,112 1,375 1,659
4 4,485 100,000 100,000 100,000 1,698 2,135 2,628
5 5,750 100,000 100,000 100,000 2,262 2,920 3,691
6 7,078 100,000 100,000 100,000 3,004 3,928 5,056
7 8,472 100,000 100,000 100,000 3,771 5,009 6,583
8 9,936 100,000 100,000 100,000 4,514 6,115 8,234
9 11,474 100,000 100,000 100,000 5,235 7,247 10,023
10 13,088 100,000 100,000 100,000 5,932 8,407 11,967
11 14,783 100,000 100,000 100,696 6,408 9,397 13,881
12 16,563 100,000 100,000 102,145 6,860 10,416 15,978
13 18,431 100,000 100,000 103,763 7,286 11,465 18,277*
14 20,393 100,000 100,000 105,567 7,687 12,543 20,797
15 22,454 100,000 100,000 107,580 8,060 13,652 23,561
16 24,617 100,000 100,000 109,822 8,404 14,790 26,591
17 26,888 100,000 100,000 112,320 8,716 15,958 29,914
18 29,273 100,000 100,000 115,099 8,994 17,155 33,558
19 31,777 100,000 100,000 118,189 9,233 18,377 37,552
20 34,407 100,000 100,000 121,627 9,431 19,627 41,932
25 49,662 100,000 100,636 159,900 9,801 26,331 71,066
30 69,133 100,000 101,222 226,682 8,771 33,736 116,247
35 93,983 100,000 100,671 313,741 4,895 41,229 184,553
40 130,148 100,000 102,490 429,975 0 52,467* 286,650
45 176,306 100,000 103,046 585,369 0 62,845 433,607
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$510.37 semiannually, $259.64 quarterly, or $87.21 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $1,767
assuming a 0 pct. rate of return; $1,758 assuming a 6 pct. rate of return;
and $991 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE, AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED OVER OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-8
<PAGE> 68
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 45
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$1,783 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING GUARANTEED MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
------------------------------------------- -------------------------------------------
END PREMIUMS ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
OF ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY AT 5 PCT. INT. 0 PCT. 6 PCT. 12 PCT. 0 PCT. 6 PCT. 12 PCT.
YEAR PER YEAR(2) GROSS GROSS GROSS GROSS GROSS GROSS
- ------ -------------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,872 100,000 100,000 100,000 228 311 395
2 3,838 100,000 100,000 100,000 1,334 1,575 1,826
3 5,902 100,000 100,000 100,000 2,399 2,876 3,394
4 8,069 100,000 100,000 100,000 3,424 4,216 5,110
5 10,345 100,000 100,000 100,000 4,405 5,594 6,990
6 12,734 100,000 100,000 100,000 5,620 7,288 9,327
7 15,243 100,000 100,000 100,000 6,874 9,106 11,949
8 17,877 100,000 100,000 100,000 8,075 10,957 14,784
9 20,643 100,000 100,000 100,000 9,216 12,837 17,852
10 23,548 100,000 100,000 100,000 10,293 14,743 21,176
11 26,597 100,000 100,000 100,000 11,021 16,394 24,505
12 29,799 100,000 100,000 100,971 11,675 18,065 28,145
13 33,161 100,000 100,000 103,624 12,250 19,756 32,116
14 36,692 100,000 100,000 106,590 12,743 21,466 36,446*
15 40,398 100,000 100,000 109,898 13,144 23,188 41,168
16 44,290 100,000 100,000 113,588 13,444 24,919 46,318
17 48,377 100,000 100,000 117,700 13,633 26,653 51,935
18 52,668 100,000 100,000 122,276 13,696 28,382 58,062
19 57,174 100,000 100,000 127,367 13,615 30,095 64,743
20 61,904 100,000 100,000 133,027 13,370 31,782 72,028
25 89,352 100,000 100,000 184,724 9,012 39,563 119,176
30 131,009 100,000 100,000 262,736 1,765 51,827 187,668
35 184,175 100,000 100,000 366,848 0 63,494 284,378
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$918.25 semiannually, $467.15 quarterly, or $156.90 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,947
assuming a 0 pct. rate of return; $2,925 assuming a 6 pct. rate of return;
and $1,783 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED OVER OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-9
<PAGE> 69
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$2,445 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
USING GUARANTEED MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,567 100,000 100,000 100,000 395 506 618
2 5,263 100,000 100,000 100,000 1,783 2,101 2,433
3 8,093 100,000 100,000 100,000 3,117 3,741 4,419
4 11,065 100,000 100,000 100,000 4,399 5,431 6,598
5 14,186 100,000 100,000 100,000 5,628 7,174 8,993
6 17,462 100,000 100,000 100,000 7,145 9,310 11,966
7 20,903 100,000 100,000 100,000 8,718 11,015 15,316
8 24,515 100,000 100,000 100,000 10,213 13,955 18,940
9 28,308 100,000 100,000 100,000 11,614 16,318 22,859
10 32,291 100,000 100,000 100,000 12,907 18,694 27,099
11 36,472 100,000 100,000 100,000 13,742 20,736 31,356
12 40,863 100,000 100,000 100,436 14,456 22,787 36,023
13 45,474 100,000 100,000 103,933 15,050 24,852 41,123
14 50,315 100,000 100,000 107,846 15,524 26,937 46,690*
15 55,398 100,000 100,000 112,215 15,872 29,042 52,773
16 61,350 100,000 100,000 117,082 16,627 31,737 59,420
17 67,600 100,000 100,000 122,496 17,212 34,470 66,676
18 74,163 100,000 100,000 128,508 17,588 37,222 74,587
19 81,053 100,000 100,000 135,184 17,706 39,973 83,201
20 88,288 100,000 100,000 142,598 17,517 42,709 92,575
25 130,267 100,000 100,000 205,487 10,183 56,098 152,212
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$1,259.18 semiannually, $640.59 quarterly, or $215.16 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $3,039
assuming a 0 pct. rate of return; $3,031 assuming a 6 pct. rate of return;
and $2,445 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE, AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-10
<PAGE> 70
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$100,000 FACE AMOUNT (GUARANTEED DEATH BENEFIT)
$1,143 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
WITH $10,000 UNSCHEDULED PREMIUM PAID AT POLICY ISSUE
USING CURRENT COST OF INSURANCE CHARGES
WITH BASIC DEATH BENEFIT
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
---- ----------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,700 100,723 101,324 101,925 9,098 9,699 10,300
2 13,485 101,007 102,275 103,614 9,719* 10,987* 12,327*
3 15,360 101,187 103,192 105,426 10,322 12,328 14,562
4 17,328 101,321 104,136 107,441 10,907 13,721 17,026
5 19,394 101,407 105,106 109,678 11,471 15,169 19,742
6 21,564 101,445 106,103 112,165 12,228 16,887 22,949
7 23,843 101,430 107,127 114,925 13,021 18,717 26,516
8 26,235 101,363 108,179 117,991 13,791 20,607 30,419
9 28,747 101,241 109,259 121,393 14,538 22,556 34,690
10 31,384 101,063 110,369 125,189 15,261 24,567 39,368
11 34,154 100,824 111,506 136,347 15,744 26,426 44,268
12 37,062 100,524 112,672 147,912 16,201 28,349 49,635
13 40,115 100,160 113,867 160,417 16,630 30,337 55,507
14 43,321 100,000 115,092 173,415 17,032 32,392 61,934
15 46,687 100,000 116,346 186,892 17,401 34,516 68,964
16 50,221 100,000 117,630 200,833 17,737 36,709 76,654
17 53,932 100,000 118,940 216,044 18,035 38,970 85,056
18 57,829 100,000 120,278 231,811 18,289 41,299 94,232
19 61,921 100,000 121,644 249,136 18,496 43,694 104,241
20 66,217 100,000 123,036 267,148 18,648 46,153 115,150
25 91,143 100,000 130,464 372,423 18,484# 59,454 186,211
30 122,956 100,000 138,644 515,430 16,240 74,488 294,531
35 163,558 100,000 147,638 708,943 10,389 91,086 457,382
40 215,378 100,000 157,527 979,596 3,427 109,134 699,711
45 281,514 100,000 168,655 1,361,839 0 128,304 1,055,689
</TABLE>
(1) If premiums are paid more frequently than annually the payments would be
$588.65 semiannually, $299.47 quarterly, or $100.58 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,239
assuming a 0 pct. rate of return; $1,143 assuming a 6 pct. rate of return;
and $1,143 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if
the gross investment return is 6%.
(3) Assumes no Policy loan has been made.
# First year shown in which Special Premium Payment Provision ceases to be in
effect.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE, AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-11
<PAGE> 71
PROVIDENT MUTUAL -- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 35
$100,000 FACE AMOUNT
$1,143 INITIAL SCHEDULED PREMIUM FOR NON-SMOKERS (1)
WITH $10,000 UNSCHEDULED PREMIUM PAID AT POLICY ISSUE
USING CURRENT COST OF INSURANCE CHARGES
WITH INCREASING DEATH BENEFIT
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
PREMIUMS ------------------------------------------- -------------------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS(3) ASSUMING HYPOTHETICAL GROSS(3)
POLICY AT 5 PCT. INT. ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR(2) 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS 0 PCT. GROSS 6 PCT. GROSS 12 PCT. GROSS
- ------ -------------- ------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,700 110,000 110,000 110,000 9,082 9,682 10,283
2 13,485 110,000 111,143 111,143 9,687 10,953* 12,292*
3 15,360 110,000 112,286 112,286 10,273 12,272 14,507
4 17,328 110,000 113,429 113,429 10,840 13,642 16,950
5 19,394 110,000 114,572 114,572 11,386 15,063 19,642
6 21,564 110,000 115,715 115,715 12,125 16,751 22,825
7 23,843 110,000 116,858 116,858 12,897 18,548 26,369
8 26,235 110,000 118,001 118,001 13,646 20,400 30,249
9 28,747 110,000 119,144 119,144 14,369 22,306 34,501
10 31,384 110,000 120,287 124,541 15,066 24,271 39,164
11 34,154 110,000 121,430 135,651 15,522 26,078 44,043
12 37,062 110,000 122,573 147,165 15,947 27,942 49,384
13 40,115 110,000 123,716 159,614 16,342 29,867 55,230
14 43,321 110,000 124,859 172,554 16,704 31,852 61,626
15 46,687 110,000 126,002 185,970 17,030 33,897 68,623
16 50,221 110,000 127,145 199,847 17,320 36,005 76,277
17 53,932 110,000 128,288 214,987 17,567 38,173 84,641
18 57,829 110,000 129,431 230,681 17,766 40,398 93,773
19 61,921 110,000 130,574 247,926 17,912 42,679 103,734
20 66,217 110,000 131,717 265,853 17,998 45,012 114,592
25 91,143 110,000 137,432 370,628 17,381 57,483 185,314
30 122,956 110,000 143,147 512,947 14,404 71,265 293,112
35 163,558 110,000 148,862 705,521 7,295 86,025 455,174
40 215,378 110,000 154,577 974,857 0 101,498 696,326
45 281,514 110,000 160,292 1,355,235 0 117,247 1,050,569
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$588.65 semiannually, $299.47 quarterly, or $100.58 monthly. The death
benefits and cash surrender values shown would be affected by the more
frequent premium payments. The annual premium on the Premium Change Date
assuming current cost of insurance charges will be as follows: $2,239
assuming a 0 pct. rate of return; $1,143 assuming a 6 pct. rate of return;
and $1,143 assuming a 12 pct. rate of return.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
(3) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT 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 SEPARATE ACCOUNTS CHOSEN BY AN OWNER. THE DEATH BENEFIT,
CASH SURRENDER VALUE AND PREMIUM ON THE PREMIUM CHANGE DATE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGE 0%, 6%, AND
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY PMLIC THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
A-12
<PAGE> 72
APPENDIX B
CALCULATION OF NET INVESTMENT FACTOR
AND CASH VALUE OF THE POLICY
Following is a description of how the Net Investment Factor is calculated
and how the Net Investment Factor is used to determine the Cash Value of the
Policy.
Net Investment Factor. Each Separate Account has its own Net Investment
Factor. The Net Investment Factor of the Separate Account for a Valuation Period
is a. divided by b., minus c. and minus d., where:
a. is:
1. the value of the assets in the Separate Account for the
preceding Valuation Period; plus
2. the investment income and capital gains, realized or unrealized,
credited to those assets during the Valuation Period for which the Net
Investment Factor is being determined; minus
3. the capital losses, realized or unrealized, charged against
those assets during the Valuation Period; minus
4. any amount charged against the Separate Account for taxes, or
any amount PMLIC sets aside during the Valuation Period as a reserve for
taxes attributable to the operation or maintenance of the Separate
Account; and
b. is the value of the assets for the preceding Valuation Period; and
c. is a charge no greater than 0.60% per year (.001644% for each day
in the Valuation Period) for mortality and expense risks; and
d. is a charge, for the Zero Coupon Bond Separate Account only, no
greater than 0.50% per year (.001370% for each day in the Valuation Period)
for transaction charges associated with the purchase of units.
The charges in c. and d. are expressed as a percentage of assets in the
Account at the beginning of each day during the Valuation Period.
Calculation of Cash Value. When the first net scheduled premium is
allocated to the Separate Accounts, the Cash Value of each Separate Account on
the Policy Date will equal the Net Premium allocated to that Separate Account
minus the first monthly deduction allocated to that Separate Account.
Thereafter, on each Valuation Day, the Cash Value of each Separate Account will
equal:
1. the Cash Value of the Separate Account on the previous Valuation
Day times the Net Investment Factor for the current Valuation Period;
2. plus any Net Premiums received during the current Valuation Period
which are allocated to that Separate Account;
3. plus any Cash Value which, during the current Valuation Period;
a. is transferred to the Separate Account from the General Account
when any loan amount is repaid, including interest credited to loaned
amounts; and
b. is transferred to the Separate Account from another Separate
Account when requested by the Owner;
4. minus any Cash Value which, during the current Valuation Period:
a. is transferred from the Separate Account to the General Account
when the Owner borrows on the Policy or fails to pay interest when due;
and
b. is transferred from the Separate Account to another Separate
Account when requested by the Owner;
B-1
<PAGE> 73
5. plus any dividends credited to the Separate Account during the
current Valuation Period;
6. minus the monthly deductions allocated to the Separate Account
during the current Valuation Period;
7. minus any partial withdrawal during the current Valuation Period
which are allocated to the Separate Account.
The Cash Value of the Policy is equal to: (a) the sum of the Cash Value of
each Separate Account; plus (b) the Cash Value in the General Account
attributable to any outstanding policy loans.
B-2
<PAGE> 74
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a record of the compound annual returns of common
stocks, high-grade corporate bonds and 30-day U.S. Treasury bills over 20 year
holding periods.* The compound annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and is not
intended as a projection of future performance. Charges associated with a
variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high-grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods of
time. To the extent that cash value is allocated to separate accounts which
invest in common stocks, these trends indicate the potential advantages of
holding a variable life insurance policy for a long period of time.
The following chart illustrates the compound annual returns of the S&P 500
Composite Stock Price Index for each of the 20-year periods shown. These returns
are compared to the compound annual returns of high-grade corporate bonds and
U.S. Treasury bills for the same periods. (The 20-year periods selected for the
chart begin in 1937 and have ending periods at five year intervals.)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Stocks Bonds U.S. Treasury Bills
<S> <C> <C> <C>
1957 12.98 2.52 0.91
1962 15.25 2.48 1.50
1967 14.63 2.01 2.38
1972 11.67 2.95 3.39
1977 8.12 3.99 4.44
1982 8.30 4.47 6.51
1987 9.27 7.88 7.44
1992 11.33 9.54 7.70
1997 16.65 10.29 7.29
</TABLE>
- ---------------
* Sources: Common stock returns -- Standard & Poor's 500 Composite Stock Price
Index. Corporate bond returns -- Salomon Brothers Long Term High Grade Corporate
Bond Index, and U.S. Treasury Bill returns -- C.R.S.P. U.S. Government Bond File
through 1976 and The Wall Street Journal thereafter. All data from: (C)Ibbotson,
Roger G., and Rex A. Sinquefield, Stocks, Bonds, Bills and Inflation (SBBI),
1982, updated in Stocks, Bonds, Bills and Inflation 1998 Yearbook(TM), Ibbotson
Associates, Inc., Chicago. All rights reserved.
C-1
<PAGE> 75
Over the 53 20-year time periods beginning in 1926 and ending in 1997 (i.e.
1926-1945, 1927-1946, and so on through 1978-1997):
-- The compound annual return of common stocks was superior to that of
high-grade, long-term corporate bonds in 50 of the 53 periods.
-- The compound annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 53 periods.
-- Common stock compound annual returns exceeded the average annual rate of
inflation in each of the 53 periods.
Over the 43 30-year time periods beginning in 1926 and ending in 1997, the
compound annual return of common stocks was superior to that of high-grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 43 periods.
From 1926 through 1997 the compound annual return for common stocks was
11.0%, compared to 5.7% for high-grade, long-term corporate bonds, 5.2% for
Long-Term Government Bonds, 3.8% for U.S. Treasury bills and 3.1% for the
Consumer Price Index.
------------------------
SUMMARY TABLE: HISTORIC S&P 500 COMPOSITE STOCK INDEX RESULTS FOR
SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Composite Stock Index, with dividends reinvested, over one-year,
five-year, ten-year and twenty-year periods beginning in 1926 and ending in
1997.
The chart shows that historically, the longer that a portfolio matching the
S&P 500 Composite Stock Index was held, the less likely was the chance of a
loss. Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter term results
tend to be more extreme than longer term results.
THE CHART IS NOT A PROJECTION OR REPRESENTATION OF FUTURE STOCK MARKET
RESULTS. IT CANNOT BE TAKEN AS REPRESENTATIVE OF THE PERFORMANCE OF ANY ONE
SEPARATE ACCOUNT. RATHER IT SHOWS THE HISTORIC PERFORMANCE OF A BROAD INDEX OF
STOCKS OVER ARBITRARILY SELECTED TIME PERIODS.
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
THAN
HOLDING NEGATIVE 0-5.00% 5.01-10.00% 10.01-15.00% 15.01-20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
------ -------- ------- ----------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
1 year 27.8% 4.2% 11.1% 6.9% 11.1% 38.9%
5 years 10.3% 14.7% 14.7% 32.4% 17.6% 10.3%
10 years 3.2% 11.1% 34.9% 22.2% 27.0% 1.6%
20 years 0.0% 5.8% 32.1% 54.7% 7.5% 0.0%
</TABLE>
- ---------------
Source: All basic data from: (C)Ibbotson, Roger G., and Rex A. Sinquefield,
Stocks, Bonds, Bills and Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills
and Inflation 1998 Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights
reserved.
TREASURY BILLS ADJUSTED FOR INFLATION
The data below show the annual rate of return over 20-year holding periods
of U.S. Treasury Bills after adjusting for inflation as measured by the Urban
Consumer Price Index. This annual rate, as adjusted, is also
C-2
<PAGE> 76
called the real interest rate and is represented as the real interest rate in
the chart below. U.S. Treasury Bills are considered to be one of the safest
kinds of investments, as they are backed by the U.S. government. However, the
highest inflation-adjusted return of U.S. Treasury Bills over the historic
20-year periods presented below has been modest.
<TABLE>
<CAPTION>
Measurement Period Treasury Bills Adjusted for
(Fiscal Year Covered) Inflation
<S> <C>
1957 -2.45
1962 -1.44
1967 0.50
1972 1.02
1977 0.44
1982 0.47
1987 1.07
1992 1.40
1997 2.29
</TABLE>
Selected 20-year periods ending on year shown above.
- ---------------
Source: All basic data from: (C)Ibbotson, Roger G., and Rex A. Sinquefield,
Stocks, Bonds, Bills and Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills
and Inflation 1998 Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights
reserved.
---------------------------
THE "DOLLAR COST AVERAGING" INVESTMENT METHOD
As the Compound Annual Returns graph indicates, the investment performance
of many common stocks has generally been positive over certain relatively long
periods. Common stocks have, however, also been subject to market declines,
often dramatic ones, and general volatility of prices over shorter time periods.
The price fluctuations of common stocks has historically been greater than that
of high-grade debt securities.
The relative volatility of common stock prices as compared with prices of
high-grade debt instruments offers both advantages and disadvantages to
investors. Unfortunately, many investors who otherwise might be interested in
common stocks see only the disadvantages and not the advantages of stock price
fluctuation.
The primary disadvantage, of course, is that price declines can be
prolonged and substantial, and when this occurs, investors cannot liquidate
their investments without realizing losses. Price declines, however, also offer
investors important opportunities.
Opportunity arises from the fact that investors can purchase more common
stock for the same amount of money than they would before prices declined.
Investors may take advantage of this if they remain willing to continue
investing in both rising and falling markets. The dollar cost averaging method
of investing demonstrates this.
C-3
<PAGE> 77
In this method of investing:
- Relatively constant dollar amounts are invested at regular intervals
(monthly, quarterly, or annually).
- Stock market fluctuations, especially the savings on purchases from price
declines, are exploited for the investor's benefit.
HOW DOLLAR COST AVERAGING WORKS
<TABLE>
<CAPTION>
INVESTMENTS AT COMMON STOCK SHARES
REGULAR INTERVALS MARKET PRICE PURCHASED
- ----------------- ------------ ---------
<S> <C> <C>
$150 $20 7.5
150 15 10.0
150 10 15.0
150 5 30.0
150 10 15.0
150 15 10.0
---- ---------
$900 87.5
Total Value of 87.5 shares @
$15/share $1,312.50
Less Investment made (900.00)
---------
Gain/Profit $ 412.50
</TABLE>
Though the market price has not returned to the initial high of $20 per
share, dollar cost averaging has permitted the investor to purchase more shares
at a savings and thus realize a significant gain. Obviously, the dollar cost
averaging method only works if the investor continues to invest relatively
constant amounts over a long period of time.
This plan of investing does not assure a profit or protect against a loss
in declining markets; it does allow investors to take advantage of market
fluctuations. Since the success of this strategy is dependent on systematic
investing, purchasers should consider their ability to sustain their payments
through all periods of marketing fluctuations.
How does the dollar cost averaging method relate to a variable life
insurance policy? A policyowner may invest his or her net premiums in a separate
account, and, although a Policy's value in the separate accounts is affected by
several factors other than investment experience (e.g., cash value charges and
charges against the separate account), the dollar cost averaging method can be
generally applied to the Policy to the extent that the policyowner pays premiums
on a regular basis and he or she allocates net premiums to separate accounts
which invest in common stocks in relatively constant amounts.
C-4
<PAGE> 78
FINANCIAL STATEMENTS
The financial statements of PMLIC included herein should be distinguished
from the financial statements of the Separate Accounts and should be considered
only as bearing upon the ability of PMLIC to meet its obligations under the
Policies.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Provident Mutual Variable Growth Separate Account, Provident
Mutual Variable Money Market Separate Account, Provident
Mutual Variable Bond Separate Account, Provident Mutual
Variable Managed Separate Account, Provident Mutual
Variable Zero Coupon Bond Separate Account, Provident
Mutual Variable Aggressive Growth Separate Account,
Provident Mutual Variable International Separate Account
and Provident Mutual Variable Separate Account.
Report of Independent Accountants...................... F-2
Statements of Assets and Liabilities, December 31,
1997.................................................. F-3
Statements of Operations for the Years Ended December
31, 1997, 1996 and 1995............................... F-8
Statements of Changes in Net Assets for the Years Ended
December 31, 1997, 1996, and 1995..................... F-22
Notes to Financial Statements.......................... F-36
Provident Mutual Life Insurance Company and Subsidiaries
Report of Independent Accountants...................... F-53
Consolidated Statements of Financial Condition,
December 31, 1997 and 1996............................ F-54
Consolidated Statements of Operations for the Years
Ended December 31, 1997, 1996 and 1995................ F-55
Consolidated Statements of Capital and Surplus for the
Years Ended December 31, 1997, 1996 and 1995.......... F-56
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995................ F-57
Notes to Consolidated Financial Statements............. F-58
</TABLE>
F-1
<PAGE> 79
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Policyholders and
Board of Directors of
Provident Mutual Life Insurance
Company
We have audited the accompanying statements of assets and liabilities of the
Provident Mutual Variable Separate Accounts (Growth, Money Market, Bond,
Managed, Aggressive Growth, International, Zero Coupon Bond and Variable) as of
December 31, 1997, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the management of the Provident Mutual
Variable Separate Accounts. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by correspondence with
the transfer agents. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Provident Mutual Variable
Separate Accounts (Growth, Money Market, Bond, Managed, Aggressive Growth,
International, Zero Coupon Bond and Variable) as of December 31, 1997, and the
results of their operations and the changes in their net assets for each of the
three years in the period then ended in conformity with generally accepted
accounting principles.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 4, 1998
F-2
<PAGE> 80
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Assets and Liabilities, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in the Market Street Fund,
Inc., at market value:
Growth Portfolio................... $206,893,584
Money Market Portfolio............. $22,625,570
Bond Portfolio..................... $13,495,581
Managed Portfolio.................. $36,192,027
Aggressive Growth Portfolio........ $34,927,244
International Portfolio............ $38,762,124
Dividends receivable................. 104,280
Receivable from Provident Mutual Life
Insurance Company.................. 263,062
------------ ----------- ----------- ----------- ----------- -----------
Total Assets......................... 206,893,584 22,992,912 13,495,581 36,192,027 34,927,244 38,762,124
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
Payable to Provident Mutual Life
Insurance Company.................. 111,809 15,048 19,057
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS........................... $206,781,775 $22,992,912 $13,480,533 $36,172,970 $34,927,244 $38,762,124
============ =========== =========== =========== =========== ===========
Held for the benefit of
policyholders...................... $206,502,297 $22,832,474 $13,364,769 $35,981,188 $34,712,042 $38,706,062
Attributable to Provident Mutual Life
Insurance Company.................. 279,478 160,438 115,764 191,782 215,202 56,062
------------ ----------- ----------- ----------- ----------- -----------
$206,781,775 $22,992,912 $13,480,533 $36,172,970 $34,927,244 $38,762,124
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 81
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Assets and Liabilities, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO
COUPON
BOND
SEPARATE
ACCOUNT
- -------------------------------------------------------------------------
2006 SERIES
SUBACCOUNT
- -------------------------------------------------------------------------
<S> <C>
ASSETS
Investment in the Stripped ("Zero") U.S. Treasury Securities
Fund, Provident Mutual Series A, at market value:
2006 Series............................................... $8,657,163
----------
LIABILITIES
Payable to Provident Mutual Life Insurance Company.......... 15,177
----------
NET ASSETS.................................................. $8,641,986
==========
Held for the benefit of policyholders....................... $8,581,416
Attributable to Provident Mutual Life Insurance Company..... 60,570
----------
$8,641,986
==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 82
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Assets and Liabilities, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance
Products Fund, at market value:
Equity-Income Portfolio............ $93,799,766
Growth Portfolio................... $109,653,375
High Income Portfolio.............. $15,302,332
Overseas Portfolio................. $24,399,967
Investment in the Variable Insurance
Products Fund II, at market value:
Asset Manager Portfolio............ $42,160,660
Index 500 Portfolio................ $72,064,851
----------- ------------ ----------- ----------- ----------- -----------
NET ASSETS........................... $93,799,766 $109,653,375 $15,302,332 $24,399,967 $42,160,660 $72,064,851
=========== ============ =========== =========== =========== ===========
Held for the benefit of
policyholders...................... $93,784,846 $109,488,252 $15,261,950 $24,357,351 $42,034,887 $72,004,045
Attributable to Provident Mutual Life
Insurance Company.................. 14,920 165,123 40,382 42,616 125,773 60,806
----------- ------------ ----------- ----------- ----------- -----------
$93,799,766 $109,653,375 $15,302,332 $24,399,967 $42,160,660 $72,064,851
=========== ============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 83
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Assets and Liabilities, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ---------------------------------------------------------------------------------------------------------------
NEUBERGER
FIDELITY NEUBERGER NEUBERGER & BERMAN
INVESTMENT FIDELITY & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance Products
Fund II, at market value:
Investment Grade Bond Portfolio............. $7,897,930
Contrafund Portfolio........................ $25,431,484
Investment in the Neuberger & Berman Advisers
Management Trust, at market value:
Balanced Portfolio.......................... $6,381,375
Growth Portfolio............................ $25,140,863
Limited Maturity Bond Portfolio............. $4,222,983
---------- ----------- ---------- ----------- -------------
NET ASSETS.................................... $7,897,930 $25,431,484 $6,381,375 $25,140,863 $4,222,983
========== =========== ========== =========== =============
Held for the benefit of policyholders......... $7,884,506 $25,412,860 $6,319,112 $25,078,557 $4,191,733
Attributable to Provident Mutual Life
Insurance Company........................... 13,424 18,624 62,263 62,306 31,250
---------- ----------- ---------- ----------- -------------
$7,897,930 $25,431,484 $6,381,375 $25,140,863 $4,222,983
========== =========== ========== =========== =============
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 84
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Assets and Liabilities, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING SMALL
APPRECIATION BOND HARD ASSETS MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in American Century Variable
Portfolios, Inc., at market value:
American Century VP Capital Appreciation
Portfolio................................. $8,434,404
Investment in the Van Eck Worldwide Insurance
Trust, at market value:
Van Eck Worldwide Bond Portfolio............ $4,377,135
Van Eck Worldwide Hard Assets Portfolio..... $2,781,168
Van Eck Worldwide Emerging Markets
Portfolio................................. $6,363,909
Investment in the Alger American Fund, at
market value:
Alger American Small Capitalization
Portfolio................................. $18,732,813
---------- ---------- ---------- ---------- -----------
NET ASSETS.................................... $8,434,404 $4,377,135 $2,781,168 $6,363,909 $18,732,813
========== ========== ========== ========== ===========
Held for the benefit of policyholders......... $8,406,219 $4,347,951 $2,747,965 $6,322,118 $18,693,517
Attributable to Provident Mutual Life
Insurance Company........................... 28,185 29,184 33,203 41,791 39,296
---------- ---------- ---------- ---------- -----------
$8,434,404 $4,377,135 $2,781,168 $6,363,909 $18,732,813
========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE> 85
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................. $ 3,927,765 $1,265,663 $ 727,891 $1,112,725 $ 248,042 $ 268,402
EXPENSES
Mortality and expense risks............ 1,171,607 170,118 78,010 208,655 202,951 251,580
Operating expense reimbursement........ (3,041) (40) (1,390)
----------- ---------- ---------- ---------- ---------- ----------
Total expenses......................... 1,168,566 170,078 76,620 208,655 202,951 251,580
----------- ---------- ---------- ---------- ---------- ----------
Net investment income.................. 2,759,199 1,095,585 651,271 904,070 45,091 16,822
----------- ---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions
reinvested........................... 19,579,907 242,281 49,195 2,101,304
Net realized gain (loss) from
redemption of investment shares...... 4,127,983 (7,292) 956,474 577,435 504,035
----------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on
investments.......................... 23,707,890 (7,292) 1,198,755 626,630 2,605,339
----------- ---------- ---------- ---------- ---------- ----------
Net unrealized appreciation of
investments:
Beginning of year.................... 36,782,658 143,144 4,034,365 4,227,761 3,295,188
End of year.......................... 49,936,122 545,131 8,084,445 9,124,521 3,573,814
----------- ---------- ---------- ---------- ---------- ----------
Net unrealized appreciation of
investments during the year.......... 13,153,464 401,987 4,050,080 4,896,760 278,626
----------- ---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain on
investments.......................... 36,861,354 394,695 5,248,835 5,523,390 2,883,965
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations...................... $39,620,553 $1,095,585 $1,045,966 $6,152,905 $5,568,481 $2,900,787
=========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-8
<PAGE> 86
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- ------------------------------------------------------------------------------
2006 SERIES
SUBACCOUNT
- ------------------------------------------------------------------------------
<S> <C>
EXPENSES
Mortality and expense risks................................. $ 47,810
Asset charge................................................ 17,446
----------
Net investment loss......................................... (65,256)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from redemption of investment shares...... 240,323
----------
Net realized gain on investments............................ 240,323
----------
Net unrealized appreciation of investments:
Beginning of year......................................... 744,136
End of year............................................... 1,354,882
----------
Net unrealized appreciation of investments during the
year...................................................... 610,746
----------
Net realized and unrealized gain on investments............. 851,069
----------
Net increase in net assets resulting from operations........ $ 785,813
==========
</TABLE>
See accompanying notes to financial statements
F-9
<PAGE> 87
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................ $1,044,885 $ 527,324 $ 626,782 $ 290,204 $1,122,466 $ 358,610
EXPENSES
Mortality and expense risks.............. 533,228 649,048 80,380 144,312 255,690 355,997
----------- ----------- ---------- ---------- ---------- -----------
Net investment income (loss)............. 511,657 (121,724) 546,402 145,892 866,776 2,613
----------- ----------- ---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain distributions reinvested... 5,253,449 2,887,725 77,467 1,152,021 2,815,676 727,665
Net realized gain from redemption of
investment shares...................... 965,614 1,224,507 123,771 156,064 391,666 814,167
----------- ----------- ---------- ---------- ---------- -----------
Net realized gain on investments......... 6,219,063 4,112,232 201,238 1,308,085 3,207,342 1,541,832
----------- ----------- ---------- ---------- ---------- -----------
Net unrealized appreciation of
investments:
Beginning of year...................... 9,654,194 12,974,029 471,856 1,745,917 4,535,884 4,431,677
End of year............................ 20,932,815 27,530,683 1,485,682 2,054,866 7,028,980 15,712,282
----------- ----------- ---------- ---------- ---------- -----------
Net unrealized appreciation of
investments during the year ........... 11,278,621 14,556,654 1,013,826 308,949 2,493,096 11,280,605
----------- ----------- ---------- ---------- ---------- -----------
Net realized and unrealized gain on
investments............................ 17,497,684 18,668,886 1,215,064 1,617,034 5,700,438 12,822,437
----------- ----------- ---------- ---------- ---------- -----------
Net increase in net assets resulting from
operations............................. $18,009,341 $18,547,162 $1,761,466 $1,762,926 $6,567,214 $12,825,050
=========== =========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-10
<PAGE> 88
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................... $307,980 $ 64,609 $ 77,242 $153,994
EXPENSES
Mortality and expense risks.................. 43,496 116,135 36,171 $ 146,708 23,036
-------- ---------- -------- ---------- --------
Net investment income (loss)................. 264,484 (51,526) 41,071 (146,708) 130,958
-------- ---------- -------- ---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain distributions reinvested....... 170,752 198,255 1,531,297
Net realized gain (loss) from redemption of
investment shares.......................... 2,841 199,925 106,220 611,229 (6,752)
-------- ---------- -------- ---------- --------
Net realized gain (loss) on investments...... 2,841 370,677 304,475 2,142,526 (6,752)
-------- ---------- -------- ---------- --------
Net unrealized appreciation of investments:
Beginning of year.......................... 155,266 477,324 71,201 1,243,267 19,157
End of year................................ 401,371 3,332,605 595,317 4,238,015 86,785
-------- ---------- -------- ---------- --------
Net unrealized appreciation of investments
during the year............................ 246,105 2,855,281 524,116 2,994,748 67,628
-------- ---------- -------- ---------- --------
Net realized and unrealized gain on
investments................................ 248,946 3,225,958 828,591 5,137,274 60,876
-------- ---------- -------- ---------- --------
Net increase in net assets resulting from
operations................................. $513,430 $3,174,432 $869,662 $4,990,566 $191,834
======== ========== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
F-11
<PAGE> 89
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING SMALL
APPRECIATION BOND HARD ASSETS MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $105,223 $ 45,568 $ 9,541
EXPENSES
Mortality and expense risks..................... $ 56,416 25,359 12,555 31,122 $ 90,562
----------- -------- --------- ----------- ----------
Net investment income (loss).................... (56,416) 79,864 33,013 (21,581) (90,562)
----------- -------- --------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain distributions reinvested.......... 171,163 33,634 449,342
Net realized gain (loss) from redemption of
investment shares............................. (90,120) 12,516 61,163 82,065 11,202
----------- -------- --------- ----------- ----------
Net realized gain on investments................ 81,043 12,516 94,797 82,065 460,544
----------- -------- --------- ----------- ----------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year............................. (633,726) 70,532 187,278 90,708 173,011
End of year................................... (1,024,766) 61,527 (31,204) (1,437,453) 1,324,974
----------- -------- --------- ----------- ----------
Net unrealized appreciation (depreciation) of
investments during the year................... (391,040) (9,005) (218,482) (1,528,161) 1,151,963
----------- -------- --------- ----------- ----------
Net realized and unrealized gain (loss) on
investments................................... (309,997) 3,511 (123,685) (1,446,096) 1,612,507
----------- -------- --------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations............................... $ (366,413) $ 83,375 $ (90,672) $(1,467,677) $1,521,945
=========== ======== ========= =========== ==========
</TABLE>
See accompanying notes to financial statements
F-12
<PAGE> 90
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................. $ 4,325,341 $1,024,420 $ 606,893 $1,018,010 $ 206,506 $ 289,229
EXPENSES
Mortality and expense risks............ 954,536 141,194 66,990 179,326 151,081 191,387
Operating expense reimbursement........ (3,491) (146) (1,087)
----------- ---------- --------- ---------- ---------- ----------
Total expenses......................... 951,045 141,048 65,903 179,326 151,081 191,387
----------- ---------- --------- ---------- ---------- ----------
Net investment income.................. 3,374,296 883,372 540,990 838,684 55,425 97,842
----------- ---------- --------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions
reinvested........................... 6,799,388 1,102,736 2,080,731 1,172,472
Net realized gain (loss) from
redemption of investment shares...... 3,053,590 (2,425) 628,270 460,172 273,023
----------- ---------- --------- ---------- ---------- ----------
Net realized gain (loss) on
investments.......................... 9,852,978 (2,425) 1,731,006 2,540,903 1,445,495
----------- ---------- --------- ---------- ---------- ----------
Net unrealized appreciation
(depreciation) of investments:
Beginning of year.................... 23,244,683 443,614 3,562,768 2,711,686 2,138,159
End of year.......................... 36,782,658 143,144 4,034,365 4,227,761 3,295,188
----------- ---------- --------- ---------- ---------- ----------
Net unrealized appreciation
(depreciation) of investments during
the year............................. 13,537,975 (300,470) 471,597 1,516,075 1,157,029
----------- ---------- --------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments....................... 23,390,953 (302,895) 2,202,603 4,056,978 2,602,524
----------- ---------- --------- ---------- ---------- ----------
Net increase in net assets resulting
from operations...................... $26,765,249 $ 883,372 $ 238,095 $3,041,287 $4,112,403 $2,700,366
=========== ========== ========= ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-13
<PAGE> 91
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------
1996 SERIES 2006 SERIES
SUBACCOUNT** SUBACCOUNT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Mortality and expense risks................................. $ 4,977 $ 33,364
Asset charge................................................ 1,982 12,204
--------- ---------
Net investment loss......................................... (6,959) (45,568)
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from redemption of investment shares...... 230,886 132,042
--------- ---------
Net realized gain on investments............................ 230,886 132,042
--------- ---------
Net unrealized appreciation (depreciation) of investments:
Beginning of year......................................... 195,315 910,239
End of year............................................... 744,136
--------- ---------
Net unrealized depreciation of investments during the
year...................................................... (195,315) (166,103)
--------- ---------
Net realized and unrealized gain (loss) on investments...... 35,571 (34,061)
--------- ---------
Net increase (decrease) in net assets resulting from
operations................................................ $ 28,612 $ (79,629)
========= =========
</TABLE>
** For the period January 1, 1996 to May 15, 1996 (date of maturity).
See accompanying notes to financial statements
F-14
<PAGE> 92
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................ $ 55,034 $ 133,186 $289,256 $ 105,244 $ 989,396 $ 114,956
EXPENSES
Mortality and expense risks.............. 324,906 435,364 40,586 83,411 196,306 106,980
---------- ---------- -------- ---------- ---------- ----------
Net investment income (loss)............. (269,872) (302,178) 248,670 21,833 793,090 7,976
---------- ---------- -------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain distributions reinvested... 1,577,632 3,362,939 56,594 115,769 815,818 295,601
Net realized gain from redemption of
investment shares...................... 292,479 461,027 136,266 72,206 42,369 108,595
---------- ---------- -------- ---------- ---------- ----------
Net realized gain on investments......... 1,870,111 3,823,966 192,860 187,975 858,187 404,196
---------- ---------- -------- ---------- ---------- ----------
Net unrealized appreciation of
investments:
Beginning of year...................... 5,231,207 8,695,334 207,596 502,338 2,425,055 1,377,575
End of year............................ 9,654,194 12,974,029 471,856 1,745,917 4,535,884 4,431,677
---------- ---------- -------- ---------- ---------- ----------
Net unrealized appreciation of
investments during the year............ 4,422,987 4,278,695 264,260 1,243,579 2,110,829 3,054,102
---------- ---------- -------- ---------- ---------- ----------
Net realized and unrealized gain on
investments............................ 6,293,098 8,102,661 457,120 1,431,554 2,969,016 3,458,298
---------- ---------- -------- ---------- ---------- ----------
Net increase in net assets resulting from
operations............................. $6,023,226 $7,800,483 $705,790 $1,453,387 $3,762,106 $3,466,274
========== ========== ======== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-15
<PAGE> 93
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------------------------------
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................. $122,049 $ 79,943 $ 4,468 $111,448
EXPENSES
Mortality and expense risks................ 40,295 $ 9,544 27,615 98,600 11,344
-------- -------- -------- ---------- --------
Net investment income (loss)............... 81,754 (9,544) 52,328 (94,132) 100,104
-------- -------- -------- ---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain distributions reinvested..... 444,565 1,045,605
Net realized gain (loss) from redemption of
investment shares........................ 34,895 3,778 14,849 96,798 (8,673)
-------- -------- -------- ---------- --------
Net realized gain (loss) on investments.... 34,895 3,778 459,414 1,142,403 (8,673)
-------- -------- -------- ---------- --------
Net unrealized appreciation (depreciation)
of investments:
Beginning of year........................ 173,631 337,802 1,140,571 44,695
End of year.............................. 155,266 477,324 71,201 1,243,267 19,157
-------- -------- -------- ---------- --------
Net unrealized appreciation (depreciation)
of investments during the year........... (18,365) 477,324 (266,601) 102,696 (25,538)
-------- -------- -------- ---------- --------
Net realized and unrealized gain (loss) on
investments.............................. 16,530 481,102 192,813 1,245,099 (34,211)
-------- -------- -------- ---------- --------
Net increase in net assets resulting from
operations............................... $ 98,284 $471,558 $245,141 $1,150,967 $ 65,893
======== ======== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
F-16
<PAGE> 94
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------------------------------
VAN ECK VAN ECK GOLD VAN ECK ALGER AMERICAN
WORLDWIDE AND NATURAL EMERGING SMALL
TCI GROWTH BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................. $65,988 $ 12,742 $ 219 $ 95
EXPENSES
Mortality and expense risks............... $ 49,667 15,456 10,810 4,045 17,365
----------- ------- -------- ------- -------
Net investment income (loss).............. (49,667) 50,532 1,932 (3,826) (17,270)
----------- ------- -------- ------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized gain distributions reinvested.... 728,835 12,496
Net realized gain (loss) from redemption
of investment shares.................... 127,215 20,012 40,140 470 (59,161)
----------- ------- -------- ------- -------
Net realized gain (loss) on investments... 856,050 20,012 52,636 470 (59,161)
----------- ------- -------- ------- -------
Net unrealized appreciation (depreciation)
of investments:
Beginning of year....................... 584,114 70,122 65,442
End of year............................. (633,726) 70,532 187,278 90,708 173,011
----------- ------- -------- ------- -------
Net unrealized appreciation (depreciation)
of investments during the year.......... (1,217,840) 410 121,836 90,708 173,011
----------- ------- -------- ------- -------
Net realized and unrealized gain (loss) on
investments............................. (361,790) 20,422 174,472 91,178 113,850
----------- ------- -------- ------- -------
Net increase (decrease) in net assets
resulting from operations............... $ (411,457) $70,954 $176,404 $87,352 $96,580
=========== ======= ======== ======= =======
</TABLE>
See accompanying notes to financial statements
F-17
<PAGE> 95
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................... $ 3,702,641 $817,140 $ 548,703 $1,057,761 $ 94,132
EXPENSES
Mortality and expense risks............. 767,425 101,404 56,053 152,755 $ 106,115 139,362
Operating expense reimbursement......... (12,376) (538) (1,846)
----------- -------- ---------- ---------- ---------- ----------
Total expenses.......................... 755,049 100,866 54,207 152,755 106,115 139,362
----------- -------- ---------- ---------- ---------- ----------
Net investment income (loss)............ 2,947,592 716,274 494,496 905,006 (106,115) (45,230)
----------- -------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Realized gain distributions
reinvested............................ 7,782,999 24,410 109,290 444,778
Net realized gain from redemption of
investment shares..................... 1,322,359 8,291 502,630 169,077 440,185
----------- -------- ---------- ---------- ---------- ----------
Net realized gain on investments........ 9,105,358 8,291 527,040 278,367 884,963
----------- -------- ---------- ---------- ---------- ----------
Net unrealized appreciation
(depreciation)
of investments:
Beginning of year..................... 3,760,116 (660,717) (168,478) 1,000,654 372,684
End of year........................... 23,244,683 443,614 3,562,768 2,711,686 2,138,159
----------- -------- ---------- ---------- ---------- ----------
Net unrealized appreciation of
investments during the year........... 19,484,567 1,104,331 3,731,246 1,711,032 1,765,475
----------- -------- ---------- ---------- ---------- ----------
Net realized and unrealized gain
on investments........................ 28,589,925 1,112,622 4,258,286 1,989,399 2,650,438
----------- -------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations....................... $31,537,517 $716,274 $1,607,118 $5,163,292 $1,883,284 $2,605,208
=========== ======== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE> 96
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------
1996 SERIES 2006 SERIES
SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Mortality and expense risks................................. $ 11,204 $ 24,226
Asset charge................................................ 4,511 8,855
-------- ----------
Net investment loss......................................... (15,715) (33,081)
-------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from redemption of investment shares...... 46,689 103,889
-------- ----------
Net realized gain on investments............................ 46,689 103,889
-------- ----------
Net unrealized appreciation (depreciation) of investments:
Beginning of year......................................... 89,755 (32,676)
End of year............................................... 195,315 910,239
-------- ----------
Net unrealized appreciation of investments during the
year...................................................... 105,560 942,915
-------- ----------
Net realized and unrealized gain on investments............. 152,249 1,046,804
-------- ----------
Net increase in net assets resulting from operations........ $136,534 $1,013,723
======== ==========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE> 97
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY INVESTMENT
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500 GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................... $ 537,930 $ 119,536 $ 41,451 $ 14,561 $ 459,474 $ 50,011 $ 28,403
EXPENSES
Mortality and expense
risks...................... 149,976 229,692 10,896 39,734 171,262 35,351 9,588
---------- ---------- -------- -------- ---------- ---------- --------
Net investment income
(loss)..................... 387,954 (110,156) 30,555 (25,173) 288,212 14,660 18,815
---------- ---------- -------- -------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain distributions
reinvested................. 640,717 14,561 6,844
Net realized gain (loss) from
redemption of investment
shares..................... 38,430 50,953 6,119 5,737 (74,582) 89,812 11,650
---------- ---------- -------- -------- ---------- ---------- --------
Net realized gain (loss)
on investments............. 679,147 50,953 6,119 20,298 (74,582) 96,656 11,650
---------- ---------- -------- -------- ---------- ---------- --------
Net unrealized appreciation
(depreciation) of
investments:
Beginning of year.......... 80,034 60,179 (1,350) (77,282) (1,113,746) 20,259 (2,065)
End of year................ 5,231,207 8,695,334 207,596 502,338 2,425,055 1,377,575 173,631
---------- ---------- -------- -------- ---------- ---------- --------
Net unrealized appreciation
of investments during the
year....................... 5,151,173 8,635,155 208,946 579,620 3,538,801 1,357,316 175,696
---------- ---------- -------- -------- ---------- ---------- --------
Net realized and unrealized
gain on investments........ 5,830,320 8,686,108 215,065 599,918 3,464,219 1,453,972 187,346
---------- ---------- -------- -------- ---------- ---------- --------
Net increase in net assets
resulting from
operations................. $6,218,274 $8,575,952 $245,620 $574,745 $3,752,431 $1,468,632 $206,161
========== ========== ======== ======== ========== ========== ========
</TABLE>
See accompanying notes to financial statements
F-20
<PAGE> 98
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
NEUBERGER NEUBERGER NEUBERGER VAN ECK VAN ECK
& BERMAN & BERMAN & BERMAN LIMITED TCI WORLDWIDE GOLD AND NATURAL
BALANCED GROWTH MATURITY BOND GROWTH BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................... $ 38,294 $ 10,198 $15,353 $ 1,318 $ 89,753 $ 7,028
EXPENSES
Mortality and expense risks... 17,742 47,689 4,199 18,644 8,303 4,526
-------- ---------- ------- -------- -------- -------
Net investment income
(loss)...................... 20,552 (37,491) 11,154 (17,326) 81,450 2,502
-------- ---------- ------- -------- -------- -------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain distributions
reinvested.................. 12,309 136,648
Net realized gain (loss) from
redemption of investment
shares...................... 14,321 (13,352) 2,057 24,415 9,650 (2,771)
-------- ---------- ------- -------- -------- -------
Net realized gain (loss)
on investments.............. 26,630 123,296 2,057 24,415 9,650 (2,771)
-------- ---------- ------- -------- -------- -------
Net unrealized appreciation
(depreciation) of
investments:
Beginning of year........... (87,659) (221,388) 267 25,541 9,600 (11,497)
End of year................. 337,802 1,140,571 44,695 584,114 70,122 65,442
-------- ---------- ------- -------- -------- -------
Net unrealized appreciation of
investments during the
year........................ 425,461 1,361,959 44,428 558,573 60,522 76,939
-------- ---------- ------- -------- -------- -------
Net realized and unrealized
gain on investments......... 452,091 1,485,255 46,485 582,988 70,172 74,168
-------- ---------- ------- -------- -------- -------
Net increase in net assets
resulting from operations... $472,643 $1,447,764 $57,639 $565,662 $151,622 $76,670
======== ========== ======= ======== ======== =======
</TABLE>
See accompanying notes to financial statements
F-21
<PAGE> 99
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income.............. $ 2,759,199 $ 1,095,585 $ 651,271 $ 904,070 $ 45,091 $ 16,822
Net realized gain (loss) on
investments...................... 23,707,890 (7,292) 1,198,755 626,630 2,605,339
Net unrealized appreciation of
investments during the year...... 13,153,464 401,987 4,050,080 4,896,760 278,626
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets from
operations....................... 39,620,553 1,095,585 1,045,966 6,152,905 5,568,481 2,900,787
------------ ------------ ----------- ----------- ----------- -----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net premiums........ 28,779,076 41,392,009 2,883,256 5,061,216 7,652,795 9,275,052
Cost of insurance and
administrative charges........... (11,378,551) (4,214,952) (1,049,368) (2,164,675) (2,627,095) (3,135,940)
Surrenders and forfeitures......... (10,450,206) (893,804) (421,877) (1,834,332) (1,314,144) (1,656,263)
Transfers between investment
portfolios....................... (4,245,851) (38,647,233) 25,947 (1,015,633) 327,609 (19,790)
Net withdrawals due to policy
loans............................ (3,880,476) (348,424) (150,015) (428,805) (565,546) (566,895)
Withdrawals due to death
benefits......................... (453,320) (10,985) (23,685) (113,392) (12,782) (25,012)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from policy
transactions..................... (1,629,328) (2,723,389) 1,264,258 (495,621) 3,460,837 3,871,152
------------ ------------ ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets........................... 37,991,225 (1,627,804) 2,310,224 5,657,284 9,029,318 6,771,939
NET ASSETS
Beginning of year................ 168,790,550 24,620,716 11,170,309 30,515,686 25,897,926 31,990,185
------------ ------------ ----------- ----------- ----------- -----------
End of year...................... $206,781,775 $ 22,992,912 $13,480,533 $36,172,970 $34,927,244 $38,762,124
============ ============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE> 100
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- ------------------------------------------------------------------------------
2006 SERIES
SUBACCOUNT
- ------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS
Net investment loss......................................... $ (65,256)
Net realized gain on investments............................ 240,323
Net unrealized appreciation of investments during the
year...................................................... 610,746
----------
Net increase in net assets from operations.................. 785,813
----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................................. 2,330,310
Cost of insurance and administrative charges................ (788,189)
Surrenders and forfeitures.................................. (153,867)
Transfers between investment portfolios..................... 143,804
Net withdrawals due to policy loans......................... (88,482)
----------
Net increase in net assets derived from policy
transactions.............................................. 1,443,576
----------
Total increase in net assets................................ 2,229,389
NET ASSETS
Beginning of year......................................... 6,412,597
----------
End of year............................................... $8,641,986
==========
</TABLE>
See accompanying notes to financial statements
F-23
<PAGE> 101
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............ $ 511,657 $ (121,724) $ 546,402 $ 145,892 $ 866,776 $ 2,613
Net realized gain on investments........ 6,219,063 4,112,232 201,238 1,308,085 3,207,342 1,541,832
Net unrealized appreciation of
investments during the year........... 11,278,621 14,556,654 1,013,826 308,949 2,493,096 11,280,605
----------- ------------ ----------- ----------- ----------- -----------
Net increase in net assets from
operations............................ 18,009,341 18,547,162 1,761,466 1,762,926 6,567,214 12,825,050
----------- ------------ ----------- ----------- ----------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums............. 23,646,606 29,144,250 3,594,929 6,932,947 8,034,994 23,023,710
Cost of insurance and administrative
charges............................... (7,387,112) (9,463,481) (1,076,133) (1,901,779) (3,249,362) (5,704,702)
Surrenders and forfeitures.............. (2,364,387) (3,547,931) (171,214) (612,736) (1,661,468) (997,451)
Transfers between investment
portfolios............................ 4,047,525 (416,903) 2,763,974 2,738,393 1,079,135 15,621,648
Net withdrawals due to policy loans..... (1,015,473) (1,502,812) (45,505) (320,179) (309,555) (1,042,356)
Withdrawals due to death benefits....... (74,532) (11,969) (5,636) (7,293) (14,147) (95,105)
----------- ------------ ----------- ----------- ----------- -----------
Net increase in net assets derived from
policy transactions................... 16,852,627 14,201,154 5,060,415 6,829,353 3,879,597 30,805,744
----------- ------------ ----------- ----------- ----------- -----------
Total increase in net assets............ 34,861,968 32,748,316 6,821,881 8,592,279 10,446,811 43,630,794
NET ASSETS
Beginning of year..................... 58,937,798 76,905,059 8,480,451 15,807,688 31,713,849 28,434,057
----------- ------------ ----------- ----------- ----------- -----------
End of year........................... $93,799,766 $109,653,375 $15,302,332 $24,399,967 $42,160,660 $72,064,851
=========== ============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-24
<PAGE> 102
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................. $ 264,484 $ (51,526) $ 41,071 $ (146,708) $ 130,958
Net realized gain (loss) on investments...... 2,841 370,677 304,475 2,142,526 (6,752)
Net unrealized appreciation of investments
during the year............................ 246,105 2,855,281 524,116 2,994,748 67,628
---------- ----------- ---------- ----------- ----------
Net increase in net assets from operations... 513,430 3,174,432 869,662 4,990,566 191,834
---------- ----------- ---------- ----------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.................. 2,548,565 8,274,186 1,807,306 7,165,598 1,348,185
Cost of insurance and administrative
charges.................................... (747,877) (1,798,797) (639,602) (2,369,791) (271,833)
Surrenders and forfeitures................... (206,163) (425,566) (137,713) (676,292) (29,867)
Transfers between investment portfolios...... 816,573 10,232,231 (79,543) (721,651) 482,396
Net withdrawals due to policy loans.......... (22,522) (201,694) (66,441) (286,901) (15,620)
Withdrawals due to death benefits............ (1,057) (6,670) (13,455)
---------- ----------- ---------- ----------- ----------
Net increase in net assets derived from
policy transactions........................ 2,387,519 16,073,690 884,007 3,097,508 1,513,261
---------- ----------- ---------- ----------- ----------
Total increase in net assets................. 2,900,949 19,248,122 1,753,669 8,088,074 1,705,095
NET ASSETS
Beginning of year.......................... 4,996,981 6,183,362 4,627,706 17,052,789 2,517,888
---------- ----------- ---------- ----------- ----------
End of year................................ $7,897,930 $25,431,484 $6,381,375 $25,140,863 $4,222,983
========== =========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements
F-25
<PAGE> 103
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING SMALL
APPRECIATION BOND HARD ASSETS MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............... $ (56,416) $ 79,864 $ 33,013 $ (21,581) $ (90,562)
Net realized gain on investments........... 81,043 12,516 94,797 82,065 460,544
Net unrealized appreciation (depreciation)
of investments during the year........... (391,040) (9,005) (218,482) (1,528,161) 1,151,963
----------- ---------- ---------- ----------- -----------
Net increase (decrease) in net assets from
operations............................... (366,413) 83,375 (90,672) (1,467,677) 1,521,945
----------- ---------- ---------- ----------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................ 3,692,178 1,320,768 883,387 3,474,642 6,837,744
Cost of insurance and administrative
charges.................................. (1,145,513) (371,619) (246,420) (677,362) (1,662,591)
Surrenders and forfeitures................. (268,757) (100,365) (28,046) (58,433) (334,781)
Transfers between investment portfolios.... (1,462,705) 321,170 539,670 2,962,129 4,643,633
Net withdrawals due to policy loans........ (101,019) (20,808) (32,784) (81,551) (221,848)
Withdrawals due to death benefits.......... (5,826) (2,563) (19) (4,220) (15,361)
----------- ---------- ---------- ----------- -----------
Net increase in net assets derived from
policy transactions...................... 708,358 1,146,583 1,115,788 5,615,205 9,246,796
----------- ---------- ---------- ----------- -----------
Total increase in net assets............... 341,945 1,229,958 1,025,116 4,147,528 10,768,741
NET ASSETS
Beginning of year........................ 8,092,459 3,147,177 1,756,052 2,216,381 7,964,072
----------- ---------- ---------- ----------- -----------
End of year.............................. $ 8,434,404 $4,377,135 $2,781,168 $6,363,909 $18,732,813
=========== ========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-26
<PAGE> 104
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income........... $ 3,374,296 $ 883,372 $ 540,990 $ 838,684 $ 55,425 $ 97,842
Net realized gain (loss) on
investments................... 9,852,978 (2,425) 1,731,006 2,540,903 1,445,495
Net unrealized appreciation
(depreciation) of investments
during the year............... 13,537,975 (300,470) 471,597 1,516,075 1,157,029
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets from
operations.................... 26,765,249 883,372 238,095 3,041,287 4,112,403 2,700,366
------------ ------------ ----------- ----------- ----------- -----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net premiums..... 30,021,490 38,804,263 2,684,818 5,312,990 7,299,202 8,944,269
Cost of insurance and
administrative charges........ (10,923,039) (3,577,047) (907,984) (2,141,363) (2,409,140) (2,851,005)
Surrenders and forfeitures...... (8,868,122) (807,207) (593,919) (1,485,140) (1,084,540) (949,465)
Transfers between investment
portfolios.................... (6,972,133) (27,374,079) (359,010) (488,185) (814,283) 567,594
Net withdrawals due to policy
loans......................... (2,932,321) (111,880) (106,211) (604,659) (468,999) (321,175)
Withdrawals due to death
benefits...................... (361,511) (9,285) (12,934) (95,250) (24,597) (66,791)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from policy
transactions.................. (35,636) 6,924,765 704,760 498,393 2,497,643 5,323,427
------------ ------------ ----------- ----------- ----------- -----------
Return of capital to Provident
Mutual Life Insurance
Company....................... (200,000) (200,000) (200,000)
------------ ------------ ----------- ----------- ----------- -----------
Total increase in net assets.... 26,529,613 7,608,137 742,855 3,539,680 6,610,046 8,023,793
NET ASSETS
Beginning of year............. 142,260,937 17,012,579 10,427,454 26,976,006 19,287,880 23,966,392
------------ ------------ ----------- ----------- ----------- -----------
End of year................... $168,790,550 $ 24,620,716 $11,170,309 $30,515,686 $25,897,926 $31,990,185
============ ============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-27
<PAGE> 105
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- -----------------------------------------------------------------------------------------
1996 SERIES 2006 SERIES
SUBACCOUNT** SUBACCOUNT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss......................................... $ (6,959) $ (45,568)
Net realized gain on investments............................ 230,886 132,042
Net unrealized depreciation of investments during the
year...................................................... (195,315) (166,103)
----------- ----------
Net increase (decrease) in net assets from operations....... 28,612 (79,629)
----------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................................. 134,184 1,694,055
Cost of insurance and administrative charges................ (53,122) (662,460)
Surrenders and forfeitures.................................. (64,059) (111,668)
Transfers between investment portfolios..................... (1,958,937) 932,017
Net withdrawals due to policy loans......................... (2,908) (90,247)
Withdrawals due to death benefits........................... (9,233)
----------- ----------
Net increase (decrease) in net assets derived from policy
transactions.............................................. (1,944,842) 1,752,464
----------- ----------
Return of capital to Provident Mutual Life Insurance
Company................................................... (110,372) (50,000)
----------- ----------
Total increase (decrease) in net assets..................... (2,026,602) 1,622,835
NET ASSETS
Beginning of year......................................... 2,026,602 4,789,762
----------- ----------
End of year............................................... -- $6,412,597
=========== ==========
</TABLE>
** For the period January 1, 1996 to May 15, 1996 (date of maturity).
See accompanying notes to financial statements
F-28
<PAGE> 106
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............. $ (269,872) $ (302,178) $ 248,670 $ 21,833 $ 793,090 $ 7,976
Net realized gain on investments......... 1,870,111 3,823,966 192,860 187,975 858,187 404,196
Net unrealized appreciation of
investments during the year............ 4,422,987 4,278,695 264,260 1,243,579 2,110,829 3,054,102
----------- ----------- ---------- ----------- ----------- -----------
Net increase in net assets from
operations............................. 6,023,226 7,800,483 705,790 1,453,387 3,762,106 3,466,274
----------- ----------- ---------- ----------- ----------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.............. 20,410,261 27,775,181 3,074,003 5,377,187 8,617,164 11,388,269
Cost of insurance and administrative
charges................................ (5,694,885) (7,871,429) (690,043) (1,404,523) (3,144,049) (2,553,289)
Surrenders and forfeitures............... (1,264,322) (1,872,916) (55,762) (332,401) (1,388,200) (317,366)
Transfers between investment
portfolios............................. 6,265,641 5,416,680 2,218,407 2,222,639 (2,961,158) 7,671,836
Net withdrawals due to policy loans...... (479,134) (618,794) (72,022) (55,225) (258,013) (159,156)
Withdrawals due to death benefits........ (53,476) (60,875) (260) (5,086) (28,551) (5,498)
----------- ----------- ---------- ----------- ----------- -----------
Net increase in net assets derived from
policy transactions.................... 19,184,085 22,767,847 4,474,323 5,802,591 837,193 16,024,796
----------- ----------- ---------- ----------- ----------- -----------
Capital contribution from Provident
Mutual Life Insurance Company.......... 10,000
----------- ----------- ---------- ----------- ----------- -----------
Total increase in net assets............. 25,207,311 30,568,330 5,180,113 7,255,978 4,599,299 19,501,070
NET ASSETS
Beginning of year...................... 33,730,487 46,336,729 3,300,338 8,551,710 27,114,550 8,932,987
----------- ----------- ---------- ----------- ----------- -----------
End of year............................ $58,937,798 $76,905,059 $8,480,451 $15,807,688 $31,713,849 $28,434,057
=========== =========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-29
<PAGE> 107
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................... $ 81,754 $ (9,544) $ 52,328 $ (94,132) $ 100,104
Net realized gain (loss) on investments........ 34,895 3,778 459,414 1,142,403 (8,673)
Net unrealized appreciation (depreciation) of
investments during the year.................. (18,365) 477,324 (266,601) 102,696 (25,538)
---------- ---------- ---------- ----------- ----------
Net increase in net assets from operations..... 98,284 471,558 245,141 1,150,967 65,893
---------- ---------- ---------- ----------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.................... 2,130,821 1,896,133 1,626,992 6,888,258 785,194
Cost of insurance and administrative charges... (507,709) (242,291) (624,216) (2,046,331) (171,297)
Surrenders and forfeitures..................... (104,535) (16,144) (154,980) (371,468) (24,959)
Transfers between investment portfolios........ 1,064,874 4,057,384 346,579 1,059,064 758,312
Net withdrawals due to policy loans............ (28,781) (8,278) (35,100) (226,752) (3,617)
Withdrawals due to death benefits.............. (2,694) (14) (6,854)
---------- ---------- ---------- ----------- ----------
Net increase in net assets derived from policy
transactions................................. 2,551,976 5,686,804 1,159,261 5,295,917 1,343,633
---------- ---------- ---------- ----------- ----------
Capital contribution from Provident Mutual Life
Insurance Company............................ 25,000
---------- ---------- ---------- ----------- ----------
Total increase in net assets................... 2,650,260 6,183,362 1,404,402 6,446,884 1,409,526
NET ASSETS
Beginning of year............................ 2,346,721 -- 3,223,304 10,605,905 1,108,362
---------- ---------- ---------- ----------- ----------
End of year.................................. $4,996,981 $6,183,362 $4,627,706 $17,052,789 $2,517,888
========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements
F-30
<PAGE> 108
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ------------------------------------------------------------------------------------------------------------------
VAN ECK VAN ECK GOLD VAN ECK ALGER AMERICAN
WORLDWIDE AND NATURAL EMERGING SMALL
TCI GROWTH BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............... $ (49,667) $ 50,532 $ 1,932 $ (3,826) $ (17,270)
Net realized gain (loss) on investments.... 856,050 20,012 52,636 470 (59,161)
Net unrealized appreciation (depreciation)
of investments during the year........... (1,217,840) 410 121,836 90,708 173,011
----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets from
operations............................... (411,457) 70,954 176,404 87,352 96,580
----------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................ 4,409,737 1,208,131 620,876 591,991 2,284,400
Cost of insurance and administrative
charges.................................. (1,147,704) (293,018) (188,073) (84,624) (343,153)
Surrenders and forfeitures................. (213,245) (71,799) (66,529) (9,852) (29,701)
Transfers between investment portfolios.... 472,972 425,637 330,253 1,616,051 5,942,776
Net withdrawals due to policy loans........ (49,208) (3,329) (17,924) (9,537) (11,830)
Withdrawals due to death benefits.......... (412) (1,767) (235)
----------- ---------- ---------- ---------- ----------
Net increase in net assets derived from
policy transactions...................... 3,472,140 1,263,855 678,368 2,104,029 7,842,492
----------- ---------- ---------- ---------- ----------
Capital contribution from Provident Mutual
Life Insurance Company................... 25,000 25,000
----------- ---------- ---------- ---------- ----------
Total increase in net assets............... 3,060,683 1,334,809 854,772 2,216,381 7,964,072
NET ASSETS
Beginning of year........................ 5,031,776 1,812,368 901,280 -- --
----------- ---------- ---------- ---------- ----------
End of year.............................. $8,092,459 $3,147,177 $1,756,052 $2,216,381 $7,964,072
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-31
<PAGE> 109
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss).... $ 2,947,592 $ 716,274 $ 494,496 $ 905,006 $ (106,115) $ (45,230)
Net realized gain on
investments................... 9,105,358 8,291 527,040 278,367 884,963
Net unrealized appreciation of
investments during the year... 19,484,567 1,104,331 3,731,246 1,711,032 1,765,475
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets
from operations............... 31,537,517 716,274 1,607,118 5,163,292 1,883,284 2,605,208
------------ ------------ ----------- ----------- ----------- -----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net premiums..... 31,018,881 25,991,971 2,748,728 5,437,753 6,979,778 9,246,142
Cost of insurance and
administrative charges........ (10,800,913) (2,892,532) (854,427) (2,184,118) (2,095,129) (2,653,024)
Surrenders and forfeitures...... (6,000,652) (483,482) (459,150) (1,593,554) (741,748) (749,885)
Transfers between investment
portfolios.................... (3,728,068) (18,394,049) (5,935) (1,219,218) 939,005 (706,696)
Net withdrawals due to
policy loans.................. (2,394,343) (216,018) (159,387) (166,162) (463,436) (428,384)
Withdrawals due to death
benefits...................... (179,253) (13) (742) (86,605) (962) (2,302)
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets
derived from policy
transactions.................. 7,915,652 4,005,877 1,269,087 188,096 4,617,508 4,705,851
------------ ------------ ----------- ----------- ----------- -----------
Return of capital to Provident
Mutual Life Insurance
Company....................... (500,000)
------------ ------------ ----------- ----------- ----------- -----------
Total increase in net assets.... 39,453,169 4,222,151 2,876,205 5,351,388 6,500,792 7,311,059
NET ASSETS
Beginning of year............. 102,807,768 12,790,428 7,551,249 21,624,618 12,787,088 16,655,333
------------ ------------ ----------- ----------- ----------- -----------
End of year................... $142,260,937 $ 17,012,579 $10,427,454 $26,976,006 $19,287,880 $23,966,392
============ ============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-32
<PAGE> 110
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ZERO COUPON BOND
SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------
1996 SERIES 2006 SERIES
SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss......................................... $ (15,715) $ (33,081)
Net realized gain on investments............................ 46,689 103,889
Net unrealized appreciation of investments during the
year...................................................... 105,560 942,915
---------- ----------
Net increase in net assets from operations.................. 136,534 1,013,723
---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................................. 343,230 1,330,797
Cost of insurance and administrative charges................ (138,727) (557,882)
Surrenders and forfeitures.................................. (43,836) (118,177)
Transfers between investment portfolios..................... 9,271 435,416
Net withdrawals due to policy loans......................... (10,176) (42,959)
Withdrawals due to death benefits........................... (6,089) (13,021)
---------- ----------
Net increase in net assets derived from policy
transactions.............................................. 153,673 1,034,174
---------- ----------
Total increase in net assets................................ 290,207 2,047,897
NET ASSETS
Beginning of year......................................... 1,736,395 2,741,865
---------- ----------
End of year............................................... $2,026,602 $4,789,762
========== ==========
</TABLE>
See accompanying notes to financial statements
F-33
<PAGE> 111
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY INVESTMENT
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500 GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income
(loss)..................... $ 387,954 $ (110,156) $ 30,555 $ (25,173) $ 288,212 $ 14,660 $ 18,815
Net realized gain (loss)
on investments............. 679,147 50,953 6,119 20,298 (74,582) 96,656 11,650
Net unrealized appreciation
of investments during the
year....................... 5,151,173 8,635,155 208,946 579,620 3,538,801 1,357,316 175,696
----------- ----------- ---------- ---------- ----------- ---------- ----------
Net increase in net assets
from operations............ 6,218,274 8,575,952 245,620 574,745 3,752,431 1,468,632 206,161
----------- ----------- ---------- ---------- ----------- ---------- ----------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net
premiums................... 13,095,871 17,511,135 1,445,564 3,784,564 10,792,167 4,239,917 1,185,287
Cost of insurance and
administrative charges..... (3,309,981) (4,789,358) (294,993) (928,908) (3,421,593) (917,384) (302,207)
Surrenders and forfeitures... (472,892) (862,489) (37,516) (109,478) (1,270,363) (258,007) (19,498)
Transfers between investment
portfolios................. 6,941,542 6,044,742 1,436,977 2,186,754 (3,131,839) 2,120,394 724,450
Net withdrawals due to
policy loans............... (527,820) (732,057) (11,036) (116,872) (272,150) (126,445) (43,336)
Withdrawals due to
death benefits............. (944) (4,026) (1,606) (650) (842)
----------- ----------- ---------- ---------- ----------- ---------- ----------
Net increase in net assets
derived from policy
transactions............... 15,725,776 17,167,947 2,537,390 4,815,410 2,695,380 5,058,475 1,544,696
----------- ----------- ---------- ---------- ----------- ---------- ----------
Total increase in net
assets..................... 21,944,050 25,743,899 2,783,010 5,390,155 6,447,811 6,527,107 1,750,857
NET ASSETS
Beginning of year.......... 11,786,437 20,592,830 517,328 3,161,555 20,666,739 2,405,880 595,864
----------- ----------- ---------- ---------- ----------- ---------- ----------
End of year................ $33,730,487 $46,336,729 $3,300,338 $8,551,710 $27,114,550 $8,932,987 $2,346,721
=========== =========== ========== ========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-34
<PAGE> 112
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Statements of Changes in Net Assets for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE SEPARATE ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------
NEUBERGER NEUBERGER NEUBERGER VAN ECK VAN ECK
& BERMAN & BERMAN & BERMAN LIMITED TCI WORLDWIDE GOLD AND NATURAL
BALANCED GROWTH MATURITY BOND GROWTH BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income
(loss)...................... $ 20,552 $ (37,491) $ 11,154 $ (17,326) $ 81,450 $ 2,502
Net realized gain (loss) on
investments................. 26,630 123,296 2,057 24,415 9,650 (2,771)
Net unrealized appreciation of
investments during the
year........................ 425,461 1,361,959 44,428 558,573 60,522 76,939
---------- ----------- ---------- ---------- ---------- ---------
Net increase in net assets
from operations............. 472,643 1,447,764 57,639 565,662 151,622 76,670
---------- ----------- ---------- ---------- ---------- ---------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net premiums... 1,179,627 4,320,950 436,960 2,085,717 756,804 418,351
Cost of insurance and
administrative charges...... (478,895) (1,153,245) (99,801) (491,728) (179,695) (130,611)
Surrenders and forfeitures.... (151,809) (214,306) (1,233) (119,956) (36,252) (39,102)
Transfers between investment
portfolios.................. 415,228 2,575,178 495,684 1,896,269 507,453 179,444
Net withdrawals due to policy
loans....................... (56,816) (129,622) (2,306) (35,265) (25,846) (8,641)
Withdrawals due to death
benefits.................... (22) (5,466) (502)
---------- ----------- ---------- ---------- ---------- ---------
Net increase in net assets
derived from policy
transactions................ 907,313 5,393,489 829,304 3,334,535 1,022,464 419,441
---------- ----------- ---------- ---------- ---------- ---------
Total increase in net
assets...................... 1,379,956 6,841,253 886,943 3,900,197 1,174,086 496,111
NET ASSETS
Beginning of year........... 1,843,348 3,764,652 221,419 1,131,579 638,282 405,169
---------- ----------- ---------- ---------- ---------- ---------
End of year................. $3,223,304 $10,605,905 $1,108,362 $5,031,776 $1,812,368 $ 901,280
========== =========== ========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements
F-35
<PAGE> 113
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Growth, Money Market, Bond, Managed, Aggressive Growth, International,
Zero Coupon Bond and Variable Separate Accounts (Separate Accounts) were
established by Provident Mutual Life Insurance Company (Provident Mutual) under
the provisions of the Pennsylvania Insurance Law. Each Separate Account is a
separate investment account to which assets are allocated to support the
benefits payable under single premium, modified premium, scheduled premium and
flexible premium adjustable variable life insurance policies (the Policies). The
Aggressive Growth, International, and Variable Separate Accounts are not
available with single premium and scheduled premium policies. The Zero Coupon
Bond Separate Account is not available with scheduled premium policies.
The Policies are distributed principally through career agents and brokers.
Provident Mutual has structured the Separate Accounts as unit investment
trusts registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended.
The Growth, Money Market, Bond, Managed, Aggressive Growth and
International Separate Accounts invest in the corresponding portfolios of the
Market Street Fund, Inc.
The Zero Coupon Bond Separate Account is comprised of the 2006 Series
Subaccount. Funds are transferred to Merrill Lynch, Pierce, Fenner & Smith
(MLPFS), who serves as sponsor of The Stripped ("Zero") U.S. Treasury Securities
Fund, Provident Mutual Series A (Zero Coupon Trust). The 2006 Series Subaccount
invests in the 2006 Series Portfolio of the Zero Coupon Trust. On May 15, 1996,
a second Subaccount was terminated due to the maturity of the underlying series
of the Zero Coupon Trust.
The Variable Separate Account is comprised of sixteen Subaccounts: the
Fidelity Equity-Income, Fidelity Growth, Fidelity High Income and Fidelity
Overseas Subaccounts invest in the corresponding portfolios of the Variable
Insurance Products Fund; the Fidelity Asset Manager, Fidelity Index 500,
Fidelity Investment Grade Bond and Fidelity Contrafund Subaccounts invest in the
corresponding portfolios of the Variable Insurance Products Fund II; the
Neuberger & Berman Balanced, Neuberger & Berman Growth and Neuberger & Berman
Limited Maturity Bond Subaccounts invest in the corresponding portfolios of the
Neuberger & Berman Advisers Management Trust; the American Century VP Capital
Appreciation (formerly TCI Growth) Subaccount invests in the corresponding
portfolio of the American Century Variable Portfolios, Inc. (formerly TCI
Portfolios, Inc.); the Van Eck Worldwide Bond, Van Eck Worldwide Hard Assets
(formerly Van Eck Gold and Natural Resources) and Van Eck Worldwide Emerging
Markets (formerly Van Eck Emerging Markets) Subaccounts invest in the
corresponding portfolios of the Van Eck Worldwide Insurance Trust; and the Alger
American Small Capitalization Subaccount invests in the corresponding portfolio
of the Alger American Fund.
Net premiums from in-force Policies are allocated to the Separate Accounts
in accordance with policyholder instructions and are recorded as variable life
policy transactions in the statements of changes in net assets. Such amounts are
used to provide money to pay benefits under the Policies (Note 4). Each Separate
Account's assets are the property of Provident Mutual.
F-36
<PAGE> 114
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
1. ORGANIZATION, CONTINUED
Transfers between investment portfolios include transfers between the
Separate Accounts and the Guaranteed Account (not shown), which is part of
Provident Mutual's General Account.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Separate Accounts included in the financial statements.
Investment Valuation:
Investment shares are valued at the net asset values of the respective
Portfolios. Transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date.
Realized Gains and Losses:
Realized gains and losses on sales of investment shares are determined
using the specific identification basis for financial reporting and income tax
purposes.
Federal Income Taxes:
The operations of the Separate Accounts are included in the Federal income
tax return of Provident Mutual. Under the provisions of the Policies, Provident
Mutual has the right to charge the Separate Accounts for Federal income tax
attributable to the Separate Accounts. No charge is currently being made against
the Separate Accounts for such tax.
Estimates:
The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities and the reported amounts from operations and policy
transactions during the period. Actual results could differ from those
estimates.
F-37
<PAGE> 115
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS
At December 31, 1997, the investments of the respective Separate
Accounts/Subaccounts are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Market Street Fund, Inc.:
Growth Portfolio................................ 10,631,736 $156,957,462 $206,893,584
Money Market Portfolio.......................... 22,625,570 $22,625,570 $22,625,570
Bond Portfolio.................................. 1,229,106 $12,950,450 $13,495,581
Managed Portfolio............................... 2,121,455 $28,107,582 $36,192,027
Aggressive Growth Portfolio..................... 1,574,008 $25,802,723 $34,927,244
International Portfolio......................... 2,848,062 $35,188,310 $38,762,124
The Stripped ("Zero") U.S. Treasury Securities
Fund, Provident Mutual Series A:
2006 Series..................................... 13,633,327 $7,302,281 $8,657,163
Variable Insurance Products Fund:
Equity-Income Portfolio......................... 3,863,252 $72,866,951 $93,799,766
Growth Portfolio................................ 2,955,617 $82,122,692 $109,653,375
High Income Portfolio........................... 1,126,829 $13,816,650 $15,302,332
Overseas Portfolio.............................. 1,270,832 $22,345,101 $24,399,967
Variable Insurance Products Fund II:
Asset Manager Portfolio......................... 2,340,958 $35,131,680 $42,160,660
Index 500 Portfolio............................. 629,993 $56,352,569 $72,064,851
Investment Grade Bond Portfolio................. 628,816 $7,496,559 $7,897,930
Contrafund Portfolio............................ 1,275,400 $22,098,879 $25,431,484
Neuberger & Berman Advisers Management Trust:
Balanced Portfolio.............................. 358,504 $5,786,058 $6,381,375
Growth Portfolio................................ 823,211 $20,902,848 $25,140,863
Limited Maturity Bond Portfolio................. 299,078 $4,136,198 $4,222,983
American Century Variable Portfolios, Inc.:
American Century VP Capital Appreciation
Portfolio.................................... 871,323 $9,459,170 $8,434,404
Van Eck Worldwide Insurance Trust:
Van Eck Worldwide Bond Portfolio................ 398,283 $4,315,608 $4,377,135
Van Eck Worldwide Hard Assets Portfolio......... 176,919 $2,812,372 $2,781,168
Van Eck Worldwide Emerging Markets Portfolio.... 578,537 $7,801,362 $6,363,909
Alger American Fund:
Alger American Small Capitalization Portfolio... 428,179 $17,407,839 $18,732,813
</TABLE>
F-38
<PAGE> 116
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
During the years ended December 31, 1997, 1996 and 1995, transactions in
investment shares were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- ----------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO MONEY MARKET PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................ 803,570 831,901 1,059,897 23,511,707 19,129,435 13,655,624
Shares received from
reinvestment of:
Dividends..................... 228,102 265,374 256,696 1,161,384 1,024,419 871,001
Capital gain distributions.... 1,229,894 436,699 601,004
----------- ----------- ----------- ------------ ------------ ------------
Total shares acquired........... 2,261,566 1,533,974 1,917,597 24,673,091 20,153,854 14,526,625
Total shares redeemed........... (960,812) (904,010) (565,932) (25,932,218) (12,978,261) (10,536,224)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in
shares owned.................. 1,300,754 629,964 1,351,665 (1,259,127) 7,175,593 3,990,401
Shares owned, beginning of
year.......................... 9,330,982 8,701,018 7,349,353 23,884,697 16,709,104 12,718,703
----------- ----------- ----------- ------------ ------------ ------------
Shares owned, end of year....... 10,631,736 9,330,982 8,701,018 22,625,570 23,884,697 16,709,104
=========== =========== =========== ============ ============ ============
Cost of shares acquired......... $37,696,907 $24,791,248 $27,059,436 $ 24,673,091 $ 20,153,854 $ 14,526,625
=========== =========== =========== ============ ============ ============
Cost of shares redeemed......... $12,847,552 $11,787,104 $ 7,086,303 $ 25,932,218 $ 12,978,261 $ 10,536,224
=========== =========== =========== ============ ============ ============
</TABLE>
F-39
<PAGE> 117
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------
BOND PORTFOLIO MANAGED PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased.......................... 199,386 168,569 192,313 179,042 221,107 208,590
Shares received from reinvestment of:
Dividends............................... 69,359 57,612 53,908 72,155 73,728 83,429
Capital gain distributions.............. 16,767 81,745 2,072
---------- ---------- ---------- ---------- ---------- ----------
Total shares acquired..................... 268,745 226,181 246,221 267,964 376,580 294,091
Total shares redeemed..................... (87,869) (127,216) (74,556) (226,374) (198,824) (204,288)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in shares owned.............. 180,876 98,965 171,665 41,590 177,756 89,803
Shares owned, beginning of year........... 1,048,230 949,265 777,600 2,079,865 1,902,109 1,812,306
---------- ---------- ---------- ---------- ---------- ----------
Shares owned, end of year................. 1,229,106 1,048,230 949,265 2,121,455 2,079,865 1,902,109
========== ========== ========== ========== ========== ==========
Cost of shares acquired................... $2,847,336 $2,391,808 $2,538,587 $4,189,158 $5,201,624 $3,791,908
========== ========== ========== ========== ========== ==========
Cost of shares redeemed................... $ 938,352 $1,348,647 $ 767,042 $2,579,637 $2,131,719 $2,171,165
========== ========== ========== ========== ========== ==========
</TABLE>
F-40
<PAGE> 118
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO INTERNATIONAL PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased.......................... 257,235 263,500 336,867 542,095 520,713 524,968
Shares received from reinvestment of:
Dividends............................... 13,532 13,575 21,751 23,400 8,442
Capital gain distributions.............. 2,684 136,800 7,271 170,284 94,861 39,890
---------- ---------- ---------- ---------- ---------- ----------
Total shares acquired..................... 273,451 413,875 344,138 734,130 638,974 573,300
Total shares redeemed..................... (97,819) (125,277) (62,003) (271,615) (117,063) (141,765)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in shares owned.............. 175,632 288,598 282,135 462,515 521,911 431,535
Shares owned, beginning of year........... 1,398,376 1,109,778 827,643 2,385,547 1,863,636 1,432,101
---------- ---------- ---------- ---------- ---------- ----------
Shares owned, end of year................. 1,574,008 1,398,376 1,109,778 2,848,062 2,385,547 1,863,636
========== ========== ========== ========== ========== ==========
Cost of shares acquired................... $5,541,378 $6,735,426 $5,631,340 $9,578,029 $8,077,706 $6,827,356
========== ========== ========== ========== ========== ==========
Cost of shares redeemed................... $1,408,820 $1,641,455 $ 841,580 $3,084,716 $1,210,942 $1,281,772
========== ========== ========== ========== ========== ==========
</TABLE>
F-41
<PAGE> 119
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND
PROVIDENT MUTUAL SERIES A
- ----------------------------------------------------------------------------------------------------------------------
1996 SERIES 2006 SERIES
- ----------------------------------------------------------------------------------------------------------------------
1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares purchased.................................. 118,128 364,596 4,580,927 4,208,650 2,903,418
Shares received from reinvestment of:
Dividends.......................................
Capital gain distributions......................
----------- ----------- ----------- ----------- ----------
Total shares acquired............................. 118,128 364,596 4,580,927 4,208,650 2,903,418
Total shares redeemed............................. (2,181,298) (217,641) (2,294,572) (1,223,768) (935,891)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in shares owned........... (2,063,170) 146,955 2,286,355 2,984,882 1,967,527
Shares owned, beginning of year................... 2,063,170 1,916,215 11,346,972 8,362,090 6,394,563
----------- ----------- ----------- ----------- ----------
Shares owned, end of year......................... 2,063,170 13,633,327 11,346,972 8,362,090
=========== =========== =========== =========== ==========
Cost of shares acquired........................... $ 117,132 $ 345,561 $ 2,702,211 $ 2,317,522 $1,461,490
=========== =========== =========== =========== ==========
Cost of shares redeemed........................... $ 1,949,315 $ 160,308 $ 1,068,989 $ 528,531 $ 353,785
=========== =========== =========== =========== ==========
</TABLE>
F-42
<PAGE> 120
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
- ----------------------------------------------------------------------------------------------------------------------
EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................... 879,873 1,036,625 937,870 555,971 826,059 659,784
Shares received from reinvestment
of:
Dividends........................ 52,772 2,918 30,564 16,709 4,794 5,481
Capital gain distributions....... 265,326 83,648 42,404 74,791 121,056
----------- ----------- ----------- ----------- ----------- -----------
Total shares acquired.............. 1,197,971 1,123,191 1,010,838 647,471 951,909 665,265
Total shares redeemed.............. (137,286) (71,820) (27,488) (161,509) (69,623) (27,312)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in shares owned....... 1,060,685 1,051,371 983,350 485,962 882,286 637,953
Shares owned, beginning of year.... 2,802,567 1,751,196 767,846 2,469,655 1,587,369 949,416
----------- ----------- ----------- ----------- ----------- -----------
Shares owned, end of year.......... 3,863,252 2,802,567 1,751,196 2,955,617 2,469,655 1,587,369
=========== =========== =========== =========== =========== ===========
Cost of shares acquired............ $25,703,423 $21,875,240 $17,235,825 $21,882,557 $27,880,379 $17,731,718
=========== =========== =========== =========== =========== ===========
Cost of shares redeemed............ $ 2,120,256 $ 1,105,790 $ 427,894 $ 3,690,895 $ 1,605,197 $ 608,521
=========== =========== =========== =========== =========== ===========
</TABLE>
F-43
<PAGE> 121
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
- -----------------------------------------------------------------------------------------------------------------------
HIGH INCOME PORTFOLIO OVERSEAS PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased.......................... 529,057 479,606 232,086 406,870 372,206 316,944
Shares received from reinvestment of:
Dividends............................... 53,162 25,643 4,088 16,746 6,165 971
Capital gain distributions.............. 6,571 5,016 66,476 6,782 971
---------- ---------- ---------- ---------- ---------- ----------
Total shares acquired..................... 588,790 510,265 236,174 490,092 385,153 318,886
Total shares redeemed..................... (139,313) (108,022) (9,155) (58,309) (47,671) (19,077)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in shares owned.............. 449,477 402,243 227,019 431,783 337,482 299,809
Shares owned, beginning of year........... 677,352 275,109 48,090 839,049 501,567 201,758
---------- ---------- ---------- ---------- ---------- ----------
Shares owned, end of year................. 1,126,829 677,352 275,109 1,270,832 839,049 501,567
========== ========== ========== ========== ========== ==========
Cost of shares acquired................... $7,427,218 $6,055,847 $2,687,554 $9,229,879 $6,786,632 $5,114,360
========== ========== ========== ========== ========== ==========
Cost of shares redeemed................... $1,619,163 $1,154,715 $ 98,892 $ 946,549 $ 774,233 $ 303,825
========== ========== ========== ========== ========== ==========
</TABLE>
F-44
<PAGE> 122
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
- -----------------------------------------------------------------------------------------------------------------------
ASSET MANAGER PORTFOLIO INDEX 500 PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased....................... 380,899 313,935 489,727 318,609 200,784 88,644
Shares received from reinvestment of:
Dividends............................ 72,745 65,522 33,935 3,902 1,531 868
Capital gain distributions........... 182,481 54,028 7,916 3,938 119
----------- ---------- ---------- ----------- ----------- ----------
Total shares acquired.................. 636,125 433,485 523,662 330,427 206,253 89,631
Total shares redeemed.................. (168,401) (277,449) (305,140) (19,452) (5,225) (14,435)
----------- ---------- ---------- ----------- ----------- ----------
Net increase in shares owned........... 467,724 156,036 218,522 310,975 201,028 75,196
Shares owned, beginning of year........ 1,873,234 1,717,198 1,498,676 319,018 117,990 42,794
----------- ---------- ---------- ----------- ----------- ----------
Shares owned, end of year.............. 2,340,958 1,873,234 1,717,198 629,993 319,018 117,990
=========== ========== ========== =========== =========== ==========
Cost of shares acquired................ $10,391,586 $6,753,590 $7,461,536 $33,442,553 $16,732,487 $5,976,098
=========== ========== ========== =========== =========== ==========
Cost of shares redeemed................ $ 2,437,871 $4,265,120 $4,552,526 $ 1,092,364 $ 285,519 $ 806,307
=========== ========== ========== =========== =========== ==========
</TABLE>
F-45
<PAGE> 123
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE CONTRAFUND
BOND PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares purchased..................................... 322,755 260,720 148,445 947,917 378,323
Shares received from reinvestment of:
Dividends.......................................... 26,504 10,256 2,620 3,925
Capital gain distributions......................... 10,374
---------- ---------- ---------- ----------- ----------
Total shares acquired................................ 349,259 270,976 151,065 962,216 378,323
Total shares redeemed (128,693) (50,765) (17,097) (60,207) (4,932)
---------- ---------- ---------- ----------- ----------
Net increase in shares owned......................... 220,566 220,211 133,968 902,009 373,391
Shares owned, beginning of year...................... 408,250 188,039 54,071 373,391
---------- ---------- ---------- ----------- ----------
Shares owned, end of year............................ 628,816 408,250 188,039 1,275,400 373,391
========== ========== ========== =========== ==========
Cost of shares acquired.............................. $4,160,380 $3,229,467 $1,765,445 $17,279,465 $5,779,392
========== ========== ========== =========== ==========
Cost of shares redeemed.............................. $1,505,536 $ 560,842 $ 190,284 $ 886,624 $ 73,354
========== ========== ========== =========== ==========
</TABLE>
F-46
<PAGE> 124
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
- -----------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased.......................... 110,201 108,736 74,181 184,992 263,886 228,427
Shares received from reinvestment of:
Dividends............................... 4,936 5,238 2,584 180 490
Capital gain distributions.............. 12,668 29,133 830 60,028 42,178 6,560
---------- ---------- ---------- ---------- ---------- ----------
Total shares acquired..................... 127,805 143,107 77,595 245,020 306,244 235,477
Total shares redeemed..................... (59,986) (36,401) (20,656) (83,282) (55,459) (10,148)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in shares owned.............. 67,819 106,706 56,939 161,738 250,785 225,329
Shares owned, beginning of year........... 290,685 183,979 127,040 661,473 410,688 185,359
---------- ---------- ---------- ---------- ---------- ----------
Shares owned, end of year................. 358,504 290,685 183,979 823,211 661,473 410,688
========== ========== ========== ========== ========== ==========
Cost of shares acquired................... $2,121,797 $2,241,958 $1,276,739 $6,796,267 $7,625,308 $5,737,857
========== ========== ========== ========== ========== ==========
Cost of shares redeemed................... $ 892,244 $ 570,955 $ 322,244 $1,702,941 $1,295,598 $ 244,085
========== ========== ========== ========== ========== ==========
</TABLE>
F-47
<PAGE> 125
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS AMERICAN CENTURY
MANAGEMENT TRUST VARIABLE PORTFOLIOS, INC.
- -----------------------------------------------------------------------------------------------------------------------
LIMITED MATURITY AMERICAN CENTURY VP CAPITAL
BOND PORTFOLIO APPRECIATION PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased............................ 132,180 116,412 64,863 251,935 384,291 308,637
Shares received from reinvestment of:
Dividends................................. 11,526 8,274 1,128 145
Capital gain distributions................ 19,341 68,178
---------- ---------- -------- ---------- ---------- ----------
Total shares acquired....................... 143,706 124,686 65,991 271,276 452,469 308,782
Total shares redeemed....................... (23,837) (20,824) (6,437) (190,232) (80,668) (13,168)
---------- ---------- -------- ---------- ---------- ----------
Net increase in shares owned................ 119,869 103,862 59,554 81,044 371,801 295,614
Shares owned, beginning of year............. 179,209 75,347 15,793 790,279 418,478 122,864
---------- ---------- -------- ---------- ---------- ----------
Shares owned, end of year................... 299,078 179,209 75,347 871,323 790,279 418,478
========== ========== ======== ========== ========== ==========
Cost of shares acquired..................... $1,969,915 $1,724,884 $932,610 $2,680,991 $4,986,969 $3,475,266
========== ========== ======== ========== ========== ==========
Cost of shares redeemed..................... $ 332,448 $ 289,820 $ 90,095 $1,948,006 $ 723,514 $ 118,574
========== ========== ======== ========== ========== ==========
</TABLE>
F-48
<PAGE> 126
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK WORLDWIDE INSURANCE TRUST
- ----------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE VAN ECK WORLDWIDE
BOND PORTFOLIO HARD ASSETS PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased............................. 127,829 140,460 101,345 87,194 54,502 49,696
Shares received from reinvestment of:
Dividends.................................. 9,965 6,267 8,113 2,862 749 534
Capital gain distributions................. 2,113 735
---------- ---------- ---------- ---------- -------- --------
Total shares acquired........................ 137,794 146,727 109,458 92,169 55,986 50,230
Total shares redeemed........................ (23,040) (25,888) (9,283) (20,277) (13,461) (18,610)
---------- ---------- ---------- ---------- -------- --------
Net increase in shares owned................. 114,754 120,839 100,175 71,892 42,525 31,620
Shares owned, beginning of year.............. 283,529 162,690 62,515 105,027 62,502 30,882
---------- ---------- ---------- ---------- -------- --------
Shares owned, end of year.................... 398,283 283,529 162,690 176,919 105,027 62,502
========== ========== ========== ========== ======== ========
Cost of shares acquired...................... $1,474,137 $1,593,168 $1,204,346 $1,503,036 $909,495 $674,277
========== ========== ========== ========== ======== ========
Cost of shares redeemed...................... $ 235,174 $ 258,769 $ 90,782 $ 259,438 $176,559 $255,105
========== ========== ========== ========== ======== ========
</TABLE>
F-49
<PAGE> 127
- --------------------------------------------------------------------------------
The Variable Separate Accounts
of Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK WORLDWIDE
INSURANCE TRUST ALGER AMERICAN FUND
- ------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE ALGER AMERICAN
EMERGING MARKETS SMALL CAPITALIZATION
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares purchased........................................... 465,094 177,883 241,101 207,020
Shares received from reinvestment of:
Dividends................................................ 702 19 2
Capital gain distributions............................... 12,008
---------- ---------- ----------- ----------
Total shares acquired...................................... 465,796 177,902 253,109 207,022
Total shares redeemed...................................... (64,711) (450) (19,603) (12,349)
---------- ---------- ----------- ----------
Net increase in shares owned............................... 401,085 177,452 233,506 194,673
Shares owned, beginning of year............................ 177,452 194,673
---------- ---------- ----------- ----------
Shares owned, end of year.................................. 578,537 177,452 428,179 194,673
========== ========== =========== ==========
Cost of shares acquired.................................... $6,428,901 $2,130,602 $10,432,636 $8,338,053
========== ========== =========== ==========
Cost of shares redeemed.................................... $ 753,212 $ 4,929 $ 815,858 $ 546,992
========== ========== =========== ==========
</TABLE>
F-50
<PAGE> 128
- --------------------------------------------------------------------------------
The Variable Separate Accounts of
Provident Mutual Life Insurance Company
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Provident Mutual makes certain deductions from premiums before amounts are
allocated to each Separate Account selected by the policyholder. The deductions
may include (1) administrative charges, (2) state premium taxes, (3) premium
processing charges, (4) premiums for supplementary benefits, (5) premiums for
extra mortality risks, (6) sales charges, (7) premiums for optional benefits,
and (8) a risk charge for the guaranteed minimum death benefit. Premiums
adjusted for these deductions are recorded as net premiums in the statement of
changes in net assets. See original policy documents for specific charges
assessed.
In addition to the aforementioned charges, each Separate Account is charged
for mortality and expense risks assumed by Provident Mutual. The annual rates
charged to cover these risks are:
For scheduled premium and single premium policies -- currently 0.35% of the
net assets held for the benefit of policyholders.
For modified premium policies -- currently 0.60% of the net assets held for
the benefit of policyholders.
For flexible premium adjustable policies ("OptionsPlus") -- currently 0.75%
of the net assets held for the benefit of policyholders, guaranteed not to
exceed 0.90%.
For flexible premium adjustable survivorship policies ("Survivor
OptionsPlus") -- currently 0.60% of the net assets held for the benefit of
policyholders, guaranteed not to exceed 0.90%.
For flexible premium adjustable policies (other than
"OptionsPlus") -- currently 0.75% of the net assets held for the benefit of
policyholders.
Each Separate Account is also charged by Provident Mutual for the cost of
insurance protection. For single premium policies, the charge is accrued daily
and deducted from the amount provided for investment annually. For scheduled
premium, modified premium and flexible premium adjustable policies, the charge
is deducted monthly. The amount of the charge is computed based upon the amount
of insurance provided during the year and the insured's attained age. Depending
upon the type of policy, additional monthly deductions may be made for (1)
administrative charges, (2) minimum death benefit charges, (3) first year policy
charges and (4) supplementary charges. See original policy documents for
additional monthly charges. These charges are included in the statements of
changes in net assets.
The Policies provide for an initial free-look period. If a policy is
cancelled within certain time constraints, the policyholder will receive a
refund equal to the policy account value plus certain deductions made under the
policy. Where state law requires a minimum refund equal to gross premiums paid,
the refund will instead equal the gross premiums paid on the policy and will not
reflect investment experience.
F-51
<PAGE> 129
- --------------------------------------------------------------------------------
The Variable Separate Accounts of
Provident Mutual Life Insurance Company
Notes to Financial Statements -- concluded
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS, CONTINUED
If a single premium or modified premium policy is surrendered within the
first nine policy years, a contingent deferred sales load charge and/or
contingent deferred administrative charge are assessed. These same charges are
assessed if a flexible premium adjustable policy is surrendered within the first
ten policy years. These charges are assessed if a flexible premium adjustable
survivorship policy is surrendered before the fifteenth policy year (twelfth
policy year for New York policies). These charges are recorded as administrative
charges in the statements of changes in net assets.
For scheduled premium and single premium policies, Provident Mutual has
agreed to make a daily adjustment to the net rate of return of the Growth, Money
Market and Bond Separate Accounts to offset completely all Market Street Fund,
Inc. expenses charged to the portfolios in which the Separate Accounts invest,
except for (1) all brokers' commissions, (2) transfer taxes, investment advisory
fees and other fees and expenses for services relating to purchases and sales of
portfolio investments, and (3) income tax liabilities. The total amounts
reimbursed for the Growth, Money Market and Bond Separate Accounts for the years
ended December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND
SEPARATE SEPARATE SEPARATE
ACCOUNT ACCOUNT ACCOUNT
-------- -------- --------
<S> <C> <C> <C>
Year ending December 31,
1997.................................................. $3,041 $40 $1,390
1996.................................................. $3,491 $146 $1,087
1995.................................................. $12,376 $538 $1,846
</TABLE>
These amounts are shown as an operating expense reimbursement reducing
total expenses in the statements of operations.
Provident Mutual makes a daily asset charge against the assets of the Zero
Coupon Bond Separate Account. The charge is to reimburse Provident Mutual for
the transaction charge paid directly by Provident Mutual to MLPFS on the sale of
the Zero Coupon Trust units to the Zero Coupon Bond Separate Account. Provident
Mutual pays these amounts from General Account assets. The amount of the asset
charge currently is equivalent to an effective annual rate of .25% of the
average daily net assets of each Subaccount. This amount may be increased in the
future, but in no event will it exceed an effective annual rate of .50%. The
charge will be cost based (taking into account the loss of interest) with no
anticipated element of profit for Provident Mutual.
F-52
<PAGE> 130
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors of
Provident Mutual Life Insurance
Company
We have audited the accompanying consolidated statements of financial condition
of Provident Mutual Life Insurance Company and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations, capital
and surplus, and cash flows for each of the three years in the period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Provident Mutual
Life Insurance Company and Subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted in 1996 Statement of Financial Accounting Standards No. 120 (SFAS 120)
and Financial Accounting Standards Board Interpretation No. 40 (FIN 40) which
required implementation of several accounting pronouncements not previously
adopted. The effects of adopting SFAS 120 and FIN 40 were retroactively applied
to the Company's previously issued financial statements, consistent with the
implementation guidance of those standards.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 20, 1998
F-53
<PAGE> 131
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Consolidated Statements of Financial Condition (Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
- --------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at market (cost: 1997-$2,647,954;
1996-$2,513,377)....................................... $2,758,069 $2,564,903
Held to maturity, at amortized cost (market:
1997-$455,776; 1996-$518,665).......................... 436,181 510,874
Equity securities, at market (cost: 1997-$22,706;
1996-$27,770)............................................. 23,818 23,809
Mortgage loans.............................................. 663,285 708,982
Real estate................................................. 52,543 71,444
Policy loans and premium notes.............................. 358,670 358,522
Other invested assets....................................... 14,546 20,781
Short-term investments...................................... 18,519 60,407
---------- ----------
Total Investments........................................... 4,325,631 4,319,722
---------- ----------
Cash........................................................ 17,985 5,551
Premiums due and deferred................................... 12,960 13,106
Investment income due and accrued........................... 73,997 74,212
Deferred acquisition costs.................................. 629,635 602,587
Reinsurance recoverable..................................... 499,488 530,326
Separate account assets..................................... 2,284,118 1,510,101
Other assets................................................ 77,059 68,045
---------- ----------
Total Assets................................................ $7,920,873 $7,123,650
========== ==========
LIABILITIES
Policy Liabilities:
Future policyholder benefits.............................. $4,344,591 $4,426,517
Policyholders' funds...................................... 146,871 149,106
Policyholder dividends payable............................ 33,258 32,697
Other policy obligations.................................. 16,638 20,332
---------- ----------
Total Policy Liabilities.................................. 4,541,358 4,628,652
---------- ----------
Expenses payable............................................ 45,013 38,540
Taxes payable............................................... 3,047 2,129
Federal income taxes payable:
Current................................................... 39,114 35,157
Deferred.................................................. 64,216 51,029
Separate account liabilities................................ 2,279,124 1,505,990
Other liabilities........................................... 104,719 104,876
---------- ----------
Total Liabilities........................................... 7,076,591 6,366,373
---------- ----------
COMMITMENTS AND CONTINGENCIES -- NOTE 9
CAPITAL AND SURPLUS
Unassigned surplus.......................................... 813,618 746,567
Net unrealized appreciation on securities................... 30,664 10,710
---------- ----------
Total Capital and Surplus................................... 844,282 757,277
---------- ----------
Total Liabilities, Capital and Surplus...................... $7,920,873 $7,123,650
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-54
<PAGE> 132
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Consolidated Statements of Operations (Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums.................................................... $220,952 $235,615 $255,509
Policy and contract charges................................. 106,449 73,873 63,387
Net investment income....................................... 331,524 333,938 336,827
Other income................................................ 47,520 43,839 37,084
Net realized gains on investments........................... 2,360 7,873 3,691
-------- -------- --------
Total Revenues.............................................. 708,805 695,138 696,498
-------- -------- --------
BENEFITS AND EXPENSES
Policy and contract benefits................................ 234,117 241,042 228,143
Change in future policyholder benefits...................... 122,463 130,147 145,545
Operating expenses.......................................... 82,310 94,786 88,880
Amortization of deferred acquisition costs.................. 73,582 56,092 63,666
Policyholder dividends...................................... 65,736 65,184 64,943
Noninsurance commissions and expenses....................... 24,962 20,520 15,903
-------- -------- --------
Total Benefits and Expenses................................. 603,170 607,771 607,080
-------- -------- --------
Income Before Income Taxes.................................. 105,635 87,367 89,418
Income tax expense (benefit):
Current................................................... 35,971 (6,613) 39,817
Deferred.................................................. 2,613 12,441 (725)
-------- -------- --------
Total Income Tax Expense.................................... 38,584 5,828 39,092
-------- -------- --------
Net Income.................................................. $ 67,051 $ 81,539 $ 50,326
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-55
<PAGE> 133
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Consolidated Statements of Capital and Surplus for the Years Ended December 31,
1997, 1996 and 1995 (Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION TOTAL
UNASSIGNED (DEPRECIATION) CAPITAL AND
SURPLUS ON SECURITIES SURPLUS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995.................................. $614,702 $(32,089) $582,613
Net income................................................ 50,326 -- 50,326
Change in unrealized appreciation (depreciation).......... -- 62,390 62,390
-------- -------- --------
Balance at December 31, 1995................................ 665,028 30,301 695,329
Net income................................................ 81,539 -- 81,539
Change in unrealized appreciation (depreciation).......... -- (19,591) (19,591)
-------- -------- --------
Balance at December 31, 1996................................ 746,567 10,710 757,277
Net income................................................ 67,051 -- 67,051
Change in unrealized appreciation (depreciation).......... -- 19,954 19,954
-------- -------- --------
Balance at December 31, 1997................................ $813,618 $ 30,664 $844,282
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-56
<PAGE> 134
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Consolidated Statements of Cash Flows (Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 67,051 $ 81,539 $ 50,326
Adjustments to reconcile net income to net cash provided
by operating activities:
Interest credited to variable universal life and
investment products................................... 108,773 117,038 117,873
Policy fees assessed on variable universal life and
investment products................................... (106,449) (73,873) (63,387)
Amortization of deferred policy acquisition costs....... 73,582 56,092 63,666
Capitalization of deferred policy acquisition costs..... (127,593) (119,031) (100,480)
Deferred Federal income taxes........................... 2,613 12,441 (725)
Depreciation and amortization expense................... 4,309 5,292 6,088
Realized gains on investments........................... (2,360) (7,873) (3,691)
Change in investment income due and accrued............. 215 991 4,719
Change in premiums due and deferred..................... 146 2,757 903
Change in reinsurance recoverable....................... 30,838 14,173 (85,199)
Change in policy liabilities and other policyholders'
funds of traditional life products.................... (44,638) (18,335) 86,570
Change in other liabilities............................. 100 1,933 (6,047)
Change in current Federal income taxes payable.......... 3,786 (43,161) 13,934
Other, net.............................................. (2,777) (6,819) (4,747)
--------- --------- ---------
Net cash provided by operating activities........... 7,596 23,164 79,803
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investments:
Available for sale securities........................... 370,224 285,514 249,231
Equity securities....................................... 8,288 8,147 11,170
Real estate............................................. 17,347 21,902 22,879
Other invested assets................................... 7,424 6,078 7,210
Proceeds from maturities of investments:
Held to maturity securities............................. 96,045 109,582 84,601
Available for sale securities........................... 207,455 165,980 146,547
Mortgage loans.......................................... 99,673 124,190 106,257
Purchases of investments:
Held to maturity securities............................. (21,721) (76,730) (71,937)
Available for sale securities........................... (705,348) (533,650) (504,337)
Equity securities....................................... (7,052) (2,966) (4,966)
Mortgage loans.......................................... (54,659) (94,254) (102,632)
Real estate............................................. (1,823) (11,449) (13,172)
Other invested assets................................... (1,807) (127) (3,976)
Net withdrawals of separate account seed money............ 29 5,985 --
Policy loans and premium notes, net....................... (148) 7,580 12,152
Net sales (purchases) of short-term investments........... 41,888 35,983 (22,365)
--------- --------- ---------
Net cash provided by (used in) investing
activities........................................ 55,815 51,765 (83,338)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Variable universal life and investment product deposits... 836,694 668,437 578,441
Variable universal life and investment product
withdrawals............................................. (887,671) (740,686) (573,177)
--------- --------- ---------
Net cash (used in) provided by financing
activities........................................ (50,977) (72,249) 5,264
--------- --------- ---------
Net change in cash.................................. 12,434 2,680 1,729
Cash, beginning of year..................................... 5,551 2,871 1,142
--------- --------- ---------
Cash, end of year........................................... $ 17,985 $ 5,551 $ 2,871
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for income taxes................ $ 31,805 $ 36,329 $ 24,109
========= ========= =========
Foreclosure of mortgage loans............................. $ 1,744 $ 7,665 $ 14,766
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-57
<PAGE> 135
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Provident Mutual Life Insurance Company (Provident Mutual) is organized as
a mutual life insurance company which conducts its business for the benefit of
its policyholders.
Provident Mutual's wholly-owned subsidiaries are Providentmutual Life and
Annuity Company of America (PLACA), Provident Mutual International Life
Insurance Company (PMILIC) and Providentmutual Holding Company (PHC) and, in
aggregate, are defined as the "Company."
The Company sells individual traditional and variable life insurance
products, annuities, and a variety of pension products and maintains a block of
direct response-marketed life and health insurance products. The Company
distributes its products through a variety of distribution channels, principally
career agents, personal producing general agents and brokers. The Company is
licensed to operate in 50 states, which are responsible for product regulation.
Sales in 10 states accounted for 72% of the Company's sales for the year ended
December 31, 1997. For many of the life and annuity products, the insurance
departments of the states in which the Company conducts business must approve
products and policy forms in advance of sales. In addition, benefits are
determined by statutes and regulations in each of these states.
PLACA specializes primarily in the development and sale of various annuity
products and sells certain traditional and variable life products, also sold by
Provident Mutual, through a personal producing general agency sales force.
PMILIC's business consists of life insurance assumed from Provident Mutual.
PHC is a downstream holding company whose major subsidiary is Sigma
American Corporation (Sigma). Sigma is a general partner in a joint venture that
provides investment advisory, mutual fund distribution, trust and administrative
services to a group of mutual funds and other parties.
Basis of Presentation
The consolidated financial statements include the accounts of Provident
Mutual and its wholly-owned subsidiaries. Intercompany transactions have been
eliminated.
As of January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 120, "Accounting and Reporting by Mutual Life
Insurance Enterprises for Certain Long-Duration Participating Contracts," an
amendment to Financial Accounting Standards Board Interpretation 40 (FIN 40),
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." The initial effect of applying this statement
has been reported retroactively through restatement of previously issued
financial statements presented herein for comparative purposes. SFAS 120
requires financial statements referred to as prepared in accordance with
generally accepted accounting principles (GAAP) to apply to all applicable
authoritative GAAP pronouncements. Prior to the
F-58
<PAGE> 136
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Basis of Presentation -- continued
adoption of SFAS 120, statutory financial statements were permitted to be
referred to as being prepared in accordance with GAAP. The significant GAAP
authoritative pronouncements requiring initial application were as follows:
-- SFAS 60, "Accounting and Reporting by Insurance Enterprises,"
-- SFAS 87, "Employers' Accounting for Pensions,"
-- SFAS 94, "Consolidation of All Majority-Owned Subsidiaries,"
-- SFAS 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments,"
-- SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions,"
-- SFAS 109, "Accounting for Income Taxes,"
-- SFAS 113, "Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts,"
-- SFAS 114, "Accounting by Creditors for Impairment of a Loan,"
-- Statement of Position (SOP) 95-1, "Accounting for Certain Insurance
Activities of Mutual Life Insurance Enterprises,"
-- SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities" and
-- SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long- Lived Assets to Be Disposed Of."
The cumulative effective on policyholders' equity of adopting the above
pronouncements primarily consists of the initial deferral of acquisition costs,
the establishment of deferred taxes, the accrual of postretirement benefits, the
elimination of the statutory asset valuation reserve and the establishment of
investment valuation allowances.
F-59
<PAGE> 137
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Basis of Presentation -- continued
As a result of the change in accounting principles, net income for 1995 as
previously reported, has been restated as follows (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
<S> <C>
Net income, as previously reported.......................... $ 37.4
Effect of changing to a different basis of accounting:
Deferred acquisition costs................................ 36.8
Net policyholder liabilities.............................. (32.2)
Deferred income taxes..................................... .7
Adjustment in valuation of investments.................... 8.5
Retirement benefits....................................... 3.6
Termination of real estate lease.......................... (8.9)
Net income (SAP) of unconsolidated subsidiaries........... 4.5
Other, net................................................ (.1)
------
Net income, as adjusted..................................... $ 50.3
======
</TABLE>
As a result of the change in accounting principles, capital and surplus as
of December 31, 1995 as previously reported, has been restated as follows (in
millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
<S> <C>
Balance at beginning of year, as previously reported........ $268.4
Add adjustment for the cumulative effect on prior years of
applying retroactively the new basis of accounting:
Deferred acquisition costs................................ 530.0
Net policyholder liabilities.............................. (161.1)
Deferred income taxes..................................... (34.0)
Adjustment in valuation of investments.................... (12.2)
Asset valuation reserve................................... 44.9
Retirement benefits....................................... (21.8)
Other, net................................................ .5
------
Balance at beginning of year, as adjusted................... 614.7
Net income.................................................. 50.3
Add adjustment for the cumulative effect on prior years of
applying accounting change -- securities.................. (32.1)
Change in unrealized gains (losses) on investment
securities................................................ 62.4
------
Balance at end of year...................................... $695.3
======
</TABLE>
The Company prepares financial statements for filing with regulatory
authorities in conformity with the accounting practices prescribed or permitted
by the Insurance Departments of the Commonwealth of
F-60
<PAGE> 138
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Basis of Presentation -- continued
Pennsylvania and the State of Delaware (SAP). Practices under SAP vary from GAAP
primarily with respect to the initial deferral of acquisition costs, the
establishment of deferred taxes, the accrual of postretirement benefits, the
elimination of the statutory asset valuation reserve and the establishment of
investment valuation allowances.
Statutory net income was $58.4 million, $34.4 million and $37.4 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Statutory
surplus was $374.4 million and $343.1 million as of December 31, 1997 and 1996,
respectively.
The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities and the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
The Company is subject to interest rate risk to the extent its investment
portfolio cash flows are not matched to its insurance liabilities. Management
believes it manages this risk through modeling of the cash flows under
reasonable scenarios.
Invested Assets
Fixed maturity securities (bonds) which may be sold are designated as
"available for sale" and are reported at market value. Unrealized
appreciation/depreciation on these securities is recorded directly in capital
and surplus net of related Federal income taxes and amortization of deferred
acquisition costs. Fixed maturity securities that the Company has the intent and
ability to hold to maturity are designated as "held to maturity" and are
reported at amortized cost.
Equity securities (common stocks, redeemable preferred stocks and
nonredeemable preferred stocks) are reported at market value. Unrealized
appreciation/depreciation on these securities is recorded directly in capital
and surplus net of related Federal income taxes and amortization of deferred
acquisition costs.
Fixed maturity and equity securities that have experienced an other than
temporary decline in value are written down to fair value by a charge to
realized losses. This fair value becomes the new cost basis of the particular
security.
Mortgage loans are carried at unpaid principal balances, less impairment
reserves. For mortgage loans considered impaired, a specific reserve is
established. A general reserve is also established for probable losses arising
from the portfolio but not attributable to specific loans. Mortgage loans are
considered impaired when it is probable that the Company will be unable to
collect amounts due according to the contractual terms of the loan agreement.
When a mortgage loan has been determined to be impaired, a reserve is
established for the difference between the unpaid principal of the mortgage loan
F-61
<PAGE> 139
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Invested Assets -- continued
and its fair value. Fair value is based on either the present value of expected
future cash flows discounted at the mortgage loan's effective interest rate or
the fair value of the underlying collateral. The reserve is charged to realized
capital losses.
Policy loans and premium notes are reported at unpaid principal balances.
Real estate is carried at cost, less encumbrances and accumulated
depreciation. The straight-line method of depreciation is used for all real
estate.
Other invested assets consist primarily of real estate joint ventures
carried on the equity basis and limited partnerships carried at the lower of
cost or market value.
Cash includes demand deposits and cash on hand.
Short-term investments include money market funds, certificates of deposit
and short-term investments whose maturities at the time of acquisition were one
year or less. These investments are carried at amortized cost which approximates
market value.
It is the Company's policy to use derivatives (exchange-traded or
over-the-counter financial instruments whose value is based upon or derived from
a specific underlying index or commodity) for the purpose of reducing exposure
to interest rate fluctuations, and not for income generation or speculative
purposes. Derivatives utilized by the Company are long and short positions on
United States Treasury notes and bond futures and certain interest rate swaps.
The net interest effect of futures transactions is settled on a daily
basis. Cash paid or received is recorded daily, along with a receivable/payable,
to settle the futures contract prior to the contract termination. The
receivable/payable is carried until the contract is terminated and the remaining
balance is included in either net investment income or realized gain or loss.
Upon termination of a futures contract that is identified to a specific
security, any gain or loss is deferred and amortized to net investment income
over the expected remaining life of the hedged security. If the futures contract
is not identified to a specific security, any gain or loss on termination is
reported as a realized gain or loss.
Interest rate swaps are settled on the contract date. Cash paid or received
is reported as an adjustment to net investment income.
Investment Valuation Reserves
Investment valuation reserves have been provided for impairments of
mortgage loans and totalled $13.1 million and $14.4 million at December 31, 1997
and 1996, respectively. Changes in the reserves are reflected as realized
capital gains and losses.
F-62
<PAGE> 140
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Benefit Reserves and Policyholder Contract Deposits
Traditional Life Insurance Products
Traditional life insurance products include those contracts with fixed and
guaranteed premiums and benefits, and consist principally of whole life and
term insurance policies, limited-payment life insurance policies and
certain annuities with life contingencies. Most traditional life insurance
policies are participating: in addition to guaranteed benefits, they pay
dividends, as declared annually by the Company based on its experience.
Reserves on traditional life insurance products are calculated by using the
net level premium method. For participating traditional life insurance
policies, the assumptions are based on mortality rates consistent with the
cash values and investment rates consistent with the Company's dividend
practices. For most such policies, reserves are based on the 1958 or 1980
Commissioners' Standard Ordinary (CSO) mortality table at interest rates
ranging from 3.5% to 4.5%.
Variable Life and Investment-Type Products
Variable life products include fixed premium variable life and flexible
premium variable universal life. Investment-type products consist primarily
of guaranteed investment contracts (GICs) and single premium and flexible
premium annuity contracts.
Benefit reserves and policyholder contract deposits on these products are
determined following the retrospective deposit method and consist of policy
values that accrue to the benefit of the policyholder, before deduction of
surrender charges.
Premiums, Charges and Benefits
Traditional Life Insurance and Accident and Health Insurance Products
Premiums for individual life policies are recognized when due; premiums for
accident and health and all other policies are reported as earned
proportionately over their policy terms.
Benefit claims (including an estimated provision for claims incurred but
not reported), benefit reserve changes, and expenses (except those
deferred) are charged to income as incurred.
Variable Life and Investment-Type Products
Revenues for variable life and investment-type products consist of policy
charges for the cost of insurance, policy initiation, administration and
surrenders during the period. Expenses include interest credited to policy
account balances and benefit payments made in excess of policy account
balances. Many of these policies are variable life or variable annuity
policies, in which investment performance credited to the account balance
is based on the investment performance of separate
F-63
<PAGE> 141
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Premiums, Charges and Benefits -- continued
Variable Life and Investment-Type Products -- continued
accounts chosen by the policyholder. For other account balances, credited
interest rates ranged from 3.8% to 9.1% in 1997.
Deferred Policy Acquisition Costs
The costs that vary with and are directly related to the production of new
business, have been deferred to the extent deemed recoverable. Such costs
include commissions and certain costs of underwriting, policy issue and
marketing.
Deferred policy acquisition costs on traditional participating life
insurance policies are amortized in proportion to the present value of
expected gross margins. Gross margins include margins from mortality,
investments and expenses, net of policyholder dividends. Expected gross
margins are redetermined regularly, based on actual experience and current
assumptions of mortality, persistency, expenses, and investment experience.
The average investment yield, before realized capital gains and losses, in
the calculation of expected gross margins was 8.0% for 1997.
Deferred policy acquisition costs for variable life and investment-type
products are amortized in relation to the incidence of expected gross
profits, including realized investment gains and losses, over the expected
life of the policies.
The costs deferred during 1997, 1996 and 1995 were $127.6 million, $119.0
million, and $100.5 million, respectively. Amortization of deferred policy
acquisition costs was $73.6 million, $56.1 million and $63.7 million during
1997, 1996 and 1995, respectively.
Capital Gains and Losses
Realized capital gains and losses on sales of investments are based upon
specific identification of the investments sold and do not include amounts
allocable to separate accounts. A realized capital loss is recorded at the time
a decline in the value of an investment is determined to be other than
temporary.
Policyholder Dividends
As of December 31, 1997, approximately 98% of the Company's in force life
insurance business was written on a participating basis. Dividends are earned by
the policyholders ratably over the policy year. Dividends are included in the
accompanying financial statements as a liability and as a charge to operations.
F-64
<PAGE> 142
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Reinsurance
Premiums, benefits and expenses are recorded net of experience refunds,
reserve adjustments and amounts assumed from or ceded to reinsurers, including
commission and expense allowances.
Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of pension and annuity
contractholders, variable life insurance policyholders and several of the
Company's retirement plans.
Premiums received and the accumulated value portion of benefits paid are
excluded from the amounts reported in the consolidated statements of operations.
Fees charged on policyholder and contractholder account values are reported as
revenues.
The contractholders/policyholders bear the investment risk on separate
account assets except in instances where the Company guarantees a fixed return.
When the contractholder/policyholder bears the investment risk, separate account
assets and liabilities are carried at fair value.
For guaranteed contracts, the separate account assets and liabilities are
carried at historical cost. The guaranteed contracts are maintained in a
separate account for statutory purposes. Due to the guaranteed return, this
separate account is included in the general account assets and liabilities for
GAAP purposes.
Federal Income Taxes
Deferred income tax assets and liabilities have been recorded for temporary
differences between the reported amounts of assets and liabilities in the
accompanying financial statements and those in the Company's income tax returns.
F-65
<PAGE> 143
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the fair values and carrying values of the
Company's financial instruments at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
(IN MILLIONS) (IN MILLIONS)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Available for sale........................ $2,758.1 $2,758.1 $2,564.9 $2,564.9
Held to maturity.......................... $455.8 $436.2 $518.7 $510.9
Equity securities........................... $23.8 $23.8 $23.8 $23.8
Commercial mortgage loans................... $726.0 $662.8 $740.6 $708.2
Residential mortgage loans.................. $.6 $.5 $.9 $.8
LIABILITIES FOR INVESTMENT-TYPE INSURANCE
CONTRACTS
Guaranteed interest contracts............... $240.7 $234.3 $321.8 $316.9
Group annuities............................. $1,345.8 $1,353.2 $1,101.8 $1,118.3
Supplementary contracts without life
contingencies............................. $30.8 $30.6 $31.4 $31.4
Individual annuities........................ $1,740.3 $1,799.6 $1,544.6 $1,597.5
</TABLE>
The underlying investment risk of the Company's variable life and variable
annuity contracts is assumed by the policyholder. These reserve liabilities are
primarily reported in the separate accounts. The liabilities in the separate
accounts are recorded at amounts equal to the related assets at fair value.
Fair values for the Company's insurance contracts other than
investment-type contracts are not required to be disclosed under Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments." However, the estimated fair value and future cash flows
of liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts. The estimated fair value of all assets
without a corresponding revaluation of all liabilities associated with insurance
contracts can be misinterpreted.
F-66
<PAGE> 144
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
2. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:
Investment Securities
Bonds, common stocks and preferred stocks are valued based upon quoted
market prices, where available. If quoted market prices are not available, as in
the case of private placements, fair values are based on quoted market prices of
comparable instruments (see Note 3).
Mortgage Loans
Mortgage loans are valued using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. For mortgage loans classified as nonperforming, the
fair value was set equal to the lesser of the unpaid principal balance or the
market value of the underlying property.
Policy Loans
Policy loans are issued with either fixed or variable interest rates,
depending upon the terms of the policies. For those loans with fixed interest
rates, the interest rates range from 5% to 8%. For loans with variable interest
rates, the interest rates are primarily adjusted quarterly based upon changes in
a corporate bond index. Future cash flows of policy loans are uncertain and
difficult to predict. As a result, management deems it impractical to calculate
the fair value of policy loans.
Guaranteed Interest Contracts
The fair value of guaranteed interest contract liabilities is based upon
discounted future cash flows. Contract account balances are accumulated to the
maturity dates at the guaranteed rate of interest. Accumulated values are
discounted using interest rates for which liabilities with similar durations
could be sold. The statement value and fair value of the assets backing up the
guaranteed interest contract liabilities were $237.1 million and $240.9 million,
respectively, at December 31, 1997 and $319.4 million and $322.4 million,
respectively, at December 31, 1996.
Group Annuities
The fair value of group annuities is primarily based upon termination
value, which is calculated by applying contractual market value adjustments to
the account balances. For those contracts not subject to market value
adjustments at termination, book value represents fair value.
F-67
<PAGE> 145
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
2. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Individual Annuities and Supplementary Contracts
The fair value of individual annuities and supplementary contracts without
life contingencies is based primarily on surrender values. For those individual
annuities and supplementary contracts that are not surrenderable, discounted
future cash flows are used for calculating fair value.
Policyholder Dividends and Coupon Accumulations
The policyholders' dividend and coupon accumulation liabilities will
ultimately be settled in cash, applied towards the payment of premiums, or left
on deposit with the Company at interest. Management deems it impractical to
calculate the fair value of these liabilities due to valuation difficulties
involving the uncertainties of final settlement.
3. MARKETABLE SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair value of investments in fixed maturity securities and equity
securities as of December 31, 1997 and 1996 are as follows (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 53.4 $ 2.0 $ .1 $ 55.3
Obligations of states and political
subdivisions................................ 66.7 3.3 .2 69.8
Debt securities issued by foreign
governments................................. 1.0 .1 -- 1.1
Corporate securities.......................... 2,257.1 104.2 10.8 2,350.5
Mortgage-backed securities.................... 269.8 11.7 .1 281.4
-------- ------ ----- --------
Subtotal -- fixed maturities............. 2,648.0 121.3 11.2 2,758.1
Equity securities............................. 22.7 4.8 3.7 23.8
-------- ------ ----- --------
Total............................... $2,670.7 $126.1 $14.9 $2,781.9
======== ====== ===== ========
</TABLE>
F-68
<PAGE> 146
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
3. MARKETABLE SECURITIES, CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 17.3 $ 1.1 $ -- $ 18.4
Obligations of states and political
subdivisions................................ 9.1 .6 .1 9.6
Debt securities issued by foreign
governments................................. 6.5 .8 -- 7.3
Corporate securities.......................... 393.9 19.1 2.5 410.5
Mortgage-backed securities.................... 9.4 .6 -- 10.0
-------- -------- --------- --------
Total............................... $436.2 $22.2 $ 2.6 $455.8
======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 62.6 $ 2.2 $ .4 $ 64.4
Obligations of states and political
subdivisions................................ 79.5 2.4 1.1 80.8
Debt securities issued by foreign
governments................................. 12.4 .1 .7 11.8
Corporate securities.......................... 2,070.2 66.4 23.9 2,112.7
Mortgage-backed securities.................... 288.7 8.5 2.0 295.2
-------- -------- --------- --------
Subtotal -- fixed maturities............. 2,513.4 79.6 28.1 2,564.9
Equity securities............................. 27.8 4.5 8.5 23.8
-------- -------- --------- --------
Total............................... $2,541.2 $84.1 $36.6 $2,588.7
======== ======== ========= ========
</TABLE>
F-69
<PAGE> 147
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
3. MARKETABLE SECURITIES, CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 17.6 $ .8 $ .1 $ 18.3
Obligations of states and political
subdivisions................................ 11.3 .3 .1 11.5
Debt securities issued by foreign
governments................................. 6.8 .5 -- 7.3
Corporate securities.......................... 464.8 10.1 4.2 470.7
Mortgage-backed securities.................... 10.4 .5 -- 10.9
-------- -------- ------- --------
Total............................... $510.9 $12.2 $4.4 $518.7
======== ======== ======= ========
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, by contractual maturity, are as follows (in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less..................................... $ 110.2 $ 110.6
Due after one year through five years....................... 653.3 674.2
Due after five years through ten years...................... 739.8 768.8
Due after ten years......................................... 1,144.7 1,204.5
-------- --------
Total............................................. $2,648.0 $2,758.1
======== ========
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMORTIZED ESTIMATED
HELD TO MATURITY COST FAIR VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less..................................... $ 23.0 $ 23.0
Due after one year through five years....................... 110.7 114.2
Due after five years through ten years...................... 181.3 190.5
Due after ten years......................................... 121.2 128.1
-------- --------
Total............................................. $436.2 $455.8
======== ========
</TABLE>
F-70
<PAGE> 148
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
3. MARKETABLE SECURITIES, CONTINUED
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Mortgage-backed securities are included based on their
contractual maturity.
Realized gains (losses) on investments for the years ended December 31,
1997, 1996 and 1995 are summarized as follows (in millions):
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------
Fixed maturities........................................... $ 7.9 $ 6.0 $ 2.0
Equity securities.......................................... (3.8) .3 .7
Mortgage loans............................................. 1.1 (1.4) .2
Real estate................................................ (2.2) 2.8 2.9
Policy loans and premium notes............................. -- .9 .1
Other invested assets...................................... (.6) (.7) (2.2)
----- ----- -----
$ 2.4 $ 7.9 $ 3.7
===== ===== =====
</TABLE>
Net unrealized appreciation (depreciation) on available for sale securities
as of December 31, 1997 and 1996 is summarized as follows (in millions):
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) before
adjustments for the following:............................ $111.2 $47.5
Amortization of deferred policy acquisition costs......... (64.0) (31.0)
Deferred Federal income taxes............................. (16.5) (5.8)
------ -----
Net unrealized appreciation................................. $ 30.7 $10.7
====== =====
</TABLE>
In late 1995, the Financial Accounting Standards Board issued "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." This report permits a one-time reclassification of
securities from held to maturity to available for sale. In response to this
report, the Company transferred fixed income securities with a combined
amortized cost of $172.3 million from the held to maturity portfolio to the
available for sale portfolio. An additional transfer of fixed income securities
with a combined cost of $24.2 million and an estimated fair value of $24.6
million was made from the available for sale portfolio to the held to maturity
portfolio. The $.4 million difference between the amortized cost and the
estimated fair value has been amortized to realized capital gains/losses.
F-71
<PAGE> 149
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
3. MARKETABLE SECURITIES, CONTINUED
Net investment income, by type of investment, is as follows for the years
ending December 31, 1997, 1996 and 1995 (in millions):
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------
Gross investment income:
Fixed maturities:
Available for sale................................... $201.2 $193.5 $194.1
Held to maturity..................................... 39.6 45.1 47.1
Equity securities...................................... .8 1.2 2.1
Mortgage loans......................................... 62.9 69.0 72.2
Real estate............................................ 10.7 11.4 11.8
Policy loans and premium notes......................... 23.4 23.4 24.0
Other invested assets.................................. 8.0 5.5 4.9
Short-term investments................................. 2.5 3.8 2.0
Other, net............................................. (.2) .5 .5
------ ------ ------
348.9 353.4 358.7
Less investment expenses............................... (17.4) (19.5) (21.9)
------ ------ ------
Net investment income.................................. $331.5 $333.9 $336.8
====== ====== ======
</TABLE>
4. MORTGAGE LOANS
Impaired mortgage loans and the related reserves are as follows at December
31, 1997 and 1996 (in millions):
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Impaired mortgage loans..................................... $ 54.3 $65.5
Reserves.................................................... (6.4) (7.2)
------ -----
Net impaired mortgage loans................................. $ 47.9 $58.3
====== =====
</TABLE>
F-72
<PAGE> 150
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
4. MORTGAGE LOANS, CONTINUED
A reconciliation of the reserve balance, including general reserves, for
mortgage loans for 1997 and 1996 is as follows (in millions):
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Balance at January 1........................................ $ 14.4 $16.2
Losses charged, net of recoveries........................... (1.3) (.5)
Releases due to foreclosures................................ -- (1.3)
------ -----
Balance at December 31...................................... $ 13.1 $14.4
====== =====
</TABLE>
The average recorded investment in impaired loans was $59.9 million and
$66.7 million during 1997 and 1996, respectively. Interest income recognized on
impaired loans during 1997, 1996 and 1995 was $4.9 million, $6.9 million and
$7.3 million, respectively. All interest income on impaired mortgage loans was
recognized on the cash basis.
5. REAL ESTATE
Real estate holdings are as follows at December 31, 1997 and 1996 (in
millions):
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Occupied by the Company..................................... $ 32.0 $38.0
Foreclosed.................................................. 18.8 28.0
Investment.................................................. 1.7 5.4
------ -----
$ 52.5 $71.4
====== =====
</TABLE>
Depreciation expense was $3.0 million, $3.2 million and $4.7 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Accumulated
depreciation for real estate totalled $12.6 million and $15.2 million at
December 31, 1997 and 1996, respectively. Permanent impairment writedowns were
$6.1 million, $1.3 million and $1.9 million for the years ended December 31,
1997, 1996 and 1995.
6. BENEFIT PLANS
The Company maintains a funded noncontributory defined benefit pension plan
that covers substantially all of its employees and a funded noncontributory
defined contribution plan that covers substantially all of its agents. The
Company's funding policy is to contribute annually the maximum amount deductible
for Federal income tax purposes. The Company provides a contributory defined
F-73
<PAGE> 151
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
6. BENEFIT PLANS, CONTINUED
contribution plan qualified under Section 401(k) of the Internal Revenue Code.
The pension cost of the defined contribution plans was $3.4 million, $2.6
million and $2.8 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
The status of the funded defined benefit pension plan and the amounts
recognized on the balance sheets as of December 31, 1997 and 1996 are as follows
(in millions):
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested................................................. $(73.7) $(72.7)
Nonvested.............................................. (3.6) (2.7)
------ ------
Accumulated benefit obligation......................... (77.3) (75.4)
Additional obligation for future salary increases...... (18.7) (19.2)
------ ------
Projected benefit obligation......................... (96.0) (94.6)
Plan assets at fair value................................... 165.8 148.7
------ ------
Plan assets in excess of projected benefit
obligation............................................ 69.8 54.1
Unrecognized transition asset.......................... (21.4) (23.7)
Unrecognized prior service cost........................ .5 .5
Unrecognized net gain.................................. (31.0) (16.4)
------ ------
Prepaid pension cost................................. $ 17.9 $ 14.5
====== ======
</TABLE>
The Company also sponsors several unfunded nonqualified defined benefit
excess benefit, supplemental executive retirement and deferred compensation
plans. The status of these unfunded defined
F-74
<PAGE> 152
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
6. BENEFIT PLANS, CONTINUED
benefit plans and the amounts recognized on the balance sheets as of December
31, 1997 and 1996 are as follows (in millions):
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested.................................................... $ (9.1) $ (8.6)
Nonvested................................................. (4.1) (2.9)
------ ------
Accumulated benefit obligation......................... (13.2) (11.5)
Additional obligation for future salary increases......... (7.4) (5.2)
------ ------
Projected benefit obligation........................... (20.6) (16.7)
Unrecognized transition obligation........................ 3.8 4.2
Unrecognized prior service cost........................... 3.2 3.4
Unrecognized net loss..................................... 4.3 2.7
Other, net................................................ (3.9) (5.1)
------ ------
Accrued pension cost................................... $(13.2) $(11.5)
====== ======
</TABLE>
The following assumptions were used to determine the projected benefit
obligation at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Discount rate............................................... 7.0% 7.5%
Expected rate of return on assets........................... 9.0% 9.0%
Rate of increase in salaries................................ 5.0% 5.5%
</TABLE>
Net periodic pension benefit included the following components for the
years ended December 31, 1997, 1996 and 1995 (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost........................................... $ 4.3 $ 4.6 $ 4.2
Interest cost.......................................... 8.3 8.1 8.0
Actual return on assets................................ (31.8) (21.9) (10.8)
Net amortization (deferral)............................ 17.1 8.1 (1.6)
------ ------ -----
Net pension benefit.................................. $ (2.1) $ (1.1) $ (.2)
====== ====== =====
</TABLE>
F-75
<PAGE> 153
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
6. BENEFIT PLANS, CONTINUED
In addition, the Company provides certain health care and life insurance
benefits (postretirement benefits) for retired employees. Substantially all of
the Company's employees may become eligible for postretirement benefits if they
reach normal retirement age while still working for the Company.
The status of the postretirement benefit plans and the amounts recognized
on the balance sheets as of December 31, 1997 and 1996 are as follows (in
millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and surviving spouses............................ $(23.4) $(28.2)
Fully eligible active employees........................... (1.0) (1.1)
Other active employees.................................... (5.4) (4.9)
------ ------
Total.................................................. (29.8) (34.2)
Unrecognized amounts:
Net gain.................................................. (16.0) (12.1)
Prior service cost........................................ 7.0 7.5
------ ------
Total.................................................. (9.0) (4.6)
------ ------
Accrued postretirement benefit cost......................... $(38.8) $(38.8)
====== ======
</TABLE>
The following assumptions were used to determine the projected benefit
obligation at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Discount rate............................................... 7.0% 7.5%
Rate of increase in salaries................................ 5.0% 5.5%
</TABLE>
Net periodic postretirement benefit cost included the following components
for the years ended December 31, 1997, 1996 and 1995 (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost................................................ $ .5 $ .4 $ .4
Interest cost............................................... 2.0 1.9 2.1
Net amortization and deferral............................... (.4) (.4) (.5)
---- ---- ----
Net periodic postretirement benefit cost.................. $2.1 $1.9 $2.0
==== ==== ====
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rate by one percentage point in each year would
F-76
<PAGE> 154
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
6. BENEFIT PLANS, CONTINUED
increase the postretirement benefit obligation as of December 31, 1997 by $1.7
million and the estimated eligibility cost and interest cost components of net
periodic postretirement benefit cost for 1997 by $.1 million.
In January 1991, the Company established a retiree health account under the
provisions of Section 401(h) of the Internal Revenue Code. In December 1997, the
Company transferred $1.6 million of excess assets from the defined benefit
pension plan to pay for 1997 qualified retiree health benefits. A transfer of
excess assets in the amount of $1.6 million was made in December 1996 to pay for
1996 qualified retiree health benefits. In December 1995, excess assets
totalling $1.6 million were transferred to pay for 1995 qualified retiree health
benefits.
7. FEDERAL INCOME TAXES
Beginning in 1996, the Company began filing a consolidated Federal income
tax return with its life insurance and non-insurance subsidiaries. Prior to
1996, the Company filed separate consolidated Federal income tax returns for its
life insurance and non-insurance subsidiaries. Each tax provision is accrued on
a separate company basis. The life company tax provisions include an equity tax.
The provision for Federal income taxes from operations differs from the
normal relationship of Federal income tax to pretax income as follows (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rate..................... $ 37.0 $30.6 $31.3
Current year equity tax................................ 8.8 8.5 8.0
True down of prior years' equity tax................... (8.0) (5.1) --
Tax settlement......................................... -- (28.3) --
Other.................................................. .8 .1 (.2)
------ ----- -----
Provision for Federal income tax from operations......... $ 38.6 $ 5.8 $39.1
====== ===== =====
</TABLE>
In 1996, the Company settled various tax issues with the IRS, including an
issue relating to the tax treatment of certain traditional life insurance policy
updates. As a result of the settlements, the 1996 Federal income tax expense in
the Statement of Operations was decreased by approximately $28.3 million which
includes $15.9 million of interest, net of taxes.
Deferred income tax assets and liabilities reflect the income tax effects
of cumulative temporary differences between the reported values of assets and
liabilities for financial statement purposes and
F-77
<PAGE> 155
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
7. FEDERAL INCOME TAXES, CONTINUED
income tax return purposes. Components of the Company's net deferred income tax
liability are as follows at December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX LIABILITY
Deferred policy acquisition costs........................... $196.5 $186.5
Prepaid pension asset....................................... 6.3 5.1
Net unrealized gain on available for sale securities........ 16.5 5.8
------ ------
Total deferred tax liability........................... 219.3 197.4
------ ------
DEFERRED TAX ASSET
Reserves.................................................... 123.8 112.4
Employee benefit accruals................................... 14.1 14.1
Invested assets............................................. 8.3 4.3
Policyholder dividends...................................... 8.1 7.9
Deferred rent............................................... 1.4 2.8
Other....................................................... (.6) 4.9
------ ------
Total deferred tax asset............................... 155.1 146.4
------ ------
Net deferred tax liability.................................. $ 64.2 $ 51.0
====== ======
</TABLE>
Under current law, stock life insurance companies are taxed at current
rates on distributions from the special surplus account for the benefit of
policyholders designated "Policyholder Surplus" (the Account). The Tax Reform
Act of 1984 eliminated further additions to the Account after December 31, 1983.
PLACA's aggregate accumulation at December 31, 1983 was $2 million. The Company
has no present plans to make any distributions which would subject the Account
to current taxation.
The Company's Federal income tax returns have been audited through 1992.
All years through 1985 are closed. Years 1986 through 1992 have been audited and
are closed with the exception of several issues for which claims for refund have
been filed. Years 1993 through the present remain open. In the opinion of
management, adequate provision has been made for the possible effect of
potential assessments related to prior years' taxes.
8. REINSURANCE
In the normal course of business, the Company assumes risks from and cedes
certain parts of its risks with other insurance companies. The primary purposes
of ceded reinsurance is to limit losses from large exposures. For life
insurance, the Company retains no more than $1,500,000 on any single life. A
portion on individual fixed rate annuity business is also reinsured.
F-78
<PAGE> 156
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
8. REINSURANCE, CONTINUED
Reinsurance contracts do not relieve the Company of its obligations to
policyholders. To the extent that reinsuring companies are later unable to meet
obligations under reinsurance agreements, the Company would be liable for these
obligations. The Company evaluates the financial condition of its reinsurers and
limits its exposure to any one reinsurer.
At December 31, 1997, there were $352.7 million of individual fixed annuity
account values coinsured by the Company, or approximately 29.7% of total
individual fixed annuity account values outstanding.
The tables below highlight the amounts shown in the accompanying financial
statements which are net of reinsurance activity (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CEDED TO ASSUMED
GROSS OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997:
Life insurance in force.................... $36,961.7 $7,549.1 $238.6 $29,651.2
========= ======== ====== =========
Premiums................................... $ 232.7 $ 15.0 $ 3.2 $ 220.9
========= ======== ====== =========
Future policyholder benefits............... $ 499.5 $ 3.9
======== ======
December 31, 1996:
Life insurance in force.................... $33,695.9 $6,559.3 $208.9 $27,345.5
========= ======== ====== =========
Premiums................................... $ 247.8 $ 15.2 $ 3.0 $ 235.6
========= ======== ====== =========
Future policyholder benefits............... $ 530.3 $ 5.1
======== ======
December 31, 1995:
Life insurance in force.................... $30,558.1 $5,829.8 $230.0 $24,958.3
========= ======== ====== =========
Premiums................................... $ 267.3 $ 12.7 $ .9 $ 255.5
========= ======== ====== =========
Future policyholder benefits............... $ 544.5 $ 5.3
======== ======
</TABLE>
F-79
<PAGE> 157
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space, data processing equipment and certain
other equipment under operating leases expiring on various dates between 1998
and 2003. Most of the leases contain renewal and purchase options based on
prevailing fair market values.
Future minimum rent payments required and related sublease rentals
receivable under non-cancelable operating leases in effect at December 31, 1997,
and which have initial or remaining terms of one year or more, are summarized as
follows (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
RENTAL SUBLEASE RENTALS
PAYMENTS RECEIVABLE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
YEAR ENDING DECEMBER 31:
1998................................................... $13.9 $2.7
1999................................................... 7.1 .5
2000................................................... 4.1 .3
2001................................................... 2.2 --
2002................................................... 1.3 --
Thereafter............................................. .4 --
----- ----
$29.0 $3.5
===== ====
</TABLE>
Total related rent expense was $12.7 million, $18.4 million and $26.5
million in 1997, 1996 and 1995, respectively, which were net of sublease income
of $1.9 million, $.5 million and $.3 million in 1997, 1996 and 1995,
respectively.
During 1995 the Company recorded a charge to operations for certain unused
leased facilities in the amount of $8.9 million, net of anticipated sublease
income.
Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its borrowers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include investment commitments related to its interests in
real estate and mortgage loans, financial guarantees of indebtedness, marketable
securities lending and interest rate futures contracts. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the statements of financial condition.
At December 31, 1997, the Company had outstanding mortgage loan, real
estate and limited partnership commitments of approximately $18.2 million. The
mortgage loan commitments, which expire
F-80
<PAGE> 158
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- continued
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES, CONTINUED
Financial Instruments With Off-Balance-Sheet Risk -- continued
through April 1998, totalled $14.4 million and were issued during 1997 at
interest rates consistent with rates applicable on December 31, 1997. As a
result, the fair value of these commitments approximates the face amount.
The Company guarantees indebtedness of certain real estate partnerships of
which it is an investor. Any estimated deficiencies between the amount of debt
guaranteed and the partnerships' ability to service the debt is provided for in
the asset valuation process through reserves or writedowns.
Derivatives are used for hedging existing bonds (including cash reserves)
against adverse price or interest rate movements and for fixing liability costs
at the time of product sales. The Company closed out hedge positions consisting
of 239 treasury futures contracts with a dollar value of $25.2 million in 1997,
162 treasury futures contracts with a dollar value of $17.3 million in 1996, and
568 treasury futures contracts with a dollar value of $56.8 million in 1995. The
approximate net losses generated from the hedge positions were $(.1) million for
the year ended December 31, 1997, $(.3) million for the year ended December 31,
1996 and $(.1) million for the year ended December 31, 1995. There were no open
hedge positions at December 31, 1997. The Company uses interest rate swaps to
synthetically convert a floating rate bond into a fixed rate bond and thereby
match fixed rate liabilities. The Company had no swaps outstanding as of
December 31, 1997.
Periodically, the Company enters securities lending agreements to earn
additional investment income on its securities. The borrower must provide cash
collateral prior to or at the inception of the loan. For bonds, cash collateral
totalling 105% of market value plus accrued interest is required. For equities,
cash collateral totalling 105% of market value is required. There were no
securities lending positions at December 31, 1997.
Investment Portfolio Credit Risk
Bonds
The Company's bond investment portfolio is predominately comprised of
investment grade securities. At December 31, 1997 and 1996, approximately
$164.6 million and $162.2 million, respectively, in debt security
investments (5.3% and 5.4%, respectively, of the total debt security
portfolio) are considered "below investment grade." Securities are
classified as "below investment grade" primarily by utilizing rating
criteria established by independent bond rating agencies.
Debt security investments with a carrying value at December 31, 1997 of $5.7
million were non-income producing for the year ended December 31, 1997.
The Company had debt security investments in the financial services industry
at both December 31, 1997 and 1996 that exceeded 5% of total assets.
F-81
<PAGE> 159
- --------------------------------------------------------------------------------
Provident Mutual Life Insurance Company
and Subsidiaries
Notes to Consolidated Financial Statements -- concluded
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES, CONTINUED
Investment Portfolio Credit Risk -- continued
Mortgage Loans
The Company originates mortgage loans either directly or through mortgage
correspondents and brokers throughout the country. Loans are primarily
related to underlying real property investments in office and apartment
buildings and retail/commercial and industrial facilities. Mortgage loans
are collateralized by the related properties and such collateral generally
approximates a minimum 133% of the original loan value at the time the loan
is made.
At December 31, 1997, there was one significant mortgage loan totaling $3.2
million in which payments on principal and/or interest were over 90 days
past due. There were no delinquent mortgage loans at December 31, 1996.
The Company had no loans outstanding in any state where principal balances
in the aggregate exceeded 20% of the Company's surplus.
Lines of Credit
The Company has approximately $50 million of available unused lines of
credit at December 31, 1997.
Litigation and Unasserted Claims
The Company is involved in various litigation, as both plaintiff and
defendant, which has arisen in the ordinary course of business, including sales
practices, and as a result of the merger with Covenant which, in the opinion of
management and legal counsel, will not have a material adverse effect on the
Company's financial position or its operations.
Insurance companies are subject to assessments, up to statutory limits, by
state guaranty funds for losses of policyholders of insolvent insurance
companies. In the opinion of management, the outcome of the proceedings and
assessments will not have a material adverse effect on the financial statements.
Guaranty fund assessments totalled $1.1 million, $1.6 million and $2.6 million
in 1997, 1996 and 1995, respectively. Of those amounts, $.8 million, $.9 million
and $1.8 million in 1997, 1996 and 1995, respectively, are creditable against
future years' premium taxes.
10. SUBSEQUENT EVENT
On January 5, 1998, the Board of Directors of Provident Mutual unanimously
approved and adopted a Plan of Conversion to reorganize Provident Mutual Life
Insurance Company, utilizing a mutual holding company structure. The proposed
conversion plan has been submitted to the Insurance Department of the
Commonwealth of Pennsylvania and is awaiting approval.
F-82
<PAGE> 160
PART II
OTHER INFORMATION
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.
RULE 484 UNDERTAKING
Article VIII of PMLIC's By-Laws provides, in part:
To the fullest extent permitted by law, the Company shall indemnify
any present, former or future Director, officer, or employee of the Company
or any person who may serve or has served at its request as officer or
Director of another corporation of which the Company is a creditor or
stockholder, against the reasonable expenses, including attorney's fees,
necessarily incurred in connection with the defense of any action, suit or
other proceeding to which any of them is made a party because of service as
Director, officer or employee of the Company or such other corporation, or
in connection with any appeal therein, and against any amounts paid by such
Director, officer or employee in settlement of, or in satisfaction of a
judgement or fine in, any such action or proceeding, except expenses
incurred in defense of or amounts paid in connection with any action, suit
or other proceeding in which such Director, officer or employee shall be
adjudged to be liable for negligence or misconduct in the performance of
his duty.
Insofar as indemnification or liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provision, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that any 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 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.
REPRESENTATION OF REASONABLENESS
Provident Mutual Life Insurance Company hereby represents that the fees and
charges deducted under the Policy, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by Provident Mutual Life Insurance Company.
II-1
<PAGE> 161
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the Prospectus with
items of Form N-8B-2.
The Prospectus consisting of 51 pages.
The undertaking to file reports.
Rule 484 undertaking.
Representations pursuant to Rule 6e-3(T).
The signatures.
The following exhibits:
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
-------- ----
<S> <C> <C>
1.A.1.a. Resolution adopted by the Board of Directors of Provident
Mutual Life Insurance Company authorizing establishment of
the Provident Mutual Variable Growth Separate Account,
Provident Mutual Variable Money Market Separate Account,
Provident Mutual Variable Bond Separate Account, Provident
Mutual Variable Managed Separate Account, and Provident
Mutual Variable Zero Coupon Bond Separate Account
1.A.1.b. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable Aggressive Growth Separate Account
1.A.1.c. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable International Separate Account
1.A.1.d. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable Separate Account
1.A.1.e. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company Approving Creation of additional
Subaccounts of Provident Mutual Variable Separate Account
1.A.1.f. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company Approving Creation of additional
Subaccounts of Provident Mutual Variable Separate Account
1.A.2. None
1.A.3.a.i. Underwriting Agreement
1.A.3.a.ii. Amendment to Underwriting Agreement
1.A.3.a.iii. Amendment to Underwriting Agreement
1.A.3.a.iv. Amendment to Underwriting Agreement
1.A.3.a.vi. Amendment to Underwriting Agreement
1.A.3.b.i. PPGA's Agreement and Supplements
1.A.3.b.ii. PPA's Agreement and Supplements
1.A.3.b.iii. PGA's Agreement and Supplements
1.A.3.b.iv. Special Agent's Career Agreement and Supplement
1.A.3.b.v. Special Agent's Agreement
1.A.3.b.vi. Corporate Agent's Agreement and Supplement
1.A.3.c.i. PPGA Commission Schedules
1.A.3.c.ii. PPA Commission Schedules
1.A.3.c.iii. PGA Commission Schedules
1.A.3.c.iv. Commission Schedules for Variable Life Insurance Products
for Agents under Special Career Agent's Career Agreement
</TABLE>
II-2
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBITS PAGE
-------- ----
<S> <C> <C>
1.A.3.c.v. Commission Schedules for Variable Life Insurance Products
for Agents under Special Agent's Agreement
1.A.3.c.vi. Commission Schedules for Variable Life Insurance Products
for Corporate Agents with Special Agent's Career Agreement
1.A.3.d. Form of Selling Agreement between 1717 Capital Management
Company and Broker/Dealers
1.A.4. None
1.A.5. Modified Premium Variable Life Insurance Policy Forms (C111,
C111A, C112 & C112A)
1.A.5.a. Disability Waiver of Premium Rider -- at issue (C545)
1.A.5.b. Disability Waiver of Premium Rider -- after issue (C550)
1.A.5.c. Guaranteed Purchase Option Rider (C645)
1.A.5.d. Variable Loan Interest Rate Rider (C744VL)
1.A.5.e. Qualify as part of Section 403(b) Rider (C827)
1.A.5.f. Accelerated Death Benefit Rider (C/D904)
1.A.5.g. Change from Fixed to Variable Loan Interest Rate Rider
(14918VL)
1.A.5.h. Increasing Death Benefit Rider (C310)
1.A.6.a. Charter of Provident Mutual Life Insurance Company
1.A.6.b. By-Laws of Provident Mutual Life Insurance Company
1.A.7. None
1.A.8. Sponsorship Agreement between Provident Mutual Life
Insurance Company and MLPFS for Zero Coupon Trust
1.A.9. None
1.A.10. Form of Application
1.A.10.a. Supplemental Application for Modified Premium
a.A.10.b. Initial Allocation Selection
2. See Exhibit 1.A.5.
3.A. Consent of Adam Scaramella, Esquire
3.B. Consent of Sutherland, Asbill & Brennan, L.L.P.
4. None
5. Inapplicable
6. Consent of Scott V. Carney, FSA, MAAA
7. Consent of Coopers & Lybrand L.L.P., Independent Accountants
8. Description of Provident Mutual Life Insurance Company's
Issuance, Transfer and Redemption Procedures for Policies
9. Powers of Attorney
10.a. Participation Agreement by and among Market Street Fund,
Inc., Provident Mutual Life Insurance Company and PML
Securities, Inc.
10.b. Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Provident Mutual
Life Insurance Company
10.c. Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Provident
Mutual Life Insurance Company
10.d. Sales Agreement between Neuberger & Berman Advisers
Management Trust and Provident Mutual Life Insurance
Company
10.e. Participation Agreement among The Alger American Fund,
Provident Mutual Life Insurance Company, and Fred Alger and
Company Incorporated
27. Inapplicable
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 5, filed on
May 1, 1998, File No. 33-65512.
II-3
<PAGE> 163
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PROVIDENT
MUTUAL LIFE INSURANCE COMPANY CERTIFIES THAT IT MEETS ALL THE REQUIREMENTS FOR
EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT PURSUANT TO RULE 485(B) UNDER THE
SECURITIES ACT OF 1933 AND, HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BERWYN AND
COMMONWEALTH OF PENNSYLVANIA ON THE 1ST DAY OF MAY, 1998.
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY
By: /s/ ROBERT W. KLOSS
------------------------------------
ROBERT W. KLOSS
Chief Executive Officer
Attest: /s/ JAMES
POTTER
- ---------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ROBERT W. KLOSS Chief Executive Officer May 1, 1998
- ------------------------------------------------ (Principal Executive Officer)
ROBERT W. KLOSS
/s/ MARY LYNN FINELLI Executive Vice President and May 1, 1998
- ------------------------------------------------ Chief Financial Officer
MARY LYNN FINELLI (Principal Financial Officer)
/s/ LINDA M. SPRINGER Vice President and Controller May 1, 1998
- ------------------------------------------------ (Principal Accounting Officer)
LINDA M. SPRINGER
* Director May 1, 1998
- ------------------------------------------------
EDWARD R. BOOK
* Director May 1, 1998
- ------------------------------------------------
DOROTHY M. BROWN
* Director May 1, 1998
- ------------------------------------------------
ROBERT J. CASALE
* Director May 1, 1998
- ------------------------------------------------
NICHOLAS DEBENEDICTUS
</TABLE>
II-4
<PAGE> 164
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Director May 1, 1998
- ------------------------------------------------
PHILIP C. HERR, II
* Director May 1, 1998
- ------------------------------------------------
J. RICHARD JONES
* Director May 1, 1998
- ------------------------------------------------
JOHN P. NEAFSEY
* Director May 1, 1998
- ------------------------------------------------
CHARLES L. ORR
* Director May 1, 1998
- ------------------------------------------------
DONALD A. SCOTT
* Director May 1, 1998
- ------------------------------------------------
JOHN J. F. SHERRERD
* Director May 1, 1998
- ------------------------------------------------
HAROLD A. SORGENTI
</TABLE>
*By: WILLIAM P. LOESCHE
----------------------
WILLIAM P. LOESCHE
Attorney-in-fact
Pursuant to Power of Attorney
II-5
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Provident
Mutual Variable Growth Separate Account, Provident Mutual Variable Money Market
Separate Account, Provident Mutual Variable Bond Separate Account, Provident
Mutual Variable Managed Separate Account, Provident Mutual Variable Zero Coupon
Bond Separate Account, Provident Mutual Variable Aggressive Growth Separate
Account, Provident Mutual Variable International Separate Account and Provident
Mutual Variable Separate Account certify that they meet all the requirements for
effectiveness of this Post-Effective Amendment pursuant to Rule 485(b) under the
Securities Act of 1933 and, have duly caused this post-effective amendment to
the Registration Statement under the Securities Act of 1933 to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Berwyn and Commonwealth of Pennsylvania on the 1st day of May, 1998.
PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE MONEY MARKET SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE BOND SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE MANAGED SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE ZERO COUPON BOND SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE AGGRESSIVE GROWTH SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE INTERNATIONAL SEPARATE ACCOUNT
PROVIDENT MUTUAL VARIABLE SEPARATE ACCOUNT
(Registrant)
By: PROVIDENT MUTUAL LIFE INSURANCE
COMPANY
(DEPOSITOR)
By: /s/ ROBERT W. KLOSS
---------------------------------------
ROBERT W. KLOSS
Chief Executive Officer
Attest: /s/ JAMES
POTTER
- ------------------------------------------
II-6
<PAGE> 166
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
-------- ----
<S> <C> <C>
1.A.1.a. Resolution adopted by the Board of Directors of Provident
Mutual Life Insurance Company authorizing establishment of
the Provident Mutual Variable Growth Separate Account,
Provident Mutual Variable Money Market Separate Account,
Provident Mutual Variable Bond Separate Account, Provident
Mutual Variable Managed Separate Account, and Provident
Mutual Variable Zero Coupon Bond Separate Account
1.A.1.b. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable Aggressive Growth Separate Account
1.A.1.c. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable International Separate Account
1.A.1.d. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company establishing the Provident Mutual
Variable Separate Account
1.A.1.e. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company Approving Creation of additional
Subaccounts of Provident Mutual Variable Separate Account
1.A.1.f. Resolution of the Board of Directors of Provident Mutual
Life Insurance Company Approving Creation of additional
Subaccounts of Provident Mutual Variable Separate Account
1.A.3.a.i. Underwriting Agreement
1.A.3.a.ii. Amendment to Underwriting Agreement
1.A.3.a.iii. Amendment to Underwriting Agreement
1.A.3.a.iv. Amendment to Underwriting Agreement
1.A.3.a.vi. Amendment to Underwriting Agreement
1.A.3.b.i. PPGA's Agreement and Supplements
1.A.3.b.ii. PPA's Agreement and Supplements
1.A.3.b.iii. PGA's Agreement and Supplements
1.A.3.b.iv. Special Agent's Career Agreement and Supplement
1.A.3.b.v. Special Agent's Agreement
1.A.3.b.vi. Corporate Agent's Agreement and Supplement
1.A.3.c.i. PPGA Commission Schedules
1.A.3.c.ii. PPA Commission Schedules
1.A.3.c.iii. PGA Commission Schedules
1.A.3.c.iv. Commission Schedules for Variable Life Insurance Products
for Agents under Special Career Agent's Career Agreement
1.A.3.c.v. Commission Schedules for Variable Life Insurance Products
for Agents under Special Agent's Agreement
1.A.3.c.vi. Commission Schedules for Variable Life Insurance Products
for Corporate Agents with Special Agent's Career Agreement
1.A.3.d. Form of Selling Agreement between 1717 Capital Management
Company and Broker/Dealers
1.A.5. Modified Premium Variable Life Insurance Policy Forms (C111,
C111A, C112 & C112A)
1.A.5.a. Disability Waiver of Premium Rider -- at issue (C545)
1.A.5.b. Disability Waiver of Premium Rider -- after issue (C550)
1.A.5.c. Guaranteed Purchase Option Rider (C645)
1.A.5.d. Variable Loan Interest Rate Rider (C744VL)
1.A.5.e. Qualify as part of Section 403(b) Rider (C827)
1.A.5.f. Accelerated Death Benefit Rider (C/D904)
1.A.5.g. Change from Fixed to Variable Loan Interest Rate Rider
(14918VL)
</TABLE>
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBITS PAGE
-------- ----
<S> <C> <C>
1.A.5.h. Increasing Death Benefit Rider (C310)
1.A.6.a. Charter of Provident Mutual Life Insurance Company
1.A.6.b. By-Laws of Provident Mutual Life Insurance Company
1.A.8. Sponsorship Agreement between Provident Mutual Life
Insurance Company and MLPFS for Zero Coupon Trust
1.A.10. Form of Application
1.A.10.a. Supplemental Application for Modified Premium
a.A.10.b. Initial Allocation Selection
3.A. Consent of Adam Scaramella, Esquire
3.B. Consent of Sutherland, Asbill & Brennan, L.L.P.
6. Consent of Scott V. Carney, FSA, MAAA
7. Consent of Coopers & Lybrand L.L.P., Independent Accountants
8. Description of Provident Mutual Life Insurance Company's
Issuance, Transfer and Redemption Procedures for Policies
9. Powers of Attorney
10.a. Participation Agreement by and among Market Street Fund,
Inc., Provident Mutual Life Insurance Company and PML
Securities, Inc.
10.b. Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Provident Mutual
Life Insurance Company
10.c. Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Provident
Mutual Life Insurance Company
10.d. Sales Agreement between Neuberger & Berman Advisers Management
Trust and Provident Mutual Life Insurance Company
10.e. Participation Agreement among The Alger American Fund,
Provident Mutual Life Insurance Company, and Fred Alger and
Company Incorporated
27. Inapplicable
</TABLE>
- ---------------
<PAGE> 1
Exhibit 1(A1)(a)
RESOLUTIONS
1. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated Provident Mutual Variable Growth Separate Account (Account);
FURTHER RESOLVED, that the President, a Vice President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, applications for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice President be and hereby are
authorized to adopt Rules and Regulations for the administration of the
Account;
FURTHER RESOLVED, that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with the Market Street Fund, Inc., for the provision of services
to the Account.
2. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated Provident Mutual Variable Bond Separate Account (Account);
FURTHER RESOLVED, that the President, a Vice President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, applications for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
<PAGE> 2
FURTHER RESOLVED, that the President or a Vice President be and hereby are
authorized to adopt Rules and Regulations for the administration of the
Account;
FURTHER RESOLVED, that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with the Market Street Fund, Inc., for the provision of services
to the Account.
3. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated Provident Mutual Variable Money Market Separate Account
(Account);
FURTHER RESOLVED, that the President, a Vice President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, application for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice President be and hereby are
authorized to adopt Rules and Regulations for administration of the
Account;
FURTHER RESOLVED; that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with the Market Street Fund, Inc., for the provision of services
to the Account.
4. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated Provident Mutual Variable Managed separate Account (Account);
FURTHER RESOLVED, that the President, a Vice President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all the action necessary to comply with the Acts, including but not
limited to execution and filing of registration statements and amendment's
thereto, applications for exemptions from the provisions of the Acts as
may be necessary or desirable, and agreements for the management of the
Account
<PAGE> 3
and for the distribution of variable life insurance policies carrying an
interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice President be and hereby are
authorized to adopt Rules and Regulations for the administration of the
Account;
FURTHER RESOLVED, that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with the Market Street Fund, Inc., for the provision of services
to the Account.
5. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated Provident Mutual Variable Zero Coupon Bond Separate Account
(Account);
FURTHER RESOLVED, that the President, a Vice President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, applications for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice President be and hereby are
authorized to adopt Rules and Regulations for the administration of the
Account;
FURTHER RESOLVED, that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with Merrill, Lynch, Pierce, Fenner & Smith for the provision of
services to the Account.
6. BE IT RESOLVED, that the following standards of conduct with respect to
investments of the above variable life insurance Separate Accounts and
variable life insurance operations are hereby adopted:
Unless otherwise approved in writing by the insurance commissioner of the
applicable state in advance of the transaction, with respect to variable
life insurance Separate Accounts, the Company shall not:
1. Sell to, or purchase from, any such Separate Account established by
the company any securities or other property, other than variable
life insurance policies.
<PAGE> 4
2. Purchase, or allow to be purchased, for any such Separate Account,
any securities of which the Company or an affiliate is the issuer.
3. Accept any compensation, other than a regular salary or wages from
the Company or affiliate, for the sale or purchase of securities to
or from any such Separate Account other than as provided by law.
4. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliate participates with such a
Separate Account in any transaction in which the Company or any of
its affiliates obtain an advantage in the price or quality of the
item purchased, in the service received, or in the cost of such
service or is disadvantaged in any of these respects by the same
transaction.
5. Borrow money or securities from any such Separate Account other than
under a policy loan provision.
<PAGE> 1
Exhibit 1(A1)(b)
February 27, 1989
Extract from the minutes of the of the Board of Directors meeting held February
21, 1989:
"The Board adopted the following resolution:
Establishment of Provident Mutual Variable Aggressive Growth Separate Account
1. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
(designated the Provident Mutual Variable Aggressive Growth Separate
Account (Account);
FURTHER RESOLVED, that the President, a Vice-President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, applications for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice-President be, and hereby
are, authorized to adopt Rules and Regulations for the administration of
the Account;
FURTHER RESOLVED, that the President or a Vice-President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with the Market Street Fund, Inc., for the provision of services
to the Account.
2. BE IT RESOLVED, that the following standards of conduct with respect to
investments of the above variable life insurance Separate Account and
variable life insurance operations are hereby adopted:
Unless otherwise approved in writing by the insurance commissioner of the
applicable state in advance of the transaction, with respect to variable
life insurance Separate Accounts, the Company shall not:
1. Sell to, or purchase from, any such Separate Account established by
the company any securities or other property, other than variable
life insurance policies.
2. Purchase, or allow to be purchased, for any such Separate Account,
any securities of which the Company or an affiliate is the issuer.
<PAGE> 2
3. Accept any compensation, other than a regular salary or wages from
the Company or affiliate, for the sale or purchase of securities to
or from any such Separate Account other than as provided by law,
4. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliate participates with such a
Separate Account in any transaction in which the Company or any of
its affiliates obtain an advantage in the price or quality of the
item purchased, in the service received, or in the cost of such
service or is disadvantaged in any of these respects by the same
transaction.
5. Borrow money or securities from any such Separate Account other than
under a policy loan provision."
/s/ Joseph A. Kenney, Jr.
--------------------------
Secretary
<PAGE> 1
Exhibit 1(A1)(c)
Extract from the minutes of the Board of Directors meeting held on July
15, 1991.
The Board adopted the following resolution:
Establishment of Provident Mutual Variable International Separate Account
1. BE IT RESOLVED, that Provident Mutual Life Insurance Company of
Philadelphia, pursuant to the provisions of Section 406.2 of the
Pennsylvania Insurance Code hereby establishes a separate account
designated the Provident Mutual Variable International Separate Account
(Account);
FURTHER RESOLVED, that the President, a Vice-President, Secretary,
Treasurer or Assistant Secretary each be authorized to take all necessary
and appropriate action to accomplish the registration of the Account as an
investment company under the Investment Company Act of 1940 and the
registration of the variable life insurance policies issued in connection
with the Account as securities under the Securities Act of 1933, and to
take all action necessary to comply with the Acts, including but not
limited to the execution and filing of registration statements and
amendments thereto, applications for exemptions from the provisions of the
Acts as may be necessary or desirable, and agreements for the management
of the Account and for the distribution of variable life insurance
policies carrying an interest in the Account assets;
FURTHER RESOLVED, that the President or a Vice-President be, and hereby
are, authorized to adopt Rules and Regulations for the administration of
the Account;
FURTHER RESOLVED, that the President or a Vice-President be, and hereby
are, authorized to take all necessary and appropriate action to effect an
agreement with The Market Street Fund, Inc., for the provision of services
to the Account.
2. BE IT RESOLVED, that the following standards of conduct with respect to
investments of the above variable life insurance Separate Account and
variable life insurance operations are hereby adopted:
Unless otherwise approved in writing by the insurance commissioner of the
applicable state in advance of the transaction, with respect to variable
life insurance Separate Accounts, the Company shall not:
1. Sell to, or purchase from, any such Separate Account established by
the company any securities or other property, other than variable
life insurance policies.
2. Purchase, or allow to be purchased, for any such Separate Account,
any securities of which the Company or an affiliate is the issuer.
<PAGE> 2
3. Accept any compensation, other than a regular salary or wages from
the Company or affiliate, for the sale or purchase of securities to
or from any such Separate Account other than as provided by law.
4. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliate participates with such a
Separate Account in any transaction in which the Company or any of
its affiliates obtain an advantage in the price or quality of the
item purchased, in the service received, or in the cost of such
service or is disadvantaged in any of these respects by the same
transaction.
5. Borrow money or securities from any such Separate Account other than
under a policy loan provision.
/s/ Joseph A. Kenney, Jr.
--------------------------
Joseph A. Kenney, Jr.
Secretary
<PAGE> 1
Exhibit 1(A1)(d)
[PROVIDENT MUTUAL LOGO]
PROVIDENT MUTUAL BUILDING, 1600 MARKET STREET, P.O. BOX 7378, PHILADELPHIA, PA.
19101, (215) 636-5495 FAX (215) 636-5129
WILLIAM P. LOESCHE
COUNSEL AND ASSISTANT SECRETARY
June 14, 1993
I hereby certify the following to be a true extract from the minutes of the
Executive Committee meeting held June 7, 1993:
"The Committee adopted resolutions, as filed with these minutes, related
to the establishment of the Provident Mutual Variable Separate Account." (See
Attachment)
/s/ W. Peter Loesche
---------------------------------------
W. Peter Loesche, Assistant Secretary
<PAGE> 2
ESTABLISHMENT OF THE PROVIDENT MUTUAL VARIABLE SEPARATE ACCOUNT
WHEREAS, on October 21, 1985 Provident Mutual Life Insurance Company of
Philadelphia ("PMLIC") established the Provident Mutual Variable Growth Separate
Account, the Provident Mutual Variable Money Market Separate Account, the
Provident Mutual Variable Bond Separate Account, the Provident Mutual Variable
Managed Separate Account and the Provident Mutual Variable Zero Coupon Bond
Separate Account; and on February 21, 1989 PMLIC established the Provident
Mutual Variable Aggressive Growth Separate Account; and on July 15, 1991 PMLIC
established the Provident Mutual Variable International Separate Account; and
WHEREAS, such Separate Accounts are registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment Act
of 1940; and
WHEREAS, PMLIC desires to create an additional Separate Account for use in
conjunction with certain variable life insurance policies (the "Policies")
issued by PMLIC;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of Provident
Mutual Life Insurance Company of Philadelphia hereby establishes a separate
account pursuant to the provisions of Section 406.2 of the Pennsylvania
Insurance Code, designated the "PROVIDENT MUTUAL VARIABLE SEPARATE ACCOUNT" (the
"Account");
FURTHER RESOLVED, that the Account shall be divided into investment
subaccounts, each of which will invest in shares of a designated mutual fund
portfolio and to which net premiums under the Policies shall be allocated in
accordance with instructions received from owners of such Policies;
FURTHER RESOLVED, that the following investment subaccounts be
established: the FIDELITY GROWTH SUBACCOUNT, the FIDELITY EQUITY-INCOME
SUBACCOUNT, the FIDELITY ASSET MANAGER SUBACCOUNT, the FIDELITY INDEX 500
SUBACCOUNT, the NEUBERGER & BERMAN GROWTH SUBACCOUNT and the NEUBERGER & BERMAN
BALANCED SUBACCOUNT;
FURTHER RESOLVED, that the Board of Directors expressly reserves the right
to add or remove any investment subaccount of the Account or substitute a
designated mutual fund portfolio for another as it may hereafter deem necessary
or appropriate;
FURTHER RESOLVED, that that portion of the assets of the Account equal to
the reserves and other contract liabilities with respect to such Account shall
not be chargeable with liabilities arising out of any other business PMLIC may
conduct; and
FURTHER RESOLVED, that the income, gains and losses, realized or
unrealized, from assets allocated to the Account shall, in accordance with the
Policies, be credited to or charged against such Account without regard to other
income, gains or losses of PMLIC; and
<PAGE> 1
Exhibit 1(A1)(e)
RESOLUTION APPROVING CREATION OF ADDITIONAL SUBACCOUNTS OF PROVIDENT MUTUAL
VARIABLE SEPARATE ACCOUNT.
WHEREAS, the Executive Committee of the Board of Directors of Provident
Mutual Life Insurance Company ("PMLIC") established the PROVIDENT MUTUAL
VARIABLE SEPARATE ACCOUNT (the "Account") on June 7, 1993 pursuant to the
provisions of Section 406.2 of the Pennsylvania Insurance Code, the subaccounts
of which are available under variable life insurance policies issued by PMLIC
(the "Policies"); and
WHEREAS, the Board of Directors of PMLIC subsequently added seven
subaccounts to the Account on February 7, 1994, for a total of thirteen
subaccounts; and
WHEREAS, on October 5, 1995, the Board of Directors added five additional
subaccounts, for a total of eighteen subaccounts; and
WHEREAS, PMLIC now desires to terminate the five subaccounts created on
October 5, 1995; and
WHEREAS, PMLIC now desires to establish three additional subaccounts, each
of which will invest in shares of a designated mutual fund portfolio and to
which net premiums under the Policies shall be allocated in accordance with
instructions received from owners of such Policies;
NOW, BE IT RESOLVED, that PMLIC, pursuant to the provisions of Section
406.2 of the Pennsylvania Insurance Code, hereby does establish and create the
following additional investment Subaccounts of the Account: THE ALGER SMALL
CAPITALIZATION SUBACCOUNT; THE FIDELITY CONTRAFUND SUBACCOUNT; AND THE VAN ECK
WORLDWIDE EMERGING MARKETS SUBACCOUNT.
FURTHER RESOLVED, that PMLIC hereby does terminate the following
investment Subaccounts of the Account, none of which have been made available
to policyholders nor funded by PMLIC: THE OFFITBANK VIF- HIGH YIELD SUBACCOUNT;
THE OFFITBANK VIF- INVESTMENT GRADE GLOBAL DEBT SUBACCOUNT; THE OFFITBANK VIF-
EMERGING MARKETS SUBACCOUNT; THE OFFITBANK VIF- GLOBAL CONVERTIBLE SUBACCOUNT;
AND THE OFFITBANK VIF- TOTAL RETURN SUBACCOUNT.
FURTHER RESOLVED, that the President or a Vice President be, and hereby
are, authorized to take all necessary and appropriate action to enter into
agreements for the sale of shares and to take such other actions and execute
such other agreements as they deem necessary or desirable to carry out the
foregoing resolutions and the intent and purposes thereof.
<PAGE> 1
EXHIBIT 1(A1)(f)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
Investment Committee
RESOLUTION
---------
WHEREAS, on October 19, 1992 Provident Mutual Life Insurance Company (the
"Company") established a separate account pursuant to the provisions of Section
406.2 of the Pennsylvania Insurance Code designated as the "Provident Mutual
Variable Annuity Separate Account" (the "Account") for use in conjunction with
certain variable annuity contracts (the "Contracts"); and
WHEREAS, such Account is registered with the Securities and Exchange Commission
("SEC") as a unit investment trust under the Investment Act of 1940; and
WHEREAS, the Company desires to establish investment subaccounts within the
Account and further reserves the right to add or remove any investment
subaccount within the Account as may be deemed necessary or appropriate;
NOW, THEREFORE, BE IT RESOLVED, that the following investment subaccounts are
hereby established within the Account: the ALL-PRO LARGE CAP VALUE SUBACCOUNT,
the ALL-PRO SMALL CAP VALUE SUBACCOUNT, the ALL-PRO LARGE CAP GROWTH SUBACCOUNT,
the ALL-PRO SMALL CAP GROWTH SUBACCOUNT, the NEUBERGER & BERMAN PARTNERS
SUBACCOUNT and the VAN ECK WORLDWIDE REAL ESTATE INVESTMENT TRUST SUBACCOUNT
(the "Subaccounts"); and
FURTHER RESOLVED, that the portion of the assets of the Account and the
Subaccounts equal to the reserves and other contract liabilities with respect to
the Account and the Subaccounts shall not be chargeable with liabilities arising
out of any other business the Company may conduct; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Account or the Subaccounts shall, in accordance
with the Contracts, be credited to or charged against such Account or
Subaccounts without regard to other income, gains or losses of the Company; and
FURTHER RESOLVED, that the President or a Vice President are hereby authorized
to take all necessary and appropriate action to effectuate the use of the
Subaccount, to adopt Rules and Regulations for the administration of the
Subaccounts, and to execute any and all agreements, including but not limited
to, an agreement with the Market Street Fund, Inc., for the provision of
services with the Subaccounts.
<PAGE> 1
Exhibit 1(A3)(ai)
UNDERWRITING AGREEMENT
AGREEMENT made this 6th day of December 1985, by and among Provident
Mutual Life Insurance Company of Philadelphia, a Pennsylvania corporation
("PMLIC"), PML Securities Company, a Pennsylvania corporation ("PML"), and
Provident Mutual Variable Growth Separate Account, Provident Mutual Variable
Money Market Separate Account, Provident Mutual Variable Bond Separate Account,
Provident Mutual Variable Managed Separate Account, and Provident Mutual
Variable Zero Coupon Bond Separate Account (collectively the "Accounts"),
separate investment accounts of PMLIC.
WITNESSETH:
WHEREAS, PMLIC has established and maintains the Accounts, pursuant to the
laws of Pennsylvania for the purpose of selling variable life insurance policies
("Policies"), the sale of which is to commence after the effective date of the
Registration Statement filed with the Securities and Exchange Commission
("Commission") on Form S-6 pursuant to the Securities Act of 1933 ("1933 Act");
and
WHEREAS, the Accounts are registered under the Investment Company Act of
1940 ("1940 Act"); and
WHEREAS, PML is registered as a broker-dealer under the Securities
Exchange Act of 1934 ("1934 Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD"); and
WHEREAS, PMLIC, the Accounts and PML wish to enter into an agreement to
have PML act as PMLIC's principal underwriter for the sale of the Policies
through the Accounts;
NOW, THEREFORE, the parties agree as follows:
A. DISTRIBUTION SERVICES
1. PML shall act as the principal underwriter for the sale of Policies to
the public, during the term of this Agreement, in each state and other
jurisdictions in which such Policies may lawfully be sold. PML shall offer the
Policies for sale and distribution at premium rates set by PMLIC. Completed
applications for Policies shall be transmitted directly to PMLIC for acceptance
or rejection in accordance with underwriting rules established by PMLIC. Initial
premium payments under the Policies shall be made by check payable to PMLIC and
shall be transmitted promptly by PML or its representatives to PMLIC.
2. PML shall be responsible for supervising and controlling its
representatives soliciting applications for Policies, for taking all necessary
and appropriate steps to ensure compliance by its representatives on a
continuous basis with applicable laws and regulations concerning the offer and
sale of policies, and for ensuring that its representatives are duly and
appropriately licensed or otherwise qualified for the sale of the Policies in
each applicable state or other jurisdiction.
<PAGE> 2
3. PMLIC agrees that during the term of this Agreement it will take any
action which is required to cause the Policies to comply as an insurance product
and a registered security with all applicable federal and state laws and
regulations. PMLIC agrees that during the term of this Agreement it will take
reasonable steps to discharge, on behalf of PML, the responsibilities set forth
in paragraph 2 above.
4. PML is hereby authorized to enter into separate written agreements, on
such terms and conditions as PML may determine not inconsistent with this
Agreement, with one or more organizations which agree to participate in the
distribution of the Policies. Such organization (hereafter "Broker") shall be
registered both as a broker/dealer under the 1934 Act and as a member of the
NASD. PML shall obtain the approval of PMLIC prior to entering into an agreement
with any such organization.
5. PML shall take reasonable steps to ensure that any Broker and its
representatives soliciting applications for Policies shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of such
Policies (and the riders and other policies offered in connection therewith)
under the insurance laws and any applicable blue-sky laws of each state or other
jurisdiction in which PMLIC is licensed to sell the Policies.
6. PML shall take reasonable steps to ensure that each Broker supervises
its representatives in compliance with applicable laws and regulations. Broker
shall assume any legal responsibilities of PMLIC for the acts, commissions,
omissions, or defalcations of such representatives insofar as they relate to the
sale of the Policies. Applications for Policies solicited by a Broker through
its agents or representatives shall be transmitted directly to PMLIC, and if
received by PML, shall be forwarded to PMLIC. All premium payments under the
Policies shall be made by check to PMLIC and remitted promptly to PMLIC.
7. PMLIC shall undertake to appoint the qualified representatives of PML
or any Broker appointed by PML as life insurance agents of PMLIC. PMLIC reserves
the right to refuse to appoint any proposed agent, or once appointed to
terminate the same.
B. COMPLIANCE AND RECORDKEEPING
1. PML is authorized to appoint the organizations described in paragraph 4
of Article A above as independent general agents of PMLIC for the sale of the
Policies. PMLIC is responsible for ensuring that Brokers are duly qualified,
under the insurance laws of the applicable jurisdictions, to sell the Policies.
2. PMLIC and PML wish to ensure that Policies sold by PML will be issued
to purchasers for whom the Policies will be suitable. On behalf of PML, PMLIC
shall take reasonable steps to ensure that the various representatives appointed
by it shall not make recommendations to an applicant to purchase a Policy in the
absence of reasonable grounds to believe that the purchase of the Policy is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
financial needs, objectives and situation, and the likelihood that the
<PAGE> 3
applicant will continue to make the premium payments contemplated by the
Policies. PML is not authorized to give any information or to make any
representations concerning the Policies other than those contained in the
current prospectus filed with the Commission or in such sales literature as may
be authorized by PMLIC.
3. PMLIC shall have the responsibility for furnishing PML and its
representatives with prospectuses, financial statements, sales promotion
materials as well as individual sales proposals related to the sale of the
Policies, and other documents which PML reasonably requests for use in
connection with the distribution of the Policies. PML shall not use any sales
materials that have not been approved by PMLIC; provided, however, that PML
shall have responsibility for approving and filing all sales literature and
advertisements with the NASD and SEC as required by law or rule.
4. On behalf of PML, PMLIC shall have the responsibility for maintaining
the record of representatives licensed, registered and otherwise qualified under
Federal Securities law to sell the Policies. On behalf of PML, PMLIC shall have
the responsibility for calculating and furnishing periodic reports to PMLIC of
the commissions and service fees payable to agents, brokers, general agents and
sales managers of PMLIC and its affiliates and for furnishing periodic reports
to PMLIC as to the sale of Policies made pursuant to this Agreement. On behalf
of PML, PMLIC shall also maintain such other records as are required of it by
applicable laws and regulations. The books, accounts and records of PMLIC, the
Accounts, and PML, shall be maintained so as to clearly and accurately disclose
the nature and details of the transactions.
5. PML and PMLIC agree to cooperate fully in any insurance regulatory
investigation or proceeding or judicial proceeding arising in connection with
the Policies distributed under this Agreement. PML and PMLIC further agree to
cooperate fully in any securities regulatory investigation or proceeding or
judicial proceeding with respect to PMLIC, PML, their affiliates and their
agents or representatives to the extent that such investigation or proceeding is
in connection with Policies distributed under this Agreement. Without
limitation:
(a)PML will be notified promptly of any customer complaint or notice
of any regulatory investigation or proceeding or judicial proceeding
received by PMLIC with respect to PML or any agent or representative or
which may affect PMLIC's issuance of any Policy marketed under this
Agreement.
(b)PML will promptly notify PMLIC of any customer complaint or
notice of any regulatory investigation or proceeding received by PML or
its affiliates with respect to PML or any agent or representative in
connection with any Policy distributed under this Agreement or any
activity in connection with any such Policy.
(c)In the case of a substantive customer complaint, PML and PMLIC
will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval
not less than five business days prior to its being sent to the customer
or regulatory authority, except that, if a more prompt response is
required, the proposed response shall be communicated by telephone or
telegraph.
<PAGE> 4
C. COMPENSATION
1. On behalf of PML, PMLIC shall arrange for the payment of commissions
directly to those registered representatives of PML who are entitled thereto in
connection with the sale of the Policies in the amounts and on such terms and
conditions as PMLIC and PML shall determine.
2. PMLIC shall arrange for the payment of commissions directly to those
Brokers who sell Policies under Agreements entered into pursuant to paragraph 4
of Article A above, in amounts as may be agreed to by PMLIC and specified in
such written agreements.
3. PMLIC shall reimburse PML for the costs and expenses incurred by PML in
furnishing or obtaining the services, materials and supplies required by the
terms of this Agreement in the initial sales efforts and the continuing
obligations hereunder.
D. MISCELLANEOUS
1. This Agreement shall be effective upon the execution hereof. This
Agreement:
(a) shall automatically be terminated in the event of its
assignment;
(b) may be terminated by any party at any time upon 60 days' written
notice to the other parties hereto;
(c) may be terminated upon written notice of a party to another
party hereto in the event of bankruptcy or insolvency of such party to
which notice is given; and
(d) may be terminated at any time upon the mutual written consent of
the parties hereto.
Upon termination of this Agreement, all authorizations, rights, and obligations
shall cease except the obligations to settle accounts hereunder, including
commissions attributable to payments or premiums or contributions subsequently
received for Policies in effect at the time of termination or issued pursuant to
applications received by PMLIC prior to termination.
2. This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulations, and rulings thereunder and of the
applicable rules and regulations of the NASD, from time to time in effect, and
the terms hereof shall be interpreted and construed in accordance therewith.
3. PML shall act as an independent contractor and nothing herein contained
shall constitute PML or its agents or employees as employees of PMLIC in
connection with the sale of the Policies.
4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
<PAGE> 5
5. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
6. PML agrees that all accounts and records which it maintains for PMLIC
and the Accounts shall be the property of PMLIC and the Accounts and that it
will surrender promptly to the designated officers of PMLIC any or all such
accounts and records upon request.
7. PML shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of PMLIC and/or the Accounts, present or
future, any materials, reasonably related to the administrative and marketing
services provided hereunder, as may be reasonably required by any governmental
agency having jurisdiction.
8. PMLIC and the Accounts shall own and control all pertinent records
relating to the variable life insurance operations.
9. In the event of termination for any reason all records shall promptly
be returned to PMLIC free from any claim or retention of rights by PML.
10. PML shall not disclose or use any records or information obtained
pursuant to this agreement in any manner whatsoever except as expressly
authorized herein and further PML will keep confidential any information
obtained pursuant to the service relationship set forth herein and disclose such
information only if PMLIC has authorized such disclosure or such disclosure is
expressly required by applicable federal or state regulatory authorities.
11. PML shall be liable for its own misconduct and negligence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ATTEST: /s/ illegible PML SECURITIES COMPANY
---------------------------
BY: /s/ illegible
-----------------------------------
ATTEST: /s/ illegible PROVIDENT MUTUAL LIFE INSURANCE
--------------------------- COMPANY OF PHILADELPHIA
BY: /s/ illegible
-----------------------------------
<PAGE> 6
ATTEST: /s/ illegible PROVIDENT MUTUAL VARIABLE GROWTH
- ----------------------------------- SEPARATE ACCOUNT
BY /s/ Leonard H. McCandless
-------------------------------------
ATTEST: /s/ illegible PROVIDENT MUTUAL VARIABLE MONEY MARKET
- ----------------------------------- SEPARATE ACCOUNT
BY: /s/ Leonard H. McCandless
-------------------------------------
ATTEST: /s/ illegible PROVIDENT MUTUAL VARIABLE BOND SEPARATE
- ----------------------------------- ACCOUNT
BY /s/ Leonard H. McCandless
-------------------------------------
ATTEST: /s/ illegible PROVIDENT MUTUAL VARIABLE MANAGED
- ----------------------------------- SEPARATE ACCOUNT
BY: /s/ Leonard H. McCandless
-------------------------------------
ATTEST: /s/ illegible PROVIDENT MUTUAL VARIABLE ZERO COUPON
- ----------------------------------- SEPARATE BOND ACCOUNT
BY: /s/ Leonard H. McCandless
-------------------------------------
<PAGE> 7
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and among PML Securities Company
("PML"), Provident Mutual Life Insurance Company of Philadelphia, ("PMLIC"), and
Provident Mutual Variable Growth Separate Account, Provident Mutual Variable
Bond Separate Account, Provident Mutual Variable Money Market Separate Account,
Provident Mutual Variable Managed Separate Account and Provident Mutual Variable
Zero Coupon Bond Separate Account (collectively the "Accounts") is made this 9th
day of September, 1988.
WITNESSETH:
WHEREAS, PML, PMLIC and the Accounts entered into an Underwriting Agreement on
December 6 1985; and
WHEREAS, it is the desire of the parties thereto to amend said Agreement;
NOW THEREFORE, it is agreed among the parties hereto to amend said Underwriting
Agreement as follows:
1. Add the following to item D.l.:
(e) may be terminated for "cause" at any time by PMLIC. "Cause" is
defined and limited for this purpose to mean willful misfeasance,
bad faith, or gross negligence by PML in the performance of its
duties or reckless disregard by it of its obligations and duties
under this Agreement.
2. Add the following at the end of item D.6.:
PMLIC, the Accounts or the authorized representatives of said
parties shall have the right to copy any such records in the
possession of PML.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement among the parties to be duly executed as of the day
and year first above written.
[SEAL] PML SECURITIES COMPANY
Attest: /s/ Joseph A. Kenney Jr. By: /s/ illegible
-------------------------- -------------------------------------
[SEAL] PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
Attest: /s/ Joseph A. Kenney Jr. By: /s/ illegible
-------------------------- -------------------------------------
<PAGE> 8
PROVIDENT MUTUAL VARIABLE GROWTH
SEPARATE ACCOUNT
Attest: By: /s/ illegible
-------------------------- -------------------------------------
PROVIDENT MUTUAL VARIABLE BOND
SEPARATE ACCOUNT
Attest: By: /s/ illegible
-------------------------- -------------------------------------
PROVIDENT MUTUAL VARIABLE MONEY
MARKET SEPARATE ACCOUNT
Attest: By: /s/ illegible
-------------------------- -------------------------------------
PROVIDENT MUTUAL VARIABLE
MANAGED SEPARATE ACCOUNT
Attest: By: /s/ illegible
-------------------------- -------------------------------------
PROVIDENT MUTUAL VARIABLE
ZERO COUPON SEPARATE ACCOUNT
Attest: By: /s/ illegible
-------------------------- -------------------------------------
<PAGE> 1
Exhibit 1(A3)(aii)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and among PML Securities Company
("PML"), Provident Mutual Life Insurance Company of Philadelphia, ("PMLIC"), and
Provident Mutual Variable Growth Separate Account, Provident Mutual Variable
Bond Separate Account, Provident Mutual Variable Money Market Separate Account,
Provident Mutual Variable Managed Separate Account and Provident Mutual Variable
Zero Coupon Bond Separate Account (collectively the "Accounts") is made this
9th day of September, 1988.
WITNESSETH:
WHEREAS, PML, PMLIC and the Accounts entered into an Underwriting Agreement on
December 6, 1985; and
WHEREAS, it is the desire of the parties thereto to amend said Agreement;
NOW THEREFORE, it is agreed among the parties hereto to amend said Underwriting
Agreement as follows:
1. Add the following to item D.l.:
(e) may be terminated for "cause" at any time by PMLIC. "Cause" is
defined and limited for this purpose to mean willful misfeasance,
bad faith, or gross negligence by PML in the performance of its
duties or reckless disregard by it of its obligations and duties
under this Agreement.
2. Add the following at the end of item D.6.:
PMLIC, the Accounts or the authorized representatives of said
parties shall have the right to copy any such records in the
possession of PML.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement among the parties to be duly executed as of the day
and year first above written.
[SEAL] PML SECURITIES COMPANY
Attest: /s/ Joseph A. Kenney Jr. By: /s/ illegible
-------------------------- -------------------------------------
[SEAL] PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
Attest: /s/ Joseph A. Kenney Jr. By: /s/ illegible
-------------------------- -------------------------------------
<PAGE> 1
Exhibit 1(A3)(aiii)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and among PML SECURITIES
COMPANY, ("PML"), PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
("PMLIC") and Provident Mutual Variable Growth Separate Account, Provident
Mutual Variable Bond Separate Account, Provident Mutual Variable Money Market
Separate Account, Provident Mutual Variable Managed Separate Account, and
Provident Mutual Variable Zero Coupon Bond Separate Account (collectively, the
"Accounts") and Provident Mutual Variable Aggressive Growth Separate Account
("Aggressive Growth Account") is made this ___________ day of __________________
1989.
WITNESSETH:
WHEREAS, PML, PMLIC and the Accounts entered into an Underwriting Agreement on
December 6, 1985, as amended on September 9, 1988; and
WHEREAS, PMLIC established the Aggressive Growth Account on February 21, 1989;
and
WHEREAS, it is the desire of the parties to amend the Underwriting Agreement to
include the Aggressive Growth Account;
NOW THEREFORE, it is agreed among the parties that said Agreement is hereby
amended to include the Aggressive Growth Account.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first above
written.
[SEAL] PML SECURITIES COMPANY
Attest: By:
-------------------------- -------------------------------------
(SEAL] PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
Attest: By:
-------------------------- -------------------------------------
[SEAL] PROVIDENT MUTUAL VARIABLE
GROWTH, BOND, MONEY MARKET,
MANAGED, ZERO COUPON BOND,
AND AGGRESSIVE GROWTH
SEPARATE ACCOUNTS
Attest: By:
-------------------------- -------------------------------------
<PAGE> 1
Exhibit 1(A3)(aiv)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and among PML SECURITIES
COMPANY, ("PML"), PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
("PMLIC") and Provident Mutual Variable Growth Separate Account, Provident
Mutual Variable Bond Separate Account, Provident Mutual Variable Money Market
Separate Account, Provident Mutual Variable Managed Separate Account, Provident
Mutual Variable Zero Coupon Bond Separate Account and Provident Mutual Variable
Aggressive Growth Separate Account (collectively, the "Accounts") and Provident
Mutual Variable International Separate Account ("International Account") is made
this ____________ day of ____________________ 1991,
WITNESSETH:
WHEREAS, PML, PMLIC and the Accounts entered into an Underwriting Agreement on
December 6, 1985, as amended on September 9, 1988 and March 21, 1989; and
WHEREAS, PMLIC established the International Account on July 15, 1991; and
WHEREAS, it is the desire of the parties to amend the Underwriting Agreement to
include the International Account;
NOW THEREFORE, it is agreed among the parties that said Agreement is hereby
amended to include the International Account.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first above
written.
[SEAL] PML SECURITIES COMPANY
Attest: By:
-------------------------- -------------------------------------
(SEAL] PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
Attest: By:
-------------------------- -------------------------------------
[SEAL] PROVIDENT MUTUAL VARIABLE
GROWTH, BOND, MONEY MARKET,
MANAGED, ZERO COUPON BOND,
AGGRESSIVE GROWTH AND INTERNATIONAL
SEPARATE ACCOUNTS
Attest: By:
-------------------------- -------------------------------------
<PAGE> 1
Exhibit 1(A3)(avi)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and among PML SECURITIES
COMPANY, ("PML"), PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
("PMLIC") and Provident Mutual Variable Growth Separate Account, Provident
Mutual Variable Money Market Separate Account, Provident Mutual Variable Bond
Separate Account, Provident Mutual Variable Managed Separate Account, Provident
Mutual Variable Zero Coupon Bond Separate Account, Provident Mutual Variable
Aggressive Growth Separate Account and Provident Mutual Variable International
Separate Account (collectively, the "Accounts") and Provident Mutual Variable
Separate Account ("Variable Account") is made this _______ day of ______________
1993.
WITNESSETH:
WHEREAS, PML, PMLIC and the Accounts entered into an Underwriting Agreement on
December 6, 1985, as amended on September 9, 1988, March 21, 1989 and November
1, 1991; and
WHEREAS, on June 7, 1993 PMLIC established the Variable Account consisting of
the Fidelity Equity-Income Subaccount, Fidelity Growth Subaccount, Fidelity
Asset Manager Subaccount, Fidelity Index 500 Subaccount, Neuberger & Berman
Growth Subaccount and Neuberger & Berman Balanced Subaccount (the
"Subaccounts"); and
WHEREAS, it is the desire of the parties to amend the Underwriting Agreement to
include the Variable Account and its Subaccounts;
NOW, THEREFORE, it is agreed among the parties that said Agreement is hereby
amended to include the Variable Account and its Subaccounts under the terms set
forth in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first above
written.
[SEAL] PML SECURITIES COMPANY
Attest: By:
-------------------------- -------------------------------------
(SEAL] PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
Attest: By:
-------------------------- -------------------------------------
[SEAL] PROVIDENT MUTUAL VARIABLE GROWTH,
MONEY MARKET, BOND, MANAGED,
ZERO COUPON BOND, AGGRESSIVE
GROWTH, INTERNATIONAL AND VARIABLE
SEPARATE ACCOUNTS
Attest: By:
-------------------------- -------------------------------------
<PAGE> 1
Exhibit 1(A3)(bi)
PPGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
PERSONAL PRODUCING
GENERAL AGENT'S AGREEMENT
This Agreement is effective ____________, by and between Provident Mutual Life
Insurance Company, hereinafter called the Company, and _________________________
_____________________, hereinafter called the General Agent.
In consideration of the mutual covenants and agreements listed below, the
parties agree as follows:
1. OBLIGATIONS OF THE GENERAL AGENT
The General Agent's obligations shall be:
(a) To recruit and recommend individuals to be licensed, appointed, and
contracted with the Company as Producing General Agents, hereinafter
called PGAs, or Personal Producing Agents, hereinafter called PPAs.
(b) To provide proper training and supervision for each PGA or PPA and to
assume responsibility for the acts of each PGA or PPA including but
not limited to obligations listed in the PGA's or PPA's Agreements
with the Company.
(c) To solicit and procure applications personally, and through PGAs or
PPAs, for the insurance and annuities set forth in the commission
schedules and issued or marketed by the Company in all states in which
the Company, the General Agent, and where applicable, the PGA or PPA,
are authorized to do business. All such applications shall be
forwarded promptly to the Company, whether the same are reported upon
favorably or otherwise by the local medical or paramedical examiner.
(d) To hold all moneys received or collected on behalf of the Company in
trust and immediately remit them to the Company without deduction.
(e) To provide service incidental to maintaining the policies or contracts
of the Company.
(f) To conform to and observe all applicable federal or state statutes or
rules or regulations pertaining to insurance or insurance agents.
(g) To conform to and observe all Company rules, policies, and directives
now in effect and as they may be revised from time to time.
<PAGE> 2
2. LIMITATION OF AUTHORITY
The General Agent is not authorized to do, and agrees not to do nor attempt
to do, nor to assist any PGA or PPA in doing, any of the following:
(a) Accept risks or contracts of any kind or bind the Company in any way.
(b) Make, alter, or discharge any insurance or other contract; or extend
the time for paying a premium; or waive forfeitures.
(c) Incur any debt, obligation, or liability for which the Company is
responsible.
(d) Initiate or respond to legal proceedings in the Company's name.
(e) Market or solicit policies or contracts, directly or indirectly, where
the General Agent, the Company, or where applicable, the PGA or PPA,
are not properly licensed.
(f) Pay any rebate of premium either directly or indirectly, or provide
any other inducement not specified in the policy or contract, to any
person as an inducement to purchase any policy or contract.
(g) Issue or use any sales material or advertisement, of any form
whatsoever, other than those supplied by the Company or with the
Company's written approval.
(h) Violate applicable replacement statutes or regulations.
(i) Induce or attempt to induce any policyholder to withdraw values from
existing policies or contracts or relinquish policies or contracts
with the Company, or its subsidiaries, for the purpose of entering
into any non-Company transaction that will result in compensation,
directly or indirectly, to the General Agent.
3. RELATIONSHIP
(a) In performing the duties under this Agreement, the General Agent shall
act as an independent contractor and not as an employee of the
Company.
(b) The General Agent agrees to be governed in the performance of his,
her, or its duties by the terms and conditions of this Agreement, and
by the rules established by the Company. While an independent
contractor, the General Agent reserves the right to exercise
independent judgment in marketing the Company's policies, including
the choice of time, place, and manner of sale. No other provision of
this Agreement nor any rule of the Company shall be construed to
abridge this right or create the relationship of employer and employee
between the Company and the General Agent, or between any employee of
the General Agent and the Company.
-2-
<PAGE> 3
4. COMPENSATION
(a) Commissions, fees, or other compensation on premiums covering
insurance policies and annuity contracts produced by the General Agent
and issued by the Company during the continuance of this Agreement,
when and as said premiums become due and are actually paid in cash to
the Company, shall be paid to the General Agent in accordance with and
subject to all of the terms and conditions of this Agreement and the
commission schedules and any Supplement and/or Amendment attached
hereto, and as they may be changed from time to time. It is expressly
recognized and agreed that the Company may unilaterally amend, modify,
or change the commission schedules and the Supplement in any manner at
any time in the future provided, however, that any such amendments,
modifications, or changes in commissions, fees, or other compensation
shall apply only to policies or contracts issued by the Company after
the effective date of such change.
(b) In the event that this Agreement is terminated pursuant to subsection
(a) or (b) of section 12 of this Agreement, commissions are vested and
shall be paid for policy years 1 to 10 to the General Agent or the
executors, administrators, or assigns of the General Agent. In the
event that this Agreement is terminated pursuant to subsection (c) or
(d) of section 12 of this Agreement, no further commissions, fees, or
other compensation shall be paid.
(c) To the extent permitted by law, the Company may discharge its
obligation under this Agreement to pay commissions, fees, or other
compensation due after its termination, if the total amount of
commissions, fees, or other compensation paid to the General Agent
under this Agreement in any full calendar year beginning with the
second full calendar year after termination of this Agreement is less
than $600.00. In such case, no further commissions, fees, or other
compensation shall be paid to the General Agent.
5. COMMISSION AND FEE EXCEPTIONS
(a) Subject to all of the provisions of this Agreement, commissions or
fees on variable life insurance policies can only be paid or credited
to a General Agent who is a registered representative of an affiliate
of the Company or a registered representative of a broker/dealer who
has a sales agreement with an affiliate of the Company and holds any
required state licenses when a variable life insurance sale is made
and when each premium is paid.
(b) Commissions, fees, and other compensation on any policy or contract
for which rates and conditions are not specified in the applicable
commission schedules shall be as determined by the Company.
(c) No commissions, fees, or other compensation shall be paid to the
General Agent upon any premium, or portion thereof, payment of which
is waived in accordance with the provisions contained in the policy
because of the disability of the insured or applicant or the death of
the applicant.
-3-
<PAGE> 4
(d) If a policy issued under this Agreement replaces, in whole or in part,
a policy or contract previously issued by the Company, or its
subsidiaries, the Company shall have the right to determine what, if
any, commissions, fees, or other compensation shall be allowed.
(e) If a policy or contract is changed to a different kind or amount, or
if its date is changed, the Company shall have the right to determine
what, if any, commissions, fees, or other compensation shall be
allowed or recovered.
(f) Commissions, fees, or other compensation, if any, on the conversion of
any policy or contract or coverage shall be as determined by the
Company.
(g) Commissions, fees, or other compensation, if any, on policies issued
on a modified underwriting, guaranteed issue, salary savings basis,
for less than published minimum or where classification is other than
standard, shall be as determined by the Company.
(h) If the Company shall return all, or any portion, of any premiums on a
policy or contract paid for under this or any previous Agreements, for
any reason whatsoever, the Company shall have the right to deduct all
or part of the commissions, fees, or other compensation received by
the General Agent on such premiums from any commissions, fees, or
other compensation thereafter due and payable to the General Agent,
without limitation to any other rights of the Company, including the
right to demand immediate repayment from the General Agent. Any amount
remaining unpaid shall be an indebtedness to the Company.
6. INDEBTEDNESS
Any indebtedness due the Company from the General Agent shall be a first
lien on all commissions, fees, or other compensation payable to the General
Agent under this Agreement, until the amount of such indebtedness is fully
paid, without limitation to any other rights of the Company, both prior to
and after termination of this Agreement to recover such indebtedness.
This provision shall not be construed in any way to limit the amount of any
indebtedness of the General Agent to the value of the commissions, fees, or
other compensation payable under this Agreement. In addition to a deduction
from commissions, fees, or other compensation, the Company may take such
other actions to recover or collect such indebtedness as it deems
appropriate. To the extent the Company takes legal action to recover such
indebtedness, it may recover attorney's fees, costs and expenses from the
General Agent.
If the General Agent is a corporation, the officer of the corporation
personally signing this Agreement guarantees the performance of all of its
terms and conditions, and hereby assumes personal liability and
responsibility for any default in said terms and conditions, including
personal responsibility and liability for repayment of any and all
indebtedness owed the Company arising out of the terms of this Agreement
without the necessity of the Company first enforcing any default against
the corporate General Agent.
-4-
<PAGE> 5
7. ASSIGNMENT OF COMMISSIONS, FEES, OR OTHER COMPENSATION
This Agreement is not assignable unless authorized in writing by the
Company.
8. NON-WAIVER OF RIGHTS
Neither failure by the Company to exercise any of its rights under this
Agreement nor its failure to require the General Agent to meet his, her, or
its obligations hereunder shall be deemed to be a waiver of such right or
obligation and shall not in any way interfere with the ability of the
Company to exercise such right or require compliance with such obligation
either prior to or after termination of this Agreement.
9. ACCOUNTS AND RECORDS
The Company has a proprietary interest in any books, accounts, computer
and/or other records, documents, policy record cards, applications,
vouchers, letters, written correspondence with policyholders and the
Company, and all other items provided by the Company, and relating to or
connected with the business of the Company, or its subsidiaries, and such
accounts and records are the property of the Company. Upon termination of
this Agreement by either party, for any reason, the General Agent agrees to
return immediately to the Company all accounts and records as defined
above. The General Agent shall at all times, up to and including the return
of said accounts and records to the Company, preserve and protect the
confidentiality of such accounts, records, and other items. The General
Agent's breach of this confidentiality by releasing any information
contained in said accounts, records, and other items to other than the
client, the client's advisors, or persons specifically authorized by the
Company, shall be deemed a violation of this Agreement.
10. PRIOR AGREEMENTS
All previous or existing Personal Producing General Agent's Agreements, or
other Agent's Agreements whether oral or written, between the General Agent
and the Company, are hereby terminated.
11. CHANGE IN AGREEMENT
The Company reserves the right to unilaterally amend, modify, or change
this Agreement, including any of the applicable commission schedules or the
Supplement in any manner at any time in the future, provided, however, that
any amendment, modification, or change in commissions, fees, or other
compensation shall apply only to policies or contracts issued by the
Company after the effective date of such change.
-5-
<PAGE> 6
12. TERMINATION OF AGREEMENT
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or without cause, by
either the Company or the General Agent giving to the other party
written notice delivered in person or sent by ordinary mail to the
party's last known address.
(b) If the General Agent is an individual, immediately upon the death of
the General Agent.
(c) If the General Agent is a corporation, immediately upon the
dissolution or liquidation of the General Agent.
(d) Immediately and without written notice if the Company determines that
the General Agent has committed any fraudulent, dishonest, or illegal
act or had misappropriated or withheld funds, and the date of such
termination shall coincide with the date of the violation or act
giving rise to termination. After such termination, no further
commissions, fees, or other compensation shall be paid to the General
Agent.
13. PROHIBITED ACTIVITY
For one year after termination of this Agreement, the General Agent shall
not directly or indirectly advise, induce, or solicit any policyholder of
the Company, or its subsidiaries, to lapse, cancel, or replace any policy
or contract of the Company or borrow values from any policy or contract of
the Company to pay any premium on a policy of another company.
In the event the General Agent violates this provision, the General Agent
agrees that the Company may pursue all remedies, legal or equitable,
including injunction, to enforce compliance with this provision and the
General Agent shall be responsible for the payment of any legal fees.
Notwithstanding any other provisions in this Agreement, no further
commissions, fees, or other compensation shall be paid in the event the
General Agent violates this provision.
14. INDEMNIFICATION
General Agent agrees to indemnify and save harmless the Company against any
liability, loss, or damage which the Company may sustain or incur directly
or indirectly due to or arising out of any obligation, act, or transaction
created or done by the General Agent or any PGA or PPA in violation of, in
excess of, or in contravention of the power and authority of the General
Agent set forth and described in this Agreement. The General Agent shall be
liable for all legal liabilities including but not limited to fines,
penalties, and attorney's fees incurred due to the actions of the General
Agent or its PGAs or PPAs. The General Agent authorizes the Company,
without precluding the Company from exercising any other remedy it may
have, to charge against all commissions, fees, or other compensation due or
to become due to the General Agent under this Agreement any moneys paid or
liabilities incurred by the Company by reason of any such act or
transaction.
-6-
<PAGE> 7
15. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all previous agreements entered into between the parties with
regard to the subject matter set forth herein.
16. MISCELLANEOUS
The term "Agreement" as used herein, refers to this Personal Producing
General Agent's Agreement, the commission schedules, and any
Supplement and/or Amendments.
17. SEVERABILITY
If any provision of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be affected and
shall remain fully enforceable.
18. ACKNOWLEDGEMENT
By executing this Agreement, the General Agent acknowledges that General
Agent has read it in its entirety and is in agreement with the terms and
conditions outlining the rights of the Company and the General Agent, under
this Agreement.
Provident Mutual Life Insurance
Company
By:
---------------------------------- ------------------------------------
Signature of General Agent
------------------------------------
Name of General Agent (Type or Print)
If General Agent is a Corporation:
By:
--------------------------------
Title:
-----------------------------
-----------------------------
Corporate Name
-----------------------------
State of Incorporation
-7-
<PAGE> 8
PPGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SUPPLEMENT TO
PERSONAL PRODUCING
GENERAL AGENT'S AGREEMENT
This Supplement is attached and hereby incorporated into the Personal Producing
General Agent's Agreement, hereinafter called the Agreement, and is subject to
all of the terms and conditions contained in the Agreement.
This Supplement may be unilaterally amended, modified or changed by the Company
at any time in the future pursuant to section 11 of the Agreement.
1. COMMISSIONS ON INDIVIDUAL LIFE INSURANCE POLICIES AND ANNUITY CONTRACTS
Subject to all of the provisions of this Agreement, the Company will pay
the General Agent on premiums covering individual life insurance policies
and annuity contracts issued during the continuance of this Agreement, when
and as said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions for policies and
contracts produced by the General Agent at the rates set forth in the
commission schedule for policy years 1 to 10 inclusive.
Subject to all of the provisions of this Agreement, the Company will pay
the General Agent on premiums covering individual life insurance policies
and annuity contracts issued during the continuance of this Agreement, when
and as said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions for policy years 1
to 10 inclusive for policies and contracts produced by PGAs or PPAs under
the General Agent's supervision. For policies and contracts produced by a
PGA or a PPA under a PGA's supervision, the Company will pay the General
Agent the difference between the amount set forth in the PGA commission
schedule and the amount set forth in the commission schedule to this
Agreement. For policies and contracts produced by a PPA under the General
Agent's supervision, the Company will pay the General Agent the difference
between the amount set forth in the PPA commission schedule and the amount
set forth in the commission schedule to this Agreement.
2. FEES ON INDIVIDUAL LIFE INSURANCE POLICIES
Subject to all of the provisions of this Agreement, the Company will pay to
the General Agent on premiums covering individual life insurance policies
issued during the continuance of this Agreement, when and as said premiums
become due and are actually paid in cash to the Company, fees for policies
produced by the General Agent at the rates set forth in the commission
schedule for policy year 11 and subsequent policy years. Said fee payment
shall cease with the last payment preceding termination of the Agreement.
<PAGE> 9
3. ADDITIONAL COMMISSIONS
Subject to all of the provisions of this Agreement, an Additional
Commission will be calculated at the end of each calendar year for policies
issued during the continuance of this Agreement. The Company will determine
the Ratio of General Agent to General Agent, PGA and PPA Production by
dividing the first year annualized premium for variable life insurance
policies produced by the General Agent for the calendar year by the first
year annualized premium for variable life insurance policies produced by
the General Agent, PGAs and PPAs under the General Agent's supervision for
the calendar year. Based on the Ratio calculated, the Company will
determine the Additional Commission on variable life policies produced by
the General Agent, PGAs, and PPAs under the General Agent's supervision for
the calendar year at the rate set forth in the commission schedule.
The Additional Commission will be paid to the General Agent in February of
the following year. Notwithstanding any other provisions in the Agreement,
if this Agreement is terminated for any reason prior to the payment of the
Additional Commission, the Company shall have no obligation to pay the
Additional Commission.
4. EXPENSE ALLOWANCE PAYMENTS
The Expense Allowance Payments (EAP) are for expenses incurred on behalf of
the Company for the recruitment and supervision of PGAs and PPAs and the
acquisition of business acquired by the General Agent. EAP will be paid for
each month the Agreement is in effect for expenses which are permitted by
law and the rules of the Company.
The General Agent will not use EAP to effect compensation in excess of the
limits of Section 4228 of the New York Insurance Law for the sale of
insurance.
Subject to all of the provisions of this Agreement, the Company will pay to
the General Agent monthly on first year premiums covering variable life
insurance policies for the preceding month which were issued during the
continuance of this Agreement, EAP for such policies produced by the
General Agent, PGAs or PPAs under the General Agent's supervision at the
rates set forth in the commission schedule.
If the Company shall return the premium on any policy for any reason
whatsoever, the General Agent agrees to repay the Company the amount of EAP
received with respect to the premiums so returned and to the extent that
this is unpaid it shall create an indebtedness to the Company.
5. GENERAL PROVISIONS
The Company's determination shall be binding and final on all parties with
regard to the matters on which the calculations and bonuses are based,
including but not limited to: the date on which a commission is considered
to be paid or credited, commissions paid by the Company, the PGAs or PPAs
under the General Agent's supervision, and the PPAs under the PGA's
supervision.
-2-
<PAGE> 10
6. INDEBTEDNESS
In addition to the provisions in section 6 of the Agreement, the Company
may deduct from any commissions, fees or other compensation due the General
Agent under the Agreement any indebtedness which is now or may hereafter
become due from the General Agent to the Company or any of its
subsidiaries, whether arising under the Agreement or otherwise. The Company
may also deduct from any commissions, fees or other compensation due the
General Agent under the Agreement any indebtedness which is now or may
hereafter become due from any PGA or PPA under the General Agent's
supervision to the Company or any of its subsidiaries.
This provision shall not be construed to limit the amount of any
indebtedness to the value of commissions, fees or other compensation due
under the Agreement, nor shall it be construed to limit any other rights of
the Company or its subsidiaries to recover any indebtedness as described
above. If legal action is taken to recover such indebtedness, the Company
and/or its subsidiaries may recover attorney's fees, costs, and expenses
from the General Agent.
Provident Mutual Life Insurance
Company
Effective Date: January 1, 1997 By: /s/ Andrew J. Stack
----------------------------------
Andrew J. Stack
Senior Vice President - PPGA
-3-
<PAGE> 11
PPGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
OF PHILADELPHIA
ANNUALIZED ADVANCE COMMISSION PAYMENTS
AMENDMENT
This Amendment is attached and hereby incorporated into the Personal Producing
General Agent's Agreement, hereinafter called the Agreement, and is subject to
all of the terms and conditions contained in the Agreement. This Amendment is
for the purpose of authorizing certain annualized advance commission payments to
the Personal Producing General Agent, hereinafter called the General Agent, and
to set forth conditions and obligations for repayment. In its sole discretion,
the Company may permit annualized advance commission payments on certain
policies in designated circumstances. As to such advances, the terms are as
follows:
1. Upon payment of the first monthly premium under the Automatic Payment Plan,
quarterly premium, or semi-annual premium on a life insurance policy issued
by the Company pursuant to an application obtained by the General Agent,
the commission for the first full policy year will be determined and paid
to the General Agent by the Company. The amount of such payment shall be
the Annualized First Year Commission.
2. The maximum premiums to which this Agreement will apply are limited to
scheduled premiums no greater than: $2,000 for semi-annual premiums, $1,000
for quarterly premiums, or $330 for monthly premiums under the Automatic
Payment Plan. Policies with premiums greater than the above listed amounts
are not eligible for annualization.
3. Should the Insured die, or should the policy on which an Annualized First
Year Commission has been paid lapse or terminate for any reason whatsoever
before the premiums for the first full policy year are paid, that
percentage of the Annualized First Year Commission equal to the percentage
of the premiums for the first full policy year which were not paid shall be
deemed to be the unearned portion of the Annualized First Year Commission
which has been advanced to the General Agent by the
<PAGE> 12
Company, and which thereafter will constitute an indebtedness to the
Company without further demand by the Company.
4. General Agent hereby agrees to repay to the Company any unearned portion of
the Annualized First Year Commission, and hereby authorizes the Company to
deduct any unearned portion of the Annualized First Year Commission from
any commissions, fees, or other compensation payable by the Company to the
General Agent. This authorization to deduct amounts owed to the Company
shall not limit any other rights or remedies available to the Company to
recover such indebtedness, including any rights or remedies set forth in
the Agreement.
5. The Company reserves the right to alter, change, or make exceptions to this
Amendment at any time and for any reason without notice to the General
Agent, including but not limited to the right to exempt or withdraw
specific policies from the Amendment and the minimum and maximum premiums
to which the Amendment will apply. In addition to the termination
provisions set forth in the Agreement, the Company may terminate this
Amendment at any time and for any reason, with or without cause.
This Amendment will not become effective until it has been approved and signed
by the Company at its Home Office.
Approved at Home Office:
By:
---------------------------------- ---------------------------------
Signature of General Agent
Effective Date:
--------------------- --------------------------------
Date
-2-
<PAGE> 1
EXHIBIT 1(A3)(bii)
PPA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
PERSONAL PRODUCING
AGENT'S AGREEMENT
This Agreement is effective ________________________________________________, by
and between Provident Mutual Life Insurance Company, hereinafter called the
Company, and ________________________________________________, hereinafter
called the Personal Producing Agent (PPA).
In consideration of the mutual covenants and agreements listed below, the
parties agree as follows:
1. OBLIGATIONS OF THE PERSONAL PRODUCING AGENT
The PPA's obligations shall be:
(a) To solicit and procure applications for the insurance and
annuities set forth in the commission schedules and issued or
marketed by the Company in all states in which the Company and
the PPA are authorized to do business. All such applications
shall be forwarded promptly to the Company, whether the same
are reported upon favorably or otherwise by the local medical
or paramedical examiner.
(b) To hold all moneys received or collected on behalf of the
Company in trust and immediately remit them to the Company
without deduction.
(c) To provide service incidental to maintaining the policies or
contracts of the Company.
(d) To conform to and observe all applicable federal or state
statutes or rules or regulations pertaining to insurance or
insurance agents.
(e) To conform to and observe all Company rules, policies, and
directives now in effect and as they may be revised from time
to time.
<PAGE> 2
2. LIMITATION OF AUTHORITY
The PPA is not authorized to do, and agrees not to do nor attempt to do
any of the following:
(a) Accept risks or contracts of any kind or bind the Company in
any way.
(b) Make, alter, or discharge any insurance or other contract; or
extend the time for paying a premium; or waive forfeitures.
(c) Incur any debt, obligation, or liability for which the Company
is responsible.
(d) Initiate or respond to legal proceedings in the Company's
name.
(e) Market or solicit policies or contracts, directly or
indirectly, where the Company or where the PPA is not properly
licensed.
(f) Pay any rebate of premium either directly or indirectly, or
provide any other inducement not specified in the policy or
contract, to any person as an inducement to purchase any
policy or contract.
(g) Issue or use any sales material or advertisement, of any form
whatsoever, other than those supplied by the Company or with
the Company's written approval.
(h) Violate applicable replacement statutes or regulations.
(i) Induce or attempt to induce any policyholder to withdraw
values from existing policies or contracts or relinquish
policies or contracts with the Company, or its subsidiaries,
for the purpose of entering into any non-Company transaction
that will result in compensation, directly or indirectly, to
the PPA.
3. RELATIONSHIP
(a) In performing the duties under this Agreement, the PPA shall
act as an independent contractor and not as an employee of the
Company.
(b) The PPA agrees to be governed in the performance of his, her,
or its duties by the terms and conditions of this Agreement,
and by the rules established by the Company. While an
independent contractor, the PPA reserves the right to exercise
independent judgment in marketing the Company's policies,
including the choice of time, place, and manner of sale. No
other provision of this Agreement nor any rule of the Company
shall be construed to abridge this right or create the
relationship of employer and employee between the Company and
the PPA, or between any employee of the PPA and the Company.
-2-
<PAGE> 3
4. COMPENSATION
(a) Commissions, fees, or other compensation on premiums covering
insurance policies and annuity contracts produced by the PPA
and issued by the Company during the continuance of this
Agreement, when and as said premiums become due and are
actually paid in cash to the Company, shall be paid to the PPA
in accordance with and subject to all of the terms and
conditions of this Agreement and the commission schedules and
any Supplement and/or Amendment attached hereto, and as they
may be changed from time to time. It is expressly recognized
and agreed that the Company may unilaterally amend, modify, or
change the commission schedules and the Supplement in any
manner at any time in the future provided, however, that any
such amendments, modifications, or changes in commissions,
fees, or other compensation shall apply only to policies or
contracts issued by the Company after the effective date of
such change.
(b) In the event that this Agreement is terminated pursuant to
subsection (a) or (b) of section 12 of this Agreement,
commissions are vested and shall be paid for policy years 1 to
10 to the PPA or the executors, administrators, or assigns of
the PPA. In the event that this Agreement is terminated
pursuant to subsection (c) or (d) of section 12 of this
Agreement, no further commissions, fees, or other compensation
shall be paid.
(c) To the extent permitted by law, the Company may discharge its
obligation under this Agreement to pay commissions, fees, or
other compensation due after its termination, if the total
amount of commissions, fees, or other compensation paid to the
PPA under this Agreement in any full calendar year beginning
with the second full calendar year after termination of this
Agreement is less than $500.00. In such case, no further
commissions, fees, or other compensation shall be paid to the
PPA.
5. COMMISSION AND FEE EXCEPTIONS
(a) Subject to all of the provisions of this Agreement,
commissions or fees on variable life insurance policies can
only be paid or credited to a PPA who is a registered
representative of an affiliate of the Company or a registered
representative of a broker/dealer who has a sales agreement
with an affiliate of the Company and holds any required state
licenses when a variable life insurance sale is made and when
each premium is paid.
(b) Commissions, fees, and other compensation on any policy or
contract for which rates and conditions are not specified in
the applicable commission schedules shall be as determined by
the Company.
-3-
<PAGE> 4
(c) No commissions, fees, or other compensation shall be paid to
the PPA upon any premium, or portion thereof, payment of which
is waived in accordance with the provisions contained in the
policy because of the disability of the insured or applicant
or the death of the applicant.
(d) If a policy issued under this Agreement replaces, in whole or
in part, a policy or contract previously issued by the
Company, or its subsidiaries, the Company shall have the right
to determine what, if any, commissions, fees, or other
compensation shall be allowed.
(e) If a policy or contract is changed to a different kind or
amount, or if its date is changed, the Company shall have the
right to determine what, if any, commissions, fees, or other
compensation shall be allowed or recovered.
(f) Commissions, fees, or other compensation, if any, on the
conversion of any policy or contract or coverage shall be as
determined by the Company.
(g) Commissions, fees, or other compensation, if any, on policies
issued on a modified underwriting, guaranteed issue, salary
savings basis, for less than published minimum or where
classification is other than standard, shall be as determined
by the Company.
(h) If the Company shall return all, or any portion, of any
premiums on a policy or contract paid for under this or any
previous Agreements, for any reason whatsoever, the Company
shall have the right to deduct all or part of the commissions,
fees, or other compensation received by the PPA on such
premiums from any commissions, fees, or other compensation
thereafter due and payable to the PPA, without limitation to
any other rights of the Company, including the right to demand
immediate repayment from the PPA. Any amount remaining unpaid
shall be an indebtedness to the Company.
6. INDEBTEDNESS
Any indebtedness due the Company from the PPA shall be a first lien on
all commissions, fees, or other compensation payable to the PPA under
this Agreement, until the amount of such indebtedness is fully paid,
without limitation to any other rights of the Company, both prior to
and after termination of this Agreement to recover such indebtedness.
This provision shall not be construed in any way to limit the amount of
any indebtedness of the PPA to the value of the commissions, fees, or
other compensation payable under this Agreement. In addition to a
deduction from commissions, fees, or other compensation, the Company
may take such other actions to recover or collect such
-4-
<PAGE> 5
indebtedness as it deems appropriate. To the extent the Company takes
legal action to recover such indebtedness, it may recover attorney's
fees, costs and expenses from the PPA.
If the PPA is a corporation, the officer of the corporation personally
signing this Agreement guarantees the performance of all of its terms
and conditions, and hereby assumes personal liability and
responsibility for any default in said terms and conditions, including
personal responsibility and liability for repayment of any and all
indebtedness owed the Company arising out of the terms of this
Agreement without the necessity of the Company first enforcing any
default against the corporate PPA.
7. ASSIGNMENT OF COMMISSIONS, FEES, OR OTHER COMPENSATION
This Agreement is not assignable unless authorized in writing by the
Company.
8. NON-WAIVER OF RIGHTS
Neither failure by the Company to exercise any of its rights under this
Agreement nor its failure to require the PPA to meet his, her, or its
obligations hereunder shall be deemed to be a waiver of such right or
obligation and shall not in any way interfere with the ability of the
Company to exercise such right or require compliance with such
obligation either prior to or after termination of this Agreement.
9. ACCOUNTS AND RECORDS
The Company has a proprietary interest in any books, accounts, computer
and/or other records, documents, policy record cards, applications,
vouchers, letters, written correspondence with policyholders and the
Company, and all other items provided by the Company, and relating to
or connected with the business of the Company, or its subsidiaries, and
such accounts and records are the property of the Company. Upon
termination of this Agreement by either party, for any reason, the PPA
agrees to return immediately to the Company all accounts and records as
defined above. The PPA shall at all times, up to and including the
return of said accounts and records to the Company, preserve and
protect the confidentiality of such accounts, records, and other items.
The PPA's breach of this confidentiality by releasing any information
contained in said accounts, records, and other items to other than the
client, the client's advisors, or
-5-
<PAGE> 6
persons specifically authorized by the Company, shall be deemed a
violation of this Agreement.
10. PRIOR AGREEMENTS
All previous or existing Personal Producing Agent's Agreements, or
other Agent's Agreements whether oral or written, between the PPA and
the Company, are hereby terminated.
11. CHANGE IN AGREEMENT
The Company reserves the right to unilaterally amend, modify, or change
this Agreement, including any of the applicable commission schedules or
the Supplement, in any manner at any time in the future, provided,
however, that any amendment, modification, or change in commissions,
fees, or other compensation shall apply only to policies or contracts
issued by the Company after the effective date of such change.
12. TERMINATION OF AGREEMENT
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or without cause,
by either the Company or the PPA giving to the other party
written notice delivered in person or sent by ordinary mail to
the party's last known address.
(b) If the PPA is an individual, immediately upon the death of the
PPA.
(c) If the PPA is a corporation, immediately upon the dissolution
or liquidation of the PPA.
(d) Immediately and without written notice if the Company
determines that the PPA has committed any fraudulent,
dishonest, or illegal act or had misappropriated or withheld
funds, and the date of such termination shall coincide with
the date of the violation or act giving rise to termination.
After such termination, no further commissions, fees, or other
compensation shall be paid to the PPA under the Agreement.
-6-
<PAGE> 7
13. PROHIBITED ACTIVITY
For one year after termination of this Agreement, the PPA shall not
directly or indirectly advise, induce, or solicit any policyholder of
the Company, or its subsidiaries, to lapse, cancel, or replace any
policy or contract of the Company or borrow values from any policy or
contract of the Company to pay any premium on a policy of another
company.
In the event the PPA violates this provision, the PPA agrees that the
Company may pursue all remedies, legal or equitable, including
injunction, to enforce compliance with this provision and the PPA shall
be responsible for the payment of any legal fees. Notwithstanding any
other provisions in this Agreement, no further commissions, fees, or
other compensation shall be paid in the event the PPA violates this
provision.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all previous agreements entered into between the parties
with regard to the subject matter set forth herein.
15. MISCELLANEOUS
The term "Agreement" as used herein, refers to this Personal Producing
Agent's Agreement, the commission schedules, and any Supplement and/or
Amendments.
16. SEVERABILITY
If any provision of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be affected
and shall remain fully enforceable.
-7-
<PAGE> 8
17. ACKNOWLEDGEMENT
By executing this Agreement, the PPA acknowledges that PPA has read it
in its entirety and is in agreement with the terms and conditions
outlining the rights of the Company and the PPA, under this Agreement.
Provident Mutual Life Insurance
Company
By: ________________________ _____________________________________
Signature of Personal Producing Agent
_____________________________________
Name of Personal Producing Agent
(Type or Print)
If PPA is a Corporation:
By: _____________________________________
Title: _____________________________________
_____________________________________
Corporate Name
_____________________________________
State of Incorporation
-8-
<PAGE> 9
PPA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SUPPLEMENT TO
PERSONAL PRODUCING
AGENT'S AGREEMENT
This Supplement is attached and hereby incorporated into the Personal Producing
Agent's Agreement, hereinafter called the Agreement, and is subject to all of
the terms and conditions contained in the Agreement.
This Supplement may be unilaterally amended, modified or changed by the Company
at any time in the future pursuant to section 11 of the Agreement.
1. COMMISSIONS ON INDIVIDUAL LIFE INSURANCE POLICIES AND ANNUITY CONTRACTS
Subject to all of the provisions of this Agreement, the Company will
pay the PPA on premiums covering individual life insurance policies and
annuity contracts issued during the continuance of this Agreement, when
and as said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions for policies
and contracts produced by the PPA at the rates set forth in the
commission schedule for policy years 1 to 10 inclusive.
2. FEES ON INDIVIDUAL LIFE INSURANCE POLICIES
Subject to all of the provisions of this Agreement, the Company will
pay to the PPA on premiums covering individual life insurance policies
issued during the continuance of this Agreement, when and as said
premiums become due and are actually paid in cash to the Company, fees
for policies produced by the PPA at the rates set forth in the
commission schedule for policy year 11 and subsequent policy years.
Said fee payment shall cease with the last payment preceding
termination of the Agreement.
<PAGE> 10
3. GENERAL PROVISIONS
The Company's determination shall be binding and final on all parties
with regard to the matters on which the calculations are based,
including but not limited to: the date on which a commission is
considered to be paid or credited and commissions paid by the Company.
4. INDEBTEDNESS
In addition to the provisions in section 6 of the Agreement, the
Company may deduct from any commissions, fees or other compensation due
the PPA under the Agreement any indebtedness which is now or may
hereafter become due from the PPA to the Company or any of its
subsidiaries, whether arising under the Agreement or otherwise.
This provision shall not be construed to limit the amount of any
indebtedness to the value of commissions, fees or other compensation
due under the Agreement, nor shall it be construed to limit any other
rights of the Company or its subsidiaries to recover any indebtedness
as described above. If legal action is taken to recover such
indebtedness, the Company and/or its subsidiaries may recover
attorney's fees, costs, and expenses from the PPA.
Provident Mutual Life Insurance
Company
Effective Date: January 1, 1997 By: /s/ Andrew J. Stack
----------------------- -----------------------------
Andrew J. Stack
Senior Vice President - PPGA
-2-
<PAGE> 11
PPA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
OF PHILADELPHIA
ANNUALIZED ADVANCE COMMISSION PAYMENTS AMENDMENT
This Amendment is attached and hereby incorporated into the Personal Producing
Agent's Agreement, hereinafter called the Agreement, and is subject to all of
the terms and conditions contained in the Agreement. This Amendment is for the
purpose of authorizing certain annualized advance commission payments to the
Personal Producing Agent, hereinafter called the PPA and to set forth conditions
and obligations for repayment. In its sole discretion, the Company may permit
annualized advance commission payments on certain policies in designated
circumstances. As to such advances, the terms are as follows:
1. Upon payment of the first monthly premium under the Automatic Payment
Plan, quarterly premium, or semi-annual premium on a life insurance
policy issued by the Company pursuant to an application obtained by the
PPA, the commission for the first full policy year will be determined
and paid to the PPA by the Company. The amount of such payment shall be
the Annualized First Year Commission.
2. The maximum premiums to which this Agreement will apply are limited to
scheduled premiums no greater than: $2,000 for semi-annual premiums,
$1,000 for quarterly premiums, or $330 for monthly premiums under the
Automatic Payment Plan. Policies with premiums greater than the above
listed amounts are not eligible for annualization.
3. Should the Insured die, or should the policy on which an Annualized
First Year Commission has been paid lapse or terminate for any reason
whatsoever before the premiums for the first full policy year are paid,
that percentage of the Annualized First Year Commission equal to the
percentage of the premiums for the first full policy year which were
not paid shall be deemed to be the unearned portion of the Annualized
First Year Commission which has been advanced to the PPA by the
Company, and which thereafter will constitute an indebtedness to the
Company without further demand by the Company.
<PAGE> 12
4. PPA hereby agrees to repay to the Company any unearned portion of the
Annualized First Year Commission, and hereby authorizes the Company to
deduct any unearned portion of the Annualized First Year Commission
from any commissions, fees, or other compensation payable by the
Company to the PPA. This authorization to deduct amounts owed to the
Company shall not limit any other rights or remedies available to the
Company to recover such indebtedness, including any rights or remedies
set forth in the Agreement.
5. The Company reserves the right to alter, change, or make exceptions to
this Amendment at any time and for any reason without notice to the
PPA, including but not limited to the right to exempt or withdraw
specific policies from the Amendment and the minimum and maximum
premiums to which the Amendment will apply. In addition to the
termination provisions set forth in the Agreement, the Company may
terminate this Amendment at any time and for any reason, with or
without cause.
This Amendment will not become effective until it has been approved and signed
by the Company at its Home Office.
Approved at Home Office:
By: _______________________________ ______________________________
Signature of PPA
Effective Date: ___________________ ______________________________
Date
-2-
<PAGE> 1
Exhibit 1(A3)(biii)
PGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
PRODUCING
GENERAL AGENT'S AGREEMENT
- --------------------------------------------------------------------------------
This Agreement is effective __________________________, by and between Provident
Mutual Life Insurance Company, hereinafter called the Company, and
___________________________, hereinafter called the PGA.
In consideration of the mutual covenants and agreements listed below, the
parties agree as follows:
1. OBLIGATIONS OF THE PRODUCING GENERAL AGENT
The PGA's obligations shall be:
(a) To recruit and recommend individuals to be licensed,
appointed, and contracted with the Company as Personal
Producing Agents, hereinafter called PPAs.
(b) To provide proper training and supervision for each PPA and to
assume responsibility for the acts of each PPA including but
not limited to obligations listed in the PPA's Agreement with
the Company.
(c) To solicit and procure applications personally, and through
PPAs, for the insurance and annuities set forth in the
commission schedules and issued or marketed by the Company in
all states in which the Company, the PGA, and where
applicable, the PPA, are authorized to do business. All such
applications shall be forwarded promptly to the Company,
whether the same are reported upon favorably or otherwise by
the local medical or paramedical examiner.
(d) To hold all moneys received or collected on behalf of the
Company in trust and immediately remit them to the Company
without deduction.
(e) To provide service incidental to maintaining the policies or
contracts of the Company.
(f) To conform to and observe all applicable federal or state
statutes or rules or regulations pertaining to insurance or
insurance agents.
<PAGE> 2
(g) To conform to and observe all Company rules, policies, and
directives now in effect and as they may be revised from time
to time.
2. LIMITATION OF AUTHORITY
The PGA is not authorized to do, and agrees not to do nor attempt to
do, nor to assist any PPA in doing, any of the following:
(a) Accept risks or contracts of any kind or bind the Company in
any way.
(b) Make, alter, or discharge any insurance or other contract; or
extend the time for paying a premium, or waive forfeitures.
(c) Incur any debt, obligation, or liability for which the Company
is responsible.
(d) Initiate or respond to legal proceedings in the Company's
name.
(e) Market or solicit policies or contracts, directly or
indirectly, where the PGA, the Company, or where applicable,
the PPA, are not properly licensed.
(f) Pay any rebate of premium either directly or indirectly, or
provide any other inducement not specified in the policy or
contract, to any person as an inducement to purchase any
policy or contract.
(g) Issue or use any sales material or advertisement, of any form
whatsoever, other than those supplied by the Company or with
the Company's written approval.
(h) Violate applicable replacement statutes or regulations.
(i) Induce or attempt to induce any policyholder to withdraw
values from existing policies or contracts or relinquish
policies or contracts with the Company, or its subsidiaries,
for the purpose of entering into any non-Company transaction
that will result in compensation, directly or indirectly, to
the PGA.
3. RELATIONSHIP
(a) In performing the duties under this Agreement, the PGA shall
act as an independent contractor and not as an employee of the
Company.
(b) The PGA agrees to be governed in the performance of his, her,
or its duties by the terms and conditions of this Agreement,
and by the rules established by the Company. While an
independent contractor, the PGA reserves the right to exercise
independent judgment in marketing the Company's policies,
including the choice of time, place, and manner of sale. No
other provision of this Agreement nor any rule of the Company
shall be construed to abridge this right or create the
relationship of employer and employee between the Company and
the PGA, or between any employee of the PGA and the Company.
-2-
<PAGE> 3
4. COMPENSATION
(a) Commissions, fees, or other compensation on premiums covering;
insurance policies and annuity contracts produced by the PGA
and issued by the Company during the continuance of this
Agreement, when and as said premiums become due and are
actually paid in cash to the Company, shall be paid to the PGA
in accordance with and subject to all of the terms and
conditions of this Agreement and the commission schedules and
any Supplement and/or Amendment attached hereto, and as they
may be changed from time to time. It is expressly recognized
and agreed that the Company may unilaterally amend, modify, or
change the commission schedules and the Supplement in any
manner at any time in the future provided, however, that any
such amendments, modifications, or changes in commissions,
fees, or other compensation shall apply only to policies or
contracts issued by the Company after the effective date of
such change.
(b) In the event that this Agreement is terminated pursuant to
subsection (a) or (b) of section 12 of this Agreement,
commissions are vested and shall be paid for policy years 1 to
10 to the PGA or the executors, administrators, or assigns of
the PGA. In the event that this Agreement is terminated
pursuant to subsection (c) or (d) of section 12 of this
Agreement, no further commissions, fees, or other compensation
shall be paid.
(c) To the extent permitted by law, the Company may discharge its
obligation under this Agreement to pay commissions, fees, or
other compensation due after its termination, if the total
amount of commissions, fees, or other compensation paid to the
PGA under this Agreement in any full calendar year beginning
with the second full calendar year after termination of this
Agreement is less than $600.00. In such case, no further
commissions, fees, or other compensation shall be paid to the
PGA.
5. COMMISSION AND FEE EXCEPTIONS
(a) Subject to all of the provisions of this Agreement,
commissions or fees on variable life insurance policies can
only be paid or credited to a PGA who is a registered
representative of an affiliate of the Company or a registered
representative of a broker/dealer who has a sales agreement
with an affiliate of the Company and holds any required state
licenses when a variable life insurance sale is made and when
each premium is paid.
(b) Commissions, fees, and other compensation on any policy or
contract for which rates and conditions are not specified in
the applicable commission schedules shall be as determined by
the Company.
(c) No commissions, fees, or other compensation shall be paid to
the PGA upon any premium, or portion thereof, payment of which
is waived in accordance with the provisions contained in the
policy because of the disability of the insured or applicant
or the death of the applicant.
-3-
<PAGE> 4
(d) If a policy issued under this Agreement replaces, in whole or
in part, a policy or contract previously issued by the
Company, or its subsidiaries, the Company shall have the right
to determine what, if any, commissions, fees, or other
compensation shall be allowed.
(e) If a policy or contract is changed to a different kind or
amount, or if its date is changed, the Company shall have the
right to determine what, if any, commissions, fees, or other
compensation shall be allowed or recovered.
(f) Commissions, fees, or other compensation, if any, on the
conversion of any policy or contract or coverage shall be as
determined by the Company.
(g) Commissions, fees, or other compensation, if any, on policies
issued on a modified underwriting, guaranteed issue, salary
savings basis, for less than published minimum or where
classification is other than standard, shall be as determined
by the Company.
(h) If the Company shall return all, or any portion, of any
premiums on a policy or contract paid for under this or any
previous Agreements, for any reason whatsoever, the Company
shall have the right to deduct all or part of the commissions,
fees, or other compensation received by the PGA on such
premiums from any commissions, fees, or other compensation
thereafter due and payable to the PGA, without limitation to
any other rights of the Company, including the right to demand
immediate repayment from the PGA. Any amount remaining unpaid
shall be an indebtedness to the Company.
6. INDEBTEDNESS
Any indebtedness due the Company from the PGA shall be a first lien on
all commissions, fees, or other compensation payable to the PGA under
this Agreement, until the amount of such indebtedness is fully paid,
without limitation to any other rights of the Company, both prior to
and after termination of this Agreement to recover such indebtedness.
This provision shall not be construed in any way to limit the amount of
any indebtedness of the PGA to the value of the commissions, fees, or
other compensation payable under this Agreement. In addition to a
deduction from commissions, fees, or other compensation, the Company
may take such other actions to recover or collect such indebtedness as
it deems appropriate. To the extent the Company takes legal action to
recover such indebtedness, it may recover attorney's fees, costs and
expenses from the PGA.
If the PGA is a corporation, the officer of the corporation personally
signing this Agreement guarantees the performance of all of its terms
and conditions, and hereby assumes personal liability and
responsibility for any default in said terms and conditions, including
personal responsibility and liability for repayment of any and all
indebtedness owed the Company arising out of the terms of this
Agreement without the necessity of the Company first enforcing any
default against the corporate PGA.
-4-
<PAGE> 5
7. ASSIGNMENT OF COMMISSIONS, FEES, OR OTHER COMPENSATION
This Agreement is not assignable unless authorized in writing by the
Company.
8. NON-WAIVER OF RIGHTS
Neither failure by the Company to exercise any of its rights under this
Agreement nor its failure to require the PGA to meet his, her, or its
obligations hereunder shall be deemed to be a waiver of such right or
obligation and shall not in any way interfere with the ability of the
Company to exercise such right or require compliance with such
obligation either prior to or after termination of this Agreement.
9. ACCOUNTS AND RECORDS
The Company has a proprietary interest in any books, accounts, computer
and/or other records, documents, policy record cards, applications,
vouchers, letters, written correspondence with policyholders and the
Company, and all other items provided by the Company, and relating to
or connected with the business of the Company, or its subsidiaries, and
such accounts and records are the property of the Company. Upon
termination of this Agreement by either party, for any reason, the PGA
agrees to return immediately to the Company all accounts and records as
defined above. The PGA shall at all times, up to and including the
return of said accounts and records to the Company, preserve and
protect the confidentiality of such accounts, records, and other items.
The PGA's breach of this confidentiality by releasing any information
contained in said accounts, records, and other items to other than the
client, the client's advisors, or persons specifically authorized by
the Company, shall be deemed a violation of this Agreement.
10. PRIOR AGREEMENTS
All previous or existing Producing General Agent's Agreements, or other
Agent's Agreements whether oral or written, between the PGA and the
Company, are hereby terminated.
11. CHANGE IN AGREEMENT
The Company reserves the right to unilaterally amend, modify, or change
this Agreement, including any of the applicable commission schedules or
the Supplement in any manner at any time in the future, provided,
however, that any amendment, modification, or change in commissions,
fees, or other compensation shall apply only to policies or contracts
issued by the Company after the effective date of such change.
-5-
<PAGE> 6
12. TERMINATION OF AGREEMENT
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or without cause,
by either the Company or the PGA giving to the other party
written notice delivered in person or sent by ordinary mail to
the party's last known address.
(b) If the PGA is an individual, immediately upon the death of the
PGA.
(c) If the PGA is a corporation, immediately upon the dissolution
or liquidation of the PGA.
(d) Immediately and without written notice if the Company
determines that the PGA has committed any fraudulent,
dishonest, or illegal act or had misappropriated or withheld
funds, and the date of such termination shall coincide with
the date of the violation or act giving rise to termination.
After such termination, no further commissions, fees, or other
compensation shall be paid to the PGA.
13. PROHIBITED ACTIVITY
For one year after termination of this Agreement, the PGA shall not
directly or indirectly advise, induce, or solicit any policyholder of
the Company, or its subsidiaries, to lapse, cancel, or replace any
policy or contract of the Company or borrow values from any policy or
contract of the Company to pay any premium on a policy of another
company.
In the event the PGA violates this provision, the PGA agrees that the
Company may pursue all remedies, legal or equitable, including
injunction, to enforce compliance with this provision and the PGA shall
be responsible for the payment of any legal fees. Notwithstanding any
other provisions in this Agreement, no further commissions, fees, or
other compensation shall be paid in the event the PGA violates this
provision.
14. INDEMNIFICATION
PGA agrees to indemnify and save harmless the Company against any
liability, loss, or damage which the Company may sustain or incur
directly or indirectly due to or arising out of any obligation, act, or
transaction created or done by the PGA or any PPA in violation of, in
excess of, or in contravention of the power and authority of the PGA
set forth and described in this Agreement. The PGA shall be liable for
all legal liabilities including but not limited to fines, penalties,
and attorney's fees incurred due to the actions of the PGA or its PPAs.
The PGA authorizes the Company, without precluding the Company from
exercising any other remedy it may have, to charge against all
commissions, fees, or other compensation due or to become due to the
PGA under this Agreement any moneys paid or liabilities incurred by the
Company by reason of any such act or transaction.
-6-
<PAGE> 7
15. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and
supersedes all previous agreements entered into between the parties
with regard to the subject matter set forth herein.
16. MISCELLANEOUS
The term "Agreement" as used herein, refers to this Producing General
Agent's Agreement, the commission schedules, and any Supplement and/or
Amendments.
17. SEVERABILITY
If any provision of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be affected
and shall remain fully enforceable.
18. ACKNOWLEDGEMENT
By executing this Agreement, the PGA acknowledges that PGA has read it
in its entirety and is in agreement with the terms and conditions
outlining the rights of the Company and the PGA, under this Agreement.
Provident Mutual Life Insurance
Company
By:________________________________ _______________________________________
Signature of Producing General Agent
_______________________________________
Name of Producing General Agent
(Type or Print)
If PGA is a Corporation:
By:_______________________________________
Title:____________________________________
_______________________________________
Corporate Name
_______________________________________
State of Incorporation
-7-
<PAGE> 8
PGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SUPPLEMENT TO
PRODUCING
GENERAL AGENT'S AGREEMENT
This Supplement is attached and hereby incorporated into the Producing General
Agent's Agreement, hereinafter called the Agreement, and is subject to all of
the terms and conditions contained in the Agreement.
This Supplement may be unilaterally amended, modified or changed by the Company
at any time in the future pursuant to section 11 of the Agreement.
1. COMMISSIONS ON INDIVIDUAL LIFE INSURANCE POLICIES AND ANNUITY CONTRACTS
Subject to all of the provisions of this Agreement, the Company will
pay the PGA on premiums covering individual life insurance policies and
annuity contracts issued during the continuance of this Agreement, when
and as said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions for policies
and contracts produced by the PGA at the rates set forth in the
commission schedule for policy years 1 to 10 inclusive.
Subject to all of the provisions of this Agreement, the Company will
pay the PGA on premiums covering individual life insurance policies and
annuity contracts issued during the continuance of this Agreement, when
and as said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions for policy
years 1 to 10 inclusive for policies and contracts produced by PPAs
under the PGA's supervision. The Company will pay the PGA the
difference between the amount set forth in the PPA commission schedule
and the amount set forth in the commission schedule to this Agreement.
2. FEES ON INDIVIDUAL LIFE INSURANCE POLICIES
Subject to all of the provisions of this Agreement, the Company will
pay to the PGA on premiums covering individual life insurance policies
issued during the continuance of this Agreement, when and as said
premiums become due and are actually paid in cash to the Company, fees
for policies produced by the PGA at the rates set forth in the
commission schedule for policy year 11 and subsequent policy years.
Said fee payment shall cease with the last payment preceding
termination of the Agreement.
<PAGE> 9
3. GENERAL PROVISIONS
The Company's determination shall be binding and final on all parties
with regard to the matters on which the calculations and bonuses are
based, including but not limited to: the date on which a commission is
considered to be paid or credited, commissions paid by the Company, and
the PPAs under the PGA's supervision.
4. INDEBTEDNESS
In addition to the provisions in section 6 of the Agreement, the
Company may deduct from any commissions, fees or other compensation due
the PGA under the Agreement any indebtedness which is now or may
hereafter become due from the PGA to the Company or any of its
subsidiaries, whether arising under the Agreement or otherwise. The
Company may also deduct from any commissions, fees or other
compensation due the PGA under the Agreement any indebtedness which is
now or may hereafter become due from any PPA under the PGA's
supervision to the Company or any of its subsidiaries.
This provision shall not be construed to limit the amount of any
indebtedness to the value of commissions, fees or other compensation
due under the Agreement, nor shall it be construed to limit any other
rights of the Company or its subsidiaries to recover any indebtedness
as described above. If legal action is taken to recover such
indebtedness, the Company and/or its subsidiaries may recover
attorney's fees, costs, and expenses from the PGA.
Provident Mutual Life Insurance
Company
Effective Date: January 1, 1997 By: /s/ Andrew J. Stack
------------------------- ----------------------------------
Andrew J. Stack
Senior Vice President - PPGA
-2-
<PAGE> 10
PGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
OF PHILADELPHIA
ANNUALIZED ADVANCE COMMISSION PAYMENTS AMENDMENT
This Amendment is attached and hereby incorporated into the Producing General
Agent's Agreement, hereinafter called the Agreement, and is subject to all of
the terms and conditions contained in the Agreement. This Amendment is for the
purpose of authorizing certain annualized advance commission payments to the
Producing General Agent, hereinafter called the PGA, and to set forth conditions
and obligations for repayment. In its sole discretion, the Company may permit
annualized advance commission payments on certain policies in designated
circumstances. As to such advances, the terms are as follows:
1. Upon payment of the first monthly premium under the Automatic Payment
Plan, quarterly premium, or semi-annual premium on a life insurance
policy issued by the Company pursuant to an application obtained by the
PGA, the commission for the first full policy year will be determined
and paid to the PGA by the Company. The amount of such payment shall be
the Annualized First Year Commission.
2. The maximum premiums to which this Agreement will apply are limited to
scheduled premiums no greater than: $2,000 for semi-annual premiums,
$1,000 for quarterly premiums, or $330 for monthly premiums under the
Automatic Payment Plan. Policies with premiums greater than the above
listed amounts are not eligible for annualization.
3. Should the Insured die, or should the policy on which an Annualized
First Year Commission has been paid lapse or terminate for any reason
whatsoever before the premiums for the first full policy year are paid,
that percentage of the Annualized First Year Commission equal to the
percentage of the premiums for the first full policy year which were
not paid shall be deemed to be the unearned portion of the Annualized
First Year Commission which has been advanced to the PGA by the
Company, and which thereafter will constitute an indebtedness to the
Company without further demand by the Company.
<PAGE> 11
4. PGA hereby agrees to repay to the Company any unearned portion of the
Annualized First Year Commission, and hereby authorizes the Company to
deduct any unearned portion of the Annualized First Year Commission
from any commissions, fees, or other compensation payable by the
Company to the PGA. This authorization to deduct amounts owed to the
Company shall not limit any other rights or remedies available to the
Company to recover such indebtedness, including any rights or remedies
set forth in the Agreement.
5. The Company reserves the right to alter, change, or make exceptions to
this Amendment at any time and for any reason without notice to the
PGA, including but not limited to the right to exempt or withdraw
specific policies from the Amendment and the minimum and maximum
premiums to which the Amendment will apply. In addition to the
termination provisions set forth in the Agreement, the Company may
terminate this Amendment at any time and for any reason, with or
without cause.
This Amendment will not become effective until it has been approved
and signed by the Company at its Home Office.
Approved at Home Office:
By:
---------------------------------- -------------------------------------
Signature of PGA
Effective Date:
---------------------- -------------------------------------
Date
-2-
<PAGE> 1
Exhibit 1(A3)(biv)
SPECIAL AGENT'S CAREER AGREEMENT
This Agreement is effective _______________ by and between Provident Mutual Life
Insurance Company, hereinafter called the Company, and ________________________
hereinafter called the Career Agent.
IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS LISTED BELOW, THE
PARTIES AGREE AS FOLLOWS:
1. OBLIGATION OF THE CAREER AGENT
The Career Agent's Obligations shall be:
(a) To solicit and procure applications on a full time basis for all
types of insurance and annuities issued or marketed by the Company.
All such applications shall be forwarded promptly to the Company,
whether the same are reported upon favorably or otherwise by the
local medical or paramedical examiner.
(b) To solicit and procure applications for insurance policies and
contracts written by subsidiary companies of the Company, provided
the Career Agent is authorized and properly licensed.
(c) To hold all moneys received or collected on behalf of the Company in
trust and immediately remit them to the Company without deduction.
(d) To provide service incidental to maintaining the policies or
contracts of the Company.
(e) To conform to and observe all applicable federal or state statutes
or rules or regulations pertaining to insurance or insurance agents.
(f) To conform to and observe all Company rules, policies and directives
now in effect and as they may be revised from time to time.
2. LIMITATION OF AUTHORITY
The Career Agent is not authorized to do, and agrees not to do nor attempt
to do, any of the following:
(a) Accept risks or contracts of any kind or bind the Company in any
way.
(b) Make, alter, or discharge any insurance or other contract; or extend
the time for paying a premium; or waive forfeitures.
(c) Incur any debt, obligation or liability for which the Company is
responsible.
(d) Initiate or respond to legal proceedings in the Company's name.
(e) Market or solicit policies or contracts, directly or indirectly,
where the Career Agent and the Company are not properly licensed.
(f) Pay any rebate of premium either directly or indirectly, or provide
any other inducement not specified in the policy, to any person as
an inducement to purchase any policy.
(g) Issue or use any sales material or advertisement, of any form
whatsoever, other than those supplied by the Company or with the
Company's written approval.
(h) Violate applicable replacement statutes or regulations.
(i) Be a full time agent, exclusive territorial representative, field
supervisor, manager, or regional manager of any other insurance
company.
(j) Induce or attempt to induce any policyholder to withdraw values from
existing policies or relinquish policies with the Company for the
purpose of entering into any non-Company transaction that will
result in compensation, directly or indirectly, to the Career Agent.
<PAGE> 2
3. RELATIONSHIP
(a) In performing his or her duties under this Agreement, the Career
Agent shall act as an independent contractor and not as an employee
of the Company.
(b) The Career Agent agrees to be governed in the performance of his or
her duties by the terms and conditions of this Agreement, and by the
rules established by the Company. While an independent contractor,
the Career Agent reserves the right to exercise independent judgment
in marketing the Company's policies, including the choice of time,
place and manner of sale. No other provision of this Agreement nor
any rule of the Company shall be construed to abridge this right or
create the relationship of employer or employee.
4. COMMISSIONS AND FEES
(a) Commissions and fees on premiums covering insurance policies and
annuity contracts produced by the Career Agent and issued by the
Company during the continuance of this Agreement, when and as said
premiums become due and are actually paid in cash to the Company,
shall be paid to the Career Agent in accordance with and subject to
all of the terms and conditions of the commission schedules and
Supplement attached hereto, and as they may be changed from time to
time. It is expressly recognized and agreed that the Company may
unilaterally amend, modify or change the commission schedules and
the Supplement in any manner at any time in the future provided,
however, that any such amendments, modifications or changes in
commissions or fees shall apply only to policies or contracts issued
by the Company after the effective date of such change.
(b) Any commissions or fees which may become payable after the death of
the Career Agent shall be paid to the executors, administrators or
assigns of the Career Agent.
(c) Upon termination of this Agreement, no further commissions or fees
shall be paid except as may be expressly provided herein; however,
if this Agreement is terminated and if immediately following such
termination the Career Agent enters into a new Special Agent's
Career Agreement with the Company, or if the Career Agent shall
become an employee of the Company, then the new career agreement or
employment will be considered a continuation of the career service
period solely for the purpose of determining the commissions and
fees payable under this Agreement.
(d) To the extent permitted by law, the Company may discharge its
obligation under this Agreement to pay compensation due after its
termination by payment of the commuted value, if under $3,000, of
such compensation at any time after the termination of this
Agreement. The commuted value will be equivalent to the sum of
commissions and fees due, or which would become due, calculated by
the Company on the basis of mortality, lapse, and interest rates
deemed appropriate by the Company.
5. COMMISSION AND FEE EXCEPTIONS
(a) Any commissions or fees payable to the Career Agent on premiums on
group insurance policies or group annuity contracts (including
wholesale and franchise coverage) shall be calculated and paid in
accordance with separate written agreements between the Career Agent
and the Company and shall be at such rates and subject to such terms
and conditions as may be fixed by the Company from time to time.
(b) Commissions and fees on any policy for which rates and conditions
are not specified in the applicable commission schedules shall be as
determined by the Company.
(c) No commissions or fees shall be paid to the Career Agent upon any
premium, or portion thereof, payment of which is waived in
accordance with the provisions contained in the policy because of
the disability of the insured or applicant, or the death of the
applicant.
(d) If a policy issued under this Agreement replaces, in whole or in
part, a policy previously issued by this Company or its
subsidiaries, the Company shall have the right to determine what, if
any, commissions or fees shall be allowed.
(e) If a policy is changed to a different kind or amount, or if its date
is changed, the Company shall have the right to determine what, if
any, commissions or fees shall be allowed or recovered.
(f) Commissions and fees, if any, on the conversion of any policy or
coverage shall be as determined by the Company.
<PAGE> 3
(g) Commissions and fees, if any, on policies issued on a modified
underwriting, guaranteed issue, salary savings basis, for less than
the published minimum amount or greater than the published maximum
age, or where classification is other than standard, shall be as
determined by the Company.
(h) If the Company shall return all, or any portion, of any premiums on
a policy or contract paid for under this or any previous Agreements,
for any reason whatsoever, the Company shall have the right to
deduct all or part of the commissions and fees received by the
Career Agent on such premiums from any commissions and fees
thereafter due and payable to the Career Agent without limitation to
any other rights of the Company, including the right to demand
immediate repayment from the Career Agent. Any amount remaining
unpaid shall be an indebtedness to the Company.
6. INDEBTEDNESS
Any indebtedness due the Company from the Career Agent shall be a first
lien on all commissions and fees payable to the Career Agent under this
Agreement, until the amount of such indebtedness is fully paid, without
limitation to any other rights of the Company both prior to and after
termination of this Agreement to recover such indebtedness.
This provision shall not be construed in any way to limit the amount of any
indebtedness of the Career Agent to the value of the commissions and fees
payable under this Agreement. In addition to a deduction from commissions
and fees the Company may take such other actions to recover or collect such
indebtedness as it deems appropriate. To the extent the Company takes legal
action to recover such indebtedness, it may recover attorney's fees, costs
and expenses from the Career Agent.
7. ASSIGNMENT OF COMMISSIONS
This Agreement is not assignable unless authorized in writing by the
Company.
8. NON-WAIVER OF RIGHTS
Neither failure by the Company to exercise any of its rights under this
Agreement nor its failure to require the Career Agent to meet his or her
obligations hereunder shall be deemed to be a waiver of such right or
obligation and shall not in any way interfere with the ability of the
Company to exercise such right or require compliance with such obligation
either prior to or after termination of this Agreement.
9. ACCOUNTS AND RECORDS
The Company has a proprietary interest in any books, accounts, computer
and/or other records, documents, policy record cards, applications,
vouchers, letters, written correspondence with policyholders and the
Company, and all other items provided by the Company, and relating to or
connected with the business of the Company or a subsidiary Company, and
such accounts and records are the property of the Company. Upon termination
of this Agreement by either party, for any reason, the Career Agent agrees
to return immediately to the Company all accounts and records as defined
above. The Career Agent shall at all times, up to and including the return
of said accounts and records to the Company, preserve and protect the
confidentiality of such accounts, records and other items. The Career
Agent's breach of this confidentiality by releasing any information
contained in said accounts, records and other items to other than the
client, the client's advisors, or persons specifically authorized by the
Company, shall be deemed a violation of this Agreement.
10. CAREER SERVICE PERIOD
"Career Service Period" as used in this Agreement means the aggregate
continuous uninterrupted period during which the Career Agent has been
under this Agreement and any previous Career Agreement or Career Agreements
with the Company or any General Agent's Agreement with the Company or any
Agency Manager's Agreement with the Company.
11. PRIOR AGREEMENTS
All previous or existing Special Agent's Career Agreements, whether oral or
written, between the Career Agent and the Company are hereby terminated. If
immediately prior to the execution of the Agreement the Career Agent was
under an Agreement that conditioned fees or commissions upon the
continuance of such Agreement, this Agreement so long as it shall remain in
force shall be considered a continuation of the former Agreement solely for
the purpose of determining the commissions and fees payable under the
former Agreement.
<PAGE> 4
12. CHANGE IN AGREEMENT
The Company reserves the right to unilaterally amend, modify or change this
Agreement, including any of the applicable commission schedules or the
Supplement, in any manner at any time in the future, provided, however,
that any amendment, modification or change in commissions or fees shall
apply only to policies or contracts issued by the Company after the
effective date of such change.
13. TERMINATION OF AGREEMENT
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or without cause, by
either the Company or the Career Agent giving to the other party
written notice delivered in person or sent by ordinary mail to the
party's last known address.
(b) Immediately upon the death of the Career Agent.
(c) Immediately and without written notice if the Company determines
that the Career Agent has committed any fraudulent, dishonest or
illegal act or has misappropriated or withheld funds. The date of
such termination shall coincide with the date of the violation or
act giving rise to termination. After such termination, no further
commissions or fees shall be paid to the Career Agent under the
Agreement.
14. MANDATORY TERMINATION
In addition to and without limitation to the Company's and the Career
Agent's rights set forth in paragraph 13(a) above to terminate this
Agreement for any reason at any time, this Agreement shall automatically
terminate without notice at the end of any calendar year during which the
Career Agent fails to meet the earnings requirement described in the then
current Supplement to this Agreement.
In the event that the Career Agent should become totally disabled, as
described below, the earnings requirement set forth in the Supplement will
be reduced by one-twelfth (1/12) for every full month such disability
continues during the calendar year. For purposes of this paragraph, the
Company in its discretion, shall make the sole and final determination of
whether the Career Agent is totally disabled, and when such disability, if
any, begins and ends.
15. PROHIBITED ACTIVITY
For one year after termination of this Agreement, the Career Agent shall
not directly or indirectly advise, induce, or solicit any policyholder of
the Company to lapse, cancel, or replace any policy or contract of the
Company or borrow values from any policy or contract of the Company to pay
any premium on a policy of another Company. In the event the Career Agent
violates this provision, the Career Agent agrees that the Company may
pursue all remedies, legal or equitable, including injunction, to enforce
compliance with this provision and the Career Agent shall be responsible
for the payment of any legal fees.
16. MISCELLANEOUS
The term "Agreement" as used herein, refers to this Special Agent's Career
Agreement, the applicable Supplement and commission schedules.
17. SEVERABILITY
If any provision of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be affected and
shall remain fully enforceable.
18. ACKNOWLEDGEMENT
By executing this Agreement, the Career Agent acknowledges that he or she
has read it in its entirety and is in agreement with the terms and
conditions outlining the rights of the Company and the Career Agent under
this Agreement.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By ______________________________ _________________________________
Career Agent
<PAGE> 5
-A-
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SUPPLEMENT TO SPECIAL AGENT'S CAREER AGREEMENT
This Supplement is attached and hereby incorporated into the Special Agent's
Career Agreement, hereinafter called the Agreement, and is subject to all of the
terms and conditions contained in the Agreement.
This Supplement may be unilaterally amended, modified or changed by the Company
at any time in the future pursuant to paragraph 12 of the Agreement and will be
reviewed annually; therefore, the current supplement must be consulted for
accurate information.
1. Commissions on Individual Life and Health Insurance Policies and Annuity
Contracts.
Subject to all of the provisions of the Agreement, the Company will pay
to the Career Agent on premiums covering individual life and health
insurance policies and annuity contracts issued during the continuance
of the Agreement, when and as said premiums become due and are actually
paid in cash to the Company, first year commissions and renewal
commissions at the rates set forth in the commission schedules but
subject to the following conditions:
(a) While the Agreement is in effect, commissions will be paid
only for policy years 1 to 10 inclusive.
(b) In the event the Agreement is terminated by reason of the
death of the Career Agent, commissions will be paid only for
policy years 1 to 10 inclusive.
(c) In the event the Agreement is terminated for reasons other
than the death of the Career Agent, commissions will be paid
according to the number of completed years of service by the
Career Agent in the career service period at the time of such
termination, determined as follows:
(i) Less than 5 years of career service after the date of
January 1, 1998 - commissions for the first policy
year only.
(ii) 5 years of career service after the date of January
1, 1998 but less than 15 years of career service --
commissions for policy years 1 to 10 inclusive will
be at the rate in the commission schedules, except
that in the case of OptionsPlus and Survivor
OptionsPlus commissions for policy years 2 to 10
inclusive on Target Premiums and Asset Based
Commissions will be at the Level B rates.
(iii) 15 or more years of career service - commissions for
policy years 1 to 10 inclusive at the rate in the
commission schedules.
2. Fees on Individual Life Insurance Policies
(a) Formula Fees Applicable to the Fourth through Tenth Years.
Subject to all of the provisions of the Agreement, the Company
will pay to the Career Agent formula fees at the rates and in
the manner set forth in this section 2(a).
Definitions - for the purpose of computing and paying the fees
in this section 2(a), the following definitions will apply.
"Policies" means all individual life insurance policies
(exclusive of all annuity contracts) issued while the
Agreement is in effect except single premium and flexible
premium variable life policies and policies in the employee
benefit series issued on a one-year term plan.
"Block of policies" means all "policies" with policy dates
which occur in the same calendar year.
"Formula fee rate" means the rate at which formula fees will
be computed on each "block of policies."
"Formula fee" means the amount to be paid on each "block of
policies" for the calendar quarter.
-B-
<PAGE> 6
Computation of the Formula Fee Rate
The Company will compute a formula fee rate applicable to each block of policies
as follows:
(1) Determine on an annual premium basis the amount of first year
commissions applicable to all policies in such block. For purposes of
this determination, first year commissions on actual premiums paid
during the first policy year up to the target premium for flexible
premium variable life policies will be included.
(2) Determine a 25 month persistency rate for all policies in such block by
dividing the amount of first year commissions determined in accordance
with (1) above into that portion of such amount of first year
commissions that is represented by policies with respect to which
premiums have been paid for the full first 25 policy months. Flexible
premium variable life policies will not be included in determining the
persistency rate.
(3) From Table A below, determine the Quantity Factor applicable to the
amount of first year commissions determined in accordance with (1)
above. The amounts listed in Table A below are applicable for policies
with policy dates which occur in 1998. The Table A amounts will be
revised on an annual basis.
(4) From Table B below, determine the Persistency Factor applicable to the
25 month persistency rate determined in accordance with (2) above.
(5) Multiply the Quantity Factor determined in accordance with (3) above by
the Persistency Factor determined in accordance with (4) above; the
product is the formula fee rate for such block of policies.
Table A
<TABLE>
<CAPTION>
First Year Commissions on
an Annual Premium Basis Quantity Factor
<S> <C>
Less than $24,000........................................................ 0%
$24,000 to $38,999................................. {FYC minus $24,000} x 4%
-------------------
{ $15,000 }
$39,000 to $77,999........................ 4% + {FYC minus $39,000 x 6%}
------------------
{ $39,000 }
$78,000 and over........................................................ 10%
</TABLE>
Table B
<TABLE>
<CAPTION>
25 Month Persistency Rate Persistency Factor
<S> <C>
.92 and over............................................................ 100%
.89 but less than .92................................................... 80%
.86 but less than .89................................................... 60%
.82 but less than .86................................................... 40%
.80 but less than .82................................................... 10%
Below .80............................................................... 0%
</TABLE>
The formula fee rate that is computed for each block of policies will remain
constant with respect to the computation of the formula fees to be paid
thereafter on such block of policies.
Computation of Formula Fees
A formula fee will be computed for each block of policies with respect to
premiums due during the fourth through the tenth policy years. Once each
calendar quarter, the Company will compute the formula fee for each block of
policies by multiplying the annual premium for all policies in such block in
force at the end of the preceding calendar quarter by the formula fee rate for
such block of policies. The total amount of formula fees to be paid for each
calendar quarter will be one-fourth (1/4) of the sum of the fees computed as
described herein for each block of policies for the preceding calendar quarter.
Premiums on flexible premium variable life policies will not be included in the
computation of formula fees.
-C-
<PAGE> 7
Payment of Formula Fees
The Company will pay quarterly formula fees as computed above
to the Career Agent. Formula fee payments shall cease with the
last payment preceding the termination of the Agreement,
except that
(i) If the Agreement at the end of the career service
period is terminated by reason of the death of the
Career Agent, formula fee payments will be continued
only if the Career Agent has at least 20 years of
continuous service during the career service period,
and
(ii) If the Agreement at the end of the career service
period is terminated for any reason other than the
death of the Career Agent and if the Career Agent has
attained age 55, has at least 10 years of continuous
service during the career service period and the sum
of the Career Agent's attained age plus years of
service during the career service period equals or
exceeds 75, formula fee payments will be continued to
the Career Agent during the Career Agent's remaining
lifetime as calculated in paragraph 2(a), such
payments ceasing with the last payment preceding the
death of the Career Agent.
(b) Uniform Fees Applicable to the Eleventh and Subsequent Policy
Years.
The uniform fees described in this section 2(b) are payable
in addition to any formula fees that may be payable as
provided in section 2(a). Once each calendar year, the
Company will determine the premiums covering policy year 11
and all subsequent policy years expected to be paid during the
next calendar year on individual life insurance policies
(exclusive of all annuity contracts) issued during the career
service period. At quarterly intervals during the Agreement,
the Company will pay to the Career Agent a sum equal to 3/4 of
1% of the aggregate premiums so determined, such payments
ceasing with the last payment preceding the termination of the
Agreement.
(c) General Provisions Applicable to the Formula Fees described in
section 2(a) above and to the Uniform Fees described in
section 2(b) above.
All computations, determinations, estimates and the bases
thereof used in computing the rates and amounts of all fees
and the manner of all payments and dates on which all payments
shall be made, shall be determined from time to time by the
Company in its sole discretion, which determination shall be
final. No fees will be paid following the termination of the
Agreement except as herein expressly provided.
3 Career Agent Earnings Requirement
(a) In order to maintain the Career Agreement, the Career Agent
must receive in each full calendar year at least $20,000 in
compensation on policies, contracts or other products produced
by the Career Agent in the Company or in any of its subsidiary
companies as are specifically authorized by the Company, in
accordance with the following limitations:
(i) The Career Agent must receive at least $17,000 in
supervisory compensation or first year cash
commissions on Provident Mutual Life Insurance
Company individual life policies.
(ii) For purposes of the earnings requirement only,
one-eighth of the first year compensation the Career
Agent receives on the sale of Provident Mutual Life
Insurance Company annuity contracts, Providentmutual
Life and Annuity Company of America policies or
contracts and/or products offered by 1717 Capital
Management Company, up to a maximum of $24,000 of
compensation per year, may be counted. Such
compensation is not counted for any other purpose,
including but not limited to eligibility for group
insurance.
(iii) If the Career Agent is contracted prior to June 1,
the earnings requirement will be pro-rated;
pro-rating is calculated on a semi-monthly basis. If
the Career Agent is contracted on or after June 1,
the Career Agent will not be subject to an earnings
requirement during the year of contracting, and
commissions received during that year will not count
toward the following year's earning requirement.
Notwithstanding the foregoing, a Career Agent who
previously had a Career Agreement with the Company
will be subject to a pro-rated earnings requirement
during the year of recontracting, regardless of the
date of recontracting.
-D-
<PAGE> 8
(b) This earnings requirement shall not apply in any calendar year
in which the Career Agent has completed at least 10 years of
continuous service during the career service period and the
sum of the Career Agent's attained age plus years of service
during the career service period equals or exceeds 75.
(c) The Career Agent may maintain the Career Agreement without
meeting the earnings requirement if:
(i) The Career Agent has completed at least five years of
continuous service during the career service period;
and
(ii) The Career Agent has met the earnings requirement in
each of the last four years; and
(iii) The Career Agent has received in the current year
sufficient first year cash commissions on Provident
Mutual Life Insurance Company individual life
policies to satisfy at least fifty percent of the
current year's earnings requirement; and
(iv) One-fifth of the aggregate first year cash
commissions on Provident Mutual Life Insurance
Company individual life policies received by the
Career Agent in the current year and four prior years
equals or exceeds the current year's earnings
requirement.
Career Agents who maintain the Career Agreement in this
fashion must pay the full cost of group insurance coverage in
the following year.
4. The Company rules, policies and directives to which the Career Agent is
required to conform pursuant to Paragraph 1(f) of the Special Agent's
Career Agreement hereafter also include the Principles of Ethical
Market Conduct, as adopted by the Insurance Marketplace Standards
Association (IMSA). The Company and its subsidiaries subscribe to the
Principles of Ethical Market Conduct and the Code of Ethical Market
Conduct in all matters affecting the sale of individually-sold life
insurance and annuity products. Currently, these Principles of Ethical
Market Conduct are:
(1) To conduct business according to high standards of honesty and
fairness, and to render that service to its customers which,
in the same circumstances, it would apply to or demand for
itself.
(2) To provide competent and customer-focused sales and service.
(3) To engage in active and fair competition.
(4) To provide advertising and sales materials that are clear as
to purpose, and honest and fair as to content.
(5) To provide for fair and expeditious handling of customer
complaints and disputes.
(6) To maintain a system of supervision and review that is
reasonably designed to achieve compliance with these
Principles of Ethical Market Conduct.
Effective Date: December 16, 1997
PROVIDENT MUTUAL LIFE
INSURANCE COMPANY
/s/ Robert W. Kloss
-----------------------
President and
Chief Operating Officer
<PAGE> 1
EXHIBIT 1(A3)(bv)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SPECIAL AGENT'S AGREEMENT
This Agreement is effective _____________________________, by and between
Provident Mutual Life Insurance Company, hereinafter called the Company, and
_____________________________________ hereinafter called the Special Agent. In
consideration of the mutual covenants and agreements listed below, the parties
agree as follows:
1. Obligations of the Special Agent
The Special Agent's Obligations shall be:
(a) To solicit and procure applications for all types of insurance and
annuities issued or marketed by the Company. All such applications
shall be forwarded promptly to the Company, whether the same are
reported upon favorably or otherwise by the local medical or
paramedical examiner.
(b) To hold all moneys received or collected on behalf of the Company in
trust and immediately remit them to the Company without deduction.
(c) To provide service incidental to maintaining the policies or
contracts of the Company.
(d) To conform to and observe all applicable federal or state statutes
or rules or regulations pertaining to insurance or insurance agents.
(e) To conform to and observe all Company rules, policies and directives
now in effect and as they may be revised from time to time.
2. Limitation of Authority
The Special Agent is not authorized to do, and agrees not to do nor
attempt to do, any of the following:
(a) Accept risks or contracts of any kind or bind the Company in any
way.
(b) Make, alter or discharge any insurance or other contract; or extend
the time for paying a premium; or waive forfeitures.
(C) Incur any debt, obligation or liability for which the Company is
responsible.
(d) Initiate or respond to legal proceedings in the Company's name.
(e) Market or solicit policies or contracts, directly or indirectly,
where the Special Agent and the Company are not properly licensed.
(f) Pay any rebate of premium either directly or indirectly, or provide
any other inducement not specified in the policy, to any person as
an inducement to purchase any policy.
(g) Issue or use any sales material or advertisement, of any form
whatsoever, other than those supplied by the Company or with the
Company's written approval.
(h) Violate applicable replacement statutes or regulations.
(i) Induce or attempt to induce any policyholder to withdraw values from
existing policies or relinquish policies with the Company for the
purpose of entering into any non-Company transaction that will
result in compensation, directly or indirectly, to the Special
Agent.
3. Relationship
(a) In performing his or her duties under this Agreement, the Special
Agent shall act as an independent contractor and not as an employee
of the Company.
<PAGE> 2
(b) The Special Agent agrees to be governed in the performance of his or
her duties by the terms and conditions of this Agreement, and by the
rules established by the Company. While an independent contractor,
the Special Agent reserves the right to exercise independent
judgment in marketing the Company's policies, including the choice
of time, place and manner of sale. No other provision of this
Agreement nor any rule of the Company shall be construed to abridge
this right or create the relationship of employer and employee.
4. Commissions
(a) Commissions on premiums covering individual life and health
insurance policies and annuity contracts produced by the Special
Agent and issued by the Company during the continuance of this
Agreement, when and as said premiums become due and are actually
paid in cash to the Company, shall be paid to the Special Agent in
accordance with and subject to all of the terms and conditions of
this Agreement and the commission schedules and any Supplement
and/or Amendment hereto, and as they may be changed from time to
time. It is expressly recognized and agreed that the Company may
unilaterally amend, modify or change the commission schedules and
any Supplement and/or Amendments hereto in any manner at any time in
the future provided, however, that any such amendments,
modifications or changes in commissions or fees shall apply only to
policies or contracts issued by the Company after the effective date
of such change.
(b) Any commissions which may become payable after the death of the
Special Agent shall be paid to the executors, administrators or
assigns of the Special Agent.
(c) To the extent permitted by law, the Company may discharge its
obligation under this Agreement to pay compensation due after its
termination if the total amount of commissions received by the
Special Agent in any full calendar year following termination of
this Agreement is less than $600. In such case, no further
commissions shall be paid to the Special Agent.
5. Commission Exceptions
(a) Any commissions payable to the Special Agent on premiums on group
annuity contracts (including wholesale and franchise coverage) shall
be calculated and paid in accordance with separate written
agreements between the Special Agent and the Company and shall be at
such rates and subject to such terms and conditions as may be fixed
by the Company from time to time.
(b) Commissions on any policy for which rates and conditions are not
specified in the applicable commission schedules shall be as
determined by the Company.
(c) No commissions shall be paid to the Special Agent upon any premium,
or portion thereof, payment of which is waived in accordance with
the provisions contained in the policy because of the disability of
the insured or applicant, or the death of the applicant.
(d) If a policy issued under this Agreement replaces, as defined by the
Company, in whole or in part, a policy previously issued by this
Company, the Company shall have the right to determine what, if any,
commissions or fees shall be allowed.
(e) If a policy is changed to a different kind or amount, or if its date
is changed, the Company shall have the right to determine what, if
any, commissions shall be allowed or recovered.
(f) Commissions, if any, on the conversion of any policy or coverage
shall be determined by the Company.
<PAGE> 3
(g) Commissions, if any, on policies issued on a modified underwriting,
guaranteed issue, salary savings basis, for less than published
minimum or where classification is other than standard, shall be as
determined by the Company.
(h) If the Company shall return all, or any portion, of any premiums on
a policy or contract paid for under this or any previous Agreements,
for any reason whatsoever, the Company shall have the right to
deduct all or part of the commissions received by the Special Agent
on such premiums from any commissions thereafter due and payable to
the Special Agent without limitation to any other rights of the
Company, including the right to demand immediate repayment from the
Special Agent. Any amount remaining unpaid shall be an indebtedness
to the Company.
6. Indebtedness
Any indebtedness which is now or may hereafter become due from the Special
Agent to Provident Mutual Life Insurance Company or any of its
subsidiaries shall be a first lien on all compensation payable under this
Agreement until such indebtedness is fully paid, without limitation to any
other rights of Provident Mutual Life Insurance Company or its
subsidiaries both prior to and after termination of this Agreement to
recover such indebtedness.
This provision shall not be construed in any way to limit the amount of
any indebtedness of the Special Agent to the value of the commissions
payable under this Agreement. In addition to a deduction from commissions,
the Company may take such other actions to recover or collect such
indebtedness as it deems appropriate. To the extent the Company takes
legal action to recover such indebtedness, it may recover attorney's fees,
costs and expenses from the Special Agent.
If the Special Agent is a corporation, the officer of the corporation
personally signing this Agreement guarantees the performance of all of its
terms and condition, and hereby assumes personal liability and
responsibility for any default in said terms and condition, including
personal responsibility and liability for repayment of any and all
indebtedness owed the company arising out of the terms of this Agreement
without the necessity of the Company first enforcing any default against
the corporate Special Agent.
7. Assignment of Commissions
This Agreement is not assignable unless authorized in writing by the
Company.
8. Non-Waiver of Rights
Neither failure by the Company to exercise any of its rights under this
Agreement nor its failure to require the Special Agent to meet his or her
obligations hereunder shall be deemed to be a waiver of such right or
obligation and shall not in any way interfere with the ability of the
Company to exercise such right or require compliance with such obligation
either prior to or after termination of this Agreement.
9. Accounts and Records
The Company has a proprietary interest in any books, accounts, computer
and/or records, documents, policy record cards, applications, vouchers,
letters, written correspondence with policyholders and the Company, and
all other items provided by the Company, and relating to or connected with
the business of the Company or a subsidiary company, and such accounts and
records are the property of the Company. Upon termination of this
Agreement by either party, for any reason, the Special Agent agrees to
return immediately to the Company all
<PAGE> 4
accounts and records as defined above. The Special Agent shall at all
times, up to and including the return of said accounts and records to the
Company, preserve and protect the confidentiality of such accounts,
records and other items. The Special Agent's breach of this
confidentiality by releasing any information contained in said accounts,
records and other items to other than the client, the client's advisors,
or persons specifically authorized by the Company, shall be deemed a
violation of this Agreement.
10. Prior Agreements
All previous or existing Agent's Agreements, whether oral or written,
between the Special Agent and the Company or any General Agent thereof are
hereby terminated.
11. Change in Agreement
The Company reserves the right to unilaterally amend, modify or change
this Agreement, including any of the applicable commission schedules and
any Supplement and/or Amendment hereto in any manner at any time in the
future, provided, however, that any amendment, modification or change in
commissions shall apply only to policies or contracts issued by the
Company after the effective date of such change.
12. Termination of Agreement
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or without cause, by
either the Company or the Special Agent giving to the other party
written notice delivered in person or sent by ordinary mail to the
party's last known address. After such termination, the Special
Agent shall be entitled to receive the commissions set forth in the
applicable commission schedule for premiums covering policy years 1
to 10 inclusive.
(b) Immediately upon the death of the Special Agent, if the Special
Agent is a natural person. After such termination, the executors,
administrators, or assigns of the Special Agent shall be entitled to
receive the commissions set forth in the applicable commission
schedule for premiums covering policy year 1 to 10 inclusive.
(c) Immediately and without written notice if the Company determines
that the Special Agent has committed any fraudulent, dishonest or
illegal act or has misappropriated or withheld funds and the date of
such termination shall coincide with the date of the violation or
act giving rise to termination. After such termination, no further
commissions shall be paid to the Special Agent under the Agreement.
13. Prohibited Activity
For one year after termination of this Agreement, the Special Agent shall
not directly or indirectly advise, induce, or solicit any policyholder of
the Company to lapse, cancel, or replace any policy or contract of the
Company or borrow values from any policy or contract of the Company to pay
any premium on a policy of another Company. In the event the Special
Agent violates this provision, the Special Agent agrees that the Company
may pursue all remedies, legal or equitable, including injunction, to
enforce compliance with this provision and the Special Agent shall be
responsible for the payment of any legal fees.
14. Insurance Marketplace Standards Association (IMSA)
The Company rules, policies and directives to which the Special Agent is
required to conform pursuant to Paragraph 1(e) of this Agreement hereafter
also include the Principles of Ethical Market Conduct, as adopted by the
Insurance Marketplace Standards Association (IMSA). Provident Mutual Life
Insurance Company and its subsidiaries subscribe to the Principles of
<PAGE> 5
Ethical Market Conduct and the Code of Ethical Market Conduct in all
matters affecting the sale of individually-sold life insurance and annuity
products.
Currently, these Principles of Ethical Market Conduct are:
(1) To conduct business according to high standards of honesty and
fairness and to render that service to its customers which, in the
same circumstances, it would apply to or demand for itself.
(2) To provide competent and customer-focused sales and service.
(3) To engage in active and fair competition.
(4) To provide advertising and sales materials that are clear as to
purpose and honest and fair as to content.
(5) To provide for fair and expeditious handling of customer complaints
and disputes.
(6) To maintain a system of supervision and review that is reasonably
designed to achieve compliance with these Principles of Ethical
Market Conduct.
15. Entire Agreement
This Agreement constitutes the entire Agreement between the parties and
supersedes all previous agreements entered into between the parties with
regard to the subject matter set forth herein.
16. Miscellaneous
The term "Agreement" as used herein, refers to this Special Agent's
Agreement, the commission schedules and any Supplement and/or Amendments.
17. Severability
If any provision of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be affected and
shall remain fully enforceable.
18. Acknowledgment
By executing this Agreement, the Special Agent acknowledges that he or she
has read it in its entirety and is in agreement with the terms and
conditions outlining the rights of the Company and the Special Agent,
under this Agreement.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By
------------------------------------- ----------------------------------
Special Agent
If Special Agent is a Corporation:
By
-------------------------------
-------------------------------
Title
-------------------------------
Corporate Name
-------------------------------
State of Incorporation
<PAGE> 1
Exhibit 1(A3)(bvi)
CORPORATE AGENT'S AGREEMENT
This Agreement is effective , by and between
Provident Mutual Life Insurance Company of Philadelphia, (hereinafter
called the Company), and , (hereinafter called the
Corporate Agent). In consideration of the mutual covenants and
agreements listed below, the parties agree as follows:
1. Obligations of the Corporate Agent
The Corporate Agent's Obligations shall be:
(a) To employ a Subagent to solicit and procure
applications on behalf of the Corporate Agent for all
types of insurance and annuities issued or marketed
by the Company. Such Subagent must be a stockholder
of the Corporate Agent and must be under the
Company's Special Agent's Career Agreement and a
Corporate Agent Assignment and Amendment must have
been executed. All such applications shall be
submitted in the Corporate name but identifying the
Subagent who solicited or procured the application on
its behalf and shall be forwarded promptly to the
Company, whether the same are reported upon favorably
or otherwise by the local medical or paramedical
examiner.
(b) To solicit and procure through such Subagent
applications for insurance policies and contracts
written by subsidiary companies of the Company,
provided the Corporate Agent and Subagent are
authorized and properly licensed.
(c) To hold all moneys received or collected on behalf of
the Company by it or its Subagent in trust and
immediately remit them to the Company without
deduction.
(d) To provide service incidental to maintaining the
policies or contracts of the Company.
(e) To conform to and observe all applicable federal or
state statutes or rules or regulations pertaining to
insurance or insurance agents.
(f) To conform to and observe all Company rules, policies
and directives now in effect and as they may be
revised from time to time.
(g) To notify the Company of the death of the Subagent or
any reason for termination under 13(b) or (c).
<PAGE> 2
2
2. Limitation of Authority
The Corporate Agent itself or through its Subagent is not
authorized to do, and agrees not to do nor attempt to do, any
of the following:
(a) Accept risks or contracts of any kind or bind the
Company in any way.
(b) Make, alter or discharge any insurance or other
contract; or extend the time for paying a premium; or
waive forfeitures.
(c) Incur any debt, obligation or liability for which the
Company is responsible.
(d) Initiate or respond to legal proceedings in the
Company's name.
(e) Market or solicit policies or contracts, directly or
indirectly, where the Corporate Agent, it's Subagent
and the Company are not properly licensed.
(f) Pay any rebate of premium either directly or
indirectly, or provide any other inducement not
specified in the policy, to any person as an
inducement to purchase any policy.
(g) Issue or use any sales material or advertisement, of
any form whatsoever, other than those supplied by
the Company or with the Company's written approval.
(h) Violate applicable replacement statutes or
regulations.
(i) Be a full time agent, exclusive territorial
representative, field supervisor, manager, or
regional manager of any other insurance company.
(j) Induce or attempt to induce any policyholder to
withdraw values from existing policies or relinquish
policies with the Company for the purpose of
entering into any non-Company transaction that will
result in compensation, directly or indirectly, to
the Corporate Agent or Subagent.
3. Relationship
(a) In performing these duties under this Agreement, the
Corporate Agent and its Subagent are independent
contractors and not employees of the Company.
(b) The Corporate Agent and its Subagent agree to be
governed in the performance of their duties by the
terms and conditions of this Agreement, and by the
rules established by the Company. The Corporate Agent
and its Subagent reserve the right to exercise
independent judgment in marketing the Company's
policies, including the choice of time, place and
manner of sale. No other provision of this Agreement
nor any rule of the Company shall be construed to
abridge this right or create the relationship of
employer and employee between the Company and the
Corporate Agent and its Subagent.
<PAGE> 3
3
4. Commissions and Fees
(a) Commissions and fees on premiums covering insurance
policies and annuity contracts produced by the
Subagent on behalf of the Corporate Agent and issued
by the Company during the continuance of this Agree-
ment, when and as said premiums become due and are
actually paid in cash to the Company, shall be paid
to the Corporate Agent in accordance with and
subject to all of the terms and conditions of the
commission schedules and the Supplement to Corporate
Agent's Agreement (hereinafter called the Supplement)
attached hereto, and as they may be changed from time
to time. It is expressly recognized and agreed that
the Company may unilaterally amend, modify or change
the commission schedules and the Supplement in any
manner at any time in the future provided, however,
that any such amendments, modifications or changes in
commissions or fees shall apply only to policies or
contracts issued by the Company after the effective
date of such amendment, modification or change.
(b) Upon termination of this Agreement, no further
commissions or fees shall be paid except as may be
expressly provided herein, however, if this Agreement
is terminated and if immediately following such term-
ination the Corporate Agent enters into a new
Corporate Agent's Agreement with the Company, or if
the Subagent shall become an employee of the Company,
then the new Corporate Agreement or employment will
be considered a continuation of the Service Period
solely for the purpose of determining the commissions
and fees payable under this Agreement.
(c) To the extent permitted by law, the Company may
discharge its obligation under this Agreement to
pay compensation due after its termination by payment
of the commuted value, if under $3,000, of such
compensation at any time after the termination of
this Agreement. The commuted value will be equivalent
to the sum of commissions and fees due, or which
would become due, calculated by the Company on the
basis of mortality, lapse, and interest rates deemed
appropriate by the Company.
5. Commission and Fee Exceptions
(a) Any commissions or fees payable to the Corporate
Agent on premiums on group insurance policies or
group annuity contracts (including wholesale and
franchise coverage) shall be calculated and paid in
accordance with separate written agreements between
the Corporate Agent and the Company and shall be at
such rates and subject to such terms and conditions
as may be fixed by the Company from time to time.
(b) Commissions and fees on any policy for which rates
and conditions are not specified in the applicable
commission schedules shall be as determined by the
Company.
(c) No commissions or fees shall be paid to the Corporate
Agent upon any premium, or portion thereof, payment
of which is waived in accordance with the provisions
contained in the policy because of the disability of
the insured or applicant, or the death of the
applicant.
<PAGE> 4
4
(d) If a policy issued under this Agreement replaces, in
whole or in part, a policy previously issued by this
Company, the Company shall have the right to
determine what, if any, commissions or fees shall be
allowed.
(e) If a policy is changed to a different kind or amount,
or if its date is changed, the Company shall have the
right to determine what, if any, commissions or fees
shall be allowed or recovered.
(f) Commissions and fees, if any, on the conversion of
any policy or coverage shall be as determined by the
Company.
(g) Commissions and fees, if any, on policies issued on a
modified underwriting, guaranteed issue, salary
savings basis, for less than published minimum or
where classification is other than standard, shall be
as determined by the Company.
(h) If the Company shall return all, or any portion, of
any premiums on a policy or contract paid for under
this or any previous Agreements, for any reason
whatsoever, the Company shall have the right to
deduct all or part of the commissions and fees
received by the Corporate Agent on such premiums from
any commissions and fees thereafter due and payable
to the Corporate Agent without limitation to any
other rights of the Company, including the right to
demand immediate repayment from the Corporate Agent.
Any amount remaining unpaid shall be an indebtedness
to the Company.
6. Indebtedness
Any indebtedness due the Company from the Corporate Agent
shall be a first lien on all commissions and fees payable to
the Corporate Agent, its successors or assigns under this
Agreement, until the amount of such indebtedness is fully
paid, without limitation to any other rights of the Company
both prior to and after termination of this Agreement to
recover such indebtedness.
This provision shall not be construed in any way to limit the
amount of any indebtedness of the Corporate Agent, its
successors or assigns, to the value of the commissions and
fees payable under this Agreement. In addition to a
deduction from commissions and fees the Company may take such
other actions to recover or collect such indebtedness as it
deems appropriate. To the extent the Company takes legal
action to recover such indebtedness, it may recover
attorney's fees, costs and expenses from the Corporate Agent,
its successors or assigns.
7. Assignment of Commissions
This Agreement is not assignable unless authorized in writing
by the Company.
8. Non-Waiver of Rights
Neither failure by the Company to exercise any of its rights
under this Agreement nor its failure to require the Corporate
Agent to meet its
<PAGE> 5
5
obligations hereunder shall be deemed to be a waiver of such
right or obligation and shall not in any way interfere with
the ability of the Company to exercise such right or require
compliance with such obligation either prior to or after
termination of this Agreement.
9. Accounts and Records
The Company has a proprietary interest in any books, accounts,
computer and/or other records, documents policy record cards,
applications, vouchers, letters, writer, correspondence with
policyholders and the Company, and all other items provided by
the Company, and relating to or connected with the business of
the Company or a subsidiary Company, and such accounts and
records are the property of the Company. Upon termination of
this Agreement by either party for any reason, the Corporate
Agent agrees to return immediately to the Company all accounts
and records as defined above. The Corporate Agent and its
Subagent shall at all times, up to and including the return of
said accounts and records to the Company, preserve and protect
the confidentiality of such accounts, records and other items.
The Corporate Agent's or its Subagent's breach of this
confidentiality by releasing any information contained in said
accounts, records and other items to other than the client,
the client's advisors, or persons specifically authorized by
the Company, shall be deemed a violation of this Agreement.
10. Service Period
"Service Period" as used in this Agreement means the aggregate
continuous uninterrupted period during which the Subagent has
been under any previous Special Agent's Career Agreement or
the Subagent has been a Subagent of the Corporate Agent under
this Agreement and any previous Corporate Agent's Agreement or
any General Agent of the Company or any Agency Manager's
Agreements but such period shall terminate on the first of the
following to occur; (a) the death of the Subagent, (b)
termination of the Subagent's employment as a Subagent of the
Corporate Agent, or (c) termination of this Agreement.
11. Prior Agreements
All previous or existing commission Agreements, whether oral
or written, between the Corporate Agent and the Company are
hereby terminated. If immediately prior to the execution of
this Agreement the Corporate Agent was under a commission
agreement that conditioned fees or commissions upon the
continuance of such agreement, this Agreement so long as it
shall remain in force shall be considered a continuation of
the former agreement solely for the purpose of determining the
commissions and fees payable under the former agreement.
12. Change in Agreement
The Company reserves the right to unilaterally amend, modify
or change this Agreement, including any of the applicable
commission schedules or the Supplement in any manner at any
time in the future, provided, however, that any amendment,
modification or change in commissions or fees shall apply
<PAGE> 6
6
only to policies or contracts issued by the Company after the
effective date of such amendment, modification or change.
13. Termination of Agreement
This Agreement shall terminate:
(a) At any time for any reason whatsoever, with or
without cause, by either the Company or the Corporate
Agent giving to the other party written notice
delivered in person or sent by ordinary mail to the
party's last known address.
(b) Immediately upon the dissolution of the Corporate
Agent.
(c) Immediately if anyone (other than a Subagent, his or
her spouse, children or grandchildren or any trust
established for the benefit of any of said
individuals) become stockholders of the Corporate
Agent.
(d) Immediately and without written notice if the Company
determines that the Corporate Agent or its Subagent
has committed any fraudulent, dishonest or illegal
act or has misappropriated or withheld funds and the
date of such termination shall coincide with the date
of the violation or act giving rise to termination.
After such termination, no further commissions or
fees shall be paid to the Corporate Agent under the
Agreement.
14. Mandatory Termination
In addition to and without limitation to the Company's and the
Corporate Agent's rights set forth in paragraph 13 (a) above
to terminate this Agreement for any reason at any time, this
Agreement shall automatically terminate without notice at the
end of any full calendar year during which the Corporate Agent
on account of business solicited on its behalf by the Subagent
fails to meet the earnings requirement described in the then
current Supplement to the then current Special Agent's Career
Agreement of the Company.
In the event that the Subagent of the Corporate Agent should
become totally disabled, as described below, the earnings
requirement set forth in the then current Supplement to the
then current Special Agent's Career Agreement of the Company
will be reduced by one-twelfth (1/12) for every full month
such disability continues during the calendar year. For
purposes of this paragraph, the Company in its discretion,
shall make the sole and final determination of whether the
Subagent is totally disabled, and when such disability, if
any, begins and ends.
15. Payment in Lieu of Pension Plan Benefits
The Corporate Agent, its Subagents or employees shall not be
eligible for participation in any retirement plan of the
Company.
Subject to all of the provisions of this Agreement, the
Company will pay to the Corporate Agent during the period
while this Agreement is in effect and
<PAGE> 7
7
the Subagent is a Subagent of the Corporate Agent, as
additional compensation, no later than April 15 of each
year, an amount equal to the amount paid or credited by the
Corporate Agent on behalf of the Subagent for the previous
calendar year to a retirement plan qualified under section
401(a) of the Internal Revenue Code maintained by the
Corporate Agent, subject to the following conditions:
(a) No payment will be made by the Company unless the
Company has received a written statement executed by
the Corporate Agent and the Subagent that such a
contribution has been paid or credited to such a
qualified plan.
(b) The maximum amount paid to the Corporate Agent in a
given year shall be the amount that would have been
contributed by the Company to its Pension Plan for
Agents for the previous calendar year (i) if the
Subagent had been or is, for variable life only,
under the Company's Special Agent's Career Agreement;
and (ii) if the commissions and fees paid to the
Corporate Agent in that previous year on account of
policies solicited by the Subagent had been or were
paid to the Subagent.
(c) No payment will be made by the Company for any period
after the Subagent's service period has terminated
according to the provisions of section 10.
16. Miscellaneous
The term Agreement as used herein, refers to this Corporate
Agent's Agreement, the applicable Supplement and commission
schedules.
17. Severability
If any of the Agreement is found to be illegal or otherwise
unenforceable, the remainder of this Agreement shall not be
affected and shall remain fully enforceable.
18. Acknowledgement
By executing this Agreement, the Corporate Agent acknowledges
that it has read this in its entirety and is in agreement with
the terms and conditions outlining the rights of the Company
and the Corporate Agent, under this Agreement.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY _______________________________
OF PHILADELPHIA CORPORATE AGENT
By______________________________________ By_________________________________
<PAGE> 8
-A-
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
SUPPLEMENT TO CORPORATE AGENT'S AGREEMENT
This Supplements attached and hereby incorporated into the Corporate
Agent's Agreement, hereinafter called the Agreement, and is subject to
all of the terms and conditions contained in the Agreement.
This Supplement may be unilaterally amended, modified or changed by the
Company at any time in the future pursuant to paragraph 12 of the
Agreement and will be reviewed annually; therefore, the current
Supplement must be consulted for accurate information.
1. Commissions on Individual Life and Health Insurance Policies
and Annuity Contracts
Subject to all of the Provisions of this Agreement, the
Company will pay to the Corporate Agent on premiums covering
individual life and health insurance policies and annuity
contracts solicited by the Subagent of the Corporate Agent and
issued during the continuance of the Agreement, when and as
said premiums become due and are actually paid in cash to the
Company, first year commissions and renewal commissions at the
rates set forth in the commission schedules but subject to the
following conditions:
(a) While the Agreement is in effect, commissions will be
paid only for policy years 1 to 10 inclusive.
(b) In the event the Agreement is terminated by reason of
the death of the Subagent of the Corporate Agent,
commissions will be paid only for policy years 1 to
10 inclusive.
(c) In the event the Agreement is terminated for any
reason other than the death of the Subagent of the
Corporate Agent, commissions will be paid according
to the number of completed years of service by the
Subagent in the Subagent's Service Period at the time
of such termination, determined as follows:
(i) Less than 5 years of Service Period -
commissions for the first policy year only.
(ii) 5 years but less than 10 years of Service
Period - commissions for the first policy
year and commissions for policy years 2 to 3
inclusive, at a rate which is 2 percent less
than the rate in the commission schedules.
(iii) 10 years but less than 15 years of Service
Period - commissions for the first policy
year and commissions for policy years 2 to 6
inclusive, at a rate which is 2 percent less
than the rate in the commission schedules.
(iv) 15 or more years of Service Period -
commissions for policy years 1 to 10
inclusive.
<PAGE> 9
-B-
2. Fees on Individual Life Insurance Policies
(a) Formula Fees Applicable to the Fourth Through Tenth Years.
Subject to all the provisions of the Agreement, the Company
will pay to the Corporate Agent during the Subagent's Service
Period formula fees at the rates and in the manner set forth
in this section 2(a).
Definitions -- for the purpose of computing and paying the
fees in this section 2(a), the following definitions will
apply.
"Policies" means all individual life insurance policies
(exclusive of all annuity contracts) solicited by the Subagent
of the Corporate Agent and issued while the Agreement is in
effect except single premium policies and policies in the
employee benefit series issued on a one-year term plan.
"Block of policies" means all "policies" with policy issue
dates which occur in the same calendar year.
"Formula fee rate" means the rate at which formula fees will
be computed on each "block of policies."
"Formula fee" means the amount to be paid on each "block of
policies" for the calendar quarter.
Computation of the Formula Fee Rate
The Company will compute a formula fee rate applicable to each
block of policies as follows:
(1) Determine on an annual premium basis the amount of
first year commissions applicable to all policies in
such block.
(2) Determine a 25 month persistency rate for all
policies in such block by dividing the amount of
first year commissions determined in accordance with
(1) above into that portion of such amount of first
year commissions that is represented by policies with
respect to which premiums have been paid for the full
first 25 policy months.
(3) From Table A below determine the Quantity Factor
applicable to the amount of first year commissions
determined in accordance with (1) above.
(4) From Table B below determine the Persistency Factor
applicable to the 25 month persistency rate
determined in accordance with (2) above.
(5) Multiply the Quantity Factor determined in accordance
with (3) above by the Persistency Factor determined
in accordance with (4) above and the product is the
formula fee rate for such block of policies.
<PAGE> 10
-C-
TABLE A
<TABLE>
<CAPTION>
First Year Commissions on Quantity Factor
an Annual Premium Basis (FYC)
<S> <C>
Less than $20,000 .................................... 0%
$20,000 to $39,000 ............... FYC minus $20,000 x 4%
(-----------------)
$20,000
$40,000 to $67,999 ........... 4% + FYC minus $40,000 x 6%
(------------------)
$28,000
S68,000 and over ..................................... 10%
</TABLE>
TABLE B
<TABLE>
<CAPTION>
25 Month Persistency Rate Persistency
Factor
<S> <C>
.92 and over ...................................... 100%
.89 but less than .92 ............................ 80%
.86 but less than .89 ............................ 60%
.82 but less than .86 ............................ 40%
.80 but less than .82 ............................ 10%
Below .80 ......................................... 0%
</TABLE>
The formula fee rate that is computed for each block of
policies will remain constant with respect to the computation
of the formula fees to be paid thereafter on such block of
policies.
Computation of Formula Fees
A formula fee will be computed for each block of policies with
respect to premiums due during the fourth through the tenth
policy years. Once each
<PAGE> 11
-D-
calendar quarter the Company will compute the formula fee for each block of
policies by multiplying the annual premium for all policies in such block in
force at the end of the preceding calendar quarter by the formula fee rate for
such block of policies. The total amount of formula fees to be paid for each
calendar a quarter will be one-fourth of the sum of the fees computed as
described herein for each block of policies for the preceding calendar quarter.
Payment of Formula Fees
The Company will pay quarterly formula fees as computed above to the
Corporate Agent during the Subagent's Service Period. Formula fee
payments shall cease with the last payment preceding the termination of
the soliciting Subagent's Service Period, except that:
(i) If the Subagent's Service Period is terminated by reason of
the death of the Subagent, formula fee payments will be
continued only if the Subagent has at least 20 years of
continuous service during the Subagents' Service Period, and
(ii) If the Subagent's Service Period is terminated for any reason
other than the death of the Subagent and if the Subagent has
attained age 55, has at least 10 years of continuous service
during the Subagents' Service Period and the sum of the
Subagent's attained age plus years of service during the
Service Period equals or exceeds 75, formula fee payments will
be continued to the Corporate Agent during the Subagent's
remaining lifetime as calculated in paragraph 2(a), such
payments ceasing with the last payment preceding the death of
the Subagent.
(b) Uniform Fees Applicable to the Eleventh and Subsequent Policy Years.
The uniform fees described in this section 2(b) are payable in addi-
tion to any formula fees that may be payable as provided in section
2(a). Once each calendar year the Company will determine the premiums
covering policy year 11 and all subsequent policy years expected to be
paid during the next calendar year on individual life insurance
policies (exclusive of all annuity contracts) solicited by the Subagent
on behalf of the Corporate Agent and issued during the Subagent's
Service Period. At quarterly intervals during the Subagent's Service
Period, the Company will pay the Corporate Agent a sum equal to 3/4 of
1% of the aggregate premiums so determined, such payments ceasing with
the last payment preceding the termination of the Subagent's Service
Period.
(c) General Provisions Applicable to the Formula Fees described in section
2(a) above and to the Uniform Fees described in section 2(b) above.
All computations, determinations, estimates and the bases thereof used
in computing the rates and amounts of all fees and the manner of all
payments and dates on which all payments shall be made, shall be
determined from time to time by the Company in its sole discretion,
which determination shall be final. No fees will be paid following the
termination of the Subagent's Service Period except as herein expressly
provided.
<PAGE> 12
-E-
3. Fees on Individual Health Insurance Policies
If the Subagent has attained age 55, has at least 10 years of
continuous service during the Subagent's Service Period and the sum of
the Subagent's attained age plus years of service during the Subagent's
Service Period equals or exceeds 75, the Company will pay to the
Corporate Agent during the Subagent's remaining lifetime on premiums on
individual health insurance policies solicited by the Subagent on
behalf of the Corporate Agent and issued during the period while this
Agreement is in effect and the Subagent is a Subagent of the Corporate
Agent, covering policy year 11 and all subsequent policy years, when
and as said paid premiums become due and are actually paid in cash to
the Company, a fee at the specified percentage rate of the premiums so
paid, a fee at the rate of 1% of the premiums so paid. Said fee
payments shall cease with the last payment preceding the death of the
Subagent.
4. Earnings Requirement
The Corporate Agent must receive in each full calendar year at least
$15,000 in supervisory compensation and/or first year cash commissions
solicited on its behalf by the Subagent on policies in the Company or
in any of its subsidiary companies as are specifically authorized by
the Company; provided, however, that this earnings requirement shall
not apply in any calendar year in which the Subagent has completed at
least 10 years of continuous service during the Service Period and the
sum of the Subagent's attained age plus years of service during the
Service Period equals or exceeds 75.
Effective Date:
---------------------------
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
By: /s/ Robert S. Johnson
----------------------------
Robert S. Johnson
Executive Vice President
Chief Marketing Officer
<PAGE> 1
Exhibit 1(A3)(ci)
PPGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE
FOR PERSONAL PRODUCING GENERAL AGENTS
OR PERSONAL PRODUCING GENERAL AGENTS - SPECIAL
1. OPTIONS (FORMS C111, C112, C116 AND STATE VARIATIONS)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid
when the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect
are considered Unscheduled Premium Payments.)
FIRST YEAR COMMISSIONS
<TABLE>
<CAPTION>
FIRST YEAR COMMISSIONS
-----------------------------------------------------------------------------
Age Nonsmoker Nonsmoker Smoker or Juvenile** Smoker or Juvenile** Expense
At Face Amount Face Amount Less Face Amount Face Amount Allowance
Issue* $100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000 Payments
- ----- --------------- ---------------- -------------------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
0-60 50% 45% 45% 40% 41%
65 45 40 40 35 36
70 40 35 35 30 36
75 30 25 25 20 26
80 20 15 15 10 21
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
** Juvenile ages are 0-21.
<TABLE>
<CAPTION>
RENEWAL
COMMISSIONS FEES
----------- --------------------------
POLICY YEARS
------------------------------------------
<S> <C> <C>
2 - 10 11 - 15 16 & LATER
9% 3% 2%
</TABLE>
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
COMMISSIONS
------------------------------------------------
POLICY YEARS
------------------
1 2 - 10
--- ------
<S> <C> <C>
PRIMARY PREMIUM - 9%
EXCESS PREMIUM 2% 2%
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a
Special Account for the policy an amount equal to the
scheduled annual premium for the policy including premiums for
supplemental benefits and substandard extras for which
commissions are normally paid.
1 of 5
<PAGE> 2
B. Upon receipt of any Unscheduled Premium, the Company will
determine the lesser of the Unscheduled Premium and the amount
of the Special Account. This is the Primary Premium. The
balance, if any, of the unscheduled Premium over the Primary
Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled
Premium Payment is made during a policy year.
D. At the end of each policy year that the Special Premium
Payment Provision is in effect, the Special Account will be
restated to the lesser of its current balance or one scheduled
annual premium. At the end of each policy year that the
Special Premium Payment Provision is not in effect, the
Special Account will be reduced to 0.
2. OPTIONSPLUS (FORMS C126, C127, C128 AND STATE VARIATIONS)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on the face amount increases will be calculated using
the renewal commission rates based on the number of twelve-month
periods (including the partial year) as measured from the date of such
increase. First year commissions will not be paid on increases in face
amount that result from changing from Death Benefit Option B to Option
A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
For policies which have had a face amount increase, premiums are
allocated in the following order: first, to the Commissionable Target
Premiums of the most recent increase; then to the next most recent
increases, successively; and finally to the initial face amount.
Premiums in excess of the total of all Commissionable Target Premiums
will be allocated to the initial face amount and to each increase in
proportion to the respective Commissionable Target Premiums.
<TABLE>
<CAPTION>
OptionsPlus
---------------------------------------------------------------------------
RENEWAL FEES
COMMISSIONS ------
-------------------- POLICY
POLICY YEARS YEARS FIRST YEAR
FIRST YEAR ------------- ----- ------ EXPENSE
COMMISSIONS 2-10 2-10 11+ ALLOWANCE
---------------------------------------------------------
AGE AT ISSUE PREMIUM
OR AT INCREASE BASED
TO FACE AMOUNT* TARGET EXCESS (% of Premium) ASSET BASED TARGET
--------------- ------ ------ -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
1-65 50% 2% 2% 0.25% 0.25% 31%
70 45 2 2 0.25 0.25 26
75 35 2 2 0.25 0.25 21
80 25 2 2 0.25 0.25 16
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
3. SURVIVOR OPTIONSPLUS (FORMS C130, C130A, AND STATE VARIATIONS)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year.
First year commissions will not be paid on increases in face amount
that result from changing from Death Benefit Option B to Option A under
the terms of the policy.
2 of 5
<PAGE> 3
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
Survivor OptionsPlus
<TABLE>
<CAPTION>
RENEWAL COMMISSIONS FEES
-----------------------------------
POLICY YEARS POLICY YEARS FIRST YEAR
FIRST YEAR ----------------------------------- EXPENSE
COMMISSIONS 2-10 2-10 11+ ALLOWANCE
------------------------------------------------------------------
PREMIUM
JOINT EQUAL BASED
AGE AT ISSUE TARGET EXCESS (% of Premium) ASSET BASED TARGET
- ------------ ------ ------ -------------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
25-80 45% 2% 2% 0.25% 0.25% 27%
</TABLE>
4. CONVERTIBLE TERM LIFE INSURANCE RIDER (FORM C308 AND STATE VARIATIONS)
First year commission rates will apply during the first year of the
rider. First year commissions will not be paid on increases in the
insurance amount.
First year commissions will be paid at the Target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is
attached up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide.
For policies which have had a rider added after policy issue, premiums
are allocated in the following order: first, to the Commissionable
Target Premium of the most recent rider; then to the next most recent
rider, and finally to the initial policy face amount. If two riders are
added on the same date, premiums will be allocated to each rider in
proportion to the respective Commissionable Target Premiums.
ASSET BASED RENEWAL COMMISSIONS FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
Asset Based Commissions will be calculated based on the Unloaned Policy Account
Value for each policy with an Unloaned Policy Account Value equal or exceeding
$1,000 as of the end of the Policy Year. The Unloaned Policy Account Value
equals the amount in the Separate Account and Guaranteed Account, excluding the
amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset Based Commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the tables above.
B. Policies issued before 1/1/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998 unless a policy has a face amount increase on or after
1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or
fee will be determined according to the Increase Ratio and the table
below. Subsequent face amount increases or decreases will cause the
asset rate to be recalculated.
3 of 5
<PAGE> 4
Face Amount of the Increase
Increase Ratio Equals ---------------------------------------
Total Policy Face Amount
<TABLE>
<CAPTION>
ASSET BASED
---------------------------------------
Increase Ratio Renewal Commissions Renewal Fees
------------------------- ------------------- ---------------
At Least But Less Than Policy Years 2-10 Policy Years 11+
-------- ------------- ------------------- ---------------
<S> <C> <C> <C> <C>
0% 10% 0.00% 0.00%
10% 20% 0.02% 0.02%
20% 30% 0.05% 0.05%
30% 40% 0.07% 0.07%
40% 50% 0.10% 0.10%
50% 60% 0.12% 0.12%
60% 70% 0.15% 0.15%
70% 80% 0.17% 0.17%
80% 90% 0.20% 0.20%
90% 100% 0.22% 0.22%
</TABLE>
CHARGEBACKS FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
In addition to the provisions in section 5(h) of the Personal Producing General
Agent's Agreement, if a policy produced by the General Agent lapses, is
surrendered or the face amount is reduced, any commissions and expense allowance
payments shall be refunded to the Company based on the formula listed below:
<TABLE>
<CAPTION>
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission/Expense Chargebacks
- ------------------------------- ------------------------------
<S> <C>
Issue date of policy or date of 100% of commissions and expense
increase in face amount to the allowances paid less 100% of the
end of the first 6 months policy Sales Surrender Charge
applicable to the Lapse, Surrender
or Reduction
Beginning of month 7 through 70% of commissions and expense
the end of 12 months after the allowances paid less 70% of the
issue date of policy or date of policy Sales Surrender Charge
increase in face amount applicable to the Lapse, Surrender
or Reduction
Beginning of month 13 through 50% of commissions and expense
the end of 24 months after the allowances paid less 50% of the
issue date of policy or date of policy Sales Surrender Charge
increase in face amount applicable to the Lapse, Surrender
or Reduction
</TABLE>
Any chargeback on a policy produced by a PGA or PPA under the General Agent's
Supervision will be at the percentage of commissions stated above and will not
be reduced by any percentage of the policy Sales Surrender Charge.
4 of 5
<PAGE> 5
4. ADDITIONAL FIRST YEAR COMMISSIONS
Additional commissions on Options Scheduled Premiums, OptionsPlus
Premiums, and Survivor OptionsPlus Premiums up to the amount of the
Commissionable Target Premium.
<TABLE>
<CAPTION>
RATIO OF GENERAL AGENT TO GENERAL ADDITIONAL
AGENT, PGA, AND PPA PRODUCTION COMMISSION
<S> <C>
Less than 50% 5%
50% but less than 60% 4%
60% but less than 70% 3%
70% but less than 80% 2%
80% but less than 90% 1%
90% and over 0%
</TABLE>
This Commission Schedule hereby amends and should be filed with your current
Agreement.
This Amendment is effective on or as of ______________________.
Provident Mutual Life insurance Company
/s/ Robert W. Kloss
PRESIDENT
5 of 5
<PAGE> 1
(Exhibit 1(A3)(cii)
PPA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE
FOR PERSONAL PRODUCING AGENTS
1 OPTIONS (Forms C111, C112, C116 and state variations)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid
when the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect
are considered Unscheduled Premium Payments.)
FIRST YEAR COMMISSIONS
<TABLE>
<CAPTION>
Age
At Non-Smoker Non-Smoker Smoker or Juvenile** Smoker or Juvenile**
Issue* Face Amount Face Amount Less Face Amount Face Amount
100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000
<S> <C> <C> <C> <C>
0-60 50% 45% 45% 40%
65 45 40 40 35
70 40 35 35 30
75 30 25 25 20
80 20 15 15 10
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
** Juvenile ages are 0-21.
<TABLE>
<CAPTION>
RENEWAL
COMMISSIONS FEES
POLICY YEARS
<S> <C> <C>
2-10 11-15 16 & LATER
7% 2.5% 1.5%
</TABLE>
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
COMMISSIONS
POLICY YEARS
1 2 - 10
<S> <C> <C>
PRIMARY PREMIUM - 7%
EXCESS PREMIUM 1.5% 1.5%
</TABLE>
1 of 3
<PAGE> 2
Notes for Options
For purposes of determining commission rates for Unscheduled Premium Payments,
Primary Premiums and Excess Premiums will be determined as follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a
Special Account for the policy an amount equal to the
scheduled annual premium for the policy including premiums for
supplemental benefits and substandard extras for which
commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will
determine the lesser of the Unscheduled Premium and the amount
of the Special Account. This is the Primary Premium. The
balance, if any, of the unscheduled Premium over the Primary
Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled
Premium Payment is made during a policy year.
D. At the end of each policy year that the Special Premium
Payment Provision is in effect, the Special Account will be
restated to the lesser of its current balance or one scheduled
annual premium. At the end of each policy year that the
Special Premium Payment Provision is not in effect, the
Special Account will be reduced to 0.
2. OptionsPlus (Forms C126, C127, C128 and state variations)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on face amount increases will be calculated using the
renewal commission rates based on the number of twelve-month periods
(including the partial year) as measured from the date of such
increase. First year commissions will not be paid on increases in face
amount that result from changing from Death Benefit Option B to Option
A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
For policies which have had a face amount increase, premiums are
allocated in the following order: first, to the Commissionable Target
Premiums of the most recent increase; then to the next most recent
increases, successively; and finally to the initial face amount.
Premiums in excess of the total of all Commissionable Target Premiums
will be allocated to the initial face amount and to each increase in
proportion to the respective Commissionable Target Premiums.
<TABLE>
<CAPTION>
OptionsPlus
RENEWAL
AGE AT ISSUE FIRST YEAR COMMISSIONS COMMISSIONS FEES
OR AT INCREASE
TO FACE AMOUNT* TARGET EXCESS POLICY YEARS
2-3 4-10 11+
<S> <C> <C> <C> <C> <C>
1-65 50% 2% 4% 3% 2%
70 45% 2% 4% 3% 2%
75 35% 2% 4% 3% 2%
80 25% 2% 4% 3% 2%
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
2 of 3
<PAGE> 3
3. Survivor OptionsPlus (Forms C130, C130A, and state variations)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year.
First year commissions will not be paid on increases in face amount
that result from changing from Death Benefit Option B to Option A under
the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
Survivor OptionsPlus
- -----------------------------------------------------------------------------
RENEWAL
FIRST YEAR COMMISSIONS COMMISSIONS FEES
JOINT EQUAL -----------------------------------------------------
AGE AT ISSUE POLICY YEARS
TARGET EXCESS --------------------------
2-3 4-10 11+
- -----------------------------------------------------------------------------
25-80 45% 2% 3% 2.5% 2%
- -----------------------------------------------------------------------------
Chargebacks for OptionsPlus and Survivor OptionsPlus
In addition to the provisions in section 5 (h) of the Personal Producing Agent's
Agreement, if a policy solicited by the Personal Producing Agent lapses, is
surrendered or the face amount is reduced, any commissions shall be refunded to
the Company based on the formula listed below:
Date of Policy Laps, Surrender
or Face Amount Reduction Commission Chargeback
- ------------------------------ ---------------------
Issue date of policy or date of 100% of commissions paid less
increase in face amount to the 100% of the policy Sales Surrender
end of the first 6 months Charge applicable to the Lapse,
Surrender or Reduction
Beginning of month 7 through the 70% of commissions paid less
end of 12 months after the issue 70% of the policy Sales Surrender
date of policy or date of increase Charge applicable to the Lapse,
in the face amount Surrender or Reduction
Beginning of month 13 through the 50% of commissions paid less
end of 24 months after the issue 50% of the policy Sales Surrender
date of policy or date of increase Charge applicable to the Lapse,
in face amount Surrender or Reduction
This Commission Schedule hereby amends and should be filed with your current
Agreement.
Effective January 1, 1997
Provident Mutual Life Insurance Company
3 of 3
<PAGE> 1
Exhibit 1(A3)(ciii)
PGA
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE
FOR PRODUCING GENERAL AGENTS
1. OPTIONS (Forms C111, C112, C116 and state variations)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid
when the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect
are considered Unscheduled Premium Payments.)
FIRST YEAR COMMISSIONS
<TABLE>
<CAPTION>
Age Nonsmoker Nonsmoker Smoker or Juvenile** Smoker or Juvenile**
at Face Amount Face Amount Less Face Amount Face Amount
Issue $100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000
- ----- --------------- ---------------- -------------------- --------------------
<S> <C> <C> <C> <C>
0-60 50% 45% 45% 40%
65 45 40 40 35
70 40 35 35 30
75 30 25 25 20
80 20 15 15 10
</TABLE>
* To obtain commission rates for intermediate issue ages, use
straight line interpolation.
* Juvenile ages are 0-21.
<TABLE>
<CAPTION>
RENEWAL
COMMISSIONS FEES
----------- ------------------------
POLICY YEARS
---------------------------------------
<S> <C> <C> <C>
2 - 10 11 - 15 16 & LATER
8% 2.5% 2%
</TABLE>
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
COMMISSIONS
----------------------------------------------
POLICY YEARS
-----------------
1 2-10
<S> <C> <C>
PRIMARY PREMIUM - 8%
EXCESS PREMIUM 2% 2%
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a
Special Account for the policy an amount equal to the
scheduled annual premium for the policy including premiums for
supplemental benefits and substandard extras for which
commissions are normally paid.
1 of 4
<PAGE> 2
B. Upon receipt of any Unscheduled Premium, the Company will
determine the lesser of the Unscheduled Premium and the amount
of the Special Account. This is the Primary Premium. The
balance, if any, of the Unscheduled Premium over the Primary
Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled
Premium Payment is made during a policy year.
D. At the end of each policy year that the Special Premium
Payment Provision is in effect, the Special Account will be
restated to the lesser of its current balance or one scheduled
annual premium. At the end of each policy year that the
Special Premium Payment Provision is not in effect, the
Special Account will be reduced to 0.
2. OptionsPlus (Forms C126, C127, C128 and state variations)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on the face amount increases will be calculated using
the renewal commission rates based on the number of twelve-month
periods (including the partial year) as measured from the date of such
increase. First year commissions will not be paid on increases in face
amount that result from changing from Death Benefit Option B to Option
A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
For policies which have had a face amount increase, premiums are
allocated in the following order: first, to the Commissionable Target
Premiums of the most recent increase; then to the next most recent
increases, successively; and finally to the initial face amount.
Premiums in excess of the total of all Commissionable Target Premiums
will be allocated to the initial face amount and to each increase in
proportion to the respective Commissionable Target Premiums.
OptionsPlus
<TABLE>
<CAPTION>
RENEWAL COMMISSIONS FEES
------------------- ----
POLICY YEARS
------------------------------
2-10 2-10 11+
AGE AT ISSUE OR FIRST YEAR COMMISSIONS ---- ---- ---
AT INCREASE TO ---------------------- PREMIUM BASED
FACE AMOUNT* TARGET EXCESS (% of Premium) ASSET BASED
--------------- ------ ------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1-65 50% 1.75% 1.75% 0.20% 0.20%
70 45 1.75 1.75 0.20 0.20
75 35 1.75 1.75 0.20 0.20
80 25 1.75 1.75 0.20 0.20
</TABLE>
* To obtain commission rates for intermediate issue ages, use
straight line interpolation.
3. Survivor OptionsPlus (Forms C130, C130A, and state variations)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year.
First year commissions will not be paid on increases in face amount
that result from changing from Death Benefit Option B to Option A under
the terms of the policy.
2 of 4
<PAGE> 3
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Sales Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
Survivor OptionsPlus
<TABLE>
<CAPTION>
RENEWAL COMMISSIONS FEES
---------------------- ----
POLICY YEARS
--------------------------------
2-10 2-10 11+
FIRST YEAR COMMISSIONS ---- ---- ---
JOINT EQUAL ---------------------- PREMIUM BASED
AGE AT ISSUE TARGET EXCESS (% of Premium) ASSET BASED
------------ ------ ------ -------------- -----------
<S> <C> <C> <C> <C> <C>
25-80 45% 1.75% 1.75% 0.20% 0.20%
</TABLE>
4. Convertible Term Life Insurance Rider (Form C308 and state variations)
First year commission rates will apply during the first year of the
rider. First year commissions will not be paid on increases in the
insurance amount.
First year commissions will be paid at the Target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is
attached up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide.
For policies which have had a rider added after policy issue, premiums
are allocated in the following order: first, to the Commissionable
Target Premium of the most recent rider; then to the next most recent
rider, and finally to the initial policy face amount. If two riders are
added on the same date, premiums will be allocated to each rider in
proportion to the respective Commissionable Target Premiums.
Asset Based Renewal Commissions for OptionsPlus and Survivor
Optionsplus
Asset Based Commissions will be calculated based on the Unloaned Policy
Account Value for each policy with an Unloaned Policy Account Value
equal or exceeding $1,000 as of the end of the Policy Year. The
Unloaned Policy Account Value equals the amount in the Separate Account
and Guaranteed Account, excluding the amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset Based Commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the tables above.
B. Policies issued before 1/11/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998 unless a policy has a face amount increase on or after
1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or
fee will be determined according to the Increase Ratio and the table
below. Subsequent face amount increases or decreases will cause the
asset rate to be recalculated.
3 of 4
<PAGE> 4
Face Amount of the Increase
Increase Ratio Equals ---------------------------------------
Total Policy Face Amount
<TABLE>
<CAPTION>
ASSET BASED
--------------------------------------
Increase Ratio Renewal Commissions Renewal Fees
------------------------ ------------------- ---------------
At Least But Less Than Policy Years 2-10 Policy Years 11+
<S> <C> <C> <C>
0% 10% 0.00% 0.00%
10% 20% 0.02% 0.02%
20% 30% 0.04% 0.04%
30% 40% 0.06% 0.06%
40% 50% 0.08% 0.08%
50% 60% 0.10% 0.10%
60% 70% 0.12% 0.12%
70% 80% 0.14% 0.14%
80% 90% 0.16% 0.16%
90% 100% 0.18% 0.18%
</TABLE>
Chargebacks for OptionsPlus and Survivor OptionsPlus
In addition to the provisions in section 5 (h) of the Producing Agent's
Agreement, if a policy produced by the PGA lapses, is surrendered or the face
amount is reduced, any commissions shall be refunded to the Company based on the
formula listed below:
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission/Expense Chargeback
- ------------------------------- ---------------------------------------
Issue date of policy or date of 100% of commissions paid less
increase in face amount to the 100% of the policy Sales Surrender
end of the first 6 months Charge applicable to the Lapse,
Surrender or Reduction
Beginning of month 7 through 70% of commissions paid less
the end of 12 months after the 70% of the policy Sales Surrender
issue date of policy or date of Charge applicable to the Lapse,
increase in face amount Surrender or Reduction
Beginning of month 13 through 50% of commissions paid less
the end of 24 months after the 50% of the policy Sales Surrender
issue date of policy or date of Charge applicable to the Lapse,
increase in face amount Surrender or Reduction
Any chargeback on a policy produced by a PPA under the PGA's supervision will be
at the percentage of commissions stated above and will not be reduced by any
percentage of the policy Sales Surrender Charge.
This Commission Schedule hereby amends and should be filed with your current
Agreement.
This Amendment is effective on or as of __________________.
Provident Mutual Life Insurance Company
/s/ Robert W. Kloss
PRESIDENT
4 of 4
<PAGE> 1
EXHIBIT 1(A3)(civ)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE FOR VARIABLE LIFE INSURANCE PRODUCTS
FOR AGENTS UNDER SPECIAL AGENT'S CAREER AGREEMENT
Provident Mutual Life Insurance Company, hereinafter called "Company", hereby
authorizes Career Agent and his/her Special Agent's Career Agreement is hereby
amended as set forth herein to permit him/her to solicit applications for
variable life insurance policies. Such solicitations shall be made only within
the territory in which such policies are approved for sale and in which the
Company and the Career Agent are authorized to do business in accordance with
licensing requirements and other applicable laws and regulations. Applications
shall be accepted only by the Company at its Service Center in Newark, Delaware.
TERMINATION
This Amendment terminates all previous or existing Commission Schedules for
Options, OptionsPlus or Survivor OptionsPlus policies. This Amendment may be
terminated at any time, with or without cause, by either party providing written
notice to the other party delivered in person or sent by ordinary mail to the
party's last known address. Termination of the Special Agent's Career Agreement
automatically terminates this Amendment.
COMMISSIONS AND FEES
Commissions or fees on variable life insurance business can only be paid or
credited to a Career Agent who is a registered representative of a broker-dealer
which is an affiliate of the Company or a registered representative of a
broker-dealer who has a sales agreement with such an affiliate of the Company
and holds any required state licenses when a variable life insurance sale is
made and when each premium is paid and when each commission or fee is paid,
except with the prior written consent of the Company. In no event will the prior
written consent of the Company be given unless the Career Agent certifies to the
Company that he or she is no longer a registered representative of any broker
dealer and authorizes the Company's broker dealer affiliate to confirm this
status periodically through the CRD system.
The first year, renewal commission and renewal fee rates applicable to variable
life insurance policies will be those listed in the tables below.
1. OPTIONS (FORMS C111, C112, C116 AND STATE VARIATIONS)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid
when the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect
are considered Unscheduled Premium Payments.)
<TABLE>
<CAPTION>
FIRST YEAR COMMISSIONS
-------------------------------------------------------------------------------------------
Age Nonsmoker Nonsmoker Smoker or Juvenile** Smoker or Juvenile**
At Face Amount Face Amount Less Face Amount Face Amount
Issue* $100,000 & Than $100,000 $100,000 & Over Less Than $100,000
Over
<S> <C> <C> <C> <C>
0-60 50% 45% 45% 40%
65 45 40 40 35
70 40 35 35 30
75 30 25 25 20
80 20 15 15 10
</TABLE>
* To obtain commission rates for intermediate issue ages, use
straight line interpolation.
** Juvenile ages are 0-21, 0-20 in Texas.
RENEWAL COMMISSIONS
POLICY YEARS
- ----------------------
2 3-10
- --- ----
7% 5%
1 of 6
<PAGE> 2
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
COMMISSIONS
POLICY YEARS
---------------------------
1 2 3-10
--- --- ----
<S> <C> <C> <C>
PRIMARY PREMIUM 0% 7% 5%
EXCESS PREMIUM 2% 2% 2%
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a
Special Account for the policy an amount equal to the
scheduled annual premium for the policy including premiums for
supplemental benefits and substandard extras for which
commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will
determine the lesser of the Unscheduled Premium and the amount
of the Special Account. This is the Primary Premium. The
balance, if any, of the Unscheduled Premium over the Primary
Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled
Premium Payment is made during a policy year.
D. At the end of each policy year that the Special Premium
Payment Provision is in effect, the Special Account will be
restated to the lesser of its current balance or one scheduled
annual premium. At the end of each policy year that the
Special Premium Payment Provision is not in effect, the
Special Account will be reduced to 0.
Fees for Options
The computation of formula and uniform fees under the Supplement to the
Special Agent's Career Agreement will not include the Excess Premium
part of this policy's Unscheduled Premiums.
2. OPTIONSPLUS (FORMS C126, C127, C128 AND STATE VARIATIONS)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on face amount increases will be calculated using the
renewal commission rates based on the number of twelve-month periods
(including the partial year) as measured from the date of such
increase. First year commissions will not be paid on increases in face
amount that result from changing from Death Benefit Option B to Option
A under the terms of the policy.
Commissions for soliciting an application for a face amount increase
where another agent solicited an approved application for the same
policy will be determined by Company rules.
First year commissions will be paid at the Target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first
year premiums greater than the Commissionable Target Premium will be
paid at the Excess rate listed in the table below. The Commissionable
Target Premium may be changed from time to time by the Company.
2 of 6
<PAGE> 3
For policies which have had a face amount increase, premiums are
allocated in the following order: first, to the Commissionable Target
Premiums of the most recent increase; then to the next most recent
increases, successively; and finally to the initial policy face amount.
Premiums in excess of the total of all Commissionable Target Premiums
will be allocated to the initial face amount and to each increase in
proportion to the respective Commissionable Target Premiums.
OptionsPlus
AGE AT ISSUE FIRST YEAR COMMISSIONS
OR AT INCREASE
TO FACE AMOUNT* --------------------------
TARGET EXCESS
1-65 50% 2%
70 45% 2%
75 35% 2%
80 25% 2%
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
3. SURVIVOR OPTIONSPLUS (FORMS C130, C130A AND STATE VARIATIONS)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year.
First year commissions will not be paid on increases in face amount
that result from changing from Death Benefit Option B to Option A under
the terms of the policy.
First year commissions will be paid at the Target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first
year premiums greater than the Commissionable Target Premium will be
paid at the Excess rate listed in the table below. The Commissionable
Target Premium may be changed from time to time by the Company.
Survivor OptionsPlus
FIRST YEAR COMMISSIONS
JOINT EQUAL ----------------------
AGE AT ISSUE TARGET EXCESS
25-80 45% 2%
4. CONVERTIBLE TERM LIFE INSURANCE RIDER (FORM C308 AND STATE VARIATIONS)
First year commission rates will apply during the first year of the
rider. First year commissions will not be paid on increases in the
insurance amount.
First year commissions will be paid at the Target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is
attached up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide.
For policies which have had a rider added after policy issue, premiums
are allocated in the following order: first, to the Commissionable
Target Premium of the most recent rider; then to the next most recent
rider, and finally to the initial policy face amount. If two riders are
added on the same date, premiums will be allocated to each rider in
proportion to the respective Commissionable Target Premiums.
For the balance of this Agreement, any reference to OptionsPlus or
Survivor OptionsPlus includes any Convertible Term Life Insurance Rider
that is attached to an OptionsPlus or Survivor OptionsPlus policy.
3 of 6
<PAGE> 4
RENEWAL COMMISSIONS AND FEES FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
Renewal commissions will be paid on premiums after the first Policy Year up to
the Commissionable Target Premium. Renewal commissions on premiums greater than
the Commissionable Target Premium will be paid at the Excess rate listed in the
table below. Renewal commissions will be paid at the Level A Target or Level B
Target rates as listed below. The level will be based on the total First Year
Commissions for life insurance products, excluding subsidiaries, produced by the
Career Agent in the calendar year during which the policy was issued.
Renewal commissions rates on face amount increases for OptionsPlus policies and
on Convertible Term Life Insurance riders added after the policy issue date will
be calculated using the renewal commission rates based on the number of
twelve-month periods (including the partial year) as measured from the date of
such increase or added rider. For policies which have had a face amount increase
or added rider, premiums are allocated in the following order: first, to the
Commissionable Target Premium of the most recent increase or added rider; then
to the next most recent increases or added rider, successively; and finally to
the initial policy face amount. Premiums in excess of the total of all
Commissionable Target Premium will be allocated to the initial face amount and
to each increase or added rider in proportion to the respective Commissionable
Target Premium.
Level A Target rates for renewal commissions will be applied to all policies
issued during the 1994 calendar year if the Career Agent received $45,000 or
more of First Year Commissions in 1994. If First Year Commissions for 1994 are
less than $45,000, then Level B Target rates will be applied for renewal
commissions on all policies issued in 1994. Level B Target rates will apply for
renewal commissions on face amount increases and for Convertible Term Life
Insurance riders added after the policy issue date. The First Year Commission
amount for Level A Target rates will be determined and announced by the Company
each year.
OptionsPlus and Survivor OptionsPlus Renewals
<TABLE>
<CAPTION>
Renewal Renewal Renewal Renewal
Commissions Fees Commissions Fees
------------- ------- ----------- -------
Policy Years Policy Years
Premium Based -------------------------- ------------------ Asset
(% of Premium) 2 3-10 11 + 2-10 11 + Based
- -------------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Level A Target 4.00% 5.00% 0% 0.25% 0.25% Level A
Level B Target 4.00% 2.26% 0% 0.15% 0.15% Level B
Excess 2.00% 2.00% 0%
</TABLE>
ASSET BASED RENEWAL COMMISSIONS
Asset Based Commissions will be calculated based on the Unloaned Policy Account
Value for each policy with an Unloaned Policy Account Value equaling or
exceeding $1,000 as of the end of the Policy Year. The Unloaned Policy Account
Value equals the amount in the Separate Account and Guaranteed Account,
excluding the amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset Based Commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the table above.
4 of 6
<PAGE> 5
B. Policies issued before 1/1/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998, unless a policy has a face amount increase on or after
1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or
fee will be determined according to the Increase Ratio and the table
below. The Level A or Level B rate will be based on which level the
agent qualified for in the year of the policy issue date. Subsequent
face amount increases or decreases will cause the asset rate to be
recalculated.
Face Amount of the Increase
Increase Ratio Equals ---------------------------
Total Policy Face Amount
<TABLE>
<CAPTION>
Asset Based Renewal Commissions Renewal Fees
Increase Ratio Policy Years 2-10 Policy Years 11+
At Least But Less Than Level A Level B Level A Level B
<S> <C> <C> <C> <C> <C>
0% 10% 0.00% 0.00% 0.00% 0.00%
10% 20% 0.02% 0.01% 0.02% 0.01%
20% 30% 0.05% 0.03% 0.05% 0.03%
30% 40% 0.07% 0.04% 0.07% 0.04%
40% 50% 0.10% 0.06% 0.10% 0.06%
50% 60% 0.12% 0.07% 0.12% 0.07%
60% 70% 0.15% 0.09% 0.15% 0.09%
70% 80% 0.17% 0.10% 0.17% 0.10%
80% 90% 0.20% 0.11% 0.20% 0.11%
90% 100% 0.22% 0.13% 0.22% 0.13%
</TABLE>
Chargebacks for OptionsPlus and Survivor OptionsPlus
In addition to the provisions in section 5 (h) of the Special Agent's Career
Agreement, if a policy solicited by the Career Agent lapses, is surrendered, or
is otherwise canceled, or the face amount is reduced, any commissions shall be
refunded to the Company based on the formula listed below:
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission Chargeback
Issue date of policy or date of 100% of commissions paid less
increase in face amount to the end 100% of the policy Sales Surrender
of the first 6 months Charge applicable to the Lapse,
Surrender or Reduction
Beginning of month 7 through the 70% of commissions paid less 70%
end of 12 months after the issue of the policy Sales Surrender Charge
date of policy or date of increase in applicable to the Lapse, Surrender or
face amount Reduction
Beginning of month 13 through the 50% of commissions paid less 50%
end of 24 months after the issue of the policy Sales Surrender Charge
date of policy or date of increase in applicable to the Lapse, Surrender or
face amount Reduction
5 of 6
<PAGE> 6
Fees for OptionsPlus and Survivor OptionsPlus
A. Formula Fees
The computation of the Quantity Factor in the formula fee rate under
the Supplement to the Agreement will include commissions on the
OptionsPlus and Survivor OptionsPlus policy. No formula fees will be
paid based on premiums on OptionsPlus or Survivor OptionsPlus policies.
B. Uniform Fees
The computation of uniform fees under the Supplement to the Agreement
will not include the premiums on the OptionsPlus or Survivor
OptionsPlus policy.
C. Renewal Fees
Renewal fees for OptionsPlus and Survivor OptionsPlus will be
calculated based on the rates as set forth above and based on premiums
and unloaned Policy Account Values covering policy year 11 and all
subsequent policy years when and as said premiums are actually paid in
cash to the Company. Renewal fees will cease with the termination of
the Agreement.
This Amendment is effective on or as of January 1, 1998.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
/s/ Robert W. Kloss
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE> 1
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
COMMISSIONS
POLICY YEARS
1 2-10
PRIMARY PREMIUM - 5%
EXCESS PREMIUM 2% 2%
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a
Special Account for the policy an amount equal to the
scheduled annual premium for the policy including premiums for
supplemental benefits and substandard extras for which
commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will
determine the lesser of the Unscheduled Premium and the amount
of the Special Account. This is the Primary Premium. The
balance, if any, of the Unscheduled Premium over the Primary
Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled
Premium Payment is made during a policy year.
D. At the end of each policy year that the Special Premium
Payment Provision is in effect, the Special Account will be
restated to the lesser of its current balance or one scheduled
annual premium. At the end of each policy year that the
Special Premium Payment Provision is not in effect, the
Special Account will be reduced to 0.
2. OptionsPlus (Forms C126, C127, C128 and state variations)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on face amount increases will be calculated using the
renewal commission rates based on the number of twelve-month periods
(including the partial year) as measured from the date of such
increase. First year commissions will not be paid on increases in face
amount that result from changing from Death Benefit Option B to Option
A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first
year premiums greater than the Commissionable Target Premium will be
paid at the Excess rate listed in the table below. The Commissionable
Target Premium may be changed from time to time by the Company.
For policies which have had a face amount increase, premiums are
allocated in the following order: first, to the Commissionable Target
Premiums of the most recent increase; then to the next most recent
increases, successively; and finally to the initial face amount.
Premiums in excess of the total of all Commissionable Target Premiums
will be allocated to the initial face amount and to each increase in
proportion to the respective Commissionable Target Premiums.
Commissions for soliciting an application for a face amount increase
where another agent solicited an approved application for the same
policy will be determined by Company rules.
2 of 5
<PAGE> 2
OptionsPlus
AGE AT ISSUE FIRST YEAR COMMISSIONS
OR AT INCREASE
TO FACE AMOUNT* TARGET EXCESS
1-65 50% 2%
70 45 2
75 35 2
80 25 2
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
3. SURVIVOR OPTIONSPLUS (FORMS C130, C130A AND STATE VARIATIONS)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year.
First year commissions will not be paid on increases in face amount
that result from changing from Death Benefit Option B to Option A under
the terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first
year premiums greater than the Commissionable Target Premium will be
paid at the excess rate listed in the table below. The Commissionable
Target Premium may be changed from time to time by the Company.
Survivor OptionsPlus
JOINT EQUAL FIRST YEAR COMMISSIONS
AGE AT ISSUE TARGET EXCESS
25-80 45% 2%
4. CONVERTIBLE TERM LIFE INSURANCE RIDER (FORM C308 AND STATE VARIATIONS)
First year commission rates will apply during the first year of the
rider. First year commissions will not be paid on increases in the
insurance amount.
First year commissions will be paid at the target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is
attached up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide.
For policies which have had a rider added after policy issue, premiums
are allocated in the following order: first, to the Commissionable
Target Premium of the most recent rider; then to the next most recent
rider, and finally to the initial policy face amount. If two riders are
added on the same date, premiums will be allocated to each rider in
proportion to the respective Commissionable Target Premiums.
For the balance of this Agreement, any reference to OptionsPlus or
Survivor OptionsPlus includes any Convertible Term Life Insurance Rider
that is attached to an OptionsPlus or Survivor OptionsPlus policy.
RENEWAL COMMISSIONS AND FEES FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
Renewal commissions will be paid on premiums after the first Policy Year up to
the Commissionable Target Premium at the Target rate listed in the table below.
Renewal commissions on premiums greater than the Commissionable Target Premium
will be paid at the Excess rate listed in the table below.
3 of 5
<PAGE> 3
Renewal commissions rates on face amount increases for OptionsPlus policies and
on Convertible Term Life Insurance riders added after the policy issue date will
be calculated using the renewal commission rates based on the number of
twelve-month periods (including the partial year) as measured from the date of
such increase or added rider. For policies which have had a face amount increase
or added rider, premiums are allocated in the following order: first, to the
Commissionable Target Premium of the most recent increase or added rider; then
to the next most recent increases or added rider, successively; and finally to
the initial policy face amount. Premiums in excess of the total of all
Commissionable Target Premium will be allocated to the initial face amount and
to each increase or added rider in proportion to the respective Commissionable
Target Premium.
OptionsPlus and Survivor OptionsPlus Renewals
Renewal Renewal Renewal Renewal
Commissions Fees Commissions Fees
Policy Years
--------------------------------------------------
2-3 4-10 11+ 2-10 11+
Target 3% 2% 0% NA NA
Excess 2% 2% 0% NA NA
Asset Based NA NA NA 0.15% 0.15%
ASSET BASED RENEWAL COMMISSIONS
Asset Based Commissions will be calculated based on the Unloaned Policy Account
Value for each policy with an Unloaned Policy Account Value equal or exceeding
$1,000 as of the end of the Policy Year. The Unloaned Policy Account Value
equals the amount in the Separate Account and Guaranteed Account, excluding the
amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset based commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the table above.
B. Policies issued before 1/1/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998, unless a policy has a face amount increase on or after
1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or
fee will be determined according to the Increase Ratio and the table
below. Subsequent face amount increases or decreases will cause the
asset rate to be recalculated.
Face Amount of the Increase
Increase Ratio Equals ---------------------------------------
Total Policy Face Amount
4 of 5
<PAGE> 4
<TABLE>
<CAPTION>
ASSET BASED
Increase Ratio Renewal Commissions Renewal Fees
At Least But Less Than Policy Years 2-10 Policy Years 11+
<S> <C> <C> <C>
0% 10% 0.00% 0.00%
10% 20% 0.01% 0.01%
20% 30% 0.03% 0.03%
30% 40% 0.04% 0.04%
40% 50% 0.06% 0.05%
50% 60% 0.07% 0.07%
60% 70% 0.09% 0.09%
70% 80% 0.10% 0.10%
80% 90% 0.11% 0.11%
90% 100% 0.13% 0.13%
</TABLE>
CHARGEBACKS FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
In addition to the provisions in section 5 (h) of the Special Agent's Agreement,
if a policy solicited by the Special Agent lapses, is surrendered or the face
amount is reduced, any commissions shall be refunded to the Company based on the
formula listed below:
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission Chargeback
Issue date of policy or date of 100% of commissions paid less
increase in face amount to the end 100% of the policy Sales
of the first 6 months Surrender Charge applicable to the
Lapse, Surrender or Reduction
Beginning of month 7 through the 70% of commissions paid less
end of 12 months after the issue 70% of the policy Sales Surrender
date of policy or date of increase in Charge applicable to the Lapse,
face amount Surrender or Reduction
Beginning of month 13 through the 50% of commissions paid less
end of 24 months after the issue 50% of the policy Sales Surrender
date of policy or date of increase in Charge applicable to the Lapse,
face amount Surrender or Reduction
This Amendment is effective on or as of January 1, 1998.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
/s/ Robert W. Kloss
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5 of 5
<PAGE> 1
EXHIBIT 1(A3)(cvi)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
COMMISSION SCHEDULE FOR VARIABLE LIFE INSURANCE PRODUCTS
FOR CORPORATE AGENTS WITH SPECIAL AGENT'S CAREER AGREEMENT
Provident Mutual Life Insurance Company of Philadelphia, hereinafter called
"Company," authorizes Career Agent and his/her Special Agent's Career Agreement
is hereby amended as set forth herein to permit him/her to solicit only
applications for variable life insurance policies. Such solicitations shall be
made only within the territory in which such policies are approved for sale and
in which the Company, and the Career Agent are authorized to do business in
accordance with licensing requirements and other applicable laws and
regulations. Applications shall be accepted only by the Company at its Home
Office in Philadelphia, Pennsylvania.
Termination
This Amendment may be terminated at any time, with or without cause, by either
party giving to the other party written notice delivered in person or sent by
ordinary mail to the party's last known address. Termination of the Special
Agent's Career Agreement automatically terminates this Amendment.
Commissions and Fees
Commissions or fees on variable life insurance business can only be paid or
credited to a Career Agent who is a registered representative of a broker-dealer
which is an affiliate of the Company or a registered representative of a
broker-dealer who has a sales agreement with such an affiliate of the Company
and holds any required state licenses when a variable life insurance sale is
made and when each premium is paid, except with the prior written consent of the
Company.
For purposes of computing the formula fees and the career agent earnings
requirement under the Agreement, the first year commissions under the Special
Agent's Career Agreement and the Corporate Agent's Agreement, if any, will be
combined. Any fees payable based on variable life policies will be paid under
the Special Agent's Career Agreement
The first year and renewal commission rates applicable to variable life
insurance policies will be those listed in the tables below:
1. OPTIONS (Forms C111, C112, C116 and state variations)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid when the
Special Premium Payment Provision is not in effect. (Scheduled Premiums paid
when the Special Premium Payment Provision is in effect are considered
Unscheduled Premium Payments.)
<TABLE>
<CAPTION>
FIRST YEAR COMMISSIONS
----------------------------------------------------------------------------------
Age Non-Smoker Non-Smoker Smoker or Juvenile** Smoker or Juvenile**
At Face Amount Face Amount Less Face Amount Face Amount
Issue* $100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000
------ --------------- ---------------- -------------------- --------------------
<S> <C> <C> <C> <C>
0-60 50% 45% 45% 40%
65 45 40 40 35
70 40 35 35 30
75 30 25 25 20
80 20 15 15 10
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
** Juvenile ages are 0-21, 0-20 in Texas.
<TABLE>
<CAPTION>
RENEWAL COMMISSIONS
-------------------
POLICY YEARS
-------------------
<S> <C>
2 3-10
7% 5%
</TABLE>
1 of 4
<PAGE> 2
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
COMMISSIONS
--------------------------------------
POLICY YEARS
-------------------
1 2 3-10
<S> <C> <C> <C>
PRIMARY PREMIUM - 7% 5%
EXCESS PREMIUM 2% 2% 2%
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium Payment
Provision is in effect, the Company will add to a Special Account for
the policy an amount equal to the scheduled annual premium for the
policy including premiums for supplemental benefits and substandard
extras for which commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will determine the
lesser of the Unscheduled Premium and the amount of the Special Account.
This is the Primary Premium. The balance, if any, of the Unscheduled
Premium over the Primary Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the balance in
the Special Account each time an Unscheduled Premium Payment is made
during a policy year.
D. At the end of each policy year that the Special Premium Payment
Provision is in effect, the Special Account will be restated to the
lesser of its current balance or one scheduled annual premium. At the
end of each policy year that the Special Premium Payment Provision is
not in effect, the Special Account will be reduced to 0.
Fees
The computation of formula and uniform fees under the then current
Supplement to the Special Agent's Career Agreement will not include the
Excess Premium part of this policy's Unscheduled Premiums.
2. OptionsPlus (Forms C126, C127, C128 and state variations)
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on face amount increases will be calculated using the
renewal commission rates based on the number of twelve-month periods
(including the partial year) as measured from the date of such increase.
First year commissions will not be paid on increases in face amount that
result from changing from Death Benefit Option B to Option A under the terms
of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium published
by the Company in the Sales Guide. Commissions on first year premiums
greater than the Commissionable Target Premium will be paid at the excess
rate listed in the table below. The Commissionable Target Premium may be
changed from time to time by the Company.
2 of 4
<PAGE> 3
For policies which have had a face amount increase, premiums are allocated in
the following order: first, to the Commissionable Target Premiums of the most
recent increase; then to the next most recent increases, successively; and
finally to the initial face amount. Premiums in excess of the total of all
Commissionable Target Premiums will be allocated to the initial face amount and
to each increase in proportion to the respective Commissionable Target Premiums.
<TABLE>
<CAPTION>
RENEWAL COMMISSIONS FEES
------------------- ----
Age at Issue FIRST YEAR COMMISSIONS Policy Years
or at Increase ---------------------- -----------------------------
to Face Amount* Target Excess 2-3 4-10 11+
--------------- ------ ------ --- ---- ---
<S> <C> <C> <C> <C> <C>
1-65 50% 2% 4% 3% 2%
70 45% 2% 4% 3% 2%
75 35% 2% 4% 3% 2%
80 25% 2% 4% 3% 2%
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight
line interpolation.
Chargebacks
In addition to the provisions in section 5 (h) of the Special Agent's Career
Agreement, if policy solicited by the Career Agent lapses, is surrendered or the
face amount is reduced, any commissions shall be refunded to the Company based
on the formula listed below:
<TABLE>
<CAPTION>
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission Chargeback
- ------------------------------- ---------------------
<S> <C>
Issue date of policy or date of 100% of commissions paid less
increase in face amount to the 100% of the policy Sales Surrender
end of the first 6 months Charge applicable to the Lapse,
Surrender or Reduction
Beginning of month 7 through 70% of commissions paid less
the end of 12 months after the 70% of the policy Sales Surrender
issue date of policy or date of Charge applicable to the Lapse,
increase in face amount Surrender or Reduction
Beginning of month 13 through 50% of commissions paid less
the end of 24 months after the 50% of the policy Sales Surrender
issue date of policy or date of Charge applicable to the Lapse,
increase in face amount Surrender or Reduction
</TABLE>
Fees
A. Formula Fees
The computation of formula fees and formula fee rate under the Supplement to
the Agreement will include premiums on the OptionsPlus policy as determined
and communicated by the Company at a future date. The computations will be
determined in the sole discretion of the Company, subject to regulatory
approval.
3 of 4
<PAGE> 4
B. Uniform Fees
The computation of uniform fees under the then current Supplement to the
Agreement will not include the premiums on the OptionsPlus policy.
This Amendment is effective on or as of November 1, 1991
----------------
(Date)
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
/s/ Illegible
-------------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER
This Commission Schedule hereby amends and should be filed with your current
Agreement.
4 Of 4
<PAGE> 1
EXHIBIT 1(A3)d
SELLING AGREEMENT
AGREEMENT dated as of ____________________, by and between 1717 Capital
Management Company ("1717"), a Pennsylvania corporation that is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934 ("1934 Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"), and _____________________., a
corporation that is registered as a broker-dealer with the SEC under the 1934
Act and a member of the NASD ("Broker Dealer") and is either licensed or is
affiliated with an insurance agency or agencies ("Insurance Entity") which is
licensed as an insurance agent pursuant to the laws of the State of __________.
References to Insurance Entity in this Agreement apply only if and to the extent
an entity or entities are set forth on Schedule "C" attached hereto and
incorporated herein by reference.
RECITAL
1717 has been appointed as the principal underwriter of the Provident
Mutual Life Insurance Company ("PMLIC") and Providentmutual Life and Annuity
Company of America ("PLACA")(collectively, the "Companies") variable life
insurance policies and variable annuity contracts (the "Policies").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. AUTHORIZATION TO SELL AND SERVICE
Subject to the terms and conditions of this Agreement, 1717
appoints and authorizes Broker Dealer and Insurance Entity to solicit sales of
and provide service with respect to the Policies which are set forth on the
applicable Schedule "A" attached hereto and incorporated herein by reference, on
a non-exclusive basis, provided that there is an effective Registration
Statement relating to such Policies under the Securities Act of 1933 ("1933
Act"). Broker Dealer and Insurance Entity hereby accept such appointment and
agree to use their best efforts to find purchasers for the Policies.
2. REPRESENTATIVES
The agents or representatives of Broker Dealer that will be
soliciting applications for the Policies ("Representatives") will be NASD
registered representatives of Broker Dealer, will possess all licenses necessary
or appropriate to sell life insurance in the state in which applications for
Policies are being solicited or signed and will have an appropriate appointment
or license by PMLIC or PLACA.
3. COMMISSIONS
As compensation for the sale of each of the Policies by the
Representatives, 1717 shall pay to Broker Dealer or to Insurance Entity, either
directly or through PMLIC or PLACA acting on 1717's behalf, the commissions and
expense allowance payments set forth on the applicable Schedule "B" attached
hereto and incorporated herein by reference (the "Commissions"). In those states
listed on Schedule "D", the Commissions shall be shared by the Insurance
Representative and the Broker Dealer, and shall be payable to the Broker Dealer.
The Commissions
<PAGE> 2
shall be subject to chargeback in accordance with the terms and conditions set
forth on such Schedule "B". 1717 reserves the unconditional right, upon thirty
(30) days written notice, to change the Commissions payable for Policies issued,
renewed, converted, exchanged or otherwise modified on or after the effective
date of such change, as set forth in the notice of change. No Commissions will
be due and payable for any surrendered or cancelled Policies which are
subsequently reinstated or rewritten through efforts of representatives of 1717,
PMLIC or PLACA other than the Representatives. Broker Dealer and Insurance
Entity shall be solely responsible for the payment of any Commissions, expense
allowance and other payments or other considerations of any kind whatsoever to
the Representatives in connection with the sale of the Policies (hereinafter
referred to as "Representatives Compensation"). Broker Dealer and Insurance
Entity shall also be responsible for all tax reporting with respect to
commissions paid to the Representatives.
4. TERM OF AGREEMENT
This Agreement shall continue in force for one year from its
effective date and will automatically renew from year to year thereafter;
provided that this Agreement shall be terminated immediately if Broker Dealer
breaches this Agreement. Any party may terminate this Agreement at any time,
without cause, upon sixty (60) days written notice to the other party. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except Sections 5(h), 9, and 10 of this Agreement shall survive the
termination of this Agreement and Broker Dealer and Insurance Entity shall
settle all accounts with 1717 and shall continue to be responsible for all
applicable chargebacks.
5. BROKER DEALER'S AND INSURANCE ENTITY'S OBLIGATIONS
In addition to other obligations assumed by Broker Dealer and
Insurance Entity under this Agreement:
(a) Broker Dealer shall be insurance licensed, or shall ensure
that Insurance Entity is insurance licensed, pursuant to the laws of the State
of ___________ and any other state in which such license is required by the
applicable insurance laws and regulations for sale of the Policies. Broker
Dealer and Insurance Entity shall have all Representatives insurance licensed
and appointed by PMLIC and/or PLACA. All insurance licenses and appointments
will be processed in accordance with PMLIC and/or PLACA procedures. PMLIC or
PLACA may, in their sole discretion, refuse, terminate or non-renew any such
license and appointment, without cause. Broker Dealer and Insurance Entity shall
ensure that all Representatives who will be soliciting and servicing the
Policies are duly licensed in those states in which such license is required by
the applicable insurance laws and regulations for sale of the Policies.
(b) Broker Dealer and Insurance Entity shall only pay
Representatives Compensation to Representatives who are properly insurance
licensed and appointed with PMLIC or PLACA and registered with the NASD.
(c) Broker Dealer and Insurance Entity shall solicit and
service the Policies in accordance with the rules, policies and directives
established by 1717, PMLIC or PLACA from time to time.
(d) Broker Dealer and Insurance Entity shall ensure that the
Representatives shall use their best efforts to keep the Policies in force.
(e) Broker Dealer and Insurance Entity shall ensure that the
Representatives shall only recommend the purchase of the Policies upon
reasonable grounds to believe that such purchase is suitable to the applicant.
Among other things, a determination of suitability shall be based on the
standards provided by 1717 from time to time.
2
<PAGE> 3
(f) Broker Dealer and Insurance Entity agree that no sales
promotion or other advertising materials relating to the Policies shall be used
unless provided or approved in writing by 1717 prior to such use. No
representations in connection with the sales of the Policies other than those
contained in the currently effective registration statements and prospectuses
for the Policies filed with the SEC, or in the aforesaid approved sales
promotion or other advertising materials, shall be made by Broker Dealer or
Insurance Entity or any of the Representatives. Broker Dealer and Insurance
Entity and the Representatives shall solicit applications for the Policies only
in states where such Policies have been approved by state authorities.
(g) Broker Dealer and Insurance Entity shall maintain or shall
cause to have maintained the records of the Representatives as required by
applicable laws and regulations. The books, accounts and records of Broker
Dealer and Insurance Entity relating to the sale of Policies shall be maintained
so as to clearly and accurately disclose the nature and details of all of the
transactions. All such records shall be subject to inspection and duplication by
PMLIC or PLACA or 1717 at any time while this Agreement is in force.
(h) Broker Dealer and Insurance Entity shall keep confidential
all information obtained pursuant to this Agreement (including, without
limitation, names of the purchasers of the Policies) and shall disclose such
information only if 1717 has authorized such disclosure in writing or if such
disclosure is expressly required by applicable federal or state regulatory
authorities.
(i) Broker Dealer shall maintain its registration under the
1934 Act and shall always be a member in good standing of the NASD.
(j) Broker Dealer shall investigate all Representatives
relative to their business reputation and competency to sell the Policies. In
addition, Broker Dealer will be responsible for training, supervision, and
control of the Representatives selling the Policies. Broker Dealer shall ensure
that all Representatives who will be soliciting and servicing the Policies are
duly registered with the NASD.
(k) Broker Dealer shall ensure that no Representative shall
offer or sell the Policies unless such Representative is an associated person of
Broker Dealer (as that term is defined in Section 3(a)(18) of the 1934 Act) and
duly registered with the NASD and any applicable state securities regulatory
authority as a registered person of Broker Dealer qualified to distribute the
Policies in such state or jurisdiction.
(l) Broker Dealer and Insurance Entity shall ensure that no
Representative Compensation shall be paid with respect to a PMLIC policy which
would be in excess of that permitted under the insurance laws of the State of
New York.
(m) Broker Dealer shall ensure that, in those instances in
which commissions are shared by the Insurance Representative with the Broker
Dealer, all requirements contained in this Agreement relating to record keeping,
training, state licensing and supervision of Representatives' activities for
compliance with Federal and state securities laws, state insurance laws and NASD
rules will remain the responsibility of Broker Dealer.
(n) Broker Dealer shall provide, in the form of Insurance
Representative Agreement attached hereto, an undertaking from each such
Insurance Representative, wherein such Insurance Representative agrees to
fulfill the duties and responsibilities required under this Agreement.
(o) Upon request by 1717, Broker Dealer shall furnish such
records as are necessary to establish that the terms of this paragraph 5 are
satisfied.
3
<PAGE> 4
6. 1717'S OBLIGATIONS
In addition to other obligations assumed by 1717 under this
Agreement:
(a) 1717 shall use its best efforts to ensure that PMLIC and
PLACA use their best efforts to maintain effectiveness of Policies' Registration
Statements with the SEC and any state securities commissions where blue-sky laws
require registration of the Policies and to maintain the appropriate approvals
in each state where Policies are to be sold. 1717 shall keep Broker Dealer and
Insurance Entity advised of any changes in the status of the Registration
Statements for the Policies.
(b) 1717 shall furnish Broker Dealer and Insurance Entity with
information regarding the states in which the Policies may be sold.
(c) 1717, or its agent, shall furnish Broker Dealer and
Insurance Entity with promotional material for use at point of sale,
applications, prospectuses and policy forms. A reasonable charge established by
1717 may be made for such materials.
(d) 1717 shall keep confidential all information obtained
pursuant to this Agreement and shall disclose such information only if Broker
Dealer or Insurance Entity has authorized such disclosure in writing or if such
disclosure is expressly required by applicable federal or state regulatory
authorities.
7. COMPLIANCE WITH STATE AND FEDERAL LAW
Broker Dealer and the Representatives shall comply with all
requirements of the NASD, the 1933 Act, the 1934 Act and all other federal
and/or state laws applicable to the solicitation and service of the Policies or
the operation of Broker Dealer including, without limitation, the NASD Rules of
Fair Practice, Section 15(b)(4)(E) of the 1934 Act and all insurance replacement
regulations and regulations prohibiting the rebating of commissions. Broker
Dealer and Insurance Entity represent and warrant either that:
(a) Broker Dealer and Insurance Entity:
(i) have obtained a letter from the Staff of the
Securities and Exchange Commission advising Broker Dealer and
Insurance Entity that the Staff will not recommend enforcement
action if Insurance Entity is not registered as a
broker/dealer with the Commission; and
(ii) are complying and will continue to comply with
the conditions set forth in such letter at all times while the
Agreement is in effect; or
(b) at the time that the Agreement becomes effective and
during the term of the Agreement:
(i) Insurance Entity is either wholly-owned by Broker
Dealer or an affiliated person of Broker Dealer or is
wholly-owned by one or more associated persons of Broker
Dealer;
(ii) Insurance Entity and its personnel will be
"associated persons" of Broker Dealer within the meaning of
Section 3(a)(18) of the 1934 Act;
(iii) Insurance Entity will engage in the offer or
sale of the Policies only through persons who are registered
persons of Broker Dealer;
4
<PAGE> 5
(iv) Insurance Entity will not receive or handle
customer funds or securities;
(v) Broker Dealer will be responsible for the
training, supervision and control of registered persons
engaging in the offer or sale of the Policies on behalf of
Insurance Entity, as required under the 1934 Act, NASD rules
and other applicable statutes or regulations, and will also be
responsible for the supervision and control of any of its
associated persons who are owners, directors or executive
officers of Insurance Entity;
(vi) Broker Dealer will comply with all applicable
requirements of the 1934 Act and the NASD, including the
requirement to maintain and preserve books and records under
Section 17(a) of the 1934 Act and the rules thereunder; and
(vii) Commissions and fees relating to the Policies
will be reflected in the quarterly FOCUS reports and the fee
assessment reports filed by Broker Dealer with the NASD.
Broker Dealer and Insurance Entity shall notify 1717
immediately in writing if Broker Dealer and/or Insurance Entity fail to comply
with any of the applicable provisions set forth above.
8. INVESTIGATIONS; CUSTOMER COMPLAINTS
Broker Dealer and Insurance Entity agree to cooperate fully in
any insurance, securities or other regulatory or judicial investigation or
proceeding arising in connection with the Policies, Broker Dealer, Insurance
Entity and/or any of the Representatives. Broker Dealer and Insurance Entity
shall permit applicable federal and state insurance and other regulatory
authorities to audit its records and shall furnish the foregoing authorities
with any information which such authorities may request in order to ascertain
whether Broker Dealer and Insurance Entity are complying with all applicable
laws and/or regulations. Broker Dealer and Insurance Entity agree to cooperate
with 1717, PMLIC and PLACA in resolving all customer complaints with respect to
the Policies, Broker Dealer, Insurance Entity and/or the Representatives.
9. INDEMNIFICATION
(a) 1717 hereby agrees to indemnify and hold harmless Broker
Dealer and Insurance Entity and each of their affiliates, officers or directors
against any losses, expenses (including reasonable attorneys fees), claims,
damages or liabilities to which Broker Dealer and Insurance Entity or such
affiliates, officers or directors become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon 1717's performance,
non-performance or breach of this Agreement, or are based upon any material
misstatement or omission contained in any Registration Statement (or any post
effective amendment thereof) or in the Prospectus or any amendment or supplement
to the Prospectus for the Policies.
(b) Broker Dealer and Insurance Entity hereby agree to
indemnify and hold harmless 1717, PMLIC and PLACA and each of their affiliates,
directors, officers and each person, if any, who controls or has controlled
1717, PMLIC or PLACA within the meaning of the 1933 Act or the 1934 Act, against
any losses, expenses (including reasonable attorneys fees), claims, (including,
but not limited to, claims for commissions or other compensation), damages or
liabilities to which 1717, PMLIC or PLACA and any such affiliates, directors,
officers or controlling persons may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon Broker Dealer and Insurance
Entity and/or their Representatives performance, non-performance or breach of
this Agreement including, but not
5
<PAGE> 6
limited to, any unauthorized use of sales materials, any oral or written
misrepresentations, or any unlawful sales practices concerning the Policies.
(c) Within 30 days after receipt by either party of notice of
the commencement of any action, such party shall, if a claim in respect thereof
is to be made, notify the other party in writing of the commencement thereof;
but the omission to so notify shall not relieve the indemnifying party from any
liability which it might otherwise have.
10. MISCELLANEOUS PROVISIONS
(a) All money payable in connection with the Policies is
PMLIC's or PLACA's exclusive property, shall be drawn payable to "Provident
Mutual Life Insurance Company" or "Providentmutual Life and Annuity Company of
America" and shall be transmitted to PMLIC or PLACA within two days of receipt
along with applications and other documents in accordance with the
administrative procedures of PMLIC or PLACA (as developed and amended from time
to time by PMLIC or PLACA) without any deduction or offset for any reason. All
applications and other communications shall be on forms supplied by PMLIC or
PLACA and are subject to acceptance or rejection by PMLIC or PLACA in PMLIC's or
PLACA's sole discretion, or by 1717 on behalf of PMLIC or PLACA. In the event an
application is rejected, all payments will be returned to the purchaser, and
Broker Dealer and Insurance Entity will be notified of such action.
(b) Broker Dealer and Insurance Entity agree to make
appropriate arrangements for delivery to the applicant of the Policy accompanied
by any additional appropriate documents. Broker Dealer, Insurance Entity, or the
Representative will obtain, upon delivery of the Policy to applicant, the
required signature on PMLIC's or PLACA's policy delivery receipt and any
application amendments and immediately forward such to PMLIC or PLACA.
(c) Broker Dealer and Insurance Entity agree that for a period
of two years from the termination of the Agreement they shall not and shall
cause the Representatives not to directly or indirectly contact policyholders of
PMLIC or PLACA for the purpose of inducing or attempting to induce such
policyholders to cancel, lapse or fail to renew such Policies with PMLIC or
PLACA, to discourage or attempt to discourage such policyholders from paying any
additional premiums under such policies, or encouraging market timing activity.
(d) Broker Dealer, Insurance Entity and their Representatives
are independent contractors with respect to 1717, PMLIC and PLACA and (i) shall
not have the right to incur indebtedness on behalf of 1717, PMLIC or PLACA nor
hold themselves out as employees of 1717, PMLIC or PLACA in connection with the
solicitation of the Policies or otherwise and (ii) shall not have the authority
to make, alter, waive or discharge any provision(s) of the Policies, to waive
any forfeiture or to grant, permit, or to extend the time of making any
payments, or to alter or substitute the forms which PMLIC or PLACA may
prescribe, or enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of 1717, PMLIC or PLACA.
(e) Broker Dealer and Insurance Entity represent that all of
their directors, officers, and Representatives are and shall be covered by
blanket fidelity bonds, including coverage for larceny and embezzlement, issued
by a reputable bonding company. These bonds shall be maintained at Broker
Dealer's and Insurance Entity's expense and shall be, at least, of the form,
type and amount required under the NASD Rules of Fair Practice. 1717 may require
evidence, satisfactory to it, that such coverage is in force and Broker Dealer
and Insurance Entity shall give prompt written notice to 1717 of any notice of
cancellation or change of coverage.
(f) Broker Dealer, Insurance Entity and 1717 each represent
that they have full power and authority to enter into this Agreement.
6
<PAGE> 7
(g) This Agreement shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and assigns
provided that neither Broker Dealer nor Insurance Entity may assign this
Agreement without the prior written consent of 1717.
(h) All notices or communications shall be sent to the
addresses set forth below or to such other address as any party may request by
giving written notice to the other parties.
TO 1717: 1717 CAPITAL MANAGEMENT COMPANY
300 CHRISTIANA EXECUTIVE CAMPUS
P.O. BOX 15626
WILMINGTON, DELAWARE 19850
TO BROKER DEALER:
TO INSURANCE ENTITY: SEE SCHEDULE "C"
(i) This Agreement shall be governed by the laws of the State
of Delaware and constitutes the entire agreement and understanding between or
among the parties hereto with respect to the Policies. 1717 reserves the
unconditional right to amend this Agreement and the Schedules attached hereto
and any of the Policies or suspend the sales of any of the Policies at any time
without prior notice. The submission of an application by any Representative
after notice of any such amendment has been sent to Broker Dealer and Insurance
Entity shall constitute Broker Dealer's and Insurance Entity's agreement to any
such amendment.
(j) Notwithstanding the foregoing subparagraph (i), any other
insurance products issued by PLACA or PMLIC may be covered by this Agreement
only as agreed by the parties in writing.
(k) Failure of any party to insist upon strict compliance with
any of the conditions of this Agreement shall not be construed as a waiver of
such conditions and no waiver of any of the provisions of this Agreement shall
be deemed a waiver of any other provisions.
(l) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
1717 CAPITAL MANAGEMENT COMPANY
By:__________________________________ (SEAL)
By:__________________________________ (SEAL)
SIGNATURE
__________________________________
PRINT NAME
7
<PAGE> 8
SCHEDULE B
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
COMMISSION SCHEDULE FOR VARIABLE ANNUITY CONTRACTS
1. Commissions for The Market Street VIP/2 and Options VIP (Forms PL512 and
PL516 and state variations)
For contracts sold by registered representatives of Broker Dealer, 1717
Capital Management shall pay to Broker Dealer, either directly or through
PLACA acting on 1717 Capital Management's behalf, the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PERCENTAGE
OF FIRST PERCENTAGE OF ASSET
FLEXIBLE PREMIUM YEAR ADDITIONAL BASED
VARIABLE ANNUITIES: ISSUE AGES PREMIUMS PREMIUMS COMMISSIONS
----------- ------------- -----------
The Market Street VIP/2
and Options VIP
CONTRACT CONTRACT CONTRACT CONTRACT
YEAR YEARS YEARS YEARS
1 2-6 7 & LATER 2 & LATER
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPTION A - No Trails 0-70 6.25 4.75 3.00 N.A.
71-85 Nonqualified 4.25 2.75 1.00 N.A.
71-80 Qualified 3.50 2.00 0.50 N.A.
- ----------------------------------------------------------------------------------------------
OPTION B 0-70 5.00 3.50 2.00 .25%
71-85 Nonqualified 3.00 1.50 0.50 .25%
71-80 Qualified 2.50 1.00 0.00 .25%
- ----------------------------------------------------------------------------------------------
</TABLE>
Commissions in the first Contract Year are based on First Year Premiums which
consist of the Initial Premium and Additional Premiums received in the first
Contract Year. Commissions in Contract Years two and later are based on
Additional Premiums received after the first Contract Year. In addition, if a
registered representative elects Option B, Asset Based Commissions will be paid
to Broker Dealer at the end of the Contract Year for Contract Years 2 and
beyond. Asset Based Commissions will be calculated based on the Unloaned
Contract Account Value equaling or exceeding $1,000 as of the end of the
Contract Year. The Unloaned Contract Account Value equals the amount in the
Variable Account and Guaranteed Account, excluding the amount in the loan
account.
Broker Dealer will be paid Option A commissions for contracts sold by its
registered representatives unless the Company receives the appropriate written
notification that a registered representative has elected Option B. The
registered representative's election will apply to all business sold by the
registered representative which is issued on or after the date of the election
and until a new election is received.
2. Chargebacks
If any Contract sold by a registered representative of Broker Dealer is
surrendered or otherwise canceled within the first 6 months after the
Contract Date, then 100% of the compensation paid to Broker Dealer shall
be repaid to 1717 Capital Management or PLACA, as the case may be. If the
Contract is surrendered or otherwise canceled during the seventh through
twelfth months after the Contract Date, 50% of the compensation paid to
Broker Dealer shall be repaid to 1717 Capital Management or PLACA, as the
case may be.
B-1 of 20
<PAGE> 9
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE FOR VARIABLE ANNUITY CONTRACTS
1. Compensation for The Market Street VIP/2 (Form PM512 and state variations)
For contracts sold by registered representatives of Broker Dealer, 1717
Capital Management shall pay to Broker Dealer, either directly or through
PMLIC acting on 1717 Capital Management's behalf, the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE OF
FLEXIBLE OF FIRST ADDITIONAL ASSET
PREMIUM YEAR PREMIUMS BASED
VARIABLE PREMIUMS COMMISSIONS
ANNUITIES ISSUE AGES ------------------------------------------------------------------- -----------
CONTRACT CONTRACT CONTRACT
The Market YEAR YEARS YEARS
Street VIP/2 1 2-6 7 & LATER CONTRACT
--------------------- ----------------------- ------------------ YEARS
Expense Expense Expense 2 & LATER
Commis- Allowance Commis- Allowance Commis- Allowance
sions Payments sions Payments sions Payments
- -------------------------------------------------------- ----------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPTION A 0-70 3.50 2.75 3.50 1.25 3.00 0.0 N.A.
No Trails 71-85 Nonqualified 3.50 0.75 2.75 0.0 1.00 0.0 N.A.
71-80 Qualified 3.50 0.00 2.00 0.0 0.50 0.0 N.A.
- ---------------------------------------------------------------------------------------------------------------------
OPTION B 0-70 2.00 3.00 1.75 1.75 1.75 0.25 .25%
71-85 Nonqualified 2.00 1.00 1.50 0.0 0.50 0.0 .25%
71-80 Qualified 2.00 0.50 1.00 0.0 0.00 0.0 .25%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Commissions and Expense Allowance Payments in the first Contract Year are based
on First Year Premiums which consist of the Initial Premium and Additional
Premiums received in the first Contract Year. Commissions and Expense Allowance
Payments in Contract Years two and later are based on Additional Premiums
received after the first Contract Year. In addition, if a registered
representative elects Option B, Asset Based Commissions will be paid to Broker
Dealer at the end of the Contract Year for Contract Years 2 and beyond. Asset
Based Commissions will be calculated based on the Unloaned Contract Account
Value equaling or exceeding $1,000 as of the end of the Contract Year. The
Unloaned Contract Account Value equals the amount in the Variable Account and
Guaranteed Account, excluding the amount in the loan account.
Broker Dealer will be paid Option A compensation for contracts sold by its
registered representatives unless the Company receives the appropriate written
notification that a registered representative has elected Option B. The
registered representative's election will apply to all business sold by the
registered representative which is issued on or after the date of the election
and until a new election is received.
2. Chargebacks
If any Contract sold by a registered representative of Broker Dealer is
surrendered or otherwise canceled within the first 6 months after the
Contract Date, then 100% of the compensation paid to Broker Dealer shall
be repaid to 1717 Capital Management or PMLIC, as the case may be. If the
Contract is surrendered or otherwise canceled during the seventh through
twelfth months after the Contract Date, 50% of the compensation paid to
Broker Dealer shall be repaid to 1717 Capital Management or PMLIC, as the
case may be.
B-2 of 20
<PAGE> 10
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
COMMISSION SCHEDULE FOR VARIABLE INSURANCE PRODUCTS
Providentmutual Life and Annuity Company of America, hereinafter called
"Company," hereby authorizes Representative to solicit applications for the
Policies. Such solicitations shall be made only within the territory in which
the Policies are approved for sale and in which the Company and the
Representative are authorized to do business in accordance with licensing
requirements and other applicable laws and regulations. Applications shall be
accepted only by the Company at its Service Center in Newark, Delaware.
TERMINATION
This authorization may be terminated at any time, with or without cause, by
either party giving to the other party written notice delivered in person or
sent by ordinary mail to the party's last known address.
COMMISSIONS
Commissions, expense allowance payments and bonuses ("Commissions") on the
Policies can only be paid or credited to a Representative who is a registered
representative of a broker-dealer which is an affiliate of the Company or a
registered representative of a broker-dealer who has a sales agreement with such
an affiliate of the Company and holds any required state licenses when a
variable life insurance sale is made and when each premium is paid, except with
the prior written consent of the Company.
The first year and renewal commission rates applicable to variable life
insurance policies will be those listed in the tables below.
PLACA OPTIONSVL (Forms PLC131, PLC132, and state variations)
First year commission rates will apply during the first Policy Year and during
the twelve month period after a face amount increase. Renewal commission rates
on face amount increases will be calculated using the renewal commission rates
based on the number of twelve-month periods (including the partial year) as
measured from the date of such increase. First year commissions will not be paid
on increases in face amount that result from changing from Death Benefit Option
B to Option A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the table
below up to the amount of the Commissionable Target Premium published by the
Company in the Marketing Guide. Commissions on first year premiums greater than
the Commissionable Target Premium will be paid at the excess rate listed in the
table below. The Commissionable Target Premium may be changed from time to time
by the Company.
For policies which have had a face amount increase, premiums are allocated in
the following order: first, to the Commissionable Target Premiums of the most
recent increase; then to the next most recent increases, successively; and
finally to the initial face amount. Premiums in excess of the total of all
Commissionable Target Premiums will be allocated to the initial face amount and
to each increase in proportion to the respective Commissionable Target Premiums.
B-3 of 20
<PAGE> 11
PLACA OptionsVL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RENEWAL COMMISSIONS
AGE AT ISSUE OR ---------------------------------
AT INCREASE TO FIRST YEAR COMMISSIONS POLICY YEARS
FACE AMOUNT* ---------------------------------
2-10 2+
-------------------------------------------------------------
PREMIUM BASED
TARGET EXCESS (% of Premium) ASSET BASED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-65 81% 2% 2% 0.25%
- --------------------------------------------------------------------------------
70 71 2 2 0.25
- --------------------------------------------------------------------------------
75 56 2 2 0.25
- --------------------------------------------------------------------------------
80 41 2 2 0.25
- --------------------------------------------------------------------------------
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
PLACA SURVIVOR OPTIONSVL (Form PLC134, PLC134A and state variations)
Face amount increase is not permitted for PLACA Survivor OptionsVL.
First year commission rates will apply during the first Policy Year. First year
commissions will not be paid on increases in face amount that result from
changing from Death Benefit Option B to Option A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the table
below up to the amount of the Commissionable Target Premium published by the
Company in the Marketing Guide. Commissions on first year premiums greater than
the Commissionable Target Premium will be paid at the excess rate listed in the
table below. The Commissionable Target Premium may be changed from time to time
by the Company.
PLACA Survivor OptionsVL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RENEWAL COMMISSIONS
JOINT EQUAL -------------------------------
AGE AT ISSUE FIRST YEAR COMMISSIONS POLICY YEARS
-------------------------------
2-10 2+
-------------------------------------------------------------
PREMIUM BASED
TARGET EXCESS (% of Premium) ASSET BASED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25-80 84% 2% 2% 0.25%
- --------------------------------------------------------------------------------
</TABLE>
CONVERTIBLE TERM LIFE INSURANCE RIDER (Form PLC308 and state variations)
First year commission rates will apply during the first year of the rider. First
year commissions will not be paid on increases in the insurance amount.
First year commissions will be paid at the target rate listed for the PLACA
OptionsVL and PLACA Survivor OptionsVL policy to which it is attached up to the
amount of the Commissionable Target Premium published by the Company in the
Marketing Guide.
For policies which have had a rider added after policy issue, premiums are
allocated in the following order: first to the Commissionable Target Premium of
the most recent rider; then to the next most recent rider and finally to the
initial policy face amount. If two riders are added on the same date, premiums
will be allocated to each rider in proportion to the respective Commissionable
Target Premiums.
ASSET BASED RENEWAL COMMISSIONS
Asset Based Commissions will be paid at the end of each Policy Year beginning at
the end of the second Policy Year. Asset Based Commissions will be calculated
based on the Unloaned Policy Account Value for each policy with an Unloaned
Policy Account Value equaling or exceeding $1,000 as of the end of the Policy
Year. The Unloaned Policy Account Value equals the amount in the Separate
Account and Guaranteed Account, excluding the amount in the loan account.
B-4 of 20
<PAGE> 12
PRODUCTION BONUS
Subject to all of the provisions of this Agreement, Production Bonus will be
calculated at the end of each full calendar quarter by multiplying the first
year cash commissions for each Representative for the calendar quarter by the
appropriate percentage factor for such first year cash commissions as listed
below:
TABLE 1
Representatives Completing Their First Full Calendar Quarter
<TABLE>
<CAPTION>
Total First Year Cash Commission Percentage Factor
<S> <C>
Less than $5,000 0.0%
$5,000 but less than $7,500 5.0%
$7,500 but less than $15,000 7.5%
$15,000 but less than $20,000 10.0%
$20,000 but less than $30,000 15.0%
$30,000 but less than $40,000 17.5%
$40,000 but less than $50,000 20.0%
$50,000 or greater 25.0%
</TABLE>
TABLE 2
Representatives Completing Their Second Full Calendar Quarter
<TABLE>
<CAPTION>
Total First Year Cash Commissions Percentage Factor
<S> <C>
Less than $10,000 0.0%
$10,000 but less than $15,000 5.0%
$15,000 but less than $30,000 7.5%
$30,000 but less than $40,000 10.0%
$40,000 but less than $60,000 15.0%
$60,000 but less than $80,000 17.5%
$80,000 but less than $100,000 20.0%
$100,000 or greater 25.0%
</TABLE>
TABLE 3
Representatives Completing Their Third Full Calendar Quarter
<TABLE>
<CAPTION>
Total First Year Cash Commissions Percentage Factor
<S> <C>
Less than $15,000 0.0%
$15,000 but less than $22,500 5.0%
$22,500 but less than $45,000 7.5%
$45,000 but less than $60,000 10.0%
$60,000 but less than $90,000 15.0%
$90,000 but less than $120,000 17.5%
$120,000 but less than $150,000 20.0%
$150,000 or greater 25.0%
</TABLE>
B-5 of 20
<PAGE> 13
TABLE 4
Representatives Completing Four or More Full Calendar Quarters
<TABLE>
<CAPTION>
Total First Year Cash Commissions in the
Most Recent Four Calendar Quarters Percentage Factor
<S> <C>
Less than $20,000 0.0%
$20,000 but less than $30,000 5.0%
$30,000 but less than $60,000 7.5%
$60,000 but less than $80,000 10.0%
$80,000 but less than $120,000 15.0%
$120,000 but less than $160,000 17.5%
$160,000 but less than $200,000 20.0%
$200,000 or greater 25.0%
</TABLE>
First year cash commissions at the end of each full calendar quarter shall be
determined by adding the first year cash commissions for the quarter and the
three immediately preceding quarters. First year cash commissions include only
first year commissions paid by the Company as listed on the commission table.
For purposes of this provision, all first year commissions earned from the date
of this Agreement until the end of the first full calendar quarter will be
deemed to apply to the first full calendar quarter.
Beginning in the ninth full calendar quarter, no Production Bonus shall be paid
if the 13-month persistency rate for the production of the Representative of the
Policies, as calculated by the Company, is less than 85% for the most recent
four calendar quarters.
If a Representative has a commission agreement with the Company for the sale of
life insurance policies other than the Policies or benefits under a corporate
agreement permitting such sales ("PLACA Agreement"), the percentage factor will
be determined by the combined first year cash commissions under this Agreement
and the PLACA Agreement. Production will be combined and the bonus paid in
accordance with the terms of the PLACA Agreement. Calculation of the 13- month
persistency rate shall also be determined on a combined basis for each such
Representative.
For purposes of determining the number of completed calendar quarters, the
effective date will be the earlier of the date the Representative is appointed
by the Company under this Agreement or the effective date of the PLACA
Agreement.
The Production Bonus will be paid during the second month following the end of
the calendar quarter. If the PLACA Agreement, if any, is terminated under
section 12(d) of the PLACA Agreement, the Company shall have no obligation to
pay the Production Bonus either under this Agreement or the PLACA Agreement. If
the PLACA Agreement, if any, is terminated for any reason, or if the
Representative terminates his or her registration with Broker Dealer, the
Production Bonus will be calculated by multiplying the amount of the Production
Bonus by the number of months that this Agreement or the PLACA Agreement had
been in effect for the calendar quarter divided by 3. This amount will be paid
following the end of the calendar quarter.
Benefits Bonus
Subject to all of the provisions of this Agreement, a Benefits Bonus will be
paid in the amount of $600 in the month following each calendar month that the
Representative meets the applicable production requirement for the month. A
Benefit Bonus will be calculated separately for each Representative under this
Agreement.
B-5 of 20
<PAGE> 14
FIRST TWELVE CALENDAR MONTHS OF AGREEMENT
At the end of each full calendar month in the first twelve full calendar months
under this Agreement for which the Representative was appointed by the Company
for the full calendar month, the Benefits Bonus will be paid if the first year
cash commissions produced by and paid on behalf of a Representative under this
Agreement equal or exceed the cumulative first year cash commissions for the
applicable month as listed below:
<TABLE>
<CAPTION>
CUMULATIVE
CALENDAR MONTH FIRST YEAR CASH COMMISSIONS
<S> <C>
1 $ 2,500
2 5,000
3 7,500
4 10,000
5 12,500
6 15,000
7 17,500
8 20,000
9 22,500
10 25,000
11 27,500
12 30,000
</TABLE>
THIRTEENTH AND LATER CALENDAR MONTHS OF AGREEMENT
At the end of each calendar month beginning with the thirteenth calendar month
under this Agreement, the Benefits Bonus will be paid if the first year cash
commissions produced by the Representative under this Agreement in the
immediately preceding twelve calendar months equal or exceed $30,000.
If the Representative has a PLACA Agreement, the Benefit Bonus will be
determined based on the combined production by the Representative under this
Agreement and the PLACA Agreement. If the Representative qualifies for the
Benefit Bonus under the PLACA Agreement without regard to production under this
Agreement, no Benefit Bonus will be paid under this Agreement on behalf of the
Representative. If the Representative qualifies for the Benefit Bonus based on
combined production under this Agreement and the PLACA Agreement, the Benefits
Bonus will be prorated based on the relative production under each agreement.
For purposes of determining the number of completed calendar months, the
effective date will be the earlier of the date the Representative is appointed
by the Company under this Agreement or the effective date of the PLACA
Agreement.
B-7 of 20
<PAGE> 15
CHARGEBACKS
If the Company shall return all, or any portion, of any premiums on a policy or
contract paid for under this or any previous Agreements, for any reason
whatsoever, the Company shall have the right to deduct all or part of the
Commissions received by Broker Dealer on such premiums from any Commissions
thereafter due and payable to Broker Dealer without limitation to any other
rights of the Company, including the right to demand immediate repayment from
Broker Dealer. Any amount remaining unpaid shall be an indebtedness to the
Company. In addition to the provision, if a policy lapses, is surrendered, or
the face amount is reduced, any Commissions shall be refunded to the Company
based on the formula listed below.
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission Chargebacks
------------------------ ----------------------
Issue date of policy or date of 100% of total compensation paid less
increase in face amount to the end 100% of the policy Sales Surrender
of the first 6 months Charge applicable to the Lapse,
Surrender or Reduction
Beginning of month 7 through the end 70% of total compensation paid less
of 12 months after the issue date of 70% of the policy Sales Surrender
policy or date of increase in face Charge applicable to the Lapse,
amount Surrender, or Reduction
B-8 of 20
<PAGE> 16
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE FOR VARIABLE LIFE INSURANCE PRODUCTS
for States Listed in Schedule D
Provident Mutual Life Insurance Company, hereinafter called "Company", hereby
authorizes Representative to solicit applications for the Policies. Such
solicitations shall be made only within the territory in which the Policies are
approved for sale and in which the Company and the Representative are authorized
to do business in accordance with licensing requirements and other applicable
laws and regulations. Applications shall be accepted only by the Company at its
Service Center in Newark, Delaware.
TERMINATION
This authorization may be terminated at any time, with or without cause, by
either party giving to the other party written notice delivered in person or
sent by ordinary mail to the party's last known address.
COMMISSIONS
Commissions on the Policies can only be paid or credited to a Representative who
is a registered representative of a broker-dealer which is an affiliate of the
Company or a registered representative of a broker-dealer who has a sales
agreement with such an affiliate of the Company and holds any required state
licenses when a variable life insurance sale is made and when each premium is
paid, except with the prior written consent of the Company.
The first year and renewal commission rates applicable to variable life
insurance policies will be those listed in the tables below.
1. OPTIONS (Forms C111, C112, C116 and state variations)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid when
the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect are
considered Unscheduled Premium Payments.)
Options
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
FIRST YEAR COMMISSIONS
Age ------------------------------------------------------------------------------- Expense
At Nonsmoker Nonsmoker Smoker or Juvenile** Smoker or Juvenile** Allowance
Issue* Face Amount Face Amount Less Face Amount Face Amount Payments
$100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0-60 50% 45% 45% 40% 41%
65 45 40 40 35 36
70 40 35 35 30 36
75 30 25 25 20 26
80 20 15 15 10 21
- ---------------------------------------------------------------------------------------------------
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
** Juvenile ages are 0-21.
<TABLE>
<CAPTION>
---------------------------------------------
RENEWAL
COMMISSIONS FEES
---------------------------------------------
POLICY YEARS
---------------------------------------------
<S> <C> <C>
2 - 10 11 - 15 16 & LATER
---------------------------------------------
9% 3% 2%
---------------------------------------------
</TABLE>
B-9 of 20
<PAGE> 17
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
<TABLE>
<CAPTION>
---------------------------------------------
COMMISSIONS
---------------------------------------------
POLICY YEARS
---------------------
1 2 - 10
---------------------------------------------
<S> <C> <C>
PRIMARY PREMIUM -- 9%
---------------------------------------------
EXCESS PREMIUM 2% 2%
---------------------------------------------
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a Special
Account for the policy an amount equal to the scheduled annual
premium for the policy including premiums for supplemental benefits
and substandard extras for which commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will determine
the lesser of the Unscheduled Premium and the amount of the Special
Account. This is the Primary Premium. The balance, if any, of the
Unscheduled Premium over the Primary Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled Premium
Payment is made during a policy year.
D. At the end of each policy year that the Special Premium Payment
Provision is in effect, the Special Account will be restated to the
lesser of its current balance or one scheduled annual premium. At
the end of each policy year that the Special Premium Payment
Provision is not in effect, the Special Account will be reduced to
0.
2. OPTIONSPLUS (Forms C126, C127 and state variations)
OptionsPlus
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
RENEWAL
COMMISSIONS FEES FIRST YEAR
-------------------------------------------- EXPENSE
AGE AT ISSUE FIRST YEAR COMMISSIONS POLICY YEARS POLICY YEARS ALLOWANCE
OR AT INCREASE --------------------------------------------
TO FACE AMOUNT* 2-10 2-10 11+
----------------------------------------------------------------------------------
PREMIUM
TARGET EXCESS BASED ASSET BASED TARGET
(% of Premium)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-65 50% 2% 2% 0.25% 0.25% 31%
70 45 2 2 0.25 0.25 26
75 35 2 2 0.25 0.25 21
80 25 2 2 0.25 0.25 16
- ---------------------------------------------------------------------------------------------------
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
B-10 of 20
<PAGE> 18
3. SPECIAL PRODUCT (Forms C122, C125 and state variations)
Special Product
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
FIRST YEAR COMMISSIONS
Premium Age at Issue -------------------------------------- RENEWAL
Class or Increase TARGET EXCESS COMMISSIONS FEES
to Face -----------------------------------------------------------------
Amount Face Amounts Face Amounts YEARS
Less than of $5,000,000 ------------------------
$5,000,000 and Over 2-10 11+
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonsmoker 20-49 20.0% 18.75% 2.5% 4% 1.6%
Nonsmoker 50+ 17.5% 16.25% 2.5% 4% 1.6%
Smoker All 15.0% 13.75% 2.5% 4% 1.6%
Substandard All 15.0% 13.75% 2.5% 4% 1.6%
- ---------------------------------------------------------------------------------------------
</TABLE>
* An expense allowance of 20% of first year commissions on Commissionable Target
Premium is available.
Notes for OptionsPlus and Special Product
First year commission rates will apply during the first Policy Year and
during the twelve month period after a face amount increase. Renewal
commission rates on the face amount increases will be calculated using the
renewal commission rates based on the number of twelve-month periods
(including the partial year) as measured from the date of such increase.
First year commissions will not be paid on increases in face amount that
result from changing from Death Benefit Option B to Option A under the
terms of the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
For policies which have had a face amount increase, premiums are allocated
in the following order: first, to the Commissionable Target Premiums of
the most recent increases, successively; and finally to the initial face
amount. Premiums in excess of the total of all Commissionable Target
Premiums will be allocated to the initial face amount and to each increase
in proportion to the respective Commissionable Target Premiums.
4. SURVIVOR OPTIONSPLUS (Forms C130, C130A and state variations)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year. First
year commissions will not be paid on increases in face amount that result
from changing from Death Benefit Option B to Option A under the terms of
the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
Survivor OptionsPlus
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
RENEWAL COMMISSIONS FEES
JOINT EQUAL ----------------------------------------------- FIRST YEAR
AGE AT ISSUE FIRST YEAR COMMISSIONS POLICY YEARS POLICY YEARS EXPENSE
----------------------------------------------- ALLOWANCE
2-10 2-10 11+
--------------------------------------------------------------------------------------
PREMIUM BASED
TARGET EXCESS (% of Premium) ASSET BASED TARGET
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
25 - 80 45% 2% 2% 0.25% 0.25% 27%
- -----------------------------------------------------------------------------------------------------
</TABLE>
B-11 of 20
<PAGE> 19
5. CONVERTIBLE TERM LIFE INSURANCE RIDER (Form C308 and state variations)
First year commission rates will apply during the first year of the rider.
First year commissions will not be paid on increases in the insurance
amount.
First year commissions will be paid at the target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is attached
up to the amount of the Commissionable Target Premium published by the
Company in the Marketing Guide.
For policies which have had a rider added after policy issue, premiums are
allocated in the following order: first, to the Commissionable Target
Premium of the most recent rider; then to the next most recent rider, and
finally to the initial policy face amount. If two riders are added on the
same date, premiums will be allocated to each rider in proportion to the
respective Commissionable Target Premiums.
ASSET BASED RENEWAL COMMISSIONS FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
Asset Based Commissions will be calculated based on the Unloaned Policy Account
Value for each policy with an Unloaned Policy Account Value equaling or
exceeding $1,000 as of the end of the Policy Year. The Unloaned Policy Account
Value equals the amount in the Separate Account and Guaranteed Account,
excluding the amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset Based Commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the tables above.
B. Policies issued before 1/1/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998 unless a policy has a face amount increase on or after 1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or fee
will be determined according to the Increase Ratio and the table below.
Subsequent face amount increases or decreases will cause the asset rate to
be recalculated.
Face Amount of the Increase
Increase Ratio Equals ---------------------------------------
Total Policy Face Amount
<TABLE>
<CAPTION>
------------------------------------------------------------------------
ASSET BASED
------------------------------------------------------------------------
Increase Ratio Renewal Commissions Renewal Fees
------------------------------------------------------------------------
At Least But Less Than Policy Years 2-10 Policy Years 11+
------------------------------------------------------------------------
<S> <C> <C> <C>
0% 10% 0.00% 0.00%
------------------------------------------------------------------------
10% 20% 0.02% 0.02%
------------------------------------------------------------------------
20% 30% 0.05% 0.05%
------------------------------------------------------------------------
30% 40% 0.07% 0.07%
------------------------------------------------------------------------
40% 50% 0.10% 0.10%
------------------------------------------------------------------------
50% 60% 0.12% 0.12%
------------------------------------------------------------------------
60% 70% 0.15% 0.15%
------------------------------------------------------------------------
70% 80% 0.17% 0.17%
------------------------------------------------------------------------
80% 90% 0.20% 0.20%
------------------------------------------------------------------------
90% 100% 0.22% 0.22%
------------------------------------------------------------------------
</TABLE>
B-12 of 20
<PAGE> 20
CHARGEBACKS
If the Company shall return all, or any portion, of any premiums on a policy or
contract paid for under this or any previous Agreements, for any reason
whatsoever, the Company shall have the right to deduct all or part of the
commissions received by Broker Dealer on such premiums from any commissions
thereafter due and payable to Broker Dealer without limitation to any other
rights of the Company, including the right to demand immediate repayment from
Broker Dealer. Any amount remaining unpaid shall be an indebtedness to the
Company. In addition to the provision, for all policies except Options, if a
policy lapses, is surrendered, or the face amount is reduced, any commissions
shall be refunded to the Company based on the formula listed below:
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission/Expense Chargebacks
------------------------ ------------------------------
Issue date of policy or date of 100% of commissions and expense
increase in face amount to the end allowances paid less 100% of the
of the first 6 months policy Sales Surrender Charge
applicable to the Lapse, Surrender
or Reduction
Beginning of month 7 through end of 70% of commissions and expense the
12 months after the date of policy allowances paid less 70% of the
or date of in face amount issue policy Sales Surrender Charge
increase applicable to the Lapse,
Surrender or Reduction
Beginning of month 13 through end of 50% of commissions and expense the
24 months after issue date of allowances paid less 50% of the or
increase in face applicable to the policy Sales Surrender Charge amount
Lapse, Surrender or Reduction
B-13 of 20
<PAGE> 21
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
COMMISSION SCHEDULE FOR VARIABLE LIFE INSURANCE PRODUCTS
for States Not Listed in Schedule D and Washington, D.C.
Provident Mutual Life Insurance Company, hereinafter called "Company", hereby
authorizes Representative to solicit applications for the Policies. Such
solicitations shall be made only within the territory in which the Policies are
approved for sale and in which the Company and the Representative are authorized
to do business in accordance with licensing requirements and other applicable
laws and regulations. Applications shall be accepted only by the Company at its
Service Center in Newark, Delaware.
TERMINATION
This authorization may be terminated at any time, with or without cause, by
either party giving to the other party written notice delivered in person or
sent by ordinary mail to the party's last known address.
COMMISSIONS
Commissions on the Policies can only be paid or credited to a Representative who
is a registered representative of a broker-dealer which is an affiliate of the
Company or a registered representative of a broker-dealer who has a sales
agreement with such an affiliate of the Company and holds any required state
licenses when a variable life insurance sale is made and when each premium is
paid, except with the prior written consent of the Company.
The first year and renewal commission rates applicable to variable life
insurance policies will be those listed in the tables below:
1. OPTIONS (Forms C111, C112, C116 and state variations)
Scheduled Premiums
First year and renewal commission rates for Scheduled Premiums paid when
the Special Premium Payment Provision is not in effect. (Scheduled
Premiums paid when the Special Premium Payment Provision is in effect are
considered Unscheduled Premium Payments.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
FIRST YEAR COMMISSIONS
------------------------------------------------------------------------------------
Age Nonsmoker Nonsmoker Smoker or Juvenile** Smoker or Juvenile** Face
At Face Amount Face Amount Less Face Amount Amount
Issue* $100,000 & Over Than $100,000 $100,000 & Over Less Than $100,000
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0-60 50% 45% 45% 40%
65 45 40 40 35
70 40 35 35 30
75 30 25 25 20
80 20 15 15 10
- ---------------------------------------------------------------------------------------------
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
** Juvenile ages are 0-21, 0-20 in Texas.
-------------------------
RENEWAL COMMISSIONS
-------------------------
POLICY YEARS
-------------------------
2-10
-------------------------
5%
-------------------------
Unscheduled Premiums
Commission rates for Unscheduled Premium Payments.
B-14 of 20
<PAGE> 22
<TABLE>
<CAPTION>
--------------------------------------------------------
COMMISSIONS
--------------------------------------------------------
POLICY YEARS
---------------------
1 2-10
--------------------------------------------------------
<S> <C> <C>
PRIMARY PREMIUM -- 5%
--------------------------------------------------------
EXCESS PREMIUM 2% 2%
--------------------------------------------------------
</TABLE>
Notes for Options
For purposes of determining commission rates for Unscheduled Premium
Payments, Primary Premiums and Excess Premiums will be determined as
follows:
A. At the beginning of each policy year that the Special Premium
Payment Provision is in effect, the Company will add to a Special
Account for the policy an amount equal to the scheduled annual
premium for the policy including premiums for supplemental benefits
and substandard extras for which commissions are normally paid.
B. Upon receipt of any Unscheduled Premium, the Company will determine
the lesser of the Unscheduled Premium and the amount of the Special
Account. This is the Primary Premium. The balance, if any, of the
Unscheduled Premium over the Primary Premium is the Excess Premium.
C. The amount of the Primary Premium will be subtracted from the
balance in the Special Account each time an Unscheduled Premium
Payment is made during a policy year.
D. At the end of each policy year that the Special Premium Payment
Provision is in effect, the Special Account will be restated to the
lesser of its current balance or one scheduled annual premium. At
the end of each policy year that the Special Premium Payment
Provision is not in effect, the Special Account will be reduced to
0.
2. OPTIONSPLUS (Forms C126, C127 and state variations)
OptionsPlus
<TABLE>
<CAPTION>
----------------------------------------------------------------
AGE AT ISSUE FIRST YEAR COMMISSIONS
OR AT INCREASE
TO FACE AMOUNT* -------------------------------------------
TARGET EXCESS
----------------------------------------------------------------
<S> <C> <C>
1-65 50% 2%
70 45 2
75 35 2
80 25 2
----------------------------------------------------------------
</TABLE>
* To obtain commission rates for intermediate issue ages, use straight line
interpolation.
OptionsPlus Renewals
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Renewal Renewal Renewal Renewal
Commissions Fees Commissions Fees
---------------------------------------------------------------
Policy Years
---------------------------------------------------------------
2-3 4-10 11+ 2-10 11+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Target 3% 2% 0% NA NA
- --------------------------------------------------------------------------------
Excess 2% 2% 0% NA NA
- --------------------------------------------------------------------------------
Asset Based NA NA NA 0.15% 0.15%
- --------------------------------------------------------------------------------
</TABLE>
Renewal commissions will be paid on premiums after the first Policy Year up to
the Commissionable Target Premium at the target rate listed in the table below.
Renewal commissions on premiums greater than the Commissionable Target Premium
will be paid at the excess rate listed in the table above.
B-15 of 20
<PAGE> 23
Renewal commissions rates on face amount increases for OptionsPlus policies and
on Convertible Term Life Insurance riders added after the policy issue date will
be calculated using the renewal commission rates based on the number of
twelve-month periods (including the partial year) as measured from the date of
such increase or added rider. For policies which have had a face amount increase
or added rider, premiums are allocated in the following order: first, to the
Commissionable Target Premium of the most recent increase or added rider; then
to the next most recent increases or added rider, successively; and finally to
the initial policy face amount. Premiums in excess of the total of all
Commissionable Target Premium will be allocated to the initial face amount and
to each increase or added rider in proportion to the respective Commissionable
Target Premium.
3. SPECIAL PRODUCT (Forms C122, C125 and state variations)
Special Product
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
FIRST YEAR COMMISSIONS
Age at Issue --------------------------------------- RENEWAL
or Increase TARGET EXCESS COMMISSIONS FEES
Premium to Face --------------------------------------------------------------
Class Amount Face Amounts Face Amounts YEARS
Less than of $5,000,000
$5,000,000 and Over 2-10 11+
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonsmoker 20-49 20.0% 18.75% 2.5% 4% 1.6%
Nonsmoker 50+ 17.5% 16.25% 2.5% 4% 1.6%
Smoker All 15.0% 13.75% 2.5% 4% 1.6%
Substandard All 15.0% 13.75% 2.5% 4% 1.6%
- --------------------------------------------------------------------------------------------
</TABLE>
Notes for OptionsPlus and Special Product
First year commission rates will apply during the first Policy Year and during
the twelve month period after a face amount increase. Renewal commission rates
on the face amount increases will be calculated using the renewal commission
rates based on the number of twelve-month periods (including the partial year)
as measured from the date of such increase. First year commissions will not be
paid on increases in face amount that result from changing from Death Benefit
Option B to Option A under the terms of the policy.
First year commissions will be paid at the target rate as listed in the table
below up to the amount of the Commissionable Target Premium published by the
Company in the Marketing Guide. Commissions on first year premiums greater than
the Commissionable Target Premium will be paid at the excess rate listed in the
table above. The Commissionable Target Premium may be changed from time to time
by the Company.
For policies which have had a face amount increase, premiums are allocated in
the following order: first, to the Commissionable Target Premiums of the most
recent increase; then the next most recent increases, successively; and finally
to the initial face amount. Premium in excess of the total of all Commissionable
Target Premiums will be allocated to the initial face amount and to each
increase in proportion to the respective Commissionable Target Premiums.
4. SURVIVOR OPTIONSPLUS (Forms C130, C130A and state variations)
Face amount increase is not permitted for Survivor OptionsPlus.
First year commission rates will apply during the first Policy Year. First
year commissions will not be paid on increases in face amount that result
from changing from Death Benefit Option B to Option A under the terms of
the policy.
First year commissions will be paid at the target rate as listed in the
table below up to the amount of the Commissionable Target Premium
published by the Company in the Marketing Guide. Commissions on first year
premiums greater than the Commissionable Target Premium will be paid at
the excess rate listed in the table below. The Commissionable Target
Premium may be changed from time to time by the Company.
B-16 of 20
<PAGE> 24
Renewal commissions will be paid on premiums after the first Policy Year
up to the Commissionable Target Premium at the target rate listed in the
table below. Renewal commissions on premiums greater than the
Commissionable Target Premium will be paid at the excess rate listed in
the table below.
Survivor OptionsPlus
<TABLE>
<CAPTION>
-------------------------------------------------------------
JOINT EQUAL FIRST YEAR COMMISSIONS
AGE AT ISSUE --------------------------------
TARGET EXCESS
-------------------------------------------------------------
<S> <C> <C>
25-80 45% 2%
-------------------------------------------------------------
</TABLE>
Survivor OptionsPlus Renewals
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Renewal Renewal Renewal Renewal
Commissions Fees Commissions Fees
----------------------------------------------------------------
Policy Years
----------------------------------------------------------------
2-3 4-10 11+ 2-10 11+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Target 3% 2% 0% NA NA
- --------------------------------------------------------------------------------
Excess 2% 2% 0% NA NA
- --------------------------------------------------------------------------------
Asset Based NA NA NA 0.15% 0.15%
- --------------------------------------------------------------------------------
</TABLE>
5. CONVERTIBLE TERM LIFE INSURANCE RIDER (Form C308 and state variations)
First year commission rates will apply during the first year of the rider.
First year commissions will not be paid on increases in the insurance
amount.
First year commissions will be paid at the target rate listed for the
OptionsPlus or Survivor OptionsPlus policy to which the rider is attached
up to the amount of the Commissionable Target Premium published by the
Company in the Marketing Guide.
Renewal commissions rates on Convertible Term Life Insurance riders added
after the policy issue date will be calculated using the renewal
commission rates based on the number of twelve-month periods (including
the partial year) as measured from the date of such added rider. For
policies which have had a face amount increase or added rider, premiums
are allocated in the following order: first, to the commissionable Target
Premium of the most recent increase or added rider; then to the next most
recent increases or added rider, successively; and finally to the initial
policy face amount. Premiums in excess of the total of all Commissionable
Target Premium will be allocated to the initial face amount and to each
increase or added rider in proportion to the respective Commissionable
Target Premium. If two riders are added on the same date, premiums will be
allocated to each rider in proportion to the respective commissionable
Target Premium.
For the balance of this Agreement, any reference to OptionsPlus or
Survivor OptionsPlus includes any Convertible Term Life Insurance Rider
that is attached to an OptionsPlus or Survivor OptionsPlus policy.
B-17 of 20
<PAGE> 25
EXPENSE ALLOWANCE PAYMENT
In addition to the commissions payable for sale of the Policies (other than
Special Product), an expense allowance payment will be made equal to the
following percentage of first year target and excess commissions:
62%
For Special Product, such expense allowance payment will be equal to 60% of
first year target commissions.
These payments are subject to the rules governing commission payments contained
in this Schedule including chargeback provisions.
ASSET BASED RENEWAL COMMISSIONS FOR OPTIONSPLUS AND SURVIVOR OPTIONSPLUS
Asset Based Commissions will be calculated based on the Unloaned Policy Account
Value for each policy with an Unloaned Policy Account Value equaling or
exceeding $1,000 as of the end of the Policy Year. The Unloaned Policy Account
Value equals the amount in the Separate Account and Guaranteed Account,
excluding the amount in the loan account.
A. Policies issued on or after 1/1/1998
Asset based commissions will be paid at the end of each Policy Year
beginning at the end of the second Policy Year according to the renewal
rates shown in the table above.
B. Policies issued before 1/1/1998
No asset based commission or fee will be paid on policies issued before
1/1/1998, unless a policy has a face amount increase on or after 1/1/1998.
For policies that have a face amount increase on or after 1/1/1998
(excluding a face amount increase resulting from changing from Death
Benefit Option B to Option A), an asset based commission or fee will be
paid beginning on the policy anniversary following the 12 month period
from the date of the increase. The rate of asset based commission or fee
will be determined according to the Increase Ratio and the table below.
Subsequent face amount increases or decreases will cause the asset rate to
be recalculated.
Face Amount of the Increase
Increase Ratio Equals ---------------------------------------
Total Policy Face Amount
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASSET BASED
- --------------------------------------------------------------------------------
Increase Ratio Renewal Commissions Renewal Fees
At Least But Less Than Policy Years 2-10 Policy Years 11+
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0% 10% 0.00% 0.00%
0--------------------------------------------------------------------------------
10% 20% 0.01% 0.01%
- --------------------------------------------------------------------------------
20% 30% 0.03% 0.03%
- --------------------------------------------------------------------------------
30% 40% 0.04% 0.04%
- --------------------------------------------------------------------------------
40% 50% 0.06% 0.06%
- --------------------------------------------------------------------------------
50% 60% 0.07% 0.07%
- --------------------------------------------------------------------------------
60% 70% 0.09% 0.09%
- --------------------------------------------------------------------------------
70% 80% 0.10% 0.10%
- --------------------------------------------------------------------------------
80% 90% 0.11% 0.11%
- --------------------------------------------------------------------------------
90% 100% 0.13% 0.13%
- --------------------------------------------------------------------------------
</TABLE>
B-18 of 20
<PAGE> 26
CHARGEBACKS
If the Company shall return all, or any portion, of any premiums on a policy or
contract paid for under this or any previous Agreements, for any reason
whatsoever, the Company shall have the right to deduct all or part of the
commissions received by Broker Dealer on such premiums from any commissions
thereafter due and payable to Broker Dealer without limitation to any other
rights of the Company, including the right to demand immediate repayment from
Broker Dealer. Any amount remaining unpaid shall be an indebtedness to the
Company. In addition to the provision for all policies except Options, if a
policy lapses, is surrendered, or the face amount is reduced, any commissions
shall be refunded to the Company based on the formula listed below.
Date of Policy Lapse, Surrender
or Face Amount Reduction Commission Chargeback
------------------------ ---------------------
Issue date of policy or date of 100% of commissions paid less end
increase in face amount to the end 100% of the policy Sales date of
of the first 6 months Surrender Charge applicable to the
Lapse, Surrender or Reduction
Beginning of month 7 through the end 70% of commissions paid less 70% of
of 12 months after the issue date of the policy Sales Surrender Charge
policy or date of increase in face applicable to the Lapse, Surrender
amount or Reduction
Beginning of month 13 through the of 50% of commissions paid less 50% of
24 months after the issue policy or the policy Sales Surrender Charge
date of increase in face amount applicable to the Lapse, Surrender
or Reduction
B-19 of 20
<PAGE> 27
COMMISSION EXCEPTIONS APPLICABLE TO SCHEDULE B
1. Commissions on any policy for which rates and conditions are not specified
in the applicable commission schedules shall be as determined by the
Company.
2. No commissions shall be paid to Broker Dealer upon any premium, or portion
thereof, payment of which is waived in accordance with the provisions
contained in the policy because of the disability of the insured or
applicant, or the death of the applicant.
3. If a policy issued under this Agreement replaces, as defined by the
Company, in whole or in part, a policy previously issued by this Company,
the Company shall have the right to determine what, if any, commissions or
fees shall be allowed.
4. If a policy is changed to a different kind or amount, or if its date is
changed, the Company shall have the right to determine what, if any,
commissions shall be allowed or recovered.
5. Commissions, if any, on the conversion of any policy or coverage shall be
determined by the Company.
6. Commissions, if any, on policies issued on a modified underwriting,
guaranteed issue, salary savings basis, for less than published minimum or
where classification is other than standard, shall be as determined by the
Company.
B-20 of 20
<PAGE> 28
SCHEDULE D
Alaska Missouri
Arizona Montana
Arkansas Nebraska
Colorado Nevada
Florida New Mexico
Hawaii North Dakota
Idaho Oklahoma
Indiana Oregon
Iowa South Dakota
Kansas Tennessee
Louisiana Utah
Michigan Washington
Minnesota Wisconsin
Mississippi Wyoming
D-1 of 1
<PAGE> 29
SCHEDULE E
Alaska Missouri
Arizona Montana
Arkansas Nebraska
Colorado Nevada
Florida New Mexico
Hawaii North Dakota
Idaho Oklahoma
Indiana Oregon
Iowa South Dakota
Kansas Tennessee
Louisiana Utah
Michigan Washington
Minnesota Wisconsin
Mississippi Wyoming
E-1 of 1
<PAGE> 1
PROVIDENT MUTUAL LIFE
INSURANCE COMPANY OF
PHILADELPHIA
INSURED A A
POLICY NUMBER 7,999,991 NOV 1, 1994 ISSUE DATE
FACE AMOUNT $75,000 01 - FEMALE ISSUE AGE, SEX
NOV 1, 1994 POLICY DATE
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA agrees:
- To pay the Beneficiary of this Policy the Proceeds at Death upon
receiving due proof of the Insured's death;
- To provide you (the Policy Owner) with the other rights and benefits of
this Policy.
These agreements are subject to the provisions of this Policy.
THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY AS DESCRIBED ON PAGE 14,
DEPENDING UPON THE PAYMENT OF PREMIUMS, THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNTS AND THE LEVEL OF MORTALITY CHARGES MADE. BUT, IT WILL NOT BE
LESS THAN THE FACE AMOUNT SHOWN ABOVE.
THE CASH VALUE MAY INCREASE OR DECREASE DAILY DEPENDING UPON THE PAYMENT OF
PREMIUMS, THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNTS AND THE LEVEL OF
MORTALITY CHARGES MADE. THERE IS NO GUARANTEED MINIMUM CASH VALUE.
A Schedule of Premiums is shown in the Policy Data. Additional unscheduled
premiums may be paid at your option subject to the limitations in this Policy.
Please read this Policy with care. A guide to its provisions is on the last
page. A summary is on page 2. Any additional benefit riders and a copy of the
Application are included in this Policy after page 21.
This is a legal contract between the Owner and
Provident Mutual Life Insurance Company of Philadelphia.
RIGHT TO CANCEL POLICY. You may return this Policy to us by the later of: (a)
10 days after you receive it; or (b) 45 days after Part I of the Application
was signed. All you have to do is take this Policy or mail it to our Home
Office at 1600 Market Street, Philadelphia, Pennsylvania 19103, or to one of
our offices or to the representative who sold it to you. If you do this, we
will cancel this Policy from the start and refund the sum of: (a) the
difference between the premiums you paid, including any policy fees or other
charges, and the amounts allocated to the Separate Accounts; and (b) the total
Cash Value of the Separate Accounts on the date we receive the returned policy.
Attest
/s/ Robert W. Kloss
-------------------
Registrar President
Modified Premium Variable Life Insurance Policy with variable insurance amount.
Insurance payable only upon death.
Schedule premiums payable throughout Insured's lifetime.
Provision for optional additional premiums.
Benefits reflect premium payments, investment results and mortality charges.
Guaranteed Minimum Death Benefit if scheduled premiums duly paid.
Participating.
<PAGE> 2
POLICY SUMMARY
This is a variable life insurance policy.
Premiums are to be paid throughout the Insured's lifetime. We have specified a
schedule of premiums which must be paid to keep this Policy in full force. Under
certain conditions, payment of a scheduled premium may not be required to keep
this Policy in full force. You will be notified if a scheduled premium payment
is not required. At your option, additional premiums may be paid, subject to the
policy provisions.
The Cash Value and Death Benefit of this Policy will vary with the payment of
premiums, the investment performance of the Separate Accounts to which your
premiums are allocated, and the extent to which mortality charges are less than
the guaranteed maximums. If all scheduled premiums are paid in accordance with
the schedule, this Policy will not lapse, even if adverse investment experience
has resulted in a zero or negative Cash Value.
The Guaranteed Minimum Death Benefit is the Face Amount. If this Policy has
lapsed, coverage may end or this Policy may stay in force with reduced benefits.
If either occurs, you may be able to reinstate this Policy within 3 years with
full benefits.
To compute the Proceeds payable upon the Insured's death, we start with the
Death Benefit and adjust this amount if there is a loan or if required premiums
are unpaid. If you surrender this Policy, the Proceeds will be the net cash
surrender value.
We will pay the Proceeds in one sum unless a Payment Option is in force. If you
elect a Payment Option, it will apply to Proceeds paid to you if you surrender
this Policy or those paid to the Beneficiary when the Insured dies. If a Payment
Option is not in force when the Insured dies, the Beneficiary will be able to
elect a Payment Option for the Proceeds at Death.
As Policy Owner, you have these rights in this Policy, among others:
- You may borrow on this Policy.
- You may surrender this Policy.
- You may change the Beneficiary.
- You may change the allocation of future net premiums among the
Separate Accounts.
- You may transfer amounts among Separate Accounts.
DEFINITIONS
ATTAINED AGE. The Issue Age of the Insured plus the length of time since the
Policy Date.
BASE PREMIUM. Total scheduled premium for this Policy minus the premium
processing charge and premiums for supplementary benefits and Extra Premium
Class.
INSURED. The person named as the Insured on the first page. He or she need not
be the Owner.
NET CASH VALUE. The Cash Value minus the sum of policy loans and accrued
interest.
NET PREMIUM. The remainder of a Base Premium or unscheduled premium after
deduction of the Premium Expense Charges.
POLICY ANNIVERSARY. The same day and month as the Policy Date in each later
year.
POLICY PROCESSING DAY. The day in each calendar month which is the same day of
the month as the Policy Date.
POLICY YEAR. A year that starts on the Policy Date or on a Policy Anniversary.
PROCEEDS. The net amount to be paid when the Insured dies or this Policy is
surrendered.
WE, OUR, US AND COMPANY. Provident Mutual Life Insurance Company of
Philadelphia, a Pennsylvania Corporation.
YOU AND YOUR. The Owner of this Policy.
Page 2
<PAGE> 3
POLICY DATA
INSURED A A
POLICY NUMBER 7,999,991 NOV 1, 1994 ISSUE DATE
FACE AMOUNT $75,000 01 - FEMALE ISSUE AGE, SEX
NOV 1, 1994 POLICY DATE
PREMIUM CLASS STANDARD
* * * * *
BENEFITS
VARIABLE WHOLE LIFE INSURANCE
* * * * *
SHORTLY BEFORE ATTAINED AGE 22, WE WILL NOTIFY THE INSURED ABOUT POSSIBLE
CLASSIFICATION AS A NON-SMOKER. IF THE INSURED DOES NOT QUALIFY FOR NON-SMOKER
STATUS OR DOES NOT RETURN THE APPLICATION FORM, WE WILL CLASSIFY THE INSURED AS
A SMOKER AND COST OF INSURANCE RATES WILL BE DETERMINED IN ACCORDANCE WITH SUCH
CLASSIFICATION.
* * * * *
3
<PAGE> 4
POLICY DATA (CONTINUED)
PAYMENT OF SCHEDULED PREMIUMS
SCHEDULED PREMIUMS ARE PAYABLE ON THE POLICY DATE AND AT INTERVALS OF 12 months
after that date, as follows:
<TABLE>
<CAPTION>
Total Base
Beginning: Premium* Premium
<S> <C> <C>
NOVEMBER 1, 1994 309.00 308.00
NOVEMBER 1, 2063 1074.00 1073.00
</TABLE>
The Premium Change Date is NOVEMBER 1, 2063
* Includes $1.00 premium processing charge described below.
* * * *
SCHEDULE OF CHARGES DEDUCTED FROM SCHEDULED PREMIUM PAYMENTS
PREMIUM EXPENSE CHARGE. A Premium Expense Charge consisting of the following
is deducted from each scheduled premium:
1. $l.00 from the total scheduled premium for premium processing.
2. 7.5% of the Base Premium for Sales Charges (5%) and State
Premium Tax Charge (2.5%).
AFTER DEDUCTION OF THESE AMOUNTS, WE ALLOCATE THE NET PREMIUM TO THE SEPARATE
Accounts you have chosen for scheduled premiums.
* * * *
PAYMENT OF UNSCHEDULED PREMIUMS
The minimum unscheduled premium is $25. After deduction of $1.00 for premium
processing and 7.5% of the remaining amount of the unscheduled premium for Sales
Charges and State Premium Tax Charges, we allocate the Net Premium to the
SEPARATE ACCOUNTS ACCORDING TO THE ALLOCATION then in effect for scheduled
premiums, unless you notify us of a different allocation.
* * * *
4
<PAGE> 5
POLICY DATA (CONTINUED)
SCHEDULE OF MONTHLY DEDUCTIONS FROM CASH VALUE
The following charges are deducted from the Cash Value on each Policy Processing
Day, starting with the Policy Date:
1. Cost of insurance charge - based on no greater than the
guaranteed rates shown on page 7;
2. Administration charge - $4.37;
3. MINIMUM DEATH BENEFIT GUARANTEE CHARGE - $0.75;
4. First year Policy charge - $5.00 for each of the first 12
Policy months.
SCHEDULE OF MAXIMUM SURRENDER CHARGES
If you surrender this Policy or if this Policy lapses, we will determine the
CASH SURRENDER VALUE AS DESCRIBED IN THE CASH Surrender Value provision. The
TOTAL SURRENDER CHARGE SHOWN BELOW IS THE maximum charge based on the premium
payment frequency shown on page 4 which we can deduct from the Cash Value in the
applicable Policy Year.
<TABLE>
<CAPTION>
CONTINGENT TOTAL
POLICY DEFERRED DEFERRED SURRENDER
YEAR ADMINISTRATIVE CHARGE SALES CHARGE CHARGE
------ --------------------- ------------ ---------
<S> <C> <C> <C>
1 $375.00 $ 77.00 $452.00
2 375.00 92.40 467.40
3 375.00 107.80 482.80
4 375.00 123.20 498.20
5 375.00 138.60 513.60
6 300.00 123.20 423.20
7 225.00 92.40 317.40
8 150.00 61.60 211.60
9 75.00 30.80 105.80
10 and later ZERO ZERO ZERO
</TABLE>
* * * *
5
<PAGE> 6
POLICY DATA (CONTINUED)
DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE FACTOR AGE FACTOR AGE FACTOR
- -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
1 12.90 34 4.40 67 1.71
2 12.53 35 4.25 68 1.67
3 12.16 36 4.11 69 1.63
4 11.79 37 3.98 70 1.59
5 11.43 38 3.85 71 1.56
6 11.08 39 3.73 72 1.52
7 10.73 40 3.61 73 1.49
8 10.39 41 3.50 74 1.46
9 10.05 42 3.40 75 1.43
10 9.73 43 3.29 76 1.40
11 9.41 44 3.19 77 1.37
12 9.10 45 3.10 78 1.35
13 8.80 46 3 01 79 1.33
14 8.51 47 2.92 80 1.30
15 8.23 48 2.84 81 1.28
16 7.96 49 2.76 82 1.26
17 7.70 50 2.68 83 1.24
18 7.45 51 2.60 84 1.23
19 7.21 52 2.53 85 1.21
20 6.98 53 2.46 86 1.19
21 6.75 54 2.40 87 1.18
22 6.53 55 2.33 88 1.17
23 6.32 56 2.27 89 1.15
24 6.12 57 2.21 90 1.14
25 5.92 58 2.15 91 1.13
26 5.73 59 2.10 92 1.12
27 5.54 60 2.04 93 1.11
28 5.36 61 1.99 94 1.09
29 5.19 62 1.94 95 1.08
30 5.02 63 1.89 96 1.07
31 4.85 64 1.84 97 1.05
32 4.70 65 1.79 98 1.04
33 4.54 66 1.75 99 1.02
</TABLE>
6
<PAGE> 7
POLICY DATA (CONTINUED)
GUARANTEED MONTHLY COST OF INSURANCE RATES PER 51,000 NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
- -------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C>
1 0.0725 34 0.1550 67 1.8852
2 0.0675 35 0.1617 68 2.0207
3 0.0658 36 0.1742 69 2.1730
4 0.0642 37 O.l900 70 2.3346
5 0.0633 38 0.2075 71 2.5440
6 0.0608 39 0.2276 72 2.8037
7 0.0600 40 0.2501 73 3.1205
8 0.0583 41 0.2776 74 3.4905
9 0.0575 42 0.3034 75 3.9018
10 0.0567 43 0.3301 76 4.3456
11 0.0575 44 0.3568 77 4.8114
12 0.0600 45 0.3843 78 5.2971
13 0.0625 46 0.4127 79 5.8178
14 0.0667 47 0.4427 80 6.3956
15 0.0708 48 0.4736 81 7.0493
16 0.0750 49 0.5069 82 7.7970
17 0.0792 50 0.5453 83 8.6466
18 0.0817 51 0.5837 84 9.6463
19 0.0850 52 0.6271 85 10.6472
20 0.0875 53 0.6780 86 11.7865
21 0.0892 54 0.7297 87 12.8864
22 0.1008 55 0.7839 88 14.1328
23 0.1025 56 0.8382 89 15.3203
24 0.1058 57 0.8900 90 16.6915
25 0.1075 58 0.9384 91 18.1571
26 0.1117 59 0.9885 92 19.7613
27 0.1150 60 1.0436 93 21.5852
28 0.1183 61 1.1469 94 23.8305
29 0.1233 62 1.2006 95 27.1616
30 0.1292 63 1.3167 96 32.3238
31 0.1342 64 1.4463 97 41.2120
32 0.1400 65 1.59l7 98 57.8139
33 0.1459 66 1.7355 99 90.9091
</TABLE>
The company has the right to change the cost of insurance deducted under the
policy which may require more premium to be paid than was illustrated or the
cash values may be less than those illustrated.
7
<PAGE> 8
POLICY SCHEDULE
(CONTINUED)
ALLOCATION OPTIONS
SCHEDULE A-1
THE MARKET STREET FUND, INC.:
Provident Mutual Variable Large Cap Growth Subaccount
Provident Mutual Variable Large Cap Value Subaccount
Provident Mutual Variable Small Cap Growth Subaccount
Provident Mutual Variable Small Cap Value Subaccount
Provident Mutual Variable Growth Separate Account
Provident Mutual Variable Aggressive Growth Separate Account
Provident Mutual Variable Bond Separate Account
Provident Mutual Variable Managed Separate Account
Provident Mutual Variable Money Market Separate Account
Provident Mutual Variable International Separate Account
SCHEDULE A-2
THE ALGER AMERICAN FUND:
Alger American Small Capitalization Subaccount
VARIABLE INSURANCE PRODUCTS FUND (VIP) OR THE
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
Fidelity Asset Manager Subaccount (VIP II)
Fidelity Contrafund Subaccount (VIP II)
Fidelity Equity-Income Subaccount (VIP)
Fidelity Growth Subaccount (VIP)
Fidelity High Income Subaccount (VIP)
Fidelity Index 500 Subaccount (VIP II)
Fidelity Investment Grade Bond Subaccount (VIP II)
Fidelity Overseas Subaccount (VIP)
Page 8
<PAGE> 9
POLICY SCHEDULE
(CONTINUED)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
Neuberger & Berman Limited Maturity Bond Subaccount
VAN ECK WORLDWIDE INSURANCE TRUST:
Van Eck Worldwide Bond Subaccount
Van Eck Worldwide Emerging Markets Subaccount
Van Eck Worldwide Hard Assets Subaccount
Van Eck Worldwide Real Estate
SCHEDULE A-3
PROVIDENT MUTUAL VARIABLE ZERO COUPON BOND SEPARATE ACCOUNT:
Maturity Date of Series: February 15, 2006
Page 8A
<PAGE> 10
GENERAL PROVISIONS:
THE CONTRACT. This Policy and the Application, a copy of which is attached, form
the whole contract. We assume that all statements in the Application were made
to the best of the knowledge and belief of the person(s) who made them; in the
absence of fraud they are assumed to be representations and not warranties. We
relied on those statements when we issued this Policy. We will not use any
statement, unless made in the Application, to void this Policy or to deny a
claim.
POLICY MODIFICATIONS. Only the President or a Vice President of the Company may
agree to modify this Policy, and then only in writing.
SUICIDE EXCLUSION. If the Insured, whether sane or insane, dies by suicide
within two years from the Issue Date, our payment will be limited to the sum of
premiums paid, minus any loan and loan interest and any withdrawals of excess
Cash Value.
MISSTATEMENT OF AGE OR SEX. If the Insured's stated age or sex is not correct,
the Face Amount of this Policy will be corrected to that which the scheduled
premium would have purchased at the correct age and sex. We will recalculate the
Cash Value from the Date of Issue using mortality charges based on the Insured's
correct age and sex and the corrected Face Amount. The Death Benefit will be
determined in accordance with the Death Benefit Provisions based on this
recalculated Cash Value. If the Issue Age is not correct we will change the
Premium Change Date shown in the Policy Data for the Insured's correct age.
INCONTESTABILITY. We will not contest this Policy after it has been in force
during the Insured's lifetime for two years from the Issue Date, except for
nonpayment of premiums. See any supplementary benefit riders for modifications
that apply to them.
ANNUAL REPORT. Each year we will send you a report. It will show: (1) the
current Death Benefit; (2) any policy loans and the accrued interest; (3) the
current Cash Value; (4) the net cash surrender value; (5) scheduled and
unscheduled premiums paid since the last report; (6) charges deducted since the
last report; (7) any withdrawals of excess Cash Value since the last report; and
(8) any other information that may be required when and where this Policy is
delivered.
You may ask for a similar report at some other time during the year. We have
the right to make a reasonable charge for the reports that you ask for, and to
limit the scope and frequency of such reports.
PAYMENTS. We will usually pay any amounts payable as a result of surrender,
partial withdrawal or policy loan within 7 days after we receive your written
request at our Home Office in a form satisfactory to us. We will usually pay the
Proceeds at Death within 7 days after we receive proof of the Insured's death at
our Home Office and all other requirements deemed necessary are met.
However, payment may be postponed if we are not able to sell securities or
determine the value of the assets of the Separate Accounts because:
1. the New York Stock Exchange is closed;
2. the Securities and Exchange Commission (SEC) requires trading
to be restricted or declares an emergency; or
3. the SEC by order permits us to defer payments for the
protection of policy owners.
DEFERMENT UNDER OPTIONS ON LAPSE. If this Policy is being continued under one
of the Options on Lapse, we may defer payment of a Cash Value and the making of
a loan for up to six months after we receive your written request at our Home
Office. We will allow interest, at a rate of 3% a year, on any payment we defer
for 30 days or more under this provision.
DIVIDEND PROVISIONS
While this Policy is in force, we will determine its share in our divisible
surplus once a year. Any dividends will be paid on the Policy Anniversary. You
may select one of the Dividend Options listed below. If you do not select any
Option, we will pay dividends under Option 3.
1. CASH. We will pay any dividend to you in cash.
2. REDUCE PREMIUM. We will apply the dividend to payment of any
scheduled premium. If the Special Premium Payment Provision
is in effect, Option 3 will apply.
3. UNSCHEDULED PREMIUM. We will consider the dividend to be an
unscheduled premium payment. We will allocate it to the
Separate Accounts in accordance with the allocation then in
effect for scheduled premiums, unless you notify us of a
different allocation.
Page 10
<PAGE> 11
POLICY OWNER AND BENEFICIARY PROVISIONS
OWNERSHIP. Unless otherwise stated in the Application or later changed, the
Owner of this Policy is the Insured. While the Insured is living, the Owner
alone is entitled to exercise any right and privilege granted by this Policy or
by us. If you, the Owner, are not the Insured and you die while the Insured is
still living, all rights will vest in your estate, unless otherwise provided.
BENEFICIARY. The Beneficiary is as stated in the Application, unless later
changed. When a Beneficiary is designated, any relationship shown is to the
Insured, unless otherwise stated. If two or more persons are named, those
surviving the Insured will share the Proceeds at Death equally, unless otherwise
stated. If none of the persons named survives the Insured, we will pay the
Proceeds at Death in one sum to the Insured's estate.
CHANGES. While the Insured is living, you may change the Owner or Beneficiary by
written notice in a form satisfactory to us. The change will take effect on the
date you sign the notice, except that it will not apply to any payment or other
action we take before we receive the notice at our Home Office. If you change
the Beneficiary, any previous arrangement you made under the Payment Options
provision is cancelled.
ASSIGNMENT. You may assign this Policy; but, we will not be bound by any
assignment unless it is in writing and we have received it at our Home Office.
Your rights and those of any other person referred to in this Policy will be
subject to the assignment. We assume no responsibility for the validity of any
assignments.
PREMIUM PAYMENT PROVISIONS
SCHEDULED PREMIUMS. The amount and frequency of the scheduled premiums are shown
in the Policy Data. The policy's first premium is due on the Policy Date. There
is no coverage under this Policy unless an amount equal to the first scheduled
premium is paid. If scheduled premiums are not paid when due or within the grace
period and the Special Premium Payment Provision is not in effect, this Policy
will lapse. If the premium payment frequency is monthly under a premium payment
plan and such plan is terminated, the premium payment frequency will be changed
to quarterly.
UNSCHEDULED PREMIUMS. Unscheduled premiums may be paid at any time during the
Insured's lifetime, so long as all required scheduled premiums have been paid.
The minimum unscheduled premium we will accept is shown in the Policy Data. We
have the right to limit the number and amount of unscheduled premium payments.
SPECIAL PREMIUM PAYMENT PROVISION. If this provision is in effect, you will not
be required to pay premiums during the following Policy Year. To find out if
this provision is in effect, we will check whether:
1. 2 months before the Policy Anniversary, the Cash Value plus
any scheduled Base Premium payments due before such Policy
Anniversary and not yet paid exceeds the Special Premium
Payment Single Premium; and
2. on the Policy Anniversary, all scheduled Base Premium payments
have been paid.
If these conditions are met, this provision will be in effect from this Policy
Anniversary until the next Policy Anniversary. This provision will be in effect
even if during such Policy Year:
1. you don't make any premium payments; or
2. the Cash Value falls below the Special Premium Payment Single
Premium.
You will be notified if the Special Premium Payment Provision is in effect.
Any premium payments that you make during the time that such provision is in
effect will be considered unscheduled premium payments.
We have filed the method of calculating the Special Premium Payment Single
Premium with the insurance supervisory official of the state in which this
Policy is delivered.
PREMIUM CHANGE. The Premium Change Date is the Policy Anniversary nearest the
Insured's Attained Age 70, or at the end of Policy Year 15, if later. Two months
prior to the Premium Change Date, we will recompute the premium amount payable
on and after such date. This recomputed premium amount will not be higher than
the amount shown in the Policy Data for the Premium Change Date.
GRACE PERIOD. We will allow a 61-day grace period from the due date for payment
of each scheduled premium after the first. This Policy will not lapse during the
grace period. If you pay the premium during the grace period, we will credit
your payment to this Policy as of the date we receive it. If you do not pay the
premium by the end of its grace period, this policy will lapse as of the date on
which such scheduled premium was due, unless the Special Premium Payment
Provision is in effect. If lapse occurs, all coverage ends, except as stated in
the Options of Lapse provisions.
Page 11
<PAGE> 12
REINSTATEMENT. If this Policy lapses you may reinstate it if all of these
conditions are met:
1. You make your request within 3 years of the date of lapse;
2. You have not surrendered this Policy for its net cash
surrender value;
3. You provide evidence, satisfactory to us, that the Insured is
insurable; and
4. You pay a premium of an amount at least equal to the greater
of:
a. all unpaid total scheduled premiums with interest at
6% per year compounded annually, plus any policy
loan and accrued loan interest in effect at the end
of the grace period; or
b. 110% of the increase in cash surrender value
resulting from reinstatement plus all overdue
premiums for supplementary benefits with interest at
6% per year compounded annually.
If this Policy has a variable loan interest rate, the loan interest will be
determined in accordance with the Effect on Reinstatement provision of the
Variable Loan Interest Rate Rider which is attached to this Policy.
Upon reinstatement, this Policy will have the same Cash Value and Death Benefit
as if it had not lapsed and all scheduled premiums were paid when due.
The date of reinstatement will be the date we approve your application for
reinstatement.
OPTIONS ON LAPSE
If this Policy lapses you have a number of options:
1. You may apply for reinstatement; or
2. You may surrender this Policy for its net cash surrender
value, if any; or
3. You may continue insurance under Extended Term Insurance; or
4. You may continue insurance under Reduced Paid Up Insurance.
REDUCED PAID UP INSURANCE. This is fixed benefit insurance for the Insured's
lifetime for the amount that the net cash surrender value as of the date this
Option is applied, plus monthly deductions on any Policy Processing Day on or
after the date of lapse, will buy.
EXTENDED TERM INSURANCE. This is fixed benefit term insurance for an amount
equal to the Death Benefit on the date of lapse, minus any unpaid loan and loan
interest. The coverage will begin from the date of lapse and continue for as
long a term period as the net cash surrender value as of the date this Option is
applied, plus monthly deductions on any Policy Processing Day on or after the
date of lapse, will buy. This Option is not available if:
1. any part of the Premium Class shown in the Policy Data is
"Extra Premium"; or
2. the amount of paid up insurance available would be greater
than that of the extended term.
An Option on Lapse will become effective as of the date of lapse. We will use
net single premiums for the Insured's Attained Age as of the date of lapse. We
will apply the Option on:
1. the date we receive your written request at our Home Office;
or
2. if we apply an Option automatically, 3 months after the date
of lapse (the due date of any unpaid premium required to keep
this Policy in full force).
If your written request is not received within 3 months after the date of
lapse, we will automatically apply the Extended Term Insurance Option at the end
of such 3-month period; if Extended Term Insurance is not available, we will
apply the Reduced Paid Up Insurance Option. If the Insured dies after the grace
period but within 3 months from the date of lapse, the greater of the benefit
available under Extended Term Insurance or Reduced Paid Up Insurance will apply.
PREMIUM EXPENSE CHARGE
The Premium Expense Charge consist of the following:
1. premium processing charge;
2 sales charge; and
3. charge for state premium taxes.
After the premium processing charge has been deducted, the sales charge and
charge for state premium taxes will be deducted from the remaining amount of
each scheduled Base Premium paid and any unscheduled premium payment. The
amounts of these charges are shown in the Policy Data.
Page 12
<PAGE> 13
THE SEPARATE ACCOUNTS
Separate Accounts will be used to support the operation of this Policy and to
support other variable life insurance policies. We will not allocate assets to
the Separate Accounts to support the operation of any contracts or policies that
are not variable life insurance.
The term "Separate Account" as used in this Policy includes any Sub-Account of
a Separate Account.
We own the assets in the Separate Accounts. However, these assets are not part
of our General Account. Income, gains and losses, whether or not realized, from
assets allocated to a Separate Account will be credited to or charged against
the account without regard to our income, gains or losses.
The Separate Accounts are described in the Policy Data. The Separate Accounts
will invest in shares or units or their respective portfolios or series. The
Separate Accounts are treated as a unit investment trust under federal
securities laws. They are registered with the Securities and Exchange Commission
(SEC) according to the Investment Company Act of 1940 (1940 Act).
The Separate Accounts are subject to the laws of the Commonwealth of
Pennsylvania which regulate the operations of insurance companies incorporated
in Pennsylvania. The investment policies of the Separate Accounts will not be
changed without the approval of the Pennsylvania Commissioner of Insurance. The
approval process has been filed with the insurance supervisory official of the
state in which this Policy is delivered.
We have the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for, the shares or units of an
investment company that are held by the Separate Accounts or that the Separate
Accounts may purchase. We reserve the right to eliminate the shares or units of
an eligible portfolio or series, and to substitute shares or units of another
portfolio or series, or another fund, if the shares or units of the portfolio or
series are no longer available for investments, or if in our judgment further
investment in the portfolio or series should become inappropriate in view of the
purposes of the Separate Account. In the event of any substitution or change,
we may, subject to your written approval and by appropriate endorsement, make
such changes in this and other policies as may be necessary or appropriate to
reflect the substitution or change.
We also reserve the right to transfer assets of a Separate Account, which
we determine to be associated with the class of policies to which this Policy
belongs, to another Separate Account. If this type of transfer is made, the
Separate Account specified in this Policy shall then refer to the Separate
Account to which the assets were transferred.
The Policy Owner will share only in the income, gains and losses of the
particular Separate Accounts to which your Net Premium payments have been
allocated or to which Cash Value has been transferred.
That portion of the assets of the Separate Accounts which equals the reserves
or other policy liabilities of the policies which are supported by the Separate
Accounts will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our General Account any assets of the
Separate Accounts which are in excess of such reserves and other policy
liabilities.
When permitted by law, we also reserve the right:
1. to create additional Separate Accounts; to create Sub-Accounts from,
or combine or remove Sub-Accounts from, Separate Accounts; or to
combine any two or more Separate Accounts;
2. to operate any one or more of the Separate Accounts as a management
investment company under the 1940 Act or in any other form permitted
by law;
3. to deregister the unit investment trusts under the 1940 Act;
4. to modify the provisions of this Policy to comply with applicable
laws, subject to your written approval;
5. to restrict or eliminate any voting rights of policyholders or other
persons who have voting rights as to the Separate Accounts.
We will value the assets of the Separate Accounts on each business day.
If you object to a material change in the investment policy of a Separate
Account, you have the right to exchange this Policy for a fixed-benefit policy,
as described in the Exchange of Policy provisions. No evidence of insurability
will be required. We will notify you of the options available and the procedures
to follow if you decide to make an exchange. You must make an exchange within
six months after the change in investment policy becomes effective. The face
amount of the new policy may not exceed the Face Amount of this Policy.
Page 13
<PAGE> 14
INVESTMENT OPTIONS
ALLOCATION OF NET PREMIUMS. We will allocate the first scheduled Net Premium to
the Separate Accounts on the later of the Issue Date or the date we receive the
premium payment. We will allocate Net Premium payments after the first
scheduled premium to the Separate Accounts on the date we receive such premium
payments. We will base the allocations on the allocation percentages chosen by
you then in effect. The allocation percentages for the first scheduled premium
are shown in the Policy Data. Unless you change these percentages, they will
also apply in later years to scheduled and unscheduled premium payments. You
may change the allocation percentages by notifying us in writing of the new
percentages. Each allocation percentage must be a whole number. You must
allocate at least 10% to each Separate Account chosen. You may choose
different Separate Accounts and allocation percentages for scheduled and
unscheduled premiums.
TRANSFER OF CASH VALUES. You may ask us to transfer all or part of your Cash
Value in one of the Separate Accounts to any of the others. The amount of the
transfer must be at least $100 or the entire balance if less than $100. If the
transfer would leave less than $100 in a Separate Account, we reserve the right
to transfer the entire amount. You may make a maximum of 4 such transfers in a
Policy Year. We will make the transfer as of the date we receive your written
request at our Home Office.
EXCHANGE OF POLICY
RIGHT TO EXCHANGE. You may exchange this Policy for a new policy of permanent
fixed benefit insurance on the life of the Insured, subject to the Conditions of
Exchange below. We will not require evidence that the Insured is insurable.
CONDITIONS OF EXCHANGE. Your right to make this exchange is subject to the
following conditions:
1. This Policy must be in full force;
2. You must ask for the exchange in writing on our form;
3. Your request must be made within:
a. 24 months after the Issue Date shown in the Policy Data; or
b. 6 months after the effective date of a material change in
investment policy of a Separate Account to which Net Premiums are
allocated;
4. You must repay any loan and loan interest under this Policy;
5. You must pay any other charges required for the exchange; and
6. You must return this Policy to us.
NEW POLICY. The new policy will be a whole life policy with a level face amount
equal to the Face Amount of this Policy. It will be for the same Issue Age,
Issue Date and Premium Class as this Policy. Premiums for the new policy will be
based on the premium rates for such policy which were in effect on the Policy
Date for this Policy. Any supplementary benefit riders in this Policy will be
included in the new policy only if such riders were available with the new
policy as of its Issue Date.
ADJUSTMENTS ON EXCHANGE. The exchange will be subject to equitable adjustments
to take into account:
1. differences in the premiums and Cash Valves between this Policy and
the new policy;
2. dividends under this Policy and the new policy;
3. the impact of investment experience of the Separate Accounts of this
Policy on the Cash Value of this Policy.
DATE OF EXCHANGE. The date of exchange will be the later of:
1. the date you send us this Policy and the signed request on our form
for such exchange;
2. the date we receive at our Home Office any sum due to be paid for the
exchange.
DEATH BENEFIT PROVISIONS
If the Insured dies while this Policy is in full force, we will pay the Proceeds
at Death to the Beneficiary.
DEATH BENEFIT. The Death Benefit is the greatest of:
1. the Face Amount shown in the Policy Data;
2. the Face Amount plus the excess of the Cash Value on the date of death
over the applicable Special Premium Payment Single Premium; or
3. the Cash Value on the date of death times the Death Benefit Factor
shown in the Policy Data for the Insured's Attained Age on the date of
death.
Page 14
<PAGE> 15
AMOUNT OF PROCEEDS AT DEATH. The Proceeds at Death will be equal to:
the sum of:
1. the Death Benefit;
2. any dividend payable at death;
3. any additional benefits due under a supplementary benefit rider
attached to this Policy; and
4. any part of the last scheduled premium paid that applies to a period
beyond the date of death;
less the sum of:
1. loan and loan interest on this Policy;
2. if the death of the Insured occurs during the grace period, any
scheduled premiums required to keep this Policy in full force.
PAYMENT OF PROCEEDS AT DEATH. We will pay the Proceeds at Death to the
Beneficiary in a lump sum, unless a Payment Option has been selected. If such
Proceeds are payable in a lump sum, we will add interest to the amount of such
Proceeds for the period from the date of death to the date of payment. The
amount of interest will be computed at the yearly rate of 3% or any higher rate
declared by us or required by law.
CASH VALUE PROVISIONS
CASH VALUE. Assuming no policy loans, the total Cash Value of this Policy at any
time is the sum of the policy's Cash Values in the Separate Accounts. If there
is an outstanding policy loan, the Cash Value in the General Account will be
added to the total Cash Value of the Separate Accounts to determine the total
Cash Value of this Policy. The Cash Value may increase or decrease on each
Valuation Day depending upon the investment return of the Separate Accounts to
which your Net Premiums have been allocated. There is no guaranteed minimum Cash
Value for this Policy.
CASH SURRENDER VALUE. THE cash surrender value at any time during the first 9
Policy Years is the Cash Value at that time minus a Surrender Charge. This
Surrender Charge has two parts: the Deferred Administrative Charge and the
Contingent Deferred Sales Charge. A Schedule of Maximum Surrender Charges for
this Policy is shown in the Policy Data. Since there are no Surrender Charges in
years 10 and later, the Cash Value and cash surrender value are the same for
such years.
In no event will the Contingent Deferred Sales Charge be greater than 25% of
the Base Premiums due for Policy Year 1, plus 5% of the Base Premiums due in
Policy Years 2 through 5. We will determine the Contingent Deferred Sales Charge
based on the lesser of Base Premiums due and the total of Base Premiums and
unscheduled premiums paid.
SURRENDER OF POLICY. You may surrender this Policy for its net cash surrender
value. The net cash surrender value at any time is the cash surrender value at
that time minus loans and loan interest. We will determine the net cash
surrender value on the date we receive your signed surrender request at our
Home Office. This Policy will end on the date you send the surrender request to
us.
WITHDRAWAL OF EXCESS CASH VALUE. You may make a partial withdrawal of Cash
Value. However you may not:
1. withdraw more than the excess of the cash surrender value over the
Withdrawal Single Premium for the Insured's Attained Age;
2. withdraw more than the amount sufficient to reduce the net loan value
(loan value less existing policy loan and accrued interest) to zero;
3. withdraw less than $300; or
4. make more than four withdrawals in a Policy Year.
Unless otherwise specified, withdrawals will be made from Separate Accounts on
a pro-rata basis. You may not repay a withdrawn amount, except as scheduled or
unscheduled premium payments subject to Premium Expense Charges.
We have filed the method of calculating the Withdrawal Single Premium with the
insurance supervisory official of the state in which this Policy is delivered.
The Death Benefit will be recalculated when you make a withdrawal and will be
as described in the Death Benefit Provisions. However, the Guaranteed Minimum
Death Benefit will not change, nor will the amount of the next scheduled
premium. The amount of scheduled premiums after the Premium Change Date may be
affected by the amount of any partial withdrawal.
Page 15
<PAGE> 16
POLICY LOAN PROVISIONS
You may borrow from the Cash Value of this Policy if:
1. the Insured is living;
2. this Policy is in force other than as Extended Term Insurance; and
3. the loan plus existing indebtedness is not more than the loan value.
LOAN VALUE. The loan value of this Policy is:
1. for Policy Years 1 through 3, 75% of the cash surrender value;
2. for Policy Years 4 and thereafter, 90% of the cash surrender value.
You may borrow any amount up to the difference between the loan value and the
existing policy loan with accrued interest. Except when used to pay premiums, a
loan must be for at least $300. Unless the Special Premium Payment Provision is
in effect, we will deduct any unpaid scheduled premiums from the loan proceeds.
INTEREST RATE CHARGED ON LOANS. We will charge interest on any loan. The
interest will accrue from day to day. You must choose to have interest charged
at either:
1. a fixed yearly rate of 8%, or
2. a variable loan rate.
If you have chosen to have loan interest charged at a variable rate, the rate
in effect on the Issue Date of this Policy is shown in the Policy Data. We will
adjust this rate in accordance with the Variable Loan Interest Rate (VLIR) Rider
attached to this Policy.
If you have chosen to have interest charged at the fixed rate, you may change
to a variable rate on the Policy Anniversary after we receive your written
request at our Home Office.
Interest is due at the end of each Policy Year. If you do not pay the interest
when it is due, we will add it to the loan. We will then begin to charge
interest on it, too. If on the Policy Anniversary the outstanding loan plus
accrued interest exceeds the cash surrender value, we will mail you and any
assignee of record, at your last known addresses, a notice that this Policy will
end if the excess amount is not repaid within 31 days after we mail such notice.
In no event will the required payment exceed the amount of the accrued interest
plus all due and unpaid scheduled premiums.
INTEREST RATE CREDITED ON LOANS. When you borrow on this Policy, the amount of
the loan continues to be a part of the Cash Value and is credited with interest
at a rate of 1.5% less than the policy loan interest rate being charged.
EFFECT OF LOANS. We will transfer the amount of the loan, and loan interest that
becomes part of the loan because it is not paid when due, from the Separate
Accounts to the General Account. The amount we transfer does not share in the
investment experience of the Separate Accounts. We transfer loan repayments and
loan interest credits from the General Account to the Separate Accounts. Since
the amount of the loan is removed from the Separate Accounts, a loan will have a
permanent effect on the Cash Value of this Policy. The longer the loan is
outstanding, the greater this effect is likely to be. The loan may also affect:
1. the cash surrender value;
2. any Death Benefit in excess of the Guaranteed Minimum Death Benefit;
3. whether the Special Premium Payment Provision is in effect; and
4. the amount of the scheduled premiums after the Premium Change Date.
ALLOCATION OF LOANS AND LOAN REPAYMENTS. We will allocate loans and repayments
among the Separate Accounts in proportion to the Net Cash Value in each Separate
Account as of the date of the loan or repayment.
AUTOMATIC PREMIUM LOAN. You may elect the Automatic Premium Loan provision in
the Application, or by written request after this Policy is issued and while it
is in full force. This provision will be operative only when premiums on this
Policy are payable every three, six or twelve months. Under this provision, a
loan will be made as of the last day of the grace period to pay a scheduled
premium provided:
1. you have not paid the scheduled premium as of the last day of the
grace period;
2. the Special Premium Payment Provision is not in effect; and
3. the loan, together with any existing indebtedness does not exceed the
loan value of this Policy. If the loan required to pay the premium and
the existing indebtedness would exceed the loan value of this Policy,
the Automatic Premium Loan provision will not apply and the Options on
Lapse provisions will apply.
You may revoke the election of this provision at any time by written request.
The revocation will only apply to premiums payable thereafter.
Page 16
<PAGE> 17
PAYMENT OPTIONS
Payments under these Options will not be affected by the investment experience
of any Separate Account after Proceeds are applied under such Options.
Instead of being paid in one sum, the Proceeds of this Policy may be paid
under one of the Options below.
OPTION 1 - PROCEEDS AT INTEREST. We will pay interest on the Proceeds at 12, 6,
3 or 1 month intervals, as elected. The interest per interval for each $1,000 of
Proceeds is shown in the table below:
<TABLE>
<CAPTION>
INTERVAL IN MONTHS AMOUNT OF INTEREST
<S> <C>
12 $30.00
6 14.89
3 7.42
1 2.47
</TABLE>
OPTION 2 - INSTALMENTS OF A SPECIFIED AMOUNT. We will pay the Proceeds in equal
instalments of the amount elected with our consent at 12, 6, 3 or 1 month
intervals. We will add interest on the balance of Proceeds to such balance each
year. We will pay instalments until the Proceeds and interest are exhausted. The
last instalment will be for the balance only of the Proceeds and interest.
OPTION 3 - INSTALMENTS FOR A SPECIFIED PERIOD. We will pay the Proceeds in the
number of equal monthly instalments certain set forth in the election. We will
base the amount of each instalment on the Option 3 table. If so elected, the
instalments may be paid at 12, 6 or 3 month intervals. The amount of each
instalment in such case will be the product of the monthly instalment and the
factor shown in the table below:
<TABLE>
<CAPTION>
FACTOR APPLIED TO
INTERVAL IN MONTHS MONTHLY INSTALMENT
<S> <C>
12 11.839
6 5.963
3 2.993
</TABLE>
OPTION 4 - LIFE INCOME. We will use the Proceeds to provide equal monthly
instalments during the payee's life. We will pay the instalments, as elected,
either without instalments certain or with instalments certain for 120 months,
for 240 months, or until the Proceeds are refunded.
"Until the Proceeds are refunded" means until the sum of the instalments paid
by us equals the amount of Proceeds settled under this Option. We will base the
amount of each instalment on the Option 4 table.
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME. We will use the Proceeds to provide
equal monthly instalments, with a number of instalments certain, during the
joint lives of the payee and one other person and during the life of the
survivor.
We will pay the instalments certain for either 120 or 240 months, as elected.
We will base the amount of each instalment on the Option 5 table.
DATE OF FIRST PAYMENT. We will make the first payment under Option 1 at the end
of the first payment interval. We will make the first payment under Option 2,
3, 4 or 5 on the date on which the Option takes effect.
INTEREST. The interest rate underlying all of the above Options is 3% per year.
Additional interest may be declared each year by us. Such additional interest
will:
1. increase the interest payment under Option 1;
2. be added to the Proceeds under Option 2; or
3. increase the instalments certain under Option 3, 4 or 5.
WITHDRAWAL OR COMMUTATION. If expressly provided in the election of the Option
but not otherwise, the payee will have the right to:
1. withdraw all or part of the balance of the Proceeds under Option 1 or
2; or
2. take in one sum the commuted value of any balance of the instalments
certain under Option 3, 4, or 5.
Partial withdrawals will be subject to our published minimum amount limits in
effect at the time the Option is elected. Such commuted value will be based on
compound interest at a yearly rate of 3%. Under Option 4 or 5, no instalments
other than instalments certain may be commuted.
We may defer payment of the amount withdrawn or commuted for a period not
exceeding 6 months.
SETTLEMENT AT DEATH OF PAYEE. After the death of the payee (the survivor in the
case of Option 5), we will make payment as directed in the election of the
Option. Such direction is subject to our approval.
The amount subject to such payment will be:
1. any balance of Proceeds, with accrued interest, under Option 1 or 2;
or
2. the value of any remaining instalment certain under Option 3, 4 or 5.
ALTERNATE LIFE INCOME OPTION. In lieu of payment in one sum, the Proceeds may be
settled under a Life Income Option based on our non-participating single premium
immediate annuity rates.
1. in effect at the time of settlement; and
2. adjusted to a due basis.
The income thus produced will be increased by 4%.
Page 17
<PAGE> 18
<TABLE>
<CAPTION>
OPTION 3 - INSTALMENTS FOR A SPECIFIED PERIOD
Monthly Instalments for Each $1,000 of the Proceeds of This Policy Settled Under Option 3
- ----------------------------------------------------------------------------------------------------------------------------------
Monthly Instalments Certain
- ----------------------------------------------------------------------------------------------------------------------------------
No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 $ 84.47 72 $ 15.14 132 $ 8.86 192 $ 6.53 252 $ 5.32 312 $ 4.59
24 42.86 84 13.16 144 8.24 204 6.23 264 5.15 324 4.47
36 28.99 96 11.68 156 7.71 216 5.96 276 4.99 336 4.37
48 22.06 108 10.53 168 7.26 228 5.73 288 4.84 348 4.27
60 17.91 120 9.61 180 6.87 240 5.51 300 4.71 360 4.18
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 4 - LIFE INCOME
Monthly Instalments for Each $1,000 of the Proceeds of This Policy Settled Under Option 4
Where the incomes are the same the longer certain period will apply.
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
M Refunded M Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5** $ 2.81 $ 2.81 $ 2.81 $ 2.80 25 $ 3.14 $ 3.14 $ 3.13 $ 3.12
6 2.83 2.82 2.82 2.81 26 3.17 3.16 3.15 3.14
7 2.84 2.84 2.83 2.83 27 3.19 3.19 3.18 3.16
8 2.85 2.85 2.84 2.84 28 3.22 3.22 3.20 3.19
9 2.86 2.86 2.86 2.85 29 3.25 3.24 3.23 3.21
10 2.87 2.87 2.87 2.86 30 3.28 3.27 3.26 3.24
11 2.89 2.89 2.88 2.88 31 3.31 3.30 3.29 3.27
12 2.90 2.90 2.90 2.89 32 3.34 3.33 3.32 3.30
13 2.92 2.91 2.91 2.90 33 3.37 3.37 3.35 3.33
14 2.93 2.93 2.92 2.92 34 3.41 3.40 3.38 3.36
15 2.95 2.95 2.94 2.93 35 3.44 3.44 3.41 3.39
16 2.96 2.96 2.96 2.95 36 3.48 3.48 3.45 3.42
17 2.98 2.98 2.97 2.96 37 3.52 3.51 3.48 3.46
18 3.00 3.00 2.99 2.98 38 3.57 3.56 3.52 3.50
19 3.02 3.01 3.01 3.00 39 3.61 3.60 3.56 3.53
20 3.04 3.03 3.30 3.02 40 3.66 3.64 3.60 3.57
21 3.06 3.05 3.05 3.04 41 3.71 3.69 3.64 3.61
22 3.08 3.07 3.07 3.06 42 3.76 3.74 3.68 3.66
23 3.10 3.09 3.09 3.08 43 3.81 3.79 3.73 3.70
24 3.12 3.12 3.11 3.10 44 3.87 3.85 3.77 3.75
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
M Refunded M Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.93 $ 3.90 $ 3.82 $ 3.80 65 $ 6.10 $ 5.81 $ 5.02 $ 5.43
46 3.99 3.96 3.87 3.85 66 6.29 5.96 5.08 5.56
47 4.05 4.02 3.92 3.90 67 6.50 6.11 5.13 5.70
48 4.12 4.09 3.97 3.96 68 6.73 6.28 5.18 5.85
49 4.19 4.15 4.03 4.01 69 6.97 6.44 5.23 6.00
50 4.27 4.22 4.08 4.08 70 7.23 6.61 5.27 6.16
51 4.34 4.29 4.14 4.14 71 7.51 6.78 5.31 6.33
52 4.43 4.37 4.20 4.20 72 7.80 6.96 5.34 6.51
53 4.51 4.45 4.26 4.27 73 8.12 7.14 5.37 6.70
54 4.60 4.54 4.32 4.35 74 8.45 7.32 5.40 6.90
55 4.70 4.62 4.39 4.42 75 8.82 7.49 5.42 7.11
56 4.80 4.72 4.45 4.50 76 9.21 7.67 5.44 7.33
57 4.91 4.82 4.51 4.58 77 9.62 7.84 5.45 7.56
58 5.03 4.92 4.58 4.67 78 10.07 8.01 5.47 7.80
59 5.15 5.03 4.64 4.76 79 10.55 8.17 5.48 8.05
60 5.28 5.14 4.71 4.86 80 11.06 8.33 5.49 8.32
61 5.42 5.26 4.78 4.96 81 11.61 8.48 5.49 8.60
62 5.57 5.39 4.84 5.07 82 12.19 8.61 5.50 8.89
63 5.74 5.52 4.90 5.19 83 12.81 8.74 5.50 9.20
64 5.91 5.66 4.96 5.30 84 13.46 8.86 5.51 9.52
85+ 14.16 8.97 5.51 9.85
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
F Refunded F Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5** $ 2.75 $ 2.75 $ 2.75 $ 2.74 25 $ 3.02 $ 3.02 $ 3.01 $ 3.01
6 2.76 2.76 2.76 2.75 26 3.04 3.04 3.03 3.02
7 2.77 2.77 2.77 2.76 27 3.06 3.06 3.05 3.04
8 2.78 2.78 2.78 2.77 28 3.08 3.08 3.07 3.06
9 2.79 2.79 2.79 2.78 29 3.10 3.10 3.09 3.09
10 2.80 2.80 2.80 2.79 30 3.13 3.12 3.12 3.11
11 2.81 2.81 2.81 2.80 31 3.15 3.15 3.14 3.13
12 2.82 2.82 2.82 2.82 32 3.18 3.17 3.16 3.15
13 2.83 2.83 2.83 2.83 33 3.20 3.20 3.19 3.18
14 2.85 2.85 2.84 2.84 34 3.23 3.23 3.22 3.20
15 2.86 2.86 2.86 2.85 35 3.26 3.26 3.24 3.23
16 2.87 2.87 2.87 2.86 36 3.29 3.29 3.27 3.26
17 2.89 2.89 2.88 2.88 37 3.32 3.32 3.30 3.29
18 2.90 2.90 2.90 2.89 38 3.35 3.35 3.33 3.32
19 2.92 2.92 2.91 2.91 39 3.39 3.38 3.37 3.35
20 2.93 2.93 2.93 2.92 40 3.42 3.42 3.40 3.38
21 2.95 2.95 2.94 2.94 41 3.46 3.46 3.43 3.42
22 2.96 2.96 2.96 2.95 42 3.50 3.50 3.47 3.45
23 2.98 2.98 2.98 2.97 43 3.54 3.54 3.51 3.49
24 3.00 3.00 2.99 2.99 44 3.59 3.58 3.55 3.53
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
F Refunded F Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.63 $ 3.63 $ 3.59 $ 3.57 65 $ 5.35 $ 5.22 $ 4.79 $ 4.97
46 3.68 3.67 3.63 3.61 66 5.51 5.36 4.86 5.08
47 3.73 3.72 3.68 3.66 67 5.67 5.50 4.93 5.20
48 3.79 3.77 3.72 3.70 68 5.85 5.65 5.00 5.33
49 3.84 3.83 3.77 3.75 69 6.04 5.80 5.06 5.47
50 3.90 3.89 3.82 3.80 70 6.25 5.96 5.12 5.61
51 3.97 3.95 3.88 3.86 71 6.47 6.14 5.18 5.76
52 4.03 4.01 3.93 3.91 72 6.71 6.31 5.23 5.93
53 4.10 4.08 3.99 3.97 73 6.97 6.50 5.28 6.10
54 4.18 4.15 4.04 4.03 74 7.26 6.69 5.32 6.28
55 4.25 4.22 4.11 4.10 75 7.56 6.89 5.35 6.48
56 4.34 4.30 4.17 4.17 76 7.90 7.09 5.39 6.68
57 4.42 4.38 4.23 4.24 77 8.26 7.29 5.41 6.90
58 4.52 4.47 4.30 4.31 78 8.65 7.49 5.43 7.13
59 4.61 4.56 4.37 4.39 79 9.07 7.69 5.45 7.38
60 4.72 4.66 4.44 4.48 80 9.53 7.89 5.47 7.64
61 4.83 4.76 4.51 4.56 81 10.03 8.08 5.48 7.91
62 4.95 4.86 4.58 4.66 82 10.57 8.26 5.49 8.21
63 5.07 4.98 4.65 4.75 83 11.16 8.43 5.49 8.51
64 5.21 5.10 4.72 4.86 84 11.79 8.59 5.50 8.83
85+ 12.48 8.74 5.50 9.18
- -----------------------------------------------------------------------------------
*On birthday nearest to due date of first instalment. **Ages 5 and under. +Ages 85 and over.
</TABLE>
Page 18
<PAGE> 19
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME
Monthly Instalments for Each $1,000 of the Proceeds of This Policy
Settled Under Option 5
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- ----------------------------------------------------------------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* -----------------------------------------------------------------------------------------------------
MALE 50 51 52 53 54 55 56 57 58 59 60 61 62
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.60 $3.63 $3.66 $3.69 $3.72 $3.75 $3.77 $3.80 $3.83 $3.85 $3.88 $3.90 $3.92
51 3.62 3.65 3.68 3.71 3.74 3.77 3.80 3.83 3.86 3.89 3.91 3.94 3.97
52 3.64 3.67 3.70 3.74 3.77 3.80 3.83 3.86 3.89 3.92 3.95 3.98 4.01
53 3.66 3.69 3.72 3.76 3.79 3.82 3.86 3.89 3.92 3.96 3.99 4.02 4.05
54 3.67 3.71 3.74 3.78 3.81 3.85 3.89 3.92 3.96 3.99 4.02 4.06 4.09
55 3.69 3.72 3.76 3.80 3.84 3.87 3.91 3.95 3.99 4.02 4.06 4.10 4.13
56 3.70 3.74 3.78 3.82 3.86 3.90 3.94 3.98 4.02 4.06 4.10 4.13 4.17
57 3.72 3.76 3.80 3.84 3.88 3.92 3.96 4.00 4.05 4.09 4.13 4.17 4.21
58 3.73 3.77 3.81 3.86 3.90 3.94 3.99 4.03 4.08 4.12 4.17 4.21 4.25
59 3.74 3.79 3.83 3.87 3.92 3.96 4.01 4.06 4.10 4.15 4.20 4.25 4.29
60 3.75 3.80 3.84 3.89 3.94 3.98 4.03 4.08 4.13 4.18 4.23 4.28 4.33
61 3.77 3.81 3.86 3.91 3.95 4.00 4.05 4.11 4.16 4.21 4.26 4.32 4.37
62 3.78 3.82 3.87 3.92 3.97 4.02 4.07 4.13 4.18 4.24 4.29 4.35 4.41
63 3.79 3.83 3.88 3.93 3.99 4.04 4.09 4.15 4.21 4.26 4.32 4.38 4.44
64 3.80 3.84 3.90 3.95 4.00 4.06 4.11 4.17 4.23 4.29 4.35 4.41 4.48
65 3.80 3.85 3.91 3.96 4.01 4.07 4.13 4.19 4.25 4.31 4.38 4.44 4.51
70 3.84 3.89 3.95 4.01 4.07 4.13 4.20 4.27 4.34 4.41 4.49 4.57 4.65
75 3.86 3.92 3.98 4.04 4.11 4.17 4.25 4.32 4.40 4.48 4.57 4.66 4.75
80 3.87 3.93 4.00 4.06 4.13 4.20 4.27 4.35 4.44 4.52 4.61 4.71 4.81
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- --------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* ---------------------------------------------
MALE 63 64 65 70 75 80
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.95 $3.97 $3.99 $4.08 $4.14 $4.18
51 3.99 4.01 4.04 4.13 4.20 4.25
52 4.03 4.06 4.08 4.19 4.27 4.32
53 4.08 4.11 4.13 4.25 4.34 4.40
54 4.12 4.15 4.18 4.31 4.41 4.48
55 4.17 4.20 4.23 4.37 4.48 4.56
56 4.21 4.25 4.28 4.44 4.56 4.64
57 4.25 4.29 4.33 4.50 4.64 4.73
58 4.30 4.34 4.38 4.57 4.72 4.82
59 4.34 4.38 4.43 4.64 4.80 4.92
60 4.38 4.43 4.48 4.71 4.89 5.02
61 4.42 4.48 4.53 4.77 4.98 5.12
62 4.46 4.52 4.58 4.84 5.07 5.23
63 4.50 4.56 4.62 4.91 5.16 5.34
64 4.54 4.60 4.67 4.98 5.25 5.45
65 4.58 4.64 4.71 5.05 5.35 5.57
70 4.73 4.82 4.91 5.36 5.81 6.18
75 4.84 4.94 5.05 5.62 6.23 6.78
80 4.91 5.02 5.14 5.79 6.54 7.27
- --------------------------------------------------------
</TABLE>
* On birthday nearest to due date of first instalment. The amount of the
monthly instalment for any combination of ages not shown in this table will
be furnished on request.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
WITH 240 MONTHLY INSTALMENTS CERTAIN
- ----------------------------------------------------------------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* -----------------------------------------------------------------------------------------------------
MALE 50 51 52 53 54 55 56 57 58 59 60 61 62
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.60 $3.63 $3.65 $3.68 $3.71 $3.73 $3.76 $3.79 $3.81 $3.84 $3.86 $3.88 $3.90
51 3.61 3.64 3.67 3.70 3.73 3.76 3.79 3.82 3.84 3.87 3.89 3.92 3.94
52 3.63 3.66 3.69 3.72 3.76 3.79 3.82 3.85 3.87 3.90 3.93 3.95 3.98
53 3.65 3.68 3.71 3.75 3.78 3.81 3.84 3.87 3.90 3.93 3.96 3.99 4.02
54 3.66 3.70 3.73 3.77 3.80 3.83 3.87 3.90 3.93 3.97 4.00 4.03 4.06
55 3.68 3.71 3.75 3.79 3.82 3.86 3.89 3.93 3.96 4.00 4.03 4.06 4.09
56 3.69 3.73 3.77 3.80 3.84 3.88 3.92 3.95 3.99 4.03 4.06 4.10 4.13
57 3.70 3.74 3.78 3.82 3.86 3.90 3.94 3.98 4.02 4.06 4.09 4.13 4.17
58 3.72 3.76 3.80 3.84 3.88 3.92 3.96 4.00 4.04 4.09 4.13 4.16 4.20
59 3.73 3.77 3.81 3.85 3.90 3.94 3.98 4.03 4.07 4.11 4.15 4.20 4.24
60 3.74 3.78 3.82 3.87 3.91 3.96 4.00 4.05 4.09 4.14 4.18 4.23 4.27
61 3.75 3.79 3.84 3.88 3.93 3.97 4.02 4.07 4.12 4.16 4.21 4.26 4.30
62 3.76 3.80 3.85 3.89 3.94 3.99 4.04 4.09 4.14 4.19 4.23 4.28 4.33
63 3.77 3.81 3.86 3.91 3.95 4.00 4.05 4.10 4.16 4.21 4.26 4.31 4.36
64 3.77 3.82 3.87 3.92 3.97 4.02 4.07 4.12 4.17 4.23 4.28 4.33 4.39
65 3.78 3.83 3.88 3.93 3.98 4.03 4.08 4.14 4.19 4.25 4.30 4.36 4.41
70 3.81 3.86 3.91 3.96 4.02 4.07 4.13 4.19 4.25 4.31 4.38 4.44 4.50
75 3.82 3.87 3.92 3.98 4.03 4.09 4.16 4.22 4.28 4.35 4.42 4.48 4.55
80 3.82 3.87 3.93 3.98 4.04 4.10 4.16 4.23 4.29 4.36 4.43 4.50 4.57
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- --------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* ---------------------------------------------
MALE 63 64 65 70 75 80
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.92 $3.94 $3.96 $4.03 $4.06 $4.08
51 3.96 3.98 4.00 4.08 4.12 4.14
52 4.00 4.02 4.05 4.13 4.17 4.19
53 4.04 4.07 4.09 4.18 4.23 4.25
54 4.08 4.11 4.13 4.23 4.29 4.31
55 4.12 4.15 4.18 4.29 4.35 4.38
56 4.16 4.19 4.22 4.34 4.41 4.44
57 4.20 4.24 4.27 4.40 4.47 4.50
58 4.24 4.28 4.31 4.45 4.53 4.57
59 4.28 4.31 4.35 4.50 4.59 4.63
60 4.31 4.35 4.39 4.55 4.65 4.69
61 4.35 4.39 4.43 4.61 4.71 4.76
62 4.38 4.42 4.47 4.66 4.77 4.82
63 4.41 4.46 4.50 4.70 4.83 4.88
64 4.44 4.49 4.54 4.75 4.88 4.94
65 4.46 4.52 4.57 4.79 4.93 5.00
70 4.57 4.63 4.69 4.97 5.15 5.24
75 4.62 4.69 4.76 5.07 5.28 5.38
80 4.64 4.71 4.78 5.11 5.33 5.44
- --------------------------------------------------------
</TABLE>
* On birthday nearest to due date of first instalment. The amount of the
monthly instalment for any combination of ages not shown in this table will
be furnished on request.
Page 19
<PAGE> 20
AVAILABILITY AND LIMITATIONS. An Option will be available if the Proceeds to be
settled under the Option are payable to a natural person in his own right and
amount to at least $5,000.
If the periodic payment under an Option would be less than $50, we may change
the frequency of payment so that the amount of each payment will be at least
$50.
In no event may any Proceeds that are to be paid under a collateral assignment
be settled under an Option. Such Proceeds may be paid only in one sum.
ELECTION. An Option to apply to the Proceeds at Death or surrender may be
elected as follows:
1. PROCEEDS AT DEATH. The election may be made:
a. by you, while the Insured is alive; or
b. by the Beneficiary, when the Insured dies, if no election is then
in force.
2. PROCEEDS AT SURRENDER. The election may be made only by you at the
time this Policy is surrendered.
An election or revocation of an option must be made by written request. Such
election or revocation when filed at the Home Office will take effect as of the
date it was signed:
1. whether or not the person making it is alive when it is filed; and
2. subject to any payment or other action by us before filing.
MISCELLANEOUS. When the Proceeds are settled under an Option, we may:
1. require the return of this Policy; and
2. issue in place of this Policy a certificate which will set forth the
terms of the Option elected.
We will require satisfactory proof of the date of birth of each person on
whose life the payments are based under Option 4 or 5 or the Alternate Life
Income Option.
The Proceeds settled under an Option will be part of our general funds. We
will not be required to segregate such Proceeds or place them in a separate
investment account.
CALCULATION OF VALUES
BASIS OF CALCULATION. Net single premiums, Cash Values, and guaranteed cost of
insurance rates are based on the Commissioners 1980 Standard Ordinary Mortality
Table with Smoker/Non-Smoker modifications. For Extended Term Insurance, net
single premiums and Cash Values are based on the Commissioners 1980
Extended Term Insurance Table with Smoker/Non-Smoker modifications. Continuous
functions are used. For computing net single premiums and Cash Values for
Extended Term and Reduced Paid Up Insurance, the interest rate used is 4 1/2%.
The Cash Value of this policy at the end of a Policy Year will be calculated in
accordance with the Standard Nonforfeiture Law. The Cash Value of Extended Term
and Reduced Paid Up Insurance at any time is equal to the net single premium for
such insurance based on the Insured's Attained Age. A detailed statement of how
we calculate the values for this Policy has been filed with the insurance
supervisory official of the state in which this Policy is delivered.
CALCULATION OF CASH VALUE. When the first net scheduled premium is allocated to
the Separate Accounts, the Cash Value in each Separate Account on the Policy
Date will equal the Net Premium allocated to that Separate Account minus the
first monthly deduction allocated to that Separate Account. Thereafter, on each
Valuation Day, the Cash Value in each Separate Account will equal:
1. the Cash Value in the Separate Account for the previous Valuation
Period times the Net Investment Factor for the current Valuation
Period;
2. plus any Net Premiums we receive during the current Valuation Period
which are allocated to that Separate Account;
3. plus any Cash Value which, during the current Valuation Period:
a. we transfer to the Separate Account from the General Account when
you repay any loan amount, including interest credited to loaned
amounts; and
b. we transfer to the Separate Account from another Separate Account
at your request;
4. minus any Cash Value which, during the current Valuation Period:
a. we transfer from the Separate Account to the General Account when
you borrow on this Policy or fail to pay interest when due; and
b. we transfer from the Separate Account to another Separate Account
at your request;
5. plus any dividends credited to the Separate Account during the current
Valuation Period;
6. minus the monthly deductions allocated to the Separate Account during
the current Valuation Period;
7. minus any partial withdrawals during the current Valuation Period
which are allocated to the Separate Account.
The Cash Value of this Policy is equal to: (a) the sum of the Cash Value of
each Separate Account; plus (b) any policy loans in the General Account.
Page 20
<PAGE> 21
VALUATION DAY AND PERIOD. Assets are valued at the close of a Valuation Day. A
Valuation Day is any day Monday through Friday, except for days when we are
closed for holidays.
A Valuation Period is the time between two successive Valuation Days. Each
Valuation Period includes a Valuation Day and any non-Valuation Day or
consecutive non-Valuation Days immediately preceding it.
NET INVESTMENT FACTOR. Each Separate Account has its own Investment Factor. The
Net Investment Factor of the Separate Account for a Valuation Period is (a)
divided by (b), minus (c) and minus (d), where.
(a) is: 1. the value of the assets in the Separate Accounts for the
preceding Valuation Period; plus
2. the investment income and capital gains, realized or
unrealized, credited to those assets during the Valuation
Period for which the Net Investment Factor is being
determined; minus
3. the capital losses, realized or unrealized, charged against
those assets during the Valuation Period; minus
4. any amount charged against the Separate Account for taxes,
or any amount we set aside during the Valuation Period as a
reserve for taxes attributable to the operation or
maintenance of the Separate Account; and
(b) is the value of the assets in the preceding Valuation Period; and
(c) is a charge no greater than .60% per year (.001643835% for each day
in the Valuation Period) for mortality and expense risks; and
(d) is a charge, for Separate Account V only, no greater than .50% per
year (.001369863% for each day in the Valuation Period) for
transaction charges associated with the purchase of units.
We will value the assets in the Separate Account at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
MONTHLY DEDUCTIONS. On each Policy Processing Day, beginning on the Policy Date,
we will deduct the following charges from the Cash Value:
1. Cost of insurance charge as described below.
2. Administration charge as shown in the Policy Data.
3. Minimum death benefit guarantee charge as shown in the Policy Data.
4. First year policy charge as shown in the Policy Data.
5. If the Special Premium Payment Provision is in effect, we will also
deduct 92 1/2% of any scheduled premium for any supplementary benefits
or "Extra Premium" Class for that date as shown in the Policy Data.
The cost of insurance charge for the following Policy Month is (a) multiplied
by the result of (b) minus (c), where:
(a) is the Cost of Insurance Rate;
(b) is the Death Benefit at the beginning of the Policy Month divided by
1.0040741; and
(c) is the Cash Value at the beginning of the Policy Month.
The Cost of Insurance Rate is based on the Insured's Attained Age, sex and
smoking status. Cost of Insurance Rates will be determined by the Company based
on our expectations as to future mortality experience. However, these rates will
not exceed those shown in the Policy Data. Such maximum rates are based on the
1980 Commissioners Standard Ordinary Mortality Table with Smoker/Non-smoker
modifications.
We will allocate the total monthly deduction among the Separate Accounts in
the same proportion as the policy's Net Cash Value in the Separate Accounts bear
to the total Net Cash Value of this Policy. We will allocate the monthly
deduction for any Policy Processing Day prior to receipt of the first premium
among the Separate Accounts based on the Net Cash Value in the Separate Accounts
on the later of the Issue Date or the date the first premium is received.
Page 21
<PAGE> 22
ENDORSEMENTS
(Only We Can Endorse This Policy)
A GUIDE TO THE PROVISIONS OF THIS POLICY
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Policy Summary.......................................2 General Provisions...............................10
Definitions..........................................2 Dividend Provisions..............................10
Policy Data.........................................3-7 Policy Owner and Beneficiary
Payment of Scheduled Premiums......................4 Provisions......................................11
Schedule of Charges From Base Premium Payment Provisions.....................11-12
Scheduled Premium Payments.......................4 Options on Lapse.................................12
Payment of Unscheduled Premiums....................4 Premium Expense Charge...........................12
Schedule of Monthly Deductions Separate Accounts................................13
From Cash Value .................................5 Investment Options...............................14
Schedule of Maximum Surrender Exchange of Policy...............................14
Charges..........................................5 Death Benefit Provisions.......................14-15
Death Benefit Factors................................6 Cash Value Provisions............................15
Guaranteed Monthly Cost of Policy Loan Provisions...........................16
Insurance Rates..................................7 Payment Options................................17-20
Description of Separate Accounts.....................8 Calculation of Values..........................20-21
Initial investment Allocation Endorsements.....................................22
of Net Premiums..................................9
</TABLE>
Page 22
<PAGE> 23
VOTING PRIVILEGE
The Owner of this Policy is a member of the Company. All members have the right
to vote at the annual meeting or at any special meetings of the members either
in person or by proxy.
Modified Premium Variable Life Insurance Policy with variable insurance amount
Insurance payable only upon death
Scheduled premiums payable throughout Insured's lifetime.
Provisions for optional additional premiums.
Benefits reflect premium payments, investment results and mortality charges.
Guaranteed Minimum Death Benefit if scheduled premiums duly paid.
Participating.
[LOGO]
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
1600 Market Street, Philadelphia. Pennsylvania 19103
<PAGE> 24
PROVIDENT MUTUAL LIFE
INSURANCE COMPANY OF
PHILADELPHIA
INSURED A A
POLICY NUMBER 7,999,991 NOV 1, 1994 ISSUE DATE
FACE AMOUNT $75,000 01 - FEMALE ISSUE AGE, SEX
NOV 1, 1994 POLICY DATE
PROVIDENT LIFE INSURANCE COMPANY OF PHILADELPHIA agrees:
- - To pay the Beneficiary of this Policy the Proceeds at Death upon receiving
due proof of the Insured's death;
- - To provide you (the Policy Owner) with the other rights and benefits of this
Policy.
These agreements are subject to the provisions of this Policy.
THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY AS DESCRIBED ON PAGE 14,
DEPENDING UPON THE PAYMENT OF PREMIUMS, THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNTS AND THE LEVEL OF MORTALITY CHARGES MADE. BUT, IT WILL NOT BE
LESS THAN THE FACE AMOUNT SHOWN ABOVE.
THE CASH VALUE MAY INCREASE OR DECREASE DAILY DEPENDING UPON THE PAYMENT OF
PREMIUMS THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNTS AND THE LEVEL OF
MORTALITY CHARGES MADE. THERE IS NO GUARANTEED MINIMUM CASH VALUE.
A Schedule of Premiums is shown in the Policy Data. Additional unscheduled
premiums may be paid at your option subject to the limitations in this
Policy.
Please read this Policy with care. A guide to its provisions is on the last
page. A summary is on page 2. Any additional benefit riders and a copy of the
Application are included in this Policy after page 21.
This is a legal contract between the Owner and
Provident Mutual Life Insurance Company of Philadelphia
RIGHT TO CANCEL POLICY. You may return this Policy to us by the later of: (a)
10 days after you receive it; or (b) 45 days after Part I of the Application
was signed. All you have to do is take this Policy or mail it to our Home
Office at 1600 Market Street, Philadelphia, Pennsylvania 19103, or to one of
our offices or to the representative who sold it to you. If you do this, we
will cancel this Policy from the start and refund all premiums you paid for it.
Attest
/s/ Robert W. Kloss
-------------------
Registrar President
Modified Premium Variable Life Insurance Policy with variable insurance amount
Insurance payable only upon death.
Scheduled premiums payable throughout Insured's lifetime.
Provision for optional additional premiums.
Benefits reflect premium premium payments, investment results and mortality
charges.
Guaranteed Minimum Death Benefit if scheduled premiums duly paid.
Participating.
<PAGE> 25
POLICY SUMMARY
This is a variable life insurance policy.
Premiums are to be paid throughout the Insured's lifetime. We have specified a
schedule of premiums which must be paid to keep this Policy in full force.
Under certain conditions, payment of a scheduled premium may not be required to
keep this Policy in full force. You will be notified if a scheduled premium
payment is not required. At your option, additional premiums may be paid,
subject to the policy provisions.
The Cash Value and Death Benefit of this Policy will vary with the payment of
premiums, the investment performance of the Separate Accounts to which your
premiums are allocated, and the extent to which mortality charges are less than
the guaranteed maximums. If all scheduled premiums are paid in accordance with
the schedule, this Policy will not lapse, even if adverse investment experience
has resulted in a zero or negative Cash Value.
The Guaranteed Minimum Death Benefit is the Face Amount. If this Policy has
lapsed, coverage may end or this Policy may stay in force with reduced
benefits. If either occurs, you may be able to reinstate this Policy within 3
years with full benefits.
To compute the Proceeds payable upon the Insured's death, we start with the
Death Benefit and adjust this amount if there is a loan or if required premiums
are unpaid. If you surrender this Policy, the Proceeds will be the net cash
surrender value.
We will pay the Proceeds in one sum unless a Payment Option is in force. If you
elect a Payment Option, it will apply to Proceeds paid to you if you surrender
this Policy or those paid to the Beneficiary when the insured dies. If a
Payment Option is not in force when the Insured dies, the Beneficiary will be
able to elect a Payment Option for the Proceeds at Death.
As Policy Owner, you have these rights in this Policy, among others:
- - You may borrow on this Policy.
- - You may surrender this Policy.
- - You may change the Beneficiary.
- - You may change the allocation of future net premiums among the Separate
Accounts.
- - You may transfer amounts among Separate Accounts.
DEFINITIONS
ATTAINED AGE. The Issue Age of the Insured plus the length of time since the
Policy Date.
BASE PREMIUM. Total scheduled premium for this Policy minus the premium
processing charge and premiums for supplementary benefits and Extra Premium
Class.
INSURED. The person named as the INSURED on the first page. He or she need not
be the Owner.
NET CASH VALUE. The Cash Value minus the sum of policy loans and accrued
interest.
NET PREMIUM. The remainder of a Base Premium or unscheduled premium after
deduction of the Premium Expense Charges.
POLICY ANNIVERSARY. The same day and month as the Policy Date in each
later year.
POLICY PROCESSING DAY. The day in each calendar month which is the same day of
the month as the Policy Date.
POLICY YEAR. A year that starts on the Policy Date or on a Policy Anniversary.
PROCEEDS. The net amount to be paid when the Insured dies or this Policy is
surrendered.
WE, OUR, US AND COMPANY. Provident Mutual Life Insurance Company of
Philadelphia, a Pennsylvania Corporation.
YOU AND YOUR. The Owner of this Policy.
Page 2
<PAGE> 26
POLICY DATA
INSURED A A
POLICY NUMBER 7,999,991 NOV 1, 1994 ISSUE DATE
FACE AMOUNT $75,000 01 - FEMALE ISSUE AGE, SEX
NOV l, 1994 POLICY DATE
PREMIUM CLASS STANDARD
* * * * *
BENEFITS
VARIABLE WHOLE LIFE INSURANCE
* * * * *
SHORTLY BEFORE ATTAINED AGE 22, WE WILL NOTIFY THE INSURED ABOUT POSSIBLE
CLASSIFICATION AS A NON-SNOKER. IF THE INSURED DOES NOT QUALIFY FOR NONSMOKER
STATUS OR DOES NOT RETURN THE APPLICATION FORM, WE WILL CLASSIFY THE INSURED AS
A SMOKER AND COST OF INSURANCE RATES WILL BE DETERMINED IN ACCORDANCE WITH SUCH
CLASSIFICATION.
* * * * *
3
<PAGE> 27
POLICY DATA (CONTINUED)
PAYMENT OF SCHEDULED PREMIUMS
SCHEDULED PREMIUMS ARE PAYABLE ON THE POLICY DATE AND AT INTERVALS OF 12 months
after that date, as follows:
<TABLE>
<CAPTION>
Total Base
Beginning: Premium* Premium
<S> <C> <C>
NOVEMBER 1, 1994 309.00 308.00
NOVEMBER 1, 2063 1074.00 1073.00
</TABLE>
The Premium Change Date is NOVEMBER 1, 2063.
* Includes $1.00 premium processing charge described below.
* * * *
SCHEDULE OF CHARGES DEDUCTED FROM SCHEDULED PREMIUM PAYMENTS
PREMIUM EXPENSE CHARGE. A Premium Expense Charge consisting of the following
is deducted from each scheduled premium:
1. $1.00 from the total scheduled premium for premium processing.
2. 7.5% of the Base Premium for Sales Charges (5%) and state Premium Tax
Charge (2.5%).
AFTER DEDUCTION OF THESE AMOUNTS, WE ALLOCATE THE NET PREMIUM TO THE SEPARATE
Accounts you have chosen for scheduled premiums.
* * * *
PAYMENT OF UNSCHEDULED PREMIUMS
The minimum unscheduled premium is $25. After deduction of $1.00 for premium
processing and 7.5% of the remaining amount of the unscheduled premium for
Sales Charges and State Premium Tax Charges, we allocate the Net Premium to the
SEPARATE ACCOUNTS ACCORDING TO THE ALLOCATION then in effect for scheduled
premiums, unless you notify us of a different allocation.
* * * *
4
<PAGE> 28
POLICY DATA (CONTINUED)
SCHEDULE OF MONTHLY DEDUCTIONS FROM CASH VALUE
The following charges are deducted from the Cash Value on each Policy
Processing Day, starting with the Policy Date:
1. Cost of insurance charge - based on no greater than the guaranteed
rates shown on page 7;
2. Administration charge - $4.37;
3. MINIMUM DEATH BENEFIT GUARANTEE CHARGE - $0.75;
4. First year Policy charge - $5.00 for each of the first 12 Policy months.
* * * *
SCHEDULE OF MAXIMUM SURRENDER CHARGES
If you surrender this Policy or if this Policy lapses, we will determine the
CASH SURRENDER VALUE AS DESCRIBED IN THE CASH Surrender Value provision. The
TOTAL SURRENDER CHARGE SHOWN BELOW IS THE maximum charge based on the premium
payment frequency shown on page 4 which we can deduct from the Cash Value On
the applicable Policy Year.
<TABLE>
<CAPTION>
CONTINGENT TOTAL
POLICY DEFERRED DEFERRED SURRENDER
YEAR ADMINISTRATIVE CHARGE SALES CHARGE CHARGE
------ --------------------- ------------ ---------
<S> <C> <C> <C>
1 $375.00 $77.00 $452.00
2 375.00 92.40 467.40
3 375.00 107.80 482.80
4 375.00 123.20 498.20
5 375.00 138.60 513.60
6 300.00 123.20 423.20
7 225.00 92.40 317.40
8 150.00 61.60 211.60
9 75.00 30.80 105.80
10 and later ZERO ZERO ZERO
</TABLE>
* * * *
5
<PAGE> 29
POLICY DATA (CONTINUED)
DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE FACTOR AGE FACTOR AGE FACTOR
---------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
1 12.90 34 4.40 67 1.71
2 12.53 35 4.25 68 1.67
3 12.16 36 4.11 69 1.63
4 11.79 37 3.98 70 1.59
5 11.43 38 3.85 71 1.56
6 11.08 39 3.73 72 1.52
7 10.73 40 3.61 73 1.49
8 10.39 41 3.50 74 1.46
9 10.05 42 3.40 75 1.43
10 9.73 43 3.29 76 1.40
11 9.41 44 3.19 77 1.37
12 9 10 45 3.10 78 1.35
13 8.80 46 3.01 79 1.33
14 8.51 47 2.92 80 1.30
15 8.23 48 2.84 81 1.28
16 7.96 49 2.76 82 1.26
17 7.70 50 2.68 83 1.24
18 7.45 51 2.60 84 1.23
19 7.21 52 2.53 85 1.21
20 6.98 53 2.46 86 1.19
21 6.75 54 2.40 87 1.18
22 6.53 55 2.33 88 1.17
23 6.32 56 2.27 89 1.15
24 6.12 57 2.21 90 1.14
25 5.92 58 2.15 91 1.13
26 5.73 59 2.10 92 1.12
27 5.54 60 2.04 93 1.11
28 5.36 61 1.99 94 1.09
29 5.19 62 1.94 95 1.08
30 5.02 63 1.89 96 1.07
31 4.85 64 1.84 97 1.05
32 4.70 65 1.79 98 1.04
33 4.54 66 1.75 99 1.02
</TABLE>
6
<PAGE> 30
POLICY DATA (CONTINUED)
GUARANTEED MONTHLY COST OF INSURANCE RATES PER $1,000 NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
- ---------- ---- -------- ---- --------- ----
<S> <C> <C> <C> <C> <C>
1 0.0725 34 0.1550 67 1.8852
2 0.0675 35 0.1617 68 2.0207
3 0.0658 36 0.1742 69 2.1730
4 0.0642 37 0.1900 70 2.3346
5 0.0633 38 0.2075 71 2.5440
6 0.0608 39 0.2276 72 2.8037
7 0.0600 40 0.2501 73 3.1205
8 0.0583 41 0.2776 74 3.4905
9 0.0575 42 0.3034 75 3.9018
10 0.0567 43 0.3301 76 4.3456
11 0.0575 44 0.3568 77 4.8114
12 0.0600 45 0.3843 78 5.2971
13 0.0625 46 0.4127 79 5.8178
14 0.0667 47 0.4427 80 6.3956
15 0.0708 48 0.4736 81 7.0493
16 0.0750 49 0.5069 82 7.7970
17 0.0792 50 0.5453 83 8.6466
18 0.0817 51 0.5837 84 9.6463
19 0.0850 52 0.6271 85 10.6472
20 0.0875 53 0.6780 86 11.7865
21 0.0892 54 0.7297 87 12.8864
22 0.1008 55 0.7839 88 14.1328
23 0.1025 56 0.8382 89 15.3203
24 0.1058 57 0.8900 90 16.6915
25 0.1075 58 0.9384 91 18.1571
26 0.1117 59 0.9885 92 19.7613
27 0.1150 60 1.0436 93 21.5852
28 0.1183 61 1.1469 94 23.8305
29 0.1233 62 1.2006 95 27.1616
30 0.1292 63 1.3167 96 32.3238
31 0.1342 64 1.4463 97 41.2120
32 0.1400 65 1.5917 98 57.8139
33 0.1459 66 1.7355 99 90.9091
</TABLE>
The company has the right to change the cost of insurance deducted under the
policy which may require more premium to be paid than was illustrated or the
cash values may be less that those illustrated.
7
<PAGE> 31
POLICY SCHEDULE
(CONTINUED)
ALLOCATION OPTIONS
SCHEDULE A-1
THE MARKET STREET FUND, INC.:
Provident Mutual Variable Large Cap Growth Subaccount
Provident Mutual Variable Large Cap Value Subaccount
Provident Mutual Variable Small Cap Growth Subaccount
Provident Mutual Variable Small Cap Value Subaccount
Provident Mutual Variable Growth Separate Account
Provident Mutual Variable Aggressive Growth Separate Account
Provident Mutual Variable Bond Separate Account
Provident Mutual Variable Managed Separate Account
Provident Mutual Variable Money Market Separate Account
Provident Mutual Variable International Separate Account
SCHEDULE A-2
THE ALGER AMERICAN FUND:
Alger American Small Capitalization Subaccount
VARIABLE INSURANCE PRODUCTS FUND (VIP) OR THE
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
Fidelity Asset Manager Subaccount (VIP II)
Fidelity Contrafund Subaccount (VIP II)
Fidelity Equity-Income Subaccount (VIP)
Fidelity Growth Subaccount (VIP)
Fidelity High income Subaccount (VIP)
Fidelity Index 500 Subaccount (VIP II)
Fidelity Investment Grade Bond Subaccount (VIP II)
Fidelity Overseas Subaccount (VIP)
Page 8
<PAGE> 32
POLICY SCHEDULE
(CONTINUED)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
Neuberger & Berman Limited Maturity Bond Subaccount
VAN ECK WORLDWIDE INSURANCE TRUST:
Van Eck Worldwide Bond Subaccount
Van Eck Worldwide Emerging Markets Subaccount
Van Eck Worldwide Hard Assets Subaccount
Van Eck Worldwide Real Estate
SCHEDULE A-3
PROVIDENT MUTUAL VARIABLE ZERO COUPON BOND SEPARATE ACCOUNT:
Maturity Date of Series: February 15, 2006
Page 8A
<PAGE> 33
GENERAL PROVISIONS
THE CONTRACT. This Policy and the Application, a copy of which is attached, form
the whole contract. We assume that all statements in the Application were made
to the best of the knowledge and belief of the person(s) who made them; in the
absence of fraud they are assumed to be representations and not warranties. We
relied on those statements when we issued this Policy. We will not use any
statement, unless made in the Application, to void this Policy or to deny a
claim.
POLICY MODIFICATIONS. Only the President or a Vice President of the Company
may agree to modify this Policy, and then only in writing.
SUICIDE EXCLUSION. If the Insured, whether sane or insane, dies by suicide
within two years from the Issue Date, our payment will be limited to the sum of
premiums paid, minus any loan and loan interest and any withdrawals of excess
Cash Value.
MISSTATEMENT OF AGE OR SEX. If the Insured's stated age or sex is not correct,
the Face Amount of this Policy will be corrected to that which the scheduled
premium would have purchased at the correct age and sex. We will recalculate
the Cash Value from the Date of Issue using mortality charges based on the
Insured's correct age and sex and the corrected Face Amount. The Death Benefit
will be determined in accordance with the Death Benefit Provisions based on
this recalculated Cash Value. If the Issue Age is not correct we will change
the Premium Change Date shown in the Policy Data for the Insured's correct age.
INCONTESTABILITY. We will not contest this Policy after it has been in force
during the Insured's lifetime for two years from the Issue Date, except for
nonpayment of premiums. See any supplementary benefit riders for modifications
that apply to them.
ANNUAL REPORT. Each year we will send you a report. It will show: (1) the
current Death Benefit; (2) any policy loans and the accrued interest; (3) the
current Cash Value; (4) the net cash surrender value; (5) scheduled and
unscheduled premiums paid since the last report; (6) charges deducted since the
last report; (7) any withdrawals of excess Cash Value since the last report;
and (8) any other information that may be required when and where this Policy
is delivered.
You may ask for a similar report at some other time during the year. We have
the right to make a reasonable charge for the reports that you ask for, and to
limit the scope and frequency of such reports.
PAYMENTS. We will usually pay any amounts payable as a result of surrender,
partial withdrawal or policy loan within 7 days after we receive your written
request at our Home Office in a form satisfactory to us. We will usually pay
the Proceeds at Death within 7 days after we receive proof of the Insured's
death at our Home Office and all other requirements deemed necessary are met.
However, payment may be postponed if we are not able to sell securities or
determine the value of the assets of the Separate Accounts because:
1. the New York Stock Exchange is closed;
2. the Securities and Exchange Commission (SEC) requires trading to be
restricted or declares an emergency; or
3. the SEC by order permits us to defer payments for the protection of
policy owners.
DEFERMENT UNDER OPTIONS ON LAPSE. If this Policy is being continued under one
of the Options on Lapse, we may defer payment of a Cash Value and the making of
a loan for up to six months after we receive your written request at our Home
Office. We will allow interest, at a rate of 3% a year, on any payment we
defer for 30 days or more under this provision.
DIVIDEND PROVISIONS
While this Policy is in force, we will determine its share in our divisible
surplus once a year. Any dividends will be paid on the Policy Anniversary. You
may select one of the Dividend Options listed below. If you do not select any
Option, we will pay dividends under Option 3.
1. CASH. We will pay any dividend to you in cash.
2. REDUCE PREMIUM. We will apply the dividend to payment of any scheduled
premium. If the Special Premium Payment Provision is in effect, Option 3
will apply.
3. UNSCHEDULED PREMIUM. We will consider the dividend to be an unscheduled
premium payment. We will allocate it to the Separate Accounts in
accordance with the allocation then in effect for scheduled premiums,
unless you notify us of a different allocation.
Page 10
<PAGE> 34
POLICY OWNER AND BENEFICIARY PROVISIONS
OWNERSHIP. Unless otherwise stated in the Application or later changed, the
Owner of this Policy is the Insured. While the Insured is living, the Owner
alone is entitled to exercise any right and privilege granted by this Policy or
by us. If you, the Owner, are not the Insured and you die while the Insured
still living, all rights will vest in your estate, unless otherwise provided.
BENEFICIARY. The Beneficiary is as stated in the Application, unless later
changed. When a Beneficiary is designated, any relationship shown is to the
Insured, unless otherwise stated. If two or more persons are married, those
surviving the Insured will share the Proceeds at Death equally, unless
otherwise stated. If none of the persons named survives the Insured, we will
pay the Proceeds at Death in one sum to the Insured's estate.
CHANGES. While the Insured is living, you may change the Owner or Beneficiary
by written notice in a form satisfactory to us. The change will take effect on
the date you sign the notice, except that it will not apply to any payment or
other action we take before we receive the notice at our Home Office. If you
change the Beneficiary, any previous arrangement you made under the Payment
Options provision is cancelled.
ASSIGNMENT. You may assign this Policy; but, we will not be bound by any
assignment unless it is in writing and we have received it at our Home Office.
Your rights and those of any other person referred to in this Policy will be
subject to the assignment. We assume no responsibility for the validity of any
assignments.
PREMIUM PAYMENT PROVISIONS
SCHEDULED PREMIUMS. The amount and frequency of the scheduled premiums are
shown in the Policy Data. The policy's first premium is due on the Policy Date.
There is no coverage under this Policy unless an amount equal to the first
scheduled premium is paid. If scheduled premiums are not paid when due or
within the grace period and the Special Premium Payment Provision is not in
effect, this Policy will lapse. If the premium payment frequency is monthly
under a premium payment plan and such plan is terminated, the premium payment
frequency will be changed to quarterly.
UNSCHEDULED PREMIUMS. Unscheduled premiums may be paid at any time during the
Insured's lifetime, so long as all required scheduled premiums have been paid.
The minimum unscheduled premium we will accept is shown in the Policy Data. We
have the right to limit the number and amount of unscheduled premium payments.
SPECIAL PREMIUM PAYMENT PROVISION If this provision is in effect, you will not
be required to pay premiums during the following Policy Year. To find out if
this provision is in effect, we will check whether:
1. 2 months before the Policy Anniversary, the Cash Value plus any scheduled
Base Premium payments due before such Policy Anniversary and not yet paid
exceeds the Special Premium Payment Single Premium; and
2. on the Policy Anniversary, all scheduled Base Premium payments have been
paid.
If these conditions are met, this provision will be in effect from this
Policy Anniversary until the next Policy Anniversary. This provision will be in
effect even if during such Policy Year:
1. you don't make any premium payments; or
2. the Cash Value falls below the Special Premium Payment Single Premium.
You will be notified if the Special Premium Payment Provision is in effect.
Any premium payments that you make during the time that such provision is in
effect will be considered unscheduled premium payments.
We have filed the method of calculating the Special Premium Payment Single
Premium with the insurance supervisory official of the state in which this
Policy is delivered.
PREMIUM CHANGE. The Premium Change Date is the Policy Anniversary nearest the
Insured's Attained Age 70, or at the end of Policy Year 15, if later. Two
months prior to the Premium Change Date, are will recompute the premium amount
payable on and after such date. This recomputed premium amount will not be
higher than the amount shown in the Policy Data for the Premium Change Date.
GRACE PERIOD. We will allow a 61-day grace period from the due date for payment
of each scheduled premium after the first. This Policy will not lapse during
the grace period. If you pay the premium during the grace period, we will
credit your payment to this Policy as of the date we receive it. If you do not
pay the premium by the end of its grace period, this policy will lapse as of
the date on which such scheduled premium was done, unless the Special Premium
Payment Provision is in effect. If lapse occurs, all coverage ends, except as
stated in the Options of Lapse provisions.
Page 11
<PAGE> 35
REINSTATEMENT. If this Policy lapses you may reinstate it if all of these
conditions are met:
1. You make your request within 3 years of the date of lapse;
2. You have not surrendered this Policy for its net cash surrender value;
3. You provide evidence, satisfactory to us, that the Insured is insurable;
and
4. You pay a premium of an amount at least equal to the greater of:
a. all unpaid total scheduled premiums with interest at 6% per year
compounded annually, plus any policy loan and accrued loan interest in
effect at the end of the grace period; or
b. 110% of the increase in cash surrender value resulting from
reinstatement plus all overdue premiums for supplementary benefits with
interest at 6% per year compounded annually.
If this Policy has a variable loan interest rate, the loan interest will be
determined in accordance with the Effect on Reinstatement provision of the
Variable Loan Interest Rate Rider which is attached to this Policy.
Upon reinstatement, this Policy will have the same Cash Value and Death
Benefit as if it had not lapsed and all scheduled premiums were paid when due.
The date of reinstatement will be the date we approve your application for
reinstatement.
OPTIONS ON LAPSE
If this Policy lapses you have a number of options:
1. You may apply for reinstatement; or
2. You may surrender this Policy for its net cash surrender value, if any, or
3. You may continue insurance under Extended Term insurance; or
4. You may continue insurance under Reduced Paid Up Insurance.
REDUCED PAID UP INSURANCE. This is fixed benefit insurance for the Insured's
lifetime for the amount that the net cash surrender value as of the date this
Option is applied, plus monthly deductions on any Policy Processing Day on or
after the date of lapse, will buy.
EXTENDED TERM INSURANCE. This is fixed benefit term insurance for an amount
equal to the Death Benefit on the date of lapse, minus any unpaid loan and loan
interest. The coverage will begin from the date of lapse and continue for as
long a term period as the net cash surrender value as of the date this Option
is applied, plus monthly deductions on any Policy Processing Day on or after
the date of lapse, will buy. This Option is not available if:
1. any part of the Premium Class shown in the Policy Data is "Extra Premium";
or
2. the amount of paid up insurance available would be greater than that of the
extended term.
An Option on Lapse will become effective as of the date of lapse. We will use
net single premiums for the Insured's Attained Age as of the date of lapse. We
will apply the Option on:
1. the date we receive your written request at our Home Office; or
2. if we apply an Option automatically, 3 months after the date of lapse (the
due date of any unpaid premium required to keep this Policy in full force).
If your written request is not received within 3 months after the date of
lapse, we will automatically apply the Extended Term Insurance Option at the
end of such 3-month period; if Extended Term Insurance is not available, we
will apply the Reduced Paid Up Insurance Option. If the Insured dies after the
grace period but within 3 months from the date of lapse, the greater of the
benefit available under Extended Term Insurance or Reduced Paid Up Insurance
will apply.
PREMIUM EXPENSE CHARGE
The Premium Expense Charge consist of the following:
1. premium processing charge;
2. sales charge; and
3. charge for state premium taxes.
After the premium processing charge has been deducted, the sales charge and
charge for state premium taxes will be deducted from the remaining amount of
each scheduled Base Premium paid and any unscheduled premium payment. The
amounts of these charges are shown in the Policy Data.
Page 12
<PAGE> 36
THE SEPARATE ACCOUNTS
Separate Accounts will be used to support the operation of this Policy and to
support other variable life insurance policies. We will not allocate assets to
the Separate Accounts to support the operation of any contracts or policies
that are not variable life insurance.
The term "Separate Account" as used in this Policy includes any Sub-Account
of a Separate Account.
We own the assets in the Separate Accounts. However, these assets are not
part of our General Account. Income, gains and losses, whether or not realized,
from assets allocated to a Separate Account will be credited to or charged
against the account without regard to our income, gains or losses.
The Separate Accounts are described in the Policy Data. The Separate Accounts
will invest in shares or units or their respective portfolios or series. The
Separate Accounts are treated as a unit investment trust under federal
securities laws. They are registered with the Securities and Exchange
Commission (SEC) according to the Investment Company Act of 1940 (1940 Act).
The Separate Accounts are subject to the laws of the Commonwealth of
Pennsylvania which regulate the operations of insurance companies incorporated
in Pennsylvania. The investment policies of the Separate Accounts will not be
changed without the approval of the Pennsylvania Commissioner of Insurance. The
approval process has been filed with the insurance supervisory official of the
state in which this Policy is delivered.
We have the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for, the shares or units of an
investment company that are held by the Separate Accounts or that the Separate
Accounts may purchase. We reserve the right to eliminate the shares or units of
an eligible portfolio or series, and to substitute shares or units of another
portfolio or series, or another fund, if the shares or units of the portfolio
or series are no longer available for investments, or if in our judgment
further investment in the portfolio or series should become inappropriate in
view of the purposes of the Separate Account. In the event of any substitution
or change, we may, subject to your written approval and by appropriate
endorsement, make such changes in this and other policies as may be necessary
or appropriate to reflect the substitution or change.
We also reserve the right to transfer assets of a Separate Account, which we
determine to be associated with the class of policies to which this Policy
belongs, to another Separate Account. If this type of transfer is made, the
Separate Account specified in this Policy shall then refer to the Separate
Account to which the assets were transferred.
The Policy Owner will share only in the income, gains and losses of the
particular Separate Accosts to which your Net Premium payments have been
allocated or to which Cash Value has been transferred.
That portion of the assets of the Separate Accounts which equals the reserves
or other policy liabilities of the policies which are supported by the Separate
Accounts will not be charged with liabilities arising from any other business
we conduct. We have the right to transfer to our General Account any assets of
the Separate Accounts which are in excess of such reserves and other policy
liabilities.
When permitted by law, we also reserve the right:
1. to create additional Separate Accounts; to create Sub-Accounts from, or
combine or remove Sub-Accounts from, Separate Accounts; or to combine any
two or more Separate Accounts;
2. to operate any one or more of the Separate Accounts as a management
investment company under the 1940 Act or in any other form permitted by
law;
3. to deregister the unit investment trusts under the 1940 Act;
4. to modify the provisions of this Policy to comply with applicable laws,
subject to your written approval;
5. to restrict or eliminate any voting rights of policyholders or other
persons who have voting rights as to the Separate Accounts.
We will value the assets of the Separate Accounts on each business day.
If you object to a material change in the investment policy of a Separate
Account, you have the right to exchange this Policy for a fixed-benefit policy,
as described in the Exchange of Policy provisions. No evidence of insurability
will be required. We will notify you of the options available and the
procedures to follow if you decide to make an exchange. You must make an
exchange within six months after the change in investment policy becomes
effective. The face amount of the new policy may not exceed the Face Amount of
this Policy.
Page 13
<PAGE> 37
INVESTMENT OPTIONS
ALLOCATION OF NET PREMIUMS. We will allocate the first scheduled Net Premium
to the Separate Accounts on the later of the Issue Date or the date we receive
the premium payment. We will allocate Net Premium payments after the first
scheduled premium to the Separate Accounts on the date we receive such premium
payments. We will base the allocations on the allocation percentages chosen by
you then in effect. The allocation percentages for the first scheduled premium
are shown in the Policy Data. Unless you change these percentages, they will
also apply in later years to scheduled and unscheduled premium payments. You
may change the allocation percentages by notifying us in writing of the new
percentages. Each allocation percentage must be a whole number. You must
allocate at least 10% to each Separate Account chosen. You may choose different
Separate Accounts and allocation percentages for scheduled and unscheduled
premiums.
TRANSFER OF CASH VALUES. You may ask us to transfer all or part of your Cash
Value in one of the Separate Accounts to any of the others. The amount of the
transfer must be at least $100 or the entire balance if less than $100. If the
transfer would leave less than $100 in a Separate Account, we reserve the right
to transfer the entire amount. You may make a maximum of 4 such transfers in a
Policy Year. We will make the transfer as of the date we receive your written
request at our Home Office.
EXCHANGE OF POLICY
RIGHT TO EXCHANGE. You may exchange this Policy for a new policy of permanent
fixed benefit insurance on the life of the Insured, subject to the Conditions of
Exchange below. We will not require evidence that the Insured is insurable.
CONDITIONS OF EXCHANGE. Your right to make this exchange is subject to the
following conditions:
1. This Policy must be in full force;
2. You must ask for the exchange in writing on our form;
3. Your request must be made within:
a. 24 months after the Issue Date shown in the Policy Data; or
b. 6 months after the effective date of a material change in investment
policy of a Separate Account to which Net Premiums are allocated;
4. You must repay any loan and loan interest under this Policy;
5. You must pay any other charges required for the exchange; and
6. You must return this Policy to us.
NEW POLICY. The new policy will be a whole life policy with a level face amount
equal to the Face Amount of this Policy. It will be for the same Issue Age,
Issue Date and Premium Class as this Policy. Premiums for the new policy will
be based on the premium rates for such policy which were in effect on the
Policy Date for this Policy. Any supplementary benefit riders in this Policy
will be included in the new policy only if such riders were available with the
new policy as of its Issue Date.
ADJUSTMENTS ON EXCHANGE. The exchange will be subject to equitable adjustments
to take into account:
1. differences in the premiums and Cash Values between this Policy and the
new policy;
2. dividends under this Policy and the new policy;
3. the impact of investment experience of the Separate Accounts of this
Policy on the Cash Value of this Policy.
DATE OF EXCHANGE. The date of exchange will be the later of:
1. the date you send us this Policy and the signed request on our form for
such exchange; or
2. the date we receive at our Home Office any sum due to be paid for the
exchange.
DEATH BENEFIT PROVISIONS
If the Insured dies while this Policy is in full force, we will pay the
Proceeds at Death to the Beneficiary.
DEATH BENEFIT. The Death Benefit is the greatest of:
1. the Face Amount shown in the Policy Data;
2. the Face Amount plus the excess of the Cash Value on the date of death
over the applicable Special Premium Payment Single Premium; or
3. the Cash Value on the date of death times the Death Benefit Factor shown
in the Policy Data for the Insured's Attained Age on the date of death.
Page 14
<PAGE> 38
AMOUNT OF PROCEEDS AT DEATH. The Proceeds at Death will be equal to:
the sum of:
1. the Death Benefit;
2. any dividend payable at death;
3. any additional benefits due under a supplementary benefit rider attached
to this Policy; and
4. any part of the last scheduled premium paid that applies to a period
beyond the date of death;
less the sum of:
1. loan and loan interest on this Policy;
2. if the death of the Insured occurs during the grace period, any scheduled
premiums required to keep this Policy in full force.
PAYMENT OF PROCEEDS AT DEATH. We will pay the Proceeds at Death to the
Beneficiary in a lump sum, unless a Payment Option has been selected. If such
Proceeds are payable in a lump sum, we will add interest to the amount of such
Proceeds for the period from the date of death to the date of payment. The
amount of interest will be computed at the yearly rate of 3% or any higher rate
declared by us or required by law.
CASH VALUE PROVISIONS
CASH VALUE. Assuming no policy loans, the total Cash Value of this Policy at
any time is the sum of the policy's Cash Values in the Separate Accounts. If
there is an outstanding policy loan, the Cash Value in the General Account will
be added to the total Cash Value of the Separate Accounts to determine the
total Cash Value of this Policy. The Cash Value may increase or decrease on
each Valuation Day depending upon the investment return of the Separate
Accounts to which your Net Premiums have been allocated. There is no guaranteed
minimum Cash Value for this Policy.
CASH SURRENDER VALUE. The cash surrender value at any time during the first 9
Policy Years is the Cash Value at that time minus a Surrender Charge. This
Surrender Charge has two parts: the Deferred Administrative Charge and the
Contingent Deferred Sales Charge. A Schedule of Maximum Surrender Charges for
this Policy is shown in the Policy Data. Since there are no Surrender Charges
in years 10 and later, the Cash Value and cash surrender value are the same for
such years.
In no event will the Contingent Deferred Sales Charge be greater than 25% of
the Base Premiums due for Policy Year 1, plus 5% of the Base Premiums due in
Policy Years 2 through 5. We will determine the Contingent Deferred Sales
Charge based on the lesser of Base Premiums due and the total of Base Premiums
and unscheduled premiums paid.
SURRENDER OF POLICY. You may surrender this Policy for its net cash surrender
value. The net cash surrender value at any time is the cash surrender value at
that time minus loans and loan interest. We will determine the net cash
surrender value on the date we receive your signed surrender request at our Home
Office. This Policy will end on the date you send the surrender request to us.
WITHDRAWAL OF EXCESS CASH VALUE. You may make a partial withdrawal of Cash
Value. However, you may not:
1. withdraw more than the excess of the cash surrender value over the
Withdrawal Single Premium for the Insured's Attained Age;
2. withdraw more than the amount sufficient to reduce the net loan value
(loan value less existing policy loan and accrued interest) to zero;
3. withdraw less than $300; or
4. make more than four withdrawals in a Policy Year.
Unless otherwise specified, withdrawals will be made from Separate Accounts
on a pro-rata basis. You may not repay a withdrawn amount, except as scheduled
or unscheduled premium payments subject to Premium Expense Charges.
We have filed the method of calculating the Withdrawal Single Premium with
the insurance supervisory official of the state in which this Policy is
delivered.
The Death Benefit will be recalculated when you make a withdrawal and will be
as described in the Death Benefit Provisions. However, the Guaranteed Minimum
Death Benefit will not change, nor will the amount of the next scheduled
premium. The amount of scheduled premiums after the Premium Change Date may be
affected by the amount of any partial withdrawal.
Page 15
<PAGE> 39
POLICY LOAN PROVISIONS
You may borrow from the Cash Value of this Policy if:
1. the Insured is living;
2. this Policy is in force other than as Extended Term Insurance; and
3. the loan plus existing indebtedness is not more than the loan value.
LOAN VALUE. The loan value of this Policy is:
1. for Policy Years 1 through 3, 75% of the cash surrender value;
2. for Policy Years 4 and thereafter, 90% of the cash
surrender value.
You may borrow any amount up to the difference between the loan value and the
existing policy loan with accrued interest. Except when used to pay premiums, a
loan must be for at least $300. Unless the Special Premium Payment Provision is
in effect, we will deduct any unpaid scheduled premiums from the loan proceeds.
INTEREST RATE CHARGED ON LOANS. We will charge interest on any loan. The
interest will accrue from day to day. You must choose to have interest charged
at either:
1. a fixed yearly rate of 8%, or
2. a variable loan rate.
If you have chosen to have loan interest charged at a variable rate, the rate
in effect on the Issue Date of this Policy is shown in the Policy Data. We will
adjust this rate in accordance with the Variable Loan Interest Rate (VLIR)
Rider attached to this Policy.
If you have chosen to have interest charged at the fixed rate, you may change
to a variable rate on the Policy Anniversary after we receive your written
request at our Home Office.
Interest is due at the end of each Policy Year. If you do not pay the
interest when it is due, we will add it to the loan. We will then begin to
charge interest on it, too. If on the Policy Anniversary the outstanding loan
plus accrued interest exceeds the cash surrender value, we will mail you and
any assignee of record, at your last known addresses, a notice that this Policy
will end if the excess amount is not repaid within 31 days after we mail such
notice. In no event will the required payment exceed the amount of the accrued
interest plus all due and unpaid scheduled premiums
INTEREST RATE CREDITED ON LOANS. When you borrow on this Policy, the amount of
the loan continues to be a part of the Cash Value and is credited with interest
at a rate of 1.5% less than the policy loan interest rate being charged.
EFFECT OF LOANS. We will transfer the amount of the loan, and loan interest
that becomes part of the loan because it is not paid when due, from the
Separate Accounts to the General Account. The amount we transfer does not share
in the investment experience of the Separate Accounts. We transfer loan
repayments and loan interest credits from the General Account to the Separate
Accounts. Since the amount of the loan is removed from the Separate Accounts, a
loan will have a permanent effect: on the Cash Value of this Policy. The longer
the loan is outstanding, the greater this effect is likely to be. The loan may
also affect:
1. the cash surrender value;
2. any Death Benefit in excess of the Guaranteed Minimum Death Benefit;
3. whether the Special Premium Payment Provision is in effect; and
4. the amount of the scheduled premiums after the Premium Change Date.
ALLOCATION OF LOANS AND LOAN REPAYMENTS. We will allocate loans and repayments
among the Separate Accounts in proportion to the Net Cash Value in each
Separate Account as of the date of the loan or repayment.
AUTOMATIC PREMIUM LOAN. You may elect the Automatic Premium Loan provision in
the Application, or by written request after this Policy is issued and while
it is in full force. This provision will be operative only when premiums on
this Policy are payable every three, six or twelve months. Under this
provision, a loan will be made as of the last day of the grace period to pay a
scheduled premium provided:
1. you have not paid the scheduled premium as of the last day of the grace
period;
2. the Special Premium Payment Provision is not in effect; and
3. the loan, together with any existing indebtedness does not exceed the
loan value of this Policy. If the loan required to pay the premium and
the existing indebtedness would exceed the loan value of this Policy,
the Automatic Premium Loan provision will not apply and the Options on
Lapse provisions will apply.
You may revoke the election of this provision at any time by written request.
The revocation will only apply to premiums payable thereafter.
Page 16
<PAGE> 40
PAYMENT OPTIONS
Payments under these Options will not be affected by the investment
experience of any Separate Account after Proceeds are applied under such
Options.
Instead of being paid in one sum, the Proceeds of this Policy may be paid
under one of the Options below.
OPTION 1 - PROCEEDS AT INTEREST. We will pay interest on the Proceeds at 12, 6,
3 or 1 month intervals, as elected. The interval per interval for each $1,000
of Proceeds is shown in the table below:
<TABLE>
<CAPTION>
Interval in Months Amount of Interest
<S> <C>
12 $30.00
6 14.89
3 7.42
1 2.47
</TABLE>
OPTION 2 - INSTALMENTS OF A SPECIFIED AMOUNT. We will pay the Proceeds in equal
instalments of the amount elected with our consent at 12, 6, 3 or 1 month
intervals. We will add interest on the balance of Proceeds to such balance each
year. We will pay instalments until the Proceeds and interest are exhausted.
The last instalment will be for the balance only of the Proceeds and interest.
OPTION 3 - INSTALMENTS FOR A SPECIFIED PERIOD. We will pay the Proceeds in the
number of equal monthly instalments certain set forth in the election. We will
base the amount of each instalment on the Option 3 table. If so elected, the
instruments may be paid at 12, 6 or 3 month intervals. The amount of each
instalment in such case will be the product of the monthly instalment and the
factor shown in the table below:
<TABLE>
<CAPTION>
Factor Applied to
Interval in Months Monthly Instalment
<S> <C>
12 11.839
6 5.963
3 2.993
</TABLE>
OPTION 4 - LIFE INCOME. We will use the Proceeds to provide equal monthly
instalments during the payee's life. We will pay the instalments, as elected,
either without instalments certain or with instalments certain for 120 months,
for 240 months, or until the Proceeds are refunded.
"Until the Proceeds are refunded" means until the sum of the instalments paid
by us equals the amount of Proceeds settled under this Option. We will base the
amount of each instalment on the Option 4 table.
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME. We will use the Proceeds to provide
equal monthly installments with a number of instalments certain, during the
joint lives of the payee and one other person and during the life of the
survivor.
We will pay the instalments certain for either 120 or 240 months, as elected.
We will base the amount of each instalment on the Option 5 table.
DATE OF FIRST PAYMENT. We will make the first payment under Option 1 at the end
of the first payment interval. We will make the first payment under Option 2,
3, 4 or 5 on the date on which the Option takes effect.
INTEREST. The interest rate underlying all of the above Options is 3% per year.
Additional interest may be declared each year by us. Such additional interest
will:
1. increase the interest payment under Option 1;
2. be added to the Proceeds under Option 2; or
3. increase the instalments certain under Option 3, 4 or 5.
WITHDRAWAL OR COMMUTATION. If expressly provided in the election of the Option
but not otherwise, the payee will have the right to:
1. withdraw all or part of the Balance of the Proceeds under Option 1 or
2; or
2. take in one sum the commuted value of any balance of the instalments
certain under Option 3, 4, or 5.
Partial withdrawals will be subject to our published minimum amount limits in
effect at the time the Option is elected. Such commuted value will be based on
compound interest at a yearly rate of 3%. Under Option 4 or 5, no instalments
other than instalments certain may be commuted.
We may defer payment of the amount withdrawn or commuted for a period not
exceeding 6 months.
SETTLEMENT AT DEATH OF PAYEE. After the death of the payee (the survivor in the
case of Option 5), we will make payment as directed in the election of the
Option. Such direction is subject to our approval.
The amount subject to such payment will be:
1. any balance of Proceeds, with accrued interest, under Option 1 or 2; or
2. the value of any remaining installments certain under Option 3, 4 or 5.
ALTERNATE LIFE INCOME OPTION. In lieu of payment in one sum, the Proceeds may
be settled under a Life Income Option based on our non-participating single
premium immediate annuity rates;
1. in effect at the time of settlement; and
2. adjusted to a due basis.
The income thus produced will be increased by 4%.
Page 17
<PAGE> 41
<TABLE>
<CAPTION>
OPTION 3 - INSTALMENTS FOR A SPECIFIED PERIOD
Monthly Instalments for Each $1,000 of the Proceeds of This Policy Settled Under Option 3
- ----------------------------------------------------------------------------------------------------------------------------------
Monthly Instalments Certain
- ----------------------------------------------------------------------------------------------------------------------------------
No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 $ 84.47 72 $ 15.14 132 $ 8.86 192 $ 6.53 252 $ 5.32 312 $ 4.59
24 42.86 84 13.16 144 8.24 204 6.23 264 5.15 324 4.47
36 28.99 96 11.68 156 7.71 216 5.96 276 4.99 336 4.37
48 22.06 108 10.53 168 7.26 228 5.73 288 4.84 348 4.27
60 17.91 120 9.61 180 6.87 240 5.51 300 4.71 360 4.18
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 4 - LIFE INCOME
Monthly Instalments for Each $1,000 of the Proceeds of This Policy Settled Under Option 4
Where the incomes are the same the longer certain period will apply.
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
M Refunded M Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5** $ 2.81 $ 2.81 $ 2.81 $ 2.80 25 $ 3.14 $ 3.14 $ 3.13 $ 3.12
6 2.83 2.82 2.82 2.81 26 3.17 3.16 3.15 3.14
7 2.84 2.84 2.83 2.83 27 3.19 3.19 3.18 3.16
8 2.85 2.85 2.84 2.84 28 3.22 3.22 3.20 3.19
9 2.86 2.86 2.86 2.85 29 3.25 3.24 3.23 3.21
10 2.87 2.87 2.87 2.86 30 3.28 3.27 3.26 3.24
11 2.89 2.89 2.88 2.88 31 3.31 3.30 3.29 3.27
12 2.90 2.90 2.90 2.89 32 3.34 3.33 3.32 3.30
13 2.92 2.91 2.91 2.90 33 3.37 3.37 3.35 3.33
14 2.93 2.93 2.92 2.92 34 3.41 3.40 3.38 3.36
15 2.95 2.95 2.94 2.93 35 3.44 3.44 3.41 3.39
16 2.96 2.96 2.96 2.95 36 3.48 3.48 3.45 3.42
17 2.98 2.98 2.97 2.96 37 3.52 3.51 3.48 3.46
18 3.00 3.00 2.99 2.98 38 3.57 3.56 3.52 3.50
19 3.02 3.01 3.01 3.00 39 3.61 3.60 3.56 3.53
20 3.04 3.03 3.30 3.02 40 3.66 3.64 3.60 3.57
21 3.06 3.05 3.05 3.04 41 3.71 3.69 3.64 3.61
22 3.08 3.07 3.07 3.06 42 3.76 3.74 3.68 3.66
23 3.10 3.09 3.09 3.08 43 3.81 3.79 3.73 3.70
24 3.12 3.12 3.11 3.10 44 3.87 3.85 3.77 3.75
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
M Refunded M Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.93 $ 3.90 $ 3.82 $ 3.80 65 $ 6.10 $ 5.81 $ 5.02 $ 5.43
46 3.99 3.96 3.87 3.85 66 6.29 5.96 5.08 5.56
47 4.05 4.02 3.92 3.90 67 6.50 6.11 5.13 5.70
48 4.12 4.09 3.97 3.96 68 6.73 6.28 5.18 5.85
49 4.19 4.15 4.03 4.01 69 6.97 6.44 5.23 6.00
50 4.27 4.22 4.08 4.08 70 7.23 6.61 5.27 6.16
51 4.34 4.29 4.14 4.14 71 7.51 6.78 5.31 6.33
52 4.43 4.37 4.20 4.20 72 7.80 6.96 5.34 6.51
53 4.51 4.45 4.26 4.27 73 8.12 7.14 5.37 6.70
54 4.60 4.54 4.32 4.35 74 8.45 7.32 5.40 6.90
55 4.70 4.62 4.39 4.42 75 8.82 7.49 5.42 7.11
56 4.80 4.72 4.45 4.50 76 9.21 7.67 5.44 7.33
57 4.91 4.82 4.51 4.58 77 9.62 7.84 5.45 7.56
58 5.03 4.92 4.58 4.67 78 10.07 8.01 5.47 7.80
59 5.15 5.03 4.64 4.76 79 10.55 8.17 5.48 8.05
60 5.28 5.14 4.71 4.86 80 11.06 8.33 5.49 8.32
61 5.42 5.26 4.78 4.96 81 11.61 8.48 5.49 8.60
62 5.57 5.39 4.84 5.07 82 12.19 8.61 5.50 8.89
63 5.74 5.52 4.90 5.19 83 12.81 8.74 5.50 9.20
64 5.91 5.66 4.96 5.30 84 13.46 8.86 5.51 9.52
85+ 14.16 8.97 5.51 9.85
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
F Refunded F Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5** $ 2.75 $ 2.75 $ 2.75 $ 2.74 25 $ 3.02 $ 3.02 $ 3.01 $ 3.01
6 2.76 2.76 2.76 2.75 26 3.04 3.04 3.03 3.02
7 2.77 2.77 2.77 2.76 27 3.06 3.06 3.05 3.04
8 2.78 2.78 2.78 2.77 28 3.08 3.08 3.07 3.06
9 2.79 2.79 2.79 2.78 29 3.10 3.10 3.09 3.09
10 2.80 2.80 2.80 2.79 30 3.13 3.12 3.12 3.11
11 2.81 2.81 2.81 2.80 31 3.15 3.15 3.14 3.13
12 2.82 2.82 2.82 2.82 32 3.18 3.17 3.16 3.15
13 2.83 2.83 2.83 2.83 33 3.20 3.20 3.19 3.18
14 2.85 2.85 2.84 2.84 34 3.23 3.23 3.22 3.20
15 2.86 2.86 2.86 2.85 35 3.26 3.26 3.24 3.23
16 2.87 2.87 2.87 2.86 36 3.29 3.29 3.27 3.26
17 2.89 2.89 2.88 2.88 37 3.32 3.32 3.30 3.29
18 2.90 2.90 2.90 2.89 38 3.35 3.35 3.33 3.32
19 2.92 2.92 2.91 2.91 39 3.39 3.38 3.37 3.35
20 2.93 2.93 2.93 2.92 40 3.42 3.42 3.40 3.38
21 2.95 2.95 2.94 2.94 41 3.46 3.46 3.43 3.42
22 2.96 2.96 2.96 2.95 42 3.50 3.50 3.47 3.45
23 2.98 2.98 2.98 2.97 43 3.54 3.54 3.51 3.49
24 3.00 3.00 2.99 2.99 44 3.59 3.58 3.55 3.53
- -----------------------------------------------------------------------------------
<CAPTION>
Number of Monthly Instalments Number of Monthly Instalments
Certain Certain
Age of ------------------------------- Age of -------------------------------
Payee Until Payee Until
None 120 240 Proceeds None 120 240 Proceeds
Are Are
F Refunded F Refunded
- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.63 $ 3.63 $ 3.59 $ 3.57 65 $ 5.35 $ 5.22 $ 4.79 $ 4.97
46 3.68 3.67 3.63 3.61 66 5.51 5.36 4.86 5.08
47 3.73 3.72 3.68 3.66 67 5.67 5.50 4.93 5.20
48 3.79 3.77 3.72 3.70 68 5.85 5.65 5.00 5.33
49 3.84 3.83 3.77 3.75 69 6.04 5.80 5.06 5.47
50 3.90 3.89 3.82 3.80 70 6.25 5.96 5.12 5.61
51 3.97 3.95 3.88 3.86 71 6.47 6.14 5.18 5.76
52 4.03 4.01 3.93 3.91 72 6.71 6.31 5.23 5.93
53 4.10 4.08 3.99 3.97 73 6.97 6.50 5.28 6.10
54 4.18 4.15 4.04 4.03 74 7.26 6.69 5.32 6.28
55 4.25 4.22 4.11 4.10 75 7.56 6.89 5.35 6.48
56 4.34 4.30 4.17 4.17 76 7.90 7.09 5.39 6.68
57 4.42 4.38 4.23 4.24 77 8.26 7.29 5.41 6.90
58 4.52 4.47 4.30 4.31 78 8.65 7.49 5.43 7.13
59 4.61 4.56 4.37 4.39 79 9.07 7.69 5.45 7.38
60 4.72 4.66 4.44 4.48 80 9.53 7.89 5.47 7.64
61 4.83 4.76 4.51 4.56 81 10.03 8.08 5.48 7.91
62 4.95 4.86 4.58 4.66 82 10.57 8.26 5.49 8.21
63 5.07 4.98 4.65 4.75 83 11.16 8.43 5.49 8.51
64 5.21 5.10 4.72 4.86 84 11.79 8.59 5.50 8.83
85+ 12.48 8.74 5.50 9.18
- -----------------------------------------------------------------------------------
*On birthday nearest to due date of first instalment. **Ages 5 and under. +Ages 85 and over.
</TABLE>
Page 18
<PAGE> 42
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME
Monthly Instalments for Each $1,000 of the Proceeds of This Policy
Settled Under Option 5
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- ----------------------------------------------------------------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* -----------------------------------------------------------------------------------------------------
MALE 50 51 52 53 54 55 56 57 58 59 60 61 62
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.60 $3.63 $3.66 $3.69 $3.72 $3.75 $3.77 $3.80 $3.83 $3.85 $3.88 $3.90 $3.92
51 3.62 3.65 3.68 3.71 3.74 3.77 3.80 3.83 3.86 3.89 3.91 3.94 3.97
52 3.64 3.67 3.70 3.74 3.77 3.80 3.83 3.86 3.89 3.92 3.95 3.98 4.01
53 3.66 3.69 3.72 3.76 3.79 3.82 3.86 3.89 3.92 3.96 3.99 4.02 4.05
54 3.67 3.71 3.74 3.78 3.81 3.85 3.89 3.92 3.96 3.99 4.02 4.06 4.09
55 3.69 3.72 3.76 3.80 3.84 3.87 3.91 3.95 3.99 4.02 4.06 4.10 4.13
56 3.70 3.74 3.78 3.82 3.86 3.90 3.94 3.98 4.02 4.06 4.10 4.13 4.17
57 3.72 3.76 3.80 3.84 3.88 3.92 3.96 4.00 4.05 4.09 4.13 4.17 4.21
58 3.73 3.77 3.81 3.86 3.90 3.94 3.99 4.03 4.08 4.12 4.17 4.21 4.25
59 3.74 3.79 3.83 3.87 3.92 3.96 4.01 4.06 4.10 4.15 4.20 4.25 4.29
60 3.75 3.80 3.84 3.89 3.94 3.98 4.03 4.08 4.13 4.18 4.23 4.28 4.33
61 3.77 3.81 3.86 3.91 3.95 4.00 4.05 4.11 4.16 4.21 4.26 4.32 4.37
62 3.78 3.82 3.87 3.92 3.97 4.02 4.07 4.13 4.18 4.24 4.29 4.35 4.41
63 3.79 3.83 3.88 3.93 3.99 4.04 4.09 4.15 4.21 4.26 4.32 4.38 4.44
64 3.80 3.84 3.90 3.95 4.00 4.06 4.11 4.17 4.23 4.29 4.35 4.41 4.48
65 3.80 3.85 3.91 3.96 4.01 4.07 4.13 4.19 4.25 4.31 4.38 4.44 4.51
70 3.84 3.89 3.95 4.01 4.07 4.13 4.20 4.27 4.34 4.41 4.49 4.57 4.65
75 3.86 3.92 3.98 4.04 4.11 4.17 4.25 4.32 4.40 4.48 4.57 4.66 4.75
80 3.87 3.93 4.00 4.06 4.13 4.20 4.27 4.35 4.44 4.52 4.61 4.71 4.81
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- --------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* ---------------------------------------------
MALE 63 64 65 70 75 80
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.95 $3.97 $3.99 $4.08 $4.14 $4.18
51 3.99 4.01 4.04 4.13 4.20 4.25
52 4.03 4.06 4.08 4.19 4.27 4.32
53 4.08 4.11 4.13 4.25 4.34 4.40
54 4.12 4.15 4.18 4.31 4.41 4.48
55 4.17 4.20 4.23 4.37 4.48 4.56
56 4.21 4.25 4.28 4.44 4.56 4.64
57 4.25 4.29 4.33 4.50 4.64 4.73
58 4.30 4.34 4.38 4.57 4.72 4.82
59 4.34 4.38 4.43 4.64 4.80 4.92
60 4.38 4.43 4.48 4.71 4.89 5.02
61 4.42 4.48 4.53 4.77 4.98 5.12
62 4.46 4.52 4.58 4.84 5.07 5.23
63 4.50 4.56 4.62 4.91 5.16 5.34
64 4.54 4.60 4.67 4.98 5.25 5.45
65 4.58 4.64 4.71 5.05 5.35 5.57
70 4.73 4.82 4.91 5.36 5.81 6.18
75 4.84 4.94 5.05 5.62 6.23 6.78
80 4.91 5.02 5.14 5.79 6.54 7.27
- --------------------------------------------------------
</TABLE>
* On birthday nearest to due date of first instalment. The amount of the
monthly instalment for any combination of ages not shown in this table will
be furnished on request.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
WITH 240 MONTHLY INSTALMENTS CERTAIN
- ----------------------------------------------------------------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* -----------------------------------------------------------------------------------------------------
MALE 50 51 52 53 54 55 56 57 58 59 60 61 62
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.60 $3.63 $3.65 $3.68 $3.71 $3.73 $3.76 $3.79 $3.81 $3.84 $3.86 $3.88 $3.90
51 3.61 3.64 3.67 3.70 3.73 3.76 3.79 3.82 3.84 3.87 3.89 3.92 3.94
52 3.63 3.66 3.69 3.72 3.76 3.79 3.82 3.85 3.87 3.90 3.93 3.95 3.98
53 3.65 3.68 3.71 3.75 3.78 3.81 3.84 3.87 3.90 3.93 3.96 3.99 4.02
54 3.66 3.70 3.73 3.77 3.80 3.83 3.87 3.90 3.93 3.97 4.00 4.03 4.06
55 3.68 3.71 3.75 3.79 3.82 3.86 3.89 3.93 3.96 4.00 4.03 4.06 4.09
56 3.69 3.73 3.77 3.80 3.84 3.88 3.92 3.95 3.99 4.03 4.06 4.10 4.13
57 3.70 3.74 3.78 3.82 3.86 3.90 3.94 3.98 4.02 4.06 4.09 4.13 4.17
58 3.72 3.76 3.80 3.84 3.88 3.92 3.96 4.00 4.04 4.09 4.13 4.16 4.20
59 3.73 3.77 3.81 3.85 3.90 3.94 3.98 4.03 4.07 4.11 4.15 4.20 4.24
60 3.74 3.78 3.82 3.87 3.91 3.96 4.00 4.05 4.09 4.14 4.18 4.23 4.27
61 3.75 3.79 3.84 3.88 3.93 3.97 4.02 4.07 4.12 4.16 4.21 4.26 4.30
62 3.76 3.80 3.85 3.89 3.94 3.99 4.04 4.09 4.14 4.19 4.23 4.28 4.33
63 3.77 3.81 3.86 3.91 3.95 4.00 4.05 4.10 4.16 4.21 4.26 4.31 4.36
64 3.77 3.82 3.87 3.92 3.97 4.02 4.07 4.12 4.17 4.23 4.28 4.33 4.39
65 3.78 3.83 3.88 3.93 3.98 4.03 4.08 4.14 4.19 4.25 4.30 4.36 4.41
70 3.81 3.86 3.91 3.96 4.02 4.07 4.13 4.19 4.25 4.31 4.38 4.44 4.50
75 3.82 3.87 3.92 3.98 4.03 4.09 4.16 4.22 4.28 4.35 4.42 4.48 4.55
80 3.82 3.87 3.93 3.98 4.04 4.10 4.16 4.23 4.29 4.36 4.43 4.50 4.57
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------
WITH 120 MONTHLY INSTALMENTS CERTAIN
- --------------------------------------------------------
Age of Payee*
Age of FEMALE
Payee* ---------------------------------------------
MALE 63 64 65 70 75 80
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.92 $3.94 $3.96 $4.03 $4.06 $4.08
51 3.96 3.98 4.00 4.08 4.12 4.14
52 4.00 4.02 4.05 4.13 4.17 4.19
53 4.04 4.07 4.09 4.18 4.23 4.25
54 4.08 4.11 4.13 4.23 4.29 4.31
55 4.12 4.15 4.18 4.29 4.35 4.38
56 4.16 4.19 4.22 4.34 4.41 4.44
57 4.20 4.24 4.27 4.40 4.47 4.50
58 4.24 4.28 4.31 4.45 4.53 4.57
59 4.28 4.31 4.35 4.50 4.59 4.63
60 4.31 4.35 4.39 4.55 4.65 4.69
61 4.35 4.39 4.43 4.61 4.71 4.76
62 4.38 4.42 4.47 4.66 4.77 4.82
63 4.41 4.46 4.50 4.70 4.83 4.88
64 4.44 4.49 4.54 4.75 4.88 4.94
65 4.46 4.52 4.57 4.79 4.93 5.00
70 4.57 4.63 4.69 4.97 5.15 5.24
75 4.62 4.69 4.76 5.07 5.28 5.38
80 4.64 4.71 4.78 5.11 5.33 5.44
- --------------------------------------------------------
</TABLE>
* On birthday nearest to due date of first instalment. The amount of the
monthly instalment for any combination of ages not shown in this table will
be furnished on request.
Page 19
<PAGE> 43
AVAILABILITY AND LIMITATIONS. An Option will be available if the Proceeds to be
settled under the Option are payable to a natural person in his own right and
amount to at least $5,000.
If the periodic payment under an Option would be less than $50, we may change
the frequency of payment so that the amount of each payment will be at least
$50.
In no event may any Proceeds that are to be paid under a collateral
assignment be settled under an Option. Such Proceeds may be paid only in one
sum.
ELECTION. An Option to apply to the Proceeds at Death or surrender may be
elected as follows:
1. PROCEEDS OF DEATH. The election may be made:
a. by you, while the Insured is alive; or
b. by the Beneficiary, when the Insured dies, if no election is then in
force.
2. PROCEEDS AT SURRENDER. The election may be made only by you at the time
this Policy is surrendered.
An election or revocation of an Option must be made by written request. Such
election or revocation when filed at the Home Office will take effect as of the
date it was signed:
1. whether or not the person making it is alive when it is filed; and
2. subject to any payment or other action by us before filing.
MISCELLANEOUS. When the Proceeds are settled under an Option, we may:
1. require the return of this Policy; and
2. issue in place of this Policy a certificate which will set forth the
terms of the Option elected.
We will require satisfactory proof of the date of birth of each person on
whose life the payments are based under Option 4 or 5 or the Alternate Life
Income Option.
The Proceeds settled under an Option will be part of our general funds. We
will not be required to segregate such Proceeds or place them in a separate
investment account.
CALCULATION OF VALUES
BASIS OF CALCULATION. Net single premiums, Cash Values, and guaranteed cost of
insurance rates are based on the Commissioners 1980 Standard Ordinary Mortality
Table with Smoker/Non-Smoker modifications. For Extended Term Insurance, net
single premiums and Cash Values are based on the Commissioners 1980 Extended
Term Insurance Table with Smoker/Non-Smoker modifications. Continuous functions
are used. For computing net single premiums and Cash Values for Extended Term
and Reduced Paid Up Insurance, the interest rate used is 4 1/2%. The Cash Value
of this Policy at the end of a Policy Year will be calculated in accordance
with the Standard Nonforfeiture Law. The Cash Value of Extended Term and
Reduced Paid Up Insurance at any time is equal to the net single premium for
such insurance based on the Insured's Attained Age. A detailed statement of how
we calculate the values for this Policy has been filed with the insurance
supervisory official of the state in which this Policy is delivered.
CALCULATION OF CASH VALUE. When the first net scheduled premium is allocated to
the Separate Accounts, the Cash Value in each Separate Account on the Policy
Date will equal the Net Premium allocated to that Separate Account minus the
first monthly deduction allocated to that Separate Account. Thereafter, on each
Valuation Day, the Cash Value in each Separate Account will equal:
1. the Cash Value in the Separate Account for the previous Valuation
Period times the Net Investment Factor for the current Valuation Period;
2. plus any Net Premiums we receive during the current Valuation Period
which are allocated to that Separate Account;
3. plus any Cash Value which, during the current Valuation Period:
a. we transfer to the Separate Account from the General Account when
you repay any loan amount, including interest credited to loaned
amounts; and
b. we transfer to the Separate Account from another Separate Account
at your request;
4. minus any Cash Value which, during the current Valuation Period
a. we transfer from the Separate Account to the General Account when
you borrow on this Policy or fail to pay interest when due; and
b. we transfer from the Separate Account to another Separate Account
at your request;
5. plus any dividends credited to the Separate Account during the current
Valuation Period;
6. minus the monthly deductions allocated to the Separate Account during
the current Valuation Period;
7. minus any partial withdrawals during the current Valuation Period which
are allocated to the Separate Account.
The Cash Value of this Policy is equal to: (a) the sum of the Cash Value of
each Separate Account, plus (b) any policy loans in the General Account
Page 20
<PAGE> 44
VALUATION DAY AND PERIOD. Assets are valued at the close of a Valuation Day. A
Valuation Day is any day Monday through Friday, except for days when we are
closed for holidays.
A Valuation Period is the time between two successive Valuation Days. Each
Valuation Period includes a Valuation Day and any non-Valuation Day or
consecutive non-Valuation Days immediately preceding it.
NET INVESTMENT FACTOR. Each Separate Account has its own Net Investment Factor.
The Net Investment Factor of the Separate Account for a Valuation Period is (a)
divided by (b), minus (c) and minus (d), where
(a) is: 1. the value of the assets in the Separate Accounts for the preceding
Valuation Period; plus
2. the investment income and capital gains, realized or unrealized,
credited to those assets during the Valuation Period for which the
Net Investment Factor is being determined, minus
3. the capital losses, realized or unrealized, charged against those
assets during the Valuation Period; minus
4. any amount charged against the Separate Account for taxes, or any
amount we set aside during the Valuation Period as a reserve for
taxes attributable to the operation or maintenance of the Separate
Account; and
(b) is the value of the assets in the preceding Valuation Period; and
(c) is a charge no greater than .60% per year (.001643835% for each day in
the Valuation Period) for mortality and expense risks; and
(d) is a charge, for Separate Account V only, no greater than .50% per year
(.001369863% for each day in the Valuation Period) for transaction
charges associated with the purchase of units.
We will value the assets in the Separate Account at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
MONTHLY DEDUCTIONS. On each Policy Processing Day, beginning on the Policy
Date, we will deduct the following charges from the Cash Value:
1. Cost of insurance charge as described below.
2. Administration charge as shown in the Policy Data.
3. Minimum death benefit guarantee charge as shown in the Policy Data.
4. First year policy charge as shown in the Policy Data.
5. If the Special Premium Payment Provision is in effect, we will also
deduct 92 1/2% of any scheduled premium for any supplementary benefits
or "Extra Premium" Class for that date as shown in the Policy Data.
The cost of insurance charge for the following Policy Month is (a) multiplied
by the result of (b) minus (c), where:
(a) is the Cost of Insurance Rate;
(b) is the Death Benefit at the beginning of the Policy Month divided by
1.0040741; and
(c) is the Cash Value at the beginning of the Policy Month.
The Cost of Insurance Rate is based on the Insured's Attained Age, sex and
smoking status. Cost of Insurance Rates will be determined by the Company
based on our expectations as to future mortality experience. However, these
rates will not exceed those shown in the Policy Data. Such maximum rates are
based on the 1980 Commissioners Standard Ordinary Mortality Table with
Smoker/Non-smoker modifications.
We will allocate the total monthly deduction among the Separate Accounts in
the same proportion as the policy's Net Cash Value in the Separate Accounts
bear to the total Net Cash Value of this Policy. We will allocate the monthly
deduction for any Policy Processing Day prior to receipt of the first premium
among the Separate Accounts based on the Net Cash Value in the Separate
Accounts on the later of the Issue Date or the date the first premium is
received.
Page 21
<PAGE> 45
ENDORSEMENTS
(ONLY WE CAN ENDORSE THIS POLICY)
<TABLE>
<CAPTION>
A GUIDE TO THE PROVISIONS OF THIS POLICY
Page Page
<S> <C> <C> <C>
Policy Summary........................................2 General Provisions..........................10
Definitions...........................................2 Dividend Provisions.........................10
Policy Data.........................................3-7 Policy Owner and Beneficiary
Payment of Scheduled Premiums........................4 Provisions.................................11
Schedule of Charges From Base Premium Payment Provisions...............11-12
Scheduled Premium Payments..........................4 Options on Lapse............................12
Payment of Unscheduled Premiums.......................4 Premium Expense Charge......................12
Schedule of Monthly Deductions Separate Accounts...........................13
From Cash Value......................................5 Investment Options..........................14
Schedule of Maximum Surrender Exchange of Policy..........................14
Charges............................................. 5 Death Benefit Provisions.................14-15
Death Benefit Factors.................................6 Cash Value Provisions.......................15
Guaranteed Monthly Cost of Policy Loan Provisions......................16
Insurance Rates.....................................7 Payment Options..........................17-20
Description of Separate Accounts......................8 Calculation of Values....................20-21
Initial Investment Allocation Endorsements................................22
of Net Premiums.....................................9
</TABLE>
Page 22
<PAGE> 46
VOTING PRIVILEGE
The Owner of this Policy is a member of the Company. All members have the right
to vote at the annual meeting or at any special meetings of the members either
in person or by proxy.
Modified Premium Variable Life Insurance Policy with variable insurance amount
Insurance payable only upon death
Scheduled premiums payable throughout Insured's lifetime.
Provisions for optional additional premiums.
Benefits reflect premium payments, investment results and mortality charges.
Guaranteed Minimum Death Benefit if scheduled premiums duly paid.
Participating
[LOGO]
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
1600 Market Street, Philadelphia, Pennsylvania 19103
<PAGE> 47
PROVIDENT MUTUAL LIFE
INSURANCE COMPANY OF
PHILADELPHIA
INSURED B B
POLICY NUMBER 1,000 JULY 19, 1995 ISSUE DATE
FACE AMOUNT $75,000 33 ISSUE AGE
JULY 19, 1995 POLICY DATE
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA agrees:
- To pay the Beneficiary of this Policy the Proceeds at Death upon receiving
due proof of the Insured's death;
- To provide you (the Policy Owner) with the other rights and benefits of
this Policy. These agreements are subject to the provisions of this Policy.
THE DEATH BENEFIT MAY INCREASE OR DECREASE DAILY AS DESCRIBED ON PAGE 14,
DEPENDING UPON THE PAYMENT OF PREMIUMS, THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNTS AND THE LEVEL OF MORTALITY CHARGES MADE. BUT, IT WILL NOT BE
LESS THAN THE FACE AMOUNT SHOWN ABOVE.
THE CASH VALUE MAY INCREASE OR DECREASE DAILY DEPENDING UPON THE PAYMENT OF
PREMIUMS THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNTS AND THE LEVEL OF
MORTALITY CHARGES MADE. THERE IS NO GUARANTEED MINIMUM CASH VALUE.
A Schedule of Premiums is shown in the Policy Data. Additional unscheduled
premiums may be paid at your option subject to the limitations in this Policy.
Please read this Policy with care. A guide to its provisions is on the last
page. A summary is on page 2. Any additional benefit riders and a copy of the
Application are included in this Policy after page 21.
This is a legal contract between the Owner and
Provident Mutual Life Insurance Company of Philadelphia.
RIGHT TO CANCEL POLICY. You may return this Policy to us by the later of: (a)
10 days after you receive it; or (b) 45 days after Part I of the Application
was signed. All you have to do is take this Policy or mail it to our Home
Office at 1600 Market Street, Philadelphia, Pennsylvania 19103, or to one of
our offices or to the representative who sold it to you. If you do this, we
will cancel this Policy from the start and refund the sum of (a) the difference
between the premiums you paid, including any policy fees or other charges, and
the amounts allocated to the Separate Accounts; and (b) the total Cash Value of
the Separate Accounts on the date we receive the returned policy.
Attest
/s/Robert W. Kloss
Registrar President
Modified Premium Variable Life Insurance Policy with variable insurance amount
Insurance payable only upon death.
Scheduled premiums payable throughout Insured's lifetime.
Provision for optional additional premiums.
Benefits reflect premium payments, investment results and mortality charges.
Guaranteed Minimum Death Benefit if scheduled premiums duly paid.
Participating.
Employee Benefit Series
<PAGE> 48
POLICY SUMMARY
This is a variable life insurance policy.
Premiums are to be paid throughout the Insured's lifetime. We have specified a
schedule of premiums which must be paid to keep this Policy in full force.
Under certain conditions, payment of a scheduled premium may not be required to
keep this Policy in full force. You will be notified if a scheduled premium
payment is not required. At your option, additional premiums may be paid,
subject to the policy provisions.
The Cash Value and Death Benefit of this Policy will vary with the payment of
premiums, the investment performance of the Separate Accounts to which your
premiums are allocated, and the extent to which mortality charges are less than
the guaranteed maximums. If all scheduled premiums are paid in accordance with
the schedule, this Policy will not lapse, even if adverse investment experience
has resulted in a zero or negative Cash Value.
The Guaranteed Minimum Death Benefit is the Face Amount. If this Policy has
lapsed, coverage may end or this Policy may stay in force with reduced
benefits. If either occurs, you may be able to reinstate this Policy within 3
years with full benefits.
To compute the Proceeds payable upon the Insured's death, we start with the
Death Benefit and adjust this amount if there is a loan or if required premiums
are unpaid. If you surrender this Policy, the Proceeds will be the net cash
surrender value.
We will pay the Proceeds in one sum unless a Payment Option is in force. If you
elect a Payment Option, it will apply to Proceeds paid to you if you surrender
this Policy or those paid to the Beneficiary when the Insured dies. If a
Payment Option is not in force when the Insured dies, the Beneficiary will be
able to elect a Payment Option for the Proceeds at Death.
As Policy Owner, you have these rights in this Policy, among others:
- - You may borrow on this Policy.
- - You may surrender this Policy.
- - You may change the Beneficiary.
- - You may change the allocation of future net premiums among the Separate
Accounts.
- - You may transfer amounts among Separate Accounts.
DEFINITIONS
ATTAINED AGE. The Issue Age of the Insured plus the length of time since the
Policy Date.
BASE PREMIUM. Total scheduled premium for this Policy minus the premium
processing charge and premiums for supplementary benefits and Extra Premium
Class.
INSURED. The person named as the Insured on the first page. He or she need not
be the Owner.
NET CASH VALUE. The Cash Value minus the sum of policy loans and accrued
interest.
NET PREMIUM. The remainder of a Base Premium or unscheduled premium after
deduction of the Premium Expense Charges.
POLICY ANNIVERSARY. The same day and month as the
Policy Date in each later year.
POLICY PROCESSING DAY. The day in each calendar month which is the same day of
the month as the Policy Date
POLICY YEAR. A year that starts on the Policy Date or on a Policy Anniversary.
PROCEEDS. The net amount to be paid when the Insured dies or this Policy is
surrendered.
WE, OUR, US AND COMPANY. Provident Mutual Life Insurance Company of
Philadelphia, a Pennsylvania Corporation.
YOU AND YOUR. The Owner of this Policy.
Page 2
<PAGE> 49
POLICY DATA
INSURED
POLICY NUMBER JULY 19, 1995 ISSUE DATE
FACE AMOUNT $75,000 33 ISSUE AGE
JULY 19, 1995 POLICY DATE
PREMIUM CLASS NON-SMOKER
* * * * *
BENEFITS
- --------
VARIABLE WHOLE LIFE INSURANCE
ACCELERATED DEATH BENEFIT RIDER
GUARANTEED PURCHASE OPTION - AMOUNT $25,000
* * * * *
THE POLICY LOAN INTEREST RATE IS VARIABLE. THE RATE IN EFFECT ON THE ISSUE DATE
IS 8.25%. THIS RATE WILL REMAIN IN EFFECT UNTIL OCT 1, 1995. IT WILL BE CHANGED
AS NOTED IN THE VARIABLE LOAN INTEREST RATE (VLIR) RIDER ATTACHED TO THIS
POLICY.
* * * * *
3
<PAGE> 50
POLICY DATA (CONTINUED)
PAYMENT OF SCHEDULED PREMIUMS
SCHEDULED PREMIUMS ARE PAYABLE ON THE POLICY DATE AND AT INTERVALS OF 1 months
after that date, as follows:
<TABLE>
<CAPTION>
Additional Premium for:
Total Base Supplementary Benefits Extra Premium
Beginning: Premium* Premium ADB WP GPO CLASS
<S> <C> <C> <C> <C> <C> <C>
JULY 19,1995 65.89 702.50 NONE NONE 637.61 NONE
JULY 19,2002 703.50 702.50 NONE
JULY 19,2032 129.82 128.82
</TABLE>
The Premium Change Date is JULY 19,2032
* Includes $1.00 premium processing charge described below.
* * * *
SCHEDULE OF CHARGES DEDUCTED FROM SCHEDULED PREMIUM PAYMENTS
PREMIUM EXPENSE CHARGE. A Premium Expense Charge consisting of the following is
deducted from each scheduled premium:
1. $1.00 from the total scheduled premium for premium processing.
2. 7.5% of the Base Premium for Sales Charges (5%) and State Premium Tax
Charge (2.5%).
AFTER DEDUCTION OF THESE AMOUNTS, WE ALLOCATE THE NET PREMIUM TO THE SEPARATE
Accounts you have chosen for scheduled premiums.
* * * *
PAYMENT OF UNSCHEDULED PREMIUMS
The minimum unscheduled premium is $25. After deduction of $1.00 for premium
processing and 7.5% of the remaining amount of the unscheduled premium for
Sales Charges and State Premium Tax Charges, we allocate the Net Premium to the
SEPARATE ACCOUNTS ACCORDING TO THE ALLOCATION then in effect for scheduled
premiums, unless you notify us of a different allocation.
* * * *
4
<PAGE> 1
Exhibit 1.A.5a
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
DISABILITY WAIVER OF PREMIUM BENEFIT (WP)
WAIVER OF PREMIUMS. Upon receipt of due proof of the Insured's total disability,
defined below, we will waive scheduled premiums for this Policy, subject to the
conditions of this rider. Such total disability must:
1. start while this rider is in force;
2. start between Attained Age 5 and Attained
Age 60; and
3. continue without pause for at least the number of days shown on
page 3.
All scheduled premiums that fall due during such total disability will be
waived. If the Special Premium Payment Provision is in effect during a period of
total disability, the amount of any scheduled premium which would have been
waived under the provisions of this rider if the Special Premium Payment
Provision was not in effect will be deposited as an unscheduled premium payment.
Any premiums that have been paid during a period of total disability will be
refunded. If the Special Premium Payment Provision is in effect and a premium is
paid during such total disability, we will deposit as an unscheduled premium
payment the amount of any scheduled premium which would have been payable if
such provision was not in effect. However, no premium will be waived, refunded
or deposited if its due date is more than one year prior to the date written
notice of total disability is filed at our Home Office. Premiums will be waived
or deposited at the frequency (premium mode) in effect when the total disability
began.
As used in this rider the word "qualified" means qualified by education,
training and experience. "Disability" means the inability of the Insured to
engage in his or her regular occupation or any gainful occupation for which he
or she is qualified.
DEFINITION OF TOTAL DISABILITY.
1. TOTAL DISABILITY. Total disability is disability which:
a. is caused by sickness or bodily injury; and
b. prevents the Insured from engaging in an occupation.
During the first 5 years of total disability,
"occupation" means the regular occupation of the
Insured at the time the disability started. However,
the Insured will not be deemed totally disabled if,
during this 5-year period, he or she is engaged in any
gainful occupation for which he or she is qualified.
After the first 5 years of total disability,
"occupation" means any gainful occupation for which the
Insured is qualified.
2. RECURRENT TOTAL DISABILITY. If, after a total disability has
stopped, a total disability due to the same or a related cause
recurs, it will be deemed a continuation of the prior period of
total disability, except that: if the Insured has engaged in the
meantime, for at least 6 months without pause, in any gainful
occupation for which he or she is qualified, such recurrence
will be deemed a new period of total disability.
3. PRESUMPTIVE TOTAL DISABILITY. Total disability also means the
total and irrecoverable loss of:
a. the sight of both eyes;
b. the use of both hands;
c. the use of both feet; or
d. the use of one hand and one foot.
EXCLUSIONS FROM COVERAGE. No premiums will be waived if the total disability was
the result of:
1. intentional, self-inflicted injury while sane or insane;
2. bodily injury occurring or sickness first manifesting itself
before this rider took effect unless such injury or sickness was
shown in the application for this rider; or
3. service in the military, naval or air forces of any country
engaged in war. "War" means declared or undeclared war and any
act incidental to war and includes resistance to armed
aggression.
NOTICE AND PROOF OF TOTAL DISABILITY. Written notice and due proof of total
disability must be given to us at our Home Office while the Insured is living
and totally disabled. Failure to give such notice and proof will not void the
claim if it is shown that they were given as soon as was reasonably possible.
We may ask for proof of continued total disability from time to time. Such
proof will not be required more than once a year after total disability has
continued for two full years. As part of any such proof, we may require medical
examinations of the Insured by physicians named by us.
(Continued on reverse side)
<PAGE> 2
PREMIUMS. The modal premiums for this benefit and the number of years the
premiums are payable are shown on page 4. The premiums for this benefit are
included in the total premiums for this Policy shown on page 4. If the Special
Premium Payment Provision is in effect, 92.5% of the premium for this benefit
will be deducted from the Cash Value of this Policy on the Policy Processing Day
on which the scheduled premium would otherwise be payable if such provision was
not in effect.
Unless the Special Premium Payment Provision is in effect, all premiums under
this Policy must be paid when due until any claim made under this rider is
approved. If a total disability starts during a grace period, the past due
premium must be paid before we can approve the claim.
TERMINATION. This rider will terminate:
1. upon written request;
2. 61 days after the due date of any unpaid premium for this rider
or for any required scheduled premium for the policy to which it
is attached (except as provided under "Premiums" in this rider);
3. at Attained Age 60 unless the Insured is then totally disabled,
in which case it will terminate on the date on which such
disability stops; or
4. upon the surrender or other termination of this Policy.
INCONTESTABILITY. We will not contest this rider after it has been in force
during the Insured's lifetime without the occurrence of total disability for 2
years from the Issue Date of this Policy, except for non-payment of premiums.
MISCELLANEOUS. While premiums are being waived under this rider, any Cash
Values, loan values and dividends provided for in this Policy will be the same
as if the waived premiums had been paid as they became due.
Any sum which is payable by us because of the waiver of a premium previously
paid and which is unpaid at the Insured's death will be paid as a part of the
proceeds of this Policy.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA on the
Issue Date of this Policy.
/s/ Robert Kloss
President
<PAGE> 1
Exhibit 1.A.5b
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
DISABILITY WAIVER OF PREMIUM BENEFIT (W)
INSURED POLICY NUMBER
ISSUE DATE OF THIS RIDER
- --------------------------------------------------------------------------------
SCHEDULE OF BENEFITS AND YEARLY PREMIUMS
YEARLY YEARS
BENEFIT PREMIUM PAYABLE
DISABILITY WAIVER OF PREMIUM - DAY WAIT
- --------------------------------------------------------------------------------
SCHEDULE OF PREMIUMS
This schedule shows the amounts of the premiums for this rider, based on the
frequency of premium payments in effect for this policy on the issue date of
this rider. If the frequency of premium payments is changed, the amounts of the
premiums will change accordingly.
YEARLY HALF-YEARLY QUARTERLY MONTHLY
- --------------------------------------------------------------------------------
WAIVER OF PREMIUMS. Upon receipt of due proof of the Insured's total disability,
defined below, the Company will waive premiums for this policy, subject to the
conditions of this rider. Such total disability must:
1. start while this rider is in force;
2. start between attained age 5 and attained age 60; and
3. continue without pause for at least the number of days shown
above in the "Schedule of Benefits and Yearly Premiums."
All premiums that fall due during such total disability will be waived. If any
such premium has been paid, it will be refunded. However, no premium will be
waived or refunded if its due date is more than one year prior to the date
written notice of total disability is filed at the Home Office of the Company.
Premiums will be waived at the frequency in effect when the total disability
began.
If total disability continues to attained age 65 and the policy provides for
premium payments after that date:
a. no further premium payments will be required; and
b. the benefits provided by this policy after such date will be the
same as if the policy were fully paid up.
As used in this rider the word "qualified" means qualified by education,
training and experience. "Disability" means the inability of the Insured to
engage in his or her regular occupation or any gainful occupation for which he
or she is qualified.
DEFINITION OF TOTAL DISABILITY.
1. TOTAL DISABILITY. Total disability is disability which:
a. is caused by sickness or bodily injury; and
b. prevents the Insured from engaging in an occupation.
During the first 5 years of total disability,
"occupation" means the regular occupation of the
Insured at the time the disability started. However,
the Insured will not be deemed totally disabled if,
during this 5-year period, he or she is engaged in any
gainful occupation for which he or she is qualified.
After the first 5 years of total disability,
"occupation" means any gainful occupation for which the
Insured is qualified.
2. RECURRENT TOTAL DISABILITY. If, after a total disability has
stopped, a total disability due to the same or a related cause
recurs, it will be deemed a continuation of the prior period of
total disability, except that: if the Insured has engaged in the
meantime, for at least 6 months without pause, in any gainful
occupation for which he or she is qualified, such recurrence
will be deemed a new period of total disability.
(Continued on reverse side)
<PAGE> 2
3. PRESUMPTIVE TOTAL DISABILITY. Total disability also means the
total and irrecoverable loss of:
a. the sight of both eyes;
b. the use of both hands;
c. the use of both feet; or
d. the use of one hand and one foot.
EXCLUSIONS FROM COVERAGE. No premiums will be waived if the total disability was
the result of:
1. intentional, self-inflicted injury while sane or insane;
2. bodily injury occurring or sickness first manifesting itself
before this rider took effect unless such injury or sickness was
shown in the application for this rider; or
3. service in the military, naval or air forces of any country
engaged in war. "War" means declared or undeclared war and any
act incidental to war and includes resistance to armed
aggression.
NOTICE AND PROOF OF TOTAL DISABILITY. Written notice and due proof of total
disability must be given to the Company at its Home Office while the Insured is
living and totally disabled. Failure to give such notice and proof will not void
the claim if it is shown that they were given as soon as was reasonably
possible.
The Company may ask for proof of continued total disability from time to time.
Such proof will not be required more than once a year after total disability has
continued for two full years. As part of any such proof, the Company may require
medical examinations of the Insured by physicians named by the Company.
PREMIUMS. The yearly premiums for this rider and the number of years they are
payable are shown above in the "Schedule of Benefits and Yearly Premiums." Years
are whole policy years. Any pro rata premium as may be payable for part of a
year on the issue date of this rider is not shown. The premiums for this rider
are payable:
1. as set forth above in the "Schedule of Premiums"; and
2. in addition to the premiums for this policy shown on page 3.
All premiums under this policy must be paid when due until any claim made
under this rider is approved. If a total disability starts during a grace
period, the past due premium must be paid before the Company can approve the
claim.
TERMINATION. This rider will terminate:
1. upon written request;
2. 31 days after the due date of any unpaid premium for this rider
or for the policy to which it is attached (except as provided
under "Premiums" in this rider);
3. at attained age 60 unless the Insured is then totally disabled,
in which case it will terminate at a. or b., whichever is
earlier:
a. the date on which such disability stops;
b. attained age 65; or
4. upon the surrender, maturity, expiry or other termination of
this policy.
INCONTESTABILITY. The Company will not contest this rider after it has been in
force during the Insured's lifetime without the occurrence of total disability
for 2 years from the issue date of this rider, except for non-payment of
premiums.
MISCELLANEOUS. While premiums are being waived under this rider, any cash
values, loan values and dividends provided for in this policy will be the same
as if the waived premiums had been paid as they became due.
Any sum which is payable by the Company because of the waiver of a premium
previously paid and which is unpaid at the Insured's death will be paid as a
part of the proceeds of this policy.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA on the issue
date of this rider.
/s/ Robery W. Kloss
President
<PAGE> 1
Exhibit 1.A.5c
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
GUARANTEED PURCHASE OPTION
BENEFIT. Additional policies on the life of the Insured may be purchased without
evidence of insurability:
1. while this rider is in force; and
2. subject to the conditions of this rider. Such policies are
called "option policies" in this rider; they may be purchased
during Regular or Alternate Option Periods, as described below.
REGULAR OPTION PERIODS. Regular Option Periods will start on the 60th day
before, and will end at, Attained Ages 25, 28, 31, 34, 37 and 40.
ALTERNATE OPTION PERIODS. An Alternate Option Period will start on the date on
which any of the following events takes place (after the Policy Date):
1. the marriage of the Insured;
2. the birth of a living child of the Insured's marriage;
3. the legal adoption by the Insured of a child less than 18 years
old; or
4. the graduation of the Insured from an accredited secondary,
technical or vocational school, college or university. This
option may be exercised only once.
Each period will end on the 90th day following the date of the event which
established such period, except that:
a. if such 90th day is the 29th, 30th or 31st day of a month, the
period will end on the 1st day of the next month; and
b. if any such period begins within 90 days prior to the
termination date of this rider, it will end on that date.
The exercise of a right to buy an option policy during an Alternate Option
Period will cancel the next Regular Option Period which has not already been
canceled by the exercise of such a right during a prior period. If both a
Regular and an Alternate Option Period end on the same date, the purchase right
may be exercised as to one of those periods, but not to both.
AMOUNT OF OPTION POLICY. The face amount of the option policy will not be more
than the amount shown on page 3 of this Policy under the heading "Guaranteed
Purchase Option." However, if two or more children are born or adopted on the
same date, the amount of the option policy will be the amount referred to above
multiplied by the number of children so born or adopted.
CONDITIONS OF PURCHASE OF OPTION POLICY.
1. Written request and payment of the first premium must be sent to
our Home Office during an Option Period.
2. The issue date of an option policy applied for during a Regular
Option Period may be any date in that period except the 29th,
30th or 31st day of any month. The issue date of an option
policy applied for during an Alternate Option Period will be the
date on which that period ends.
3. An option policy will take effect on its issue date if the
Insured is then living. If the Insured dies before such date,
any premiums paid for the option policy will be returned.
4. The premium class of the option policy will be Standard unless
this Policy is in an extra-premium class, in which case the
option policy will be in an extra-premium class.
5. The option policy may be on any life or endowment plan which has
a level face amount and level premiums. The policy also must be
one that is customarily issued by us:
a. on the issue date of and in the premium class of the
option policy;
b. at the Insured's then Attained Age; and
c. in the amount applied for.
6. The premium will be based on:
a. the Insured's age at his or her birthday nearest the
issue date of the option policy; and
b. the premium rates then in use by us.
7. At your request, an option policy may have a waiver of premium
rider on a form then in use by us if:
a. the option policy is on the whole life plan; and
b. this Policy has such a rider attached.
(Continued on reverse side)
<PAGE> 2
8. At your request, an option policy may have an accidental death
benefit (ADB) rider on a form then in use by us if this Policy
has such a rider attached. The face amount of such benefit will
be the same as that of the option policy, subject to our then
published limits for such benefit.
9. An option policy will contain any exclusion, restriction, or
endorsement that is part of this Policy or that is customarily
included in policies issued at the time the option policy is
issued.
10. The Suicide and Incontestability periods in an option policy
will be measured from the Issue Date of this Policy. A rider to
this effect will be attached to the option policy.
TERM INSURANCE. We will provide term insurance on the life of the Insured during
an Alternate Option Period. Coverage will end on the day before the termination
date of such period. The amount of insurance will be equal to the face amount of
the option policy that may be purchased during such period.
If an ADB rider is contained in this Policy and if such accidental death
benefit becomes payable by reason of the Insured's death while this term
insurance is in force, the amount of term insurance otherwise payable under this
clause will be increased by the amount payable under such ADB rider.
PREMIUMS. The modal premiums for this benefit and the period for which the
premiums are payable are shown on page 4. The premiums for this benefit are
included in the total premiums for this Policy shown on page 4.
If the Special Premium Payment Provision is in effect, 92.5% of the premium
for this benefit will be deducted from the Cash Value of this Policy on the
Policy Processing Day on which a scheduled premium would otherwise be payable if
such provision was not in effect.
TERMINATION. The right to purchase an option policy during an Option Period will
end on the termination date of that period. This rider will terminate:
1. upon written request;
2. 61 days after the due date of any unpaid premium for this rider
or any required scheduled premium for the policy to which it is
attached;
3. upon the cancellation of the last Regular Option Period by
exercise of the right to purchase an option policy during an
Alternate Option Period;
4. at Attained Age 40; or
5. upon the surrender or other termination of this Policy.
MISCELLANEOUS. During an Alternate Option Period, before we will issue an option
policy or pay any term insurance benefit, satisfactory proof must be received of
any:
1. marriage;
2. birth;
3. adoption; or
4. graduation.
The word "marriage" as used in this rider means a marriage in which a person
authorized by law to perform a marriage ceremony has done so. Reinstatement of
this Policy and this rider will not reinstate any right to purchase an option
policy with respect to any Option Period which ended before the date of
reinstatement.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA on the Issue
Date of this Policy.
/s/ Robert W. Kloss
President
<PAGE> 1
Exhibit 1.A.5d
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
VARIABLE LOAN INTEREST RATE (VLIR)
INTEREST RATE. Interest on loans on this Policy will accrue at a variable rate.
The loan interest rate will be determined by us as of the first day of each
January, April, July and October. Such rate will take effect on the date as of
which it is determined; it will apply to both new and outstanding loans for 3
months after that date.
To determine the loan interest rate for each new 3 month period, we will
compare the loan interest rate for the preceding 3 months with a maximum
interest rate prescribed by law and defined below. If there is a difference of
1/2% or more and the maximum interest rate is higher, the loan interest rate may
be increased by at least 1/2% but not higher than the maximum interest rate; if
it is lower, the loan interest rate will be reduced to the same as or less than
the maximum interest rate.
Maximum Interest Rate. The maximum yearly interest rate is the greater of:
1. the Corporate Bond Yield Average -- Monthly Average Corporates
as published by Moody's Investors Service, Inc., for the
calendar month ending 2 months before the date as of which the
loan interest rate is determined; and
2. 5 1/2%.
If at any time such Corporate Bond Yield Average is not published, the rate used
in its place will be as then prescribed by law or by regulation of the insurance
supervisory official of the state in which this Policy was delivered.
NOTIFICATION OF RATE. We will notify you:
1. of the initial loan interest rate when a loan other than an
automatic premium loan is made;
2. of the initial loan interest rate as soon as possible after an
initial automatic premium loan is made; and
3. in advance of any increase in the loan interest rate if there is
an outstanding loan.
The loan interest rate in effect on the Issue Date is shown on page 3.
EFFECT ON TERMINATION. This Policy will not terminate during a Policy Year as
the sole result of a change in the loan interest rate during that year. We will
keep this Policy in force during such year until the time it would otherwise
have terminated if there had not been a change in the loan interest rate during
that year.
EFFECT ON REINSTATEMENT. The interest on any indebtedness paid or reinstated
upon reinstatement of this Policy will be at the rate or rates in effect from
the due date of the unpaid premium to the date of reinstatement.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA on the Issue
Date of this Policy.
/s/ Robert W. Kloss
President
<PAGE> 1
Exhibit 1.A.5e
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
RIDER
AMENDMENT TO QUALIFY LIFE INSURANCE POLICY
AS A PART OF A SECTION 403(b) TAX-SHELTERED ANNUITY
For purposes of qualifying the Policy applied for as part of a tax-sheltered
annuity under Section 403(b) of the Internal Revenue Code of 1986, as amended
("Code"), the Policy herein is amended as follows:
1. This Policy is issued as part of a tax-sheltered annuity contract
qualified under Code Section 403(b) pursuant to an agreement between the
Policyowner ("Owner") and the Owner's employer, an organization described in
Code Section 403(b)(1)(A). The Insured must be the Owner.
2. While this Rider is in effect, premiums must be paid by an employer
qualified under Code Section 403(b)(1)(A) (including salary reduction
contributions) or by transfer from an annuity contract qualified under Code
Section 403(b). Premiums must comply with applicable limits under the Code,
including Sections 402(b), 403(b) and 415. Aggregate premiums (including
premiums paid by dividends) must at all times be less than: (a) 50% of aggregate
employer contributions if this Policy provides ordinary life insurance
protection with nonincreasing premiums and nondecreasing death benefits; (b)
otherwise, 25% of aggregate employer contributions.
3. In accordance with Code Section 403(b)(131), distributions under this
Contract are permitted only when the Owner, as determined under the Code: (a)
attains age 59 1/2; (b) separates from service; (c) dies; (d) becomes disabled;
or (e) requires a distribution on account of hardship. Hardship distributions
are limited to the Owner's contributions (excluding income resulting from those
contributions). Distributions prior to age 59 1/2 due to hardship or separation
from service may be considered premature distributions under the Code subject to
penalty tax as well as regular income tax.
4. While this Rider is in effect, the Policy Loan provision of this
Policy is modified to permit loans only in compliance with Code Section 72(p).
5. Distributions of benefits under this Policy shall comply with Code
Section 403(b)(10) and the regulations thereunder, including incidental death
benefit rules. At the time the Owner retires, or by April 1 of the calendar year
following the year in which the Owner attains age 70 1/2, whichever is later:
(a) the entire value of this Policy must, at the Owner's election, be
surrendered or applied to a settlement option providing a periodic income; or
(b) the Policy will be continued in force, subject to the payment of any
required premium, this Rider will no longer be in effect, and the Owner will be
treated as receiving taxable income equal to the cash surrender value. However,
if the Owner has 5% or more ownership in the Owner's employer, distributions
must begin by April 1 of the calendar year following the year in which the Owner
attains age 70 1/2.
6. The Proceeds at Interest Settlement Option is deleted. It may not be
elected as a Settlement Option.
7. This Policy is non-transferable. This Policy may not be sold,
assigned, or pledged as collateral for a loan or as security for the performance
of an obligation, other than to the Company to the extent permitted under Code
Section 403(b).
8. The Owner is solely responsible for determining whether
contributions, loans, distributions and the exercise of all rights of ownership
under this Policy comply with applicable Code requirements. Elective deferrals
made under this Policy may not not exceed the annual limit as indicated under
Code Section 402(g).
9. No option or provision of this Policy will be available or may
be elected that would disqualify the Policy under Code Section 403(b). The
Company reserves the right to amend this Policy and Rider to satisfy Code
Section 403(b) and the regulations thereunder.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY on the Issue Date of the
Policy.
/s/ Robert W. Kloss
President and Chief Executive Officer
<PAGE> 1
Exhibit 1.A.5f
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
ACCELERATED DEATH BENEFIT
INSURED POLICY NUMBER
EFFECTIVE DATE RIDER ISSUE DATE
IF ACCELERATED DEATH BENEFITS ARE ADVANCED UNDER THE TERMS OF THIS
RIDER, THEIR PAYMENT WILL REDUCE THE AMOUNT OF DEATH BENEFITS, SURRENDER
BENEFITS AND LOAN VALUE THAT MAY SUBSEQUENTLY BE PAID UNDER THIS POLICY.
RECEIPT OF ACCELERATED DEATH BENEFITS UNDER THIS RIDER MAY OR MAY NOT BE
TAXABLE. WHETHER OR NOT THE OWNER OR BENEFICIARY INCURS A TAX LIABILITY WHEN
BENEFITS ARE PAID DEPENDS ON HOW THE IRS INTERPRETS APPLICABLE PROVISIONS OF THE
INTERNAL REVENUE CODE. AS WITH ALL TAX MATTERS, THE OWNER SHOULD CONSULT HIS OR
HER PERSONAL TAX ADVISER TO ASSESS THE IMPACT OF RECEIVING ACCELERATED DEATH
BENEFITS UNDER THIS RIDER.
RECEIPT OF ACCELERATED DEATH BENEFITS MAY ADVERSELY AFFECT ELIGIBILITY
FOR MEDICAID OR OTHER GOVERNMENT BENEFITS OR ENTITLEMENTS.
THIS RIDER IS NOT A LONG TERM CARE RIDER AS DEFINED IN THE STATUTES OF
THE STATE WHERE THE POLICY IS DELIVERED.
This Rider is a part of the Policy to which it is attached. All definitions,
provisions, conditions and limitations of the Policy apply to this Rider, unless
changed by this Rider. The Effective Date and Rider Issue Date are the same as
the Issue Date shown in the Policy Specifications, unless another Effective Date
and Rider Issue Date are shown above.
DEFINITIONS
- -----------
DUE PROOF OF ELIGIBILITY - Certification in a written form satisfactory to us by
a Physician treating the Insured stating that the Insured has a Terminal Illness
or is expected to be Permanently Confined in a Nursing Care Facility. This
Certification must include a diagnosis of the Terminal Illness or of the disease
or disorder resulting in Permanent Confinement in the Nursing Care Facility.
ELIGIBLE DEATH BENEFIT - The Insurance Proceeds payable at death as of the date
we approve payment of the Accelerated Death Benefit less:
1. any dividend accumulations;
2. any dividends due and not paid;
3. any dividend payable at death;
4. any Premium Refund at Death;
5. any insurance payable under the terms of any rider attached to
this policy.
NURSING CARE FACILITY - A facility which meets all of the following standards:
1. it is licensed and operated to provide skilled, intermediate or
custodial care according to the laws of the state in which it is
located;
2. its primary function is:
(a) to provide nursing and/or custodial care and room and
board to individuals who are not able to care for
themselves and who require nursing care; and
(b) to charge a fee for facility confinement and services
rendered. Care must be provided under the direction of:
a Physician; a registered nurse (RN); a licensed
practical nurse (LPN); or a licensed vocational nurse
(LVN);
3. it is not a hospital, a home for the aged, a retirement home, a
rest home, a community living center, or a place mainly for the
treatment of alcoholism, mental illness or drug abuse. It is a
separate facility or a distinct part of another facility which
is physically separate from that facility.
(continued on reverse side)
<PAGE> 2
PERMANENTLY CONFINED - The Insured:
1. has resided in a Nursing Care Facility for at least 180
consecutive days; and
2. has a disease or disorder which, with reasonable medical
certainty, necessitates the Insured's continued residence in a
Nursing Care Facility until the time of such Insured's death.
Physician - A person who is licensed to practice medicine in the state in which
treatment is received and who is acting within the scope of that license. The
Physician may not be the Owner, Insured or a spouse, parent, child, brother or
sister of either the Owner or Insured.
Terminal Illness - A noncorrectable medical condition which, with reasonable
medical certainty, can be expected to result in the Insured's death within
twelve months from the date of certification given to us as Due Proof of
Eligibility for this benefit.
DESCRIPTION OF
- --------------
ACCELERATED DEATH BENEFIT
- -------------------------
AMOUNT OF BENEFIT. Upon receipt at our Home Office of Due Proof of Eligibility,
we will pay you an Accelerated Death Benefit while this Policy is in force and
the Insured is living. The amount of your Accelerated Death Benefit request must
be for at least $10,000; the maximum available amount is equal to 75% of the
Eligible Death Benefit less 25% of any outstanding policy loans and accrued
interest (if any). The total of the Accelerated Benefits paid from all your
Policies issued by us and our subsidiaries cannot exceed $250,000.
The $250,000 maximum limitation will be adjusted at the beginning of each
calendar year by the CPI Factor. The CPI Factor is based upon the Consumer Price
Index for All Urban Consumers, United States City Average, All Items, as
published by the U.S. Department of Labor (or other nationally published index
which is comparable in scope and purpose to this index). This CPI Factor is the
percentage equivalent of the difference between C and D divided by D. ("C" is
the CPI Factor for the October preceding the year the claim is approved; "D" is
the CPI Factor for October 1992.)
You may request only one Accelerated Death Benefit from this Policy. After
receiving the Accelerated Death Benefit, you may request additional Accelerated
Death Benefits to pay premiums and policy loan interest which are due for this
Policy. There are no restrictions on the use of the Accelerated Death Benefit.
MEANS OF PAYMENT. Once we have approved payment of the Accelerated Death
Benefit, we will make a loan in accordance with the Policy's Loan Provisions (if
any). The amount of the loan will be the lesser of the maximum loan available
under the Policy and the amount of the Accelerated Death Benefit payment. If the
amount of the Accelerated Death Benefit payment is greater than the amount of
such loan, we will pay the remaining amount to you and place a Death Benefit
Lien against the Policy's Death Benefit for such remaining amount.
PAYMENT METHOD. You may choose to have the Accelerated Death Benefit amount paid
under one of the following methods:
1. Lump Sum - the Accelerated Death Benefit amount will be paid in
one sum.
2. Monthly Installment - the Accelerated Death Benefit amount will
be paid in 12 or 24 equal monthly installments. Monthly payments
will be calculated using interest of at least 3% per annum. If
the Insured dies before the full number of payments has been
made, the present value of the remaining payments will be paid
to the named Beneficiary in a lump sum. We will compute the lump
sum based on the interest rate we used to determine the monthly
payments.
INTEREST PAYABLE
- ----------------
POLICY LOAN INTEREST. Interest is payable on the outstanding policy loan at the
rate of interest specified in the Policy.
DEATH BENEFIT LIEN INTEREST. Interest accrues daily on the amount of the Death
Benefit Lien from the date the Accelerated Death Benefit payment is made until
the date of the Insured's death. The lien interest rate is the rate in effect on
the first day of the calendar quarter in which the claim is approved. The lien
interest rate is determined as follows:
To determine the lien interest rate per annum for any calendar quarter, we
will compare the lien interest rate for the previous calendar quarter with a
Maximum Interest Rate prescribed by law and defined below. If there is a
difference of 1/2% or more and the Maximum Interest Rate is higher, the lien
interest rate may be increased by at least 1/2% but not higher than the Maximum
Interest Rate; if it is lower, the lien interest rate will be reduced to be the
same as or less than the Maximum Interest Rate.
(continued on next page)
<PAGE> 3
MAXIMUM INTEREST RATE. The Maximum Interest Rate is the greater of:
1. Moody's Corporate Bond Yield Average - Monthly Average
Corporates, as published by Moody's Investors Services, Inc., or
any successor thereto, for the calendar month ending two months
before the date on which the rate is determined. (If the bond
average is no longer published, a similar average will be
established by law or regulation issued by the insurance
commissioner); and
2. the rate used to compute the cash surrender value under the
Policy during the applicable period plus 1% per annum.
We will notify you at the time a lien is made of the interest rate applicable
to such lien.
EFFECT ON EXISTING POLICY
- -------------------------
INSURANCE PROCEEDS AT DEATH. The Insurance Proceeds at Death otherwise payable
under the Policy at the time of the Insured's death will be reduced by the
amount of any outstanding Death Benefit Lien and accrued interest thereon.
SURRENDER VALUE AND LOAN VALUE. If you make a request for a surrender, a policy
loan or a withdrawal, the Policy's Surrender and Loan Value (if any) will be
reduced by the amount of any outstanding Death Benefit Lien and accrued interest
thereon as of the date of receipt of your written request for the surrender,
loan or withdrawal.
PREMIUMS AND POLICY LOAN INTEREST. Premiums and policy loan interest must be
paid when due.
However, if elected at the time the claim form is completed, you may change
the premium frequency to yearly and pay future premiums and policy loan interest
through additional Accelerated Death Benefit payments. If this Policy is a
flexible premium policy, the Planned Periodic Premium will be considered due for
the purposes of this provision.
DIVIDENDS. Since the amount of dividends payable reflects policy loan activity,
additional policy loan amounts incurred due to payment of the Accelerated Death
Benefit will affect the amount of dividends payable for the Policy.
POLICY TERMINATION AND REINSTATEMENT. The Policy will terminate on the Policy
Anniversary when the Insurance Proceeds at Death on such Policy Anniversary is
less than or equal to zero. We will have no further obligations under this
Policy.
If the Policy terminates while subject to a Death Benefit Lien, we will
extinguish the Death Benefit Lien without further recourse. If the Policy is
reinstated, the Death Benefit Lien must also be reinstated with accrued interest
as if the Policy had never terminated.
GENERAL PROVISIONS
- ------------------
CONDITIONS FOR PAYMENT OF ACCELERATED BENEFITS. Your right to receive the
Accelerated Death Benefit payment is subject to the following conditions:
1. The Policy must be in force other than as Extended Term
Insurance;
2. Due Proof of Eligibility and a properly com- pleted claim form
must be received at our Home Office prior to payment of the
Accelerated Death Benefit. We may request additional medical
information from your Physician. We reserve the right to require
an independent physical examination at our expense;
3. We reserve the right to charge an Administrative Fee at the time
of payment of the Accelerated Death Benefit. It will not exceed
$250 and will be deducted from the amount of the Accelerated
Death Benefit payment;
4. The Accelerated Death Benefit amount requested must be for at
least $10,000;
5. The Accelerated Death Benefit paid may not exceed 75% of the
Eligible Death Benefit for this Policy less 25% of outstanding
Policy loans and accrued interest (if any);
6. The total of the Accelerated Death Benefits paid by us and our
subsidiaries for all of your policies may not exceed $250,000.
(This cumulative maximum will be adjusted yearly as described
above);
7. The Policy may not be assigned in whole or in part except to us
as security for the Death Benefit Lien; therefore, we must
receive a signed release of interest from any assignee and a
signed consent from any irrevocable beneficiary authorizing
payment of Accelerated Death Benefits. At our discretion, before
we pay the Accelerated Death Benefit, we may require written
authorization from any other party whom we believe has a
potential interest in the proceeds of this Policy;
(continued on reverse side)
<PAGE> 4
8. No benefit is available if the Terminal Illness or Permanent
Confinement is the result of intentionally self-inflicted
injuries;
9. This Rider provides for the accelerated payment of the death
benefit of your life insurance policy. It is not meant to cause
you to involuntarily access proceeds ultimately pay- able to the
named Beneficiary. Accelerated Death Benefits will be made
available to you on a voluntary basis only. Therefore you are
not eligible for this benefit if:
(a) you are required by law to use this benefit to meet the
claims of creditors, whether in bankruptcy or
otherwise;
(b) you are required by a government agency to use this
benefit in order to apply for, obtain, or otherwise
keep a government benefit or entitlement.
TERMINATION OF RIDER
- --------------------
This Rider will terminate on the earliest of:
1. Receipt of your written request for termination of this Rider;
or
2. Policy termination or maturity; or
3. The Policy Anniversary when the Insurance Proceeds payable at
Death on such Policy Anniversary is less than or equal to zero.
Signed for the Company at Philadelphia, Pennsylvania on the Rider Issue Date.
/s/ Robert W. Kloss
President and Chief Executive Officer
<PAGE> 1
Exhibit 1(A5)(g)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
POLICY AMENDMENT
CHANGE FROM FIXED TO VARIABLE POLICY LOAN INTEREST RATE
- ------------------------------------------------------------------------------
INSURED AMENDMENT DATE
POLICY NUMBER INTEREST RATE ON
AMENDMENT DATE
- ------------------------------------------------------------------------------
This amendment is attached to and made a part of this Policy.
The "Interest Rate Charged on Loans" provision is removed and replaced with the
provisions set forth below:
VARIABLE INTEREST RATE CHARGE ON LOANS. We will charge interest on any loan.
Such interest will accrue at a variable rate. The loan interest rate will be
determined by us as of the first day of each January, April, July and October.
Such rate will take effect on the date as of which it is determined; it will
apply to both new and outstanding loans for 3 months after that date.
To determine the loan interest rate for each new 3 month period, we will
compare the loan interest rate for the preceding 3 months with a maximum
interest rate prescribed by law and defined below. If there is a difference of
1/2% or more and the maximum interest rate is higher, the loan interest rate
may be increased by at least 1/2% but not higher than the maximum interest
rate; if it is lower, the loan interest rate will be reduced to be the same as
or less than the maximum interest rate.
MAXIMUM INTEREST RATE. The maximum interest rate is the greater of:
1. the Corporate Bond Yield Average -- Monthly Average Corporates
as published by Moody's Investors Service, Inc., for the calendar
month ending 2 months before the date as of which the loan
interest rate is determined; and
2. 5 1/2%.
If at any time such Corporate Bond Yield Average is not published, the rate
used in its place will be as then prescribed by law or by regulation of the
insurance supervisory official of the state in which this Policy was delivered.
NOTIFICATION OF RATE. We will notify you:
1. of the initial loan rate when a loan other than an automatic
premium loan is made;
2. of the initial loan interest rate as soon as possible after
an initial automatic premium loan is made; and
3. in advance of any increase in the loan interest rate if
there is an outstanding loan.
The loan interest rate in effect on the Amendment Date is shown above.
Interest accrues from day to day. Interest is due at the end of each Policy
Year. If you do not pay the interest when it is due, we will add it to the
loan. We will then begin to charge interest on it too. If on the Policy
Anniversary the outstanding loan plus accrued interest exceeds the cash
surrender value, we will mail to you and any assignee of record, at your last
known addresses, a notice that this Policy will end if the excess amount is not
repaid within 31 days after we mail such notice. In no event will the required
payment exceed the amount of the accrued interest plus all due and unpaid
scheduled premiums.
EFFECT ON TERMINATION. This Policy will not terminate during a Policy Year as
the sole result of a change in the loan interest rate during that year. We will
keep this Policy in force during such year until the time it would otherwise
have terminated if there had not been a change in the loan interest rate during
that year.
EFFECTIVE ON REINSTATEMENT. The interest on any indebtedness paid or
reinstated upon reinstatement of this Policy will be at the rate or rates in
effect from the due date of the unpaid scheduled premium to the date of
reinstatement.
This amendment will not change any provision of this Policy except as set forth
above.
Signed for the Company in Philadelphia, Pennsylvania.
/s/ Robert W. Kloss
President
Form 14918VL
<PAGE> 1
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
RIDER
INCREASING DEATH BENEFIT
INSURED POLICY NUMBER
RIDER ISSUE DATE
GENERAL This rider is part of the policy to which it is attached.
PROVISIONS It is subject to all of the provisions of the policy that
are not inconsistent with it. The policy to which this
rider is attached is changed as follows:
GUARANTEED THE DEATH BENEFIT FOR THIS POLICY WILL NOT BE LESS THAN
MINIMUM THE FACE AMOUNT OF THE POLICY (SHOWN ON THE FACE PAGE OF
DEATH BENEFIT THE POLICY AND IN THE POLICY DATA) PLUS THE SUM OF ALL
UNSCHEDULED PREMIUMS RECEIVED AS OF THE DATE OF DEATH.
DEATH BENEFIT The Death Benefit is the greatest of:
1. The Face Amount of the policy plus the sum of all
unscheduled premiums received as of the date of
death;
2. The Face Amount of the policy plus the excess of
the Cash Value on the date of death over the
applicable Special Premium Payment Single Premium;
or
3. The Cash Value on the date of death times the Death
Benefit Factor shown in the Policy Data for the
Insured's Attained Age on the date of death.
MINIMUM The monthly deduction for the Minimum Death Benefit
DEATH BENEFIT Guarantee Charge will be based on the Face Amount plus the
GUARANTEE sum of all unscheduled premiums received as of the Policy
CHARGE Processing Day on which such charge is deducted from the
Cash Value. The Minimum Death Benefit Guarantee Charge is
$0.01 per $1000 of Guaranteed Minimum Death Benefit.
SPECIAL PREMIUM We have filed with the insurance supervisory official of
PAYMENT the state in which this policy is delivered the method of
SINGLE PREMIUM calculating the Special Premium Payment Single Premium and
AND the Withdrawal Single Premium when the Increasing Death
WITHDRAWAL Benefit Rider applies. These calculations assume a Death
SINGLE PREMIUM Benefit equal to the Face Amount of this policy plus the
sum of all unscheduled premium payments.
Attached by PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA on the Rider
Issue Date shown above.
/s/ Robert W. Kloss
President and
Chief Operating Officer
<PAGE> 1
Exhibit 1(A6)(a)
The Articles of Incorporation of the Surviving Corporation shall be amended and
restated in their entirety as follows:
RESTATED ARTICLES OF INCORPORATION
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
A Non-Stock Corporation
WHEREAS, the Corporation is the Surviving Corporation
following the merger of Covenant Life Insurance Company with and into Provident
Mutual Life Insurance Company of Philadelphia; and
WHEREAS, Provident Mutual was incorporated as Provident Life
and Trust Company of Philadelphia by Letters Patent duly granted pursuant to the
act of March 22, 1865 (P.L. 555, No. 539), with power to write life insurance
and grant annuities on the combined stock and mutual principle and to receive
deposits and act as trustee, with certain other rights, powers, privileges and
franchises conferred and imposed by specifically enumerated sections of the act
of April 2, 1856 (P.L. 211, No. 236); and
WHEREAS, the laws applicable to Provident Mutual were amended
and supplemented by the acts of March 12, 1866 (P.L. 184, No. 156), February 18,
1869 (P.L. 194, No. 170), February 1, 1871 (P.L. 14, No. 17), and April 1, 1873
(P.L. 466, No. 488); and
WHEREAS, on December 29, 1922 pursuant to a plan for
acquisition of shares adopted under the act of April 20, 1921 (P.L. 175, No.
103) the name of Provident Mutual was changed to Provident Mutual Life Insurance
Company of Philadelphia and Provident Mutual was converted into a mutual
insurance company without power to receive deposits subject to the provisions
of, and having the rights, privileges and powers of a mutual life insurance
company incorporated under, The Insurance Company Law of 1921, act of May 17,
1921 (P.L. 682, No. 284); and
<PAGE> 2
WHEREAS, on June 19, 1991, Provident Mutual became subject to
the Business Corporation Law of 1988 by reason of enactment of the act of
December 19, 1990 (P.L. 834, No. 198), known as the GAA Amendments Act of 1990;
and
WHEREAS, Covenant Life, with roots dating back to 1717, was
incorporated pursuant to Letters Patent granted January 11, 1759; and Provident
Mutual was incorporated by the Commonwealth of Pennsylvania March 22, 1865; and
WHEREAS, Covenant Life is America's first life insurance
company; and
WHEREAS, Covenant Life has always served the religious
community; and
WHEREAS, the Surviving Corporation acknowledges as its
predecessors both Provident Mutual and Covenant Life as the constituent
corporations to the merger and acknowledges the origins and principles of both
such entities;
NOW THEREFORE,
SECTION 1. The name of the Corporation is "Provident Mutual
Life Insurance Company" (hereinafter the "Corporation").
SECTION 2. The address of the registered office of the
Corporation in the Commonwealth of Pennsylvania is 1600 Market Street, in the
City of Philadelphia, County of Philadelphia.
SECTION 3. The corporation is incorporated under the
provisions of the Business Corporation Law of 1988.
SECTION 4. The Corporation is a mutual life insurance company
organized upon a non-stock basis and shall be authorized to engage in any
lawful act or activity. The class of insurance for which the corporation is
constituted is Clauses (1) and (2) of Subdivision (a) of Section 202 of the act
of May 17, 1921 (P.L. 682, No. 284), known as The Insurance Company Law of 1921,
as amended, viz:
2
<PAGE> 3
(1) To insure the lives of persons, and every insurance
appertaining thereto; to grant and dispose of annuities; including variable life
insurance contracts and annuity contracts under which values or payments or both
vary in relation to the investment experience of the issuer or a separate
account or accounts maintained by the issuer and to insure against personal
injury, disablement, or death resulting from traveling or general accidents, and
against disablement resulting from sickness, and every insurance appertaining
thereto, when written as a part of a policy of life insurance.
(2) To insure against personal injury, disablement, or death
resulting from traveling or general accidents, and against disablement resulting
from sickness, and every insurance appertaining thereto.
The Corporation has a surplus in lieu of guaranty capital exceeding $250,000
above its reinsurance reserve and all its other liabilities.
SECTION 5. Meetings of members may be held within or without
the Commonwealth of Pennsylvania, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provisions of the applicable laws of the
Commonwealth of Pennsylvania) outside the State of Pennsylvania at such place or
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
SECTION 6. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in the Restated Articles of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon members herein are granted subject to this reservation.
SECTION 7. These Restated Articles of Incorporation supersede
the original Articles of Incorporation of the Corporation and all amendments
thereto.
3
<PAGE> 1
PROVIDENT MUTUAL
LIFE INSURANCE COMPANY
BY-LAWS
(REVISED EDITION 9/96)
<PAGE> 2
Exhibit 1(A6)(b)
ARTICLE I
MEMBERS' MEETINGS
SECTION 1. REGULAR AND SPECIAL MEETINGS: The annual meeting of the members shall
be held on the first Thursday of June in each year, the time of the meeting, and
if necessary any change in the date of the meeting, shall be fixed by the Board
of Directors no later than one hundred and twenty days prior to such first
Thursday in June. When such Thursday shall fall on a legal holiday, the annual
meeting shall be held on the next succeeding business day. Special meetings may
be called by the Board of Directors. The members present in person or by proxy
at all annual or special meetings of the members shall constitute a quorum.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS: The Board of Directors shall
consist of such number of Directors, not fewer than nine nor more than
twenty-one, as the Board shall from time to time determine. The Board shall
divide such number of Directors into three classes of as nearly equal number as
is practicable. When the Board increases or decreases the number of Directors,
the Board shall designate the class or classes to which such increase or
decrease is applicable.
At each annual meeting, an election shall be held of one class of
Directors to serve for three years and until the election of their successors.
It shall be required that upon his or her appointment to the Board, a new
Director, unless already an owner of a Company policy, shall become an eligible
voting member through the purchase of a Company policy.
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<PAGE> 3
Death, retirement, or resignation of a Director or an increase in the
number of Directors of a class shall create a vacancy in such class. In case of
any vacancy in any class, the remaining members of the Board may elect a new
member to hold office for the unexpired term of the vacancy which exists.
Retirement of a Director is mandatory on the first day of the month
following the month in which such Director attains the age of 70.
SECTION 2. MEETINGS OF THE BOARD OF DIRECTORS: Regular meetings of the Board of
Directors shall be held at the office of the Company at such times as the Board
shall direct. There shall be at least four such regular meetings in each
calendar year. When the time fixed for any regular meeting shall fall on a legal
holiday, the meeting shall be held on the next succeeding business day, unless
otherwise ordered by the Board.
Special meetings may be called at any time by the Chairman of the Board or
the President, and shall be called on request of any two Directors.
The Secretary shall notify the Directors of all meetings of the Board,
specifying in the case of special meetings the subject to be acted upon.
A majority of the whole Board of Directors shall constitute a quorum.
SECTION 3. CHAIRMAN OF MEETINGS: The Chairman of the Board, if one has been
elected by the Board, shall preside at meetings of the Board. If no Chairman of
the Board has been elected, or in his absence, the President or Chief Executive
Officer shall preside at meetings of the Board.
SECTION 4. NOMINATION OF CANDIDATES BY THE BOARD OF DIRECTORS: The Chief
Executive Officer shall appoint five Directors, which appointments shall be
approved by the Board, all of which are to be outside Directors, to be
known as the Nominating Committee, which Committee shall deliver in writing to
the Chief Executive Officer or to the Board of Directors on or before the
December Meeting of the Board of Directors the names of persons as candidates
for election as Directors at the next annual meeting. The number of candidates
submitted shall be the same as the number of Directors in the class to be
elected at the next annual meeting.
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<PAGE> 4
The Board of Directors may substitute another candidate for any candidate
so nominated who for any reason whatsoever shall not be qualified for election
at the annual meeting.
SECTION 5. NOMINATION OF CANDIDATES BY MEMBERS: A member shall be eligible for
election to the Board of Directors if the member's nomination shall have been
made in writing by seven thousand five hundred or more members of the Company
and such written nomination shall have been delivered to the Chief Executive
Officer or to the Board of Directors on or before the Fifteenth day of December
immediately preceding the annual meeting, setting forth the name and a written
acceptance of the nomination by the candidate.
If, for any reason whatsoever, any candidate so nominated shall not be
qualified for election at the annual meeting, a majority of members signing such
written nomination may substitute another candidate by delivering to the Chief
Executive Officer or to the Board before the annual meeting a written nomination
signed by a majority of said members setting forth the name and address of the
substitute candidate and a written acceptance of such nomination by such
substitute candidate.
SECTION 6 POWERS OF DIRECTORS: The Board of Directors shall have power to adopt
such measures and to prescribe from time to time such rules and regulations for
the management of the Company as the Board shall deem proper. When no Chairman
of the Board is serving as an officer of the Company as provided in Article III
below, the Board may elect one of its members as honorary Board Chairman who
shall not be an officer of the Company and shall have no duties or
responsibilities as such.
3
<PAGE> 5
ARTICLE III
OFFICERS
SECTION 1. OFFICERS: The officers of the Company may include a Chairman of the
Board, and shall consist of a President, one or more Vice Presidents, an
Actuary, a Treasurer, a Secretary, and such other officers as the Board of
Directors shall deem necessary.
SECTION 2. TIME OF HOLDING OFFICE: All officers shall be elected annually by
the Board of Directors and shall hold their offices during the pleasure of
the Board.
SECTION 3. CHIEF EXECUTIVE OFFICER: The Chief Executive Officer shall be the
Chairman of the Board or the President as the Board may from time to time
designate. Under the direction of the Board, he shall exercise a general
supervision and control of all the affairs of the Company. The work of all other
officers and employees of the Company shall at all times be subject to his
control and direction. He shall appoint, subject to approval by the Board, all
committees thereof, and shall be ex-officio a member of all such committees
unless otherwise directed by the Board.
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 1. COMMITTEES: There shall be an Audit Committee of the Board, a
Compensation Committee of the Board, a Dividend Committee of the Board, an
Executive Committee of the Board, an Investment Committee of the Board and such
other Committees as the Board may determine from time to time to be necessary or
desirable for the conduct of the Company's affairs.
Unless otherwise specified, the following shall apply to all Committees of
the Board: a Committee shall consist of at least three members and all members
shall be appointed annually by the Board; all regular meetings shall be held at
such times and places as the Committee may
4
<PAGE> 6
determine; if a vacancy shall exist on a Committee, the Chief Executive Officer
may appoint a new member to hold office until such time as the Board shall fill
the vacancy; if for any reason whatsoever a member of a Committee is unable to
attend a certain meeting or meetings of a Committee, the Chief Executive Officer
may appoint from the Board a substitute member of a Committee to act at such
meeting or meetings in place of the member absent; at all meetings, the presence
of at least a majority of a Committee shall be necessary to constitute a quorum,
and all actions taken by a Committee shall be by the affirmative vote of a
majority of the members present; the Chairperson of a Committee shall not serve
as such for more than three years; and all actions taken by the Committee shall
be reported to the Board.
SECTION 2. EXECUTIVE COMMITTEE: The Executive Committee shall consist of the
Chairpersons of the Audit, Compensation, Dividend and Investment Committees, the
Chief Executive Officer, and two Directors who shall be appointed annually by
the Board, one of whom shall be appointed as Chairperson of the Committee.
The Executive Committee shall be responsible for corporate governance
issues and shall have the authority to consider and take action upon all matters
especially referred to it by the officers of the Company or the Board of
Directors and during the interval between meetings of the Board of Directors the
Executive Committee shall possess and may exercise the powers of the Board of
Directors in the management and direction of the affairs of the Company insofar
as the Committee may do so in conformity with law, all actions taken by the
Committee to be duly reported to the Board.
SECTION 3. AUDIT COMMITTEE: All members of the Audit Committee shall be outside
Directors.
The Committee shall make in person, or by such deputies, agents, public
accountants or other assistants as they may designate and appoint to act on
their behalf, such examinations and audits of the assets and liabilities of the
Company as they may from time to time decide and determine, or as the Board may
by Resolution direct. Written report of all examinations shall be made to the
regular meeting of the Board of Directors next succeeding such examinations.
5
<PAGE> 7
SECTION 4. INVESTMENT COMMITTEE: The Investment Committee shall consist of
not fewer than three regular members and the Chief Executive Officer.
The Investment Committee shall have the authority to supervise the
investments of the Company. All investment transactions approved by the
Committee shall be adopted as if such approvals had been given by the Board of
Directors and all such actions taken by the Committee shall be duly reported to
the Board.
SECTION 5. COMPENSATION COMMITTEE: The Committee shall consist of no fewer than
five members all of which shall be outside Directors.
The Committee shall review recommendations of management regarding
compensation and human resource strategies. The Committee shall establish
guidelines for the total Company compensation philosophy including Executive
Incentive compensation and welfare benefits. All Committee action shall be
reported to the Board.
SECTION 6. DIVIDEND COMMITTEE: The Dividend Committee shall consist of at
least three outside Directors. The Committee shall meet with management as
needed and annually shall establish the dividend scale.
The Committee shall report all actions to the Board and the Final dividend
scale shall be approved by the Board.
SECTION 7. ADVISORY COMMITTEE: An Advisory Committee shall be appointed annually
by the Nominating Committee from among those individuals who have served at
least five years on the Board of Directors and who have retired from the Board.
The total number of an individual's years of appointment to the Advisory
Committee shall not exceed the number of years served as a member of the Board
of Directors or ten years whichever is less.
The Committee shall meet with the Chairman at least twice a year and shall
be paid an Advisory Fee on a quarterly basis. Individuals who were also
employees of the Company are eligible for appointment to the Committee but
ineligible for the Advisory Fee.
6
<PAGE> 8
ARTICLE V
DEPOSITS OF MONEY
SECTION 1. UNINVESTED MONEY: All uninvested money, except such amounts as may be
needed for current use, shall be deposited in the name of the Company in such
depositories as the Board of Directors may designate from time to time.
SECTION 2. WITHDRAWAL OF DEPOSITS: No money shall be withdrawn from the
depositories authorized under the preceding Section, except by check, draft or
other authorization signed by any one of the following officers: the President,
the Chairman of the Board, a Vice President, an Assistant Vice President -
Securities Investments, the Treasurer or an Assistant Treasurer, unless special
authority be given therefor by Resolution of the Board of Directors.
ARTICLE VI
CONTRACTS OF INSURANCE AND ANNUITIES
SECTION 1. EXECUTION OF CONTRACTS OF INSURANCE AND ANNUITIES: All contracts for
insurance and for annuities, all permits and other instruments subsidiary
thereto, and all endorsements and impression stamps thereon, shall be signed by
the President, the Chairman of the Board, a Vice President, or the Treasurer, or
signed with the facsimile signature of one of the aforementioned officers
engraved, lithographed or impressioned thereon, and, if required, attested or
countersigned by the actual signature of any one of the following officers: the
Secretary, an Assistant Secretary, the Treasurer, an Assistant Treasurer, the
Chief Actuary, an Associate Actuary, an Assistant Actuary, the General Counsel,
an Assistant General Counsel, an Associate Counsel, an Assistant Counsel, a
Registrar, or an Assistant Registrar.
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<PAGE> 9
ARTICLE VII
OTHER CONTRACTS, TRANSFERS AND CONVEYANCES
SECTION 1. EXECUTION OF CONTRACTS, TRANSFERS, CONVEYANCES AND OTHER INSTRUMENTS:
The President, the Chairman of the Board, a Vice President, the Treasurer, or
the Assistant Vice President Mortgage Loans and Real Estate is hereby authorized
and empowered:
(a) to assign or transfer, either in person or by attorney, all loans of
the United States of America, the Commonwealth of Pennsylvania, the City of
Philadelphia, or of any other Government, State, County, Municipality, or
Governmental Unit or Agency, and all other bonds, notes, loans, stocks, or other
securities registered in the name of the Company;
(b) to execute all transfers, conveyances and leases of real estate,
assignments of mortgages, extensions of mortgages, releases of mortgages,
letters of attorney to satisfy mortgages of record, assignments and
extinguishments of ground rents, and generally all instruments touching upon or
affecting the title of real estate held or owned by the Company, the authority
to execute all of the foregoing hereby being conferred upon said officers as
fully, amply and entirely and with the same and like force and effect as if a
special Resolution of the Board of Directors were adopted in each case; and
(c) to execute all other contracts or instruments in connection with the
business of the Company, other than contracts of Insurance and Annuities
provided for under Article VI.
SECTION 2. OTHER DESIGNEES: In addition to the officers authorized and empowered
to perform all of the acts referred to in the preceding section, the Board may
from time to time by resolution authorize and empower other designated officers
to perform all or any of such acts.
SECTION 3. CORPORATE SEAL: Whenever circumstances require that the corporate
seal of the Company be affixed to a contract or other instrument, said contract
or other instrument shall be signed by an
8
<PAGE> 10
authorized officer as provided in Section 1 of this Article VII, and may be
attested by the Secretary, an Assistant Secretary, the Treasurer, an Assistant
Treasurer, an Assistant Vice President - Securities Investments, an Actuary, an
Associate Actuary, an Assistant Actuary, an Assistant General Counsel, an
Associate Counsel, an Assistant Counsel, the Vice President - Mortgage Loans and
Real Estate, an Assistant Vice President - Mortgage Loans and Real Estate.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
SECTION 1. INDEMNIFICATION: To the fullest extent permitted by Law, the Company
shall indemnify any present, former or future Director, officer, or employee of
the Company or any person who may serve or have served at its request as a
Director, officer, employee, member, fiduciary, trustee, or agent of another
corporation, partnership, joint venture, trust or other enterprise or
association, against the reasonable expenses, including attorney's fees,
actually incurred in connection with the defense of any threatened, pending or
completed action, suit or other proceeding whether civil, criminal,
administrative or investigative to which any of them is made a party because of
service as a Director, officer or employee of the Company or such other
corporation, partnership, joint venture, trust or other enterprise or
association, or in connection with any appeal therein, and against any amounts
paid by such Director, officer or employee in settlement of, or in satisfaction
of a judgment, penalty, damage, settlement amount, excise tax assessed with
respect to an employee benefit plan or fine in any such action, suit or other
proceeding including one by or in the right of the Company, a class of members
or otherwise; except expenses incurred in defense of or amounts paid in
connection with any action, suit or other proceeding in which such Director,
officer or employee shall be adjudged to be liable for willful misconduct or
recklessness in the performance of his or her duty. The termination of any such
action, suit or other proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not of itself be deemed
an adjudication of willful misconduct or recklessness.
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<PAGE> 11
SECTION 2. PAYMENT OF EXPENSES: Expenses incurred by a Director, officer or
employee in defending any such action, suit or other proceeding shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that said Director,
officer or employee is not entitled to be indemnified by the Company.
SECTION 3. PROCEEDINGS INITIATED BY A DIRECTOR, OFFICER AND OTHER PERSONS:
Notwithstanding the provisions of Section 1 of this Article VIII, the Company
shall not indemnify a Director, officer or employee for any liability incurred
in an action, suit or proceeding initiated (which shall not be deemed to include
counterclaims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of Directors in
office.
SECTION 4. NON-EXCLUSIVITY AND SUPPLEMENTARY COVERAGE: The indemnification and
advancement of expenses provided for in this Article VIII shall not be deemed
exclusive of any other rights to which those persons seeking indemnification and
advancement of expenses may be entitled under any By-Law, agreement, vote of the
members or disinterested Directors or otherwise, both as to action in their
official capacities and as to action in another capacity while holding that
office, and shall continue as to a person who has ceased to be a Director,
officer or employee and shall ensure to the benefit of the heirs, executors,
administrators and personal representatives of such a person. The Company may
create a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to this Section or otherwise.
SECTION 5. PAYMENT OF INDEMNIFICATION: An indemnified Director, officer or
employee shall be entitled to indemnification within 30 days after a written
request for indemnification has been delivered to the Secretary of the Company.
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ARTICLE IX
LIMITATION ON LIABILITIES OF DIRECTORS
SECTION 1. LIMITATION OF LIABILITY: A Director of the Company shall not be
liable as such, to the Company or members for monetary damages (including,
without limitation, any judgment, amount paid in settlement, fine, penalty,
punitive damages, excise tax assessed with respect to an employee benefit plan
arising from any action taken or any failure to take any action) unless:
(a) the Director has breached or failed to perform the duties of his
or her office under 42 Pa. C.S.A Section 8368 (relating to standard of care and
justifiable reliance); and
(b) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
SECTION 2. EXCLUSIONS: The provisions of Section 1 above shall not apply to:
(a) the responsibility or liability of a Director pursuant to any
criminal statute; or
(b) the liability of a Director for the payment of taxes pursuant to
local, state or Federal law.
SECTION 3. STANDARD OF CARE: A Director of the Company shall stand in a
fiduciary relation to the Company and shall perform his or her duties as a
Director, including his or her duties as a member of any committee of the Board
of Directors upon which he or she may serve, in good faith, in a manner he or
she reasonably believes to be in the best interests of the Company, and with
such care, including reasonable inquiry, skill and diligence, as a person of
ordinary prudence would use under similar circumstances. In performing his or
her duties, a Director shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by any of the following: (i)
one or more officers or employees of the Company whom the Director reasonably
believes to be reliable and competent
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<PAGE> 13
in the matters presented; (ii) legal counsel, public accountants or other
persons as to matters which the Director reasonably believes to be within the
professional or expert competence of such persons; or (iii) a committee of the
Board of Directors upon which he or she does not serve, duly designated in
accordance with law, as to matters within its designated authority, which
committee the Director reasonably believes to merit confidence. A Director shall
not be considered to be acting in good faith if he or she has knowledge
concerning the matter in question that would cause his or her reliance to be
unwarranted.
SECTION 4. FACTORS THAT MAY BE CONSIDERED: In discharging the duties of their
respective positions, the Board of Directors, committees of the Board of
Directors and individual Directors may, in considering the best interests of the
Company, consider the effects of any action upon employees, upon suppliers and
customers of the Company and upon communities in which offices or other
establishments of the Company are located, and all other pertinent factors. The
consideration of these factors shall not constitute a violation of Section 3
hereof.
SECTION 5. PRESUMPTION OF GOOD FAITH: Absent breach of fiduciary duty, lack of
good faith or self-dealing, actions taken as a Director or any failure to take
any action shall be presumed to be in the best interests of the Company.
ARTICLE X
FINANCIAL REPORTS
SECTION 1. FINANCIAL REPORTS: Pursuant to Section 1554(c) of the Pennsylvania
Business Corporation Law of 1988, the Company shall be under no obligation to
furnish the members of the Company, who are members as of the date of the
enactment of this By-Law Amendment, with annual financial statements, including
a balance sheet as of the end of each fiscal year and a statement of income. The
Board of Directors or any authorized committee thereof shall continue to
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<PAGE> 14
have the authority to direct the extent and manner of distribution to members of
such financial statements and balance sheets.
ARTICLE XI
AMENDMENTS TO BY-LAWS
SECTION 1. AMENDMENTS: The By-Laws of the Company may be changed, altered and
amended from time to time by the Board of Directors, provided that any proposal
of such change, alteration or amendments shall be made in writing at any regular
meeting of the Board, and shall lie over for final action thereon until at least
the next regular meeting thereafter, and that the notice of the meeting at which
the By-Law is to be finally passed upon shall contain a statement that such
action is to be taken.
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<PAGE> 1
EXHIBIT 1(A8)
AGREEMENT REGARDING OPERATION OF THE STRIPPED ("ZERO")
U.S. TREASURY SECURITIES FUND PROVIDENT MUTUAL SERIES A
AGREEMENT effective May 12, 1986, between Provident Mutual
Life Insurance Company of Philadelphia ("Provident Mutual"), an insurance
company chartered in Pennsylvania, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), a Delaware corporation.
WHEREAS, Provident Mutual is a life insurance company which
currently issues variable life insurance policies and it and other affiliated
insurance companies may issue various versions of variable life insurance
policies in the future ("Policies"), and
WHEREAS, the Provident Mutual Variable Zero Coupon Bond
Separate Account ("Account") is a separate investment account of Provident
Mutual registered under the Investment Company Act of 1940 ("Act") as a part of
a unit investment trust, which serves as the investment vehicle for the Policies
issued by Provident Mutual and its separate accounts, and
WHEREAS, the Provident Mutual Series of Stripped ("Zero") U.S.
Treasury Securities Fund and any subsequent series ("Zero Trust"), is a unit
investment trust sponsored by Merrill Lynch that will have several portfolios
("Trusts"), and the Zero Trust is registered as a unit investment trust under
the Act, and
WHEREAS, Provident Mutual seeks a unit investment trust as the
underlying investment medium for the Account and any similar accounts
established by affiliated companies ("Accounts"), the units of which will be
sold to the Accounts and the investment
<PAGE> 2
in which will enable the Accounts to provide policyowners with a stabilized rate
of return, and
WHEREAS, Merrill Lynch desires to make the Zero Trust available
to Provident Mutual for the investment of amounts allocated under the Policies
to the Account and to Accounts designated by Provident Mutual of affiliated
companies, and
WHEREAS, Merrill Lynch intends to maintain a secondary market in
units representing interests in the Trusts ("Units") in order to enable the
Accounts to provide policyowners with a stabilized rate of return.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
1. Provident Mutual shall invest assets of the Account in the
Zero Trust and Merrill Lynch will serve as sponsor and depositor of the Zero
Trust, provided that Merrill Lynch and Provident Mutual fulfill their respective
obligations set forth in paragraphs 2 through 10.
2. Unless otherwise determined by mutual agreement, Units of the
Zero Trust will be sold exclusively to the Account or Accounts designated by
Provident Mutual.
3. Initially, Merrill Lynch will create three Trusts, containing
securities with specified maturities in years 1991, 1996 and 2005, respectively,
or any other maturities mutually agreed upon by Merrill Lynch and Provident
Mutual. Thereafter, as may be mutually agreed upon by the parties from time to
time,
- 2 -
<PAGE> 3
Merrill Lynch will create additional Trusts containing securities with different
maturities.
4. Until the securities of any particular Trust of the Zero
Trust mature, Merrill Lynch will make Units available continuously for purchase
by Provident Mutual for investment of assets of the Account, either by selling
Units currently held in inventory or by creating new Units, except that Merrill
Lynch shall not be obligated to create new Units if the underlying portfolio
securities are unavailable. When creating additional Units, regardless of the
size of the purchase order from Provident Mutual, Merrill Lynch will acquire
portfolio securities to fund such Units only in round-lots.
5. Units of fractional undivided interest in the Trusts will be
issued to Merrill Lynch on its deposit of securities in a Trust of the Zero
Trust, based upon the offering side evaluation of the securities so deposited.
Units will be sold to the Account at an offering price, next computed after
receipt by Merrill Lynch of an order to purchase, that is the sum of: (a) the
net asset value of the Units uniformly computed on any given day based upon
either a daily or weekly computation calculated in accordance with Rule 22c-1
under the Act, using an offering side evaluation of the portfolio securities,
and (b) a transaction charge. The amount of the transaction charge applicable to
a Unit of a particular Trust will vary based upon the period of time remaining
until maturity of the Trust at the time the Unit is purchased, as follows:
- 3 -
<PAGE> 4
<TABLE>
<CAPTION>
Transaction Charge As
A Percentage of the
Remaining Years Until Maturity Offering Price of the
Of the Trust Trust Unit
- ------------ ----------
<S> <C>
less than 2 years 0.25%
at least 2 years but less than 3 years 0.50%
at least 3 years but less than 5 years 0.75%
at least 5 years but less than 8 years 1.00%
at least 8 years but less than 13 years 1.50%
at least 13 years but less than 18 years 1.75%
18 years or more 2.00%
</TABLE>
These rates are subject to change hereafter, by mutual agreement, provided that
any new rate established does not exceed the rate ordinarily paid by a dealer to
acquire similar securities, and provided that the transaction charge shall not
be increased if the staff of the Securities and Exchange Commission expresses
and objection to such change or, if Provident Mutual believes necessary, unless
an order of the Securities and Exchange Commission, providing appropriate
exemptive relief, is obtained. In addition, in the event Merrill Lynch should
cease to maintain a secondary market, the transaction charge will be adjusted to
an amount determined by mutual agreement, after considering factors including
the absence of a secondary market, aggregate expenses and charges to Merrill
Lynch and any standards set by the Securities and Exchange Commission as
necessary to continue the exemptive relief granted in connection with the
investment by the Account in the Zero Trust.
6. Merrill Lynch will use its best efforts to continuously
maintain a secondary market in Units of each Trust and will repurchase Units
held by the Account, absent an extreme and
- 4 -
<PAGE> 5
unforeseen occurrence which makes it financially impracticable for Merrill Lynch
to repurchase the Units, at a price equal to the net asset value of the Units,
based upon the offering side evaluation of the underlying securities of the
applicable Trust.
7. Merrill Lynch may, at its discretion, redeem in cash or in
kind Units of the Zero Trust that it has purchased in the secondary market, or
acquired upon deposit of securities in the Zero Trust, provided that it redeems
Units only in an amount substantially equal to the value of one or more
securities held in the affected Trust, so that the uninvested cash generated by
such redemption is de minimus.
8. The underlying securities of each Trust will be evaluated by
a qualified entity, selected by Merrill Lynch, that is not affiliated with
Merrill Lynch.
9. On each day that Provident Mutual is required by Rule 22c-1
under the Act to value the Policies, but on which no Units are purchased from,
or sold to, Merrill Lynch by Provident Mutual, Merrill Lynch will cause the Zero
Trust to provide to Provident Mutual a net asset value for the Units, using an
offering side evaluation of the portfolio securities, computed on a daily or
weekly basis in accordance with Rule 22c-1 under the Act.
10. An entity which meets the qualifications set forth in
Section 26 of the Act will serve as trustee for each Trust, who shall agree to
furnish Provident Mutual, within 30 days after the
- 5 -
<PAGE> 6
end of each calendar year, year-end financial statements for each Trust which
have been audited by independent public accountants.
The terms used in this Agreement shall be construed in
accordance with the Act, and this Agreement shall be governed by and construed
in accordance with the laws of the State of New York. This agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and such counterparts together shall constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be affixed
hereto as of the date set forth above by their respective officers who have been
duly authorized.
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
By /s/ Illegible
----------------------------------
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Illegible
----------------------------------
- 6 -
<PAGE> 1
PC 0111
- - Provident Mutual Life Insurance Company
- - Providentmutual Life and Annuity Company of America, a Stock Life Insurance
Company
Part II of Application for Insurance
To be completed in the handwriting of the examiner
(or of an authorized company representative on non-medical applications)
1. First - Middle Initial - Last Name of Proposed Insured
_______________________________________________________________________
2. Date of Birth (Month, Day, Year) ___________________________
3. Social Security No. ________________________________
4. a) Height in shoes ___ft. ___in.
b) Weight (clothed) ___ lbs.
c) No. of pounds ___ gained ___ lost in last 2 years?
If any parts of questions 5 thru 15 are answered yes, give full details below
in Q. 18.
5. Have you ever had or been told by a physician or other member of the
medical profession that you had any of the following?
a) Dizziness, fainting spells, convulsions, nervous or mental disorder,
severe or persistent headache, stroke, insanity or epilepsy? ___ Yes ___ No
b) Anemia, elevated cholesterol or any disease or disorder of the blood or
persistent infections? ___ Yes ___ No
c) Disorder of any glands, syphilis, venereal disease, breast or immune
system disease or disorder?___ Yes ___ No
d) Rheumatic fever, chorea, rheumatism or arthritis? ___ Yes ___ No
e) High blood pressure, pain or any discomfort in the chest, angina
pectoris, heart murmur, heart attack or other disorder of the heart or blood
vessels, or irregular or rapid pulse? ___ Yes ___ No
f) Shortness of breath, spitting blood, emphysema, persistent cough,
disorder of the lungs, asthma, tuberculosis, pleurisy or chronic bronchitis?
___ Yes ___ No
g) Recurrent indigestion, chronic diarrhea, passage of blood, colitis,
stomach or duodenal ulcer, gall bladder disorder, pancreas or liver disorder
or jaundice? ___ Yes ___ No
h) Kidney stone or disorder, urinary or bladder disorder, sugar, albumin,
pus, blood or casts in the urine, any disorder of the reproductive system?
___ Yes ___ No
i) Any disease or injury of the neck, back, spine or joints or muscles
<PAGE> 2
requiring treatment of any kind? ___ Yes ___ No
j) Hernia, varicose veins, swelling of legs or ankles, or any deformity or
paralysis? ___Yes ___No
k) Diabetes, goiter, thyroid disorder, skin disorder, tumors, lumps or
growths or cancer? ___ Yes ___ No
l) Impairment of vision not fully corrected by glasses or impairment of
hearing? ___ Yes ___ No
6. Within the past 5 years have you had any disease, disorder, ailment,
impairment, injury or amputation not listed above? ___ Yes ___ No
7. Have you ever used alcohol, marijuana, hallucinogens, stimulants,
sedatives, or narcotics or taken any treatment for alcohol or drug use?
___ Yes ___ No
Kind and amount used weekly.
8. Have you ever applied for or received from any source disability benefits?
___ Yes ___ No
Include dates and durations.
9. Have you ever undergone or been advised by a physician or other
practitioner to undergo any surgical operation? ___ Yes ___ No
10. Within the past 10 years have you ever been admitted to any hospital or
sanitarium for treatment or observation? ___ Yes ___ No
11. Within the past 5 years have you been advised by a physician or other
practitioner to have any special examinations or tests such as x-rays,
electrocardiograms, heart, blood, urine or breathing tests? ___ Yes ___ No
12. Have you been diagnosed by a member of the medical profession as having
AIDS or ARC or received treatment from a member of the medical profession for
AIDS or ARC? ___ Yes ___ No
13. Are you now taking or have you within the last 2 years taken any drug or
any medicine prescribed by a physician or other practitioner? ___ Yes ___ No
14. Is there any history of diabetes, cancer or heart disease in your family?
___ Yes ___ No
15. Have you used any tobacco product or product containing tobacco or
nicotine in the last 12 months? ___ Yes ___ No
16. Family History - Age, if Living Age at death Cause of death
Father ______________ ____________ ______________
Mother ______________ ____________ ______________
Brothers and Sisters
No. living ___
No. dead ___
17. Personal physician: (if none, physician last consulted)
a) Name _______________________________________________________________
<PAGE> 3
b) Address ____________________________________________________________
c) Date last seen _____________________________________________________
d) Reason and Outcome _________________________________________________
18. Question # above Full details Physicians, practitioners, hospitals, etc.
I have read this completed Part II and represent that to the best of my
knowledge and belief all statements and answers herein are complete, true and
correctly recorded.
Signed at (City, State) ______________________________________________________
on (Date) (Month, Day, Year) ________________________________________________
Completed and Witnessed by
Physician _________________________________________________________________
Para-Med. Tech. ___________________________________________________________
or Agent __________________________________________________________________
Proposed Insured _____________________________________________________________
A2 1.91
19. GENERAL APPEARANCE:
a) Measured height _______
b) Scale weight _________
20. GIRTH:
Chest at full inspiration ___ inches
Chest at full expiration ___ inches
One inch below umbilicus ___ inches
21. BLOOD PRESSURE:
Record three or more separate readings including the highest and the lowest.
The applicant should be seated and the pressures taken over a period of at
least five minutes.
1 2 3
Systolic ____ ____ ____
Diastolic (disappearance of all sound) ____ ____ ____
22. URINALYSIS:
Date (Month, Day, Year) _____________
Time ____ a.m. ____ p.m.
a) Date and hour voided
b) Albumin present?
c) Sugar present?
A portion of the specimen of urine should be sent to the laboratory indicated
on the container and envelope provided, if:
1) Instructed by agent;
2) Albumin or sugar is present or has ever been found in the past;
<PAGE> 4
3) History of kidney disease;
4) Family history of diabetes or congenital kidney disease; or
5) Systolic blood pressure over 140 or diastolic blood pressure over 90 on
examination.
23. Are you forwarding a specimen of urine to the lab? If so, give reason.
24. Where was this examination made?
___ Examiner's office
___ Agent's office
___ Proposed Insured's residence
___ Proposed Insured's place of business
25. HEART: Make examination of the heart and chest with stethoscope against
bare skin. Auscultate all valve areas before and after exercise (25 vigorous
hops on each foot), sitting and recumbent, including the left lateral
position.
a) Heart Rate per minute
If irregular
complete the following: At rest After exercise 2 min.
after exercise
Heart rate _______ ______________ ______________
Number of irregularities _______ ______________ ______________
Type of irregularity _______ ______________ ______________
b) Is the heart enlarged? ___Yes ___No
If yes, indicate position of apex or left border
c) Are heart sounds normal? ___Yes ___No
d) If murmur is present, describe below in "Additional Explanatory Remarks"
its timing, location, transmission, and the effect of exercise and
respiration.
26. LUNGS: Are the lungs and thoracic cage normal? ___Yes ___No
If no, give details.
27. ABDOMEN: Is abdomen normal to examination and palpation? ___Yes ___No
If no, describe below in "Additional Explanatory Remarks" scars, masses,
tenderness, rigidity, or any hernia.
28. NEUROLOGICAL: Describe neurological condition including patellar and
pupillary reflexes and Romberg's sign.
29. Is the thyroid normal? ___Yes ___No
If enlarged, is it ___Nodular? ___Diffuse?
30. Describe any abnormalities of:
a) Veins (varicosities-location, extent, ankle edema, ulceration)
b) Lymphatic glands
c) Teeth and gums
<PAGE> 5
d) Throat and tonsils
31. After reviewing the answers and as a result of your examination, do you
find any evidence of any past or present disease not specifically mentioned in
this application? ___Yes ___No
If yes, give details.
32. a) Has this person ever consulted you on a professional basis for other
than insurance examinations? ___Yes ___No
b) If yes, when and for what reasons?
ADDITIONAL EXPLANATORY REMARKS
I certify that the statements and answers made by the proposed insured, in
answer to the questions in Part II of the application on the reverse side of
this form, are correctly recorded therein; that I have made a full and careful
physical examination of the proposed insured; and that the answers to
the questions on both sides of this form are in my own handwriting.
Name of Agent ________________________________________________________________
F. E. ________________________________________________________________________
Agent's Code _________________________________________________________________
Physician ____________________________________________________________________
Print or type full name, address and tax no. of examiner
Name _________________________________________________________________________
Social Security or Taxpayer's Id. No. ______________________
Street _______________________________________________________________________
City ____________________________________________State _____ Zip Code ________
A2 1.91
<PAGE> 1
PC 0103
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
Berwyn, Pennsylvania
Supplemental Application For OPTIONS
To be made a part of application dated (Month/Day/Year) _____________________
1. First - Middle Initial - Last Name of Proposed Insured
________________________________________________________________________________
2. Date of Birth (Month/Day/Year) _______________________
3. Suitability Statement by Applicant:
a. Did you receive the prospectus? ___ Yes ___ No
(If "yes," give date of prospectus) _____________________
b. Do you understand that:
the death benefit may increase or decrease depending on the policy's
investment return, but will never be less than the guaranteed minimum?
___ Yes ___ No
the cash value may increase or decrease depending on the investment return?
___ Yes ___ No
c. Do you believe that this policy will meet your insurance needs and
financial objectives? ___ Yes ___ No
You may obtain an illustration showing the Death Benefit and cash surrender
values upon request.
4. Additional Benefits:
___ Waiver of Premium Benefit
___ Accidental Death Benefit
___ Guaranteed Purchase Option
___ Accelerated Death Benefit
___ Increasing Death Benefit
___ _________________________
5. Premium Mode and Plan:
___ Yearly
___ Half-Yearly
___ Quarterly
___ APP
___ Monthly (list bill only)
Cash Submitted: $ ____________
First Scheduled Premium: $ ___________
Unscheduled Premium: (Minimum payment = $25) $ ____________
Indicate the amount of unscheduled premium payments which you want us to show as
payable on your premium notices:$ ______________________ (Note that you are only
required to pay scheduled premiums to keep the policy in full force.)
ALSO COMPLETE FORM A58 - INITIAL ALLOCATION SCHEDULES
<PAGE> 2
Signed at (City and State) ___________________________________________________
On (Date) (Month/Day/Year)____________________________________________________
Agent's Name (please print) __________________________________________________
Applicant's Signature ________________________________________________________
Owner's Signature ____________________________________________________________
Signature of Agent ___________________________________________________________
The above-indicated agent certifies that the information supplied by the
applicant has been truly and accurately recorded on this application.
A7-VL 7.93
<PAGE> 1
PC 0103
- - Provident Mutual Life Insurance Company, Berwyn, PA
- - Providentmutual Life and Annuity Company of America, A Stock Life Insurance
Company, Newark, DE
Variable Life Initial Allocation Schedules
To be used in conjunction with application dated (Month/Day/Year) ___________
First Name - Middle Initial - Last Name of Proposed Insured
Insured 1 ___________________________________________________________________
Insured 2 (where applicable) ________________________________________________
Initial Allocation Percentages (Whole Percentages Only)
Provident Mutual FLEXIBLE PREMIUM VARIABLE LIFE
Premiums Monthly Deductions
ALL PRO SERIES
Large Cap Growth(1).........................___% ___%
Large Cap Value(1)..........................___% ___%
Small Cap Growth(1).........................___% ___%
Small Cap Value(1)..........................___% ___%
SENTINEL ADVISORS COMPANY
Growth(1)...................................___% ___%
Aggressive Growth(1)........................___% ___%
Bond(1).....................................___% ___%
Managed(1)..................................___% ___%
Money Market(1).............................___% ___%
THE BOSTON COMPANY ASSET MGMT
International(1)............................___% ___%
ALGER MANAGEMENT
Small Capitalization(2).....................___% ___%
FIDELITY MANAGEMENT & RESEARCH
Asset Manager(4)............................___% ___%
Contrafund(4)...............................___% ___%
Equity-Income(3)............................___% ___%
Growth(3)...................................___% ___%
High Income(3)..............................___% ___%
Index 500(4)................................___% ___%
Investment Grade Bond(4)....................___% ___%
Overseas(3).................................___% ___%
NEUBERGER & BERMAN MGMT
Limited Maturity Bond(5)....................___% ___%
<PAGE> 2
Partners(5).................................___% ___%
VAN ECK ASSOCIATES
Worldwide Bond(6)...........................___% ___%
Worldwide Emerging Mkts(6)..................___% ___%
Worldwide Hard Assets(6)....................___% ___%
Worldwide Real Estate(6)....................___% ___%
ZERO COUPON BOND
2006 Trust(7)...............................___% ___%
GUARANTEED ACCOUNT..........................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
TOTAL.......................................100% 100%
Providentmutual FLEXIBLE PREMIUM VARIABLE LIFE
Premiums Monthly Deductions
ALL PRO SERIES
Large Cap Growth(1).........................___% ___%
Large Cap Value(1)..........................___% ___%
Small Cap Growth(1).........................___% ___%
Small Cap Value(1)..........................___% ___%
SENTINEL ADVISORS COMPANY
Growth(1)...................................___% ___%
Aggressive Growth(1)........................___% ___%
Bond(1).....................................___% ___%
Managed(1)..................................___% ___%
Money Market(1).............................___% ___%
THE BOSTON COMPANY ASSET MGMT
International(1)............................___% ___%
ALGER MANAGEMENT
Small Capitalization(2).....................___% ___%
FIDELITY MANAGEMENT & RESEARCH
Asset Manager(4)............................___% ___%
Contrafund(4)...............................___% ___%
Equity-Income(3)............................___% ___%
Growth(3)...................................___% ___%
High Income(3)..............................___% ___%
Index 500(4)................................___% ___%
Investment Grade Bond(4)....................___% ___%
Overseas(3).................................___% ___%
<PAGE> 3
NEUBERGER & BERMAN MGMT
Limited Maturity Bond(5)....................___% ___%
Partners(5).................................___% ___%
VAN ECK ASSOCIATES
Worldwide Bond(6)...........................___% ___%
Worldwide Emerging Mkts(6)..................___% ___%
Worldwide Hard Assets(6)....................___% ___%
Worldwide Real Estate(6)....................___% ___%
ZERO COUPON BOND
2006 Trust(7)...............................N/A N/A
GUARANTEED ACCOUNT..........................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
TOTAL.......................................100% 100%
Provident Mutual OPTIONS
(May not allocate less than 5% to a selected account.)
Premiums Unscheduled Premiums
ALL PRO SERIES
Large Cap Growth(1).........................___% ___%
Large Cap Value(1)..........................___% ___%
Small Cap Growth(1).........................___% ___%
Small Cap Value(1)..........................___% ___%
SENTINEL ADVISORS COMPANY
Growth(1)...................................___% ___%
Aggressive Growth(1)........................___% ___%
Bond(1).....................................___% ___%
Managed(1)..................................___% ___%
Money Market(1).............................___% ___%
THE BOSTON COMPANY ASSET MGMT
International(1)............................___% ___%
ALGER MANAGEMENT
Small Capitalization(2).....................___% ___%
FIDELITY MANAGEMENT & RESEARCH
Asset Manager(4)............................___% ___%
Contrafund(4)...............................___% ___%
Equity-Income(3)............................___% ___%
Growth(3)...................................___% ___%
High Income(3)..............................___% ___%
<PAGE> 4
Index 500(4)................................___% ___%
Investment Grade Bond(4)....................___% ___%
Overseas(3).................................___% ___%
NEUBERGER & BERMAN MGMT
Limited Maturity Bond(5)....................___% ___%
Partners(5).................................N/A N/A
VAN ECK ASSOCIATES
Worldwide Bond(6)...........................___% ___%
Worldwide Emerging Mkts(6)..................___% ___%
Worldwide Hard Assets(6)....................___% ___%
Worldwide Real Estate(6)....................___% ___%
ZERO COUPON BOND
2006 Trust(7)...............................___% ___%
GUARANTEED ACCOUNT..........................N/A N/A
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
___________________________.................___% ___%
TOTAL.......................................100% 100%
Portfolio of: (1)Market Street Fund; (2)Alger American Fund; (3)VIP Fund;
4)VIP II Fund; (5)Neuberger & Berman Advisers Management Trust; (6)Van Eck
Worldwide Insurance Trust; (7)Series of The Stripped ("Zero") U.S. Treasury
Securities Fund
Signed at (City and State) ___________________________________________________
On (Date) (Month, Day, Year) _________________________________________________
Owner Name (please print)_____________________________________________________
Owner Signature ______________________________________________________________
Owner Name (please print) ____________________________________________________
Owner Signature ______________________________________________________________
A58 5.98
_______________________Pg. 2_________________________
PC 0103
<PAGE> 5
- - Provident Mutual Life Insurance Company, Berwyn, PA
- - Providentmutual Life and Annuity Company of America, A Stock Life Insurance
Company, Newark, DE
Variable Annuity Initial Allocation Schedules
To be used in conjunction with application dated (Month, Day, Year) __________
First Name -- Middle Initial -- Last Name of Proposed Annuitant Annuitant
________________________________________________________________________________
Initial Allocation Percentages (Whole Percentages Only)
Options VIP
ALL PRO SERIES
Large Cap Growth(1).........................___%
Large Cap Value(1)..........................___%
Small Cap Growth(1).........................___%
Small Cap Value(1)..........................___%
SENTINEL ADVISORS COMPANY
Growth(1)...................................___%
Aggressive Growth(1)........................___%
Bond(1).....................................___%
Managed(1)..................................___%
Money Market(1).............................___%
THE BOSTON COMPANY ASSET MGMT
International(1)............................___%
ALGER MANAGEMENT
Small Capitalization(2).....................___%
FIDELITY MANAGEMENT & RESEARCH
Asset Manager(4)............................___%
Contrafund(4)...............................___%
Equity-Income(3)............................___%
Growth(3)...................................___%
High Income(3)..............................___%
Index 500(4)................................___%
Investment Grade Bond(4)....................___%
Overseas(3).................................___%
NEUBERGER & BERMAN MGMT
Limited Maturity Bond(5)....................___%
Partners(5).................................___%
VAN ECK ASSOCIATES
Worldwide Bond(6)...........................___%
Worldwide Emerging Mkts(6)..................___%
Worldwide Hard Assets(6)....................___%
Worldwide Real Estate(6)....................___%
<PAGE> 6
GUARANTEED ACCOUNT .........................___%
(not available in OR or WA)
____________________________................___%
____________________________................___%
____________________________................___%
____________________________................___%
TOTAL.......................................100%
Market Street VIP/2
ALL PRO SERIES
Large Cap Growth(1).........................___%
Large Cap Value(1)..........................___%
Small Cap Growth(1).........................___%
Small Cap Value(1)..........................___%
SENTINEL ADVISORS COMPANY
Growth(1)...................................___%
Aggressive Growth(1)........................___%
Bond(1).....................................___%
Managed(1)..................................___%
Money Market(1).............................___%
THE BOSTON COMPANY ASSET MGMT
International(1)............................___%
FIDELITY MANAGEMENT & RESEARCH
Asset Manager(4)............................___%
Contrafund(4)...............................___%
Equity-Income(3)............................___%
Growth(3)...................................___%
High Income(3)..............................___%
Index 500(4)................................___%
OPCAP ADVISORS
Equity(7)...................................___%
Managed(7)..................................___%
Small Cap(7)................................___%
SCUDDER
Bond(8).....................................___%
Growth and Income(8)........................___%
International(8)............................___%
THE DREYFUS CORPORATION
Growth and Income(9)........................___%
Socially Responsible Growth(10).............___%
Zero Coupon 2000(9).........................___%
FEDERATED ADVISERS
<PAGE> 7
U.S. Government Bond(11) ...................___%
Utility(11).................................___%
VAN ECK ASSOCIATES
Worldwide Bond(6)...........................___%
Worldwide Emerging Markets(6)...............___%
Worldwide Hard Assets(6)....................___%
Worldwide Real Estate(6)....................___%
GUARANTEED ACCOUNT .........................___%
(not available in OR)
____________________________................___%
____________________________................___%
____________________________................___%
____________________________................___%
TOTAL ......................................100%
Portfolio of: (1)Market Street Fund; (2)Alger American Fund; (3)VIP Fund; (4)VIP
II Fund; (5)Neuberger & Berman Advisers Management Trust; (6)Van Eck Worldwide
Insurance Trust; (7)OCC Accumulation Trust; (8)Scudder Variable Life Investment
Fund; (9)Dreyfus Variable Investment Fund; (10)Dreyfus Socially Responsible
Growth Fund; (11)Federated Insurance Series
Signed at (City and State)____________________________________________________
On (Date) (Month, Day, Year)__________________________________________________
Owner Name (please print)_____________________________________________________
Owner Signature_______________________________________________________________
Owner Name (please print)____________________________________________________
Owner Signature _____________________________________________________________
A58 5.98
<PAGE> 1
EXHIBIT 3(A)
LOGO
PROVIDENT MUTUAL
1050 WESTLAKES DRIVE, BERWYN, PA 19312-2419
P.O. BOX 1717, VALLEY FORGE, PA 19482-1717
(610) 407-1239, (800) 523-4681, FAX: (610) 407-1379
ADAM SCARAMELLA
COUNSEL
April 30, 1998
Provident Mutual Life Insurance Company
1050 Westlakes Drive
Berwyn, PA 19312
RE: Provident Mutual Life Insurance Company
Provident Mutual Variable Growth Separate Account, et al.
(File No. 33-2625)
Gentlemen:
I hereby consent to the use of my name under the heading "Legal Matters" in the
Prospectus filed as part of Post-Effective Amendment No. 18 to the Registration
Statement on Form S-6 (File No. 33-2625) for the Provident Mutual Variable
Growth Separate Account, the Provident Mutual Variable Money Market Separate
Account, the Provident Mutual Variable Bond Separate Account, the Provident
Mutual Variable Managed Separate Account, the Provident Mutual Variable Zero
Coupon Bond Separate Account, the Provident Mutual Variable Aggressive Growth
Separate Account, the Provident Mutual Variable International Separate Account
and the Provident Mutual Variable Separate Account.
Very truly yours,
/s/ ADAM SCARAMELLA
-------------------------------
Adam Scaramella
A HERITAGE OF STRENGTH FOR TOMORROW'S FINANCIAL NEEDS
<PAGE> 1
EXHIBIT 3(B)
[SUTHERLAND, ASBILL & BRENNAN, L.L.P. LETTERHEAD]
ATLANTA * AUSTIN * NEW YORK * WASHINGTON
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
April 29, 1998
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
INTERNET: [email protected]
Provident Mutual Life Insurance Company
1050 Westlakes Drive
Berwyn, PA 19312
RE: PROVIDENT MUTUAL LIFE INSURANCE COMPANY
PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT, ET AL.
(FILE NO. 33-2625)
---------------------------------------------------------
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of post-effective amendment No. 18 to
the Form S-6 registration statement (File No. 33-2625) for Provident Mutual
Variable Growth Separate Account, et al. In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By: /s/ STEPHEN E. ROTH
________________________
Stephen E. Roth
<PAGE> 1
EXHIBIT 6
LOGO
PROVIDENT MUTUAL
1050 WESTLAKES DRIVE, BERWYN, PA 19312-2419
TELEPHONE (610) 407-1717, FAX (610) 407-1438
April 30, 1998
Provident Mutual Life Insurance Company
1050 Westlakes Drive
Berwyn, PA 19312
Gentlemen:
I hereby consent to the use of my name under the heading "Experts" in the
Prospectus filed as part of Post-Effective Amendment No. 18 to the Registration
Statement on Form S-6 (File No. 33-2625) for the Provident Mutual Variable
Growth Separate Account, the Provident Mutual Variable Money Market Separate
Account, the Provident Mutual Variable Bond Separate Account, the Provident
Mutual Variable Managed Separate Account, the Provident Mutual Variable Zero
Coupon Bond Separate Account, the Provident Mutual Variable Aggressive Growth
Separate Account, the Provident Mutual Variable International Separate Account
and the Provident Mutual Variable Separate Account.
Very truly yours,
/s/ SCOTT V. CARNEY
--------------------------
Scott V. Carney, FSA, MAAA
Vice President & Actuary
A HERITAGE OF STRENGTH FOR TOMORROW'S FINANCIAL NEEDS
<PAGE> 1
EXHIBIT 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion, in this Post-Effective Amendment
No. 18 to the Registration Statement under the Securities Act of 1933, as
amended, filed on Form S-6 (File No. 33-2625) for the Provident Mutual Variable
Separate Accounts (Growth, Money Market, Bond, Managed, Zero Coupon Bond,
Aggressive Growth, International and Variable), of the following reports:
1. Our report dated February 20, 1998 on our audits of the financial
statements of Provident Mutual Life Insurance Company and
Subsidiaries as of December 31, 1997 and 1995 and for each of
the three years in the period ended December 31, 1997.
2. Our report dated March 4, 1998 on our audits of the financial
statements of the Provident Mutual Variable Separate Accounts
(Growth, Money Market, Bond, Managed, Aggressive Growth,
International, Zero Coupon Bond and Variable) as of December 31,
1997 and for each of the three years in the period ended
December 31, 1997.
We also consent to the reference to our Firm under the caption
"Experts".
COOPERS & LYBRAND, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 30, 1998
<PAGE> 1
EXHIBIT 8
Description of PMLIC's Issuance, Transfer
and Redemption Procedures for Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
Set forth below is the information called for under Rule 6e-3(T)(b)(12)(iii)
under the Investment Company Act of 1940 (" 1940 Act"). That rule provides an
exemption for separate accounts, their investment advisers, principal
underwriters and sponsoring insurance company from Sections 22(c), 22(d), 22(e),
and 27(c)(1) of the 1940 Act, and Rule 22(c)-1 promulgated thereunder for
issuance, transfer and redemption procedures under flexible premium variable
life insurance policies to the extent necessary to comply with Rule 6e-3(T),
state administrative laws or established administrative procedures of the life
insurance company. In order to qualify for the exemption, procedures must be
reasonable, fair and not discriminatory and they must be disclosed in the
registration statement filed by the separate accounts.
PMLIC's Separate Accounts (the Growth Separate Account, the Money Market
Separate Account, the Bond Separate Account, the Managed Separate Account, the
Zero Coupon Bond Separate Account, the Aggressive Growth Separate Account and
the International Separate Account) are registered under the 1940 Act.
Procedures described herein apply equally to each Separate Account. For purposes
of this description, procedures are defined in terms of one Account except where
a discussion of all or any particular Account is necessary.
PMLIC believes its procedures meet the requirements of Rule 6e-3(T)(b)(12)(iii)
and states the following:
1. Because of the insurance nature of PMLIC's flexible premium
adjustable survivorship variable life insurance policies ("policies") and due to
the requirements of state insurance laws, the procedures necessarily differ in
significant respects from procedures for mutual funds and contractual plans for
which the 1940 Act was designed.
2. In structuring its procedures to comply with Rule 6e-3(T), state
insurance laws and administrative procedures of PMLIC, it has attempted to
comply with the intent of the 1940 Act, to the extent deemed feasible.
3. In general, state insurance laws require that PMLIC's procedures be
reasonable, fair and not discriminatory.
4. Because of the nature of the insurance product, it is often
difficult to determine precisely when PMLIC's procedures deviate from those
required under Sections 22(c), 22(d), 22(e), or 27(c)(1) of the 1940 Act or Rule
22c-1 thereunder. Accordingly, set out below is a summary of the principal
policy provisions and procedures which may be deemed to constitute, either
directly or indirectly, such a deviation. The summary, while comprehensive, does
not attempt to treat each and every procedure or variation which might occur and
does include certain procedural steps which do not constitute deviations from
the above-cited Sections or Rule.
I. "Redemption Procedures": Surrender and Related Transactions
This section will outline those procedures which differ in certain significant
respects from redemption procedures for mutual funds and contractual plans.
PMLIC's policies provide for the payment of monies to a policyowner or
beneficiary upon presentation of a policy. The principal difference between
PMLIC's "redemption" procedures and those in a mutual fund or contractual plan
context is that the payee will not
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<PAGE> 2
receive a pro rata or proportionate share of the Account's assets within the
meaning of the 1940 Act. The amount received by the payee will depend upon the
particular benefit for which the policy is presented, including, for example,
the net cash surrender value or part thereof, or proceeds at death. There are
also certain policy provisions--such as the loan privilege--under which the
policy will not be presented to PMLIC but which will affect the policyowner's
benefits and involve a transfer of the assets supporting the policy reserve out
of the Account. Finally, state insurance laws may require that certain
requirements be met before PMLIC is permitted to make payments to the payee.
a. Surrender for Net Cash Surrender Value
A policyowner may surrender the policy for its net cash surrender value at any
time while both or either of the insureds is living. PMLIC will ordinarily pay
the net cash surrender value within seven days after receipt, at its Home
Office, of the policy and a signed request for surrender. Computations with
respect to the investment experience of the Account will be made at the close of
trading of the New York Stock Exchange on each day during which the New York
Stock Exchange is open for trading and any other day in which there is a
sufficient degree of trading of an Account's portfolio of securities to
materially affect the value of such Account. PMLIC will pay the net cash
surrender value based on the next computed value after the surrender request is
received. The surrender is effective on the date the policyholder transmits the
request to PMLIC.
The net cash surrender value at any time during the first 15 policy years is the
policy account value less any outstanding policy loan and accrued interest,
minus any surrender charge.
The surrender charge consists of a deferred administrative charge and a deferred
sales charge. The deferred administrative charge is equal to $1.50 per $1,000
face amount in policy years 1 to 11, reducing by 20% each year for policy years
12 through 15 until it is zero in Policy Year 16.
<TABLE>
<CAPTION>
Policy Year Charge per $1,000 Face Amount
<S> <C>
1-11 $1.50
12 1.20
13 .90
14 .60
15 .30
16 and after 0
</TABLE>
The deferred sales charge is equal to 25% of the premiums received during the
first policy year up to one surrender charge target premium (which is an amount,
based on the joint equal age of the insureds, used solely for the purpose of
calculating the deferred sales charge) plus 4% of all other premiums received to
the date of surrender, lapse or decrease. The deferred sales charge, however,
will not exceed the maximum deferred sales charge. During policy years one
through 11, this maximum equals: For Joint Equal Ages (JEA) 25-71, 50% of the
surrender charge target premium for the initial face amount; for JEA 72-75, 40%
of the surrender charge target premium; and for JEA 76-80, 30% of the surrender
charge target premium. The maximum declines by 20% each year in policy years 12
through 15 until it is zero in policy year 16 and after.
Any surrender charge applicable upon surrender of the policy will be deducted
from the policy account value. Any pro rata surrender charge applicable upon a
decrease in face amount will be allocated based on the proportion that the
guaranteed account value and the value in the Accounts bear to the total
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<PAGE> 3
unloaned policy account value.
PMLIC will make the payment of the net cash surrender value out of its general
account and, at the same time, transfer assets from the Account to the general
account in an amount equal to the portion of the policy account value in the
Account.
In lieu of payment of the net cash surrender value in a single sum upon
surrender of a policy, an election may be made to apply all or a portion of the
proceeds under one of the fixed benefit payment options described in the
policies or, with the approval of PMLIC, a combination of options. The election
may be made by the policyowner during his or her lifetime, or, if no election is
in effect at the death of the last surviving insured, by the beneficiary. An
option in effect at death may not be changed to another form of benefit after
death. The fixed benefit settlement options are subject to the restrictions and
limitations set forth in the policies.
b. Partial Withdrawal of Net Cash Surrender Value
A policyowner may make a partial withdrawal of net cash surrender value from the
policy. The minimum amount of a partial withdrawal is S1500. A $25 expense
charge will be deducted from the policy account value for each withdrawal. The
amount of the withdrawal and the expense charge will be allocated based on the
proportion that the guaranteed account value and the value in the Accounts bear
to the total unloaned policy account value.
PMLIC will ordinarily pay the amount of the partial withdrawal to the
policyowner within 7 days after receipt at its Home Office of the withdrawal
request.
c. Death Claims
PMLIC will ordinarily pay a death benefit to the beneficiary within seven days
after receipt, at its Home Office, of certified death certificates for both
Insureds, the claimant's statement signed by the beneficiary, and any other
requirements necessary to make payment.
There are two Death Benefit Options available under the policy. Under Death
Benefit Option A, the death benefit is equal to the greater of: (1) the face
amount of the policy; and (2) the policy account value on the date of the last
surviving insured's death times the applicable percentage for the younger
insured's attained age. Under Death Benefit Option B, the death benefit is equal
to the greater of: (1) the face amount of the policy plus the policy account
value on the date of the last surviving insured's death; and (2) the policy
account value on the date of such death times the applicable percentage for the
younger insured's attained age.
The Death Benefit Option is chosen at the time of application for the policy.
After the second policy year, the owner may request a change from Option A to
Option B or vice versa by completing an application for change. No charges will
be imposed to change the Death Benefit Option. The change will be effective as
of the policy processing day that coincides with or next follows the date PMLIC
approves the request. The change does not require evidence of insurability. If
the policyowner changes from Option A to Option B, the death benefit will not
change and PMLIC will decrease the face amount by the policy account value; if
the change is from Option B to Option A, the death benefit will not change and
PMLIC will increase the face amount by the policy account value. No surrender
charge nor expense charge will be imposed for a decrease or increase in face
amount resulting from the change.
The policyowner may also request decrease in the face amount after the second
policy year by completing
3
<PAGE> 4
an application for change. The minimum amount of any decrease is $25,000. After
a decrease the face amount may not be less than the minimum face amount for a
newly issued policy at the time of the decrease. If approved, the change will be
effective as of the policy processing day that coincides with or next follows
the date of approval and new policy schedule pages will be issued. If the change
is not approved, the policy will remain as is. For a decrease in face amount,
any applicable pro rata surrender charge will be applied.
To determine the proceeds payable to the beneficiary at the death of the last
surviving insured, the death benefit will be increased to reflect any insurance
benefits added by rider, and decreased by any outstanding policy loans and
accrued interest, and any unpaid monthly deductions. The proceeds at death also
reflects interest from the date of the last surviving insured's death to the
date of payment.
PMLIC will make payment of the death benefit out of its general account, and
will transfer assets from the Account to the general account in an amount equal
to the investment base in that Account. In lieu of payment of the death benefit
in a single sum, a settlement option may be elected as described immediately
above with respect to surrender for net cash surrender value.
If both insureds die by suicide within 2 years from the policy issue date and
within 90 days of each other; or, if the last surviving insured dies by suicide
within 2 years from such date and within 90 days of the death of the first of
the insureds to die; or, if the last surviving insured lives for more than 90
days beyond the date that the first death occurred by suicide and the surviving
insured does not exchange the policy as described below, PMLIC will pay the sum
of all premiums paid for the policy, decreased by any policy loans and accrued
interest on such loans and any partial withdrawals of net cash surrender value.
During the 90 day period following the date that the first Insured dies by
suicide, the surviving insured may exchange the survivorship policy, without
evidence of insurability, for a fixed benefit policy issued by PMLIC on the life
of such surviving insured. The policy issue date will be the 9lst day after the
date of the first insured's death. If one of the insureds commits suicide within
two years of the policy issue date and the surviving insured dies (other than by
suicide) within 90 days of the date of the first death, PMLIC will pay the
insurance proceeds to the beneficiary.
If the stated age or sex of either insured is not correct, the death benefit and
the amount of any benefits provided by rider shall be those which would have
been purchased based on the most recent deduction for cost of insurance and such
benefits, at the correct age and sex of both insureds.
d. Payment of Policy Account Value on Final Policy Date
On the final policy date (policy anniversary nearest the younger insured's
attained age 100), PMLIC will pay the policy account value less any outstanding
policy loans and accrued interest, and any unpaid monthly deductions to the
policyowner and coverage under the policy will end. PMLIC will ordinarily pay
this amount within 7 days of the final policy date.
e. Exchange of Policy
During the first 2 years following issuance of the policy, the policyowner may,
on one occasion, transfer the entire policy account value in the Accounts to the
Guaranteed Account without such counting as a "transfer". Net premiums paid
after such a transfer must be allocated to the guaranteed account.
Within 6 months after the effective date of a material change in the investment
policy of a chosen Account, the policyowner may transfer the portion of the
policy account value in such Account to any of the other Accounts or to the
guaranteed account without such counting as a "transfer".
4
<PAGE> 5
f. Default and Lapse
The duration of the insurance coverage under the policy depends upon whether the
net cash surrender value is sufficient to cover the monthly deductions except
that during the first 2 policy years, the policy will not lapse if the
cumulative premiums paid (less the amount of any policy loans and partial
withdrawals) equals or exceeds the Minimum Guarantee Premium. The Minimum
Guarantee Premium is the Minimum Annual Premium multiplied by the number of
months since the Policy Date (including the current month) divided by 12. If the
net cash surrender value at the beginning of any policy month is less than the
deductions for that month and, during the first 2 policy years the Minimum
Guarantee Premium has not been paid, PMLIC will send written notice to the
policyowner at the address shown in PMLIC's records stating that a grace period
of 61 days began on the day PMLIC mailed the notice. The notice will indicate
the amount of three monthly deductions. If PMLIC does not receive such amount
before the end of the 61-day grace period, PMLIC will withdraw the policy
account value, including any applicable surrender charge, and notify the
policyowner that the policy has lapsed without value. The amount withdrawn will
be transferred to PMLIC's general account.
If the last surviving insured dies during the grace period, the insurance
proceeds will be paid and any overdue monthly deductions will be deducted in
determining the amount payable to the beneficiary.
g. Policy Loan
A policyowner may borrow from PMLIC using the policy as sole security. The
policyowner may borrow up to the net cash surrender value. The minimum loan
amount is $500 or such smaller minimum required by a particular state. The net
cash surrender value for this purpose will be the net cash surrender value
computed on the date a written request for a loan is received by PMLIC. Payment
of the loan from PMLIC's general account will generally be made to the
policyowner within seven days of receipt. Interest on the loan accrues daily at
a fixed annual rate of 6%. The policyowner may repay all or a portion of any
loan and accrued interest while the insured is living and the policy is in
force.
PMLIC will allocate the amount of a loan based on the proportion that the
guaranteed account value and the value of the Accounts bear to the total
unloaned policy account value at the time the loan is made.
The collateral for the loan will be the loan amount plus accrued interest to the
next policy anniversary less interest at 4% per annum. The collateral for the
loan will be deducted from each account and transferred to the loan account.
PMLIC will credit the loan account with interest at effective annual rates it
determines in advance of each calendar year, but not less than 4%. The
collateral will be recalculated and interest credited transferred to the
accounts: (1) when loan interest is paid or treated as part of the loaned
amount; (2) when a new loan is made; and (3) when a loan repayment is made. A
transfer to or from the loan account will be made to reflect any recalculation
of collateral.
Repayments up to the amount of the outstanding loan will be allocated to the
accounts based on the amount of the outstanding loan allocated to each Account
as of the date of repayment. Any repayment in excess of the amount of the
outstanding loan will be allocated to the Accounts based on the amount of
interest due on the portion of the outstanding loan allocated to each Account.
The amount of interest due is determined as of the next policy anniversary.
The amount of any outstanding loan plus accrued loan interest is subtracted from
the death benefit or the cash surrender value on payment.
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<PAGE> 6
h. Redistributions and Transfers Among Accounts
A policyowner may redistribute the policy account value in the Accounts up to 4
times a year without charge. The redistribution will be effective as of the date
of receipt of the written transfer request at PMLIC's Home Office. The amount
transferred must be at least $1,000 (or the entire Account balance, if
smaller). After 4 transfers in a policy year, a $25 transfer charge will be
deducted from the amount being transferred. All transfers included in a request
are treated as one "transfer" transaction.
i. Right of Cancellation
PMLIC's policies provide that the policyowner, within 45 days after signing Part
I of the policy application, within 10 days after receipt of the policy or
within 10 days after the mailing of the Notice of Withdrawal Right, whichever is
latest, may return the policy and receive a refund. The refund is equal to the
policy account value when the cancellation request is received, plus: (1) any
premium expense charges which were deducted from premiums: (2) monthly
deductions made on any policy processing day; and (3) daily charges against the
Accounts and the investment advisory fees and expenses for the fund. Such a
provision is required under the insurance laws of a number of states (PMLIC will
refund the premiums paid if such is required by state law).
j. Rewrite Privilege
Pursuant to an administrative procedure of PMLIC known as "rewriting," PMLIC
policyowners may, subject to the terms of the policy, substitute another policy
currently offered by PMLIC for a policy issued within the six month period
immediately preceding the date of rewrite. The new policy will typically have
the same face amount as the original policy. The original policy will be deemed
to be void and the new policy will be backdated to the issue date of the
original policy in accordance with PMLIC's standard backdating procedures. There
is currently more than one policy into which a policyowner may rewrite.
k. Policy Split Option
The policy can be split on a 50-50 basis into two fixed benefit policies, one on
the life of each insured, with evidence of insurability satisfactory to PMLIC,
The split can be made if a final divorce decree is issued with respect to the
marriage of the two insureds or if the federal tax law is changed to remove the
unlimited marital deduction or reduction of at least 50% in the estate taxes
payable on death. The face amount and policy account value minus policy loans
and accrued interest will be divided evenly between the two new policies.
1. Refund of Excess Premiums for Modified Endowment Contracts
At the time a premium is credited which would cause the policy to become a
Modified Endowment Contract (MEC), PMLIC will notify the policyowner that unless
a refund of the excess premium is requested by the policyowner, the policy will
become a MEC. The policyowner will have 30 days after receiving such notice to
request the refund. The excess premium paid (with any required interest or
earnings) will be returned to the policyowner upon receipt by PMLIC of the
request. The amount refunded will be deducted from the Accounts in the same
proportion as the premium was allocated to the Accounts.
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<PAGE> 7
II. "Public Offering Price": Purchase and Related Transactions
--Section 22(d) and Rule 22c-1
This section outlines those principal policy provisions and administrative
procedures which might be deemed to constitute, either directly or indirectly, a
"purchase" transaction. Because of the insurance nature of the policies, the
procedures involved necessarily differ in certain significant respects from the
purchase procedures for mutual funds and contractual plans. The chief
differences revolve around the premium rate structure and the insurance
underwriting (i.e., evaluation of risk) process. There are also certain policy
provisions--such as loan repayment--which do not result in the issuance of a
policy but which require certain repayments by the policyowner and involve a
transfer of assets supporting the policy reserve into the Account.
a. Premium Schedules and Underwriting Standards
Cost of insurance rates for PMLIC's policies will not be the same for all
policyholders. The chief reason is that the principle of pooling and
distribution of mortality risks is based upon the assumption that each
policyowner pays an amount commensurate with the mortality risk for both
insureds which is actuarially determined based upon factors such as age, health,
smoking status and occupation. In the context of life insurance, a uniform cost
of insurance (or "public offering price") for all insureds would discriminate
unfairly in favor of those insureds representing greater mortality risks to the
disadvantage of those representing lesser risks. Accordingly, although there
will be no uniform "public offering price" for all policyholders, there will be
a single "price" for all policyholders in a given actuarial category.
Lower cost of insurance rates will be charged for nonsmokers and preferred risk
insureds who are standard risks in other respects. Additional rates will be
charged for a policy involving "special" premium class or for supplementary
benefits.
In setting its cost of insurance rates, PMLIC will take into consideration
actuarial estimates of death and surrender benefits, premium payments, expenses,
investment experience and an amount to be contributed to PMLIC's surplus. In
addition, the cost of insurance will depend upon the face amount of the policy
and the ages and sexes of the persons insured.
The policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. The underwriting
standards and premium processing practices followed by PMLIC 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. State insurance laws prohibit unfair discrimination among
policyholders, but recognize that premiums must be based upon factors such as
age, sex, health and occupation.
The minimum initial premium is equal to the following factor multiplied by the
Minimum Annual Premium. No insurance will take effect until the minimum initial
premium is paid.
<TABLE>
<CAPTION>
Premium Billing Mode
Selected At issue Factor
<S> <C>
Annual 1.000
Semi-annual 0.500
Quarterly 0.250
Monthly 0.167
</TABLE>
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<PAGE> 8
Prior to the final policy date, the owner may pay additional premiums at any
time (subject to a $25 minimum). The policyowner may schedule planned periodic
premiums for which PMLIC will send a reminder notice. The policyowner is not
required to pay the planned periodic premiums and may change their frequency and
amount; the policy will not lapse unless the net cash surrender value is
insufficient for the monthly deductions.
b. Application and Initial Premium Process
The policy can be issued for two insureds, each between ages 21 and 85 and with
a Joint Equal Age between 25 and 80. Before issuing a policy, PMLIC will require
that the proposed insureds meet certain underwriting standards satisfactory to
PMLIC. Upon receipt of the completed applications for both of the proposed
insureds, PMLIC will follow its underwriting (i.e., evaluation of risks)
procedures designed to determine whether the applicants are insurable. This
process may require that further information be provided by the proposed
insureds before a determination can be made.
The date on which a policy is issued is referred to as the policy issue date.
The policy issue date represents the commencement of the suicide and contestable
periods for purposes of the policies.
For states which require a refund of the premiums paid when a policy is returned
under the free-look provision, the portion of the minimum net initial premium
and any premiums received prior to 15 days from the later of the policy issue
date or the date the minimum initial premium is received which is to be
allocated to the Accounts, will be credited upon receipt to the Money Market
Separate Account. At the expiration of the 15-day period, the amount in the
Money Market Separate Account will be allocated to the Accounts selected at the
time of application.
Insurance coverage will also typically begin on the later of the policy issue
date or the date the minimum initial premium is received. PMLIC may, however,
provide temporary life insurance coverage, the death benefit of which shall not
exceed $500,000, prior to the policy issue date, provided the minimum initial
premium has been paid.
The policy date is the date used to determine the policy anniversary date. In
addition, the insurance ages of the insureds will be determined as of that date.
The policyowner determines the policy date. In no case may the policy date be
more than six months prior to the issue date.
c. Premium Processing
Whenever a premium is received, PMLIC will subtract the Premium Expense Charge
from the premium. The Premium Expense Charge consists of: the Premium Tax Charge
(based on state of residence); a Percent of Premium Charge (currently 5.0% in
policy years 1-10); and a Federal Tax Charge of 1.25%. What is left (the Net
Premium) will be invested in the chosen Accounts as of the date received.
(except for premiums received during the 15-day period specified in II b.,
above).
d. Payment of Planned Periodic Premiums Under Automatic Payment Plan
Premiums may be paid monthly under the Automatic Payment Plan (APP) where the
policyowner authorizes PMLIC to withdraw the planned periodic premiums from the
policyowner's checking account each month. The premiums are paid either through
"checks" drawn on the policyowner's account or via electronic funds transfer
(EFT). For all policyowners who elect APP, net premiums will be credited to the
policy on the same date of each month (currently it is anticipated that this
will be the 18th of each month; if the 18th falls on a weekend day or holiday,
it ordinarily will be on the next following business
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<PAGE> 9
day). The net premium will be allocated to the Accounts on the day the funds are
available to PMLIC.
e. Refund of Excess Premiums for Modified Endowment Contracts
See I(1) above
f. Reinstatement
A policy not surrendered for its net cash surrender value may be reinstated
within three years from the date of lapse in accordance with the policy. To
reinstate, the insureds or surviving insured generally must submit written
applications for reinstatement providing evidence of insurability satisfactory
to PMLIC and pay PMLIC an amount sufficient to keep the policy in force for at
least three months after the date of reinstatement, which is the date the
reinstatement application is approved.
Upon reinstatement, the policy account value will be based upon the premium paid
to reinstate the policy and the policy will be reinstated with the same policy
date as it had prior to the lapse.
g. Repayment of Loan
A loan made under PMLIC's policies may be repaid while the insured is living and
the policy is in force with an amount equal to the monies borrowed plus interest
at a fixed annual rate of 6%.
Repayments up to the amount of the outstanding loan will be allocated to the
Accounts based on the allocation of the outstanding loans to each Account as of
the date of the repayment. PMLIC will allocate any repayment in excess of the
amount of the outstanding loan to the Accounts based on the amount of interest
due as of the next policy anniversary on the outstanding loan allocated to each
Account.
h. Correction of Misstatement of Age or Sex
If PMLIC discovers that the stated age or sex of either insured is not correct,
the death benefit will be that which would have been purchased by the most
recent deduction for cost of insurance for the correct ages and sexes of both
insureds.
i. Redistributions Into Accounts
This is the other side of the transaction described in I(h) above.
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Method of Computing Adjustments in
Payments and Cash Values Upon
Conversion to Fixed Benefit Policies
Pursuant to Rule 6e-3(T)
Conversions during the first 24 months for new issues:
Any conversion during the first 24 months after issue will be executed by
transferring the portion of the policy account value in the Accounts to the
guaranteed account as of the date we receive the conversion request. No charge
will be made for such transfer. Net premiums paid after the date of the
conversion must be allocated to the guaranteed account.
10
<PAGE> 1
POWER OF ATTORNEY
Know all men by these presents:
That I, Edward R. Book, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of April, 1998.
/s/ Edward R. Book
-------------------------------
Edward R. Book
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this day of April, 1998, before me personally appeared Edward R. Book, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires:
----------------------------------
Notary Public
<PAGE> 2
POWER OF ATTORNEY
Know all men by these presents:
That I, Dorothy M. Brown, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Dorothy M. Brown
------------------------------
Dorothy M. Brown
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Dorothy M. Brown, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
----------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 3
POWER OF ATTORNEY
Know all men by these presents:
That I, Robert L. Casale, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Robert J. Casale
-------------------------------
Robert J. Casale
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Robert J. Casale, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
-------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 4
POWER OF ATTORNEY
Know all men by these presents:
That I, Nicholas DeBenedictis, a member of the Board of Directors of PROVIDENT
MUTUAL LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true
and lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either
of them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Nicholas DeBenetictis
-------------------------------
Nicholas DeBenedictis
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Nicholas
DeBendictis, to me known and known to me to be the person mentioned and
described in and who executed the foregoing instrument and he duly acknowledged
to me that he executed the same.
My commission expires: /s/ Jennifer J. Aviles
----------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 5
POWER OF ATTORNEY
Know all men by these presents:
That I, Philip C. Herr, II, a member of the Board of Directors of PROVIDENT
MUTUAL LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true
and lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either
of them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Philip C. Herr, II
-------------------------------
Philip C. Herr, II
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Philip C. Herr, II,
to me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
----------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 6
POWER OF ATTORNEY
Know all men by these presents:
That I, J. Richard Jones, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ J. Richard Jones
-------------------------------
J. Richard Jones
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared J. Richard Jones, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
---------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 7
POWER OF ATTORNEY
Know all men by these presents:
That I, John P. Neafsey, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ John P. Neafsey
-------------------------------
John P. Neafsey
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared John P. Neafsey, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
---------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 8
POWER OF ATTORNEY
Know all men by these presents:
That I, Charles L. Orr, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Charles L. Orr
-------------------------------
Charles L. Orr
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Charles L. Orr, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
----------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 9
POWER OF ATTORNEY
Know all men by these presents:
That I, Donald A. Scott, a member of the Board of Directors of PROVIDENT MUTUAL
LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true and
lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of
them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Donald A. Scott
-------------------------------
Donald A. Scott
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Donald A. Scott, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
---------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 10
POWER OF ATTORNEY
Know all men by these presents:
That I, John J. F. Sherrerd, a member of the Board of Directors of PROVIDENT
MUTUAL LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true
and lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either
of them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ John J. F. Sherrerd
-------------------------------
John J. F. Sherrerd
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared John J. F. Sherrerd,
to me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
-------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 11
POWER OF ATTORNEY
Know all men by these presents:
That I, Harold A. Sorgenti, a member of the Board of Directors of PROVIDENT
MUTUAL LIFE INSURANCE COMPANY, do hereby make constitute and appoint as my true
and lawful attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either
of them severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY and filed with the Securities and
Exchange Commission:
Registration Statements for the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940 of certain variable annuity contracts
and variable life insurance policies for the appropriate Separate Accounts.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of PROVIDENT MUTUAL LIFE INSURANCE COMPANY and
for so long as either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be
employees of PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this first day of May, 1997.
/s/ Harold A. Sorgenti
-------------------------------
Harold A. Sorgenti
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 1st day of May, 1997, before me personally appeared Harold A. Sorgenti,
to me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ Jennifer J. Aviles
------------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE> 1
Exhibit 10(a)
PARTICIPATION AGREEMENT
By and Among
MARKET STREET FUND, INC.
And
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
And
PML SECURITIES COMPANY
THIS AGREEMENT, made and entered into this _______ day of
______________ 1992 by and among PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF
PHILADELPHIA, a Pennsylvania corporation (hereinafter the "Company"), on its
own behalf and on behalf of PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT,
PROVIDENT MUTUAL VARIABLE MONEY MARKET SEPARATE ACCOUNT, PROVIDENT MUTUAL
VARIABLE BOND SEPARATE ACCOUNT, PROVIDENT MUTUAL VARIABLE MANAGED SEPARATE
ACCOUNT, PROVIDENT MUTUAL VARIABLE AGGRESSIVE GROWTH SEPARATE ACCOUNT, and
PROVIDENT MUTUAL VARIABLE INTERNATIONAL SEPARATE ACCOUNT (hereinafter, each
individually the "Account," or collectively, the "Accounts"), segregated asset
accounts of the Company, the MARKET STREET FUND, INC., an open-end diversified
management investment company organized under the laws of the State of Maryland
(hereinafter the "Fund") and PML SECURITIES COMPANY, a Pennsylvania Corporation
(hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered
<PAGE> 2
into participation agreements substantially identical to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143),
granting Participating insurance companies and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
life policies (the "Policies") under the 1933 Act; and
- 2 -
<PAGE> 3
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company under the insurance laws of Pennsylvania, to set aside and invest assets
attributable to the policies; and
WHEREAS, the Company has registered the Accounts as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Accounts to fund the Policies and the Underwriter is authorized to sell
such shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Accounts, executing such orders
on a daily basis at the net
- 3 -
<PAGE> 4
asset value next computed after receipt and acceptance by the Fund or its agent
of the order for the shares of the Fund.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Directors of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by
- 4 -
<PAGE> 5
the Company, executing such requests on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the
request for redemption.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Policies shall be invested in the Fund, or in the Company's
general account; provided that such amounts may also be invested in an
investment company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios of
the Fund; or (b) the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment company available as a
funding vehicle for the Policies; or (c) such other investment company was
available as a funding vehicle for the Policies prior to the date of this
Agreement and the Company so informs the Fund and Underwriter prior to their
signing this Agreement; or (d) the Fund or Underwriter consents to the use of
such other investment company.
1.7. The Company shall pay for Fund shares on the same day that it
places an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire.
1.8. Issuance and transfer of the Funds, shares will be by book entry
only. Stock certificates will not be issued to
- 5 -
<PAGE> 6
the Company or any of the Accounts. Shares ordered from the Fund will be
recorded in an appropriate title for the applicable Account or the appropriate
subaccount of the applicable Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act and that the Policies will be issued and sold
in compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Accounts as segregated asset accounts
- 6 -
<PAGE> 7
under Section 40-37-109 of the Pennsylvania Insurance Code and has registered
the Accounts as a unit investment trust in accordance with the provisions of the
1940 Act to serve as segregated investment accounts for the Policies, and that
it will maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statement under the 1933 Act for the
Policies and the registration statement under the 1940 Act for the Accounts from
time to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sale in accordance with the securities
laws of the various states only if and to the extent deemed necessary by the
Company.
2.2. The Company represents that it believes, in good faith, that the
Policies are currently and at the time of issuance will be treated as life
insurance contracts under applicable provisions of the Internal Revenue Code of
1986, and that it will. make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that they
might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The
- 7 -
<PAGE> 8
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it believes, in good faith, that it is
currently qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with the Pennsylvania Insurance Code as it applies to the
Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with requirements of the Company's
domiciliary state upon written notice from the Company of such requirements and
proposed adjustments, it being agreed and understood that in any such case the
Fund shall be allowed a reasonable period of time under the circumstances after
receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1
- 8 -
<PAGE> 9
under the 1940 Act or otherwise, although it may make such payments in the
future. To the extent that it decides to finance distribution expenses pursuant
to Rule 12b-1, the Fund undertakes to have a board of directors, a majority of
whom are not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the 1933 Act, the 1934 Act, and the 1940 Act.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective Policy owners and applicants. The
Underwriter shall print and distribute, at the Fund's expense, as many copies as
necessary for distribution to existing Policy owners or participants. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation and other assistance as is reasonably necessary in order for the
Company to have the new prospectus for the Policies and the Fund's new
prospectus printed together in one document, in such case the Fund shall bear
its share of expenses as described above.
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<PAGE> 10
3.2. The Fund's prospectus shall state that the Statement of
Additional information for the Fund is available from the Underwriter (or, in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund) shall provide such
Statement, at its expense, to the Company and to any owner of or participant
under a Policy who requests such Statement or, at the Company's expense, to
any prospective Policy owner and applicant who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing Policy owners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Policy owners or
participants;
(ii) vote the Fund shares held in the Accounts in accordance with
instructions received from Policy owners or participants; and
(iii) vote Fund shares held in the Accounts for which no timely
instructions have been received, and any Fund shares held in
the Company's general account, in the same proportion as Fund
shares of such Portfolio for which instructions have been
received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable policy owners. The Company
reserves the right to vote Fund
- 10 -
<PAGE> 11
shares held in any segregated asset account or in its general account in its own
right, to the extent permitted by law. Participating Insurance Companies shall
be responsible for assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Underwriter is named, at least fifteen
business days prior to its use. No such material shall be used if the Fund or
the Underwriter objects to such use within fifteen business days after receipt
of such material.
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<PAGE> 12
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Policies other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account(s) is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company objects to such use within fifteen business days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Accounts, or the Policies other than the information or representations
contained in a registration statement or prospectus for the Policies, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Accounts which are
- 12 -
<PAGE> 13
in the public domain or approved by the Company for distribution to Policy
owners or participants, or in sales literature or other promotional material
approved by the Company, except with the permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
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<PAGE> 14
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's shares
under federal law, and, if applicable, under any state securities law,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
Policy owners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
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<PAGE> 15
ARTICLE VI. Diversification
6.1. The Fund will comply with Section 817(h) of the Internal Revenue
Code of 1986, and all regulations issued thereunder, relating to the
diversification requirements for variable annuity, endowment, and life insurance
contracts.
ARTICLE VII. Potential Conflicts
7.1. The Board of Directors of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the policy owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance policy owners; or (f) a decision by an insurer to disregard the
voting instructions of policy owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications
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<PAGE> 16
thereof. A majority of the Board shall consist of persons who are not
"interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Board. The Company agrees to assist the Board in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever policy owner voting instructions are
disregarded. The Board shall record in its minutes or other appropriate records,
all reports received by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including
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<PAGE> 17
(but not limited to) another Portfolio of the Fund, or submitting the question
whether such segregation should be implemented to a vote of all affected policy
owners and, as appropriate, segregating the assets of any appropriate group
(i.e., variable annuity policy owners or variable life insurance policy owners,
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected policy owners the option of making such
a change; and (2) establishing a new registered management investment company or
managed separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of Policy owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw each affected Account's investment in the Fund.
The Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that it is withdrawing each
affected Account's investment in the Fund pursuant to this Section 7.4.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company is permitted to withdraw each affected Account's investment in
the Fund. The Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares
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<PAGE> 18
of the Fund until the Company notifies the Underwriter and the Fund that it is
withdrawing each affected Account's investment in the Fund pursuant to this
Section 7.5.
7.6. For purposes of Section 7.3 of this Agreement, the Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required to establish a new
funding medium for the Policies. The Company shall not be required by Section
7.3 to establish a new funding medium for the Policies if an offer to do so has
been declined by vote of a majority of Policy owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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<PAGE> 19
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund,
the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Fund or the Underwriter within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement or
prospectus for the Policies or contained in the
Policies or sales literature for the Policies (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading in light of
the circumstances in which they were made; provided
that this agreement to indemnify shall not apply as
to any indemnified party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on behalf
of the Fund for use in the registration statement or
prospectus
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<PAGE> 20
for the Policies or in the Policies or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Policies or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Policy or Fund registration statement, the
Policy or Fund prospectus or sales literature for
the Policies or the Fund not supplied by the Company
or persons under its control) or wrongful conduct
of the Company or persons under its control, with
respect to the sale or distribution of the Policies
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement;
or
(v) arise out of any material breach by the Company of
this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an indemnified party would otherwise be subject by reason of
willful misfeasance, bad
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<PAGE> 21
faith, or gross negligence in the performance of his or her duties or by reason
of his or her reckless disregard of obligations or duties under this Agreement
or to the Fund.
8.1(c). The indemnified parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Policies or the operation of
the Fund.
8.2. Indemnification By the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Underwriter) or litigation (including legal and
other expenses) to which the indemnified parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact
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<PAGE> 22
required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnity shall not apply as to any
indemnified party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf
of the Company for use in the registration statement
or prospectus for the Fund or in sales literature for
the Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Policies or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Policies or in the
Policy or Fund registration statement, the Policy or
Fund prospectus or sales literature for the Policies
or the Fund not supplied by the Underwriter or
persons under its control) or wrongful conduct of the
Underwriter or persons under its control, with
respect to the sale or distribution of the Policies
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature covering the Policies (or any amendment
thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon and in conformity with information furnished to
the Company by or on behalf of the Underwriter; or
(iv) arise out of any material breach by the Underwriter
of this Agreement;
except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
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<PAGE> 23
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations and duties
under this Agreement or to the Company or the Accounts.
8.2(c). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Policies or the
operation of the Accounts.
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors, officers, employees or agents and each person, if
any, who controls or is associated with the Company within the meaning of such
terms under the federal securities laws (collectively, the "indemnified parties"
for the purpose of this Section 8.3) against any and all losses, claims, damages
or liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which they or
any of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities
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<PAGE> 24
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
for the Fund or sales literature of the Fund (or any
amendment or supplement thereto), or arise out of or
are based upon the omission or the alleged omission
to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances
in which they were made; provided that this agreement
to indemnify shall not apply if such statement or
omission or alleged statement or alleged omission
was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of
the Company for use in the registration statement or
prospectus for the Fund or sales literature for the
Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale or
distribution of the Policies or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Policies or the
Policy or Fund registration statement or the Policy
or Fund prospectus or sales literature for the
Policy or the Fund not supplied by the Fund or
persons under its control) or wrongful conduct of the
Fund or the Fund's investment adviser or persons
under their control, with respect to the sale or
distribution of the Policies or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement or prospectus or sales
literature covering the Policies (or any amendment or
supplement thereto), or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading in light of the circumstances
in which they were made, if such statement or
omission was made in reliance upon and in
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<PAGE> 25
conformity with information furnished by or on behalf
of the Fund to the Company; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of any material breach by the Fund of this
Agreement;
except to the extent provided in Section 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Company or the Accounts.
8.3(c). The indemnified parties will promptly notify the Fund of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Policies or the operation of the
Fund.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8-4) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against
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<PAGE> 26
a party entitled to indemnification under this Article VIII ("indemnified
party" for the purpose of this Section 8.4) unless such indemnified party shall
have notified the indemnifying party in writing within a reasonable time after
the summons or other first legal process giving information of the nature of
the claim shall have been served upon such indemnified party (or after such
party shall have received notice of such service on any designated agent), but
failure to notify the indemnifying party of any such claim shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
against whom such action is brought under the indemnification provision of this
Article VIII, except to the extent that the failure to notify results in the
failure of actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of failure to give such notice. In case any such
action is brought against the indemnified party, the indemnifying party will be
entitled to participate, at its own expense, in the defense there-of. The
indemnifying party also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party's
election to assume the defense thereof, the indemnified party shall bear the
fees and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense there-
-26-
<PAGE> 27
of other than reasonable costs of investigation, unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law.
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the commonwealth of
Pennsylvania.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those stat-
-27-
<PAGE> 28
utes, rules and regulations as the SEC grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written notice
to the other parties; or
(b) at the option of the Company if shares of all Portfolios are not
reasonably available to meet the requirements of the Policies as determined by
the Company. Prompt notice of the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the National Association of Securities Dealers, Inc.
("NASD"), the SEC, the Insurance Commissioner or any other regulatory body
regarding the Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of the Fund shares;
or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
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<PAGE> 29
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Policy owners having an
interest in an Account (or any sub-account) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Policies for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 day's prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by
a majority of the Directors of the Fund, or a majority of its disinterested
Directors, that an irreconcilable material conflict exists among the interests
of (i) all policy owners of variable insurance products of all separate accounts
or (ii) the interests of the Participating Insurance Companies investing in the
Fund; or
(g) at the option of the Company if the Company has withdrawn an
Account's investment in the Fund because the Company's disregard of voting
instructions could conflict with the majority of policy owner voting
instructions and if the Company's judgment represents a minority position or
would preclude a majority vote; or
(h) at the option of the company if the Company has withdrawn an
Account's investment in the Fund because a particular state insurance
regulator's decision applicable to the
-29-
<PAGE> 30
Company conflicts with the majority of other state insurance regulators;
(i) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Sub-chapter M of the Internal Revenue Code
of 1986, or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(k) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement.
10.2. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.3. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Policies (as opposed to Fund
shares attributable to the Company's assets held in any of the Accounts), and
the Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until 90 days after
the Company shall have notified the Fund or Underwriter of its intention to do
so.
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ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Stanley R. Reber, President
Market Street Fund, Inc.
1600 Market Street
Philadelphia, PA 19103
If to the Company:
Edward W. Diffin, Jr., Esq.
Provident Mutual Life Insurance
Company of Philadelphia
1600 Market Street
Philadelphia, PA 19103
If to the Underwriter:
William Chu, Compliance Officer
PML Securities Company
Christiana Executive Campus
P.O. Box 15626
Wilmington, DE 19850
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (in-
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cluding without limitation the names and addresses of the owners of the
Policies) and, except as contemplated by this Agreement, shall not disclose,
disseminate or utilize such confidential information until such time as it may
come into the public domain without the express prior written consent of the
affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
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<PAGE> 33
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
SEAL By:_____________________________
Date:___________________________
Fund:
MARKET STREET FUND, INC.
SEAL By:_____________________________
Date:___________________________
Underwriter:
PML SECURITIES COMPANY
SEAL By:_____________________________
Date:___________________________
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EXHIBIT 10 (b)
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
THIS AGREEMENT, made and entered into as of the 1st day of September,
1993 by and among PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA,
(hereinafter the "Company"), a Pennsylvania corporation, on its own behalf and
on behalf of each segregated asset account of the Company set forth on Schedule
A hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter'), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life insurance contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to attributable to the aforesaid variable annuity
and variable life insurance contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity contracts and
the Underwriter is authorized to sell such shares to unit investment trusts such
as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE 1. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company, on behalf of each Account, orders, executing such orders
on a daily basis at the net asset value next computed after receipt by the Fund
or its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 9:00 a.m.
Boston time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
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<PAGE> 3
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales. The Fund shall make
available upon written request from the Company a list of all other
Participating Insurance Companies.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Payment by the Fund
shall be in Federal funds transmitted by wire to the Company's account, as
designated by the Company in writing from time-to-time, and will normally be
made the business day following the day the Fund receives the redemption order;
however, as permitted by the Investment Company Act of 1940, payment may be
delayed up to seven days.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are
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<PAGE> 4
substantially different from the investment objectives and policies of all the
Portfolios of the Fund; or (b) the Company gives the Fund and the Underwriter 60
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts, or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and Underwriter prior to
their signing this Agreement (a list of such funds appearing on Schedule C to
this Agreement); or (d) the Fund or Underwriter consents to the use of such
other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares transmitted by the Company to the
Underwriter is made in accordance with the provisions of Section 1.1 hereof.
Payment shall be in federal funds transmitted by wire on such Business Day. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
2. 1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws. The Company will require that the sale of the Contracts shall comply
in all material respects with state insurance suitability requirements. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account
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<PAGE> 5
under applicable state law and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act for as long as Fund shares are sold. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
insurance or annuity contracts, under applicable provisions of the Code and that
it will make every effort to maintain such treatment and that it will notify the
Fund and the Underwriter immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement. The Company will notify the Fund from time to time of any changes
required under applicable laws and regulations of regulatory bodies having
jurisdiction over it and the Fund will attempt to make any required adjustments,
to the extent feasible and consistent with
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<PAGE> 6
market conditions, to comply with such requirements, within a reasonable period
of time under the circumstances, after receipt of such notice, or will notify
the Company that it cannot comply therewith.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Delaware and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Delaware and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less $5
million. The aforesaid includes coverage for larceny and embezzlement is issued
by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more
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<PAGE> 7
frequently if the prospectus for the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares held in each Account in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares held in each Account for which no timely
instructions have been received in the same proportion as
Fund shares of such portfolio for which instructions have
been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4. 1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its
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<PAGE> 8
use. No such material shall be used if the Fund or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
Failure to respond within fifteen days of actual receipt by the Fund or the
Underwriter or a designee thereof shall constitute approval.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either. The Fund and the Underwriter or its
designee agree to respond to any request for approval on a prompt and timely
basis.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company. The Company agrees
to respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
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<PAGE> 9
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1934 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approval, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter
in writing and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter or other resources available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund's shares will be registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
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<PAGE> 10
6. 1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will comply with Section 817(h) of the Code
and Treasury Regulation 1.817-5, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulations. In the event of a breach
of this Article VI by the Fund, it will take all reasonable steps (a) to notify
Company of such breach and (b) to adequately diversify the Fund so as to achieve
compliance with the grace period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding, (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e, variable annuity contract owners, variable life
insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the
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<PAGE> 11
affected contract owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance
-11-
<PAGE> 12
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1 (a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they
were made, provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for
use in the Registration Statement or prospectus for the Contracts or in
the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales
-12-
<PAGE> 13
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, if such a statement or
omission was made in reliance upon and in conformity with, information furnished
to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
-13-
<PAGE> 14
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
This indemnification shall be in addition to any liability which the
Company may otherwise have.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and PMS Securities Company (an affiliate of Company), and each of their
directors and officers and each person, if any, who controls the Company or PML
Securities Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances
in which they were made, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment
or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
-14-
<PAGE> 15
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
in light of the circumstances in which they were
made, if such statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund;
or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
This indemnification shall be in addition to any liability
which the Underwriter may otherwise have.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any
-15-
<PAGE> 16
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
PML Securities, and each of their directors and officers and each person, if
any, who controls the Company and PML Securities within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional, in good faith or otherwise, to
comply with the diversification requirements
specified in Article VI of this Agreement);or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. This indemnification shall be in addition to any liability which
the Fund may otherwise have.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first
-16-
<PAGE> 17
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result
thereof. In case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund or the operation of
the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by six months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's
-17-
<PAGE> 18
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional
-18-
<PAGE> 19
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VI] and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.3 While this Agreement is in effect, the Company shall not redeem
Fund shares attributable to the Contracts (as opposed to Fund shares
attributable to the Company's assets held in the Account) except (i) as
necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"). Upon request, the company will promptly furnish
to the Fund and the Underwriter the opinion of counsel for the Company (which
counsel shall be reasonably satisfactory to the Fund and the Underwriter) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from allocating
payments to a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Provident Mutual Life Insurance
Company of Philadelphia
1600 Market Street
Philadelphia, PA 19103
Attention: David N. Ingram
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
-19-
<PAGE> 20
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland or Michigan, the Underwriter shall indemnify and reimburse the Company
for any out of pocket expenses and actual damages the Company has incurred as a
result of any such proceeding; provided however that the provisions of Section
8.2(b) of this and 8.2(c) shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
-20-
<PAGE> 21
addition to any other indemnification and reimbursement obligations of the Fund
and/or the Underwriter under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.10. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP")), as soon as
practical and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as
soon as practical and in any event within 45 days after the
end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or Contract owners, as
soon as practical after the delivery thereof to stockholders;
(d) any registration statement for any Account invested in the
Fund (without exhibits) and financial reports of the Company
filed with the Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
-21-
<PAGE> 22
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
By its authorized officer,
By:
----------------------------------
Title:
----------------------------------
Date:
----------------------------------
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By:
----------------------------------
Title:
----------------------------------
Date:
----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By:
----------------------------------
Title:
----------------------------------
Date:
----------------------------------
-22-
<PAGE> 23
Schedule A
Separate Accounts and Associated Contracts
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- ------------------------------------------- --------------------------------------
<S> <C>
Provident Mutual Variable Annuity Flexible Premium Deferred Variable
Separate Account - October 19, 1992 Annuity Contract II - PM 512
Provident Mutual Variable Separate Account Modified Premium Variable Life
June 7, 1993 (Options) - Forms C111 and C112
Flexible Premium Adjustable Variable
Life - Form C122
Flexible Premium Adjustable Variable
Life (Options Plus) - Forms C126 and
C127
Flexible Premium Adjustable
Survivorship, Variable Life (Survivor
Options Plus) - Form C130
</TABLE>
-23-
<PAGE> 24
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of the
Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
-24-
<PAGE> 25
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
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<PAGE> 26
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity
Legal must review and approve tabulation format
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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<PAGE> 27
SCHEDULE C
Other investment companies currently available under the Contracts issued by the
Company:
Market Street Fund, Inc.
Growth Portfolio
Money Market Portfolio
Bond Portfolio
Managed Portfolio
Aggressive Growth Portfolio
International Portfolio
Scudder Variable Life Investment Fund*
Bond Portfolio
Quest for Value Accumulation Trust*
Equity Portfolio
Small Cap Portfolio
Managed Portfolio
Dreyfus Variable Investment Fund*
Zero Coupon 2000 Portfolio
* To be added
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<PAGE> 1
EXHIBIT 10(c)
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
THIS AGREEMENT, made and entered into as of the 1st day of September,
1993 by and among PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA,
(hereinafter the "Company"), a Pennsylvania corporation, on its own behalf and
on behalf of each segregated asset account of the Company set forth on Schedule
A hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the " 1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life insurance contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to attributable to the aforesaid variable annuity
and variable life insurance contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the " 1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity contracts and
the Underwriter is authorized to sell such shares to unit investment trusts such
as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company, on behalf of each Account, orders, executing such orders
on a daily basis at the net asset value next computed after receipt by the Fund
or its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 9:00 a.m.
Boston time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
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<PAGE> 3
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund Will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales. The Fund shall make
available upon written request from the Company a list of all other
Participating Insurance Companies.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Payment by the Fund
shall be in Federal funds transmitted by wire to the Company's account, as
designated by the Company in writing from time-to-time, and will normally be
made the business day following the day the Fund receives the redemption order;
however, as permitted by the Investment Company Act of 1940, payment may be
delayed up to seven days.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to
in writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are
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<PAGE> 4
substantially different from the investment objectives and policies of all the
Portfolios of the Fund; or (b) the Company gives the Fund and the Underwriter 60
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and Underwriter prior to
their signing this Agreement (a list of such funds appearing on Schedule C to
this Agreement); or (d) the Fund or Underwriter consents to the use of such
other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares transmitted by the Company to the
Underwriter is made in accordance with the provisions of Section 1.1 hereof.
Payment shall be in federal funds transmitted by wire on such Business Day. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
2. 1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws. The Company will require that the sale of the Contracts shall comply
in all material respects with state insurance suitability requirements. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account
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<PAGE> 5
under applicable state law and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act for as long as Fund shares are sold. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
insurance or annuity contracts, under applicable provisions of the Code and that
it will make every effort to maintain such treatment and that it will notify the
Fund and the Underwriter immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement. The Company will notify the Fund from time to time of any changes
required under applicable laws and regulations of regulatory bodies having
jurisdiction over it and the Fund will attempt to make any required adjustments,
to the extent feasible and consistent with
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<PAGE> 6
market conditions, to comply with such requirements, within a reasonable period
of time under the circumstances, after receipt of such notice, or will notify
the Company that it cannot comply therewith.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Delaware and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Delaware and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.1 1. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less $5
million. The aforesaid includes coverage for larceny and embezzlement is issued
by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more
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<PAGE> 7
frequently if the prospectus for the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares held in each Account in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares held in each Account for which no timely
instructions have been received in the same proportion as Fund
shares of such portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4. 1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its
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<PAGE> 8
use. No such material shall be used if the Fund or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
Failure to respond within fifteen days of actual receipt by the Fund or the
Underwriter or a designee thereof shall constitute approval.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either. The Fund and the Underwriter or its
designee agree to respond to any request for approval on a prompt and timely
basis.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company. The Company agrees
to respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
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<PAGE> 9
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature. (i.e., any written communication distributed or made generally
available to customers or the public. including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1934 Act.
ARTICLE V. Fees and Expenses
5. 1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule l2b-I to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approval, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund's shares will be registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
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<PAGE> 10
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations. In the event of a breach of
this Article VI by the Fund, it will take all reasonable steps (a) to notify
Company of such breach and (b) to adequately diversify the Fund so as to achieve
compliance with the grace period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict. up to an including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity contract owners, variable life
insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the
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<PAGE> 11
affected contract owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance
-11-
<PAGE> 12
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they
were made, provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for
use in the Registration Statement or prospectus for the Contracts or in
the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales
-12-
<PAGE> 13
literature of the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they
were made, if such a statement or omission was made in reliance upon
and in conformity with, information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
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<PAGE> 14
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
This indemnification shall be in addition to any liability which the
Company may otherwise have.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and PMS Securities Company (an affiliate of Company), and each of
their directors and officers and each person, if any, who controls the Company
or PML Securities Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which
they were made, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for use
in the Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect to
the sale or distribution of the Contracts or Fund shares; or
-14-
<PAGE> 15
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by
and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
This indemnification shall be in addition to any liability which the
Underwriter may otherwise have.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any
-15-
<PAGE> 16
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
PML Securities, and each of their directors and officers and each person, if
any, who controls the Company and PML Securities within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional, in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. This indemnification shall be in addition to any liability which
the Fund may otherwise have.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first
-16-
<PAGE> 17
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve the Fund from any liability which
it my have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result
thereof. In case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund or the operation of
the Fund.
ARTICLE IX. Applicable Law
9. 1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by six months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's
-17-
<PAGE> 18
determination that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify: or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional
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<PAGE> 19
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.3 While this Agreement is in effect, the Company shall not redeem
Fund shares attributable to the Contracts (as opposed to Fund shares
attributable to the Company's assets held in the Account) except (i) as
necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"). Upon request, the Company will promptly furnish
to the Fund and the Underwriter the opinion of counsel for the Company (which
counsel shall be reasonably satisfactory to the Fund and the Underwriter) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from allocating
payments to a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Provident Mutual Life Insurance
Company of Philadelphia
1600 Market Street
Philadelphia, PA 19103
Attention: David N. Ingram
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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<PAGE> 20
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland or Michigan, the Underwriter shall indemnify and reimburse the Company
for any out of pocket expenses and actual damages the Company has incurred as a
result of any such proceeding; provided however that the provisions of Section
8.2(b) of this and 8.2(c) shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
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<PAGE> 21
addition to any other indemnification and reimbursement obligations of the Fund
and/or the Underwriter under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.10. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles and annual report (prepared under
generally accepted accounting principles ("GAAP")), as soon as
practical and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as
soon as practical and in any event within 45 days after the
end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or Contract owners, as
soon as practical after the delivery thereof to stockholders;
(d) any registration statement for any Account invested in the
Fund (without exhibits) and financial reports of the Company
filed with the Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
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<PAGE> 22
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
By its authorized officer,
By:
------------------------------------------
Title:
------------------------------------------
Date:
------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By:
------------------------------------------
Title:
------------------------------------------
Date:
------------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By:
------------------------------------------
Title:
------------------------------------------
Date:
------------------------------------------
-22-
<PAGE> 23
Schedule A
Separate Accounts and Associated Contracts
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- ------------------------------------------ -----------------------------------------
<S> <C>
Provident Mutual Variable Annuity Flexible Premium Deferred Variable
Separate Account - October 19, 1992 Annuity Contract II - PM 512
Provident Mutual Variable Separate Account Modified Premium Variable Life
June 7, 1993 (Options) - Forms C111 and C112
Flexible Premium Adjustable Variable
Life - Form C122
Flexible Premium Adjustable Variable
Life (Options Plus) - Forms C126 and
C127
Flexible Premium Adjustable
Survivorship Variable Life (Survivor
Options Plus) - Form C130
</TABLE>
-23-
<PAGE> 24
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of the
Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
-24-
<PAGE> 25
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company)
addressed to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests
Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied by
the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
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<PAGE> 26
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity
Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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<PAGE> 27
SCHEDULE C
Other investment companies currently available under the Contracts
issued by the Company:
Market Street Fund, Inc.
Growth Portfolio
Money Market Portfolio
Bond Portfolio
Managed Portfolio
Aggressive Growth Portfolio
International Portfolio
Scudder Variable Life Investment Fund*
Bond Portfolio
Quest for Value Accumulation Trust*
Equity Portfolio
Small Cap Portfolio
Managed Portfolio
Dreyfus Variable Investment Fund*
Zero Coupon 2000 Portfolio
* To be added
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<PAGE> 1
Exhibit 10(d)
SALES AGREEMENT
THIS AGREEMENT is made by and between NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST ("TRUST"), a Massachusetts business trust and PROVIDENT MUTUAL
LIFE INSURANCE COMPANY OF PHILADELPHIA ("LIFE COMPANY"), a life insurance
company organized under the laws of the State of Pennsylvania.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended ("'40 Act"), as an open-end
diversified management investment company; and
WHEREAS, TRUST is organized as a series fund, currently with
four Portfolios: Liquid Asset Portfolio, Limited Maturity Bond
Portfolio, Growth Portfolio and Balanced Portfolio; and
WHEREAS, TRUST was organized to act as a funding vehicle for certain
variable contracts offered by life insurance companies through separate accounts
of such life insurance companies; and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer variable contracts
participating in such Separate Accounts and is desirous of having TRUST as an
underlying funding vehicle for such variable contracts.
NOW, THEREFORE, it is hereby agreed by and between TRUST and LIFE
COMPANY as follows:
1. TRUST represents and warrants that TRUST shares sold pursuant to this
Agreement shall be registered under the Securities Act of 1933 and duly
authorized for issuance, and shall be issued, in compliance in all material
respects with applicable law, and that TRUST is and shall remain registered
under the '40 Act for so long as required thereunder. TRUST further represents
and warrants that TRUST currently qualifies and will make every effort to
continue to qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that TRUST will notify LIFE COMPANY immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future. TRUST further represents and warrants that TRUST will comply with
Section 817(h) of the Code, and all regulations issued thereunder, and that
TRUST will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that TRUST has ceased to so qualify or that TRUST might not so qualify
in the future.
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<PAGE> 2
2. TRUST will make available to the Separate Accounts shares of the
selected Portfolios for investment of purchase payments of variable contracts
allocated to the Separate Accounts.
3. TRUST will make the shares available to the Separate Accounts on a
daily basis at the net asset value next computed after receipt of each order by
the Trust.
4. Orders shall be placed for such shares with the Trust's custodian
pursuant to procedures which are then in effect and which may be modified as is
reasonable from time to time. TRUST shall make the net asset value per share for
each Portfolio available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after calculation thereof and shall use its best efforts to make
such net asset value per share available by 6:30 p.m. Eastern time.
5.(a) TRUST will bear the printing costs (or duplicating costs
with respect to the statement of additional information) and
mailing costs associated with the delivery of the following
TRUST (or individual Portfolio) documents, and any supplements
thereto, to the then existing shareholders or beneficial owners
of shares of TRUST including the variable contract owners of
LIFE COMPANY whose contracts use one or more Portfolios of TRUST
as a funding vehicle:
(i) prospectuses and statements of additional
information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
LIFE COMPANY will submit any bills for printing, duplicating
and/or mailing costs, relating to the TRUST documents described
above, to the TRUST for reimbursement by the TRUST. LIFE COMPANY
shall monitor such costs and shall use its best efforts to
control these costs. LIFE COMPANY will provide the TRUST on a
semi-annual basis, or more frequently as reasonably requested by
the TRUST, with a current tabulation of the number of existing
policyowners of LIFE COMPANY whose policy values are invested in
the TRUST. This tabulation will be sent to the TRUST in the form
of a letter signed by a duly authorized officer of LIFE COMPANY
attesting to the accuracy of the information contained in the
letter.
(b) TRUST will provide LIFE COMPANY, with respect to prospective
variable contract owners of LIFE COMPANY,
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<PAGE> 3
the following TRUST ( or individual Portfolio) documents, and
any supplements thereto:
(i) camera ready copy of the current prospectus for
printing by the LIFE COMPANY;
(ii) a copy of the statement of additional information
suitable for duplication;
(iii) camera ready copy of proxy material suitable for
printing; and
(iv) annual and semi-annual reports in camera ready
form.
6. Any materials utilized by LIFE COMPANY which describe TRUST (or its
individual Portfolios), its shares, or TRUST's investment adviser shall be
submitted to TRUST and TRUST's distributor for approval prior to use, not less
than five (5) business days before such approval is needed by LIFE COMPANY.
Advertising and literature, if and to the extent that it describes LIFE COMPANY,
the Separate Accounts or the variable contracts, prepared by TRUST's distributor
for use in marketing TRUST or the Portfolios, will be submitted to LIFE COMPANY
for approval before use, not less than five (S) business days before such
approval is needed by TRUST's distributor.
7. LIFE COMPANY and its agents will not make any representations
concerning the TRUST (or its individual Portfolios) or TRUST shares except those
contained in the then current prospectus of the TRUST (or its individual
Portfolios) and in current printed sales literature of the TRUST (or its
individual Portfolios).
8. LIFE COMPANY agrees to inform the Board of Trustees of TRUST of the
existence of or any potential for any material irreconcilable conflict of
interest between the interests of the contract owners of the Separate Accounts
investing in TRUST and/or any other separate account of any other insurance
company investing in TRUST.
Any material irreconcilable conflict may arise for a variety of reasons,
including:
(a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private
letter ruling, or any similar action by insurance, tax or
securities regulatory authorities;
-3-
<PAGE> 4
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or
by contract owners of different life insurance companies
utilizing TRUST; or
(f) a decision by LIFE COMPANY to disregard the voting instructions
of contract owners.
LIFE COMPANY will be responsible for assisting the Board of Trustees of
TRUST in carrying out its responsibilities by providing the Board with all
information reasonably necessary for the Board to consider any issue raised
including information as to a decision by LIFE COMPANY to disregard voting
instructions of contract owners.
It is agreed that if it is determined by a majority of the members of
the Board of Trustees of TRUST or a majority of its disinterested Trustees that
a material irreconcilable conflict exists affecting LIFE COMPANY, LIFE COMPANY
shall, at its own expense, take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps may include, but are
not limited to,
(a) withdrawing the assets allocable to some or all of the Separate
Accounts from TRUST or any Portfolio and reinvesting such assets
in a different investment medium, including another Portfolio of
the TRUST or submitting the questions of whether such
segregation should be implemented to a vote of all affected
contract owners and, as appropriate, segregating the assets of
any particular group (i.e. annuity contract owners, life
insurance contract owners or qualified contract owners) that
votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change;
(b) establishing a new registered management investment company or
managed separate account.
If a material irreconcilable conflict arises because of LIFE COMPANY's
decision to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the LIFE
COMPANY may be required, at the TRUST's election, to withdraw a Separate
Account's investment
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<PAGE> 5
in TRUST. No charge or penalty will be imposed against a Separate Account as a
result of such a withdrawal. LIFE COMPANY agrees that any remedial action taken
by it in resolving any material conflicts of interest will be carried out with a
view only to the interests of contract owners.
For purposes hereof, a majority of the disinterested members of the
Board of Trustees of TRUST shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no event will TRUST
be required to establish a new funding medium for any variable contracts. LIFE
COMPANY shall not be required by the terms hereof to establish a new funding
medium for any variable contracts if an offer to do so has been declined by vote
of a majority of affected contract owners.
TRUST will undertake to promptly make known to LIFE COMPANY the Board of
Trustees' determination of the existence of a material irreconcilable conflict
and its implications.
9. LIFE COMPANY shall provide pass-through voting privileges to all
variable contract owners so long as the Securities and Exchange Commission
continues to interpret the '40 Act to require such pass-through voting
privileges for variable contract owners. LIFE COMPANY shall be responsible for
assuring that each of its Separate Accounts calculates voting privileges in a
manner consistent with other life companies utilizing TRUST. It is a condition
of this Agreement that LIFE COMPANY will vote shares, for which it has not
received voting instructions as well as shares attributable to it, in the same
proportion as it votes shares for which it has received instructions.
10. This Agreement shall terminate automatically in the event of its
assignment unless made with the written consent of LIFE COMPANY and TRUST.
11. This Agreement may be terminated at any time on 90 days' written
notice to the other party hereto, without the payment of any penalty.
12. This Agreement shall be subject to the provisions of the '40 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the Securities and Exchange Commission setting forth such
relief.
13. It is understood by the parties that this Agreement is not to be
deemed an exclusive arrangement.
14. This Agreement is made by TRUST pursuant to authority granted by the
Trustees, and the obligations created hereby are
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<PAGE> 6
not binding on any of the Trustees or shareholders of TRUST individually, but
bind only the property of TRUST.
Executed this day of ___________, 1993.
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
ATTEST :___________________ By:___________________________
Stanley Egener, Chairman
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
ATTEST :___________________ By:____________________________
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<PAGE> 1
Exhibit 10(e)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 29 day of April, 1996, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Provident Mutual Life Insurance
Company, a life insurance company organized as a corporation under the laws of
the State of Pennsylvania, (the "Company"), on its own behalf and on behalf of
each segregated asset account of the Company set forth in Schedule A, as may be
amended from time to time (the "Accounts"), and Fred Alger and Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the " 1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17 1989 (File No. 812-7076), granting Participating Insurance Companies
and their separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Portfolios of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
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<PAGE> 2
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders
and requests for redemption by 9:30 a.m. Eastern time on the next
following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
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<PAGE> 3
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Proceeds of redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire
to the Company by order of the Trust with the reasonable expectation of
receipt by the Company by 2:00 p.m. Eastern time on the next Business
Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market
conditions exist, but in no event shall payment be delayed for a
greater period than is permitted by the 1940 Act. The Trust reserves
the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day.
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<PAGE> 4
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law. The Trust shall bear the expense of distributing proxy statements,
periodic reports of the Trust and other shareholder communications
to Contract owners.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the Company to
print together in one document the current prospectus for the Trust and
the current prospectuses for other funds available under the Contracts
issued by the Company. The Trust shall bear the expense of printing
copies of its current prospectus that will be distributed to existing
Contract owners, and the Company shall bear the expense of printing
copies of the Trust's prospectus that are used in connection with
offering the Contracts issued by the Company.
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<PAGE> 5
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners. The
Trust, at the Company's expense, shall provide the Company with copies
of its periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably request
for use in connection with offering the Contracts issued by the
Company. If requested by the Company in lieu thereof, the Trust shall
provide such documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other
assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately
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<PAGE> 6
derived from the registration statement or prospectus for the Trust
shares (as such registration statement and prospectus may be amended or
supplemented from time to time), annual and semi-annual reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or
other promotional material approved by the Trust or its designee,
except as required by legal process or regulatory authorities or with
the prior written permission of the Trust, the Distributor or their
respective designees. The Trust and the Distributor agree to respond to
any request for approval on a prompt and timely basis. The Company
shall adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust
or the Distributor are not distributed to existing or prospective
Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established by
the Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered Account
and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contacts without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion. The Company reserves the right, to the extent permitted by
law, to vote shares held in any Account in its sole discretion.
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<PAGE> 7
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of
Pennsylvania and that it has legally and validly established each
Account as a segregated asset account under such law as of the date set
forth in Schedule A, and that 1717 Capital Management Company, the
principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member
in good standing of the National Association of Securities Dealers,
Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all materials respects with
all applicable federal and state laws; and the sale of the Contracts
shall comply in all material respects with state insurance law
suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
the rules and regulations thereunder.
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3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any
Portfolio has ceased to comply or might not so comply and will
immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance
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<PAGE> 9
regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter or any
similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions
given by variable annuity contract and variable life insurance contract
owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the
Company of any determination by the Trustees that a material
irreconcilable conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all
information reasonably necessary for and requested by the Trustees to
consider any issues raised including, but not limited to, information
as to a decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the
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Trust shall continue to accept and implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
Until the end of such six (6) month period the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in
no event will the Trust be required to establish a new funding medium
for any Contract. The Company shall not be required to establish a new
funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the material irreconcilable conflict. In the event that the
Trustees determine that any proposed action does not adequately remedy
any material irreconcilable conflict, then the Company will withdraw
the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing
of the foregoing determination; provided, however, that such withdrawal
and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
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ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or
the alleged omission to state there in a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and was accurately derived from
written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares;
or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
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(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out or result from the provision by the Company to the
Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of
the Company to provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify
and hold the Company and each of its directors, officers, employees,
and agents and each person. if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for the purposes of this Section 5.2) against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Distributor or persons under its control, with respect
to the sale or acquisition of the Contracts or Portfolio
shares; or
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(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Distributor or
the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that arise from such Indemnified Party's willful misfeasance, bad
faith or negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have
been served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service upon
or other notification to any designated agent), but failure to notify
the party against whom indemnification is sought of any such claim
shall not relieve that party from any liability which it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
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ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice
to the other parties, unless a shorter time is agreed to by
the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the
Company; or
(h) at the option of the Company, if the Portfolio falls to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
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(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with Section
6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Provident Mutual Life Insurance Company
1050 Westlakes Drive
Berwyn, PA 19312
Attn: Linda E. Senker
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ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
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8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By: /s/ Mary Marsden-Cochran
--------------------------------------
Name: Mary Marsden-Cochran
Title: Secretary
Alger American Fund
By: /s/ Mary Marsden-Cochran
--------------------------------------
Name: Mary Marsden-Cochran
Title: Secretary
Provident Mutual Life Insurance Company
By: /s/ Linda E. Senker
--------------------------------------
Name: Linda E. Senker
Title: SENIOR ASSOCIATE GENERAL COUNSEL
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SCHEDULE A
SEGREGATED ASSET ACCOUNTS
Provident Mutual Variable Growth Separate Account
Provident Mutual Variable Money Market Separate Account
Provident Mutual Variable Bond Separate Account
Provident Mutual Variable Managed Separate Account
Provident Mutual Variable International Separate Account
Provident Mutual Variable Aggressive Growth Separate Account
Provident Mutual Variable Lift Separate Account
Provident Mutual Variable Annuity Separate Account
